U.S. Department of Housing

and Urban Development

Office of Inspector General

Semiannual Report to Congress

April 1, 2010, through September 30, 2010
Audit profile of performance 

for the period April 1, 2010, through September 30, 2010

Results This reporting period

Investigation profile of performance 

for the period April 1, 2010, through September 30, 2010

Results This reporting period

Hotline profile of performance 

for the period April 1, 2010, through September 30, 2010

Results This reporting period

1

 This represents all cost transactions during the period in which dollar amounts were reported with any recommendation.

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

3

 Administrative sanctions include limited denial of participation, relocations, removal from program participation, 

restraining orders, and systemic implication report submitted.

4

 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 OIG activities. 

Profile of Performance

$40,252,087

$126,694,457

781

755

389

79

168

41

49

28

57

1037

Funds put to better use

Recoveries/receivables

Arrests2

Indictments/informations

Convictions/pleas/pretrial diversions

Civil actions

Administrative sanctions3

Suspensions

Debarments

Personnel actions4

Search warrants

Subpoenas issued

Recommendations that funds be put to better use1

Recommended questioned costs1

Collections from audits

Administrative sanctions

$225,136,232

$109,919,327

$14,150,383

3

Funds put to better use

Recoveries/receivables

$933,674

$140,614

FY 10 totals

$813,264,347

$155,188,440

$32,706,317

4

FY 10 totals

$76,756,637

$519,225,525

1,393

1,235

898

129

371

90

95

58

99

1827

FY 10 totals

$1,297,454

$215,696
A Message from the Acting Inspector General

iii

It is with great pleasure that I present the U.S. Department of 

Housing and Urban Development (HUD), Office of Inspector General’s 

(OIG) Semiannual Report to Congress, which summarizes the activities 

and accomplishments of our office for the second half of fiscal year 

2010. HUD OIG employees–auditors, agents, attorneys, analysts, and 

support staff–continue their critical efforts to improve the economy and 

efficiency of programs administered by HUD.

This has been an exceedingly busy and productive period for our 

office. Our key divisions, working collaboratively in a cross-disciplinary 

fashion, have achieved significant results on behalf of HUD beneficiaries 

and American taxpayers. As an active partner in the Financial Fraud 

Enforcement Task Force, we have been at the forefront of getting the 

message out to our local communities about collaborative efforts across 

the government involving our State and local partners. Together, we are 

investigating and prosecuting significant financial crimes, ensuring swift 

punishment for those who seek unjust enrichment, recovering proceeds 

for those who are victimized, and addressing financial discrimination in 

the lending and financial markets.

During the past 6 months, we have issued 115 audit reports with a total of 478 recommendations, 

including monetary results totaling nearly $278 million. Our investigative work has resulted in 755 

indictments; 389 convictions; 168 administrative actions; and more than $126 million in fines, restitutions, 

and recoveries. We have also issued two inspections and evaluations reports: one on housing counseling 

services and one on HUD’s Credit Watch system.

During this reporting period, we have also focused on our enhanced Civil Fraud Initiative, to which we 

have dedicated a cadre of forensic auditors. They are concentrating in a concerted fashion on recovering 

ill-gotten gains from those who commit fraud against HUD programs.

The implementation of the American Recovery and Reinvestment Act and its effectiveness are discussed 

in our 28 audits of different entities, which looked at the capability and efficiency with which the money 

was spent. Recommendations and improvements on the utilization of these funds are continually provided 

to the Department.

During this reporting period, we completed an initiative known as Operation Watch Dog. This effort 

started in response to the Federal Housing Administration (FHA) Commissioner’s concern regarding 

increased default rates against the FHA insurance fund for failed loans. In total, we reviewed 284 FHA 

loans that were underwritten by 15 direct endorsement lenders to determine whether the loans were 

underwritten in accordance with FHA requirements. We found that 140 of the 284 loans reviewed were not 

underwritten in accordance with requirements. As a result, FHA’s insurance fund lost or has the potential 

to lose nearly $11.2 million from this limited sample. 

We performed an internal audit of HUD’s Home Equity Conversion Mortgage (HECM) program to 

determine whether HUD’s adoption and reversal of an informal foreclosure deferral policy for HECM loans 

A Message from the Acting 

Inspector General
iv

A Message from the Acting Inspector General

that defaulted due to nonpayment of taxes and insurance had a negative effect on the HECM program. 

We found that HUD’s policy did have a negative effect on the universe of HECM loans and loan servicers. 

As a result, four servicers contacted were holding almost 13,000 defaulted loans with a maximum claim 

amount of more than $2.5 billion, and two of the four servicers said that they were awaiting HUD guidance 

on how to handle them. Further, the servicers had paid taxes and insurance premiums totaling more than 

$35 million for these 12,958 borrowers, and if HUD does not take action, additional payments will be made 

in the next 12 months.

On another front, a key HUD OIG investigation exemplifies our commitment to pursuing fraud 

perpetuated against FHA’s mortgage insurance program. Lee Farkas, a former chairman of Taylor, Bean 

& Whitaker Mortgage Corporation (TBW), an FHA-approved direct endorsement lender and Government 

National Mortgage Association (Ginnie Mae) issuer, was arrested after his indictment in U.S. District 

Court, Ocala, FL, for allegedly committing conspiracy and bank, wire, and securities fraud. Farkas and 

others were indicted for allegedly selling phony or previously pledged loans to investors in the secondary 

mortgage market and causing TBW to submit false statements to HUD and Ginnie Mae. HUD and these 

programs experienced almost $2 billion in losses. 

Our investigators have also been focused on public corruption. The former Alamosa Housing Authority 

executive director and others were collectively sentenced in U.S. District Court, Denver, CO, to 37 months 

incarceration, 3 years supervised release, and 5 years probation and ordered to pay HUD nearly $640,000 in 

restitution for their earlier guilty pleas to committing theft by generating unauthorized housing authority 

checks. 

These examples of our audits and investigations show the exceptional work done by our staff, which 

has resulted in a significant positive impact on fraud and against misuse of taxpayer dollars. Our staff also 

conducted approximately 60 fraud and prevention awareness briefings to thousands of participants at all 

levels of government and industry in an effort to educate the public regarding improper activities. I am 

grateful to all of our employees nationwide who worked so tirelessly during this period.

The continuing evolvement of OIG operations comes at an especially important time for the oversight 

community. Every day, HUD OIG increases its dedication and commitment to becoming a more efficient 

and effective organization, which enables us to become better at recovering taxpayer dollars and working 

with our partners to bring those to justice who would seek to harm our vital programs. We look forward 

to continuing to fulfill our important responsibilities and working with Congress in overseeing these vital 

programs which support our Nation’s citizenry.

Michael P. Stephens

Acting Inspector General 
Audit reports issued by program

Single-family housing, 24%

Multifamily housing, 3%

Public and Indian housing, 36%

Community planning and 

development, 29%

Other programs, 8%

Audit monetary benefits identified by program

Single-family housing, 15%

Multifamily housing, 2%

Public and Indian housing, 24%

Community planning and 

development, 54%

Other programs,* 5%

Audit monetary benefits identified in millions of dollars

$200

$180

$160

$140

$120

$100

$80

$60

$40

$20

$0 Single-family 

housing

Multifamily 

housing

Public and 

Indian housing

Community 

planning and 

development

Other 

programs

$51.1

$5.1

$79.3

$183.0

$18.2

v

Audit Charts

* Other programs include financial and information system audits.
Investigative cases opened by program area (total: 711)

Single-family housing, 34% (240)

Public and Indian housing, 41% (291)

Multifamily housing, 8% (55)

Community planning and 

development, 9% (67)

Other, 8% (58)

Investigative recoveries by program area (total: $126,694,457)

Single-family housing, 88% 

($111,975,850)

Public and Indian housing, 8% 

($10,308,337)

Multifamily housing, 2% ($1,910,932)

Community planning and 

development, 2% ($2,283,104)

Other, 0% ($216,234)

Investigation Charts

vi

Investigative cases closed by program area (total: 331)

Single-family housing, 22% (72)

Public and Indian housing, 43% (143)

Multifamily housing, 9% (29)

Community planning and 

development, 15% (51)

Other, 11% (36)
Acronyms List

AIGA Assistant Inspector General for Audit

AIGI Assistant Inspector General for Investigation

ARIGA Assistant Regional Inspector General for Audit

ARRA American Recovery and Reinvestment Act of 2009

ASAC Assistant Special Agent in Charge

CDBG Community Development Block Grant

CFR Code of Federal Regulations

CPD Office of Community Planning and Development

DRGR Disaster Recovery Grant Reporting system

FEMA Federal Emergency Management Agency

FERA front-end risk assessment

FFI Fugitive Felon Initiative

FFMIA Federal Financial Management Improvement Act of 1996

FHA Federal Housing Administration

FICO Fair Isaac Credit Organization

FISMA Federal Information Security Management Act

FY fiscal year

Ginnie Mae Government National Mortgage Association 

HECM home equity conversion mortgage

HERA Housing and Economic Recovery Act of 2008

HOME HOME Investment Partnerships Program

HOPWA Housing Opportunities for Persons with AIDS

HUD U.S. Department of Housing and Urban Development

IDIS Integrated Disbursement and Information System

IG Inspector General

IRS Internal Revenue Service

IT information technology

NAHRO National Association of Housing and Redevelopment Officials

NSP Neighborhood Stabilization Program

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

RIGA Regional Inspector General for Audit 

vii

Acronyms List
viii

Acronyms List

SA Special Agent

SAC Special Agent in Charge

SSA Social Security Administration

SSN Social Security number

U.S.C. United States Code

USDA United States Department of Agriculture
ix

Table of Contents

Table of Contents

Executive Highlights 1

Chapter 1 - HUD’s Single Family Housing Programs 7

Audit 8

Investigations 16 

Inspections and Evaluations 29

Chapter 2 - HUD’s Public and Indian Housing Programs 31

Audit 32

Investigations 42

Chapter 3 - HUD’s Multifamily Housing Programs 57

Audit 58

Investigations 61 

Chapter 4 - HUD’s Community Planning and Development Programs 65

Audit 66

Investigations 74 

Chapter 5 - American Recovery and Reinvestment Act of 2009 79

Introduction and Background 80 

Audit 81

Chapter 6 - Disaster Grant Programs 91

Introduction and Background 92 

Audit 93 

Investigations 97

Chapter 7 - Other Significant Audits and Investigations/OIG Hotline 105

Audit 106

Investigations 109

OIG Hotline 110

Chapter 8 - Outreach Efforts 113

Chapter 9 - Review of Policy Directives 129

Enacted Legislation 130

Notices and Policy Issuances 130

Chapter 10 - Audit Resolution 131

Audit Reports Issued Before the Start of the Period With No Management Decision 132

Significantly Revised Management Decisions 134

Significant Management Decision With Which OIG Disagrees 136 

Federal Financial Management Improvement Act of 1996 138

Appendix 1 - Peer Review Reporting 139

Appendix 2 - Audit Reports Issued 141

Appendix 3 - Tables 151

Appendix 4 - Index 171

HUD OIG Operations Telephone Listing 175
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. 130

Section 5(a)(1)-description of significant problems, abuses, and deficiencies relating to 1-111, 130

the administration of programs and operations of the Department.

Section 5(a)(2)-description of recommendations for corrective action with respect to 7-111

significant problems, abuses, and deficiencies.

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

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

Section 5(a)(4)-summary of matters referred to prosecutive authorities and the 7-111 

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 

costs and 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 7-111 

of questioned and unsupported costs.

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

total dollar value of questioned and unsupported costs. 

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, Table A 

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

end of the period.

Section 5(a)(11)-a description and explanation of the reasons for any 134 

significant revised management decisions made during the reporting period.

Section 5(a)(12)-information concerning any significant management decision with which the 136

Inspector General is in disagreement.

Section 5(a)(13)-the information described under section 05(b) of the Federal Financial 138

Management Improvement Act of 1996.

Reporting Requirements

x

Reporting Requirements
Executive

Highlights
HUD Strategic Goal: Strengthen the Nation’s Housing Market to Bolster 

the Economy and Protect Consumers

OIG Strategy: Contribute to the increase of effectiveness in the 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

• Strategy for civil fraud initiatives

• 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

• OIG completed an initiative known as Operation Watchdog, which consisted of a review 

of the underwriting process of 15 direct endorsement lenders to determine whether 

loans were processed in accordance with Federal Housing Administration (FHA) 

requirements. Audits of another seven FHA single-family mortgage lenders found that 

lenders did not follow HUD requirements when underwriting loans and performing 

quality control procedures. 

• OIG audited HUD’s Home Equity Conversion Mortgage (HECM) program to determine 

whether HUD’s adoption and reversal of its informal foreclosure policy had a negative 

effect on the HECM program. 

• Lee Farkas was arrested and charged with allegedly committing bank, wire, and 

securities fraud and allegedly causing HUD and the Government National Mortgage 

Association (Ginnie Mae) losses in excess of $1.9 billion.

• A Texas couple was collectively sentenced to 89 years incarceration after admitting to 

committing more than $4.3 million in mortgage fraud. 

• A Georgia man admitted to committing a conspiracy and aggravated identity fraud in a 

reverse mortgage scheme that caused HUD more than $1 million in losses. 

• Anchor Mortgage and its president were found liable and ordered to pay the U.S. 

Department of Justice more than $2.9 million for violating the False Claims Act. 

• HECM fraud was described for more than 75 mortgage regulators meeting in Memphis, 

TN.

• Resources for civil and criminal mortgage fraud investigations were provided to more 

than 80 civil attorneys from the U.S. Attorney’s Office.

• Mortgage fraud was described for more than 400 Mortgage Bankers Association 

members in Chicago, IL, Fort Worth, TX, and Williston, VT. 

page 9

page 9

page 17

page 17

page 23

page 24

page 114 

page 114

pages 114-117

Emerging Issues: Areas of OIG interest

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

• FHA and Ginnie Mae’s ability and capacity to oversee its expanding market share

• Effectiveness in loan modification in the prevention of foreclosures

• Review of mortgage servicers’ processing of foreclosures

• Continued concerns for the health and soundness of the FHA fund

2 Strategic Initiative 1

Executive Highlights
HUD Strategic Goal: Meet the Need for Quality Affordable Rental Homes

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

through

• The American Recovery and Reinvestment Act (ARRA) – to focus on grantees’ administration of 

ARRA funds

• Reducing erroneous payments

• Contributing to improving the performance of entities managing rental assistance programs

• Investigative initiatives involving corruption in the management of troubled public housing 

authorities and multifamily developments

• Public and Departmentwide outreach initiatives

Highlights: Results or impact of significant OIG work

• Audits of 14 Section 8 Housing Choice Voucher and leased housing activities found 

that the housing agencies were not following HUD’s requirements for administering 

the program.

• The former Alamosa Housing Authority executive director and another individual 

were sentenced to 37 months incarceration for their earlier guilty pleas to committing 

theft from a program receiving Federal funds or money laundering.

• Former Blackfeet Housing Authority employees were sentenced to 26 months 

incarceration for stealing housing authority funds. 

• Fourteen Palm Beach County Housing Authority housing recipients were arrested and 

charged with allegedly committing housing assistance fraud.

• A former HUD multifamily contractor pled guilty to soliciting more than $500,000 

in kickbacks in exchange for HUD-subsidized multifamily housing development 

contracts.

• OIG completed 28 ARRA-related reviews of how HUD is administering the program 

and/or how the grantees are administrating the ARRA-related funds. 

• Presentations that described HUD OIG’s priorities, past results, and future objectives 

were given to more than 500 individuals attending a “Sustainable Homes and 

Communities” conference in Fargo, ND

• Presentations describing HUD OIG’s mission, priorities, and housing assistance 

fraud were given to more than 450 National Association of Housing and 

Redevelopment Officials meeting in Indiana, Idaho, Colorado, Missouri, South 

Dakota, Arkansas, New Hampshire, Michigan, and Delaware

• OIG continued to follow up with the Department on the need to change legislation 

pertaining to HUD’s requirements prohibiting lifetime registered sex offenders from 

admission to HUD-subsidized housing. 

•

page 33

page 43

page 44

page 47

page 62

page 81

page 118

pages 120-121

page 132

Emerging Issues: Areas of OIG interest

• Rental assistance fraud initiatives targeting public housing agencies in receivership or on the HUD 

troubled list

• Eligibility of grantee expenditures, particularly ARRA

• HUD’s oversight of grantee ARRA expenditures

Strategic Initiative 2 3

Executive Highlights
HUD Strategic Goal: Build Inclusive and Sustainable Communities Free From 

Discrimination

OIG Strategy: 

• Promote integrity, efficiency, and effectiveness of programs

• Contribute to the reduction of fraud, waste, and abuse

• ARRA - focus on grantees’ execution and administration of Neighborhood Stabilization Program 

(NSP) and Community Development Block Grant (CDBG) grantees

• Audits of the CDBG, Supportive Housing, and HOME Investment Partnerships (HOME) programs

• Audits of disaster activities

• Investigative initiative to fight corruption in the administration of State or local community grant 

recipients 

• Disaster relief fraud in HUD CDBG-funded programs

• Public dissemination of HUD OIG activities and outreach activities with State and local 

government agencies and other community affairs agencies

Highlights: Results or impact of significant OIG work

• OIG reviewed several housing authorities to ensure that the authorities maintained their 

Housing Choice Voucher program units within housing quality standards.

• OIG reviewed the HOME program of the Puerto Rico Department of Housing and found 

that the Department did not have adequate controls and procedures to ensure that HOMEfunded activities met program objectives.

• OIG conducted eight NSP I reviews during the period to determine whether the grantees 

were properly obligating the NSP I funds in accordance with the Housing and Economic 

Recovery Act of 2008. OIG found that the grantees were not properly obligating the funds.

• A California escrow administrator pled guilty to committing embezzlement involving $3.9 

million in HUD CDBG funds, including $22,000 in City of Pomona, CA, ARRA funds. 

• Two Florida Agriculture and Mining University Federal Credit Union administrators were 

indicted for allegedly conspiring and embezzling HUD Historically Black College grant 

funds.

• Alleged false lead inspection reports involving HUD-subsidized multifamily housing 

developments led to charges against two individuals, one a former HUD employee and 

both current building inspectors for the City of Detroit, MI.

• A former HUD attorney and her husband each pled guilty to stealing $150,000 in HUD 

CDBG Disaster Recovery Assistance funds from the Mississippi Development Authority. 

• A Louisiana Road Home program recipient was charged with allegedly stealing $150,000 

in HUD CDBG Disaster Recovery Assistance funds and more than $245,000 in disaster 

assistance from the Small Business Administration and Federal Emergency Management 

Agency.

• HUD OIG hosted a number of mortgage fraud working group meetings in Chicago, IL.

• Special agents provided an overview of HUD OIG operations for more than 100 CDBG 

grantees attending a training seminar in Jefferson City, MO.

page 33

page 68

page 71

page 75

page 75

page 76

page 97

page 98

page 115

page 123

Emerging Issues: Areas of OIG interest

• Audits and investigations of ARRA funding and NSP

• Review of Green Retrofit activities

• Focus on infrastructure projects

4 Strategic Initiative 3

Executive Highlights
5

HUD Strategic Goal: Transform the Way HUD Does Business

OIG Strategy: 

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

• Contribute to improving HUD’s execution of and accountability for fiscal responsibilities 

through

• Referring audits and investigations to the departmental Mortgagee Review Board and other 

management officials to ensure the accountability of individuals and firms committing fraud

• Referring audits and investigations to the U.S. Department of Justice for civil enforcement

• Audits of HUD’s financial statements

• Audits of HUD’s information systems and security management

• Participating in the U.S. Department of Justice Financial Fraud Task Force

Highlights: Results or impact of significant OIG work

• A real estate closing attorney in Newark, NJ, was debarred from transactions with 

HUD and the Federal Government for 60 months.

• Ideal Mortgage Bankers, doing business as Lend America, was issued a permanent 

civil injunction and ordered to refrain from participating in any Federal program 

involving mortgage loans.

• Former Alamosa Housing Authority employees and others were suspended or 

debarred after they admitted committing theft from a program receiving Federal 

funds or money laundering.

• HUD OIG audited HUD’s procedures for administrating completed and expired 

contracts to determine whether HUD performed contract closeout procedures in a 

timely manner.

• HUD OIG recommended collection of nearly $2.8 million in damages and penalties 

awarded against Anchor Mortgage Corporation in violation of the False Claims Act.

page 19

page 24

page 43

page 106

page 107

Emerging Issues: Areas of OIG interest

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

program

• Continued modernization and enhancement of HUD’s information systems

• Contracts and procurement acquisition

Strategic Initiative 4

Executive Highlights

Chapter 1

Single-Family

Housing Programs
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 a number of outreach efforts (see chapter 8, page 114).

Audit

Strategic Initiative 1: Contribute to the reduction of fraud

in single-family insurance programs

Key program results Questioned costs Funds put to better use

$11.4 million $39.6 million

Page 9

Page 9

Page 11

Page 11

Page 13

Page 14 

Page 15

Page 15

Audit 28 audits

Our

focus

• Review of HUD’s Home Equity Conversion Mortgage program

• Operation Watch Dog - Review of loan underwriting process

• HUD’s single-family program automated underwriting process

• Mortgagees, loan correspondents, and direct endorsement lenders

• Review of consumer credit counseling services

• Review of HUD’s management and marketing contractors for real 

estate-owned properties

• Review of HUD’s single-family renewal process

• Review of HUD’s Office of Lender Activities and Program 

Compliance

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

during this reporting period

Region 1 - 3%

Region 2 - 18%

Region 3 - 4% 

Region 4 -4%

Region 5 - 29%

Region 6 - 7%

Regions 7/8/10 - 14%

Region 9 - 21%

Region 11 - (N/A)*

* This does not include disaster relief audits. See chapter 6 for these reviews.

8

Chapter 1 - Single-Family Housing Programs
Review of HUD’s Home Equity Conversion Mortgage Program

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

performed an internal audit of HUD’s Home Equity Conversion Mortgage (HECM) program to determine 

whether HUD’s adoption and reversal of an informal foreclosure deferral policy for HECM loans that 

defaulted due to nonpayment of taxes and insurance had a negative effect on the HECM program.

HUD’s informal foreclosure deferral policy and its reversal had a negative effect on the universe of 

HECM loans and loan servicers. After cancelling its informal policy, HUD did not issue guidance to 

servicers advising them of what actions to take regarding defaulted loans. Thus, servicers continued to 

service the loans and paid the taxes and insurance for the borrowers, but they did not notify HUD. As a 

result, four servicers contacted were holding almost 13,000 defaulted loans with a maximum claim amount 

of more than $2.5 billion, and two of the four servicers said that they were awaiting HUD guidance on 

how to handle them. Further, the servicers had paid taxes and insurance premiums totaling more than $35 

million for almost 13,000 borrowers, and if HUD does not take action, additional payments will be made 

in the next 12 months.

HUD also could not identify the deferred or defaulted loans in the Single Family Data Warehouse and 

did not track the number of borrowers who were unable to pay their property taxes or insurance premiums. 

As a result, HUD did not know how many loans had principal amounts increasing because the servicer 

had added payments for taxes and insurance to the loan amount. Since unreported defaulted loans were 

only obtained from 4 of 16 HECM servicers nationwide, more defaulted loans may exist. Further, as HUD 

could not track these loans, it did not know the potential claim amount. In the event of foreclosure of the 

nearly 8,000 loans of which HUD was aware and almost 13,000 loans of which it was not aware, HUD 

could lose an estimated $1.4 billion upon sale of the properties.

OIG recommended that HUD (1) discontinue the practice of deferring foreclosure due to nonpayment 

of taxes and insurance; (2) issue formal guidance to servicers regarding loans currently in default due to 

nonpayment of property taxes and insurance, including requiring the servicers to foreclose if the borrowers 

do not pay the delinquent taxes and insurance; (3) develop and implement a plan to minimize the risk 

of future defaults due to nonpayment of taxes and insurance; and (4) develop a tracking and reporting 

system, including making modifications to the Single Family Data Warehouse, to ensure that HUD can 

track the defaulted loans and the amounts paid by the borrowers. (Audit Report: 2010-FW-0003)

Operation Watch Dog - Review of Loan Underwriting Process

During the reporting period, HUD OIG completed an initiative known as Operation Watch Dog. This 

initiative started in response to the Federal Housing Administration (FHA) Commissioner’s concern 

regarding the increasing default rates against the FHA insurance fund for failed loans.

The initiative consisted of a review of the underwriting process of 15 direct endorsement lenders. The 

results of our review are summarized in the chart below.

9

Chapter 1 - Single-Family Housing Programs
10

Chapter 1 - Single-Family Housing Programs

Lender Issue date

1st Advantage 

Mortgage, 

LLC

Birmingham 

Bancorp 

Mortgage 

Corporation

Mac-Clair 

Mortgage 

Corporation

Alacrity 

Lending 

Company

Dell Franklin 

Financial, 

LLC

D & R 

Mortgage 

Corporation

Assurity 

Financial 

Services, LLC

Americare 

Investment 

Group

American 

Sterling Bank

Webster 

Bank

Alethes, 

LLC

Security 

Atlantic 

Mortgage 

Company, Inc.

First 

Tennessee 

Bank, N.A.

Pine State 

Mortgage 

Corporation

Sterling 

National 

Mortgage 

Company, Inc.

Number 

deficient 

loans

Location OIG 

memorandum 

number

Loans 

reviewed

Actual or 

potential 

loss to HUD

Potential 

affirmative civil 

enforcement

Lombard, IL 

West 

Bloomfield, 

MI

Flint, MI

Southlake, 

TX

Millersville, 

MD

Farmington 

Hills, MI

Englewood, 

CO

Arlington,

TX

Sugar Creek, 

MO

Cheshire, 

CT

Lakeway, 

TX

Edison, NJ

Memphis, 

TN

Atlanta, GA

Great Neck, 

NY

2010-CH-1806

2010-CH-1807

2010-CH-1808

2010-LA-1803

2010-CH-1810

2010-CH-1811

2010-LA-1804

2010-LA-1805

2010-LA-1806

2010-NY-1805

2010-LA-1807

2010- NY-1806

2010-NY-1807

2010-NY-1808

2010-NY-1809

07/15/10

07/21/10

07/22/10

07/26/10

07/30/10

08/04/10

08/05/10

08/06/10

08/24/10

09/01/10

09/08/10

09/22/10

09/27/10

09/29/10

09/30/10

Total

20

20

20

20

20

15

20

19

12

20

20

20

18

20

20

284

8

9

7

19

3

9

8

12

9

6

19

6

5

14

6

140

$325,452

$643,340

$562,551

$1,599,529

$542,330

$936,572

$1,180,997

$741,498

$492,239

$516,990

$1,056,447

$553,730

$435,574

$1,095,202

$508,823

$11,191,274

$710,904

$1,354,180

$1,177,602

$3,341,558

$1,107,160

$1,940,644

$2,421,992

$1,572,996

$1,051,978

$1,078,980

$2,255,394

$1,152,460

$908,648

$2,295,404

$1,062,646

$23,432,546
HUD’s Single-Family Program Automated Underwriting Process

HUD OIG audited HUD’s automated underwriting process to assess whether HUD had in place 

appropriate and effective management controls over the process. 

HUD did not have appropriate and effective management controls in place over its automated 

underwriting process. Specifically, it implemented changes to the FHA Technology Open to Approved 

Lenders Scorecard’s (Scorecard) review rules without properly assessing the associated risk and appropriately 

documenting the changes. As a result, loans valued at more than $6.1 billion were automatically approved for 

FHA insurance despite having debt ratios that exceeded established thresholds for automated underwriting. 

Without evaluating the risks associated with the higher ratios allowed by the automated underwriting 

system, HUD cannot provide assurance regarding whether these loans had conditions that might have 

posed an increased risk of loss to the FHA insurance fund. 

In addition, HUD did not perform adequate monitoring of its automated underwriting process, including 

the use of authority to override automatic referrals for manual underwriting. These problems allowed 

automatic approval of 29,325 loans with FHA-insured unpaid mortgage balances totaling more than $6.1 

billion and posed an unknown risk to the FHA insurance fund because HUD failed to document a risk 

analysis and authorization to support the ratio review rule changes. 

Additionally, FHA insured 1,073 loans that were flagged by the automated underwriting process for 

unknown reasons yet were automatically approved without HUD’s being able to clearly determine whether 

the loans had passed all system tests and edit checks in the automated underwriting process or failure to 

pass was appropriately overridden. The projected loss to the FHA insurance fund for the 1,073 loans was 

$1.8 million for an outstanding balance of more than $249 million. 

OIG recommended that HUD develop or expand, as applicable, and implement written policies and 

procedures for (1) assessing the risk of proposed changes to the Scorecard’s algorithm and review rules; (2) 

formally supporting, authorizing, and updating corresponding system documents for changes made to the 

automated underwriting process; and (3) continuous monitoring of the automated underwriting process 

through the normal course of business, including the use of authority to override automatic referrals and, 

as applicable, periodic reviews, reconciliations, or comparisons of the automated underwriting processed 

data. Additionally, OIG recommended that HUD conduct a risk analysis to determine the appropriate 

front-end and back-end ratios for the Scorecard’s review rules and institute the appropriate changes. OIG 

determined that the full contents of this report would not be appropriate for public disclosure and released 

a redacted version to the public. (Audit Report: 2010-LA-0002)

Mortgagees, Loan Correspondents, and Direct Endorsement 

Lenders

Audits to uncover loan origination abuses by single-family lenders 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, in addition to the Operation Watch 

Dog lenders, HUD OIG reviewed seven FHA single-family mortgage lenders. While the objectives varied 

by auditee, the majority of the reviews were to determine whether the auditees originated FHA-insured 

loans in accordance with HUD requirements. The following section illustrates some of the audits conducted 

in the single-family mortgage lender area.

ppp

11

Chapter 1 - Single-Family Housing Programs
HUD OIG audited Lendamerica Home Loans, Inc., an FHA-approved direct endorsement lender located 

in Coral Gables, FL, and found that Lendamerica did not follow HUD requirements when underwriting 

the five loans reviewed. HUD insured the loans, which unnecessarily placed the FHA insurance fund at 

risk for more than $1 million. Lendamerica did not ensure the accuracy, validity, and completeness of its 

loan originations. In addition, it did not implement a quality control program that complied with HUD 

requirements. As a result, the effectiveness of Lendamerica’s quality control program in guarding against 

errors, omissions, and fraud and protecting HUD from unacceptable risk was diminished and could result 

in an increased risk to the FHA insurance fund.

OIG recommended that HUD require Lendamerica to (1) indemnify it for the five insured loans with 

significant deficiencies, (2) pay down the loan balance for two overinsured loans, and (3) implement and 

enforce controls to ensure that loans are processed in accordance with HUD requirements. OIG also 

recommended that HUD take appropriate measures to ensure that Lendamerica develops and implements 

a quality control program that complies with HUD requirements and refer it to the Mortgagee Review Board 

for consideration of taking appropriate administrative actions. (Audit Report: 2010-AT-1005) 

ppp

HUD OIG audited National Bank of Kansas City in Overland Park, KS, and found that National Bank did 

not follow HUD’s requirements regarding income, liability, and asset determination in 4 of the 16 defaulted 

loans reviewed. These loans had material underwriting deficiencies that affected the insurability of the 

loans. In addition, National Bank did not comply with HUD’s quality control requirements. Specifically, 

its plan lacked elements required by HUD, and it did not ensure that its quality control reviews met HUD 

requirements. 

OIG recommended that HUD require National Bank to indemnify it for two actively insured loans with 

unpaid principal balances totaling nearly $386,000 and future losses on two loans with unpaid principal 

balances totaling nearly $281,000. Also, OIG recommended that HUD verify that National Bank provides 

its underwriters with additional training on its new procedures and properly performs its quality control 

function. (Audit Report: 2010-KC-1005)

ppp

HUD OIG audited Access National Mortgage Corporation in Denver, CO, and found that Access National 

generally complied with HUD regulations, procedures, and instructions in the origination and underwriting 

of the 23 insured loans reviewed. However, it did not comply with HUD regulations, procedures, and 

instructions for two loans it submitted to HUD for insurance endorsement. It submitted the loans, totaling 

more than $410,000, for endorsement when the loan payments were not current.

OIG recommended that HUD (1) require Access National to indemnify it for any future losses on the 

two loans that were incorrectly submitted and (2) ensure that Access National implements policies to ensure 

that loans are current when submitted to HUD for endorsement. (Audit Report: 2010-DE-1004)

ppp

HUD OIG audited New England Regional Mortgage Corporation in Salem, NH, and found that the 

Corporation generally complied with HUD requirements in the origination of FHA-insured single-family 

loans. In addition, its quality control plan, as implemented, fulfilled HUD’s requirements. However, one loan 

had significant underwriting deficiencies, including improperly documented borrower income, an omitted 

liability, undervalued debt-to-income ratios, and failure to notify HUD of an employee loan transaction. 

Therefore, the loan was not eligible for FHA mortgage insurance and placed the FHA insurance fund at 

risk for a potential loss of more than $221,000. Additionally, the Corporation was incorrectly listed as the 

12

Chapter 1 - Single-Family Housing Programs
holding lender for 43 active loans and the servicing lender for 8 active loans. HUD will not pay a claim for 

insurance benefits if the information on the claim and HUD’s FHA insurance system do not agree.

OIG recommended that HUD require the Corporation to indemnify it for a loss that may be incurred 

related to the loan that did not meet FHA insurance requirements. OIG also recommended that the 

Corporation update its remaining mortgage records in HUD’s system to reflect the appropriate mortgage 

holder and implement procedures to ensure the timely submission of mortgage record changes for future 

loans sold to investing lenders. (Audit Report: 2010-BO-1007)

ppp

HUD OIG audited the Fairfax, VA, branch office of Prospect Mortgage, LLC, and found that Prospect 

Mortgage generally complied with HUD requirements in its origination and quality control review of FHA 

loans. However, its branch office did not underwrite one of five defaulted loans reviewed in accordance with 

HUD requirements. In addition, Prospect Mortgage did not always perform quality control reviews of its 

FHA-insured loans in a timely manner. As a result, the FHA insurance fund was exposed to an unnecessarily 

increased risk, and the effectiveness of Prospect Mortgage’s quality control process was lessened. 

OIG recommended that HUD (1) require Prospect Mortgage to indemnify it for more than $193,000, the 

unpaid principal balance for the loan, and (2) direct Prospect Mortgage to improve its quality control process 

and follow up in 6 months to ensure the lender’s compliance. (Audit Report: 2010-PH-1010)

ppp

HUD OIG audited one HECM loan underwritten by Financial Freedom Senior Funding Corporation of 

Irvine, CA, which was identified during an internal audit of the HUD HECM program.

The loan was improperly insured as the property had several years of deferred property taxes, which 

is a violation of HECM regulations. Neither Financial Freedom’s loan correspondent, 1ST AA Reverse 

Mortgage, Inc., nor the title company found that the property had property tax deferments, totaling more 

than $14,000, covering approximately 20 years. As neither the originating lender nor the borrower had 

paid the taxes before the loan closed, HECM regulations were not followed, and the loan should not have 

been FHA insured. As of February 28, 2010, the loan’s unpaid principal balance was nearly $75,000, and 

the maximum claim amount was nearly $78,000. 

OIG recommended that HUD require Financial Freedom to indemnify it for the loan. (Audit Report: 

2010-FW-1805)

Review of Consumer Credit Counseling Services

HUD OIG audited Consumer Credit Counseling Services of the Midwest in Columbus, OH, an affiliate 

of the National Foundation for Credit Counseling, Inc., to determine whether Consumer Credit complied 

with HUD’s requirements for housing counseling. 

Consumer Credit did not comply with HUD’s regulations and/or its agreement with the National 

Foundation. Specifically, it did not ensure that its (1) clients’ housing counseling action plans were accurate 

and/or properly completed and (2) clients’ files contained supporting documentation of the housing 

counseling activities. Further, Consumer Credit did not ensure that uncertified housing counselors were 

adequately trained and/or monitored and its housing counseling sessions were appropriately reimbursed 

by HUD. As a result, HUD lacked assurance that Consumer Credit’s housing counseling services were 

effective and resulted in the best outcome for clients.

13

Chapter 1 - Single-Family Housing Programs
OIG recommended that HUD require Consumer Credit to (1) reimburse HUD nearly $9,000 from nonFederal funds for the housing counseling sessions that received duplicate reimbursements or were funded 

by both HUD and an Ohio Department of Development grant, (2) maintain records of its housing counselors’ 

training and monitoring of its housing counselors’ housing counseling activities, and (3) implement adequate 

procedures and controls to ensure compliance with HUD’s requirements and its agreement with the 

National Foundation if its contract is not cancelled. Such procedures and controls would ensure that more 

than $126,000 in anticipated HUD grant funds for fiscal year (FY) 2011 (grant year October 1, 2010, through 

September 30, 2011) is used in accordance with established requirements and for its intended purposes.

OIG also recommended that HUD (1) require the National Foundation to cancel its agreement(s) with 

Consumer Credit to provide services under its housing counseling program(s) and (2) determine legal 

sufficiency and if legally sufficient, pursue remedies under the Program Fraud Civil Remedies Act (PFCRA) 

against Consumer Credit for incorrectly submitting claims for reimbursement for housing counseling sessions 

that were already reimbursed or did not comply with HUD’s requirements and/or its agreement with the 

National Foundation. (Audit Report: 2010-CH-1014)

Review of HUD’s Management and Marketing Contractors for 

Real Estate-Owned Properties

HUD OIG audited Michaelson, Connor, and Boul, Incorporated (MCB), a management and marketing 

contractor for HUD real estate-owned properties in Southfield , MI, to determine whether MCB complied 

with HUD’s requirements regarding the sale of HUD single-family real estate-owned homes (HUD homes) 

in Michigan, in particular the closing activities. 

MCB did not adequately provide oversight of the closings on the sale of HUD homes. Specifically, it 

did not (1) always request lead-based paint stabilization services and/or city presale inspections in a timely 

manner or (2) adequately monitor the closing agents and report to HUD deficiencies with closing sales of 

HUD homes as required under its contract. As a result, HUD and MCB incurred an additional $1 million 

plus in holding costs to maintain the homes in its inventory and lost the opportunity to receive nearly $48,000 

in proceeds as buyers cancelled their sales contracts due to closing delays.

OIG recommended that HUD (1) require MCB to provide documentation showing that the buyers 

cancelled their sales contracts for reasons other than delayed actions by MCB and/or the closing agents 

or reimburse HUD nearly $48,000 from non-Federal funds for the losses HUD incurred on the sale of 

the two homes and (2) implement requirements for the new management and marketing contracts that 

provide specific responsibilities for performing activities under the contracts, including but not limited to 

requesting city presale inspections and lead-based paint stabilization, to ensure that sales of HUD homes 

close in a timely manner, and monitoring the closing agents for compliance with their contracts with HUD. 

Since MCB’s contract was to expire on September 30, 2010, OIG did not recommend that MCB improve its 

procedures and controls regarding the oversight of the closings on HUD homes as it will no longer perform 

this function. (Audit Report: 2010-CH-1012) 

ppp

HUD OIG audited National Home Management Solutions in Independence, OH, HUD’s management 

and marketing contractor for HUD real estate-owned properties in Ohio, to determine whether National 

Home complied with HUD’s requirements regarding the sale of HUD single-family real estate-owned 

properties. 

National Home did not fully comply with its HUD contract and HUD’s requirements regarding the 

sale of HUD homes. It did not always notify backup bidders when the winning bidders failed to provide 

14

Chapter 1 - Single-Family Housing Programs
executed sales contracts and/or accept prospective buyers’ preliminary bids to purchase HUD homes in a 

timely manner. National Home also did not maintain adequate documentation to support (1) its reanalysis 

for homes that did not sell within the first 45 days of market exposure or (2) its rationale for accepting bids 

that were below HUD’s minimum acceptable bid amounts and/or did not result in the highest net returns 

to HUD. As a result, HUD lacked assurance that National Home represented HUD’s best interest in the 

management and marketing of its homes and maximized the net returns to the FHA insurance fund. 

Further, OIG reviewed 10 HUD homes that were the subject of allegations regarding National Home’s 

awarding of the homes to buyers who did not submit the highest bids. National Home received approval 

from HUD to award the homes when the winning bid amounts were below HUD’s minimum acceptable 

bid amounts at the time the homes were listed on the market for sale or did not result in the highest net 

returns to HUD. However, National Home did not maintain documentation of its rationale for accepting 

the bids for 2 of the 10 homes as required under its HUD contract.

OIG recommended that HUD require National Home to (1) provide documentation showing that HUD 

approved the acceptance of the bids and the rationale for why acceptance of such bids would be in HUD’s 

best interest, as required under its contract, or reimburse HUD more than $36,000 from non-Federal funds 

for the losses HUD incurred on the five properties and (2) implement adequate procedures and controls to 

ensure compliance with its HUD contract, including but not limited to maintaining documentation to support 

its (a) rationale for approving bids below HUD’s minimum acceptable bid amounts or bids that do not result 

in the highest net return to HUD, (b) analyses of homes that have been on the market in excess of 45 days, 

and (c) notification of backup bidders in accordance with its HUD contract. (Audit Report: 2010-CH-1009)

Review of HUD’s Single-Family Renewal Process

HUD OIG audited the FHA Title II single-family lender renewal process to determine whether FHA 

ensured that lenders submitted recertification requirements in a timely manner. 

FHA did not ensure that lenders submitted recertification forms, annual fees, and/or audited financial 

statements in a timely manner. It did not promptly issue notices of violation to lenders that did not submit 

required annual recertification documentation and/or fees when due. As a result, FHA insured loans made 

by noncompliant lenders, putting the insurance fund at risk. 

OIG recommended that HUD revise the recertification process to discontinue issuing notices of deficiency 

and issue notices of violation promptly for all lenders that do not submit or attempt to submit one or more 

of the required items by the due date. (Audit Report: 2010-KC-0002)

Review of HUD’s Office of Lender Activities and Program 

Compliance

HUD OIG audited HUD’s Office of Lender Activities and Program Compliance, Quality Assurance 

Division, to determine whether HUD had adequate controls to track, obtain, and record indemnification 

agreements from lenders for materially deficient loans.

HUD had written policies and procedures for determining when an indemnification agreement was 

appropriate and how to process a signed agreement. However, it did not have written policies and procedures 

for pursuing the signed indemnification agreement from lenders. 

OIG recommended that HUD develop and implement effective policies and procedures to ensure that 

its employees consistently pursue signed indemnification agreements. (Audit Report: 2010-KC-0003)

ppp

15

Chapter 1 - Single-Family Housing Programs
Investigations

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

housing program staff and conducted jointly with Federal, State, and local law enforcement agencies. The 

results of various significant investigations are described below.

Strategic Initiative 1: Contribute to the reduction of fraud

in single-family insurance programs

Key program 

results

$ 

recovered

Convictions/pleas/ 

pretrials

$111,975,850 125

Page 17

Page 23

Page 24

Page 26

Investigations 72

Our

focus

• Loan origination fraud

• Home Equity Conversion Mortgage program fraud

• Civil and administrative actions

• Other single-family fraud

Cases 

closed

Admin/civil 

actions

128

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

during this reporting period

Region 1 - 2%

Region 2 - 18%

Region 3 - 6%

Region 13 - 0% 

Region 4 - 11%

Region 14 - 10%

Region 5 - 6%

Region 15 - 6%

Region 6 - 8%

Regions 7/8 - 13%

Region 9 - 15%

Region 10 - 4%

Region 11 - 1%

16

Chapter 1 - Single-Family Housing Programs
17

Chapter 1 - Single-Family Housing Programs

Loan Origination Fraud

Lee Farkas, a former chairman of Taylor, Bean & 

Whitaker Mortgage Corporation (Taylor), an FHAapproved direct endorsement lender and Government 

National Mortgage Association (Ginnie Mae) issuer, 

was arrested after his indictment in U.S. District Court, 

Ocala, FL, for allegedly committing a conspiracy and 

bank, wire, and securities fraud. Farkas and others 

allegedly sold phony or previously pledged loans to 

investors in the secondary mortgage market and caused 

Taylor to submit false statements to HUD and Ginnie 

Mae. HUD and Ginnie Mae realized losses in excess 

of $1.9 billion. 

ppp

Vincent Sirolli, the former president of the nowdefunct Encore Mortgage, was sentenced in U.S. District 

Court, Philadelphia, PA, to16 months incarceration and 

3 years supervised release and ordered to pay HUD 

and other lenders more than $4.4 million in restitution 

for his earlier guilty plea to making false statements 

to HUD and committing a conspiracy and wire and 

identity fraud. From March 2001 to March 2003, Sirolli 

and others provided fraudulent loan documents used 

by unqualified borrowers to obtain FHA-insured 

mortgages. HUD realized losses in excess of $4.4 million 

after 183 mortgages defaulted. 

ppp

Darrell and Kandace Marriott, the former owners of 

One Way Home and Land, were collectively sentenced 

in Navarro and Kaufman County District Courts, 

Corsicana and Kaufman, TX, to 89 years incarceration 

for their earlier guilty pleas to engaging in an organized 

criminal activity, securing the execution of documents 

by deception, or misapplication of fiduciary property. 

In addition, Consuelo Cisneros, a former employee of 

Energy Homes, was sentenced to 40 days incarceration 

and 5 years supervised release and ordered to perform 

100 hours of community service for her earlier guilty 

plea to engaging in an organized criminal activity. From 

October 2003 to September 2008, Darrell and Kandace 

Marriott, Cisneros, and others forged home buyers’ 

signatures and provided fraudulent information or 

documents used by unqualified borrowers to obtain 

FHA-insured mortgages. HUD realized losses of $4.3 

million after 74 mortgages defaulted. 

ppp

Copyright 2010. The Washington Post. Washington, DC. 

Reprinted with permission.

Copyright 2010. Corsicana Daily Sun. Corsicana, TX. 

Reprinted with permission.
18

Chapter 1 - Single-Family Housing Programs

Leroy Hayden and Antonio Tavarez, a former manager and loan officer for the now-defunct U.S. Mortgage 

Corp. (U.S. Mortgage), each pled guilty in U.S. District Court, Newark, NJ, to committing a conspiracy to 

commit wire fraud. In addition, former U.S. Mortgage loan officer David Cobianchi was sentenced to 36 

months probation and ordered to pay HUD $115,593 in restitution for his earlier guilty plea to committing 

a conspiracy to make false statements to HUD. Between December 1998 and February 2009, Hayden, 

Tavarez, Cobianchi, and others fraudulently sold credit union mortgage loans to the Federal National 

Mortgage Association, used $139 million in illicit proceeds to fund personal and business investments and 

U.S. Mortgage operations, or provided fraudulent documents used by unqualified borrowers to obtain 

FHA-insured and conventional mortgages on properties with inflated values. HUD realized losses of $2.7 

million after 100 mortgages defaulted. 

ppp

Lorenzo Espinoza was sentenced in U.S. District Court, Los Angeles, CA, to 5 years incarceration and 

3 years probation and ordered to pay HUD $614,919 in restitution for his earlier guilty plea to committing 

money laundering, concealing assets and making false oaths and claims in a bankruptcy proceeding, and 

willfully failing to pay Federal income tax. Espinoza purchased multiple properties, obtained inflated 

appraisals, and resold the properties to straw borrowers who obtained FHA-insured mortgages. HUD 

realized losses in excess of $2 million after 32 mortgages defaulted.

ppp

Gordon Miller, a registered agent for Canyon View Escrow, pled guilty in U.S. District Court, Salt Lake 

City, UT, to committing wire fraud. From July 2002 to December 2004, Miller and others identified properties 

surrendered to bankruptcy courts in a number of States, posed as bankruptcy court or financial institution 

representatives and secured quit claim deeds from the property owners, rented about 300 properties and 

collected rents but failed to remit mortgage loan payments, and used the rents collected for personal 

expenditures. HUD realized losses of about $1.6 million after 45 mortgages defaulted. 

ppp

Maria Contreras, a loan officer for Atlantic Pacific Mortgage Company, doing business as America’s 

First Mortgage (America’s First), an FHA-approved direct endorsement lender, pled guilty in U.S. District 

Court, Fort Meyers, FL, to committing loan application fraud. In addition, America’s First president Juan 

Gonzalez and loan officer Mark Willberg were collectively sentenced to 12 months and 1 day incarceration, 

180 days home detention, 5 years probation, and 3 years supervised release for their earlier guilty pleas to 

committing loan application fraud or making false statements; Gonzalez also paid HUD $382,405 before 

sentencing, and Willberg was ordered to pay HUD $154,325 in restitution. From June 2006 to December 

2007, Gonzalez, Willberg, Contreras, and others created and submitted false information and documents 

used by unqualified borrowers to obtain FHA-insured mortgages. HUD realized losses in excess of $1.5 

million after nine mortgages defaulted. 

ppp

Stilianos and Kyriakos Mavroulis, the president and vice president of Fidelity Home Mortgage 

Corporation (Fidelity), were each indicted in U.S. District Court, Baltimore, MD, for allegedly committing a 

conspiracy to defraud Ginnie Mae. From 2007 to November 2008, Stilianos and Kyriako Mavroulis allegedly 

conspired, caused the submission of fraudulent Fidelity reports to Ginnie Mae, and failed to pay Ginnie 

Mae about $1.3 million in FHA-insured mortgage claim funds. 

ppp
Chapter 1 - Single-Family Housing Programs

19 Stafford Hilaire, a former vice president and loan officer of Catalina Century Mortgage, was sentenced in 

U.S. District Court, Denver, CO, to 32 months incarceration and 24 months supervised release and ordered 

to pay HUD and others $397,237 in restitution and forfeit $10,934 for his earlier conviction of committing 

money laundering and a conspiracy to defraud the United States. Hilaire 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. 

ppp

Rito and Rosemary Diaz, real estate agents for Realty World, Familia Reality, Home Life, and Network 

Realty, were collectively sentenced in U.S. District Court, Los Angeles, CA, to 12 months and 1 day 

incarceration and 72 months supervised probation and ordered to pay HUD $832,566 and First Magnus 

Financial $93,442 in restitution for their earlier guilty pleas to committing mail fraud and aiding and abetting. 

From 1997 to 2001, Rito and Rosemary Diaz provided or submitted fraudulent documents used by unqualified 

borrowers to obtain FHA-insured mortgages. HUD realized losses of $832,555 after 16 mortgages defaulted. 

ppp

Harold Meza, a former real estate agent for JLF Properties (JLF), pled guilty in U.S. District Court, 

Riverside, CA, to committing a conspiracy. In addition, former JLF real estate agent Karla Preciado, also 

known as Karla Venegas, was sentenced to 3 years probation and ordered to pay HUD $167,781 in restitution 

for her earlier guilty plea to committing a conspiracy. From 2003 to 2006, Meza, Preciado, and others created 

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

realized losses of $545,789 after 18 mortgages defaulted. 

ppp

Timothy Johnson and Pamela Terrell were each charged in U.S. District Court, Birmingham, AL, 

with allegedly making false statements, committing mail fraud, or providing a false statement to Federal 

investigators. In addition, Tamiko Davis pled guilty to making false statements. In 2007, Johnson allegedly 

created and mailed fraudulent Social Security Administration award letters allegedly used by Terrell and 

other unqualified borrowers to obtain FHA-insured mortgages, and from October 2007 to January 2010, 

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

mortgages. HUD realized losses of about $400,000 after four mortgages defaulted. 

ppp

Dema Daiga and Olu Campbell were each convicted in U.S. District Court, Baltimore, MD, of committing 

wire fraud and aggravated identity theft and aiding and abetting. From August 2008 to January 2010, Daiga 

and Campbell used false identities to purchase properties and provided or submitted false information and 

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

realized a loss of $395,000 after one mortgage defaulted.

ppp

Kenneth Lagonie, the president of Quality Homes Are Us, and Katrina Arrington, a former mortgage loan 

processor for the now-defunct N.J. Affordable Homes (Affordable Homes), were collectively sentenced in 

U.S. District Court, Newark, NJ, to 56 months incarceration and 72 months supervised release and ordered 

to pay a number of victims more than $53 million in restitution for their earlier guilty pleas to committing a 

conspiracy to commit wire fraud or defraud the United States. In addition, former Affordable Homes owner 

Wayne Puff, real estate appraiser Michael Meehan, closing attorney Mitchell Fishman, and Sydney Raposo, 
each previously sentenced for their earlier guilty pleas to making false statements to HUD or committing 

wire fraud or a conspiracy to commit wire fraud, were debarred from procurement and nonprocurement 

transactions with HUD and throughout the Executive Branch of the Federal Government indefinitely. 

Between March 2003 and September 2005, the above defendants and others provided false information to 

lure investors or created and submitted fraudulent appraisals and other loan documents used by unqualified 

borrowers to obtain FHA-insured and conventional mortgages. HUD realized losses of $327,839 after three 

mortgages defaulted. 

ppp

Tamiko Alston, the former owner of Above All Title & Escrow, pled guilty in U.S. District Court, 

Norfolk, VA, to committing a conspiracy to commit mail and wire fraud. From September 2007 to June 

2008, Alston assisted unqualified borrowers who obtained FHA-insured and conventional mortgages and 

created fraudulent HUD-1 settlement statements that failed to report the receipt and disbursement of actual 

settlement funds. HUD realized losses in excess of $275,000 after five mortgages defaulted. 

ppp

Derrick Boamah was arrested and charged in U.S. District Court, Worcester, MA, with allegedly making 

false statements and committing wire fraud. From May to October 2006, Boamah allegedly provided false 

information on mortgage applications and fraudulently obtained FHA-insured and conventional mortgages. 

HUD realized a loss of $257,099 after his mortgage defaulted.

ppp

A.J. Adewunmi, a former owner of Re/Max Associates Plus (Re/Max) and Cots Realty, and former 

Re/Max real estate agents Christian Juan and Patricia Olmos were each indicted in U.S. District Court, St. 

Louis, MO, for allegedly making false statements and committing a conspiracy and mail and wire fraud. 

The above defendants allegedly conspired and provided false documents used by unqualified borrowers 

to obtain FHA-insured and conventional mortgages. HUD realized losses of $239,000 after four mortgages 

defaulted.

ppp

Charles Smith, the owner of Smith’s Properties, and Smith’s Properties salesman Clarence Holt were 

each indicted in U.S. District Court, Sumter, SC, for allegedly causing false statements to be submitted to 

HUD. Smith and Holt allegedly caused the submission of fraudulent loan documents used by unqualified 

borrowers to obtain FHA-insured mortgages. HUD realized losses of $231,679 after four mortgages defaulted. 

ppp

Anthony Palermo, the president of First Start Mortgage, an FHA-approved lender; FHA borrowers Dereck 

Czerniak and Alexander Abramovich; and Jimmy Pililimis were each charged in Cook County Circuit Court, 

Chicago, IL, with allegedly committing theft, attempted identity theft, and financial institution and loan 

fraud. The above defendants allegedly created or provided fraudulent documents to obtain FHA-insured 

mortgages. HUD realized a loss of about $150,000 after one mortgage defaulted. 

ppp

Lashwanda Smith was sentenced in DeKalb County Superior Court, Atlanta, GA, to 10 years probation 

for her earlier guilty plea to committing residential mortgage fraud. In December 2005, Smith provided 

20

Chapter 1 - Single-Family Housing Programs
fraudulent documents and obtained an FHA-insured mortgage. HUD realized a loss of $115,407 after her 

mortgage defaulted. 

ppp

Rebecca Loeffler, also known as Rebecca Bischoff, was sentenced in U.S. District Court, Kansas City, MO, 

to 5 years probation and ordered to pay HUD $115,051 in restitution for her earlier guilty plea to making a 

false statement. In July 2007, Loeffler provided false information and obtained an FHA-insured mortgage. 

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

ppp

Doris Strickland, a fabricated employee of the James and Albert Group, also known as the James and 

Albert Corporation, pled guilty in U.S. District Court, Cleveland, OH, to committing a conspiracy, forgery, 

and bank fraud. Strickland and others provided fraudulent documents to obtain FHA-insured and 

conventional mortgages. HUD realized a loss of $112,763 after one mortgage defaulted.

ppp

Meggan and David Alexander were each charged in a superseding indictment filed in U.S. District Court, 

Cedar Rapids, IA, with allegedly making false statements. In April 2007, Meggan Alexander allegedly 

provided false information when she obtained an FHA-insured mortgage, and in September 2007, Meggan 

and David Alexander allegedly provided false information in an attempt to avoid foreclosure. HUD realized 

a loss of $110,772 after the mortgage defaulted.

ppp

Rab Nawaz, the owner of Excellent Painting; Syed Babar; and eight additional individuals were each 

charged in superseding indictments filed in U.S. District Court, New Haven, CT, with allegedly making 

false statements and committing a conspiracy to commit wire fraud or defraud the United States; Nawaz 

was also charged with allegedly obstructing justice. From February 2007 to April 2010, Nawaz, Babar, and 

others allegedly conspired, resold properties at inflated values, and provided false information or fraudulent 

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

realized a loss of $75,000 after one mortgage defaulted.

ppp

Patricia Donaldson was indicted in Dallas County District Court, Dallas, TX, for allegedly engaging in 

an organized crime, making false statements to obtain property or credit, and tampering with a government 

record. Donaldson allegedly conspired with others and created or provided fraudulent documents used 

by an unqualified borrower to obtain an FHA-insured mortgage. HUD realized a loss of $60,358 after 

the mortgage defaulted. In addition, Donaldson allegedly used a false Social Security number (SSN) and 

fraudulently obtained Federal student loans.

ppp

LeeAnn Bible pled guilty in U.S. District Court, Fort Worth, TX, to making false entries to HUD. In 

October 2002, Bible provided fraudulent documents and obtained an FHA-insured mortgage. HUD realized 

a loss of $18,277 after her mortgage defaulted.

ppp

21

Chapter 1 - Single-Family Housing Programs
More than 30 individuals were arrested and charged or indicted in U.S. District Court, Manhattan, NY, 

for allegedly committing a conspiracy to commit bank and wire fraud. Dubbed “Operation Stolen Dreams,” 

the above defendants allegedly participated in FHA-insured and conventional mortgage fraud schemes that 

involved counterfeit documents, straw buyers, and fraudulent loan modification programs. HUD losses 

have not yet been determined.

ppp

Raquel Berger, a realtor for Exit Dream Home Realty, Inc., and 28 other individuals were each indicted 

or charged in U.S. District Court, Newark, NJ, for allegedly committing a conspiracy to commit wire fraud, 

and 26 of the above defendants were arrested. The above defendants allegedly conspired and created or 

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

mortgages. HUD losses have not yet been determined.

ppp

Fourteen individuals employed as mortgage loan brokers, real estate agents, tax professionals, and other 

professions were each indicted in U.S. District Court, Los Angeles, CA, for allegedly making false statements 

and committing bank fraud and a conspiracy to commit bank fraud. The above defendants allegedly 

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

mortgages. HUD losses have not yet been determined.

ppp

Gregory Newsome, a loan officer for Universal Bancorp; Alan Greer, a realtor for CNR & I; FHA 

borrowers Eddie Greer and Brenda Strong; and Johnny Webb and Nicole Johnson, also known as Nicole 

Jones, were each charged in Cook County Circuit Court, Chicago, IL, with allegedly organizing a financial 

crimes enterprise and committing theft, money laundering, a conspiracy to commit financial crimes, and a 

continuing financial crimes enterprise. From 2007 to 2009, the above defendants allegedly conspired and 

provided false information or fraudulent documents to obtain FHA-insured and conventional mortgages. 

HUD losses have not yet been determined.

ppp

Lauro Gutierrez, the owner of LG Home Improvements, Inc., was indicted in U.S. District Court, 

Brooklyn, NY, for allegedly committing a conspiracy to commit bank and wire fraud. From April 2006 to 

July 2008, Gutierrez allegedly provided fraudulent employment verifications used by unqualified borrowers 

to obtain FHA-insured mortgages. HUD losses have not yet been determined.

ppp

David Vickers, a general contractor with J & G Homes, Inc., was charged in a superseding indictment 

filed in U. S. District Court, Jacksonville, FL, with allegedly committing a conspiracy to commit wire, mail, 

and bank fraud. Vickers and others allegedly provided downpayment funds and assisted unqualified 

borrowers who obtained FHA-insured mortgages. HUD losses have not yet been determined.

ppp

Great Country Mortgage Bankers loan officers Curtis Poore, Fermin Bergouingnan, and William Alonso 

each pled guilty in U.S. District Court, Miami, FL, to committing a conspiracy to commit wire fraud. 

In addition, Jose Cazas, a developer for the Cedar Pointe Condominiums, was sentenced to 33 months 

22

Chapter 1 - Single-Family Housing Programs
incarceration and 36 months supervised release for his earlier guilty plea to committing a conspiracy to 

commit wire fraud. From April 2007 to January 2008, the above defendants and others created and submitted 

false information and fraudulent documents used by unqualified borrowers to obtain 46 FHA-insured 

mortgages. Since the City of Miami condemned the Cedar Pointe Condominiums and the units cannot 

convey, HUD paid no claims and realized no losses.

ppp

Rhode Island State Senator Christopher Maselli was charged in U.S. District Court, Providence, RI, with 

allegedly committing bank fraud. From December 2007 to March 2009, Maselli allegedly provided false 

information and fraudulent documents when he obtained four FHA-insured mortgages and other consumer 

loans. HUD realized no losses.

ppp

Giovanni Barreto, an Internal Revenue Service revenue officer, was arrested after his indictment in U.S. 

District Court, Camden, NJ, for allegedly making false statements and committing wire fraud and aggravated 

identity theft. Barreto allegedly provided false information and forged his estranged wife’s signature on a 

number of documents relating to the origination of an FHA-insured mortgage.

Home Equity Conversion Mortgage Program Fraud

Jonathan Kimpson pled guilty in U.S. District Court, Atlanta, GA, to committing a conspiracy and 

aggravated identity theft. From October 2007 to February 2010, Kimpson and others conspired and created 

or submitted false information or fraudulent documents used by elderly borrowers to obtain inflated reverse 

mortgages through the HUD HECM program and diverted the illicit equity proceeds obtained into accounts 

they controlled. HUD realized losses in excess of $1 million. 

ppp

Mary Fulbright was indicted in U.S. District Court, Rochester, NY, for allegedly committing bank 

fraud. From October to December 2008, Fulbright allegedly used a quit claim deed and illegally changed 

the ownership of her father’s property, provided false information and used a power of attorney document 

to certify and close on a reverse mortgage through the HUD HECM program in her father’s name, and 

fraudulently obtained $176,364 in equity proceeds she was not entitled to receive. 

ppp

Norma Cheesman, a former elderly health care provider, was arrested and charged in King County 

Superior Court, Seattle, WA, with allegedly committing forgery, theft, and attempted theft. Between 2007 

and August 2008, Cheesman allegedly deceived an elderly couple in her care and misappropriated and used 

about $157,700 in equity proceeds they had obtained through the HUD HECM program. 

ppp

Julia Jerome was indicted in Richland County Court of General Sessions, Columbia, SC, for allegedly 

exploiting a vulnerable adult. Between February and November 2008, Jerome allegedly assisted an elderly 

homeowner who applied for and obtained a reverse mortgage through the HUD HECM program and 

fraudulently used $52,815 in equity proceeds that belonged to the victim. 

ppp

23

Chapter 1 - Single-Family Housing Programs
Marilyn James was charged in Jackson County 

Circuit Court, Kansas City, MO, with allegedly 

committing forgery and financial exploitation of 

the elderly or disabled. James allegedly filed a quit 

claim deed and transferred ownership of a property 

to an elderly individual suffering from Alzheimer’s 

disease, used the victim’s identity and applied for a 

reverse mortgage through the HUD HECM program, 

and fraudulently obtained $64,000 in equity proceeds. 

In addition, James allegedly obtained $9,000 after she 

fraudulently applied for a loan against the victim’s 

life insurance policy. 

ppp

Benjamin Okeke, a loan officer for Beli Commercial 

Mortgage, was indicted in Davidson County General 

Sessions Court, Nashville, TN, for allegedly 

committing theft. In February 2010, a HUD HECM 

program applicant provided Okeke with $3,494 to 

settle a credit card debt before his loan closing, but 

Okeke allegedly stole and personally used these 

funds. 

Civil and Administrative Actions

John Munson, the former president of Anchor Mortgage Corporation (Anchor Mortgage), and Anchor 

Mortgage were each found liable in U.S. District Court, Chicago, IL, and ordered to pay the U.S. Department 

of Justice more than $2.9 million for violating the False Claims Act. From 1996 to 2000, Munson and previously 

convicted Anchor Mortgage employees created or submitted fraudulent documents used by unqualified 

borrowers to obtain FHA-insured mortgages, and Anchor Mortgage failed to report referral fees it obtained 

from previously convicted Casalinda Realty employees on HUD-1 settlement statements. HUD realized 

losses in excess of $1 million after 11 mortgages defaulted.

ppp

Ideal Mortgage Bankers, doing business as Lend America, was issued a permanent civil injunction 

filed in U.S. District Court, Brooklyn, NY. The civil injunction prevents Lend America and Lend America 

employees or agents from submitting claims for FHA insurance on loans in default. In addition, Lend America 

is prohibited from originating, underwriting, or submitting loans to be insured by FHA or participating 

in any Federal program involving mortgage loans. To date, HUD has realized losses in excess of $860,000 

after six mortgages defaulted.

ppp

Daniel Fox, a former real estate closing attorney previously sentenced in U.S. District Court, Newark, 

NJ, for his earlier guilty plea to making false statements to HUD, was debarred from procurement and 

nonprocurement transactions with HUD and throughout the Executive Branch of the Federal Government 

for 60 months. From October 2000 to November 2008, Fox and others created and provided fraudulent 

24

Chapter 1 - Single-Family Housing Programs

Copyright 2010. The Kansas City Star. Kansas City, MO. 

Reprinted with permission.
documents used by unqualified borrowers to obtain FHA-insured mortgages. HUD realized losses of 

$603,074 after 11 mortgages defaulted.

ppp

Nathan Russo, a mortgage broker and vice president of Action Mortgage Corporation who was previously 

indicted in U.S. District Court, Hartford, CT, for allegedly making false statements and committing a 

conspiracy to commit wire fraud, 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. In addition, Action Mortgage Corporation, a HUD-approved 

loan correspondent, was suspended from approving FHA-insured loans for a minimum of 6 months for 

its failure to report the Russo indictment to HUD. From February 2007 to April 2010, Russo and others 

allegedly conspired and resold properties at inflated values or provided false information or documents 

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

of $75,000 after one mortgage defaulted.

ppp

FHA mortgage lender W.R. Starkey Mortgage, LLP (Starkey), and George Varsamis, a former salesperson 

for K and B Homebuilders and Homes America, a subsidiary of the Phoenix Housing Group, each entered 

into consent judgments filed in North Carolina Superior Court, Raleigh, NC, and collectively agreed to 

pay more than $4.5 million in compensatory damages to the North Carolina Department of Justice and a 

number of victims. From 2007 to 2008, Starkey and its employees or agents allegedly used false information 

and assisted unqualified borrowers who obtained about 171 FHA, U.S. Department of Agriculture, or 

conventional mortgages, and Varsamis allegedly engaged in unfair and deceptive practices involving the 

sale and financing of manufactured and modular homes. The consent judgment also permanently enjoins 

Varsamis from engaging in real estate, lending, or other related activities.

ppp

Jermaine Spencer, a former HUD Officer/Teacher Next Door program participant and Bureau of Prisons 

employee who previously pled guilty in U.S. District Court, Denver, CO, to submitting false statements, 

entered into a PFCRA settlement and agreed to pay HUD $83,800. In 2003, Spencer obtained a HUD-owned 

property and received a $72,500 discount but failed to reside in the property or report his nonresidency on 

HUD certifications.

ppp

Clay Preuit, a former officer of Transnation Title & Escrow who previously pled guilty in U.S. District 

Court, Boise, ID, to aiding and abetting, entered into a PFCRA settlement and agreed to pay HUD $10,000. 

In 1998, Preuit assisted an unqualified borrower who submitted false information to obtain an FHA-insured 

mortgage.

Other Single-Family Fraud

Eleven individuals were each indicted in Dallas County District Court, Dallas, TX, for allegedly securing 

the execution of documents by deception. The above defendants allegedly used false SSNs to obtain FHAinsured mortages. HUD realized losses of $452,547 after nine mortgages defaulted.

ppp

25

Chapter 1 - Single-Family Housing Programs
Louis Luevano, also known as Ray Luevano, a former real estate broker for Harvest Realty who was 

previously sentenced to 6 years incarceration and 5 years parole for his earlier conviction of offering a false 

instrument for recording and committing theft, a conspiracy to commit theft, a conspiracy in an attempt 

to influence a public servant, forgery, and computer crimes, appeared in Adams County District Court, 

Brighton, CO, and was ordered to pay HUD $378,045 in restitution. Luevano and others provided false 

SSNs and fraudulent documents used by unqualified borrowers to obtain FHA-insured mortgages. HUD 

realized losses of $378,045 after five mortgages defaulted.

ppp

Gennaro Rauso, the owner of D&B Property Investors, was charged in U.S. District Court, Philadelphia, 

PA, with allegedly committing bankruptcy and mail fraud, equity skimming, and a number of Federal 

income tax violations. Rauso allegedly persuaded more than 200 distressed homeowners to transfer the 

ownership of their properties to him, including four properties with FHA-insured mortgages, and filed 

fraudulent bankruptcy petitions to delay foreclosure proceedings. HUD realized losses of $118,000 after 

four mortgages defaulted.

ppp

Jason Martinez, a real estate agent and mortgage broker for Merit Mortgage Financial, LLC, was sentenced 

in U.S. District Court, Tampa, FL, to 36 months incarceration and 60 months probation and ordered to 

undergo 500 hours in a drug control program and pay HUD $15,500 and others more than $2.9 million in 

restitution for his earlier guilty plea to committing theft of government funds and a conspiracy to commit 

mail and wire fraud. From February 2005 to May 2007, Martinez assisted straw buyers with the fraudulent 

purchase of five HUD real estate-owned properties, including a property purchased by his spouse through 

the HUD Officer/Teacher Next Door program. HUD realized a loss of $15,500 after one mortgage defaulted.

ppp

Richard Swoveland was sentenced in Marion County Superior Court, Indianapolis, IN, to 9.5 years 

incarceration for his earlier guilty plea to committing theft and forgery. From December 2009 to March 2010, 

Swoveland entered five HUD real estate-owned properties without authorization, fraudulently claimed 

ownership of the properties, and collected about $6,250 in tenant security deposits and rents. 

ppp

John Murphy, the former president of Alliance Mortgage Banking Corporation (Alliance), a HUDapproved direct endorsement lender, pled guilty in U.S. District Court, Central Islip, NY, to committing bank 

fraud. Murphy fraudulently used more than $3.3 million in restricted funds from the Alliance warehouse 

line of credit and issued checks for 36 mortgage loans, including eight FHA-insured mortgages, without 

sufficient funds in the Alliance bank account.

ppp

Kiya McNeal, an owner of Lloyds and Handson Abstracts of Philadelphia (Lloyds and Handson), was 

charged in U.S. District Court, Philadelphia, PA, with allegedly committing wire fraud. From May 2008 

to January 2009, McNeal allegedly prepared false HUD-1 forms and electronically diverted and personally 

used more than $225,000 in Lloyds and Handson settlement funds, including funds associated with an 

FHA-insured mortgage.

ppp

26

Chapter 1 - Single-Family Housing Programs
27

Chapter 1 - Single-Family Housing Programs

Antone Thompson, doing business as TnT Engineering, was indicted in U.S. District Court, Salt Lake 

City, UT, for allegedly making false statements to HUD. From February 2005 to July 2008, Thompson 

allegedly completed, certified, and submitted more than 70 manufactured housing engineering reports to 

HUD after his engineering license had been suspended. HUD losses have not yet been determined.

ppp

JoAnn Williams was arrested and charged in Queens County Criminal Court, Queens, NY, with allegedly 

committing forgery, grand larceny, and identity theft; criminal or unlawful possession of a forged instrument, 

stolen property, and personal identification; falsifying business records; and offering a false instrument for 

filing. From May 2007 to August 2010, Williams allegedly filed false documents with HUD, fraudulently 

obtained an FHA mortgage insurance reimbursement check, forged the victim’s signature, and deposited 

the illicit funds into her bank account. HUD losses have not yet been determined.

ppp

Darius Morris and James Smith were each arrested and charged in Wayne County District Court, Detroit, 

MI, with allegedly committing arson, a conspiracy to commit arson, and money laundering; using a computer 

to commit a crime under false pretenses; and conducting a criminal enterprise. In addition, George Mealy 

and Walter McNabb each pled guilty to committing arson and obtaining property by false pretenses. Morris 

and Smith allegedly and Mealy and McNabb admittedly illegally entered and fraudulently sold more than 

20 HUD and other bank-owned properties and destroyed one property by arson. HUD losses have not yet 

been determined.

ppp

Taeana Stokes was sentenced in U.S. District Court, Springfield, IL, to 13 months incarceration and 3 

years probation for her earlier conviction of committing bankruptcy fraud. From February 2003 to January 

2006, Stokes failed to report four prior bankruptcies on her current bankruptcy petition and submitted 

forged documents in an effort to delay FHA foreclosure proceedings and obtain additional credit. HUD 

losses have not yet been determined.

ppp

Scott Archer, founder of Dominion Investment Group, was arrested and charged in Genesee County 

District Court, Flint, MI, with allegedly committing a criminal enterprise and crimes under false pretenses. 

Archer allegedly claimed ownership of 70 homes, including two HUD real estate-owned properties, and 

fraudulently transferred the ownership of these properties to other individuals. HUD losses have not yet 

been determined.

ppp

John Hemphill, doing business as United States Mortgage Release Corporation, was convicted in U.S. 

District Court, Chicago, IL, of committing mail fraud and impersonating an officer, agent, or employee acting 

under the authority of the United States. From May to October 2009, Hemphill filed fictitious deeds and 

transferred the ownership of properties belonging to others, including a HUD real estate-owned property, 

and posed as a Federal receiver to prospective buyers. HUD losses have not yet been determined.

ppp
28

Chapter 1 - Single-Family Housing Programs

Robert Mora was sentenced in Maricopa County Superior Court, Phoenix, AZ, to 60 months probation 

and ordered to pay the Maricopa County Sheriff’s Office and a number of victims $272,960 in restitution 

for his earlier guilty plea to committing forgery. Mora and others filed fraudulent ownership deeds and 

obtained equity loans on properties they did not own, including a property with an FHA-insured mortgage. 

HUD losses have not yet been determined.

ppp

Jeffrey Weems pled guilty in Wayne County Circuit Court, Detroit, MI, to breaking and entering, and 

Kenneth Collins was sentenced to 1 year probation for his earlier guilty plea to breaking and entering. 

Weems and Collins entered two HUD real estate-owned properties and removed the furnaces and water 

heaters from both properties. HUD losses have not yet been determined.

ppp
29

Chapter 1 - Single-Family Housing Programs

Inspections and Evaluations

ACORN Housing Corporation, Inc., Evaluation of HUD Housing 

Counseling Grant Expenditures

In response to a congressional request, HUD OIG performed an evaluation of grant funds awarded 

under HUD’s Housing Counseling Program to ACORN Housing Corporation, Inc. (AHC), now operating 

as Affordable Housing Centers of America (AHCOA), to determine whether AHC used its FY 2008 and 

2009 HUD grant funds, totaling more than $3.2 million, in compliance with grant agreement requirements. 

Tests focused on HUD funds used to pay the salary and fringe benefit costs (salary expenses) of AHC staff 

that provided housing counseling directly to clients. More than $2.5 million was charged to the HUD 

grants as salary expenses (more than $1.3 million or 83 percent in FY 2008 and nearly $1.2 million or 73 

percent in FY 2009). 

Salary expenses charged by AHC to the HUD housing counseling grants were not fully supported. 

Payroll records did not comply with Office of Management and Budget (OMB) Circular A-122; for 

example, time sheets did not distribute hours by grant. Further, the caseload allocation method used by 

AHC to determine the amount of HUD-chargeable salary expenses was problematic and unsupported. 

Consequently, HUD had no assurance that the counselors’ salary expenses charged to the HUD grants 

reflected grant-eligible services. Also, ineligible salary expenses, totaling $65,548, were charged to the FY 

2009 HUD grant, and Federal procurement standards at 24 CFR (Code of Federal Regulations) Part 84, 

which require “open and free” competition, were not met. 

OIG recommended that HUD require AHCOA to reimburse the program for unsupported and ineligible 

salary expenses charged to the HUD housing counseling grants and implement a time and activities 

system that meets OMB Circular A-122 requirements. Further, AHCOA needs to implement a procurement 

system that complies with 24 CFR Part 84. OIG also recommended that HUD consider placing AHCOA in 

“inactive” status while it initiates corrective actions to address the exceptions and recommendations noted 

and provide AHCOA with technical guidance and assistance as needed. (I&E Report: IED-10-002)

Evaluation of the Effectiveness of HUD’s Credit Watch Termination 

Initiative in Deterring Deficiencies in the Performance of Lenders’ 

Loans

HUD OIG evaluated HUD’s Credit Watch Termination Initiative (Credit Watch) to determine whether 

it was used effectively to deter deficiencies and substandard performance in FHA single-family lending 

and whether Credit Watch could be manipulated, allowing lenders to avoid HUD’s scrutiny and program 

sanctions. 

While a past instance in which a lender manipulated the Credit Watch program to avoid HUD 

scrutiny (i.e., closing an “at-risk” branch office approaching the 200 percent termination threshold and 

then opening a new branch office in the same lending area to originate loans) was noted, the review did 

not disclose a systemic problem. Credit Watch statistical reports effectively identified lender branch 

offices with unacceptable high default and claim rates. However, historically, (1) Credit Watch analyses 

and sanctions were narrower in scope than permitted by Federal regulations, (2) results of the analyses 

were not routinely shared or coordinated with other departmental oversight efforts, and (3) procedures 

for proposed termination actions were not available and records were incomplete. One other matter was 
30

Chapter 1 - Single-Family Housing Programs

noted concerning procedures for determining and supporting the de minimis amount used to identify 

lenders that are subject to the Credit Watch process. 

OIG recommended that HUD establish a formal process to better coordinate the Credit Watch results 

with other departmental oversight efforts. Further, HUD needs to formally document its procedures for 

postponing and withdrawing proposed Credit Watch terminations and establish a uniform record-keeping 

system for the process and results. OIG also recommended that HUD formally document its procedures 

for the de minimis amount and ensure that the basis for the amount is supported. (I&E Report: IED-10-003)

ppp
Chapter 2

Public and Indian

Housing Programs
The U.S. Department of Housing and Urban Development (HUD) provides grants and subsidies to 4,100 

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 HUD’s Office of Inspector General (OIG), has conducted a number of outreach efforts (see 

chapter 8, page 118).

Audit

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

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

during this reporting period

Region 1 - 12%

Region 2 - 10%

Region 3 - 15% 

Region 4 - 12%

Region 5 - 17%

Region 6 - 12%

Regions 7/8/10 - 17%

Region 9 - 5%

Region 11 - (N/A)*

* The total public and Indian housing audits, questioned costs, and funds put to better use amounts include any American 

Recovery and Reinvestment Act of 2009 (18 audits) and disaster recovery (1 audit) type audits conducted in the public and 

Indian housing area. The writeups for these audits are shown separately in chapters 5 and 6 of this semiannual report.

Key program results Questioned costs Funds put to better use

$39.3 million $40.1 million

Page 33

Page 37

Page 38

Page 41

Audit 41 audits*

Our

focus

• Section 8 Housing Choice Voucher and leased housing 

program activities at public housing agencies

• Public housing and voucher programs

• Public housing program activities

• Review of public housing authorities to determine 

whether multifamily property owners were overpaid 

32

Chapter 2 - Public and Indian Housing Programs

* This does not include disaster relief audits. See chapter 6 for these reviews.
During this reporting period, OIG reviewed HUD’s controls over the Section 8 Housing Choice Voucher 

and leased housing programs, public housing and voucher programs, and public housing activities.

Section 8 Housing Choice Voucher and Leased Housing Program 

Activities at Public Housing Agencies

Audits of the Section 8 Housing Choice Voucher program continued to be 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 reviews were to determine whether the units met housing 

quality standards, the PHA managed the program according to HUD requirements, and the eligibility of 

the tenants was correctly determined. The following section illustrates the audits conducted in the Section 

8 Housing Choice Voucher program area. 

ppp

HUD OIG audited the Philadelphia Housing Authority in 

Philadelphia, 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 ensure that its program 

units met housing quality standards as required. Of 67 program units 

inspected, 62 did not meet HUD’s housing quality standards, 29 of which 

were in material noncompliance with HUD’s standards. The Authority 

spent nearly $69,000 in program funds and received more than $2,000 

in administrative fees for these 29 units. 

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 non-Federal 

funds for the improper use of program and administrative funds for units 

that materially failed to meet HUD’s housing quality standards, and (3) 

implement adequate procedures and controls to ensure that in the future, 

program units meet housing quality standards to prevent an estimated 

$18.6 million from being spent annually on units that materially fail to 

meet HUD’s standards. (Audit Report: 2010-PH-1011)

ppp

HUD OIG audited the Housing Authority of the City and County of 

San Francisco, CA’s Section 8 housing quality standards inspections of 

Housing Choice Voucher program-funded housing units and found that 

the Authority did not conduct its housing quality standards inspections 

of voucher-funded housing units in accordance with HUD rules and 

regulations. Of the 65 housing units inspected, 58 did not meet housing 

quality standards, and 46 of those units had material deficiencies. 

OIG recommended that HUD require the Authority to (1) repay 

HUD more than $279,000 in expended housing assistance payments for 

housing units that were deemed materially deficient; (2) establish and 

implement policies, procedures, and controls regarding its inspection 

33

Chapter 2 - Public and Indian Housing Programs

Copyright 2010. The Philadelphia Inquirer. 

Philadelphia, PA. Reprinted with permission.
process to prevent more than $11.4 million in HUD funds from being spent on housing units with material 

housing quality standards deficiencies; and (3) verify that the applicable owners have taken appropriate 

corrective action regarding the housing quality standards deficiencies identified or take enforcement action. 

(Audit Report: 2010-LA-1015)

ppp

HUD OIG audited the Section 8 Project-Based Voucher program at the DuPage Housing Authority in 

Wheaton, IL, and found that the Authority inappropriately administered its program. It lacked the required 

eligibility documentation for its program projects to support more than $3.4 million in housing assistance 

payments. Further, it made improper housing assistance payments, totaling more than $33,000, for 8 months 

before the effective dates of two housing assistance payments contracts.

The Authority executed housing assistance payments contracts with inappropriate contract rents. The 

contract rents for 6 of the Authority’s 11 projects exceeded the maximum allowable amounts according to 

HUD’s requirements. Based on the inappropriate contract rents, the Authority overpaid nearly $270,000 

in housing assistance. 

The Authority did not properly select program households from waiting lists. It allowed its program 

projects to select the households and did not perform quality control reviews of the selection process. As 

a result, it inappropriately paid more than $188,000 in housing assistance for 14 households that did not 

meet project eligibility requirements and was unable to support more than $57,000 in housing assistance 

payments for 3 households. Further, it underpaid $200 in housing assistance for two households. 

OIG recommended that HUD require the Authority to (1) reimburse its program from non-Federal funds 

for the improper use of more than $600,000 in program funds, (2) provide documentation or reimburse its 

program from non-Federal funds nearly $4 million in program funds, and (3) implement adequate procedures 

and controls to address the findings cited. These procedures and controls should help to ensure that nearly 

$200,000 in program funds is spent on program administration that meets HUD’s requirements over the 

next year. OIG also recommended that HUD review the Authority’s household selections to ensure that 

they comply with HUD’s requirements. If the Authority fails to comply with HUD’s requirements, HUD 

should take appropriate action against the Authority and/or its applicable employee(s). (Audit Report: 

2010-CH-1008)

ppp

HUD OIG audited the Section 8 Housing Choice Voucher and low-income public housing programs of 

the Waltham Housing Authority in Waltham, MA, and found that the Authority generally administered 

the programs efficiently and effectively and in compliance with its annual contributions contract and HUD 

regulations. It also generally accounted for the use of its Section 8 administrative and local reserves to 

ensure proper use. However, it did not (1) properly account for and report interprogram fund transactions 

between its Federal and State programs, resulting in nearly $3.9 million in unsupported transactions being 

recorded in its program accounts; (2) provide support and justification for nearly $552,000 in contracts to 

show that the contracts were properly documented; and (3) establish a reasonable travel policy to ensure 

that travelers submitted detailed travel expense vouchers.

OIG recommended that HUD require the Authority to (1) provide support for the interprogram fund 

transactions that were out of balance between Federal and State programs and implement procedures for 

recording and reconciling interprogram transactions and correcting imbalances, (2) provide support and 

justification for its contracts or reimburse its operating funds from non-Federal funds for the applicable 

34

Chapter 2 - Public and Indian Housing Programs
amounts, and (3) revise its travel policy and obtain approval of the policy from the Authority’s board of 

commissioners. (Audit Report: 2010-BO-1006)

ppp

HUD OIG audited the Housing Authority of DeKalb County, GA’s use of its net restricted assets and 

found that the Authority used more than $2.5 million of its net restricted assets to pay ineligible program 

and administrative expenses for other assisted housing programs. It did not (1) maintain separate bank 

accounts, (2) properly track its net restricted asset funds, and (3) have proper policies and controls in place. 

As a result, it misused net restricted asset funds that could have provided assistance to eligible families in 

its housing voucher program.

OIG recommended that HUD require the Authority to (1) reconcile its books and records to determine the 

amount of net restricted asset funds used to pay program and administrative expenses for various housing 

programs, (2) reimburse the net restricted assets fund account from non-Federal funds the $2.5 million or 

the current amount owed from various housing programs, and (3) implement its established policy for the 

use of net restricted assets to ensure that net restricted assets are properly used and bank accounts remain 

separated for the various programs. (Audit Report: 2010-AT-1010)

ppp

HUD OIG audited the Section 8 Project-Based Voucher program of the Michigan State Housing 

Development Authority in Lansing, MI, and found that the Authority’s program administration regarding 

documentation of households’ eligibility and housing assistance and utility allowance payment calculations 

was inadequate. The Authority did not ensure that its household files contained the required documentation 

to support households’ admission to and continued assistance on the program. All 89 files reviewed were 

missing documentation required by HUD and the Authority’s program administrative plan to support 

nearly $629,000 in housing assistance and utility allowance payments and associated administrative fees.

In addition, the Authority did not effectively manage its housing assistance calculation and payment 

process in accordance with HUD requirements and its program administrative plan, resulting in nearly 

$23,000 in overpayments for 25 households and more than $3,000 in underpayments for 29 households. 

Further, it received nearly $33,000 in program administrative fees for these households. The Authority also 

inappropriately made more than $47,000 in overpayments of housing assistance and utility allowances for 

units when it failed to ensure that units receiving program housing assistance payments were under an 

executed housing assistance payments contract. 

The Authority did not effectively use HUD’s Enterprise Income Verification system Income Discrepancy 

Report to recover or reimburse program housing assistance and utility allowance payments for households 

with unreported, underreported, or overestimated income, resulting in more than $32,000 in overpayments 

and more than $1,700 in underpayments of housing assistance and utility allowances. Further, it did not 

remove six deceased individuals from its program and did not recover more than $6,000 in housing assistance 

and utility allowance payments from the properties’ owners.

OIG recommended that HUD require the Authority to (1) reimburse its program from non-Federal 

funds for the improper use of nearly $118,000 in program funds, (2) provide documentation or reimburse 

its program more than $757,000 from non-Federal funds for the unsupported payments cited, and (3) 

implement adequate procedures and controls to address the findings cited to prevent nearly $89,000 in 

program funds from being spent on excessive housing assistance and utility allowance payments over the 

next year. (Audit Report: 2010-CH-1007)

ppp

35

Chapter 2 - Public and Indian Housing Programs
HUD OIG completed two audits of the Housing Authority of the City of Terre Haute, IN’s Section 

8 Housing Choice Voucher program. The first audit found that the Authority’s program administration 

regarding housing unit conditions was inadequate. Of the 55 housing units inspected, 31 did not meet HUD’s 

housing quality standards, and 22 had 133 violations that existed at the time of the Authority’s previous 

inspections. The 22 units had between 1 and 32 preexisting violations per unit. The Authority generally 

complied with Federal regulations when abating units that failed inspections.

OIG recommended that HUD require the Authority to reimburse its program from non-Federal funds for 

the improper use of more than $11,000 in program funds and implement adequate procedures and controls 

to address the finding cited to prevent more than $341,000 from being spent on units with material housing 

quality standards violations over the next year. (Audit Report: 2010-CH-1005)

The second audit found that the Authority paid housing assistance for the wrong payment standard 

and inappropriate housing and created conflicts of interest regarding its for-profit and nonprofit entities. 

Households on the waiting list were forced to increase their waiting period before receiving assistance under 

the program. In addition, the Authority paid nearly $117,000 in housing assistance for units that were not 

allowed under HUD’s requirements. Further, there was no assurance that households lived in qualified 

housing, paid the appropriate rents, and were housed fairly and that applicants were properly screened. 

The Authority also failed to operate its Family Self-Sufficiency program correctly and made more than 

$58,000 in escrow payments to households contrary to Federal requirements. Lastly, the Authority’s program 

administration regarding housing assistance payment calculations, documentation to support households’ 

eligibility for housing assistance, and its Section 8 project-based certificate contract was inadequate.

OIG recommended that HUD require the Authority to (1) implement a detailed comprehensive plan to 

improve its programs, (2) reimburse its Housing Choice Voucher program more than $126,000 from nonFederal funds for the improper use of program funds, (3) reimburse its Family Self-Sufficiency program 

more than $58,000 from non-Federal funds for its improper use of funds, (4) provide support or reimburse 

its Housing Choice Voucher program nearly $9,000 from non-Federal funds for the unsupported housing 

assistance payments, and (5) implement adequate procedures and controls to address the findings cited to 

prevent more than $15,000 in program funds from being spent on excessive housing assistance and utility 

allowances over the next year.

OIG also recommended that HUD take administrative action against the former executive director and 

former board of commissioners for failing to administer the Authority according to HUD’s and its own 

requirements. (Audit Report: 2010-CH-1013)

ppp

HUD OIG audited the Section 8 program of the Compton Housing Authority in Compton, CA, and 

found that the Authority did not use Section 8 program funds in accordance with HUD rules and regulations 

as it did not fully comply with portability procedures and responsibilities. It was not fully reimbursed for 

housing assistance payments made for its portability tenants. Additionally, there was a lack of tracking and 

reconciliation between what was paid and what was received. As a result, over the years, the Authority 

used more than $2.2 million from its net restricted assets account to pay for the shortfall, operated in a deficit 

situation, and did not have sufficient funds to pay for its portability tenants. Ultimately, these deficiencies 

put tenants at risk of losing their housing assistance. 

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

reconcile portability tenants’ housing assistance paid and received from the respective initial public housing 

authorities, (2) seek reimbursement of nearly $190,000 from initial housing authorities for unreimbursed 

36

Chapter 2 - Public and Indian Housing Programs
housing assistance payments for portability tenants, (3) reimburse nearly $56,000 in overpaid housing 

assistance to the respective initial housing authorities, (4) and evaluate and reconcile its portability tenant 

billings and payments for calendar year 2010 after implementation of the procedures and controls. (Audit 

Report: 2010-LA-1016)

ppp

HUD OIG audited the Section 8 Housing Choice Voucher program of the Lake Metropolitan Housing 

Authority in Painesville, OH, based upon a congressional request and found that the Authority’s program 

administration regarding its program procurement and zero-income households was inadequate but it 

generally complied with the Family Self-Sufficiency program requirements. The Authority failed to follow 

its procurement and ethical policies regarding possible conflicts of interest when obtaining contracted 

services for its program. OIG identified deficiencies in all 13 contractual agreements reviewed. As a result, 

full and open competition was hindered, and the Authority paid more than $64,000 in unsupported contract 

expenses and more than $3,000 in inappropriate contract expenses.

Further, the Authority failed to comply with its program administrative plan regarding zero-income 

household reviews. Of the 58 zero-income households reviewed, 29 had either excluded or unreported 

income that affected their housing assistance payments. As a result, the Authority overpaid housing assistance 

and utility allowances, totaling more than $36,000, for households that were required to meet their rental 

obligations. It generally complied with the Family Self-Sufficiency program requirements. However, of 

the 32 participant files with escrow balances reviewed, 20 contained errors in one or more of the escrow 

credit applications, resulting in more than $14,000 in escrow credit overpayments and more than $3,000 in 

escrow credit underpayments.

OIG recommended that HUD require the Authority to (1) provide documentation or reimburse its 

program from non-Federal funds for the unsupported payments cited, (2) reimburse its program from nonFederal funds for the improper use of more than $68,000 in program funds, and (3) implement adequate 

procedures and controls to address the findings cited to prevent more than $19,000 in program funds from 

being spent on excessive escrow credits, housing assistance and utility allowance payments, and contract 

payments. (Audit Report: 2010-CH-1015)

Public Housing and Voucher Programs

HUD OIG audited HUD’s Office of Public Housing and Voucher Programs to determine whether HUD 

reasonably ensured that public housing agencies properly managed their housing choice voucher net 

restricted assets and appropriately awarded 2009 set-aside fund awards for unforeseen circumstances and 

higher than average leasing. 

HUD had discovered that it did not have accurate information about public housing agency net restricted 

assets and had taken appropriate steps to improve its controls. In addition, HUD did not ensure that about 

$18,000 in set-aside funds was used for its intended purpose. It immediately resolved this discrepancy.

OIG recommended that HUD (1) rectify the discrepancy for the award overpayment, (2) check the 

accuracy of other unforeseen circumstance awards made for similar tenant income reductions and rectify any 

discrepancies, and (3) correct the process for future similar awards. HUD agreed with the recommendations 

and had addressed them. There were no additional recommendations. (Audit Report: 2010-KC-0001)

37

Chapter 2 - Public and Indian Housing Programs
Public Housing Program Activities

HUD OIG audited the central office procurement system of the Puerto Rico Public Housing Administration 

(authority) in San Juan, PR, to determine whether (1) the authority’s procurement policies and procedures 

complied with HUD requirements, (2) it followed its policies and procedures and HUD procurement 

requirements, (3) it adequately supported the reasonableness of the cost of goods and services acquired, 

and (4) an electronic surveillance system installed at several of its public housing projects generated the 

intended benefits.

Generally, the authority complied with requirements for planning, soliciting, and awarding contracts 

and purchase orders. However, the review identified procurement deficiencies in two contracts and three 

purchase orders, which resulted in monetarily significant deficiencies. The authority used an improper 

procurement procedure, failed to perform required cost analyses, and paid for equipment that was not used 

or missing. It also awarded purchase orders for other than the lowest quoted price without justification and 

paid more than the contract price. In addition, the electronic surveillance system installed at several of its 

public housing projects did not generate the intended benefits. As a result, the authority did not support 

the reasonableness of more than $9.7 million in contracts, paid more than $3.57 million for equipment that 

did not provide the intended benefits, and paid more than $28,000 for excessive expenditures. 

OIG recommended that HUD require the authority to (1) provide support showing the eligibility and 

reasonableness of more than $9.7 million spent on contracts that were not awarded in accordance with 

HUD requirements or reimburse its programs from non-Federal funds and (2) reimburse its public housing 

program more than $3.6 million paid for excessive costs and unused/missing equipment. In addition, 

OIG recommended that HUD evaluate the surveillance system installed throughout the authority’s public 

housing projects and determine whether it was implemented in an effective and efficient manner. (Audit 

Report: 2010-AT-1009) 

ppp

HUD OIG audited the procurement function of the Harrisburg Housing Authority in Harrisburg, PA, 

to determine whether the Authority procured goods and services in accordance with HUD regulations and 

other applicable requirements. 

The Authority did not purchase goods and services in accordance with HUD regulations and its 

procurement policy. OIG identified deficiencies with the Authority’s purchases of goods and services from 

17 of 20 vendors reviewed. The Authority acquired goods and services without having contracts in place 

and after contracts had expired. Also, it improperly awarded noncompetitive contracts and did not maintain 

records to document the significant history of procurements. 

OIG recommended that HUD require the Authority to (1) provide documentation to support that 

payments for goods and services, totaling $1.7 million, were fair and reasonable or reimburse the applicable 

programs from non-Federal funds for any amounts that it cannot support, (2) develop and implement controls 

to ensure that it complies with all applicable procurement requirements, (3) provide procurement training to 

all employees involved in the procurement process, and (4) develop and implement a contract administration 

system. OIG also recommended that HUD expand its monitoring of the Authority’s procurement function 

to ensure that it operates in compliance with applicable requirements. (Audit Report: 2010-PH-1012)

ppp

38

Chapter 2 - Public and Indian Housing Programs
HUD OIG audited the Housing Authority of Whitesburg, KY, to determine whether the Authority 

properly accounted for cash receipts and disbursements and made procurements in accordance with Federal 

requirements.

The Authority mismanaged its operations. It (1) did not properly account for rental receipts, (2) failed 

to prepare and file some quarterly tax returns and deposit more than $64,000 in Federal withholding taxes 

with the Internal Revenue Service, (3) could not support a number of disbursements and spent more than 

$29,000 for various unnecessary and/or unreasonable costs, and (4) failed to follow Federal procurement 

regulations when awarding Public Housing Capital Fund program contracts and change orders and could 

not support capital fund drawdowns. As a result, fewer funds were available for the Authority’s primary 

mission, and it was unable to fully meet its financial obligations. 

OIG recommended that HUD declare the Authority in substantial default in accordance with its annual 

contributions contract and require it to (1) establish an effective system of internal controls for all aspects 

of its operations, (2) account for nearly $135,000 in tenant rent receipts and support more than $264,000 in 

disbursements and more than $275,000 in drawdowns, (3) support that contracts totaling nearly $447,000 

were fairly and openly competed, (4) file missing tax returns and make all required tax deposits, and (5) 

implement requested actions in the memorandum of agreement between HUD and the Authority. OIG also 

recommended that HUD take appropriate administrative action against the Authority officials responsible 

for mismanaging its operations. (Audit Report: 2010-AT-1003)

ppp

HUD OIG audited the New Rochelle, NY, Municipal Housing Authority’s administration of its lowrent housing program to determine whether the Authority administered its program in accordance with 

applicable regulations. 

The Authority had weaknesses in the administration of its low-rent program because it did not (1) 

properly determine tenant eligibility; (2) ensure that program units were decent, safe, and sanitary; and (3) 

support rent charged to an employee-tenant. In addition, the Authority had weaknesses in its procurement, 

payroll, and financial management functions because it (1) executed contracts contrary to HUD’s and its 

own policy, (2) did not maintain adequate support for payroll, and (3) expended and loaned funds among 

programs contrary to regulation. As a result, the Authority lacked assurance that low-rent program tenants 

were properly certified and resided in units that were decent, safe, and sanitary; services were obtained at 

the most economical and efficient price; payroll costs were eligible and adequately supported; and funds 

were always expended in accordance with HUD regulations. 

OIG recommended that HUD instruct Authority officials to (1) strengthen controls over low-rent 

tenant certification and unit inspection procedures to ensure that tenant eligibility is properly determined 

and adequately documented and that annual inspections of low-rent units are conducted; (2) establish 

procedures for the approval and calculation of rents; (3) provide documentation to justify the rent charged 

to an employee-tenant or pay the more than $57,000 that should have been collected; (4) strengthen controls 

to ensure compliance with HUD procurement, payroll, and financial management regulations; and (5) repay 

from non-Federal funds the more than $38,000 expended for ineligible costs. (Audit Report: 2010-NY-1010)

ppp

HUD OIG reviewed selected transactions at the Wilmington Housing Authority in Wilmington, NC, to 

determine whether the Authority misused HUD funds in its purchase of either Eastbrook Apartments or a 

tract of vacant land known locally as the “Winfield Smith” property. 

39

Chapter 2 - Public and Indian Housing Programs
The Authority misused nearly $210,000 in HUD Section 8 reserves to make mortgage payments on a 

non-HUD development, Eastbrook Apartments, and nearly $58,000 in HUD replacement housing factor 

funds to purchase vacant land. As a result, these funds were not available to assist the Authority’s lowincome residents as HUD intended.

OIG recommended that HUD require the Authority to repay its Section 8 administrative fee reserves 

nearly $210,000 and its capital fund account nearly $58,000 from non-Federal funds and provide HUD 

evidence that it has implemented effective controls to better ensure the proper use of HUD funds. (Audit 

Report: 2010-AT-1805)

ppp

HUD OIG audited the New Rochelle, NY, Municipal Housing Authority’s administration of its Resident 

Opportunities and Self-Sufficiency (ROSS) and Housing Choice Voucher Family Self-Sufficiency grant 

programs to determine whether the Authority expended ROSS and Family Self-Sufficiency program funds 

for eligible costs and implemented adequate controls over the programs to ensure compliance with HUD 

regulations. 

Contrary to regulations, Authority officials charged the grants ineligible and unsupported expenses 

related to charges incurred before the execution of grant agreements and for costs under another grant. In 

addition, the Authority had control weaknesses in its procedures for administering its ROSS and Family 

Self-Sufficiency programs, causing program participants to not be credited with the proper escrow amount 

and noncompliance with program administrative requirements. 

OIG recommended that HUD instruct Authority officials to (1) repay from non-Federal funds the nearly 

$220,000 in ineligible expenses charged to the grant programs, (2) support or repay from non-Federal funds 

nearly $101,000 related to the unsupported charges paid with ROSS and Family Self-Sufficiency program 

funds, (3) recoup a nearly $300 overpayment from and pay nearly $3,000 due to Family Self-Sufficiency 

program participants, and (4) develop procedures to ensure compliance with all ROSS and Family SelfSufficiency program administrative requirements. (Audit Report: 2010-NY-1011)

ppp

HUD OIG audited the Georgetown, TX, Housing Authority 

due to a congressional request. The objectives were to determine 

(1) whether the Authority and/or its nonprofit affiliates used HUD 

funding for recent developments and if so, whether they followed 

HUD regulations and (2) whether the Authority used HUD funds only 

for eligible expenditures.

The Authority’s nonprofit related entities did not develop public 

housing units in their recent development projects; therefore, they 

were not required to follow HUD regulations for the developments. 

However, the Authority violated its annual contributions contract 

when it used nearly $196,000 in HUD funding for development costs 

and other ineligible and unsupported expenditures. In addition, 

the Authority’s financial records were inaccurate. As a result, it had 

fewer funds available to operate its HUD-funded programs, and its 

stakeholders were unaware of its true financial position.

Copyright 2010. Austin American Statesman. Austin, TX. 

Reprinted with permission.

40

Chapter 2 - Public and Indian Housing Programs
OIG recommended that HUD require the Authority to (1) reimburse its Housing Choice Voucher program 

fund more than $48,000 from non-Federal sources for ineligible development costs, (2) hire an independent 

firm to perform a comprehensive review of the more than $137,000 in questioned low-rent funds to determine 

the source and appropriated year and require reimbursements as appropriate, (3) provide support for or 

reimburse its Housing Choice Voucher program fund more than $1,000 in unsupported expenditures, (4) 

correct its books and records to show its true financial position, (5) reverse more than $9,000 in expenses for 

voided checks and record the voids in the general ledger, and (6) develop and implement written policies 

and procedures regarding financial and disbursement controls. OIG also recommended that HUD take 

appropriate actions to ensure that the former executive director does not place HUD programs at further 

risk, including but not limited to issuing a limited denial of participation. (Audit Report: 2010-FW-1004)

Review of Public Housing Authorities To Determine Whether 

Multifamily Property Owners Were Overpaid

HUD OIG conducted a national audit of public housing authorities to determine whether they overpaid 

voucher subsidies to multifamily property owners in specific types of subsidized properties. 

Public housing authorities generally did not overpay subsidies to subsidized multifamily properties. OIG 

compared addresses of 1.93 million housing choice vouchers with addresses of 17,684 multifamily properties 

with Federal loans. OIG identified 193 addresses for which a voucher payment was made to the owner of 

a subsidized multifamily property, and 148 of these vouchers were reported correctly. The remaining 45 

vouchers were incorrectly reported. For these 45 vouchers, OIG did not find that the vouchers had common 

property owners, common public housing authorities, or common management agents.

OIG recommended that HUD update Housing Choice Voucher Guidebook 7420.10G to include a section 

on the relationship between properties with Federal loans and the public housing authorities’ rental payments 

to those properties’ owners. (Audit Report: 2010-BO-0003)

ppp

41

Chapter 2 - Public and Indian Housing Programs
42

Chapter 2 - Public and Indian Housing Programs

Investigations

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

and Indian housing program staff and 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

Key program 

results

$ 

recovered

Convictions/pleas/ 

pretrials

$10,308,337 196

Page 43

Page 47

Page 51

Page 51

Page 52

Page 52

Investigations 143

Our

focus

• Public housing authority theft/embezzlement

• Rental assistance fraud

• FedRent Initiative

• Fugitive Felon Initiative

• Civil and administrative actions

• Other fraud/crimes

Cases 

closed

Admin/civil 

actions

149

Chart 2.2: Percentage of OIG public and Indian housing closed

 investigation cases during this reporting period

Region 1 - 2%

Region 2 - 18%

Region 3 - 5%

Region 13 - 1% 

Region 4 - 4%

Region 14 - 7%

Region 5 - 7%

Region 15 - 7%

Region 6 - 11%

Regions 7/8 - 3%

Region 9 - 18%

Region 10 - 13%

Region 11 - 4%
43

Chapter 2 - Public and Indian Housing Programs

Public Housing Authority Theft/Embezzlement

Doris Abeyta, the former Alamosa Housing Authority (Alamosa) executive director, and Jeffery Guntle 

were collectively sentenced in U.S. District Court, Denver, CO, to 37 months incarceration, 3 years supervised 

release, and 5 years probation and ordered to perform 200 hours of community service and pay HUD 

$643,882 in restitution for their earlier guilty pleas to committing theft from a program receiving Federal 

funds or money laundering. In addition, former Alamosa assistant executive director Terri Lucero pled 

guilty to filing a false Federal income tax return, Abeyta and Lucero were suspended from procurement and 

nonprocurement transactions with HUD and throughout the Executive Branch of the Federal Government 

pending the outcome of related debarment actions, and Guntle was debarred for 36 months. From April 

1998 to November 2007, the above defendants and others embezzled more than $1.3 million in Alamosa 

funds when they generated or negotiated unauthorized housing authority checks. 

ppp

Charlesetta Jackson and Danielle Collins, a former Kansas City Housing Authority (Kansas City) 

employee and Housing Choice Voucher program participant, were collectively sentenced in U.S. District 

Court, Kansas City, KS, to 36 months incarceration, 6 months home confinement, and 5 years probation 

and ordered to pay a number of housing authorities $293,782 in restitution for their earlier guilty pleas to 

committing a conspiracy, mail fraud, and bribery. From March 2007 to January 2008, Jackson and Collins 

accepted bribes from unqualified housing applicants in exchange for Section 8 vouchers. HUD realized 

losses of $236,480. 

ppp

Jennifer Edwards, the former director of the Delaware County Housing Authority (Delaware County), 

paid Delaware County $213,000 and was sentenced in U.S. District Court, Indianapolis, IN, to 54 months 

probation for her earlier guilty plea to committing theft and embezzlement. From 2004 to 2009, Edwards 

created false invoices and fraudulently obtained $170,000 in Delaware County funds and used an additional 

$43,000 in Delaware County funds to pay for repairs to her residence. 

ppp

Laura Morales, the former executive director of the Bexar County Housing 

Authority (Bexar County), was sentenced in U.S. District Court, San Antonio, 

TX, to 5 years probation and ordered to pay Bexar County $131,144 in restitution 

for her earlier guilty plea to committing theft of government funds. From 2003 

to June 2008, Morales claimed unearned leave hours and fraudulently obtained 

$131,144 in Bexar County funds. 

ppp

Tracey White-Jenkins, the former Irvington Housing Authority Section 

8 director, was sentenced in U.S. District Court, Newark, NJ, to 18 months 

incarceration and 36 months probation and ordered to pay HUD $34,458 

and Travelers Insurance $71,918 in restitution for her earlier guilty plea to 

committing theft of government funds and submitting a false Federal income 

tax return. White-Jenkins fraudulently obtained, deposited, and personally 

used $106,376 in Irvington housing assistance payments.

ppp Copyright 2010. San Antonio Express News. 

San Antonio, TX. Reprinted with permission.
44

Chapter 2 - Public and Indian Housing Programs

Donna Little Dog and Cletus Running Wolf, a former Blackfeet Housing Authority (Blackfeet) payroll 

coordinator and employee, were collectively sentenced in U.S. District Court, Great Falls, MT, to 26 months 

incarceration and ordered to pay Blackfeet $131,563 in restitution for their earlier guilty pleas to committing 

theft from a program receiving Federal funds or aiding and abetting. From 2005 to 2009, Little Dog issued 

$104,343 in unauthorized payroll checks to Running Wolf. 

ppp

William Deatrick, the former Brevard Family of Housing (Brevard) director of facilities, was arrested 

after his indictment in U.S. District Court, Orlando, FL, for allegedly committing a conspiracy and theft from 

a program receiving Federal funds. In addition, former Brevard contractor Derrick O’Neal pled guilty to 

committing theft or bribery from a program receiving Federal funds. From August 2005 to November 2006, 

Deatrick allegedly solicited and accepted bribes from Brevard contractors in return for Brevard contracts, 

and O’Neal admittedly provided more than $100,000 in kickbacks to Deatrick. 

ppp

William Pollock, a former assistant executive director for the Knox County Housing Authority (Knox 

County), pled guilty in U.S. District Court, Knoxville, TN, to committing theft and embezzlement. From 

October 2005 to October 2008, Pollock embezzled $37,191 in Knox County funds. 

ppp

Katisha Simmons, a former St. Louis County Housing Authority (St. Louis County) Section 8 caseworker, 

pled guilty in U.S. District Court, St. Louis, MO, to misapplication of government funds. In addition, former 

St. Louis County Section 8 landlord Michael Moore was sentenced to 60 months probation and ordered to 

pay St. Louis County $30,834 in restitution for his earlier guilty plea to committing blackmail. Between March 

and April 2009, Simmons manipulated the St. Louis County accounting system and caused the issuance of 

$30,834 in unauthorized housing assistance payments to Moore in exchange for about one-half of the funds. 

ppp

Lesvia Barrera, the former executive director of the Eagle Pass Housing Authority, was sentenced in U.S. 

District Court, Eagle Pass, TX, to 15 months incarceration and 3 years supervised release and ordered to pay 

HUD $21,295 in restitution for his earlier conviction of committing a conspiracy to defraud the government. 

During October 2001 and August 2003, Barrera and previously convicted Juan Sifuentes submitted $17,800 

in false claims to HUD. 

ppp

Barbara Hollowell, the former executive director of the Benton Harbor Housing Commission (Benton 

Harbor), was sentenced in U.S. District Court, Grand Rapids, MI, to 1 day incarceration and 24 months 

supervised release and ordered to perform 200 hours of community service and pay Benton Harbor $21,401 

and the Social Security Administration (SSA) $4,469 in restitution for her earlier guilty plea to committing 

theft of government funds and SSA fraud. Hollowell fraudulently used a Benton Harbor credit card and 

obtained about $12,000 in personal use items and failed to report employment income on SSA retirement 

certifications. 

ppp
45

Chapter 2 - Public and Indian Housing Programs

Randy Dinwiddie, the former executive director of the Clinton Housing Authority (Clinton), was charged 

in Henry County District Court, Clinton, MO, with allegedly committing theft. In May 2010, Dinwiddie 

allegedly stole $9,997 in Clinton funds. 

ppp

Tomas Rodriguez, the former executive director of the El Paso County Housing Authority (El Paso 

County), was sentenced in U.S. District Court, El Paso, TX, to 9 months incarceration and 2 years supervised 

release and ordered to perform 100 hours of community service and pay El Paso County $9,900 in restitution 

for his earlier guilty plea to committing theft from a program receiving Federal funds. From March 2006 

to April 2007, Rodriguez used a former El Paso County maintenance employee to renovate an apartment 

complex that he owned while the employee earned wages from the housing authority. 

ppp

Tammy Sawyers, the former director of the North Chicago Housing Authority (North Chicago), was 

charged in Lake County Circuit Court, Chicago, IL, with allegedly committing theft. From 2006 to 2008, 

Sawyers allegedly failed to report her ownership interest in or the tenant vacancy of two North Chicago 

subsidized housing units and obtained about $9,800 in housing assistance she was not entitled to receive. 

ppp

Lawand Johnson, the former executive director of the St. John the Baptist Parish Housing Authority (St. 

John), was sentenced in Louisiana State Court, Laplace, LA, to 2 months incarceration (suspended) and 6 

months probation and fined $500 for his earlier guilty plea to committing theft. From May to November 

2009, Johnson used $2,000 in St. John funds to pay personal expenses. 

ppp

Roman Reyes, a former San Antonio Housing Authority (San Antonio) maintenance supervisor, pled 

guilty in U.S. District Court, San Antonio, TX, to accepting bribes, and former San Antonio project manager 

Robert Olivares was sentenced to 2 years probation and ordered to pay the U.S. Department of Justice $7,200 

in restitution for his earlier guilty plea to accepting bribes. Between May 2008 and March 2009, Reyes and 

Olivares accepted bribes from San Antonio contractors in exchange for housing authority contracts. 

ppp

Rosa Reyes, a former Nassau County Office of Housing and Intergovernmental Affairs (Nassau County) 

employee, was indicted in Nassau County Court, Mineola, NY, for allegedly committing grand larceny 

and official misconduct, accepting bribes, offering a false instrument for recording, and falsifying business 

records. In addition, Catherine Diaz, a former Nassau County housing specialist and treasurer of the 

Association of Long Island Housing Agencies (Association), pled guilty to committing grand larceny and 

official misconduct. Between July 2003 and July 2008, Reyes allegedly and Diaz admittedly solicited and 

accepted bribes from housing applicants in exchange for preferential placement on the subsidized housing 

waiting list, and from May 2006 to September 2007, Diaz stole and personally used more than $3,000 in 

Association funds. 

ppp
46

Chapter 2 - Public and Indian Housing Programs

Muriel Goldtooth, a former Tohono O’Odham Ki:Ki Association (Tohono O’Odham) employee, was 

charged in Tohono O’Odham Nation Judicial Court, Sells, AZ, with allegedly committing a conspiracy, 

fraud, forgery, and theft. From December 2000 to September 2002, Muriel Goldtooth allegedly misused the 

Tohono O’Odham credit card, fraudulently obtained wages and overtime payments, and conspired with 

previously convicted Tohono O’Odham executive director Loren Goldtooth when he used Tohono O’Odham 

funds for personal expenses. HUD losses have not yet been determined. 

ppp

Donna English, doing business as Project Managers, Inc., a Michigan City Housing Authority (Michigan 

City) contractor, was charged in U.S. District Court, Hammond, IN, with allegedly committing theft and 

mail and wire fraud. From 2002 to 2008, English allegedly submitted false invoices and obtained payments 

from Michigan City for products and services not provided and failed to repay the Federal Communications 

Commission E-Rate Program for cash advances she obtained. HUD losses have not yet been determined. 

ppp

Alfredo Lopez, a former San Antonio Housing Authority (San Antonio) maintenance supervisor, was 

sentenced in U.S. District Court, San Antonio, TX, to 3 years probation for his earlier guilty plea to making 

false statements. In December 2007, Lopez accepted a motorcycle trailer from a San Antonio contractor in 

exchange for San Antonio contracts and lied to Federal agents when questioned. 

ppp

Edward Washburn, the former Cheyenne River Housing Authority (Cheyenne River) director of 

modernization, was indicted in U.S. District Court, Pierre, SD, for allegedly accepting a thing of value and 

being influenced in a transaction. From September 2005 to October 2008, Washburn allegedly accepted 

kickbacks from a contractor in exchange for Cheyenne River contracts. 

ppp

Kerri Bizzell, a former Philadelphia Housing Authority (Philadelphia) contracting officer, was indicted 

in U.S. District Court, Philadelphia, PA, for allegedly committing extortion and obstruction of justice. From 

December 2007 to May 2008, Bizzell allegedly solicited and accepted kickbacks from contractors in exchange 

for Philadelphia contracts. 

ppp

John Fischer, the former capital improvements administrator of the Buffalo Municipal Housing Authority 

(Buffalo), pled guilty in U.S. District Court, Buffalo, NY, to interfering with commerce under color of an 

official right. Fischer 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 attempted to influence the official 

statements provided by others after he learned of the ongoing investigation. 

ppp

Frank Isaac and Charles Williams, former Cuyahoga Metropolitan Housing Authority (Cuyahoga) 

housing inspectors, were each charged in Cuyahoga County Court of Common Pleas, Cleveland, OH, with 

allegedly committing bribery. Isaac and Williams allegedly conducted or granted extensions for Cuyahoga 

Housing Choice Voucher program housing inspections in exchange for cash payments. 
47

Chapter 2 - Public and Indian Housing Programs

Rental Assistance Fraud

Fourteen Palm Beach County Housing Authority (Palm 

Beach County) subsidized housing recipients or landlords were 

each arrested and charged in the 15th Judicial Circuit Court, 

Wellington, FL, with allegedly committing public assistance 

or homestead exemption fraud, grand theft, or an organized 

scheme to defraud. In addition, Palm Beach County housing 

recipient Stephanie Porter entered into a pretrial diversion and 

agreed to perform 25 hours of community service and pay Palm 

Beach County $2,660 in restitution, and former housing recipients 

Sonya Stewart and Anthony Brides were collectively sentenced 

to 48 months supervised release and ordered to pay Palm Beach 

County $62,215 in restitution for their earlier guilty pleas to 

committing grand theft or public assistance fraud. Between April 

2001 and July 2010, the above defendants allegedly failed to report 

income, assets, unauthorized residents, or the subleasing of their 

subsidized units, and from January to December 2009, Stewart 

failed to report the criminal histories of authorized residents on 

housing certifications. Collectively, the above defendants obtained 

more than $590,000 in housing assistance they were not entitled 

to receive. 

ppp

Michael Chezan and Calvin Early, a Chicago Housing 

Authority (Chicago) Section 8 landlord and former Chicago 

housing recipient, were each indicted in U.S. District or Cook 

County Circuit Courts, Chicago, IL, for allegedly committing theft, 

theft by deception, or mail fraud. In addition, former Chicago 

housing recipient Hubert Williams was sentenced to 9 months 

home detention and 27 months probation and ordered to pay HUD 

$24,218 and the SSA and others $56,485 in restitution for his earlier 

guilty plea to committing theft of government funds, and former 

Chicago Section 8 landlord Jonathan Hon was sentenced to 30 

months incarceration and 5 years supervised release and ordered 

to pay HUD $200,000 and others $1.89 million in restitution for his 

earlier guilty plea to committing wire fraud. Between July 2002 

and July 2008, Chezan allegedly provided false documents and 

obtained housing assistance payments for properties he did not 

own, Early allegedly failed to report his receipt of dual housing 

subsidies, Williams failed to report income and used the Social 

Security number (SSN) belonging to another individual, and Hon 

failed to report the sale of his subsidized properties and provided 

fraudulent documents used by unqualified borrowers to obtain 

conventional mortgages. Collectively, the above defendants 

obtained about $404,218 in housing assistance and $56,486 in SSA 

and other benefits they were not entitled to receive. 

ppp

Copyright 2010. The Palm Beach Post. Palm 

Beach, FL. Reprinted with permission.
48

Chapter 2 - Public and Indian Housing Programs

Thirty-four current or former Georgia Department of Community Affairs subsidized housing recipients 

were each arrested and charged in various Georgia Courts, GA, with allegedly making false statements and 

writings, committing theft by taking or deception, or obtaining public assistance through fraud. Between 

April 2004 and January 2010, the above defendants allegedly provided false information or failed to report 

income, accurate household compositions, or unauthorized residents on housing certifications and collectively 

obtained $376,329 in housing assistance they were not entitled to receive. 

ppp

Nine New York City Housing Authority (New York City) housing recipients or landlords were each 

charged in U.S. District Court, Manhattan, NY, with allegedly making false statements or committing theft 

of government funds. In addition, New York City housing recipient Rhonda Jordon was sentenced to 36 

months supervised release and ordered to perform 100 hours of community service and pay New York City 

$37,783 in restitution for her earlier guilty plea to making false statements to HUD. Between May 2002 

and July 2010, Jordan admittedly and the remaining defendants allegedly failed to report income, assets, 

their nonresidency and the subleasing of their subsidized unit, dual housing subsidies, accurate household 

compositions, or familial relationships to their Section 8 landlords or used the identity of another and 

attempted to obtain housing assistance. Collectively, the above defendants obtained $358,848 in housing 

assistance they were not entitled to receive. 

ppp

Angie Quiroz and Konrad Seisl, a former Easton Housing Authority Section 8 tenant and landlord, were 

each indicted in U.S. District Court, Boston, MA, for allegedly committing a conspiracy and theft of public 

money. In addition, former Chelsea Housing Authority (Chelsea) public housing tenant Lizbeth Valerio 

and Boston Housing Authority (Boston) Section 8 tenant Martine Bastien were collectively sentenced to 24 

months and 1 day incarceration, 1 year probation, and 3 years supervised release and ordered to pay Chelsea 

and Boston $75,114 and the SSA and others $110,592 in restitution for their earlier conviction or guilty plea to 

making a false claim to a government agency or committing mail fraud, identity theft, or larceny. Between 

1995 and January 2010, Quiroz and Seisl allegedly (Valerio was found guilty) and Bastien admittedly failed 

to report income, assets, or unauthorized residents on housing certifications and collectively obtained 

$105,534 in housing assistance they were not entitled to receive. 

ppp

Five current or former Montgomery County Housing Opportunities Commission (Montgomery County) 

subsidized housing recipients were each charged in Montgomery County District Court, Baltimore or Silver 

Spring, MD, with allegedly making false statements or committing public assistance fraud and theft. In 

addition, former Montgomery County housing recipient Rogie Hancock was sentenced to 4 years supervised 

probation and ordered to pay Montgomery County $22,386 in restitution for her earlier guilty plea to 

making false statements. Between June 2004 and May 2009, the above defendants allegedly and Hancock 

admittedly failed to report income on housing certifications and collectively obtained about $100,806 in 

housing assistance they were not entitled to receive. 

ppp

Jennifer Mathias-Kraft and Harrison Fobb, former Adams County Housing Authority (Adams County) 

housing recipients, were each charged in Adams County District Court, Thornton, CO, with allegedly 

committing theft or forgery. In addition, former Adams County housing recipient Jacquelyne Garcia was 

sentenced to 2 years probation and fined $1,658 for her earlier guilty plea to committing forgery. Between 
49

Chapter 2 - Public and Indian Housing Programs

2004 and 2009, Mathias-Kraft and Fobb allegedly and Garcia admittedly failed to report income or accurate 

household compositions on housing certifications and collectively obtained $93,436 in housing assistance 

they were not entitled to receive. 

ppp

April Brown, Tamara Cunningham, and Shakeya Dorsey, McKeesport Housing Authority housing 

recipients, were each charged in Allegheny County Court, McKeesport, PA, with allegedly committing 

theft by deception. The above defendants allegedly failed to report income on housing certifications and 

collectively obtained $93,173 in housing assistance they were not entitled to receive. 

ppp

Five former Salt Lake City or Salt Lake County Housing Authorities authorized and unauthorized 

housing recipients or a landlord were each charged in Utah State Court, Salt Lake City, UT, with allegedly 

obtaining housing assistance through fraud. In addition, former Salt Lake City housing recipient Katinia 

Tuupo was sentenced to 36 months supervised probation and ordered to pay Salt Lake City $23,963 and the 

Utah Workforce Services $5,775 in restitution for her earlier guilty plea to attempted housing and public 

assistance fraud. Between November 2005 and January 2010, the above defendants allegedly and Tuupo 

admittedly failed to report income or unauthorized residents on housing certifications and collectively 

obtained $86,982 in housing assistance they were not entitled to receive. 

ppp

Shichella Wiley, a former Indianapolis Housing Agency (Indianapolis) Section 8 tenant, was charged 

in Marion County Superior Court, Indianapolis, IN, with allegedly committing theft, welfare fraud, and 

perjury. In addition, former Indianapolis housing recipient Annette Perry pled guilty to committing welfare 

fraud, and Indianapolis Section 8 tenant Jonessa Gillespie was sentenced to 2 years electronic monitoring 

and 1 year probation and ordered to pay Indianapolis $20,651 in restitution for her earlier guilty plea to 

committing welfare fraud. Between 2005 and 2010, Wiley allegedly and Perry and Gillespie admittedly failed 

to report income, accurate household compositions, or their criminal histories on housing certifications and 

collectively obtained $86,648 in housing assistance they were not entitled to receive. 

ppp

Nelson Torres, Isabel Gonzales, and Ana Rodriguez, a Brookhaven Housing Authority Section 8 landlord 

and tenants, were each arrested and charged in Suffolk County District Court, Coram, NY, with allegedly 

committing grand larceny and offering a false instrument for recording. From 2005 to August 2010, the above 

defendants allegedly failed to report assets or their joint residency on housing certifications and collectively 

obtained about $85,000 in housing assistance they were not entitled to receive. 

ppp

Tracy Webster, a former Cambridge Housing Authority Section 8 tenant, was arrested and charged in 

U.S. District Court, Cambridge, MA, with allegedly making a false statement. From May 2005 to August 

2008, Webster allegedly failed to report income on housing certifications and obtained $81,828 in housing 

assistance she was not entitled to receive. 

ppp
50

Chapter 2 - Public and Indian Housing Programs

Carlesia Alexander, a former Las Vegas Housing Authority (Las Vegas) Section 8 tenant, was charged in 

Las Vegas Justice Court, Las Vegas, NV, with allegedly committing theft, and former Las Vegas Section 8 

tenant Angela Carpenter pled guilty to committing attempted theft. Between January 2005 and July 2009, 

Alexander allegedly and Carpenter admittedly failed to report income or an accurate marital status or 

household composition on housing certifications and together obtained $79,304 in housing assistance they 

were not entitled to receive. 

ppp

Larry Spratt and Brenda Grubisich, former Cook County Housing Authority Section 8 tenants, were 

collectively sentenced in Cook County Circuit Court, Chicago, IL, to 2 years incarceration, 1 year supervised 

release, and 48 months probation and ordered to pay HUD $20,000 in restitution for their earlier guilty pleas 

to committing theft. Between 2000 and 2008, Spratt and Grubisich failed to report income or their ownership 

interest in the subsidized property on housing and other certifications and together obtained $79,087 in 

housing assistance and $172,733 in SSA and other benefits they were not entitled to receive. 

ppp

Ruth Herman, a former Concord Housing Authority public housing tenant, was sentenced in Middlesex 

County Superior Court, Woburn, MA, to 4 years probation and ordered to pay Concord $73,947 in restitution 

for her earlier guilty plea to making false statements and committing larceny and perjury. From August 2001 

to January 2007, Herman failed to report an unauthorized resident or his income on housing certifications 

and obtained $73,947 in housing assistance she was not entitled to receive. 

ppp

Aesha Johnson, a Cuyahoga Metropolitan Housing Authority (Cuyahoga) Section 8 landlord and tenant, 

pled guilty in Cuyahoga County Court of Common Pleas, Cleveland, OH, to committing theft and tampering 

with records. In addition, former Cuyahoga Section 8 landlords Francis Turner and Roderick Brown were 

collectively sentenced to 22 months incarceration, 60 months probation, and 36 months supervised release 

and ordered to pay Cuyahoga $39,340 in restitution for their earlier guilty pleas to making false statements 

or committing theft. Between March 2004 and September 2009, the above defendants failed to report income, 

familial relationships to their Section 8 landlords, accurate SSNs or identities, or prior criminal histories on 

housing certifications and collectively obtained $70,662 in housing assistance they were not entitled to receive. 

ppp

Latasha White, Darryle Snyder, Jo’rell Kensey, and Maria Portillo, Housing Authority of the City of Los 

Angeles (Los Angeles) Section 8 tenants, and San Bernardino County Housing Authority Section 8 tenants 

Chevelle Parks, Lashay Roberts, Lisa Howard, and Duvall Rivers were each arrested on probable cause 

for allegedly obtaining housing assistance through fraud. In addition, Los Angeles Section 8 tenants Kim 

Tart and Anthony Carter were each charged in Los Angeles County Superior Court, Los Angeles, CA, with 

allegedly committing grand theft or perjury, obtaining aid by misrepresentation, or failing to provide true 

information on sex offender registrations and failing to file a sex offender change of address. Between May 

2004 and September 2010, the above defendants allegedly failed to report income, unauthorized residents 

and their criminal histories, or their lifetime sex offender status on housing certifications. HUD losses have 

not yet been determined. 
51

Chapter 2 - Public and Indian Housing Programs

FedRent Initiative

HUD’s most recent study estimates the combined gross improper rental housing assistance payments to 

be more than $1 billion in fiscal year 2008. 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.

Natosha Houston, a former Arlington Housing Authority (Arlington) and Tarrant County Housing 

Assistance Office (Tarrant County) Section 8 tenant and U.S. Department of Homeland Security employee, 

was sentenced in U.S. District Court, Fort Worth, TX, to 6 months incarceration and 12 months supervised 

release and ordered to pay Arlington and Tarrant County $53,803 in restitution for her earlier guilty plea to 

making false statements to HUD. From 1997 to 2005, Houston failed to report income on housing certifications 

and obtained $53,803 in housing assistance she was not entitled to receive. 

ppp

Arvay Smith, a former Chicago Housing Authority public housing tenant and U.S. Postal Service 

employee, pled guilty in U.S. District Court, Chicago, IL, to committing theft of government funds. From 

December 2002 to February 2007, Smith failed to report income or assets on housing certifications and 

obtained about $41,800 in housing assistance she was not entitled to receive. 

ppp

Shawnda Burnett, a former Housing Authority for the City of Los Angeles (Los Angeles) Section 8 tenant 

and current Equal Employment Opportunity Commission employee, was sentenced in U.S. District Court, 

Los Angeles, CA, to 3 years probation and ordered to pay Los Angeles $37,374 in restitution for her earlier 

guilty plea to making a false statement. From February 2005 to April 2008, Burnett failed to report income 

on housing certifications and obtained $37,374 in housing assistance she was not entitled to receive. 

ppp

Violet Berry-Simmons, a Newark Housing Authority Section 8 tenant and U.S. Postal Service employee, 

pled guilty in U.S. District Court, Newark, NJ, to committing theft of government funds. From July 2003 

to April 2007, Berry-Simmons failed to report income on housing certifications and obtained $27,288 in 

housing assistance she was not entitled to receive. 

Fugitive Felon Initiative

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 Federal, State, city, and county 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 
52

Chapter 2 - Public and Indian Housing Programs

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 8,738 arrests. OIG strongly 

supports Operation FALCON in an effort to make HUD public and assisted housing a safe place for families 

to live. Below are examples of FFI efforts. 

ppp

Nine Housing Authority of New Orleans housing recipients were each arrested and charged in Louisiana 

State Court, New Orleans, LA, with allegedly failing to appear; committing aggravated rape, simple battery, 

armed robbery, or accessory after the fact; or possession of cocaine. The above defendants allegedly failed 

to appear for court hearings involving rape, murder, assault, sexual assault, or assault of a child; allegedly 

possessed cocaine; or allegedly committed aggravated rape, simple battery, armed robbery, or accessory 

after the fact. 

ppp

Clifford Wiggins, a registered sex offender and unauthorized Pensacola Housing Authority (Pensacola) 

tenant, was arrested and charged in Escambia County Circuit Court, Pensacola, FL, with allegedly failing 

to report a name or address change or comply with sex offender registration laws. From December 2009 to 

May 2010, Wiggins allegedly failed to report his residency in a Pensacola subsidized unit. 

ppp

Ieasha Hale, Teri Tomaskovich, Shanta Davis, and Jermain Jackson, Mobile Housing Board Section 8 

tenants, were each arrested on outstanding State or county warrants in Mobile, AL, for allegedly committing 

probation violations, possessing marijuana, or failing to appear. 

ppp

Antranette Baker, a Mississippi Regional Housing Authority VI housing recipient, was arrested on an 

outstanding warrant issued by the Mississippi State Court, Jackson, MS, for allegedly committing burglary. 

Civil and Administrative Actions

Sergio Gonzalez, the former Englewood Housing Authority (Englewood) bookkeeper previously 

sentenced in U.S. District Court, Newark, NJ, for his earlier guilty plea to committing theft of government 

funds, was debarred from procurement and nonprocurement transactions with HUD and throughout the 

Executive Branch of the Federal Government for 36 months. Gonzalez and previously sentenced Englewood 

deputy director Ronnie Faison used about $100,000 in Englewood funds for their personal gain. 

ppp

Seizure warrants for a 2009 Ford F150 truck and an equipment trailer were issued by the U.S. District 

Court, Ripley, TN, and served on David Ford, the former executive director of the Ripley Housing Authority 

who was previously arrested and charged with allegedly committing forgery. Ford allegedly used embezzled 

Ripley funds to purchase the truck and trailer. 
53

Chapter 2 - Public and Indian Housing Programs

Other Fraud/Crimes

Bobby Ferguson, Michael Woodhouse, Calvin Hall, and Shakib Deria, doing 

business as Xcel Construction (Xcel), Ferguson Enterprises, Inc. (Ferguson), A&F 

Environmental (A&F), and Johnson Consulting & Construction (Johnson), as 

well as Xcel, Ferguson, A&F, and Johnson were each charged in U.S. District 

Court, Detroit, MI, with allegedly committing a conspiracy, fraud, money 

laundering, and structuring financial transactions; obstructing justice; and 

possession of a firearm. Between January 2007 and September 2010, the above 

defendants allegedly conspired, rigged bids, and obtained more than $100,000 

in HUD HOME Investment Partnerships and Moderate Rehabilitation of 

Obsolete Property funds for Gardenview Estates (Gardenview), a Detroit 

Housing Commission housing development. In addition, the above defendants 

allegedly dumped contaminated soil on the Gardenview property and caused 

the Detroit Housing Commission to expend about $4 million in HOPE VI funds 

to remove the contaminated soil. HUD realized losses in excess of $4 million. 

ppp

Orlando Brown pled guilty in U.S. District Court, New Orleans, LA, to 

committing arson. Brown and others set fire to a number of St. John the Baptist 

Parish Housing Authority subsidized housing units. HUD losses are estimated 

at $573,480. 

ppp

Gretchen Scott, a St. Petersburg Housing Authority (St. Petersburg) Section 8 

landlord and the former president of All-N-One Mortgage Services, Inc. (All-NOne), pled guilty in U.S District Court, Tampa, FL, to committing a conspiracy 

to defraud HUD and bank and wire fraud. In addition, former All-N-One 

vice president Eric Scott was convicted of committing bank and wire fraud, 

and former All-N-One employee Lakeisha Gates was sentenced to 60 months 

probation and ordered to pay Chase Home Finance $146,903 in restitution for 

her earlier guilty plea to committing a conspiracy to defraud HUD and bank and 

wire fraud. From August 2007 to September 2008, Gretchen and Eric Scott, Gates, 

and others conspired to obtain fraudulent mortgage loans for straw buyers, 

submitted false property ownership documents and fraudulently obtained 

$8,350 in St. Petersburg housing assistance, and overcharged St. Petersburg 

Section 8 tenants more than $2,668 in rents. 

ppp

Adrian Hawkins, a former Lexington-Fayette Urban County Housing Authority (Lexington-Fayette) 

Section 8 tenant, and Josh Burgess both pled guilty in U.S. District Court, Lexington, KY, to passing counterfeit 

security of an organization with the intent to deceive. From December 2009 to January 2010, Burgess and 

Hawkins created or forged and negotiated about $6,500 in bogus Lexington-Fayette checks. 

ppp

Copyright 2010. The Detroit 

News. “Ferguson indicted on 

fraud charges,” by Robert Snell 

and Christine MacDonald, 

September 9, 2010
54

Chapter 2 - Public and Indian Housing Programs

Terrance McCaa and Roger Wilder, Jr., were each arrested and charged in the 6th Judicial Circuit Court, 

Northport, AL, with allegedly committing forgery. The above defendants allegedly cashed $5,000 in 

counterfeit checks drawn on a Housing Authority of the City of Northport bank account. 

ppp

Lloyd Royal III, a Montgomery County Housing Opportunities Commission (Montgomery County) 

unauthorized tenant, was sentenced in U.S. District Court, Baltimore, MD, to 37 years incarceration for his 

earlier conviction of committing sex trafficking and a conspiracy to commit sex trafficking and possession of 

a firearm in furtherance of a crime of violence. From April to May 2007, Royal committed the above crimes 

from a Montgomery County subsidized housing unit. 

ppp

Elizabeth Sammut, a former Detroit Housing Commission, Michigan State Housing Development, and 

other housing authorities Section 8 landlord, and Jeffrey Johnson were collectively sentenced in Wayne 

County Circuit Court, Detroit, MI, to 28 days incarceration and 60 days home confinement and ordered 

to pay Detroit Edison Energy $84,283 in restitution for their earlier guilty pleas to conducting a criminal 

enterprise and malicious destruction of utility property. Sammut and Johnson tampered with Detroit Edison 

Energy electric meters attached to HUD-subsidized properties and stole about $706,000 in electric utilities. 

ppp

Fifteen individuals were each indicted in U.S. District, Jackson County Circuit, or Jackson and Johnson 

County Courts, Kansas City or Olathe, KS, or Kansas City, MO, for allegedly passing counterfeit securities 

or committing wire fraud, identity theft, or a conspiracy to manufacture counterfeit securities. In addition, 

Christopher Summers was sentenced to 51 months incarceration and 5 years probation and ordered to pay 

the U.S. Department of Treasury and others $379,743 in restitution for his earlier guilty plea to possessing 

counterfeit securities and committing wire fraud and a conspiracy to defraud the U.S. Government. From 

May 2007 to May 2009, Summers admittedly and the remaining defendants and others allegedly conducted 

or participated in a counterfeit check scheme from a public housing unit that involved the Kansas City and 

Independence, MO, Housing Authorities and a number of businesses. 

ppp

Ali Hassan Zindani was indicted in U.S. District Court, Manhattan, NY, for allegedly committing 

a conspiracy and bribery, and Bashir Zindani was sentenced to 5 months incarceration, 5 months home 

detention, and 31 months supervised release and ordered to forfeit $10,000 to the U.S. Government for his 

earlier guilty plea to committing a conspiracy and bribery. From February to April 2010, Ali Hassan Zindani 

allegedly and Bashir Zindani admittedly paid $10,000 to an individual acting as a New York City Housing 

Authority (New York City) employee in return for his assistance in obtaining a New York City commercial 

property lease. 

ppp

Denise Dunlap, a Marion Metropolitan Housing Authority (Marion) Section 8 landlord doing business as 

Key Management, was arrested after her indictment in Delaware County Court of Common Pleas, Delaware, 

OH, for allegedly engaging in a pattern of corrupt activity, committing theft and money laundering, and 

securing writings by deception. Between 2005 and 2008, Dunlap allegedly assisted unqualified buyers who 
55

Chapter 2 - Public and Indian Housing Programs

fraudulently obtained conventional mortgage loans for 26 properties, including seven properties placed 

into the Marion Section 8 program.

ppp

María Díaz-Sanchez was charged in San Juan State Court, San Juan, PR, with allegedly committing theft 

and fraud. From December 2008 to March 2009, Díaz-Sanchez allegedly portrayed herself as a volunteer for 

the Puerto Rico Department of Housing and fraudulently collected advanced deposits and other housing 

fees from a number of victims. 

ppp

Natalie Cole, a St. Landry Parish Housing Authority housing recipient, was charged in Louisiana State 

Court, LeBeau, LA, with allegedly obstructing justice and possessing marijuana, drug paraphernalia, and 

a firearm with narcotics. Cole allegedly possessed marijuana, drug paraphernalia, and a weapon in her 

subsidized unit and stored equipment used in a counterfeit operation. 

ppp

Michael White, a Housing Authority of New Orleans housing recipient, was charged in Louisiana State 

Court, New Orleans, LA, with allegedly committing identity theft and access device fraud. From September 

2009 to January 2010, White allegedly used stolen credit card numbers to pay the debts of other individuals 

in exchange for cash. 

ppp

Chapter 3

Multifamily

Housing Programs
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.

Audit

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

Chart 3.1: Percentage of OIG multifamily housing audit reports

during this reporting period

* This does not include disaster relief audits. See chapter 6 for these reviews.

Key program results Questioned costs Funds put to better use

$5.1 million ---

Page 59

Audit 3 audits

Our

focus

• Owner and management agent operations

Region 1 - 34%

Region 2 - 0%

Region 3 - 0% 

Region 4 - 0%

Region 5 - 33%

Region 6 - 0%

Regions 7/8/10 - 0%

Region 9 - 33%

Region 11 - (N/A)*

58

Chapter 3 - Multifamily Housing Programs
Owner and Management Agent Operations

HUD OIG audited the Avesta Housing Management Corporation in Portland, ME, to review Avesta’s 

management of 30 HUD projects and determine whether HUD funds were used in accordance with its 

regulatory agreement and HUD requirements. Specifically, OIG wanted to determine whether (1) Avesta 

complied with HUD procurement policies and procedures, (2) services provided by Avesta under identityof-interest contracts were reasonable and adequately supported, and (3) Avesta’s method of cost allocation 

was adequate and supported.

Avesta did not comply with HUD procurement procedures because it could not furnish documentation 

to substantiate that it solicited bids and/or obtained cost estimates when procuring ongoing services and 

construction contracts. In addition, it had not established written procurement policies. Procurements 

totaling more than $2.6 million covering a 3-year period were unsupported.

OIG recommended that HUD require Avesta to (1) comply with all terms and conditions of its 

management certifications and HUD requirements for soliciting written or verbal cost estimates and 

maintaining documentation supporting the basis for contract awards and (2) provide an independent 

cost analysis for each procurement cited to ensure that all procurements were reasonable and supported. 

HUD should also require Avesta to provide acceptable documentation in support of the fees charged for 

maintenance, janitorial, and resident service coordinator services and determine whether the costs were 

reasonable. For fees not considered reasonable, HUD should ask Avesta to reimburse the HUD projects 

from non-Federal funds.

Lastly, OIG recommended that HUD require Avesta to provide documentation in support of the 

distribution of more than $470,000 in property manager salaries to the HUD projects. For any amounts not 

reasonable or supported, it should reimburse the HUD projects from non-Federal funds. In addition, OIG 

recommended that HUD require Avesta to provide documentation to determine whether nearly $326,000 

in accounting/bookkeeping service costs was at or below market rate. For any service costs that exceeded 

the market rate, Avesta should reimburse the HUD projects from non-Federal funds. (Audit Report: 2010-

BO-1008)

ppp

In response to a congressional request, HUD OIG reviewed allegations that Columbus Properties Limited 

Partnership in Columbus, OH, did not renovate six apartment complexes in Ohio for which it obtained 

HUD-insured mortgages. Congresswoman Mary Jo Kilroy asked OIG to provide answers to five specific 

questions. The objectives were to determine whether HUD followed its standard operating procedures for 

monitoring the inspection of renovation activities designed to ensure compliance with the specifications 

and to address the questions outlined in the congressional request. 

OIG concluded that HUD followed its procedures to monitor the renovation of the six projects and 

addressed the congresswoman’s questions. Based on the results of the review, OIG made no recommendations. 

(Audit Report: 2010-CH-1809)

ppp

In response to a congressional request, HUD OIG reviewed the Retreat at Santa Rita Springs in Green 

Valley, AZ, a Federal Housing Administration (FHA)-insured multifamily project under Section 231 of the 

National Housing Act, to determine whether the operations of the community complied with applicable 

HUD rules and regulations and other Federal requirements. 

59

Chapter 3 - Multifamily Housing Programs
The community did not comply with applicable Federal rules and regulations and its regulatory 

agreement with HUD in the operation of the project. This noncompliance included (1) resident security 

deposits converted to community fees and/or commingled with operating funds and (2) prohibited 

management costs and erroneous and duplicative billings charged to the project. 

OIG recommended that HUD require the owner to (1) refund former residents and prospective residents 

$11,000 in security deposits and (2) reimburse the project more than $19,000 for ineligible and unsupported 

expenses. (Audit Report: 2010-LA-1014)

ppp

60

Chapter 3 - Multifamily Housing Programs
61

Chapter 3 - Multifamily Housing Programs

Investigations

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

housing program staff and 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

Chart 3.2: Percentage of OIG multifamily housing closed investigation cases

during this reporting period

Key program 

results

$ 

recovered

Convictions/pleas/ 

pretrials

$1,910,932 37

Page 62

Page 62

Page 64

Investigations 29

Our

focus

• Theft/embezzlement

• Rental assistance fraud

• Other fraud/crimes

Cases 

closed

Admin/civil 

actions

48

Region 1 - 7%

Region 2 - 35%

Region 3 - 22%

Region 13 - 0% 

Region 4 - 3%

Region 14 - 0%

Region 5 - 3%

Region 15 - 3%

Region 6 - 3%

Regions 7/8 - 15%

Region 9 - 3%

Region 10 - 3%

Region 11 - 3%
Theft/Embezzlement

Christopher Grimsley, a former construction manager for AIMCO Apartment Management, a HUD 

multifamily management agent, pled guilty in U.S. District Court, Kansas City, MO, to committing mail 

fraud. From May 2003 to June 2009, Grimsley solicited $538,341 in kickbacks from contractors in exchange 

for HUD-subsidized and conventional multifamily housing development contracts. 

ppp

Brenda Phillips, a former manager for the Quail Ridge Apartments, a HUD-subsidized multifamily 

housing development, was sentenced in U.S. District Court, Wichita, KS, to 12 months incarceration and 

36 months probation and ordered to pay Cohen Esry Management Company $227,978 in restitution for her 

earlier guilty plea to making a false statement. From 2001 to 2006, Phillips submitted false tenant information 

on HUD certifications and fraudulently obtained $160,234 in housing assistance. 

ppp

Meredith Sullivan, a former manager for Sycamore Grove Apartments, a HUD-subsidized multifamily 

housing development, was sentenced in U.S. District Court, Kansas City, MO, to 16 months incarceration 

and 24 months supervised release and ordered to pay HUD $34,444 in restitution for his earlier guilty 

plea to making false statements. From 2004 to 2009, Sullivan submitted false tenant information on HUD 

certifications and provided housing applicants with preferential placement on the housing waiting list in 

exchange for actual or anticipated sexual relations. HUD realized losses of $138,611. 

ppp

Stanislaw Paul, the owner of JRDKS Construction, was charged in Louisiana State Court, Jefferson, 

LA, with allegedly committing theft of funds. Paul allegedly submitted a false risk and liability insurance 

invoice and overcharged the developer of a HUD-funded project $42,122. 

ppp

Richard Arroyo and Margarita Villegas, the president and director of the South Bronx Community 

Corporation Management Corporation (South Bronx), a HUD multifamily management agent, were 

collectively sentenced in U.S. District Court, Bronx, NY, to 22 months and 1 day incarceration, ordered to pay 

a not yet named victim $169,415 in restitution, and fined $6,000 for their earlier guilty pleas to committing 

theft of government funds. From May 2005 to February 2009, Arroyo and Villegas used a South Bronx credit 

card for unauthorized personal use items. HUD losses have not yet been determined. 

Rental Assistance Fraud

Seven current or former Section 8 tenants residing in HUD-subsidized multifamily housing developments 

were each arrested and charged in U.S. District or Manhattan Criminal Courts, Manhattan, NY, with 

allegedly committing theft of government funds or grand larceny or falsifying business records. In addition, 

former housing recipients Sandy Colon and Annette Vargas each pled guilty to committing petit larceny, 

and former housing recipients Latasha Greene and Phyllis Pigford were collectively sentenced to 7 months 

incarceration and 36 months probation and ordered to pay HUD $24,096 in restitution for their earlier 

conviction or guilty plea to making false statements, committing grand larceny, or falsifying business 

records. Between 2004 and May 2010, the above seven defendants allegedly (Greene was found guilty) and 

62

Chapter 3 - Multifamily Housing Programs
63

Chapter 3 - Multifamily Housing Programs

Colon, Vargas, and Pigford admittedly failed to report income, unauthorized residents, or the subleasing 

of their subsidized units on housing certifications and collectively obtained $283,427 in housing assistance 

they were not entitled to receive. 

ppp

Six Section 8 tenants residing in HUD-subsidized 

multifamily housing developments were each arrested 

and charged in U.S. District or Staten Island Criminal 

Courts, Staten Island, NY, with allegedly committing theft 

of government funds or grand larceny, offering a false 

instrument for filing, or falsifying business records. Between 

February 2005 and December 2009, the above defendants 

allegedly failed to report income on housing certifications 

and collectively obtained $179,840 in housing assistance they 

were not entitled to receive. 

ppp

Tyese Wilson, Gilberto Torres, and Kewanna Sheppard, Section 8 tenants in 

HUD-subsidized multifamily housing developments, were each arrested and 

charged in U.S. District or Bronx Criminal Courts, Bronx, NY, with allegedly 

committing theft of public funds or grand larceny or falsifying business records. 

In addition, Section 8 tenant Francina N’Diaye pled guilty to committing theft 

of government funds. Between February 2005 and January 2010, the above 

defendants allegedly and N’Diaye admittedly failed to report income on housing 

certifications and collectively obtained $133,300 in housing assistance they were 

not entitled to receive. 

ppp

Glenda Rivera and Sylvester Okonoboh, former Section 8 tenants at Amiff 

Housing, a HUD-subsidized multifamily housing development, were collectively 

sentenced in U.S. District Court, Boston, MA, to 3 months home confinement 

and 72 months probation and ordered to pay HUD $82,579 in restitution for 

their earlier guilty pleas to committing theft of government funds. Between 

October 2004 and June 2009, Rivera and Okonoboh failed to report income on 

housing certifications and together obtained $82,579 in housing assistance they 

were not entitled to receive. 

ppp

Annette Rhue, a Section 8 tenant at Central Gardens I Apartments (Central 

Gardens), a HUD-subsidized multifamily housing development, was indicted in 

Prince Georges Circuit Court, Upper Marlboro, MD, for allegedly making false 

statements and committing theft, welfare fraud, and perjury. In addition, Central 

Gardens Section 8 tenant Crystal Bailey was convicted of committing theft, 

and Section 8 tenants Sonia Johnson and Chequetia Burnett were collectively 

sentenced to 1 year incarceration (suspended) and 8 years supervised probation

Copyright 2010. Staten Island 

Advance. Staten Island, NY. 

Reprinted with permission.
and ordered to perform 200 hours of community service and pay the Maryland Department of Housing 

and Community Development $27,421 in restitution for their earlier guilty pleas to making false statements 

or committing theft. Rhue allegedly (Bailey was found guilty) and Johnson and Burnett admittedly failed 

to report income or unauthorized residents on housing certifications and collectively obtained $65,146 in 

housing assistance they were not entitled to receive. 

ppp

Fatimah Washington, Shalleka Stephens, Estelle Fryar, and Deborah Young, Section 8 tenants at Druid 

Hills II Apartments, a HUD-subsidized multifamily housing development, were each arrested and charged 

or indicted in Walterboro Municipal or Colleton County Courts, Walterboro, SC, for allegedly making false 

statements. Between October 2004 and January 2010, the above defendants allegedly failed to report income 

on housing certifications and collectively obtained $62,510 in housing assistance they were not entitled to 

receive. 

ppp

John Martinez, an unauthorized tenant at San Juan Del Centro Apartments, a HUD-subsidized 

multifamily housing development, was charged in Boulder District Court, Boulder, CO, with allegedly 

committing theft and forgery and obtaining a signature by deception. From January 2000 to March 2010, 

Martinez allegedly duped a mentally challenged individual into claiming residency in the subsidized housing 

unit and providing annual housing certifications, but Martinez actually resided in the subsidized housing 

unit and obtained more than $40,500 in housing assistance he was not entitled to receive. 

Other Fraud/Crimes

Ronald Gifford, an attorney for Garden Court Apartments (Garden Court), a HUD-subsidized elderly 

housing development, was sentenced in Marshall County Superior Court, Plymouth, IN, to 12 months 

home detention and 24 months probation and ordered to perform 200 hours of community service and pay 

Garden Court $17,000 in restitution for his earlier guilty plea to committing theft and deception. In June 

2006 and June 2007, Gifford submitted fraudulent documents to HUD and falsely claimed that Garden 

Court was a nonprofit entity. 

ppp

64

Chapter 3 - Multifamily Housing Programs
Chapter 4

Community Planning

and Development 

Programs
The Office of Community Planning and Development (CPD) seeks to develop viable communities by 

promoting integrated approaches that provide decent housing, suitable living environments, and expanded 

economic opportunities for low- and moderate-income persons. The primary means toward this end is the 

development of partnerships among all levels of government and the private sector. 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 a number of outreach efforts (see chapter 8, page 122).

Audit

Strategic Initiative 3: Contribute to the strengthening of communities

Chart 4.1: Percentage of OIG community planning and development 

audit reports during this reporting period

* The total CPD audits, questioned costs, and funds put to better use amounts include any American Recovery and 

Reinvestment Act of 2009 (eight audits) and disaster recovery (seven audits) type audits conducted in the CPD area. The 

writeups for these audits are shown separately in chapters 5 and 6 of this semiannual report.

Key program results Questioned costs Funds put to better use

$52.8 million $71.7 million

Page 67

Page 68

Page 71

Page 72

Audit 34 audits*

Our

focus

• Community Development Block Grant programs

• HOME Investment Partnerships Program

• Neighborhood Stabilization Program 

• Youthbuild and Supportive Housing program

66

Chapter 4 - Community Planning and Development Programs

Region 1 - 3%

Region 2 - 3%

Region 3 - 3% 

Region 4 - 29%

Region 5 - 9%

Region 6 - 6%

Regions 7/8/10 - 20%

Region 9 - 12%

Region 11 - 15%
OIG audited the Community Development Block Grant (CDBG) program, the HOME Investment 

Partnerships Program (HOME), and the Neighborhood Stabilization Program (NSP). 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 community planning and development area.

Community Development Block Grant Programs

HUD OIG audited the City of Jersey City, NJ’s CDBG float loan activity and found that the City did not 

comply with applicable regulations and failed to take timely action when the float loan defaulted. Specifically, 

it did not (1) make a good faith effort to collect payment on the float loan in the amount of $3.5 million, (2) 

identify a proper default remedy in case the float loan defaulted, (3) properly account for and report float 

loan program income to HUD, (4) follow the required steps when the terms of the float loan were extended, 

and (5) maintain adequate supporting documentation to show that the national objective was met. 

OIG recommended that HUD instruct the City to (1) reimburse the CDBG program from non-Federal 

funds for the defaulted float loan, (2) provide supporting documentation related to nearly $73,000 in 

program income generated from the float loan, (3) establish adequate policies and procedures to ensure 

that it complies with applicable CDBG float loan rules, and (4) and provide the supporting documents to 

show that the CDBG national objective was met. (Audit Report: 2010-NY-1012)

ppp

HUD OIG audited the City of East St. Louis, IL’s CDBG program and found that the City awarded 

CDBG funds to 143 recipients without adequately verifying their eligibility to receive housing rehabilitation 

assistance. Specifically it did not verify eligibility criteria such as evidence of flood insurance, homeowners 

insurance, code compliance, and income eligibility. 

OIG recommended that HUD require the City to (1) provide supporting documentation or reimburse 

its CDBG program more than $1.2 million expended on ineligible recipients, (2) develop and implement a 

quality assurance plan to ensure that all program recipients meet program eligibility requirements, and (3) 

provide training to ensure future compliance. (Audit Report: 2010-KC-1008) 

ppp

HUD OIG audited the CDBG program administered by the City of Deerfield Beach, FL, and found 

that the City did not administer its program in accordance with applicable HUD requirements. It did not 

request exception to HUD’s conflict-of-interest provision before the awarding of funds. As a result, HUD 

had no assurance that the City did not practice favoritism in the awarding of funds and may have placed 

HUD’s funds at risk. 

The City did not maintain adequate supporting documentation to demonstrate that it properly allocated 

salaries to the program. Without supporting documentation to substantiate the allocation of actual services 

performed by personnel, there was no assurance that the salary expenditures were accurate and program 

related. 

The City did not comply with HUD requirements in meeting the national objective for its housing 

activities. It did not maintain adequate supporting documentation to demonstrate that the individuals 

served were low- and moderate-income persons. As a result, there was no assurance that expended program 

funds achieved the intended national objective.

67

Chapter 4 - Community Planning and Development Programs
OIG recommended that HUD require the City to (1) reimburse its program nearly $225,000 from nonFederal funds for ineligible costs, (2) provide supporting documentation or reimburse its program more 

than $142,000 from non-Federal funds for unsupported salary expenditures, and (3) provide supporting 

documentation or reimburse its program more than $28,000 from non-Federal funds for an activity for which 

the national objective was unsupported. (Audit Report: 2010-AT-1015)

HOME Investment Partnerships Program

HUD OIG audited the HOME program of the Puerto Rico Department of Housing in San Juan, PR, and 

found that the Department did not have adequate controls and procedures to ensure that HOME-funded 

activities met program objectives. It (1) disbursed more than $4.4 million for ineligible expenditures and 

activities that failed to meet the HOME program objectives, (2) disbursed more than $9 million for activities 

that reflected slow progress without assurance that the activities would generate the intended benefits, 

and (3) failed to reprogram and put to better use more than $7.9 million in unexpended HOME funds for 

activities that were not carried out or terminated. As a result, HUD had no assurance that funds were used 

solely for eligible purposes and that HOME objectives were met.

OIG recommended that HUD require the Government of Puerto Rico or its designee to (1) reimburse the 

HOME program more than $4.4 million for ineligible expenses and activities that failed to meet program 

objectives, (2) reprogram and put to better use more than $7.9 million in unexpended funds for activities 

that had not generated the intended benefits, and (3) establish and implement controls and procedures for 

its HOME program to ensure that HUD requirements and objectives are met. OIG also recommended that 

HUD determine the eligibility of more than $9 million disbursed for projects with signs of slow progress, 

reevaluate the feasibility of these activities, and recapture any shortfall generated by the closure and 

deobligation of funds associated with terminated activities that do not meet statutory requirements for the 

timely commitment and expenditure of funds. (Audit Report: 2010-AT-1011)

ppp

HUD OIG audited the Polk County, FL, NSP and HOME program and found that while implementing 

its NSP, the County did not comply with requirements that governed procurements, safeguarding of assets, 

and accurate reporting of NSP obligations. It also did not take proper actions to protect the ownership of 

abandoned and foreclosed-upon properties acquired with NSP funds or the revenues expected from their 

disposition. These violations put more than $6.1 million at risk because the County allowed a nonprofit 

entity, with which it had no contract, to acquire abandoned and foreclosed-upon properties in its name 

without title restrictions and sell the properties. In addition, the County did not accurately report NSP 

acquisition obligations in HUD’s Disaster Recovery Grant Reporting (DRGR) system and did not post NSP 

performance reports to its Web page in a timely manner.

While implementing its HOME program, the County did not require its community housing development 

organization (CHDO) to comply with its contract that required it to obtain competitive bids for procurements. 

As a result, the CHDO did not have documentation to support the reasonableness of more than $1.2 million 

in construction contract costs examined during the review. OIG determined that the costs were reasonable. 

However, the violations reflected a lack of attention by County and CHDO officials to their obligation to 

enforce contract procurement requirements for construction costs paid with HOME funds.

OIG recommended that HUD require the County to (1) terminate its NSP administrative contract and 

arrange for the continued administration and implementation of its NSP by County staff or a properly 

procured contractor, (2) reimburse its NSP more than $4.4 million if title to NSP-acquired properties is not 

transfered to the County or an entity with the legal authority to hold the titles, (3) establish proper safeguards 

68

Chapter 4 - Community Planning and Development Programs
over its NSP funds, and (4) reimburse more than $98,000 for questionable fees. OIG also recommended 

that HUD review and determine the accuracy of NSP obligations made after the completion of OIG’s onsite 

review and ensure that the County posts its quarterly NSP performance reports to its Web page and that its 

CHDO complies with procurement requirements. (Audit Report: 2010-AT-1014)

ppp

HUD OIG audited the Puerto Rico Department of Housing HOME program in San Juan, PR, and found 

that the Department (1) did not reimburse the HOME program more than $2 million for three activities that 

were terminated and did not meet HOME objectives, (2) failed to reprogram and put to better use more than 

$1.84 million in unexpended HOME funds, (3) failed to collect more than $1.26 million in overdue HOME 

loans and did not return to the United States Treasury more than $275,000 in repayments, and (4) improperly 

reported to HUD more than $6.4 million in HOME commitments without executing written agreements. 

Further, the Department’s financial management system (1) did not account for more than $991,000 in HOME 

receipts, (2) did not support the allocability of more than $301,000 in disbursements and allowed the use of 

more than $151,000 for ineligible expenditures, (3) did not deposit into its bank account more than $137,000 

in HOME receipts, and (4) failed to disburse funds in a timely manner. As a result, HUD had no assurance 

that the Department met HOME objectives and commitment requirements. 

OIG recommended that HUD require the Department to (1) repay more than $3.58 million for ineligible 

expenditures associated with terminated activities, unexpended 2002 HOME funds, and unallowable 

administrative costs; (2) collect and/or reprogram and put to better use more than $3.62 million for 

HOME funds for terminated activities, uncollected loans, repayment funds not remitted to its treasury 

account, receipts not deposited into its bank account, and unsupported commitments; and (3) provide 

all supporting documentation to demonstrate the allocability and eligibility of more than $1.29 million in 

HOME disbursements. (Audit Report: 2010-AT-1006)

ppp

HUD OIG audited the Mobile Housing Board in Mobile, AL, which serves as both the public housing 

agency and the administering agency for the City of Mobile’s HOME and CDBG programs, and found 

that the City did not perform annual monitoring of the Housing Board to ensure that its HOME funds 

were used in accordance with all program requirements. Cost allocation plans were not developed by the 

Housing Board to properly allocate or prorate its HOME program costs for phases III and IV of its HOPE 

VI redevelopment project. The Housing Board arbitrarily charged more than $1 million to phases III and 

IV. As a result, it disbursed nearly $840,000 in unsupported costs in both phases. The Housing Board used 

nearly $340,000 of its HOME funds to pay for ineligible costs in all four phases of its HOPE VI redevelopment 

project. As a result, nearly $340,000 in HOME funds was not used as intended under the HOME program.

OIG recommended that HUD ensure that the City (1) establishes and maintains a subrecipient agreement 

with the Housing Board pursuant to HUD requirements, (2) develops procedures to monitor the Housing 

Board at least annually, and (3) reallocates the excessive $1.9 million in HOME and CDBG funds to other 

eligible activities and program recipients. OIG also recommended that HUD require the Housing Board to 

(1) support the nearly $840,000 in HOME funds it charged to phases III and IV with either a cost allocation 

or proration plan, repaying any amount that cannot be supported; (2) lower the sales prices of the HOME 

units in phase I to within HUD requirements and ensure that they are occupied by qualified low-income 

persons in a timely manner or repay the more than $156,000 in ineligible HOME funds; and (3) recapture 

the nearly $184,000 in HOME funds used to pay for ineligible costs for phases II, III, and IV of the HOPE 

VI redevelopment. (Audit Report: 2010-AT-1004)

ppp

69

Chapter 4 - Community Planning and Development Programs
HUD OIG reviewed the City of Montebello, CA’s HOME program and found that the City’s Whittier 

and 6th Street project was not timely and the City committed and disbursed $1.3 million in HOME funds 

without the required written agreement. It also recorded the project as completed in HUD’s Integrated 

Disbursement and Information System (IDIS), although no project construction had begun. 

OIG recommended that HUD require the City to (1) repay the HOME project funds, plus any interest due, 

and place the funds into the HOME U.S. Treasury account; (2) implement written procedures and controls 

regarding the HOME program; and (3) obtain IDIS training. (Audit Report: 2010-LA-1013)

ppp

HUD OIG audited Polk County, FL. The audit identified more than $1.6 million in incorrect commitment 

entries that the County made in IDIS. The incorrect entries masked a shortfall of more than $400,000 that 

is subject to recapture by HUD. In addition, the County improperly executed agreements for its HOMEfunded tenant-based rental assistance activities that obligated Section 8 funds to pay the costs, although 

the County used HOME funds to make the assistance payments. The Section 8 contracts did not legally 

support the commitment of HOME funds. 

OIG recommended that HUD (1) recapture the HOME funds not committed by the County’s October 

31, 2008, deadline; (2) require the County to implement controls to ensure that future HOME funds are 

committed by the required deadline, monitor commitments entered into IDIS, and take appropriate action to 

promptly correct detected violations; and (3) require the County to prepare a proper legal contract template 

for its HOME-funded tenant-based rental assistance activities and use that contract template for all future 

HOME funds committed to those activities. (Audit Report: 2010-AT-1008)

ppp

HUD OIG audited HUD’s Office of Affordable Housing Programs’ oversight of resale and recapture 

provisions for HOME-assisted home ownership projects and found that HUD did not ensure that participating 

jurisdictions complied with HUD’s requirements in their use of resale and recapture provisions to enforce 

HUD’s affordability requirements for HOME-assisted projects. Of the 40 projects reviewed, 27 participating 

jurisdictions did not include appropriate resale and/or recapture provisions in their 29 consolidated and/

or action plans that were in effect at the time the participating jurisdictions set up 32 projects in IDIS. 

Further, 18 participating jurisdictions did not ensure that appropriate resale or recapture provisions were 

implemented for 21 projects. In addition, three participating jurisdictions did not ensure that HUD’s 

interest was sufficiently protected in three projects for which more than $43,000 in HOME funds was used 

for home-buyer assistance.

OIG recommended that HUD require the Office to (1) ensure that the State of New York and Cobb County, 

GA, Consortium reimburse their programs $30,000 and nearly $10,000, respectively, for two projects for which 

they did not ensure that they met HUD’s affordability requirements; (2) ensure that the State of Montana 

places a deed restriction, land covenant, affidavit, and/or lien on a property to ensure that it would recoup 

all or a portion of the more than $3,000 in HOME funds used for a project if the housing does not continue 

to be the principal residence of the household for the duration of the affordability period or reimburse its 

program more than $3,000; and (3) implement adequate procedures and controls to address the finding 

cited. (Audit Report: 2010-CH-0002)

70

Chapter 4 - Community Planning and Development Programs
Neighborhood Stabilization Program

HUD OIG audited the State of Kansas’ Neighborhood Stabilization Program I (NSP I) and found that 

the State improperly obligated more than $12 million of its NSP I funds by reporting its funds as obligated 

in HUD’s DRGR system without those funds’ being linked to a specific address and/or household. Also, 

the State entered into NSP I contracts without all of the required provisions. 

OIG recommended that HUD require the State to (1) implement a system to track and support its 

obligations as defined by HUD rules and regulations and (2) deobligate any portion of the more than 

$12 million in NSP I funds that has not been expended and was improperly obligated. In addition, OIG 

recommended that the State amend its NSP I contracts with its subrecipients to include the missing provisions 

and the additional NSP I funding awarded. Finally, OIG recommended that the State’s NSP staff receive 

training regarding the required provisions of NSP I contracts. (Audit Report: 2010-KC-1006)

ppp

HUD OIG audited the Sacramento Housing Redevelopment Agency in Sacramento, CA, and found that 

the Agency did not administer its NSP in accordance with HUD rules and regulations. Specifically, it (1) 

allowed ineligible properties to be rehabilitated; (2) did not adequately monitor projects, which resulted in 

ineligible costs; (3) permitted the developer to make unnecessary upgrades and overinflate the construction 

budget; (4) did not ensure that it met its reporting requirements; and (5) lacked management controls. These 

deficiencies resulted in ineligible costs and funds that could be put to better use. 

OIG recommended that HUD require the Agency to repay from non-Federal funds more than $1.1 million 

in ineligible costs and establish and implement effective management controls. Improvement of controls 

would ensure that more than $5.3 million in funds could be put to better use. (Audit Report: 2010-LA-1011)

ppp

HUD OIG audited the City and County of Denver, CO’s NSP I and found that the City improperly 

obligated more than $1.5 million of its NSP I funds by recording its funds as obligated in HUD’s DRGR 

system without the funds being linked to a specific address and/or household. Additionally, the City did 

not follow HUD’s NSP I reporting regulations. It did not post two quarterly NSP I performance reports on 

its official Web site within the 30-day requirement.

OIG recommended that HUD (1) require the City to develop and implement policies and procedures to 

ensure proper obligation of NSP I funding and deobligate any portion of the more than $1.5 million in NSP 

I funds that was not properly obligated and (2) provide technical assistance to the City regarding HUD’s 

reporting requirements to ensure that it posts quarterly NSP I performance reports on its official Web site 

within the 30-day requirement. (Audit Report: 2010-DE-1006)

ppp

HUD OIG reviewed the City of Chattanooga, TN’s NSP and found that the City generally administered 

its program in accordance with HUD’s rules and regulations. However, it was sometimes inconsistent in 

identifying obligations and was not always accurate in its reporting to HUD. 

OIG recommended that HUD continue to monitor the City’s progress in obligating its program funds to 

ensure that it meets the September 6, 2010, deadline and that the City be required to develop and implement 

improved internal controls for tracking obligations and reporting. (Audit Report: 2010-AT-1012)

ppp

71

Chapter 4 - Community Planning and Development Programs
HUD OIG reviewed the Louisville/Jefferson County, KY, Metropolitan Government’s (Louisville Metro) 

NSP and found that Louisville Metro generally administered its program in accordance with HUD’s rules 

and regulations and was making progress in obligating its funds. However, it was not always accurate in 

its reporting to HUD. 

OIG recommended that HUD continue to monitor Louisville Metro’s progress in obligating its program 

funds to ensure that it meets the September 20, 2010, deadline. OIG also recommended that Louisville Metro 

strengthen its internal controls over reporting. (Audit Report: 2010-AT-1013)

ppp

HUD OIG reviewed the City of Augusta, GA’s NSP I and found that the City demonstrated the capacity 

to properly obligate its entire $2.4 million NSP I grant by the September 5, 2010, statutory deadline. However, 

it (1) did not have internal controls in place to perform continuous and routine monitoring of its obligation 

process to ensure that its obligations were processed as intended and were valid and (2) entered its NSP I 

obligations into the DRGR system database in June 2010 for its LH25 set-aside activities. At that time, the 

obligations were not valid because the contracts for those obligations had not been signed by all parties. 

Overall, the City’s actions taken or planned indicated its willingness to make necessary improvements. 

Therefore, OIG made no recommendations. (Audit Report: 2010-AT-1806)

ppp

HUD OIG reviewed Clark County, NV’s NSP and found that Clark County generally had sufficient 

capacity and had been administering its NSP in accordance with HUD requirements. However, it needs to 

revise its written procedures and developer agreements to ensure that properties to be sold to eligible home 

buyers will be sold at a price permitted by NSP requirements. 

OIG recommended that HUD require Clark County to revise its written procedures and developer 

agreements to ensure that rehabilitated properties will be sold at no more than the cost of acquisition and 

rehabilitation. (Audit Report: 2010-LA-1012)

Youthbuild and Supportive Housing Program

HUD OIG audited Sasha Bruce Youthwork, Incorporated, in Washington, DC, to determine whether 

it used its Youthbuild and Supportive Housing program grant funds in accordance with HUD regulations 

and its grant agreements. 

Youthwork did not support the eligibility of more than $1.9 million in expenditures. It failed to maintain 

records identifying the source and application of funds for its HUD-sponsored activities as required by 

HUD regulations and its grant agreements. Its accounting system did not separately track expenses paid 

by HUD versus expenses paid through other funding sources. Therefore, HUD had no assurance that $1.9 

million in grant funds it disbursed to Youthwork were used for eligible activities that met the intent of its 

grant agreements.

OIG recommended that HUD evaluate the issues identified and if appropriate, initiate administrative 

actions against responsible Youthwork officials. OIG also recommended that HUD require Youthwork 

to provide documentation to demonstrate that more than $1.9 million was used for eligible activities or 

repay HUD from non-Federal funds, improve its financial management system, and implement improved 

accounting procedures to ensure that it meets Federal requirements. At a minimum, the financial management 

system should maintain accounting records that (1) track expenses paid by HUD versus expenses paid 

72

Chapter 4 - Community Planning and Development Programs
through other funding sources; (2) demonstrate that expenditures paid were for eligible activities; (3) 

determine and adequately document the reasonableness, allocability, and allowability of costs; and (4) 

demonstrate that expenditures tie in with HUD-approved budget line items, thereby ensuring that more 

than $686,000 in program funds will be used for eligible purposes. (Audit Report: 2010-PH-1008)

ppp

73

Chapter 4 - Community Planning and Development Programs
Investigations

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.

Strategic Initiative 3: Contribute to the strengthening 

of communities

Key program 

results

$ 

recovered

Convictions/pleas/ 

pretrials

$2,283,104 30

Page 75

Page 76

Investigations 51

Our

focus

• Theft/embezzlement

• Other fraud/crimes

Cases 

closed

Admin/civil 

actions

6

Chart 4.2: Percentage of OIG community planning and development 

closed investigation cases during this reporting period

Region 1 - 4%

Region 2 - 11%

Region 3 - 2%

Region 13 - 0% 

Region 4 - 2%

Region 14 - 4%

Region 5 - 2%

Region 15 - 4%

Region 6 - 2%

Regions 7/8 - 8%

Region 9 - 2%

Region 10 - 2%

Region 11 - 57%

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Chapter 4 - Community Planning and Development Programs

74
4

Chapter 4 - Community Planning and Development Programs

Theft/Embezzlement

Belinda Exon, an escrow administrator for Rehab Financial Corporation, an organization that manages 

HUD community planning and development and CDBG funds for a number of California municipalities, pled 

guilty in U.S. District Court, Los Angeles, CA, to committing embezzlement of property from organizations 

receiving Federal funds. From September 2002 to October 2008, Exon diverted and used about $3.9 million 

in HUD funds for personal investments, including $22,000 in City of Pomona American Recovery and 

Reinvestment Act funds. 

ppp

Eugene Telfair, president of the Florida Agriculture and Mining University Federal Credit Union (A&M 

Credit Union), and A&M Credit Union grant administrator Robert Nixon were each indicted in U.S. District 

Court, Tallahassee, FL, for allegedly committing theft of government funds, wire fraud, and a conspiracy 

to embezzle grant funds from HUD and others and filing false Federal income tax returns. From January 

2002 to August 2009, Telfair and Nixon allegedly provided false consulting and administrative billings and 

obtained and embezzled $134,253 in HUD Historically Black College grant funds through the A&M Credit 

Union. 

ppp

Emmanuel Nwadike, a former contractor for the City of Opa-Locka who is currently suspended from 

doing business with the Federal government, was arrested and charged in Miami-Dade District Court, 

Miami, FL, with allegedly making a false statement and committing organized fraud, grand theft, and 

money laundering. From June 2009 to April 2010, Nwadike allegedly obtained about $50,000 in HUD CDBG 

funds through the City of Opa-Locka for engineering services provided by General Design Professionals, 

a company Nwadike allegedly controls. 

ppp

Copyright 2010. Tallahassee Democrat. Tallahassee, FL. Reprinted with permission.

75
76

Chapter 4 - Community Planning and Development Programs

Kortni Calabrese, a former bookkeeper for Community Action in Self Help, Inc. (Community Action), a 

nonprofit organization that receives HUD HOME program funds, was sentenced in Wayne County District 

Court, Lyons, NY, to 12 months probation and ordered to pay Community Action $3,692 in restitution for 

her earlier guilty plea to committing grand larceny and a scheme to defraud. From September 2004 to 

December 2005, Calabrese issued $15,000 in unauthorized Community Action checks. 

ppp

Lola May, the former executive director of the Queensborough Neighborhood Association 

(Queensborough), an organization that receives HUD CDBG funds, was sentenced in Louisiana State 

Court, Shreveport, LA, and ordered to pay Queensborough $2,335 in restitution for her earlier guilty plea to 

unauthorized use of a moveable. During 2009, May used $2,335 in Queensborough funds for personal gain. 

ppp

Randy McRae, a former board member of the Central Prince Georges County Community Development 

Corporation (CDC), was indicted in Prince Georges County District Court, Upper Marlboro, MD, for 

allegedly uttering a counterfeit document and committing theft, aggravated theft, and counterfeiting. 

McRae allegedly forged CDC board member signatures on documents he submitted to become a certified 

CHDO, fraudulently obtained $50,000 in HUD HOME and private investor funds, and used these funds 

for personal investments or expenses. HUD losses have not yet been determined. 

ppp

Russell McLaughlin, Jr., the former president of Building Inspections Underwriters, Inc., was sentenced 

in U.S. District Court, Newark, NJ, to 12 months incarceration and 36 months supervised release and fined 

$20,100 for his earlier guilty plea to giving and offering a bribe. McLaughlin paid about $5,000 to previously 

sentenced Anthony Saccomanno, the former director of the Cherry Hill Department of Code Enforcement 

and Inspections (Cherry Hill), an organization that receives HUD CDBG funds, in return for $240,000 in 

Cherry Hill contracts. 

Other Fraud/Crimes

Anthony Sharpe, a former HUD Real Estate Assessment Center inspector and current City of Detroit 

building inspector, doing business as Sharpe Environmental; City of Detroit building inspector MoReno 

Taylor, doing business as Taylor Environmental Sampling & Testing (Taylor Environmental); Sharpe 

Environmental; and Taylor Environmental were each charged in U.S. District Court, Detroit, MI, with 

allegedly making false statements and committing mail fraud and fraud through the interstate transportation 

of money. From 2004 to 2007, Sharpe and Sharpe Environmental allegedly provided false residential lead 

inspection reports for Wayne Metropolitan Community Action Agency, an organization that receives HUD 

CDBG funds. In addition, Sharpe, Taylor, Sharpe Environmental, and Taylor Environmental allegedly 

created false lead inspection records for seven HUD-subsidized multifamily housing developments located 

in Cincinnati, OH, and four HUD-subsidized multifamily housing developments located in Detroit, MI. 

HUD losses have not yet been determined. 

ppp

Robert Jacumin, also known as Roy or Kris King, a former HUD Housing Opportunities for Persons with 

AIDS (HOPWA) program participant, was sentenced in U.S. District Court, Fort Lauderdale, FL, to 5 years 

supervised release and ordered to pay HUD $45,000 and the Social Security Administration (SSA) $24,428 
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Chapter 4 - Community Planning and Development Programs

in restitution for his earlier guilty plea to making false statements and committing theft of government 

funds. Jacumin failed to report income or assets on housing and other certifications and obtained $59,300 

in housing assistance and $21,695 in SSA benefits he was not entitled to receive. 

ppp

Janice Morelock was charged in Atchison County District Court, Atchison, KS, with allegedly providing 

false information and committing theft by deception. Morelock, a HUD HOME program recipient through 

the Atchison County Housing Authority, allegedly provided false information on grant certifications and 

fraudulently obtained $27,493 in HUD funds. 

ppp

Richard Norton, a HUD HOME program participant, was arrested after his indictment in U.S. District 

Court, Fresno, CA, for allegedly committing mail fraud and interstate transportation of stolen property. 

Between October 2005 and September 2009, Norton allegedly stole more than $900,000 in merchandise from 

his employer, resold the items and received more than $1 million but failed to report this income on his 

HUD HOME loan application, and fraudulently obtained $25,312 in HOME funds. 

ppp

Josephine Moore pled guilty in U.S. District Court, Buffalo, NY, to committing theft of government 

funds. Between March and October 2008, Moore provided false information when she applied for and 

obtained $24,000 in Community Block Lead Abatement grant funds through the City of Rochester, NY, a 

HUD CDBG-funded municipality. 

ppp

Malcolm Crawford, also known as Calvin Gamble, a West Valley City Housing Authority HOPWA 

program recipient, was charged in U.S. District Court, Salt Lake City, UT, with allegedly committing mail 

fraud and willfully causing another to commit a Federal crime. From August 1993 to July 2010, Crawford 

allegedly failed to report income, used multiple names and Social Security numbers on housing and other 

certifications, and obtained about $21,844 in housing assistance and about $161,156 in SSA and other benefits 

he was not entitled to receive. 

ppp

Michael Cenzi, Ronald Caceci, and Herbert Babcock, employees of Sinisgalli, Inc., a demolition contractor 

for the City of Rochester, a municipality that receives HUD CDBG funds, each pled guilty in Monroe County 

District Court, Rochester, NY, to endangering public health and illegally dumping hazardous waste. Cenzi, 

Caceci, and Babcock illegally discarded asbestos and other hazardous waste products removed from Rochester 

properties that received CDBG funds. 

ppp

Chapter 5

American Recovery 

and Reinvestment Act 

of 2009
The United States Department of Housing and Urban Development (HUD) has received $13.61 billion in 

funding under the American Recovery and Reinvestment Act of 2009 (ARRA) in several housing program 

areas. Table 1 shows the HUD program areas receiving funding and the amounts appropriated to each 

program. 

Table 1: HUD programs receiving ARRA funding

Program Area

• Public Housing Capital Fund

• Native American Housing Block 

Grant

• Community Development Block 

Grant

• Neighborhood Stabilization Program

• HOME Investment Partnerships 

Program-Tax Credit Assistance 

Program

• Homelessness Prevention Fund

• Assisted Housing Stability grant

• Green Retrofit grant 

• Lead Hazard Reduction 

Demonstration program

Office of Public and Indian 

Housing

Office of Community 

Planning and Development

Office of Multifamily Housing

Office of Healthy Homes and 

Lead Hazard Control

$4,000,000,000

$510,000,000

$1,000,000,000

$2,000,000,000

$2,250,000,000

$1,500,000,000

$2,000,000,000

$250,000,000

$100,000,000

Funding amount

Total $ 13,610,000,000

ARRA also provided $15 million to the HUD Office of Inspector General (OIG). This funding will 

remain available until September 2013. The purpose of the funding is for “oversight and audit of programs, 

grants, and activities funded by this Act and administered by the Department of Housing and Urban 

Development.”

Through its audit and investigative programs, HUD OIG will constantly tailor and adjust its shortand long-term activities for timely and effective oversight of the ARRA funds expended by HUD programs. 

OIG’s plan will be adjusted as the HUD programs develop plans and distribute their ARRA funds. OIG 

will step up outreach and training efforts for the prevention of fraud, waste, and abuse to the Department 

and recipients of ARRA funds. 

ppp

Introduction and Background

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Chapter 5 - American Recovery and Reinvestment Act of 2009
Audit

The Office of Audit initiated a three-phased approach to conducting related audit work. The actions it 

has taken and plans to take will help position it to meet the increased workload under ARRA and protect 

the Federal investment over the long term. 

The Office of Audit’s overall oversight objectives for HUD funding under ARRA are to determine 

whether 

• Funds are awarded and distributed in a prompt, fair, and reasonable manner;

• The recipients and uses of all funds are transparent to the public, and the public benefits of these 

funds are reported clearly, accurately, and in a timely manner; 

• Funds are used for authorized purposes, and instances of fraud, waste, error, and abuse are 

mitigated; 

• Projects funded under ARRA avoid unnecessary delays and cost overruns; and 

• Program goals are achieved, including specific program outcomes and improved results on broader 

economic indicators. 

In the prior semiannual reporting periods, HUD OIG reviewed HUD’s front-end risk assessments, 

audited HUD’s formula allocation dictated in ARRA programs, and assessed the administrative capacity 

for selected grantees to effectively administer ARRA funds. During this semiannual reporting period, our 

focus has shifted from the capacity assessments to audits of the grantee expenditures. OIG has also started 

to focus on HUD’s oversight activities. 

The following section demonstrates the audit work that has been completed during this reporting 

period. 

Strategic Initiative 3: Contribute to the strengthening of communities

* The total ARRA-related audits consist of community planning and development, public and Indian housing, and other 

activity audits. The questioned costs and funds put to better use amounts relate only to ARRA-related costs. 

Key program results Questioned costs Funds put to better use

$9 million $13.8 million

Page 82

Page 82

Page 87

Page 88

Page 88

Page 89

Page 89

Audit 28 audits*

Our

focus

• Departmentwide audits

• Public Housing Capital Fund audits and reviews

• Native American Housing Block Grant audits and reviews 

• Community Development Block Grant audits and reviews

• Neighborhood Stabilization Program audits and reviews

• Tax Credit Assistance Program

• Homelessness Prevention and Rapid Re-housing Program

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Chapter 5 - American Recovery and Reinvestment Act of 2009
In addition to the audits described in this chapter, HUD OIG, has conducted a number of outreach 

efforts (see chapter 8, page 123).

Departmentwide Audits

HUD OIG audited HUD’s internal control structure for ensuring that ARRA recipient data are reported 

completely, accurately, and in a timely manner and to determine whether material omissions and significant 

errors were identified correctly. 

HUD established the Recovery Implementation Team (Recovery Team) to monitor and maintain ARRA 

funding and reporting. The Recovery Team’s accomplishments as of the March 31, 2010, reporting period 

were as follows: (1) developed policies and procedures for validating recipient reporting, (2) completed 

several rounds of validation checks of recipient data, (3) successfully assisted approximately 99 percent of the 

prime recipients (4,849 of 4,911) in meeting reporting requirements, and (4) met with OIG on a monthly basis 

to discuss ARRA activities. The overall quality assurance process was successful. However, the Recovery 

Team should provide additional and updated guidance to HUD program offices pertaining to enforcement 

actions for nonreporting. In accordance with Office of Management and Budget Memorandum 10-17, Federal 

agencies have additional requirements to ensure that recipients report in a timely manner. OIG recommended 

that the Recovery Team ensure that program offices have implemented this new memorandum and request 

updated enforcement action procedures from the program offices. (Audit Report: 2010-DP-0003)

ppp

In response to a request from the Recovery Accountability and Transparency Board, HUD OIG reviewed 

HUD’s guidance to ARRA recipients to post signs, logos, and emblems intended to publicly identify the 

expenditure of ARRA or “stimulus” funds. The Board was asked by Congressman Darrell Issa, ranking 

member of the Committee on Oversight and Government Reform, to determine the scope and impact of 

the Obama Administration’s guidance to recipients on what he stated was politicized stimulus advertising. 

The Board in turn asked OIG to respond to a series of inquiries regarding such advertising as it pertained to 

HUD’s ARRA programs. Congressman Issa characterized HUD’s stimulus advertising as the most overtly 

political guidance that “provided recipients a suggested sign template informing the public that projects 

have been funded by American Recovery and Reinvestment Act, Barack Obama, President.” The objective 

was to determine whether HUD required or encouraged its ARRA recipients to post signs to publicly identify 

projects that were funded with stimulus funds. 

For two programs, HUD initially included provisions in the grant agreements requiring the posting of 

signs. HUD later issued agencywide guidance that “encouraged” ARRA recipients to post signs. (Audit 

Report: 2010-HA-0801)

Office of Public and Indian Housing Audits and Reviews

Public Housing Capital Fund Audits and Reviews

HUD OIG reviewed the Housing Authority of the City of Wilson, NC, which was granted $9.2 million 

for Public Housing Capital Fund projects under ARRA, to evaluate the Authority’s capacity to administer 

additional capital funds received under ARRA and determine whether the Authority followed Federal 

procurement regulations. OIG expanded the objectives to include an assessment of the eligibility of the 

Authority’s planned green renovation of 68 senior housing units using a $7.6 million Public Housing 

Capital Fund competitive grant.

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Chapter 5 - American Recovery and Reinvestment Act of 2009
The Authority lacked sufficient capacity to administer the additional $9.2 million in capital funds it 

received under ARRA. It failed to comply with procurement and financial management requirements in 

its administration of other capital and operating funds and could not provide assurance that it properly 

awarded more than $2.4 million for contracts. The Authority’s plan to substantially rehabilitate 68 senior 

housing units into an energy-efficient, green community using a $7.6 million ARRA competitive capital 

fund grant was ineligible. The cost of renovating this development as planned would result in the inefficient 

and wasteful use of Federal funds and the unnecessary displacement of elderly tenants.

OIG recommended that HUD continue increased oversight and monitoring of the Authority and require 

it to develop, implement, and enforce written policies and procedures for its procurement and financial 

management functions. The Authority must also provide acceptable support for unsupported costs or 

repay them. OIG also recommended that HUD rescind the Authority’s $7.6 million ARRA competitive 

grant. (Audit Report: 2010-AT-1007)

ppp

HUD OIG audited the Housing Authority of the City of Terre Haute, IN’s Public Housing Capital Fund 

(Capital Fund) program to determine whether the Authority (1) properly administered its program and (2) 

had the capacity to administer its ARRA funds.

Under the direction of its former executive director, the Authority violated its annual contributions 

contract with HUD when it obtained a $2.3 million construction loan and a $2 million line of credit to 

finance capital improvements without HUD approval. Further, the Authority did not follow HUD’s and 

its own procurement requirements and failed to pay its maintenance staff and a contractor the appropriate 

Federal labor standard wage rates as required by the Davis-Bacon Act. The Authority obligated its 

ARRA funds in a timely manner. However, it lacked adequate written policies and procedures and staff 

knowledgeable of HUD’s and other Federal procurement requirements. Therefore, it lacked sufficient 

capacity to expend the funds. As a result, the Authority encumbered $2.3 million of its project assets, and 

HUD lacked assurance that it (1) used more than $1.4 million in program funds for the intended purposes, 

(2) operated its program in an efficient manner, and (3) had the capability to effectively expend its ARRA 

funding. Further, the Authority owed more than $49,000 in wage restitution.

OIG recommended that HUD require the Authority to provide documentation or reimburse HUD for 

the various costs associated with its finding, implement adequate procedures and controls to address the 

findings cited, and require the Authority to acquire the capacity to manage its ARRA and other similar 

funding.

OIG also recommended that HUD make an appropriate legal determination and (1) pursue the 

appropriate administrative sanction(s) against the Authority’s former executive director for failing to 

enforce HUD’s requirements and (2) determine legal sufficiency and if legally sufficient, pursue remedies 

under the Program Fraud and Civil Remedies Act against the Authority’s former board chairperson/

principals for incorrectly certifying that the information contained in the Authority’s annual plans was 

true and accurate. (Audit Report: 2010-CH-1010)

ppp

HUD OIG audited the Hartford Housing Authority in Hartford, CT, regarding its $5 million 

Public Housing Capital Fund grant under ARRA to determine whether the Authority (1) had adequate 

management controls over its obligation process, (2) maintained support for obligations, and (3) obligated 

its grant funds for eligible projects.

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Chapter 5 - American Recovery and Reinvestment Act of 2009
Overall, the Authority had adequate controls over obligating and supporting its ARRA capital grant. 

However, it did not always obligate funds for eligible activities. The Authority planned to use its ARRA 

funds to repair and federalize its State housing units. However, its plans changed when the full scope of 

the required repairs and funds needed was determined. The Authority shortened the normal procurement 

time and executed site improvement and boiler replacement contracts for the full amount of the grant before 

the statutory deadline. Most of the Authority’s obligations were for eligible activities, properly procured, 

and adequately supported. However, the Authority contracted to replace 224 boilers, including 33 that 

had not reached the end of their useful life, with boilers that did not meet energy efficiency requirements. 

OIG recommended that HUD ensure that the Authority stops its plans to replace boilers that have 

not reached the end of their economic life and reprograms nearly $138,000 in future annual capital funds 

and ensures that boilers scheduled for replacement in years 2015-2018 are replaced with energy-efficient 

boilers, thereby putting more than $954,000 in ARRA funds to better use. (Audit Report: 2010-BO-1005)

ppp

HUD OIG performed a capacity review to assess the Rochester, NY, Housing Authority’s administration 

of its Capital Fund program. The Authority was awarded $5.9 million in capital funds under ARRA. 

The Authority had weaknesses in its financial controls that if left unaddressed could lead to its having a 

diminished capacity to effectively administer its supplemental ARRA funds. Specifically, the Authority (1) 

charged ineligible and unsupported expenses to its Capital Fund program, (2) failed to reimburse eligible 

expenses from its Capital Fund program, and (3) inaccurately allocated employee payroll expenses charged 

to its Capital Fund program. Except for these issues, Authority officials demonstrated a positive attitude 

toward establishing and implementing additional financial controls, their procurement controls complied 

with regulations, and their capital program outputs were in accordance with their established plans. Thus, 

overall, the Authority had the capacity to effectively administer its Capital Fund program supplemental 

funds provided under ARRA according to applicable requirements.

OIG recommended that (1) HUD monitor and oversee the Authority’s charges and withdrawals for 

Capital Fund program administrative expenses and ensure that only allocable 2009 payroll expenditures 

are charged to the Authority’s Capital Fund programs. Further, OIG recommended that HUD instruct 

the Authority to (2) ensure that nearly $380,000 in ineligible charges and withdrawals of capital funds is 

properly accounted for and reimbursed to HUD from non-Federal funds, (3) provide documentation to 

justify the more than $177,000 in unsupported withdrawals and reimburse HUD for any unsupported costs 

determined to be ineligible, (4) provide documentation to HUD to ensure that nearly $3,000 in relocation 

expenses was reclassified and charged to the Authority’s operating fund and that more than $3,000 in 

eligible modernization-related expenses is reimbursed from capital funds, (5) establish and implement 

policies and procedures that will ensure that allocation plan percentages are accurate and vouchers are 

supported, eligible, and in accordance with Capital Fund program policies and procedures; and (6) review 

and revise its financial controls for tracking capital fund expenditures to ensure that Capital Fund program 

expenses are requested in a timely manner and that all eligible expenses are included in voucher requests. 

(Audit Report: 2010-NY-1804)

ppp

HUD OIG reviewed the Housing Authority of the County of Salt Lake, UT’s Public Housing Capital 

Fund ARRA grant to determine whether the Authority properly obligated and expended its formula grant 

funds. 

84

Chapter 5 - American Recovery and Reinvestment Act of 2009
The Authority did not properly obligate more than $500,000 of its grant funds. It obligated the funds 

without executing contracts for the planned improvements. However, it generally expended more than 

$600,000 of its formula grant funds properly.

OIG recommended that HUD recapture the nearly $561,000 in grant funds that was not properly 

obligated by the deadline. (Audit Report: 2010-DE-1007)

ppp

HUD OIG audited the Elkton Housing Authority in Elkton, MD, to determine whether the Authority 

obligated and disbursed capital funds received under ARRA according to ARRA requirements and 

applicable HUD rules and regulations. 

The Authority did not comply with HUD regulations in obligating and disbursing capital funds. 

Specifically, it (1) did not award a contract totaling nearly $125,000 in accordance with its request for 

proposals, (2) did not ensure that goods used for its ARRA project complied with the “buy American” 

requirement, and (3) improperly drew down nearly $29,000 for administrative costs before incurring ARRA 

expenditures. It also did not accurately report the number of jobs created as a result of its ARRA projects. 

OIG recommended that HUD require the Authority to (1) provide documentation to support the 

evaluation of proposals and the selection of the contractor or reimburse HUD nearly $125,000 from nonFederal funds, (2) provide documentation to support that goods used for its ARRA project were produced 

in the United States, (3) provide documentation to support the administrative costs requested and received 

or reimburse HUD nearly $29,000 from non-Federal funds, and (4) develop and implement adequate 

procedures to ensure that ARRA activities meet HUD requirements. (Audit Report: 2010-PH-1007)

ppp

HUD OIG audited the Housing Authority of Baltimore City in Baltimore, MD, to determine whether 

the Authority administered capital funds provided under ARRA according to ARRA requirements and 

applicable HUD rules and regulations. 

The Authority generally administered its grant funds in accordance with ARRA requirements and 

applicable HUD rules and regulations. 

OIG recommended that HUD require the Authority to (1) properly record a $19,000 transaction on 

its books, (2) strengthen controls for maintaining documentation to support cell phone expenditures and 

recording transactions in its general ledger, (3) track the performance of its energy conservation program, (4) 

report performance annually, and (5) identify funds it will use to repay the funds it borrowed to implement 

energy conservation measures if the projected savings from implementing the measures are not realized. 

(Audit Report: 2010-PH-1013)

ppp

HUD OIG audited the ARRA funds awarded to the Housing Authority of the Sac and Fox Nation of 

Oklahoma in Shawnee, OK, to determine whether the Authority had the capacity to use its ARRA funds 

in accordance with HUD requirements. 

The Authority did not always administer its procurement contracts or acquire property for planned 

ARRA activities in accordance with requirements. Specifically, it did not prepare a cost estimate or technical 

85

Chapter 5 - American Recovery and Reinvestment Act of 2009
evaluation factors for its architectural services contract or acquire two low-rent homes in accordance with 

HUD regulations. Further, it charged ARRA expenditures to other grants, which resulted in an inaccurate 

ARRA report. 

OIG recommended that HUD (1) initiate enforcement actions to require the Authority to follow 

procurement and acquisition requirements, (2) ensure that Authority staff understands and complies with 

procurement and environmental review requirements, and (3) require the Authority to properly report 

ARRA activities. Further, HUD should increase monitoring and oversight of the Authority’s planned 

ARRA activities and/or provide technical assistance and enter into a performance agreement with the 

Authority. (Audit Report: 2010-FW-1003) 

ppp

HUD OIG reviewed the Housing Authority of the City of Pueblo, CO, to determine whether the Authority 

obligated and expended its Public Housing Capital Fund Stimulus (formula) Recovery Act Funded grant 

funds in accordance with ARRA rules and regulations and whether it properly reported ARRA information 

in federalreporting.gov. The Authority generally followed ARRA rules and regulations when obligating 

and expending its ARRA capital funds. However, it did not accurately report in federalreporting.gov the 

number of jobs created and the number of jobs retained using its ARRA capital funds.

OIG recommended that HUD assist the Authority in receiving formal training on how to properly 

report the number of jobs created and the number of jobs retained. (Audit Report: 2010-DE-1005) 

ppp

HUD OIG audited HUD’s compliance with obligation, recapture, and reallocation requirements for 

the ARRA Capital Fund program, specifically, its plans to recapture unobligated formula grants by the 

March 17, 2010, obligation deadline and reallocate the recaptured funds. HUD’s plan was a generalized 

description of the process it would undertake to recapture and reallocate formula grant funds not obligated 

by the deadline. 

OIG recommended that HUD improve its plan by revising it to include more detailed procedures for 

accomplishing HUD’s goals and a timeline for completing them and use this plan for future recapture and 

reallocation events. (Audit Report: 2010-FW-0002)

ppp

HUD OIG audited the Omaha, NE, Housing Authority to determine whether the Authority (1) obligated 

ARRA grant funds in accordance with ARRA requirements and applicable HUD rules, (2) expended ARRA 

grant funds in accordance with ARRA requirements and applicable HUD rules, and (3) accurately and 

completely reported the ARRA grant information to Recovery.gov. 

The Authority generally obligated and expended ARRA grant funds in accordance with ARRA 

requirements, but it did not accurately or completely report ARRA grant information to Recovery.gov. 

OIG recommended that HUD require the Authority to obtain training for its staff and management on 

requirements for reporting to Recovery.gov. (Audit Report: 2010-KC-1009) 

ppp

86

Chapter 5 - American Recovery and Reinvestment Act of 2009
HUD OIG audited the Housing Authority of the City of Pottsville, PA, regarding a nearly $993,000 

grant that it received for its Capital Fund program under ARRA, to determine whether the Authority 

administered its grant funds according to ARRA requirements and applicable HUD rules and regulations. 

Overall, the Authority administered its grant funds in accordance with ARRA requirements and HUD 

rules and regulations. Specifically, it (1) used grant funds for eligible activities included in its annual plan 

or 5-year action plan, (2) obligated and expended grant funds within established deadlines, (3) received and 

disbursed grant funds in a timely manner, (4) effectively monitored and reported on its grant funds, and (5) 

generally procured goods and services in accordance with applicable HUD requirements. However, it did 

not prepare independent cost estimates before soliciting bids for its grant-funded activities. 

OIG recommended that HUD require the Authority to develop and implement controls to ensure that 

it creates independent cost estimates as required and documents them in its contract files. (Audit Report: 

2010-PH-1006) 

ppp

HUD OIG audited the Harrisburg, PA, Housing Authority’s administration of its Public Housing 

Capital Fund grant that it received under ARRA to determine whether the Authority administered its $4.4 

million in grant funds provided under ARRA according to ARRA requirements and applicable HUD rules 

and regulations. 

The Authority generally administered its grant according to ARRA requirements and applicable HUD 

rules and regulations. However, it did not accurately enter job creation information into the appropriate 

Federal reporting Web site. 

OIG recommended that HUD require the Authority to develop and implement controls to ensure that 

ARRA job creation data that it enters into the Federal reporting Web site are accurate. (Audit Report: 2010-

PH-1009) 

Native American Housing Block Grant Audits and Reviews 

HUD OIG conducted a capacity review of the Ft. Belknap Indian Community in Harlem, MT, to 

determine whether there was evidence that Ft. Belknap lacked the capacity to adequately administer its 

ARRA funding in accordance with requirements. 

There were weaknesses in Fort Belknap’s administration of its block grant program that could 

significantly affect its capacity to administer its ARRA funding. Fort Belknap (1) completed renovation 

work in violation of its Indian housing plans, (2) completed purchases in violation of cost principles for 

Federal awards, (3) did not submit its audited financial statements when required, (4) did not pursue 

collection of its past-due tenant accounts receivable, and (5) did not maintain equity accounts on its home 

buyers. 

OIG recommended that HUD increase monitoring and oversight of Fort Belknap’s administration 

and disbursement of ARRA funds, to include increased onsite monitoring if deemed necessary, to ensure 

compliance with program rules and regulations. (Audit Report: 2010-DE-1801) 

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Chapter 5 - American Recovery and Reinvestment Act of 2009
Office of Community Planning and Development Audits 

and Reviews

Community Development Block Grant Audits and Reviews 

HUD OIG reviewed HUD’s Office of Community Planning and Development’s (CPD) risk assessment 

process to determine whether CPD had established and properly implemented a risk assessment process 

that used appropriate measures to determine risk and identify grantees for monitoring.

CPD had established and implemented a risk assessment process that used relevant assessment factors 

to determine risk and identify grantees for monitoring. OIG identified and reviewed risk assessment factors 

in existence, evaluated whether they were adequate, and considered additional factors required under 

ARRA. The risk assessment factors in place were adequate to identify grantees for appropriate monitoring. 

Additionally, the risk analyses prepared annually were used to select grantees for later monitoring.

OIG made no recommendations since no reportable deficiencies were identified. (Audit Report: 2010-

BO-0801)

Neighborhood Stabilization Program Audits and Reviews 

HUD OIG audited the State of Illinois’ Neighborhood Stabilization Program (NSP) to determine 

whether the State (1) had the capacity to effectively and efficiently administer its NSP and obligate NSP 

funds before the required 18-month obligation deadline, (2) awarded NSP funds for eligible projects, and 

(3) used NSP funds for eligible administrative costs.

The State needs to improve its capacity to effectively and efficiently administer its NSP. Although 

the Illinois Housing Development Authority, the current administrator of the State’s NSP, had sufficient 

staffing levels and extensive experience with HUD programs, it is at risk of not meeting the required 

18-month obligation deadline for NSP funds. Further, the Illinois Department of Human Services, the 

former administrator of the State’s NSP, allocated more than $4.8 million in NSP funds for a project that 

did not comply with HUD’s requirements and did not comply with Federal requirements for maintaining 

sufficient documentation to support the use of nearly $8,000 in NSP funds for administrative expenses. 

As a result, a significant portion of the State’s nearly $20.9 million in unobligated NSP funds is at risk of 

being recaptured by HUD and not being used to stabilize neighborhoods and stem the decline in value of 

neighboring homes in the State, and HUD lacked assurance that the State used nearly $8,000 in NSP funds 

for eligible NSP administrative costs.

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

to ensure that it obligates its NSP funds for eligible projects before September 4, 2010; (2) implement the 

Authority’s NSP reallocation award plan for the more than $4.8 million in NSP funds available after the 

Authority rescinded one of the Department’s allocations for a project; (3) provide sufficient supporting 

documentation or reimburse its NSP from non-Federal funds, as appropriate, for the nearly $8,000 in NSP 

funds used for unsupported administrative costs; and (4) implement adequate procedures and controls to 

address the finding cited. (Audit Report: 2010-CH-1011)

ppp

HUD OIG evaluated HUD’s award process for the Neighborhood Stabilization Program 2 (NSP 2) to 

determine whether HUD’s methodology and controls for the evaluation and selection of applications for 

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the $1.93 billion in NSP 2 funds were in accordance with applicable requirements. OIG added a second 

objective to determine whether HUD included special conditions in the grant agreements of high-risk 

grantees. 

HUD’s methodology and controls for evaluating and selecting the applications were in accordance with 

requirements in the notice of funding availability. HUD followed the required procedures for evaluating 

applications against threshold requirements, such as program eligibility, and then rated the applications 

that passed threshold requirements against the six rating factors. At each step, HUD applied quality control 

procedures to ensure that its decisions were correct and supportable. HUD then ranked the applications 

according to their scores and properly selected 56 for funding. OIG also reviewed the grant agreements for 

the 56 selected grantees and found that HUD included special conditions as required by the regulations. 

OIG made no recommendations since no reportable deficiencies were identified. (Audit Report: 2010-

AT-0001)

Tax Credit Assistance Program 

HUD OIG audited the ARRA-funded Tax Credit Assistance Program (TCAP) of the Missouri Housing 

Development Commission in Kansas City, MO, to determine whether the Commission obtained wage reports 

and lobbying certifications required by Federal law and accurately reported job creation to Recovery.gov. 

The Commission did not obtain and review all Davis-Bacon Act reports and lobbying certifications from 

contractors working on TCAP-funded projects. In addition, it did not accurately report job creation data 

to Recovery.gov. 

OIG recommended that HUD require the Commission to (1) design and implement a system for 

identifying contractors working during the month on TCAP-funded projects and tracking the receipt of 

required documentation, (2) obtain and review the required lobbying certifications and Davis-Bacon Act 

files that were missing, (3) restate its fourth quarter 2009 and first quarter 2010 job creation figures in its 

administrative files, and (4) restate its second quarter jobs creation figures to Recovery.gov during the 

continuous correction period and establish an adequate system for reviewing the job creation reports to 

ensure proper reporting in future quarters. (Audit Report: 2010-KC-1007)

Homelessness Prevention and Rapid Re-Housing Program 

HUD OIG audited the Washington State Department of Commerce to determine whether the State 

disbursed its Homelessness Prevention and Rapid Re-Housing Program (HPRP) grant in accordance with 

ARRA requirements. 

The State paid for HPRP services for ineligible participants and participants whose eligibility was not 

supported. In addition, it made a duplicate payment to one of its subgrantees for HPRP. 

OIG recommended that HUD require the State to (1) reimburse its HPRP more than $3,000 from nonFederal funds for one ineligible participant and either provide supporting documentation for the participants 

lacking adequate documentation or reimburse its program nearly $167,000 from non-Federal funds for those 

affected participants and (2) reimburse its HPRP more than $7,000 from non-Federal funds for the duplicate 

payment to its subgrantee. (Audit Report: 2010-SE-1001)

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HUD OIG audited the HPRP of the State of Arizona Housing Department to determine whether the 

Department administered the grant in compliance with ARRA and other applicable regulations. 

The Department had adequate policies and procedures to ensure that ARRA funds were accounted 

for separately and reporting requirements were met. However, it did not have adequate policies and 

procedures to ensure that its subrecipients properly established eligibility for program participants and 

activities and maintained source documents for program expenditures in accordance with the applicable 

documentation requirements for Federal grants. Further, the Department’s policies and procedures were 

not adequate to ensure that subrecipients received adequate training and monitoring to ensure compliance 

with the specific HPRP regulations. 

OIG recommended that HUD require the Department to (1) provide supporting documentation or repay 

unsupported amounts for nearly $76,000 in program expenditures and (2) provide adequate training and 

monitoring to its subrecipients to ensure that they have implemented policies and procedures to comply 

with HPRP requirements and maintain appropriate source documentation for program expenditures. By 

ensuring that its subrecipients properly establish and document that program participants and activities 

are eligible, the Department will reduce the risk of waste, fraud, and abuse for its remaining ARRA funds 

under the program. (Audit Report: 2010-LA-1010)

ppp

HUD OIG audited The Other Place, Inc., in Dayton, OH, regarding its use of ARRA HPRP funds to 

determine whether The Other Place used program funds effectively and efficiently and complied with 

HUD’s requirements. 

The Other Place generally used its HPRP funds in accordance with HUD’s and its requirements. 

However, it provided rental assistance for units with program rents that exceeded fair market rents for the 

area and for a larger unit than the one in which a program participant resided. As a result, nearly $1,000 

in program funds was not used effectively and efficiently or in accordance with HUD’s requirements. 

Further, The Other Place did not ensure that the initial program participant consultation and eligibility 

determination was completed in a timely manner. Program participants began receiving rental assistance 

on October 1, 2009, but the program application forms were not completed by the participants until 

December 2009. However, the participants were eligible to receive program rental assistance. 

OIG recommended that HUD require The Other Place to reimburse its program from non-Federal 

funds for the improper use of program funds and implement adequate procedures and controls to ensure 

that its program is operated in accordance with HUD’s and its requirements. (Audit Report: 2010-CH1006)

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Chapter 5 - American Recovery and Reinvestment Act of 2009
Chapter 6

Disaster Grant

Programs
Over the past several years, the U.S. Department of Housing and Urban Development (HUD) has 

allocated more than $29.4 billion to various States through its Community Development Block Grant (CDBG) 

program. These supplemental appropriations provide additional funds for disaster relief; long-term recovery; 

and restoration of infrastructure, housing, and economic revitalization in areas affected by severe storms 

and flooding for which the President has declared a major disaster. As a result of the continuing natural 

disasters, HUD faces significant management challenges in administering these disaster recovery programs. 

A significant challenge for HUD is how to encourage States to undertake long-term strategies that focus on 

reducing damage from future natural disasters. 

HUD, Office of Inspector General (OIG), audit efforts have highlighted these problems, as well as 

offering appropriate recommendations to resolve these challenges. Further, the HUD OIG Office of Audit 

continues to be diligent in its efforts to pursue fraud, waste, and abuse in the audits of the $29.4 billion in 

HUD emergency supplemental funding provided for disaster recovery. In addition to performing audits of 

Hurricane Katrina funding, the Office of Audit has pursued audits of funding for the Midwest floods and 

Hurricanes Ike and Gustav. During the current semiannual period, the Office of Audit has completed five 

audits of Katrina funding and three audits of other disaster funding. 

ppp

Introduction and Background

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During this period, the OIG Office of Audit issued eight new audit reports on various HUD disaster 

programs. There were seven reviews involving the CDBG disaster programs and one review of the Federal 

Emergency Management Agency’s (FEMA) and HUD, Office Public and Indian Housing’s Disaster Housing 

Assistance Program (DHAP)-Ike. In addition to the audits, inspections, and investigations described in this 

chapter, OIG has conducted a number of outreach efforts (see chapter 8, page 126). 

Audit

* The total disaster audits, questioned costs, and funds put to better use amounts include seven audits conducted in the 

community planning and development area and one audit in the public and Indian housing area. 

Key program results Questioned costs Funds put to better use

Audit 8 audits* $19 million $28.1 million

HUD OIG performed a review of the State of Louisiana, Office of Community Development’s Louisiana 

Tourism Marketing Program, administered by the State’s subrecipient, the Department of Culture, Recreation 

and Tourism (DCRT) in Baton Rouge, LA, to determine whether DCRT, as the State’s subrecipient, ensured 

that Program disbursements were adequately supported.

DCRT generally ensured that Program disbursements were adequately supported. However, in a few 

instances, it did not maintain adequate records to support the eligibility of costs. In addition, DCRT did 

not always ensure that supporting documentation was readily available for review. As a result, the State 

was unable to support its Program costs.

OIG recommended that HUD require the State to (1) support or repay its Program nearly $83,000 in 

unsupported costs, (2) consider reviewing a sample of the remaining 128 disbursements related to its five 

subrecipients to provide reasonable assurance that the disbursements are adequately supported, and (3) 

ensure that DCRT’s invoice file records are readily available for review. (Audit Report: 2010-AO-1003)

ppp

HUD OIG audited the State of Iowa’s business rental assistance program funded by CDBG disaster 

funds to determine whether the State ensured that the City of Cedar Rapids provided rental assistance to 

eligible businesses based on appropriate leases. 

The State did not implement adequate controls over its program. It did not provide adequate guidance 

for determining whether leases were market rate. It also did not perform a complete duplicate benefits 

check to verify that the businesses did not receive duplicate benefits from any other program, insurance, 

or source before awarding the disaster assistance funds. In addition, it did not perform onsite monitoring 

reviews to evaluate program operations.

OIG recommended that HUD require the State to (1) provide documentation to support that program 

funds were properly paid or reimburse the CDBG program from non-Federal sources any amounts that 

it cannot support and (2) implement adequate controls over the program. (Audit Report: 2010-KC-1004)

ppp
HUD OIG audited the State of Mississippi, a $5.5 billion CDBG disaster recovery grantee, to determine 

whether the State ensured that contracts were procured in accordance with its and other applicable policies 

and procedures under its disaster recovery program.

Although the State generally ensured that contracts were procured in accordance with its program 

policies and procedures, it paid program funds to one contractor that exceeded the contract maximums. 

OIG recommended that HUD require the State to support or repay its program nearly $22,000 in 

unsupported costs and ensure that its staff is knowledgeable of its invoice verification policies and procedures. 

(Audit Report: 2010-AO-1004)

ppp

HUD OIG audited HUD’s CDBG Supplemental II Disaster Recovery program funds administered 

by the Texas Department of Housing and Community Affairs (TDHCA) to determine whether TDHCA 

followed Federal and State of Texas regulations in procuring the program management firm to administer 

the Housing Assistance and Sabine Pass Restoration Programs. 

TDHCA did not follow requirements or best practices in the acquisition of its Disaster Recovery-funded 

program management firm. Specifically, it accepted and approved the only proposal received when the 

proposal’s cost exceeded the request for proposals’ specification by $3.68 million. TDHCA made material 

changes to the contract that increased the maximum cost by $1.99 million, budgeted $210,000 in prohibited 

costs, and contracted to pay its program management firm using multiple payment types including $2.23 

million for a cost plus a percentage of cost type, which is prohibited by Federal regulations. In addition, 

TDHCA’s contract with its program management firm lacked sufficient detail tying construction management 

services and oversight to the payment and budget section costs for the proper identification and allocation 

of $14.33 million in costs. As a result, TDHCA could not ensure that it received the best value for the State, 

and its contract included ineligible and unsupported costs of nearly $18.76 million.

OIG recommended that HUD require TDHCA to (1) adopt sound agency business procedures for Disaster 

Recovery-funded procurements in accordance with State policy, (2) train its staff members to ensure that 

they follow its policies, (3) reimburse its Disaster Recovery account for $2.44 million in ineligible costs, (4) 

provide support for or reimburse $16.32 million in unsupported costs, and (5) modify its contract language. 

(Audit Report: 2010-FW-1005)

ppp

HUD OIG audited the State of Louisiana, Office of Community Development’s Orleans Parish Long 

Term Community Recovery Program, in Baton Rouge, LA, administered by the State’s subrecipient, the 

City of New Orleans, to determine whether the City, as the State’s subrecipient, met the requirements of its 

cooperative endeavor agreement with the State during its administration of the New Orleans Redevelopment 

Authority’s projects under the Program. 

The City, as the State’s subrecipient, did not always meet the requirements of its agreement with the 

State during its administration of the Authority’s projects. Specifically, the City failed to meet agreement 

obligations as it did not (1) execute agreements with the Authority in a timely manner and ensure that the 

Authority completed projects within specified timeframes; (2) ensure that the Authority met its performance 

standards, reporting, and consultation requirements or implemented projects in an efficient manner; (3) set 

progressive deadline dates for the Authority or appropriately develop the Authority’s initial agreement 

performance standard requirements; and (4) have monitoring controls in place to ensure that the Authority’s 

projects effectively progressed. The State did not (1) conduct an onsite monitoring review of the City to 

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Chapter 6 - Disaster Grant Programs

correct deficiencies, (2) set progressive deadline dates in its agreement with the City to adequately track 

the Program’s progress, or (3) exercise its agreement options when the City failed to meet its obligations in 

a timely and effective manner. As a result, Program funds were not used in a timely, efficient, or effective 

manner, thus delaying the City’s recovery from the damage caused by Hurricanes Katrina and Rita. 

OIG recommended that HUD require the State to exercise its agreement option by deobligating the 

$28.1 million in Program funds allocated to the Authority’s projects and reallocate those funds to other 

disaster programs. In addition, the State must finalize its monitoring plan and consider including an 

individual subrecipient risk assessment requirement in its final monitoring plan to determine the frequency 

of monitoring. (Audit Report: 2010-AO-1005)

ppp

HUD OIG audited DHAP-Ike in Southeastern Texas to determine whether HUD ensured that four 

housing agencies in Texas correctly calculated and paid DHAP-Ike payments to eligible tenants and for 

eligible units in accordance with program requirements. 

HUD did not ensure that the 4 housing agencies in Texas that received the most assistance followed 

DHAP-Ike requirements for 51 of the 68 active files reviewed. Further, for 27 of the files, the housing agencies’ 

errors affected the payment or tenant/unit eligibility. Projecting the results of the sample showed that of 

the 9,817 families assisted by the 4 housing agencies, at least 6,374 of the families likely had an error in their 

file, and at least 2,920 of the families’ payments or eligibility was affected. 

OIG recommended that HUD (1) perform additional monitoring of its contractor, (2) provide standardized 

guidance to the housing agencies, (3) perform onsite monitoring at the housing agencies, and (4) require the 

4 housing agencies to correct the file documentation errors in the 51 identified files and repay or support 

the 27 questioned payments totaling nearly $49,000. (Audit Report: 2010-FW-0004)

ppp

HUD OIG audited the State of Alabama, Department of Economic and Community Affairs’ Hurricane 

Katrina CDBG Disaster Funds program, administered by the State’s subrecipient, the City of Bayou La 

Batre, to determine whether the State and Bayou La Batre administered the program in accordance with 

the requirements of their grant agreements. 

In general, the State and Bayou La Batre properly administered the program by adequately documenting 

the housing applicants’ use of financial assistance provided by other sources, ensuring that housing applicants 

did not receive a duplicate benefit. The State also ensured that Bayou La Batre adequately supported and 

expended program funds only for eligible costs. 

Since the State ensured that Bayou La Batre properly administered its program in accordance with the 

requirements of its grant agreements, OIG did not recommend corrective action. (Audit Report: 2010-AO1006)

ppp

HUD OIG audited the State of Alabama, Department of Economic and Community Affairs’ Hurricane 

Katrina CDBG Disaster Funds program, administered by the State’s subrecipient, Mobile County Commission, 

to determine whether the State and Mobile administered the program in accordance with the requirements 

of the State’s grant agreements.
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Chapter 6 - Disaster Grant Programs

In general, Mobile, as the State’s subrecipient, met the requirements of its agreements when it usually 

ensured that program disbursements were (1) adequately supported and expended for only eligible expenses 

and (2) not used for the same purpose as financial assistance provided by other sources. 

Since the State ensured that Mobile properly administered its program in accordance with the requirements 

of its grant agreements, OIG did not recommend corrective action. (Audit Report: 2010-AO-1007)

ppp
The HUD OIG Office of Investigation continues to pursue HUD disaster assistance crimes with other 

law enforcement agencies, including the Federal Bureau of Investigation and other Federal, State, and 

local partners. While the majority of prosecutions during this reporting period involved individuals who 

obtained disaster assistance through fraud, OIG is vigorously pursuing public corruption, infrastructure, 

and procurement crimes. Working with the Louisiana Recovery and Mississippi Development Authorities, 

OIG is taking a proactive role to prevent fraudulent disaster-related claim payments and assist with the 

recovery of deceptive or fraudulent grants. In addition, HUD OIG continues to be a dedicated partner in 

the National Center for Disaster Fraud Task Force (previously known as the Hurricane Katrina Fraud Task 

Force). HUD OIG provides personnel to support the joint command center in Baton Rouge, LA, continues to 

support disaster-related investigative efforts throughout the country, and actively participates in the sharing 

of information and the receipt and referral of complaints with other law enforcement agencies.

Homeowner Grant Fraud

Former HUD attorney Diane Walder and her 

husband James Groomes each pled guilty in U.S. District 

Court, Gulfport, MS, to committing theft of government 

funds. Walder and Groomes applied for and received 

$150,000 in CDBG Disaster Recovery Assistance funds 

through the Mississippi Development Authority (MDA) 

and $50,000 in Small Business Administration (SBA) 

disaster assistance for hurricane-damaged residential 

property, but the damaged property was not their 

primary residence during Hurricane Katrina. 

ppp

Denise Gibbons-Stobaugh and Keith Stobaugh 

were collectively sentenced in U.S. District Court, New 

Orleans, LA, to 12 months and 1 day incarceration, 3 

years supervised release, and 3 years probation; ordered 

to pay the Louisiana Office of Community Development 

$150,000 in restitution; and fined $1,500 for their earlier 

guilty pleas to committing theft of government funds 

or misprision of a felony. Gibbons-Stobaugh applied 

for and received $150,000 in CDBG Disaster Recovery 

Assistance funds through the Louisiana Road Home 

(Road Home) program and $38,800 in SBA disaster 

assistance after she claimed extensive property damage 

from Hurricane Katrina, but the property sustained 

only minimal storm damage; Keith Stobaugh concealed 

information and failed to report that his wife used false 

information when she fraudulently applied for and 

received CDBG and SBA disaster funds. 

ppp

Investigation

(2010) The Times-Picayune Publishing Co. All rights 

reserved. Used with permission of the Times-Picayune.

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Chapter 6 - Disaster Grant Programs
Robert and Chressye Wallace each pled guilty in U.S. District Court, New Orleans, LA, to committing 

theft of government funds. Robert and Chressye Wallace applied for and received $150,000 in CDBG 

Disaster Recovery Assistance funds through the Road Home program for hurricane-damaged residential 

property, but the damaged property was not their primary residence during Hurricane Katrina. 

ppp

Ellaine Mullone was charged in U.S. District Court, New Orleans, LA, with allegedly committing theft 

of government funds. Mullone applied for and received $150,000 in CDBG Disaster Recovery Assistance 

funds through the Road Home program, $219,000 in SBA disaster assistance, and $26,676 in FEMA 

assistance for hurricane-damaged residential property, but allegedly the damaged property was not her 

primary residence during Hurricane Katrina. 

ppp

Ruth Goodman was charged in U.S. District Court, New Orleans, LA, with allegedly making false 

statements, committing theft of government funds and mail fraud, and possessing a false passport. 

Goodman applied for and received $132,146 in CDBG Disaster Recovery Assistance funds through the 

Road Home program and $342,000 in SBA disaster assistance for hurricane-damaged residential property, 

but allegedly the damaged property was not her primary residence during Hurricane Katrina. In addition, 

Goodman allegedly submitted false documents to FEMA and possessed a fraudulent passport. 

ppp

Frederick Rabito was sentenced in U.S. District Court, New Orleans, LA, to 36 months probation and 

fined $3,000 for his earlier guilty plea to making false statements. Rabito applied for and received $122,396 

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. 

ppp

Thomas Steele was sentenced in U.S. District Court, New Orleans, LA, to 6 months in a halfway house, 

6 months home confinement, and 24 months probation; ordered to pay the Louisiana Office of Community 

Development $119,935 in restitution; and fined $1,500 for his earlier guilty plea to making false statements. 

Steele applied for and received $119,935 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. 

ppp

Ryant Price was sentenced in U.S. District Court, New Orleans, LA, to 3 years probation and ordered 

to pay the Louisiana Office of Community Development $105,000 and FEMA $14,858 in restitution for his 

earlier guilty plea to committing theft of government funds. Price applied for and received $105,000 in 

CDBG Disaster Recovery Assistance funds through the Road Home program and $14,858 in FEMA disaster 

assistance for hurricane-damaged residential property, but the damaged property was not his primary 

residence during Hurricane Katrina. 

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Garrett Goodbee paid the Louisiana Office of Community Development $104,900 and was sentenced 

in U.S. District Court, New Orleans, LA, to 2 years probation for his earlier guilty plea to committing theft 

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Chapter 6 - Disaster Grant Programs
of government funds. Goodbee applied for and received $104,900 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. 

ppp

Walter Thayer was sentenced in U.S. District Court, Gulfport, MS, to 17 months incarceration and 3 

years supervised release and ordered to perform 100 hours of community service and pay MDA $100,000 

and FEMA $33,000 in restitution for his earlier guilty plea to committing theft of government funds. Thayer 

applied for and received $100,000 in CDBG Disaster Recovery Assistance funds through MDA and $26,200 

in FEMA disaster assistance for hurricane-damaged residential property, but the damaged property was 

not his primary residence during Hurricane Katrina. 

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LaTanicia McMillan-Rogers and Wayne Rogers each pled guilty in U.S. District Court, Jackson, MS, 

to committing theft of government funds. McMillan-Rogers and Wayne Rogers applied for and received 

$91,021 in CDBG Disaster Recovery Assistance funds through MDA and $156,358 in SBA and FEMA 

disaster assistance for hurricane-damaged residential property, but the damaged property was not their 

primary residence during Hurricane Katrina. 

ppp

William Turnage, Jr., pled guilty in U.S. District Court, New Orleans, LA, to making a false statement. 

Turnage applied for and received $89,355 in CDBG Disaster Recovery Assistance funds through the Road 

Home program and $12,500 in FEMA disaster assistance for hurricane-damaged residential property, but 

the damaged property was not his primary residence during Hurricane Katrina. 

ppp

Robert Kenney was sentenced in U.S. District Court, Hattiesburg, MS, to 2 years probation, ordered 

to perform 100 hours of community service, and fined $15,000 for his earlier guilty plea to making false 

statements. Kenney applied for and received $86,490 in CDBG Disaster Recovery Assistance funds 

through MDA for hurricane-damaged residential property, but the damaged property was not his primary 

residence during Hurricane Katrina. 

ppp

Mary Guidry was sentenced in U.S. District Court, Gulfport, MS, to 5 months home confinement and 

3 years probation, ordered to perform 80 hours of community service and pay MDA $69,742 in restitution, 

and fined $3,000 for her earlier guilty plea to making false statements and committing theft of government 

funds. Mary Guidry applied for and received $69,742 in CDBG Disaster Recovery Assistance funds 

through MDA and $6,706 in FEMA disaster assistance for hurricane-damaged residential property, but the 

damaged property was not her primary residence during Hurricane Katrina. 

ppp

Wayne Manning was sentenced in U.S. District Court, New Orleans, LA, to 5 years probation and 

ordered to pay the Louisiana Office of Community Development $64,877 in restitution for his earlier guilty 

plea to making false statements. Manning applied for and received $64,877 in CDBG Disaster Recovery 

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Chapter 6 - Disaster Grant Programs
Assistance funds through the Road Home program for hurricane-damaged residential property, but the 

damaged property was not his primary residence during Hurricane Katrina. 

ppp

Michelle Carroll and Steven Gardner each pled guilty in U.S. District Court, Gulfport, MS, to committing 

mail fraud or aggravated identify theft. Carroll and Gardner applied for and received $63,105 in CDBG 

Disaster Recovery Assistance funds through MDA for hurricane-damaged residential property as husband 

and wife, but Carroll and Gardner were not married, and Carroll provided false identification and other 

documents to obtain the funds. 

ppp

Sylvia Fleming was sentenced in U.S. District Court, Gulfport, MS, to 6 months home confinement 

and 5 years probation and ordered to perform 70 hours of community service and pay FEMA $33,000 

in restitution for her earlier guilty plea to committing theft of government funds. Fleming applied for 

and received $60,074 in CDBG Disaster Recovery Assistance funds through MDA for hurricane-damaged 

residential property, but the damaged property was not her primary residence during Hurricane Katrina. 

ppp

Hubert Sentino pled guilty in U.S. District Court, New Orleans, LA, to committing theft of government 

funds. Sentino applied for and received $60,000 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. 

ppp

Albert McCarty, Sr., was sentenced in U.S. District Court, New Orleans, LA, to 5 years probation and 

ordered to pay the Louisiana Office of Community Development $56,000 and SBA $43,067 in restitution 

for his earlier guilty plea to committing theft of government funds. McCarty applied for and received 

$56,000 in CDBG Disaster Recovery Assistance funds through the Road Home program and $50,800 in 

SBA disaster assistance for hurricane-damaged residential property, but the damaged property was not his 

primary residence during Hurricane Katrina. 

ppp

Elizabeth Holiday was sentenced in U.S. District Court, New Orleans, LA, to 5 months home 

confinement and 5 years probation and ordered to pay the Louisiana Office of Community Development 

$54,566 in restitution for her earlier guilty plea to committing theft of government funds. Holiday applied 

for and received $54,566 in CDBG Disaster Recovery Assistance funds through the Road Home program 

for hurricane-damaged residential property, but the damaged property was not her primary residence 

during Hurricane Katrina. 

ppp

Carlas Williams was charged in U.S. District Court, Baton Rouge, LA, with allegedly committing wire 

fraud. Williams allegedly provided fraudulent information when she applied for and received $51,449 in 

CDBG Disaster Recovery Assistance funds through the Road Home program and $98,000 in SBA disaster 

assistance for hurricane-damaged residential property. 

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Chapter 6 - Disaster Grant Programs
David and Cindy Cole each pled guilty in U.S. District Court, Gulfport, MS, to committing theft of 

government funds and mail fraud. David and Cindy Cole applied for and received $46,695 in CDBG 

Disaster Recovery Assistance funds through MDA for hurricane-damaged residential property, but the 

damaged property was not their primary residence during Hurricane Katrina. 

ppp

Sharon Baker paid the Louisiana Office of Community Development $33,500 and was sentenced in 

U.S. District Court, New Orleans, LA, to 6 months home confinement and 2 years probation for her earlier 

guilty plea to committing theft of government funds. Baker applied for and received $33,500 in CDBG 

Disaster Recovery Assistance funds through the Road Home program for hurricane-damaged residential 

property, but the damaged property was not her primary residence during Hurricane Katrina. 

ppp

Barbara Dennis was charged in U.S. District Court, Jackson, MS, with allegedly making false statements 

and committing theft of government funds. Dennis applied for and received $23,883 in FEMA disaster 

assistance and attempted to obtain $48,452 in CDBG Disaster Recovery Assistance funds through MDA 

for hurricane-damaged residential property, but allegedly the damaged property was not her primary 

residence during Hurricane Katrina. 

ppp

Shawntell Manuel was sentenced in U.S. District Court, New Orleans, LA, to 12 months and 1 day 

incarceration and 3 years supervised probation and ordered to pay SBA $122,641 in restitution for her 

earlier guilty plea to committing theft of government funds. Manuel provided false information and 

fraudulent documents when she applied for and received $122,641 in SBA disaster assistance loan funds 

and attempted to obtain CDBG Disaster Recovery Assistance funds through the Road Home program. 

ppp

Lionel Perkins was charged in a superseding indictment filed in U.S. District Court, New Orleans, LA, 

with allegedly committing obstruction of justice. Perkins, who was previously charged with allegedly 

committing theft of government funds, aggravated identity theft, and other crimes, allegedly instructed 

other individuals to tamper with documents relating to his pending criminal trial. 

HUD and FEMA Disaster Housing Assistance Fraud 

Karen Jones, a Housing Authority of New Orleans (New Orleans) Section 8 tenant and FEMA disaster 

housing recipient, was charged in U.S. District Court, New Orleans, LA, with allegedly committing mail 

and wire fraud. From December 2006 to January 2009, Jones allegedly failed to report her nonresidency in 

her subsidized unit or her dual receipt of disaster housing assistance and obtained $33,525 in New Orleans 

housing assistance she was not entitled to receive. 

ppp

Alicia Watt, a former Dupage Housing Authority (Dupage) Section 8 tenant and FEMA disaster 

housing recipient, was indicted in U.S. District Court, Chicago, IL, for allegedly committing mail fraud. 

From 2005 to 2009, Watt allegedly claimed Hurricane Katrina evacuee status and obtained FEMA disaster 

housing assistance at the same time she resided in Dupage subsidized housing; failed to report her receipt 

of FEMA disaster housing assistance on Dupage certifications or her receipt of dual housing benefits to 

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Chapter 6 - Disaster Grant Programs
the Social Security Administration (SSA); and obtained $32,971 in Dupage housing assistance, $29,751 in 

FEMA disaster housing assistance, and $60,000 in SSA benefits she was not entitled to receive. 

ppp

Donna Gaines, a former Alameda County Housing Authority Section 8 tenant, was charged in U.S. 

District Court, Oakland, CA, with allegedly committing theft of government funds. From 2001 to 2008, 

Gaines allegedly failed to report income or her receipt of FEMA disaster assistance on housing certifications 

and obtained $14,174 in housing assistance she was not entitled to receive. 

ppp

Adrienne Breaux, a Harris County Housing Authority Hurricane Katrina disaster housing assistance 

recipient, was sentenced in U.S. District Court, Houston, TX, to 12 months and 1 day incarceration and 

3 years supervised release and ordered to pay FEMA $50,293 in restitution for her earlier guilty plea to 

making false statements and committing wire fraud and a conspiracy to submit false claims. Breaux and 

her previously sentenced husband, Odell Chambers, used the identities and Social Security numbers 

belonging to other individuals and applied for and received about $11,322 in housing and $92,890 in other 

disaster assistance they were not entitled to receive. 

ppp

Cynthia Dixon, a former Marietta Housing Authority Housing Choice Voucher program participant 

and FEMA disaster housing assistance recipient, was sentenced in Cobb County Superior Court, Marietta, 

GA, to 5 years probation for her earlier guilty plea to making false statements and committing theft by 

deception. From March 2007 to February 2008, Dixon failed to report her receipt of disaster housing 

assistance on housing certifications and obtained $7,882 in housing and utility assistance she was not 

entitled to receive. 

ppp

Piquela Stelly, a former housing recipient at Wurzbach Manor Apartments 

(Wurzbach Manor), a HUD-subsidized multifamily housing development, was 

sentenced in U.S. District Court, San Antonio, TX, to 5 years probation and ordered 

to collectively pay HUD, FEMA, and the American Red Cross (Red Cross) $78,484 

in restitution for her earlier guilty plea to submitting a false or fraudulent claim. 

From October 2005 to June 2006, Stelly filed false FEMA and Red Cross disaster 

assistance claims, failed to report unauthorized residents or her receipt of disaster 

assistance on housing certifications, and fraudulently obtained $6,957 in housing 

and $71,535 in FEMA and Red Cross disaster assistance she was not entitled to 

receive. 

ppp

Millie Singleton, a former Tarrant County Housing Authority Housing Choice 

Voucher program participant and FEMA disaster housing assistance recipient 

through the Harris County Housing Authority, was sentenced in Tarrant County 

District Court, Fort Worth, TX, to 4 years deferred adjudication and ordered to pay 

HUD $4,405 in restitution for her earlier guilty plea to securing the execution of a 

102

Chapter 6 - Disaster Grant Programs

Copyright 2010. San Antonio 

Express News. San Antonio, TX. 

Reprinted with premission.
document by deception. Between June and November 2008, Singleton failed to report her receipt of dual 

housing subsidies on housing certifications and obtained $4,405 in housing assistance she was not entitled 

to receive. 

ppp

Monique Morris and Dawn Eppers, a former Brazos Valley Councils of Government Section 8 tenant 

and landlord and Hurricane Katrina disaster housing assistance recipients, were each indicted in Brazos 

County State Court, Bryan, TX, for allegedly securing the execution of a document by deception. From 

January 2006 to June 2007, Morris and Eppers allegedly submitted fraudulent documents, failed to report 

their receipt of dual housing subsidies, and together obtained $3,243 in housing assistance they were not 

entitled to receive. 

ppp

George Magee, a Housing Authority of New Orleans Section 8 tenant and Hurricane Katrina disaster 

housing assistance recipient, was sentenced in U.S. District Court, New Orleans, LA, to 14 months home 

confinement and 5 years probation and ordered to pay FEMA $10,000 and the Louisiana Department of 

Social Services $7,753 in restitution for his earlier guilty plea to committing theft of government funds and 

mail fraud. Magee submitted false documents and obtained $15,474 in disaster housing assistance he was 

not entitled to receive. 

ppp

Leslie Landrio, also known as Leslie Washington, a former Houston Housing Authority Housing 

Choice Voucher program participant and FEMA disaster housing assistance recipient through the Harris 

County Housing Authority, pled guilty in Harris County District Court, Houston, TX, to committing theft. 

From June 2006 to November 2007, Landrio failed to report her receipt of dual housing subsidies and 

fraudulently obtained $5,824 in disaster housing assistance she was not entitled to receive. 

ppp

Christine Tate, a former New Britain Housing Authority Section 8 tenant, was sentenced in U.S. District 

Court, Hartford, CT, to 3 years probation and ordered to pay the U.S. Department of Homeland Security, 

Office of Inspector General, $3,742 in restitution for her earlier guilty plea to making false statements. 

From September 2005 to November 2006, Tate applied for and received $3,742 in FEMA disaster assistance 

after she claimed Hurricane Katrina evacuee status, but Tate resided in either Connecticut or Alabama 

during the storm. 

FEMA and Other Fraud by HUD Tenants

Alton Donahue and Jabar Triplett, unauthorized East Baton Rouge Housing Authority Section 8 tenants, 

were collectively sentenced in U.S. District Court, Baton Rouge, LA, to 12 months incarceration, 3 years 

supervised release, and 3 years probation, and Donahue was ordered to pay FEMA $10,391 in restitution 

for their earlier guilty pleas to committing theft of government funds or mail fraud, illegal conversion of 

government property, or aiding and abetting. Donahue and Triplett fraudulently obtained and negotiated 

a $10,391 FEMA disaster assistance check that belonged to another individual. 

ppp

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Chapter 6 - Disaster Grant Programs

Chapter 7

Other Significant Audits

and Investigations/

OIG Hotline
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 a number of outreach 

efforts (see chapter 8, page 126).

Audit

Strategic Initiative 4: Contribute to improving HUD’s execution 

and accountability of fiscal responsibilities as a relevant 

and problem-solving advisor to the Department’s execution

* The total “other” audits include American Recovery and Reinvestment Act of 2009 (two audits) type audits conducted in 

other areas. The writeups for these audits are shown separately in chapter 5 of this semiannual report.

HUD OIG’s more significant audits are discussed below.

HUD’s Office of the Chief Procurement Officer

HUD OIG audited HUD’s procedures for administering completed and expired contracts in compliance 

with applicable regulations to determine whether HUD performed contract closeout procedures on completed 

and expired contracts in a timely manner. OIG’s objective was expanded to determine whether the contract 

files were complete and properly maintained. 

HUD did not close contracts in a timely manner. Specifically, it did not close out more than 1,800 contract 

actions for which the performance period had expired or the work had been completed more than 6 months 

before OIG’s review. Of these actions, 35 contracts had outstanding balances totaling $15.2 million that 

should have been deobligated. Also, HUD did not maintain accountability for contract files. As a result, it 

could not locate 15 of the 94 files sampled, and 11 files were incomplete because required documents were 

missing. 

OIG recommended that HUD (1) deobligate the outstanding balances remaining on the contracts 

reviewed, (2) increase the priority for closing expired and completed contracts and appropriately deobligate 

outstanding balances to avoid future backlogs, and (3) establish adequate administrative controls to properly 

maintain and safeguard contract files. (Audit Report: 2010-HA-0003) 

Key program results Questioned costs Funds put to better use

$3 million $15.2 million

Page 106

Page 107

Page 107

Page 107

Page 107

Page 108

Audit 9 audits*

Our

focus

• HUD’s Office of the Chief Procurement Officer

• Collections made under the False Claims Act

• Fiscal Year 2009 review of information systems controls 

• Review of HUD’s network devices 

• Review of controls over HUD’s property and equipment

• Review of HUD’s Lead Hazard Reduction Demonstration 

Grant program

106

Chapter 7 - Significant Audits and Investigations/OIG Hotline
Collections Made Under the False Claims Act

HUD OIG reviewed the loan origination practices of Anchor Mortgage Corporation in Chicago, IL, to 

identify violations of Federal Housing Administration (FHA) requirements and the related losses incurred 

by HUD. 

HUD sued the lender and its owner under the False Claims Act. In August 2010, the court entered a 

judgment of nearly $3 million against the lender and its owner. The court concluded that Anchor had provided 

false information or violated HUD regulations for 11 loans. The lender had provided false gift affidavits 

in connection with applications it submitted to obtain FHA-insured loans. It had also paid fees to a real 

estate company for referring borrowers, although it certified to HUD that it had paid no kickbacks, fees, or 

consideration of any type to anyone in connection with the transaction except as permitted by HUD rules. 

OIG recommended that HUD collect nearly $2.8 million in damages and penalties awarded against 

Anchor and more than $226,000 in damages and penalties awarded against the owner for violating the False 

Claims Act. (Audit Report: 2010-CF-1801)

Fiscal Year 2009 Review of Information Systems Controls 

(Report Not Available to the Public)

HUD OIG reviewed general and application controls for selected information systems to assess 

management controls over HUD’s computing environments as part of its audit of HUD’s financial statements 

for fiscal year 2009 under the Chief Financial Officer’s Act of 1990. The review was based on the Government 

Accountability Office’s “Federal Information Systems Controls Audit Manual” and information technology 

guidelines established by the Office of Management and Budget and the National Institute of Standards 

and Technology. 

OIG determined that the contents of this report would not be appropriate for public disclosure and has, 

therefore, limited its distribution to selected officials. (Audit Report: 2010-DP-0002)

Review of HUD’s Network Devices 

(Report Not Available to the Public)

HUD OIG audited HUD’s network devices to determine whether the security configurations implemented 

on the devices provided adequate controls to prevent abuse or unauthorized access to HUD’s information 

resources. OIG evaluated security measures that protect HUD information by scanning identified network 

devices and identifying vulnerabilities and suspect configurations that place sensitive information at risk. 

OIG conducted the audit as a component of the testing of general and technical controls for information 

systems in connection with (1) an audit of HUD’s consolidated financial statements and (2) the annual 

evaluation of HUD’s information system security program and practices required by the Federal Information 

Security Management Act of 2002. 

OIG determined that the contents of this report would not be appropriate for public disclosure and, 

therefore, limited its distribution to selected HUD officials. (Audit Report: 2010-DP-0004)

Review of Controls Over HUD’s Property and Equipment

HUD OIG audited HUD’s property and equipment to determine whether HUD properly recorded and 

tracked the acquisition and disposal of its capitalized and other accountable property and equipment. 

107

Chapter 7 - Significant Audits and Investigations/OIG Hotline
10

Not all purchases of accountable equipment were recorded in HUD’s inventory management system, the 

Facilities Integrated Resource Management System (FIRMS). Additionally, HUD lacked sufficient purchase 

documentation for accountable equipment in FIRMS. Also, there were deficiencies noted in FIRMS, and 

HUD’s inventory policies and procedures needed to be updated. HUD properly recorded and tracked its 

capitalized equipment. 

OIG recommended that HUD (1) develop and implement a system which would allow it to identify 

when equipment is purchased, (2) update and reissue the standard operating procedures for reporting the 

purchases of equipment and implement a set of standard operating procedures for users of purchase cards, 

(3) develop and implement system interfaces, and (4) develop and implement a process that can distinguish 

between capitalized and expensed equipment in FIRMS. OIG further recommended that HUD ensure that 

its employees are properly trained in the procedures for identifying which equipment needs to be reported 

and are aware of the requirement to report the purchase and, in some instances, the lease of equipment to 

HUD. (Audit Report: 2010-FO-0004)

Review of HUD’s Lead Hazard Reduction Demonstration Grant 

Program

HUD OIG audited HUD’s grant program for Lead Hazard Reduction Demonstration (LHRD) to determine 

whether (1) HUD awarded grants in accordance with the selection criteria specified in the fiscal year 2009 

notice of funding availability (NOFA) and (2) a hotline complaint, alleging that HUD changed application 

scores to award grants to applicants that were not ranked high enough to receive funding under the 2009 

NOFA, had merit. 

OIG found no intent to change scores to fund certain applicants; thus, the allegation could not be 

substantiated. The scores were changed to correct errors in the waiver matching requirement percentage 

during the threshold review. In addition, five LHRD applicants incorrectly received two bonus points 

because they were not in designated empowerment zones.

OIG recommended that HUD ensure that (1) the accuracy of threshold reviews is verified before the 

applications are sent to the application review panel, (2) the quality control reviews are completed and 

documented before the application review panel report is submitted for approval, and (3) the review panel 

members do not perform quality control reviews of applications that they reviewed. OIG also recommended 

that HUD follow the new procedures requiring the reviewers to verify that applicants are in a designated 

empowerment zone. (Audit Report: 2010-HA-0002) 

ppp

108

Chapter 7 - Significant Audits and Investigations/OIG Hotline
Investigations

Herman Ransom, a former director of the HUD Office of Multifamily Housing, was sentenced in U.S. 

District Court, Kansas City, KS, to 12 months incarceration and 2 years probation and ordered to pay HUD 

$46,926 in restitution for his earlier conviction of committing theft of government funds and wire fraud. 

From September 2001 to June 2007, Ransom played tennis or gambled at local casinos during work hours. 

HUD realized losses of $46,926. 

ppp

Louis Simpson, the owner of Worldwide Communications Group, was sentenced in U.S. District Court, 

Plano, TX, to 183 months incarceration and 3 years supervised release and ordered to pay an amount of 

restitution not yet determined for his earlier conviction of committing wire fraud and aggregated identity 

theft. Simpson claimed an association with HUD and provided fraudulent HUD and financial institution 

documents in an attempt to gain investors and sell products or medical benefits to HUD low-income tenants. 

ppp

Strategic Initiative 4: Contribute to improving HUD’s execution 

and accountability of fiscal responsibilities as a relevant 

and problem-solving advisor to the Department’s execution

Key program 

results

$ 

recovered

Convictions/pleas/ 

pretrials

Investigations 36 $216,234 1

Cases 

closed

Admin/civil 

actions

6

09 109

Chapter 7 - Significant Audits and Investigations/OIG Hotline
OIG Hotline

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 nine 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 10,489 complaints -- 74 percent (7,784) 

received by telephone, 10 percent (1,001) by mail, and 16 percent (1,704) by e-mail. Every allegation 

determined to be related to the OIG mission is logged into a database and tracked.

Of the complaints received, 493 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.

Chart 7.1: Hotline cases opened by program area

Public and Indian housing, 40%

Multifamily housing, 12%

Community planning and 

development, 3%

OIG audit and investigation, 30%

Single-family housing, 4%

Other, 11%

The hotline closed 310 cases this reporting period. The closed hotline cases included 61 substantiated 

allegations. The substantiated allegations resulted in 20 administrative sanctions, including action taken 

against a tenant for failing to report all income and allowing unauthorized live-ins to reside in her HUDsubsidized residence. The Department also took 47 corrective actions that resulted in $140,614 in recoveries 

of losses and $933,674 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. 

110

Chapter 7 - Significant Audits and Investigations/OIG Hotline
Chart 7.2: Hotline dollar impact from program offices

$900,000

$700,000

$500,000

$300,000

$200,000

$0 Public and Indian housing Multifamily housing

$725,420

$72,926

$160,590

$47,194

Funds put to better use Recoveries

ppp

111

Chapter 7 - Significant Audits and Investigations/OIG Hotline

Chapter 8

Outreach

Efforts
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

Deputy Assistant Inspector General for Audit (DAIGA) Joan Hobbs and Special Agent in Charge (SAC) 

Rene Febles provided information and insight and described the resources available for civil and criminal 

mortgage fraud investigations as panelists during a U.S. Attorney’s Civil Chiefs conference in Columbia, 

SC. Approximately 80 prosecutors attended. 

ppp

SAC Barry McLaughlin provided an overview of HUD OIG operations and mortgage fraud as a panelist 

at a Mortgage Bankers Association conference in Chicago, IL. The panel was moderated by Federal Deposit 

Insurance Corporation Inspector General Jon Rymer and included Deputy Special Inspector General for 

the Troubled Asset Relief Program Christopher Sharpley and Rachel Dollar from Smith-Dollar PC. Other 

panel members included personnel from the U.S. Department of Justice, the Federal Housing Administration 

(FHA), and the mortgage industry. Approximately 250 individuals attended each session. 

ppp

SAC Herschell Harvell, Assistant Special Agent in Charge (ASAC) Lisa Gore, and Special Agent (SA) 

Eric Wilkins provided an overview of HUD OIG’s mission and goals and described fraud and “red flag” 

indicators relating to the HUD Home Equity Conversion Mortgage (HECM) program at a training symposium 

sponsored by the National Association of Consumer Credit Counselors and the American Association of 

Residential Mortgage Regulators in Memphis, TN. Approximately 75 mortgage regulators attended. 

ppp

SAC Rene Febles, SA Christina Scaringi, and Assistant U.S. Attorney (AUSA) Richard Hayes participated 

in a panel discussion and described issues found in mortgage fraud investigations at a meeting held for 

New York State Bar Association members in Manhattan, NY. Approximately 80 New York State attorneys 

attended. 

ppp

SAC Barry McLaughlin sponsored and hosted an Illinois Mortgage Fraud Working Group meeting in 

Chicago, IL, and Federal Bureau of Investigation Supervisory SA Paul Holdeman provided an overview of 

the latest trends in mortgage fraud, suspicious activity reports, and law enforcement efforts. Approximately 

25 regulators, investigators, and prosecutors attended. 

ppp

Chapter 8 - Outreach Efforts

114
ASAC Brad Geary and SA Julien Kubesh provided a presentation, entitled “The Latest Trends in Mortgage 

Fraud”; described the FHA, HECM, and the Neighborhood Stabilization programs (NSP); and discussed 

various Federal statutes and enforcement efforts for individuals attending an International Association of 

Financial Crime Investigators conference in Minneapolis, MN. Approximately 25 financial institution and 

law enforcement personnel attended.

ppp

ASAC Ray Espinosa provided a presentation, entitled “The Latest Trends in Mortgage Fraud,” described 

the FHA and HECM programs, and illustrated OIG’s undercover operations and enforcement efforts at a 

Bank and Credit Union Safety and Fraud seminar sponsored by the Chicago Police Department in Chicago, 

IL. Approximately 25 financial institution loss prevention and Federal, State, and local law enforcement 

personnel attended. 

ppp

ASAC Suzanne Steigerwald and Assistant Regional Inspector General for Audit (ARIGA) Sarah Pon 

provided an overview of HUD OIG’s mission and hosted a question and answer forum for approximately 

40 Colorado, Utah, Montana, Wyoming, and North and South Dakota congressional staff members and 

HUD personnel meeting in Denver, CO. 

ppp

ASAC Gene Westerlind provided an overview of HUD OIG’s mission and priorities and described 

mortgage fraud schemes and OIG’s role in mortgage fraud investigations at the New England Chapter 

of the International Association of Financial Crimes Investigators conference in Uncasville, CT. At the 

conclusion, a question and answer forum was held for approximately 150 financial and law enforcement 

personnel in attendance.

ppp

ASAC Lisa Gore and SA Casey Fincher provided an overview of HUD and HUD OIG’s mission and 

goals, described the functions of the Offices of Investigation and Audit, explained common and emerging 

mortgage fraud schemes, and illustrated a short-sale mortgage fraud investigation at a Tennessee Land Title 

Association conference in Nashville, TN. Approximately 50 title industry professionals attended. 

ppp

ASAC Michael Gibson provided an overview of reverse mortgage products and HECM fraud schemes, 

described potential FHA mortgage fraud indicators, and illustrated current investigations and the fraud 

referral process at a Reverse Mortgage Risk Management meeting in Los Angeles, CA. Approximately eight 

Bank of America senior executives and Financial Crimes Enforcement Network representatives attended. 

ppp

ASAC Kedric McKnight provided an overview of HUD OIG’s mission and role in FHA mortgage fraud 

and described mortgage fraud detection and prevention strategies at a Mortgage Bankers Association meeting 

in Fort Worth, TX. More than 160 association members attended.

ppp

Chapter 8 - Outreach Efforts

115
ASAC Tony Meeks and SA James Carrieres provided an overview of HUD OIG’s mission and described 

successful Arizona mortgage fraud investigations for about 100 loan officers and underwriters meeting at 

AmeraFirst Mortgage in Scottsdale, AZ. 

ppp

ASAC James Luu provided an overview of HUD OIG’s mission and function and described investigative 

priorities relating to mortgage fraud and FHA programs at a seminar sponsored by the Chico Association 

of Realtors in Chico, CA. Approximately 75 real estate professionals attended.

ppp

ASAC Lisa Gore provided an overview of HUD OIG’s mission and goals, described the functions of the 

office of Investigation, explained OIG’s role in the use and analysis of Bank Secrecy Act data, and discussed 

the HECM program and foreclosure fraud schemes at a Southern District of Georgia Bank Secrecy Act 

Seminar in Savannah, GA. Approximately 100 financial industry professionals attended.

ppp

ASAC Kevin McBride provided an overview of the latest trends in FHA mortgage fraud and discussed 

mortgage fraud indicators at a HUD-sponsored training conference held in Greensboro, NC. Approximately 

150 loan counselors attended. 

ppp

ASAC Wallace Merriman provided an overview of HUD OIG’s mission and described predatory lending, 

property flipping, equity skimming, and appraisal and HECM program fraud as a panelist at a housing 

conference in Columbia, MD. The conference was sponsored by the Baltimore Homeownership Preservation 

Coalition and the Maryland Housing Counselor Network. Approximately 100 State, local, and nonprofit 

agency representatives attended. 

ppp

ASAC Brad Geary and Barbara Anderson, an attorney from Latimer, Levay, and Jurasek, LLC, provided 

a presentation, entitled “Real Time: Updates in Real Estate, Construction, and Lending Litigation,” and 

discussed FHA mortgages, deed theft schemes, Federal statutes, and current law enforcement efforts at a 

continuing legal seminar held for attorneys and real estate professionals in Chicago, IL. Approximately 40 

attorneys and title company employees attended. 

ppp

ASAC James Luu provided an overview of HUD OIG’s mission and function and described investigative 

priorities relating to mortgage fraud, FHA programs, and economic stimulus packages at a HUD-sponsored 

congressional briefing held in San Francisco, CA. Approximately 40 congressional, HUD, and local 

government representatives attended.

ppp

ASAC Brad Geary provided a presentation, entitled “The Latest Trends in Mortgage Fraud,” and 

described the FHA and HECM programs and current law enforcement efforts as a panelist during a seminar 

Chapter 8 - Outreach Efforts

116
in Chicago, IL. The seminar was sponsored by the Practicing Law Institute. Other panelists included AUSA 

Toi Houston and Robert Burson, the Senior Associate Regional Director for the Securities and Exchange 

Commission. Approximately 50 attorneys attended. 

ppp

ASAC Kedric McKnight provided an overview of HUD OIG’s mission and role and described FHA 

and housing assistance fraud schemes at a “Housing Summit” held in Fort Worth, TX. Approximately 110 

home buyers and mortgage and banking industry professionals attended.

ppp

ASAC Brad Geary provided a presentation, entitled “The Latest Trends in Mortgage Fraud,” and 

discussed FHA mortgages, property flipping, and deed theft schemes; the HECM program and NSP; and 

Federal statutes and current law enforcement efforts for Chicago Association of Government Accountants 

meeting in Chicago, IL. Approximately 25 auditors from various OIG agencies attended.

ppp

ASAC Korey Brinkman and SA Rebecca Nickell provided an overview of HUD OIG’s mission during 

a CitiMortgage teleconference in St. Louis, MO. Approximately 50 CitiMortgage fraud investigators 

participated. 

ppp

SA James Carrieres provided an overview of HUD OIG’s mission and described successful Arizona 

mortgage fraud investigations for about 300 real estate professionals attending an “Industry Partners” 

conference in Scottsdale, AZ. 

ppp

SA John Raney provided an overview of HUD OIG’s mission and described the HECM program, 

mortgage fraud schemes, and issues related to predatory lending at a public benefits forum hosted by AARP 

in Denver, CO. Approximately 85 individuals attended. 

ppp

SAs Herminia Neblina and Ira Long provided an overview of HUD OIG and described the HECM 

program and schemes associated with fraudulent mortgages and loan modifications at a home rescue fair in 

La Puente, CA. The fair was hosted by Congresswoman Grace Napolitano. Approximately 105 La Puente 

government officials and others attended.

ppp

SA James Carrieres provided an overview of HUD OIG’s mission and described successful Arizona 

mortgage fraud investigations at a meeting held for about 75 real estate agents from Coldwell Banker and 

Keller Williams Realty in Mesa, AZ. 

ppp

Chapter 8 - Outreach Efforts

117
SA Brian Gosselin provided an overview of HUD OIG’s mission and role and described mortgage 

fraud for Vermont Mortgage Bankers Association members meeting in Williston, VT. Approximately 12 

mortgage professionals attended. 

ppp

SAs Timothy Lishner and Thomas Osting provided an overview of HUD OIG’s mission and role in FHA 

mortgage fraud and described mortgage fraud detection and prevention strategies at a meeting held for the 

Colorado Association of Hispanic Real Estate Professionals in Denver, CO. Approximately 75 individuals 

attended.

ppp

ARIGA William Nixon, Senior Auditor Tamara Wallinger, and Auditor Stacey Streeter provided a mortgage 

fraud update to the 2010 Oklahoma Mortgage Broker Association Conference in Tulsa, OK. Approximately 

45 people attended the seminar. Auditors answered questions before and after the presentation.

ppp

Regional Inspector General for Audit (RIGA) Heath Wolfe and SAC Barry McLaughlin provided a 

presentation to the Downstate Chapter of the Illinois Mortgage Bankers Association in Bloomington, IL. 

RIGA Wolfe discussed the new Civil Fraud Initiative, lender-related audit findings, and what to expect when 

undergoing an audit. SAC McLaughlin discussed the recent mortgage fraud trends, red flags of mortgage 

fraud, and what to do when you suspect fraud. The audience included managers and staff from mortgage 

bankers, real estate offices, and new home builders. 

ppp

ARIGA William Nixon and Senior Auditor Danita Wade provided a mortgage fraud update to the 

Dallas-Ft.Worth Association of Mortgage Brokers/Professionals in Dallas, TX. Approximately 60 people 

attended the seminar. Auditors answered questions before and after the presentation.

ppp

RIGA Heath Wolfe gave two presentations in Springfield, IL, on HUD OIG’s mission and goals and 

the functions of the Office of Audit. The first session consisted of 29 individuals representing FHA lenders, 

municipalities, housing authorities, nonprofits, and homeless advocacy groups. The second was made up 

of 19 State and Federal congressional staffers.

Public Housing and Rental Assistance Programs

SAC Michael Powell and RIGA Ron Hosking provided an overview of HUD OIG’s priorities, past results, 

and future objectives during four breakout sessions at HUD’s 2010 Sustainable Homes and Communities 

conference in Fargo, ND. The breakout sessions included one session for elected officials, board members, 

and policy makers; two sessions for public housing authority management; and one session for Native 

American program participants. Approximately 500 government and industry leaders and managers 

attended the conference, including U.S. Senator Kent Conrad and other Federal, State, and local government 

representatives. 

ppp

Chapter 8 - Outreach Efforts

118
SAC Wayne North provided an overview of HUD OIG’s role in Indian housing and Community 

Development Block Grant (CDBG) investigations as a panelist at an Affiliated Tribes of Northwest Indians 

conference in Spokane, WA. Other panel members included representatives from the U.S. Department of 

Justice, the U.S. Attorney’s Office, the Bureau of Indian Affairs, Warm Springs and Coleville Tribal Police 

chiefs, and HUD personnel from the Office of Native American Programs. More than 200 tribal leaders 

representing 56 Indian tribes attended.

ppp

SAC Rene Febles, ASAC Kevin Chan, and SAs Rasove Ramirez and Elizabeth Peralta provided an 

overview of HUD housing assistance investigations and described potential fraud within the American 

Recovery and Reinvestment Act of 2009 (ARRA) and NSP during a meeting with Westchester County Section 

8 Administrators in White Plains, NY. More than 15 housing representatives attended. 

ppp

SAC Mike Powell and Senior Auditor Dan Tipton provided an overview of HUD OIG’s mission and 

described multifamily program investigations and audits at a Heartland Affordable Housing Management 

Association meeting in Kansas City, MO. At the conclusion, a question and answer forum was held for 

approximately 60 housing professionals in attendance.

ppp

SAC Barry McLaughlin and ARIGA Ron Farrell provided an overview of HUD OIG investigations 

and audits; explained “red flag” fraud indicators, rental assistance fraud schemes, and recent audits and 

civil enforcement efforts; and described ARRA funding fraud at a National Association of Housing and 

Redevelopment Officials (NAHRO) conference in Indianapolis, IN. Approximately 60 NAHRO members 

attended.

ppp

SAC Wayne North and ARIGA Ed Schmidt provided an overview of HUD OIG and described recent 

ARRA audit findings and housing investigations at an Idaho NAHRO conference in Boise, ID. Approximately 

30 housing officials attended.

ppp

SAC Herschell Harvell and ASAC Nadine Gurley provided a presentation, entitled “How to Combat 

Fraud, Waste, and Abuse within Georgia Housing Authorities,” at a Georgia Association of Housing and 

Redevelopment Authorities conference in Savannah, GA. Approximately 60 housing authority executive 

directors attended. 

ppp

SAC Breck Nowlin and RIGA Heath Wolfe made presentations to more than 65 individuals at the 

Michigan NAHRO conference in Troy, MI. SAC Nowlin and RIGA Wolfe discussed the Public Housing 

Capital Fund program being funded by ARRA. Both presentations included ARRA accountability and 

reporting requirements. RIGA Wolfe’s presentation covered the audit process, common findings in public 

housing agency nonprofit development activities and HUD’s Section 8 Housing Choice Voucher and ProjectChapter 8 - Outreach Efforts

119
Based Voucher programs, and the Office of Audit’s affirmative civil enforcement initiative. SAC Nowlin’s 

presentation also included an overview of OIG’s Office of Investigation’s roles and responsibilities plus its 

priority areas. 

ppp

ASAC Wallace Merriman, ARIGA Kimberly Harrison, and SA Michael Wagenhauser provided an overview 

of HUD OIG’s mission and the Offices of Investigation and Audit; described HUD OIG investigations and 

audits, the audit process, prevention and risk management controls, best practices for housing authorities, 

and rental assistance fraud and identity theft; and provided avenues for protecting information and 

identifying and preventing fraud in multifamily housing programs at the Virginia Association of Housing 

and Community Development Officials conference in Virginia Beach, VA. Approximately 60 housing 

agency representatives attended.

ppp

ASAC Eric Bizjak provided an overview of HUD OIG’s mission, goals, and priorities; explained the 

functions of the Office of Investigation; and described HUD OIG initiatives that monitor HUD ARRA and 

Housing and Economic Recovery Act of 2008 (HERA) funding at a meeting held for Federal, State, and local 

public and private housing representatives in Columbus, OH. 

ppp

ASAC Suzanne Steigerwald and SA Trevor Wood provided an overview of HUD OIG’s mission, described 

the functions of the Office of Investigation, and illustrated fraud detection and enforcement methods 

used to successfully prosecute housing investigations at a Colorado NAHRO conference in Pueblo, CO. 

Approximately 60 housing professionals attended.

ppp

ASAC Kevin Chan and SA Jarred Palmiotto provided an overview of the FHA, CDBG, and Section 8 

programs and discussed HUD OIG’s authority and the process for detecting and preventing fraud and 

selecting and conducting investigations at a New York State Association of Renewal and Housing Officials 

conference in Albany, NY. Approximately 25 housing officials attended. 

ppp

ASAC Korey Brinkman and Senior Auditor Kim Dahl provided an overview of HUD OIG’s mission at 

an annual NAHRO conference in St. Louis, MO. Approximately 80 housing officials attended. 

ppp

ASAC Louis Mancini and SA Heather Yannello provided an overview of HUD OIG’s mission, HUD 

programs, and the assistance available for housing authorities at the New York State Public Housing 

Authority Directors Association conference in Verona, NY. Approximately 150 housing officials attended.

ppp

ASAC Eric Bizjak and SA David Fredrick provided an overview of HUD OIG’s mission, goals, and 

priorities; explained the functions of the Offices of Audit and Investigation; and described housing assistance 

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fraud trends at an Ohio Housing Authorities conference in Columbus, OH. Approximately 50 housing 

professionals and others attended. 

ppp

ARIGA Sonya Lucas made a presentation to 70 members of the Georgia Association of Housing and 

Redevelopment Authorities Spring Conference in Macon, GA. She provided an overview of OIG and 

discussed fraud prevention for public housing authorities.

ppp

SA John Raney provided an overview of HUD OIG’s mission, described the Office of Investigation 

functions, and illustrated fraud detection and enforcement methods used to successfully prosecute housing 

investigations at a Mountain Plains NAHRO conference in Deadwood, SD. Approximately 50 NAHRO 

members attended.

ppp

SA Tammy Hernandez provided an overview of HUD OIG’s mission, goals, and priorities; explained 

the function of the Offices of Audit and Investigation; and described HUD OIG initiatives that relate to 

HUD funding in both ARRA and NSP at a Southwest Regional NAHRO conference in Springdale, AR. 

Approximately 75 NAHRO members attended.

ppp

SAs Edward Redmond and Stephen Tufts provided an overview of HUD OIG’s mission and role and 

described the detection and investigation of waste, fraud, and abuse in HUD-funded programs at a New 

England NAHRO conference in Breton Woods, NH. At the conclusion, a question and answer forum was 

held for approximately 100 housing representatives in attendance. 

ppp

SA Heather Yannello provided an overview of HUD programs and described HUD OIG’s mission as it 

relates to the detection and investigation of program fraud at a training seminar hosted by the New York 

State Division of Criminal Justice in Buffalo, NY. Approximately 120 government officials attended.

ppp

SAs James Fincher, Keith Benderoth, and Jeffery Monnin provided an overview of HUD OIG’s mission 

and goals; described the Offices of Investigation and Audit, rental assistance initiatives, and the HUD 

Enterprise Income Verification system; and illustrated management and tenant fraud schemes at a Housing 

Management conference in Louisville, KY. At the conclusion, a question and answer forum was held for 

275 management agents and others in attendance. 

ppp

SA Robert Petrole provided an overview of HUD OIG’s mission and role in the Housing Choice Voucher 

and Multifamily housing programs, described current trends in rental assistance fraud investigations, and 

illustrated fraud detection methods at a Maryland Association of Housing and Redevelopment Agency 

conference in Ocean City, MD. Approximately 50 housing representatives attended. 

ppp

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SA Ronnyne Bannister provided an overview of HUD OIG’s mission and described housing authority 

investigations and reviews at a meeting for Prince Georges County Housing Authority landlords in Prince 

Georges County, MD. At the conclusion, a question and answer forum was held for approximately 40 

prospective landlords in attendance. 

ppp

SA Gregory Williams provided an overview of HUD OIG’s mission, role, and priorities and discussed 

fraud detection, prevention, and reporting methods at two public safety meetings held at Worcester Housing 

Authority housing units in Worcester, MA. Approximately 70 residents and law enforcement personnel 

attended. 

ppp

SAs Jeffery Monnin and Keith Benderoth provided an overview of HUD OIG’s mission and role and 

described rental fraud initiatives and reporting methods at a Kentucky Housing Corporation conference in 

Bowling Green, KY. More than 380 housing professionals attended. 

ppp

SAs Eric Huhtala and Paul Richard provided an overview of HUD OIG’s mission and authority and 

described fraud prevention and detection during a “Fraud Prevention and Personal Safety Training” seminar 

hosted by the Housing Authority of the County of San Joaquin in Stockton, CA. More than 30 housing 

authority representatives and law enforcement personnel attended. 

ppp

SAs Bozena Schrank and Daniel Austin provided an overview of HUD OIG’s mission and described the 

HUD Public and Indian housing program and OIG’s role in tenant fraud at a Washington Auditor Managers 

meeting in Olympia, WA. Approximately 24 audit managers and legal staff attended.

Community Planning and Development

Michael Beard, Charlene Mills, and Lakesha Mays of the Technical Oversight and Planning Division 

(TOP) participated in a panel at the HUD Office of Community Planning and Development (CPD) Managers 

Training in Washington, DC. TOP joined headquarters CPD representatives Jenny Sardone and Jessie Kome 

to discuss the fiscal year 2011 CPD audit plan and the results of recent audits. Discussion centered around 

the national NSP and HOME Investment Partnerships Program (HOME) program.

ppp

SAC Diane DeChellis and ARIGA Michael Motulski presented an overview of HUD OIG’s mission and 

priorities; described OIG’s organizational structure, the functions of the Offices of Audit and Investigation, 

current management challenges, HUD stimulus funds, and recent audits and investigations; and provided 

information relating to audit reports and the OIG Internet Web site for Rhode Island Bureau of Audit staff 

members meeting in Providence, RI. At the conclusion, a question and answer forum was held for 15 staff 

members in attendance.

ppp

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SAC Rene Febles, ASAC Steven Perez, and SA Jennifer Schofield-Lake provided an overview of HUD 

Community Planning and Development programs and fraud detection and prevention methods and 

described the NSP and recovery funds for Nassau County Intergovernmental and Housing Agency employees 

meeting in Hempstead, NY. Approximately 20 individuals attended. 

ppp

RIGA Tanya Schulze, ASAC James Luu, and ARIGA Vincent Mussetter provided an overview of HUD 

OIG’s mission and conducted two workshops that described fraud detection and prevention methods at 

a CDBG and HOME conference in Sacramento, CA. Approximately 50 nonprofit grantees and State and 

local government officials attended. 

ppp

ARIGA Helen Sparks and Senior Auditor Chad Gagon attended a “welcome home” ceremony for the 

first homeowner in the City of North Las Vegas, NV, to receive keys to an NSP-acquired and -rehabilitated 

home. The ceremony was attended by the mayor and staff of the City of North Las Vegas, HUD CPD 

representative M. Roy Porter, and staff from the nonprofit developer.

ppp

SAs Chris Conn and Tim Mugrage provided an overview of HUD OIG’s mission and described the 

functions of the Office of Investigation at a Missouri CDBG training seminar held in Jefferson City, MO. 

At the conclusion, a question and answer forum was held for approximately 100 grantees in attendance. 

ppp

SA Victoria Marquez provided an overview of HUD OIG’s mission at a “Faith-based and Neighborhood 

Partners” grant writing seminar held in San Antonio, TX. Approximately 75 grant writers and grantees 

attended. 

ppp

SA David Smith provided an overview of HUD OIG’s mission, described the functions of the Office of 

Investigation, and illustrated fraud detection and enforcement methods used to successfully prosecute grant 

fraud investigations for Utah grant administrators meeting in West Valley, UT. Six grant administrators 

attended.

ppp

SA Victoria Marquez provided an overview of HUD OIG’s mission and priorities at a meeting held for 

community development directors in San Antonio, TX. Approximately 25 directors attended.

American Recovery and Reinvestment Act

SAC Joseph Clarke and ARIGA David Kasperowicz gave a presentation on HUD OIG reviews involving 

funds provided under ARRA at a Middle Atlantic NAHRO conference in Wilmington, DE. The presentation 

included an overview of HUD OIG’s mission and goals and the functions of the Offices of Audit and 

Investigation and focused primarily on anticipated and ongoing HUD OIG oversight of ARRA funding. 

ARIGA Kasperowicz presented information on the Office of Audit’s plans for auditing ARRA funds and 

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concerns about the risks in ARRA programs. SAC Clarke described the HUD OIG zero tolerance stance, 

presented information on potential criminal activities associated with the ARRA programs, and provided 

examples of HUD OIG criminal cases involving government funds. Approximately 30 grantees attended 

the presentation. 

ppp

RIGA John Buck and ARIGA David Kasperowicz were guest speakers at the 2010 Governor’s Conference 

on Housing and Community Development hosted by the New Jersey Housing and Mortgage Finance 

Agency and the New Jersey Department of Community Affairs in Atlantic City, NJ. RIGA Buck presented 

an overview of HUD OIG’s mission and goals and the function of the Office of Audit. ARIGA Kasperowicz 

presented information on the Office of Audit’s plans for auditing ARRA funds; concerns about the risk of 

fraud, waste, and abuse in ARRA programs; and information on findings identified in recent audits of the Tax 

Credit Assistance Program. Approximately 20 housing development professionals attended the presentation. 

ppp

RIGA Tanya Schulze and ARIGA Helen Sparks met with the directors of the State of Nevada Legislative 

Auditors and the Internal Auditors in Reno, NV. The main focus of the discussion was ARRA and how 

efforts and resources related to HUD’s ARRA-funded activities can be coordinated. The officials expressed 

an interest in coordinating with OIG in the future.

ppp

RIGA Tanya Schulze and SAC James Todak participated in a briefing in Los Angeles, CA, with about 

35 local congressional representatives and HUD officials. They spoke about OIG’s organization, workload, 

and current initiatives and priorities. The questions and discussions focused largely HUD’s and OIG’s 

current activities related to ARRA. 

ppp

ASAC Eric Bizjak provided an overview of HUD OIG’s mission, goals, and priorities; explained the 

functions of the Offices of Audit and Investigation; and described HUD OIG initiatives that monitor HUD 

ARRA and HERA funding for seven congressional staff members meeting in Columbus, OH. 

ppp

ASAC Kedric McKnight and ARIGAs Nikita Irons and Tracey Carney provided an overview of the 

ARRA, FHA mortgage fraud, and the HECM program; described HUD program requirements, current 

trends, audit findings, and fraud schemes; and discussed OIG’s investigative enforcement strategies and 

audit expectations at an “Annual Neighborhoods” conference in Little Rock, AR. Approximately 50 real 

estate and mortgage industry professionals attended. 

ppp

ASAC Korey Brinkman and ARIGA Carrie Gray provided an overview of HUD OIG’s mission and 

described fraud schemes, recent audit findings, and HUD ARRA funding at a project-based contract 

administrator summit held in St. Louis, MO. At the conclusion, a question and answer forum was held 

for approximately 50 housing finance agency staff members from Missouri, Iowa, Kansas, Nebraska, and 

Oklahoma. 

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ASAC Eric Bizjak provided an overview of HUD OIG’s mission, goals, and priorities; explained the 

Office of Investigation functions; and described HUD OIG initiatives that monitor ARRA and HERA HUD 

funding at a meeting held for employees from the Cincinnati/Hamilton County Continuum of Care for 

the Homeless in Columbus, OH. 

ppp

ARIGA Karen Campbell spoke at the HUD Manager’s Conference in Saratoga Springs, NY. She provided 

an overview of the Office of Audit’s 2010 initiatives and work plans. There were approximately 20 managers 

in attendance. Discussions included ARRA funds and planned and completed audits. 

ppp

ARIGA Tracey Vargas and SAC Wayne North spoke at a meeting of The Association of Washington 

Housing Authorities in Yakima, WA. The meeting was attended by approximately 20 housing authority 

executive directors from Washington. ARIGA Vargas and SAC North provided an overview of HUD OIG, 

its organization, and findings noted in ARRA audits of housing authorities.

ppp

ARIGA Carrie Gray and ASAC Korey Brinkman spoke at a HUD training session for community planning 

and development formula grantees in St. Louis, MO. The training was attended by approximately 25 staff 

members from various entitlement cities in the eastern half of Missouri. ARIGA Gray and ASAC Brinkman 

provided an overview of HUD OIG, various fraud schemes, recent audit findings, and ARRA funding.

ppp

ARIGA Helen Sparks spoke about the OIG audit process and ARRA audits at a briefing hosted by HUD 

in San Francisco, CA, for Region IX Federal, State, and local government elected officials to discuss HUD 

activities in various program areas. The briefing was followed by a roundtable question and answer period.

ppp

ARIGA Kevin Smullen and Senior Auditors Llyod Currie and Kristen Ekmalian attended the STOP Fraud 

Task Force meeting at the offices of the Massachusetts Attorney General in Boston, MA. The Task Force, 

established in 2009 in response to the enactment of ARRA, includes representatives from Massachusetts 

State and U.S. Federal investigative, audit, and inspector general agencies. The discussion topics focused on 

what fraud prevention techniques had worked in the past and indicated that going forward, the focus would 

be more on identifying ARRA-related fraud and less on prevention. A teamwork approach in combating 

fraud was encouraged. A discussion was held on successes to date. Approximately 15 Task Force members 

were in attendance.

ppp

SA Juan Juarez provided an overview of HUD OIG’s mission, goals, and priorities; described the 

functions of the Office of Investigation and OIG initiatives that monitor HUD ARRA and NSP funding; 

and illustrated procurement fraud detection and prevention at a meeting in Houston, TX. Employees from 

the Texas Department of Rural Affairs and the City of Huntsville along with NauticalAffordable Housing 

subgrantees attended. 

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Law Enforcement Outreach

SA Heather Yannello and Investigative Student Trainee Matthew Begeal provided an overview of HUD 

OIG’s witness relocation process at a “Cultivation and Protection of Witnesses” training conference in 

Hamburg, NY. The event was sponsored by the U.S. Attorney’s Office. Approximately 100 law enforcement 

officials attended. 

ppp

In cooperation with the National Center for Missing and Exploited Children, SA Scott Savedow and SAs 

from the Federal Law Enforcement Officers Association fingerprinted about 170 children during National 

Missing Children’s Day events held at the Pahokee and Fort Lauderdale Housing Authorities in Pahokee 

and Fort Lauderdale, FL. 

Other Outreach

Inspector General (IG) Kenneth Donohue and DAIGA Joan Hobbs addressed a group of 200 auditors 

and information technology professionals at the 2010 Association of Government Accountants/American 

Society of Military Comptrollers Technology and Fraud Conference in Honolulu, HI. The session was 

entitled “Civil Fraud: Going after the Money.” IG Donohue discussed civil fraud techniques and how to 

bring money back to Federal organizations. The presentation included a question and answer session.

ppp

DAIGA Joan Hobbs, Counsel to the Inspector General Bryan Howell, and Civil Fraud Division Director 

Kim Randall held a teleconference with the Department of Justice Civil Divisions in Washington, DC, and 

more than 20 U.S. Attorney’s Offices nationwide, as well as HUD’s Office of General Counsel. They explained 

the makeup of OIG’s new Civil Fraud Division and the Division’s focus on mortgage fraud. In addition, 

the group discussed a major tool in litigating mortgage fraud, the Financial Institution Reform, Recovery, 

and Enforcement Act of 1989, as well as HUD-related cases recently filed using the Act. They answered 

questions from the participants and expressed a desire to work closely with HUD and the Department of 

Justice to pursue civil actions against those that commit fraud against HUD. 

ppp

Michael Beard, Director of HUD OIG’s Technical Oversight and Planning Division, presented Region 

VI’s Distinguished Service Recognition Award to Nicole Faison, HUD Program Advisor, in Washington, 

DC. Region VI recognized Ms. Faison for her efforts regarding OIG’s deceased tenants assignment. She 

aided OIG throughout the assignment and championed the report to ensure the implementation of the 

recommendations.

ppp

Civil Fraud Division Director Kim Randall met in St Louis, MO, with the Criminal and Civil Divisions 

of the U.S. Attorney’s Office for the Eastern District of Missouri. Director Randall provided an overview 

of HUD OIG’s new Civil Fraud Division and how HUD OIG was working with HUD’s Office of General 

Counsel in preparing civil action referrals to the Department of Justice. Director Randall also discussed 

how HUD OIG and the U.S. Attorney’s Offices could work together on civil cases.

ppp

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Civil Fraud Division Director Kim Randall met in Fairview Heights, IL, with the Civil and Criminal 

Divisions of the U.S. Attorney’s Office for the Southern District of Illinois. Director Randall described HUD 

OIG’s new Civil Fraud Division and how HUD OIG was working with HUD’s Office of General Counsel 

in preparing civil action referrals to the Department of Justice. Director Randall discussed ongoing and 

potential civil cases regarding fraudulent use of HUD program funds and OIG’s continued commitment to 

working with HUD’s Office of General Counsel on future cases.

ppp

ARIGAs Ed Schmidt and Tracey Vargas met with Chuck F. Pfeil, Director of Audit, and Kelly Collins, 

Deputy Director of State and Local Audits, of the Washington State Auditor’s office in Olympia, WA. They 

discussed the work of each office and how the offices can work together. 

ppp

ARIGA Sarah Pon and Auditor Sally Yang held a teleconference with Mike Geesey, Director of Audit, 

and Pam Robinson, State Legislative Auditor, of the State of Wyoming auditor’s office in Denver, CO. The 

purpose of the meeting was for the two offices to become familiar with each other and discuss the possibilities 

for pooling resources. They discussed the work that each office does and how the offices can work together. 

They agreed to keep in touch and pool resources if the possibility arises.

ppp

ARIGA Sarah Pon and Auditor Sally Yang met in Denver, CO, with Cindi M. Radke, Legislative Audit 

Manager, State of Colorado; Sally Symanski, State Auditor, State of Colorado; and two of their staff members 

that oversee State of Colorado audits to discuss the roles of each office and how they can work together. As 

a result, the offices agreed to coordinate oversight of HUD funds when opportunities arise.

ppp

ARIGAs Narcell Stamps and Sonya Lucas met with the Chief of the Civil Division of the United States 

Attorney’s Office, Northern District of Georgia, and one of her AUSAs in Atlanta, GA. ARIGAs Stamps 

and Lucas obtained feedback on factors OIG should consider when referring cases to the United States 

Attorney for civil action and factors the United States Attorney should consider when deciding whether to 

accept referrals and open civil cases. The AUSA stated that the United States Attorney’s Office is interested 

in referrals that involve single-family mortgage loans and individuals who violate requirements that are 

subject to civil action. ARIGAs Stamps and Lucas discussed and obtained constructive feedback on issues 

such as dollar thresholds, ability to pay, necessity for there to be a loss to the government, preservation of 

assets to settle civil judgments, jurisdictional issues, pursuit of administrative action as parallel proceedings, 

and content of the referral package. The AUSA expressed an interest in working with OIG as it pursues 

civil fraud. 

ppp

ASAC Kedric McKnight and ARIGA Theresa Carroll gave presentations at the 2010 Congressional Briefing 

held at the Albuquerque, NM, HUD office. The presentations covered OIG’s opening of a new office in 

Albuquerque and the mission, roles, responsibilities, and results of OIG. The briefing was attended by one 

congressman, several congressional aides, and local activists. 

ppp

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Computer Audit Specialist (CAS) Cliff Cole participated as a guest speaker at the Association of 

Government Accountants (AGA) national audio conference on “The Latest Tools and Techniques for 

Auditors.” The audio conference was broadcast live from Alexandria, VA, to more than 100 locations and 

nearly 2,000 participants across the United States. CAS Cole highlighted how using audit analytics could 

add value to the organization and demonstrated how the efficiencies of using these techniques could produce 

better results with bigger returns on investment while consuming fewer resources. He further described the 

history of HUD OIG’s computer-assisted audit techniques (CAATs) journey that ultimately brought it to the 

forefront of the inspector general community as one of the leading Federal agencies in innovative audit and 

investigative data analytics. The conference was attended by members of AGA; the National Association 

of State Auditors, Comptrollers, and Treasurers; and the Association of Local Government Auditors. 

ppp

Senior Auditor Amber Eyster presented a description of the HUD OIG Office of Audit at HUD’s Region 

VIII New Employee Program Orientation in Denver, CO. She discussed OIG’s independence from HUD, 

OIG’s mission, internal versus external audits, and how OIG selects audits. The audience consisted of 

approximately 20 new HUD employees, representing various program areas including the Offices of Single 

Family Housing, Multifamily Housing, Fair Housing and Equal Opportunity, and Regional Counsel and 

the OIG Office of Investigation. 

ppp

Senior Auditor Chad Gagon and Auditor Stacey Streeter visited with senior pastors and church officials 

from several faith groups in Las Vegas, NV. The congregations of the respective churches are situated in 

areas that have been hit hard by the recent foreclosure crisis. Auditor Streeter provided an overview of 

HUD OIG’s mission and goals and the function of the Office of Audit. Auditor Gagon discussed audit 

findings related to the single-family program, types of mortgage fraud, and current foreclosure and loan 

modification scams. Approximately 17 people attended.

ppp

SAs Lori DiCriscio and Robert Petrole participated in the 9th annual 5K “Run to Remember” in Baltimore, 

MD, to commemorate the lives of those lost on September 11, 2001. 

ppp

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Chapter 9

Reviews of

Policy Directives
Reviewing and making recommendations on legislation, regulations, and policy issues is a critical part 

of the Office of Inspector General’s (OIG) responsibilities under the Inspector General Act. During this 

6-month reporting period, OIG has committed approximately 464 hours to reviewing 160 issuances. The 

draft directives consisted of 36 notices of funding availability, 96 mortgagee letters or notices, and 28 other 

directives. OIG provided comments on 99 percent of these directives. This chapter highlights some of OIG’s 

comments for this reporting period.

Enacted Legislation

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 (HERA) and the American Recovery 

and Reinvestment Act of 2009 (ARRA). These laws contained significant new funding and programs for the 

U.S. Department of Housing and Urban Development (HUD). Specifically, the Neighborhood Stabilization 

Program (NSP) was created under HERA and provided an initial $3.92 billion in funding to State and local 

governments for the redevelopment of abandoned and foreclosed-upon homes and residential properties. 

ARRA provided an additional $13.61 billion to existing programs, including an additional $2 billion for NSP. 

On May 20, 2009, the President signed the Helping Families Save Their Homes Act of 2009. This new law 

provides the Federal Housing Administration (FHA) with additional loss mitigation authority to assist FHA 

borrowers under the Making Home Affordable program. Further, this legislation expanded the authority 

to use FHA loss mitigation to assist defaulted home buyers in avoiding foreclosure to include those facing 

imminent default. Lastly, the President signed the Dodd-Frank Wall Street Reform and Consumer Protection 

Act. This legislation establishes an office of housing counseling within HUD to boost home ownership 

and rental housing counseling. Further, it provides for foreclosure legal assistance. Specifically, the bill 

authorizes a HUD-administered program for making grants to provide foreclosure legal assistance to lowand moderate-income homeowners and tenants related to home ownership preservation, home foreclosure 

prevention, and tenancy associated with home foreclosure. 

OIG is performing audits of recipients of HERA and ARRA funding. Based on risks identified in HUD’s 

front-end risk assessments, OIG targeted program areas and will propose regulatory changes, as necessary, 

to control risks in these new program areas. 

OIG also participated in a number of meetings with HUD officials regarding these additional funds and 

the programmatic risks of the activities. OIG continues to express concerns about the capacity of many of 

the grantees. It has expressed its concerns in its review comments to clearance items and directly to HUD 

officials.

The Federal Housing Commissioner continued to propose a number of risk management initiatives 

related to HUD’s single-family programs and has started the process of updating its multifamily program 

requirements. As part of the issuances reviewed, OIG provided comments on the preliminary rules. Many of 

the proposed changes required rule making. On April 20, 2010, HUD issued the final rule of Federal Housing 

Administration: Continuation of FHA Reform; Strengthening Risk Management Through Responsible 

FHA-Approved Lenders [Docket No. FR 5356–F–02]. This final rule increases the net worth requirements 

for FHA-approved lenders, provides for the elimination of FHA approval of loan correspondents, and 

updates FHA regulations to incorporate criteria specified in the Helping Families Save Their Homes Act of 

2009 designed to ensure that only entities of integrity are involved in the origination of FHA-insured loans.

Notices and Policy Issuances

OIG objected to a mortgagee letter advising about the new architect/owner agreement, which provides 

a consistent documentary framework for the design and construction of a project. Working cooperatively 

with the Department, OIG continues its efforts to resolve its objections. 

ppp

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Chapter 10

Audit

Resolution
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 ensuring that the agreed-upon changes are implemented 

rests with HUD managers. This chapter describes significant revised management decisions and 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 3, table B, “Significant Audit Reports Described in Previous Semiannual Reports 

in Which Final Action Had Not Been Completed as of September 30, 2010.”

Audit Reports Issued Before Start of Period With No Management 

Decision as of September 30, 2010 

Registered Sex Offenders’ Occupancy of HUD-Subsidized Housing

Issued August 14, 2009. The Inspector General referred this issue to the Assistant Secretaries for Housing 

and Public Housing on December 28, 2009, because agreement could not be reached with the Deputy 

Assistant Secretaries on 13 of the 22 recommendations. The recommendations relate to OIG’s audit of HUD’s 

requirement prohibiting lifetime registered sex offenders from admission to HUD-subsidized housing. Based 

upon a statistical sample, OIG determined that HUD subsidized an estimated 2,094 to 3,046 households that 

included lifetime registered sex offenders. As a result, it did not accomplish the objective of the statute to 

prevent admission of dangerous sex offenders, and the same offenders who were deemed too dangerous 

for admission were allowed to continue living in subsidized housing. 

OIG recommended that HUD seek legislative and program rule changes to require denial of continued 

occupancy and termination of tenancy or continued subsidy, as appropriate, for all lifetime registered sex 

offenders residing in subsidized housing. OIG also recommended that if legislative changes are passed, 

HUD develop and implement a plan to detect lifetime registered sex offenders occupying subsidized 

housing. Additionally, OIG recommended that HUD require projects and housing authorities to revise their 

admission, screening, and recertification procedures and urge them to aggressively pursue termination of 

assistance for lifetime sex offenders to the extent allowed by law. 

Both Assistant Secretaries submitted new proposed management decisions on March 31, 2010. OIG agreed 

with the Assistant Secretaries on all but two recommendations, which related to the need for legislative 

changes to require denial of continued occupancy and termination of tenancy for all lifetime registered sex 

offenders residing in subsidized housing. Specifically, OIG’s audit identified tenants who were eligible 

at the time of admission but later became lifetime registered sex offenders. While Congress has banned 

lifetime registered sex offenders from being admitted to federally assisted housing, current statutes do not 

effectively empower HUD to purge all lifetime registrants who already reside there. This issue is troubling 

because HUD possesses sufficient legal authority to terminate other groups. To compensate for this gap in 

its statutory authority, HUD’s only present option is to employ a mix of regulations, policies, and procedures, 

the statutory basis and ultimate efficacy of which are disputable. A statutory fix authorizing and requiring 

termination of lifetime registrants from federally assisted housing is the surest means to enable HUD to 

protect residents from known sex offenders. 

On April 29, 2010, OIG referred this matter to the Deputy Secretary for a final decision. On June 22, 2010, 

OIG met with the Assistant Secretaries and their staff. On July 7, 2010, the Assistant Secretaries submitted 

“PIH [Office of Public and Indian Housing] and Multifamily Housing Alternate Proposal to Seeking 

Legislation Mandating Termination of Assistance or Tenancy of State Lifetime Registered Sex Offenders.” 

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This proposal was to amend the U.S. Housing Act of 1937 to ban admission and mandate the termination of 

tenancy and assistance for public and assisted housing tenants who become tier III sex offenders, rather than 

attaching the standards to State registration law. In addition, PIH and the Office of Multifamily Housing 

would strongly encourage public housing agencies and owner/agents to establish standards concerning 

admission and termination of tier I and tier II sex offenders. On July 19, 2010, OIG rejected the Assistant 

Secretaries’ alternate proposal because it would loosen the standards that Congress has already established 

and again referred the matter to the Deputy Secretary for a final decision. (Audit Report: 2009-KC-0001)

HUD Lacked Adequate Controls To Ensure the Timely Commitment 

and Expenditure of HOME Funds

Issued September 28, 2009. HUD OIG audited HUD’s HOME Investment Partnerships Program (HOME). 

OIG recommended that the HUD Office of Community Planning and Development (CPD) establish and 

implement controls to ensure that field offices require participating jurisdictions to close out future HOME 

activities within a timeframe that will permit reallocation and use of the funds for eligible activities in time 

to avoid losing them to recapture by the United States Treasury under provisions of Public Law 101-510. 

OIG also recommended that CPD obtain a formal legal opinion from HUD’s Office of General Counsel 

regarding whether

• HUD’s cumulative technique for assessing compliance with commitment deadlines is consistent 

with and an allowable alternative to the 24-month commitment required by 42 U.S.C. (United States 

Code) § 12748 and

• HUD’s first-in, first-out (FIFO) method for assessing compliance with HOME expenditure 

requirements is consistent with and an allowable alternative to the 8-year recapture deadline pursuant 

to Public Law 101-510, codified at 31U.S.C. § 1552.

CPD obtained a legal opinion from the Assistant General Counsel for Community Development on 

March 5, 2010. The legal opinion supports the Department’s use of the cumulative approach and FIFO 

accounting method. Based on this legal opinion, CPD does not plan to implement OIG’s recommendation 

to discontinue use of the FIFO method to account for the commitment and expenditure of HOME funds or 

the cumulative technique for assessing deadline compliance.

OIG requested reconsideration of the opinion. On June 10, 2010, HUD’s General Counsel and Chief 

Financial Officer provided additional information regarding HUD’s recapture requirements of the HOME 

program statute and CPD’s use of cumulative accounting and the FIFO method for financial management.

HUD explained that CPD’s use of cumulative accounting in its financial management represents a 

reasonable interpretation of the statutory duties imposed on the HUD Secretary and addresses the complex 

administrative challenges inherent in managing the HOME Investment Trust. HUD also explained that 

obligations and expenditures under the HOME program are accounted for on a FIFO basis by fund type 

instead of by fiscal year and that CPD, in enforcing the obligation and expenditure requirements, looks to 

total cumulative obligations and expenditures instead of accounting for them by fiscal year. Based on the 

Chief Financial Officer’s financial analysis, given the origin of these requirements and the fundamental 

nature of this block grant program, HUD believed that the FIFO accounting method for obligations and 

expenditures by fund type was consistent with Federal accounting requirements and had no objection to the 

total cumulative obligations and expenditures methods used for assessing compliance with the 24-month 

commitment and 5-year expenditure requirements.

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OIG continues to disagree that CPD’s use of the FIFO method for recognizing commitments and 

expenditures that participating jurisdictions make against their HOME appropriations or CPD’s cumulative 

accounting are consistent with the legislation under 42 U.S.C. § 12748, requiring recapture of funds not 

committed by statutory deadline dates. These methods of accounting also potentially violate the closure 

of accounts under 31 U.S.C. § 1552. 

Another issue raised by CPD’s accounting methods is whether HUD’s FIFO accounting method 

complies with Federal accounting requirements for maintaining the U.S. Standard General Ledger and 

general appropriations law. The accounting issues require review for compliance with Federal accounting 

standards and appropriation law. Since OIG’s last semiannual report date, in conjunction with its annual 

audit of HUD’s financial statements, OIG has discussed the FIFO accounting method with the Government 

Accountability Office (GAO) to obtain its views on whether the method violates Federal standards for 

appropriation accounting. (Audit Report: 2009-AT-0001)

Significantly Revised Management Decisions

Section 5(a)(11) of the Inspector General Act, as amended, requires that OIG report information 

concerning the reasons for any significant revised management decisions made during the reporting period. 

During the current reporting period, there were significant revised management decisions on three audits.

Mays Property Management, Inc., Multifamily Management Agent - 

Little Rock, AR

Issue Date: September 17, 2004. As part of OIG’s initiative to combat equity skimming, OIG audited nine 

multifamily projects managed by Mays Property Management, Inc. (Mays). The objective was to determine 

whether Mays complied with project regulatory agreements and HUD regulations when disbursing funds. 

Mays officials disbursed project operating funds for items that violated project regulatory agreements 

with HUD. They charged management agent expenses to projects, paid for unsupported expenditures, 

diverted project funds to Mays and a property owner, and overcharged expenses to projects. In addition, 

Mays split its management fee with a project owner and transferred project funds to other projects having 

cash-flow problems. As a result, Mays’ officials misspent more than $979,000 in project funds and made 

unauthorized advances of more than $20,000 from five projects to other projects. These violations had a 

negative financial impact on the projects. 

OIG made several recommendations to HUD’s Multifamily Housing Directors in Fort Worth, TX, 

and Little Rock, AR, including (1) require Mays to repay the projects nearly $492,000 for the ineligible 

expenditures of project funds (recommendation 1A); (2) require Mays to furnish required documentation 

and if it does not, require Mays to repay the projects more than $437,000 (recommendation 1C); and (3) 

with HUD approval, require projects to pay their debt to other projects (recommendation 1E). There were 

other recommendations, but they were not affected by the revised management decisions below.

HUD and OIG agreed on the original management decisions in February 2005. On April 2, 2010, OIG 

agreed with HUD’s request to revise the management decision to allow it to request approval from the 

Assistant Secretary for Housing-Federal Housing Commissioner to write off the amounts as they were 

deemed uncollectible. On July 15, 2010, the Assistant Secretary for Housing-Federal Housing Commissioner 

requested OIG concurrence to write off nearly $929,000 for recommendations 1A and 1C, which would also 

resolve recommendation 1E. On August 4, 2010, OIG agreed with HUD’s request to write off the nearly 

$929,000. OIG agreed with the writeoff based primarily on a judgment against Mr. Mays that awarded 

more than $1.7 million to a third party, which required several of Mays’ properties to be sold to satisfy the 

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judgment. HUD also sought administrative enforcement through its Departmental Enforcement Center. 

However, the statutes of limitations had expired. (Audit Report 2004-FW-1009)

East Meyer Community Association - Kansas City, MO

Issue Date: November 24, 2003. HUD OIG conducted an audit of East Meyer Community Association 

to determine whether East Meyer used its Community Development Block Grant and Neighborhood 

Initiative Grant funds in accordance with applicable guidelines. OIG found that East Meyer improperly 

spent nearly $727,000 of its Neighborhood Initiative Grant and recommended that HUD take necessary 

action to recoup the nearly $727,000.

HUD agreed with the recommendation; however, East Meyer filed a Chapter 7 (liquidation) bankruptcy 

on April 3, 2003. According to the records in the bankruptcy court, the Clerk of the Court initially issued a 

notice to creditors advising that there were no assets and that it was unnecessary for any creditor to file any 

claim. On December 31, 2003, the Clerk issued another notice to creditors advising that it appeared that the 

bankruptcy estate had assets and that creditors had to file claims in order to share in any distribution from 

the estate. HUD did not file a claim and, therefore, HUD did not share in any distribution from the estate. 

The bankruptcy case was fully administered, and it was terminated on September 21, 2009.

In April 2004, HUD’s Office of General Council advised CPD that “the available evidence indicates that 

East Meyer has no money that HUD could recover.” HUD’s Office of General Council recently reassessed 

the likelihood that HUD would recover any funds from East Meyer and on March 8, 2010, again advised 

that it was “unlikely that HUD will be able to recover any funds from East Meyer.” In addition, on June 24, 

2010, HUD received a letter from the U.S. Department of Justice stating that the Federal Claims Collection 

Standards, 31 CFR (Code of Federal Regulations) Part 903, grant HUD authority to terminate collection 

activity because HUD failed to file a claim with the bankruptcy court. On September 24, 2010, OIG agreed 

with the revised management decision to write off the nearly $727,000 in improperly spent funds. (Audit 

Report 2004-KC-1001)

Tenant-Based Section 8 Vouchers Used for Tax Credit-Subsidized 

Units - Washington, DC

Issue Date: November 8, 2006. HUD OIG conducted an internal, nationwide review of rents that HUD 

allowed tax credit project owners to charge to tenant-based Section 8 voucher households. OIG initiated 

the review as a follow-up to previous OIG audit work at a public housing agency, which noted that lowincome housing tax credit (tax credit) projects charged higher rents to tenant-based housing choice voucher 

households than to tenants without vouchers. The rents charged for voucher households also exceeded the 

rent restrictions established by the Internal Revenue Service for these tax credit projects. OIG found that, 

consistent with program regulations, tax credit project owners were allowed to charge the Housing Choice 

Voucher program more than $13.5 million annually for rents that exceeded the Internal Revenue Service 

maximum rent when they leased rent-restricted units to households with tenant-based housing choice 

vouchers (tenant-based vouchers). OIG also determined that accurate and up-to-date information on the 

use and cost of tenant-based vouchers in tax credit units was not available because no agency monitored 

the overlap of these programs. Without the tenant-based vouchers, the same tax credit units would have 

been available to the same households at the lower, Internal Revenue Service restricted rent. The restricted 

rents were established for all of the units in each project because the owners had proposed and agreed to 

them in exchange for a capital subsidy in the form of tax credits. HUD had already disallowed similar rent 

levels for other subsidized affordable housing programs on the basis that the additional portion amounted 

to an extra subsidy. Further, use of tenant-based voucher funds to pay such unnecessarily high rents 

directly reduced scarce program funds that could be used to assist additional low-income families. 

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OIG recommended that PIH draft and implement tenant-based voucher program regulations that 

required housing authorities to limit housing assistance payments contract gross rent to an amount not to 

exceed the applicable area’s tax credit-restricted rent at the 60 percent income level for units in projects that 

are 100 percent rent restricted, thus increasing the availability of tenant-based Section 8 voucher funds by 

at least $13.5 million annually (recommendation 1A). 

HUD officials at PIH disagreed with the recommendation (1A), and the matter was referred to the 

Deputy Secretary of HUD. In a May 9, 2007, memorandum, the Deputy Secretary noted that “OIG may be 

correct in finding that the current PIH policy of allowing project owners to charge the tenant-based voucher 

program rents that exceed the maximum tax credit rent is, in fact, an ‘extra subsidy.’ The extent to which this 

practice is unnecessary, wasteful, or overlaps other subsidy programs is not clear and needs further study.” 

Accordingly, HUD and OIG agreed that the recommendation would remain open until sufficient data 

from the implementation of recommendations 2A and 2B (which required HUD to track the use of tenantbased Section 8 vouchers in tax credit units and establish controls to ensure that available data on the costs 

of using multiple program subsidies to provide affordable housing are tracked and reported) had been 

gathered and analyzed by HUD and evaluated by OIG. Once data were available, OIG was to reevaluate 

recommendation 1A, make any appropriate revisions, and submit the revised recommendation(s) to the 

Deputy Secretary. The final action target dates for all of the recommendations were set for 2009 and 2010 

to accommodate the effort needed to establish tracking mechanisms and gather data.

In 2008, the United States Congress passed the Housing and Economic Recovery Act (HERA), which 

contained a provision that allows tax credit projects to charge tenant-based voucher holders rents higher 

than the tax credit limits. PIH subsequently issued regulations to implement the policy. In a May 4, 

2010, memorandum to OIG, the Office of Public Housing and Voucher Programs proposed closing 

recommendation 1A based on this legislative change. OIG agreed with PIH’s interpretation of HERA 

regarding the allowable rents for tenant-based vouchers used for tax credit-subsidized units and closed the 

recommendation on June 15, 2010. (Audit Report 2007-LA-0001)

Significant Management Decision With Which OIG Disagrees

The Puerto Rico Public Housing Administration Mismanaged Its Capital 

Fund Financing Program and Inappropriately Obligated $32 Million in 

Recovery Act Funds – San Juan, PR

Issue date: September 30, 2009. OIG audited the Puerto Rico Public Housing Administration’s (authority) 

Capital Fund Financing Program (Financing Program) as part of OIG’s strategic plan goals to improve 

HUD’s fiscal accountability. The objectives of the audit were to determine whether (1) the authority 

obligated and expended the 2003 Financing Program funds in accordance with HUD requirements, (2) 

the authority’s financial management system complied with program requirements, (3) the authority 

completed the proposed modernization activities under its 2003 Financing Program, and (4) the authority 

had the capacity to administer additional funds under the American Recovery and Reinvestment Act of 

2009 (ARRA).

The authority did not manage the 2003 Financing Program in an economical, efficient, and effective 

manner. In addition, it inappropriately obligated $32.12 million in ARRA funds to supplant expenditures 

from other non-Federal funds in violation of its annual contributions contract with HUD.

Three of the recommendations in the report requested that HUD obtain a formal legal opinion regarding 

the following two issues:

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• Whether the authority’s use of capital funds to pay for interest expenses for 2003 bond proceeds 

used to pay off the bonds is allowable and consistent with regulations at 2 CFR Part 225.

• Whether the authority obligated $31.65 million and expended nearly $463,000 in ARRA funds for 

five cited contracts in accordance with ARRA requirements, HUD Notice PIH 2009-12(HA), and the 

authority’s annual contributions contract.

HUD obtained a legal opinion from the Assistant General Counsel on March 18, 2010. The legal opinion 

concluded that the authority’s actions complied with the applicable requirements.

OIG disagrees with this determination and stands by the conclusion that HUD should hold the authority 

accountable for the improper use of capital and ARRA funds. The Office of General Counsel ignored the 

fact that the authority and its residents did not receive a single benefit from the $57.4 million expended on 

interest for unused bond funds. It also ignored the fact that the construction contracts paid with ARRA 

funds were awarded in 2008, were registered with the State controller’s office, and were already obligated 

with other sources of funding. Also, the scopes of the work were not expanded or increased and were not 

for new projects. The contracts were awarded significantly before ARRA was signed into law and before 

the authorized obligation start date of March 18, 2009. (Audit Report: 2009-AT-1015)

HUD’s Community Development Block Grant Set-Aside for Colonias 

Was Not Used for Its Intended Purposes –Washington, DC

Issue date: July 29, 2008. OIG has been unable to reach agreement with CPD on the actions necessary 

to correct the deficiencies identified in OIG’s audit entitled “HUD’s Community Development Block 

Grant Set-Aside for Colonias Was Not Used for Its Intended Purposes,” issued on July 29, 2008. OIG has 

an agreed-upon management decision for recommendation number 1C wherein CPD’s Office of Block 

Grant Assistance decided to issue guidance to satisfy the recommendation that HUD issue criteria or other 

guidance that (1) better defines a colonia, (2) requires the States to support the colonia designations with 

objective criteria, and (3) requires the States to prioritize funding to colonias with the greatest need, thereby 

better assuring compliance with the Cranston-Gonzales National Affordable Housing Act of 1990. 

However, OIG has nonconcurred on CPD’s proposed guidance because OIG disagreed with CPD’s 

interpretation of the statute implementing the colonia set-aside. OIG and CPD define a colonia, as found in 

Section 916 of the Act, differently. Moreover, OIG believes that to comply with the Act, CPD should require 

the States to (1) support their colonia designations using the objective criteria from the Act, (2) expend setaside funds in accordance with the Act, and (3) prioritize funding to colonias with the greatest need. 

Further, the GAO issued its December 2009 report on “Rural Water Infrastructure - Improved 

Coordination and Funding Processes Could Enhance Federal Efforts to Meet Needs in the U. S.-Mexico 

Border Region” (GAO-10-126), which found that HUD has “not always ensured compliance with statutory 

requirements and regulations concerning the eligibility of applicants or projects or the prioritization of 

funds from programs targeted at the border region.” Moreover, GAO also “found that HUD has not 

developed guidance for determining what constitutes a colonia, has not made such determinations, and 

has not reviewed states’ determinations. Lacking guidance and direction from HUD, states have applied 

requirements differently.” OIG has discussed the matter with CPD’s Assistant Secretary and agrees that 

CPD and OIG are at an impasse. Therefore, OIG is forwarding the issue to HUD’s Deputy Secretary for a 

final decision on this audit. (Audit Report 2008-FW-0001)

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Federal Financial Management Improvement Act of 1996

In fiscal year 2009, 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.

During fiscal year 2009, HUD made limited progress in bringing the financial management systems 

into compliance with FFMIA. HUD’s financial management systems continued to not meet current 

requirements. HUD’s systems were not operated in an integrated fashion and linked electronically to 

efficiently and effectively provide agencywide financial system support necessary to carry out the agency’s 

mission and support the agency’s financial management needs.

HUD’s financial systems, many of which were developed and implemented before the issue date of 

current standards, were not designed to provide the range of financial and performance data currently 

required. HUD is in the process of modernizing its financial management systems by developing an 

integrated financial management system. The modernization development, HUD’s Integrated Financial 

Improvement Project (HIFMIP), was launched in fiscal year 2003 but has been plagued by delays. Originally 

planned for implementation in 2006, the contract for HIFMIP was awarded on September 23, 2010. The 

Office of Management and Budget (OMB) approved the 18-month base period of performance for the 

contract, which is expected to run through April 2012. Future option periods will require OMB approval.

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. 

At the end of 2009, the Department reported that 2 of its 40 financial management systems were not in 

substantial compliance with FFMIA. These two systems are the HUD Procurement System and Small 

Purchase System. The Department plans to acquire a new application, which will bring these systems 

into compliance with FFMIA. The acquisition of the new application was completed on September 30, 

2010. Although 38 individual systems had been certified as compliant with Federal financial management 

systems requirements, HUD had not performed independent reviews of all of its financial management 

systems within the 3-year period required by OMB Circular A-127. Collectively and in the aggregate, 

deficiencies continued to exist. 

In addition, OIG audit reports have disclosed that security of financial information was not provided 

in accordance with OMB Circular A-130, Management of Federal Information Resources, appendix III, and 

the Federal Information Security Management Act. 

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Appendix 1

Peer Review 

Reporting
Appendix 1 - Peer Review Reporting

140

Background

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law No. 111-203), Section 

989C, requires Inspectors General to report the latest peer review results in their semiannual reports to 

Congress. The purpose in doing so is to enhance transparency within the government. Both the Office of 

Audit and Office of Investigation are required to undergo a peer review of their individual organizations 

every 3 years. The purpose of the reviews is to ensure that the work completed by the respective 

organizations meets the applicable requirements and standards. The following is a summary and status of 

the latest round of peer reviews for both organizations. 

Office of Audit

Peer Review Conducted on HUD OIG

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

received a rating of pass (the highest rating) on the peer review report issued by the U.S. Treasury Inspector 

General for Tax Administration on September 22, 2009. There were no recommendations included in the 

System Review Report. The report stated: 

In our opinion, the system of quality control in effect for the year ended March 31, 2009, for the 

audit organization of the HUD OIG has been suitably designed and complied with to provide the 

HUD OIG with reasonable assurance of performing and reporting in conformity with applicable 

professional standards in all material respects. Federal audit organizations can receive a rating 

of pass, pass with deficiencies, or fail. The HUD OIG has received a peer review rating of pass.

Peer Review Conducted by HUD OIG on USDA

The U.S. Department of Agriculture (USDA) OIG received a rating of pass on the peer review report issued 

by HUD OIG on September 30, 2009. The System Review Report contained no findings or recommendations. 

Office of Investigation

Peer Review Conducted on HUD OIG

The most recent peer review of the Office of Investigation was conducted in 2008 by the United States 

Postal Service’s Office of Inspector General. The results of the peer review found HUD OIG compliant 

(the highest rating) with the quality of standards established by the inspector general community and the 

attorney general guidelines.

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Appendix 2

Audit Reports

Issued
Internal Reports

19 Audit Reports

Chief Information Officer (2 Reports)

2010-DP-0002 Fiscal Year 2009 Review of Information Systems Controls in Support of the 

Financial Statements Audit, 05/14/2010.

2010-DP-0004 Security Weaknesses on HUD’s Network Devices, 09/30/2010.

Chief Procurement Officer (1 Report)

2010-HA-0003 HUD Needs To Improve Controls Over Its Administration of Completed and 

Expired Contracts, 09/30/2010. Better use: $15,200,000.

Community Planning and Development (2 Reports)

2010-AT-0001 HUD Evaluated and Selected Applications for the Recovery Act’s NSP 2 in 

Accordance With Applicable Requirements, 06/25/2010.

2010-CH-0002 The Office of Affordable Housing Programs’ Oversight of Resale and Recapture 

Provisions for HOME Investment Partnerships Program-Assisted Homeownership 

Projects Was Inadequate, 04/13/2010. Questioned: $43,086.

Housing (4 Reports)

2010-FW-0003 HUD Was Not Tracking Almost 13,000 Defaulted HECM Loans With Maximum 

Claim Amounts of Potentially More Than $2.5 Billion, 08/25/2010. Better 

use: $35,494,896.

2010-KC-0002 FHA Delayed Sending Violation Notices to Lenders That Did Not Meet 

Recertification Requirements, 08/06/2010.

2010-KC-0003 HUD’s Written Policies and Procedures for Loan Indemnifications Were Generally 

Adequate, But Did Not Include Procedures for Pursuing Signed Indemnification 

Agreements From Lenders, 09/28/2010.

2010-LA-0002 HUD’s Office of Single Family Housing’s Management Controls Over Its 

Automated Underwriting Process, 09/15/2010. Better use: $1,887,442.

Lead Hazard Control (1 Report)

2010-HA-0002 HUD’s Office of Healthy Homes and Lead Hazard Control Grant Selection 

Procedures Used for the Lead Hazard Reduction Demonstration Program, 

09/29/2010.

Office of Chief Human Capital Officer (1 Report)

2010-FO-0004 Review of HUD’s Property and Equipment, 08/17/2010.

Office of Strategic Planning and Management (1 Report)

2010-DP-0003 Review of the Effectiveness of HUD’s Data Quality Review Processes for the 

ARRA, 09/17/2010.

Public and Indian Housing (4 Reports)

2010-BO-0003 Public Housing Authorities Generally Paid Voucher Subsidy Payments to 

Subsidized Multifamily Properties Correctly, 08/09/2010.

2010-FW-0002 HUD’s Recapture and Reallocation Plan for Recovery Act Public Housing Capital 

Fund Grants Had Weaknesses, 04/13/2010.

Appendix 2 - Audit Reports Issued

142
2010-FW-0004 HUD’s Oversight of the Hurricane Ike Disaster Housing Assistance Program in 

Texas Needed Improvement, 09/30/2010. Questioned: $85,103; Unsupported: 

$53,510; Better use: $800.

2010-KC-0001 HUD Took Appropriate Steps to Improve Its Controls Over Net Restricted Assets 

but Overpaid Section 8 Set-Aside Funds to One Public Housing Agency, 

04/16/2010. Questioned: $17,992; Unsupported: $17,992.

Audit-Related Memorandums1

Community Planning and Development (1 Report)

2010-BO-0801 HUD Region 1 Community Planning and Development Offices’ Monitoring 

of Homelessness Prevention and Rapid Re-Housing Program Grants Funded 

Under the ARRA Was Appropriately Targeted to Higher Risk Grantees, 

04/16/2010.

Office of the Secretary (1 Report)

2010-HA-0801 HUD’s Guidance on Posting Signs for ARRA Projects, 08/06/2010.

Public and Indian Housing (1 Report)

2010-NY-0801 Corrective Action Verification, Utica Municipal Housing Authority, Low-Rent 

Housing Program, Utica, NY, Audit Report Number 2006-NY-1005, 09/13/2010.

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1

 The memorandum format is used to communicate the results of reviews not performed in accordance with generally accepted 

government auditing standards, to close out assignments with no findings and recommendations, to respond to requests for 

information, to report on the results of a survey, or to report the results of civil actions or settlements.

Appendix 2 - Audit Reports Issued

143
External Reports

96 Audit Reports

Community Planning and Development (29 Reports)

2010-AO-1003 The State of Louisiana’s Subrecipient Generally Ensured Costs Were Supported 

Under Its Tourism Marketing Program, Baton Rouge, LA, 04/30/2010. Questioned: 

$82,752; Unsupported: $82,752.

2010-AO-1004 The Mississippi Development Authority Generally Ensured That Contracts 

Were Procured in Accordance With Its Disaster Recovery Program Policies 

and Procedures, Jackson, MS, 06/22/2010. Questioned: $21,964; Unsupported: $21,964.

2010-AO-1005 The State of Louisiana’s Subrecipient Did Not Always Meet Agreement 

Requirements When Administering Projects Under the Orleans Parish Long 

Term Community Recovery Program, Baton Rouge, LA, 08/04/2010. Better 

use: $28,125,000.

2010-AO-1006 The State of Alabama Generally Ensured That the City of Bayou La Batre 

Properly Administered Its Hurricane Katrina CDBG Disaster Funds Program, 

Montgomery, AL, 09/30/2010.

2010-AO-1007 The State of Alabama Generally Ensured Mobile Administered Its Hurricane 

Katrina CDBG Disaster Funds Program in Accordance With HUD Requirements, 

Montgomery, AL, 09/30/2010.

2010-AT-1004 Mobile Housing Board Used HOME Investment Partnerships Program Funds 

for Ineligible and Unsupported Costs for Its HOPE VI Redevelopment, Mobile, AL, 

05/17/2010. Questioned: $1,179,370; Unsupported: $839,713; Better use: $1,991,149.

2010-AT-1006 The Puerto Rico Department of Housing Failed To Properly Manage Its 

HOME Investment Partnerships Program, San Juan, PR, 06/11/2010. Questioned: 

$4,880,023; Unsupported: $1,293,336; Better use: $3,625,127.

2010-AT-1008 Polk County Entered Incorrect Commitments Into HUD’s Integrated 

Disbursement and Information System for Its HOME Program, Bartow, FL, 

07/30/2010. Better use: $400,776.

2010-AT-1011 The Puerto Rico Department of Housing Did Not Ensure Compliance With 

HOME Program Objectives, San Juan, PR, 08/25/2010. Questioned: $13,455,261; 

Unsupported: $9,027,082; Better use: $7,958,225.

2010-AT-1012 The City of Chattanooga Needs To Strengthen Controls for Tracking Obligations 

and Reporting for Its NSP, Chattanooga, TN, 09/03/2010.

2010-AT-1013 The Louisville/Jefferson County Metropolitan Government Needs To Strengthen 

Controls Over Reporting for Its NSP, Louisville, KY, 09/17/2010.

2010-AT-1014 Polk County Did Not Comply With Procurement and Contract Requirements in 

Its NSP and HOME Program, Bartow, FL, 09/28/2010. Questioned: $4,524,621; 

Unsupported: $4,426,071; Better use: $7,010,369.

2010-AT-1015 The City of Deerfield Beach Did Not Properly Administer Its CDBG Program, 

Deerfield Beach, FL, 09/29/2010. Questioned: $395,288; Unsupported: $170,546; 

Better use: $33,444.

2010-CH-1006 The Other Place, Inc., Needs To Improve the Administration of Its 

Homelessness Prevention and Rapid Re-Housing Program Under the ARRA, 

Dayton, OH, 04/30/2010. Questioned: $970.

144

Appendix 2 - Audit Reports Issued
2010-CH-1011 The State of Illinois Needs To Improve Its Capacity To Effectively and 

Efficiently Administer Its NSP, Chicago, IL, 08/05/2010. Questioned: $7,938; 

Unsupported: $7,938; Better use: $4,833,000.

2010-DE-1003 The City of Ogden Appropriately Administered the HOME Investment 

Partnerships Program, Ogden, UT, 04/02/2010.

2010-DE-1006 The City and County of Denver Did Not Properly Obligate and Report NSP I 

Funding, Denver, CO, 09/17/2010. Better use: $1,535,289.

2010-FW-1005 The Texas Department of Housing and Community Affairs Did Not Fully 

Follow Requirements or Best Practices in the Acquisition of Its Disaster 

Recovery-Funded Program Management Firm, Austin, TX, 07/20/2010. 

Questioned: $18,763,330; Unsupported: $16,321,965.

2010-KC-1004 The State of Iowa Did Not Implement Adequate Controls Over Its Business Rental 

Assistance Program, Des Moines, IA, 05/26/2010.

2010-KC-1006 The State of Kansas Did Not Properly Obligate Its NSP Funds, Topeka, KS, 

08/20/2010. Better use: $10,145,313.

2010-KC-1007 The Missouri Housing Development Commission Did Not Always Obtain 

Required Documents and Properly Report on the Tax Credit Assistance 

Program Funded Under the Recovery Act, Kansas City, MO, 09/10/2010.

2010-KC-1008 The City of East St. Louis Awarded Block Grant Program Funds to Recipients 

Without Adequately Verifying Their Eligibility, East St. Louis, IL, 09/28/2010. 

Questioned: $1,228,994; Unsupported: $1,228,994.

2010-LA-1010 Arizona Department of Housing’s Administration of Its Recovery Act 

Grant: Homelessness Prevention and Rapid Re-Housing Program, 

Phoenix, AZ, 05/07/2010. Questioned: $75,543; Unsupported: $75,543.

2010-LA-1011 Sacramento Housing and Redevelopment Agency Did Not Always Administer 

the NSP in Accordance With HUD Rules and Regulations, Sacramento, CA, 

06/02/2010. Questioned: $1,114,587; Better use: $5,317,180.

2010-LA-1012 Clark County Needs To Revise Its Written Procedures and Developer Agreements 

To Ensure Compliance With NSP Requirements, Las Vegas, NV, 06/09/2010.

2010-LA-1013 The City of Montebello Did Not Comply With HOME Requirements, Montebello, 

CA, 07/08/2010. Questioned: $1,300,000.

2010-NY-1012 The City of Jersey City’s CDBG Funds Used for a Float Loan Did Not Comply 

With Applicable Regulations, Jersey City, NJ, 07/01/2010. Questioned: $3,572,517; 

Unsupported: $72,517.

2010-PH-1008 Sasha Bruce Youthwork, Incorporated, Did Not Support More Than $1.9 Million 

in Expenditures, Washington, DC, 05/11/2010. Questioned: $1,945,050; 

Unsupported: $1,945,050; Better use: $686,342.

2010-SE-1001 Washington State Did Not Disburse Its Homelessness Prevention and Rapid 

Re-Housing Funds in Accordance With Program Requirements, Olympia, 

WA, 08/31/2010. Questioned: $177,254; Unsupported: $166,785.

Housing (10 Reports)

2010-AT-1005 Lendamerica Home Loans Did Not Follow HUD Requirements in Originating 

Loans and Implementing Its Quality Control Program, Coral Gables, FL, 

05/20/2010. Better use: $1,098,683.

145

Appendix 2 - Audit Reports Issued
2010-BO-1007 New England Regional Mortgage Corporation Generally Complied With 

HUD Requirements for Loan Origination but Did Not Properly Underwrite 

One Loan, Salem, NH, 08/03/2010. Better use: $221,590.

2010-BO-1008 The Avesta Housing Management Corporation Did Not Properly Follow HUD 

Rules and Regulations, Portland, ME, 09/03/2010. Questioned: $5,060,513; 

Unsupported: $5,060,513.

2010-CH-1009 National Home Management Solutions Did Not Fully Comply With 

HUD’s Requirements for the Management and Marketing of HUD Real 

Estate-Owned Properties, Independence, OH, 07/22/2010. Questioned: $36,455; 

Unsupported: $36,455.

2010-CH-1012 Michaelson, Connor, and Boul Did Not Provide Adequate Oversight of Closings on 

the Sales of HUD Real Estate-Owned Homes, Southfield, MI, 09/15/2010. 

Questioned: $47,947; Unsupported: $47,947.

2010-CH-1014 Consumer Credit Counseling Service of the Midwest Did Not Materially 

Comply With HUD’s Requirements and Its Grant Agreement Regarding 

Housing Counseling, Columbus, OH, 09/30/2010. Questioned: $10,574; 

Unsupported: $1,700; Better use: $126,310.

2010-DE-1004 Access National Mortgage Corporation Did Not Follow HUD Requirements 

When Submitting Two of Its Loans for Endorsement, Denver, CO, 07/02/2010. 

Better use: $241,464.

2010-KC-1005 National Bank of Kansas City Did Not Follow HUD’s Underwriting and 

Quality Control Requirements, Overland Park, KS, 06/04/2010. Better use: $399,919.

2010-LA-1014 The Retreat at Santa Rita Springs Did Not Comply With HUD Rules and 

Regulations and Other Federal Requirements, Green Valley, AZ, 

08/02/2010. Questioned: $30,216; Unsupported: $2,817.

2010-PH-1010 Prospect Mortgage, LLC, Generally Complied With HUD Requirements 

Regarding FHA-Insured Single-Family Loans, Fairfax, VA, 06/22/2010. 

Better use: $116,014.

Public and Indian Housing (31 Reports)

2010-AT-1003 The Housing Authority of Whitesburg Mismanaged Its Operations, Whitesburg, 

KY, 04/28/2010. Questioned: $1,150,665; Unsupported: $1,148,415.

2010-AT-1007 The Housing Authority, City of Wilson, Lacked the Capacity To Effectively 

Administer Recovery Act Funds, Wilson, NC, 07/27/2010. Questioned: $2,462,249; 

Unsupported: $2,422,039; Better use: $7,820,272.

2010-AT-1009 The Puerto Rico Public Housing Administration Needs To Improve Its 

Procurement Procedures, San Juan, PR, 08/13/2010. Questioned: $13,389,382; 

Unsupported: $9,784,157.

2010-AT-1010 The Housing Authority of DeKalb County Improperly Used Its Net Restricted 

Assets, Decatur, GA, 08/23/2010. Questioned: $2,583,244.

2010-BO-1005 The Hartford Housing Authority’s Plan To Replace Boilers Did Not Meet 

Recovery Act and Federal Efficiency Requirements, Hartford, CT, 07/21/2010. 

Better use: $1,092,325.

146

Appendix 2 - Audit Reports Issued
2010-BO-1006 Waltham Housing Authority Needs To Improve Controls Over Its Interprogram 

Fund Transactions, Procurement, and Travel for Its Housing Choice 

Voucher and Low-Income Public Housing Programs, Waltham, MA, 07/27/2010. 

Questioned: $4,547,463; Unsupported: $4,519,535.

2010-BO-1009 The Manchester Housing Authority Obligated its Recovery Act Grant Funds in 

a Timely Manner for Eligible Projects and Properly Supported Expenditures, 

Manchester, CT, 09/21/2010.

2010-BO-1010 The Boston Housing Authority Generally Administered Its Capital Fund 

Recovery Grant as Required, Boston, MA, 09/27/2010.

2010-CH-1005 Housing Authority of the City of Terre Haute Did Not Effectively Operate Its 

Section 8 Housing Quality Standards Inspection Program, Terre Haute, 

IN, 04/09/2010. Questioned: $11,974; Better use: $341,088.

2010-CH-1007 The Michigan State Housing Development Authority Needs To Improve Its 

Controls Over Section 8 Project-Based Housing Assistance Payments, Lansing, 

MI, 05/14/2010. Questioned: $873,213; Unsupported: $754,574; Better use: $90,527.

2010-CH-1008 The DuPage Housing Authority Inappropriately Administered Its Section 8 

Project-Based Voucher Program, Wheaton, IL, 06/15/2010. Questioned: $4,532,241; 

Unsupported: $3,924,954; Better use: $191,864.

2010-CH-1010 The Housing Authority of the City of Terre Haute Substantially Mismanaged Its 

Capital Fund Program and Lacked Capacity To Adequately Administer Its 

Recovery Act Funds, Terre Haute, IN, 07/27/2010. Questioned: $4,878,428; 

Unsupported: $3,837,268.

2010-CH-1013 The Housing Authority of the City of Terre Haute Did Not Materially Operate 

Its Programs According to HUD’s Requirements and Did Not Effectively 

Operate Its Section 8 Housing Choice Voucher Program, Terre Haute, IN, 

09/29/2010. Questioned: $195,318; Unsupported: $8,893; Better use: $15,825.

2010-CH-1015 The Lake Metropolitan Housing Authority Needs To Improve Its Administration 

of Its Section 8 Housing Choice Voucher Program, Painesville, OH, 09/30/2010. 

Questioned: $132,824; Unsupported: $64,264; Better use: $19,573.

2010-DE-1005 The Housing Authority of the City of Pueblo Generally Followed Recovery Act 

Rules and Regulations When Obligating and Expending Its Recovery Act Capital 

Funds but Did Not Accurately Report Recovery Act-Funded Jobs, Pueblo, 

CO, 09/17/2010.

2010-DE-1007 The Housing Authority of the County of Salt Lake Properly Expended Its 

Recovery Act Capital Grant Funds But Did Not Properly Obligate All of 

the Funds, Salt Lake City, UT, 09/24/2010. Questioned: $560,726.

2010-FW-1003 The Housing Authority of the Sac and Fox Nation of Oklahoma Did Not 

Demonstrate the Administrative Capacity To Appropriately Expend Its Recovery 

Act Funding, Shawnee, OK, 05/13/2010. Better use: $850.

2010-FW-1004 The Georgetown Housing Authority Used $195,855 for Ineligible and 

Unsupported Expenditures, Georgetown, TX, 06/02/2010. Questioned: $186,387; 

Unsupported: $29,310; Better use: $9,468.

2010-FW-1006 Housing Authority of the City of Odessa Generally Complied With HUD 

Regulations and Guidance in Its Transactions With Its Related Entity and Its 

Administration of Its Section 8 Programs, Odessa, TX, 08/23/2010.

147

Appendix 2 - Audit Reports Issued
2010-KC-1009 The Omaha Housing Authority Did Not Comply With Recovery Act Requirements 

When Reporting on Recovery Act Capital Funds, Omaha, NE, 09/30/2010.

2010-LA-1015 The Housing Authority of the City and County of San Francisco Did Not 

Effectively Operate Its Housing Choice Voucher Housing Quality Standards 

Inspections, San Francisco, CA, 08/31/2010. Questioned: $318,154; Unsupported: 

$39,018; Better use: $11,420,400.

2010-LA-1016 The Compton Housing Authority Was Not Fully Reimbursed for Housing 

Assistance Payments for Portability Tenants, Compton, CA, 09/28/2010. Better 

Use: $245,654.

2010-NY-1010 New Rochelle Municipal Housing Authority Had Control Weaknesses in Its 

Low-Rent Housing Program, New Rochelle, NY, 04/07/2010. Questioned: $95,607; 

Unsupported: $57,252; Better use: $114,948.

2010-NY-1011 New Rochelle Municipal Housing Authority Had Weaknesses in Its 

Self-Sufficiency Grant Programs, New Rochelle, NY, 04/07/2010. Questioned: 

$320,617; Unsupported: $100,637; Better use: $36,570.

2010-PH-1006 Audit of the Housing Authority of the City of Pottsville’s Recovery Act Capital 

Fund Grant, Pottsville, PA, 04/13/2010.

2010-PH-1007 The Elkton Housing Authority Did Not Comply With HUD Regulations in 

Obligating and Disbursing Recovery Act Capital Funds, Elkton, MD, 05/03/2010. 

Questioned: $286,947; Unsupported: $286,947.

2010-PH-1009 The Harrisburg Housing Authority Generally Administered Its Recovery Act 

Capital Fund Grant in Accordance With Applicable Requirements, Harrisburg, PA, 

05/13/2010.

2010-PH-1011 The Philadelphia Housing Authority Did Not Ensure That Its Section 8 Housing 

Choice Voucher Program Units Met Housing Quality Standards, Philadelphia, PA, 

07/08/2010. Questioned: $70,932; Better use: $18,625,950.

2010-PH-1012 The Harrisburg Housing Authority Did Not Procure Goods and Services in 

Accordance With HUD Regulations and Its Procurement Policy, Harrisburg, PA, 

07/27/2010. Questioned: $1,736,962; Unsupported: $1,736,962.

2010-PH-1013 The Housing Authority of Baltimore City Generally Administered Its Recovery 

Act Capital Fund Grants in Accordance With Applicable Requirements, Baltimore, 

MD, 09/20/2010. Better use: $19,263.

2010-SE-1002 Alaska Housing Finance Corporation Needs To Improve Its Quality Control Plan, 

Anchorage, AK, 09/27/2010.

Audit-Related Memorandums2

Community Planning and Development (2 Reports)

2010-AT-1806 The City of Augusta Demonstrated the Capacity To Obligate Its NSP1 Funds, 

Augusta, GA, 09/24/2010.

2010-FW-1804 The City of Oklahoma City Had the Capacity To Manage Recovery Acts Funding, 

Oklahoma City, OK, 06/03/2010.

2

 The memorandum format is used to communicate the results of reviews not performed in accordance with generally accepted 

government auditing standards, to close out assignments with no findings and recommendations, to respond to requests for 

information, to report on the results of a survey, or to report the results of civil actions or settlements.

148

Appendix 2 - Audit Reports Issued
General Counsel (2 Reports)3

2010-CF-1801 Final Civil Action, Anchor Mortgage Corporation, Loan Origination Fraud - 

Violations of the False Claims Act, Chicago, IL, 09/30/2010. Questioned: 

$2,992,941.

Housing (17 Reports)

2010-CH-1806 1st Advantage Mortgage, LLC, Did Not Properly Underwrite a Selection of FHA 

Loans, Lombard, IL, 07/15/2010. Questioned: $325,452.

2010-CH-1807 Birmingham Bancorp Mortgage Corporation Did Not Properly Underwrite a 

Selection of FHA Loans, West Bloomfield, MI, 07/21/2010. Questioned: $643,340.

2010-CH-1808 Mac-Clair Mortgage Corporation Did Not Properly Underwrite a Selection of 

FHA Loans, Flint, MI, 07/22/2010. Questioned: $562,551.

2010-CH-1809 Columbus Properties Limited Partnership, Property Renovations, Columbus, OH, 

08/03/2010.

2010-CH-1810 Dell Franklin Financial, LLC, Did Not Properly Underwrite a Selection of FHA 

Loans, Millersville, MD, 07/30/2010. Questioned: $542,330.

2010-CH-1811 D&R Mortgage Corporation Did Not Properly Underwrite a Selection of FHA 

Loans, Farmington Hills, MI, 08/04/2010. Questioned: $936,572.

2010-FW-1805 Financial Freedom Senior Funding Corporation Improperly Funded One 

Ineligible HECM Loan, Irvine, CA, 09/17/2010. Questioned: $74,906.

2010-LA-1803 Alacrity Lending Company Did Not Properly Underwrite a Selection of FHA 

Loans, Southlake, TX, 07/26/2010. Questioned: $1,599,529.

2010-LA-1804 Assurity Financial Services, LLC, Did Not Properly Underwrite a Selection of 

FHA Loans, Englewood, CO, 08/05/2010. Questioned: $1,180,997.

2010-LA-1805 Americare Investment Group Did Not Properly Underwrite a Selection of FHA 

Loans, Arlington, TX, 08/06/2010. Questioned: $741,498.

2010-LA-1806 American Sterling Bank Did Not Properly Underwrite a Selection of FHA Loans, 

Sugar Creek, MO, 08/24/2010. Questioned: $492,239.

2010-LA-1807 Alethes, LLC, Did Not Properly Underwrite a Selection of FHA Loans, Lakeway, 

TX, 09/08/2010. Questioned: $1,056,447.

2010-NY-1805 Webster Bank Did Not Properly Underwrite a Selection of FHA Loans, Cheshire, 

CT, 09/01/2010. Questioned: $516,990.

2010-NY-1806 Security Atlantic Mortgage Company, Inc., Did Not Properly Underwrite a 

Selection of FHA Loans, Edison, NJ, 09/22/2010. Questioned: $553,730.

2010-NY-1807 First Tennessee Bank, N.A., Did Not Properly Underwrite a Selection of FHA 

Loans, Memphis, TN, 09/27/2010. Questioned: $435,574.

2010-NY-1808 Pine State Mortgage Corporation Did Not Properly Underwrite a Selection of FHA 

Loans, Atlanta, GA, 09/29/2010. Questioned: $1,095,202.

2010-NY-1809 Sterling National Mortgage Company, Inc., Did Not Properly Underwrite a 

Selection of FHA Loans, Great Neck, NY, 09/30/2010. Questioned: $508,823.

149

Appendix 2 - Audit Reports Issued

3

 Quality control review not included in listing. 
Public and Indian Housing (5 Reports)

2010-AT-1805 The Wilmington Housing Authority Misused Federal Funds in the Purchase of 

Two Properties, Wilmington, NC, 05/19/2010. Questioned: $267,914.

2010-CH-1805 The Benton Harbor Housing Commission Had Sufficient Capacity To Adequately 

Administer Its Recovery Act Funding, Benton Harbor, MI, 04/14/2010.

2010-DE-1801 The Fort Belknap Indian Community Had Weaknesses That Could Significantly 

Affect Its Capacity To Administer Its Recovery Act Funding, Harlem, MT, 

04/23/2010.

2010-NY-1804 The Rochester Housing Authority Had Financial Control Weaknesses That Could 

Affect Its Capacity to Administer Recovery Act Funds, Rochester, NY, 06/04/2010. 

Questioned: $557,242; Unsupported: $177,289; Better use: $6,075.

2010-SE-1801 Seattle Housing Authority’s Capacity To Administer Recovery Act Funding Under 

the Capital Fund Program, Seattle, WA, 04/21/2010.

ppp

150

Appendix 2 - Audit Reports Issued
Appendix 3

Tables
Table A

Audit reports issued before the start of the period

with no management decision at September 30, 2010

*Significant audit reports described in previous semiannual reports

Report number

and title

Reason for lack of

management decision

Issue date

* 2009-KC-0001 HUD Subsidized an 

Estimated 2,094 to 3,046 Households 

That Included Lifetime Registered Sex 

Offenders

* 2009-AT-0001 HUD Lacked Adequate 

Controls To Ensure the Timely 

Commitment and Expenditure of HOME 

Funds

See chapter 10, page 132.

See chapter 10, page 133.

08/14/2009

09/28/2009

Appendix 3 - Tables

152
Report 

number

Report title Issue

date

Decision

date

Final

action

Table B

Significant audit reports on which final action had not been completed 

within 12 months after the date of the 

Inspector General’s report

2002-AT-1002

2002-KC-0002

2004-DP-0002

2004-PH-1008

2004-PH-1012

2005-AT-1004

2005-CH-1002

2005-NY-1005

2005-AT-1013

2006-CH-0001

2006-NY-1003

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

Application Control Review of the Tenant 

Rental Assistance Certification System

Safe Haven Outreach Ministry, 

Incorporated, Washington, DC

Mortgage America Bankers, LLC, 

Nonsupervised Loan Correspondent, 

Kensington, MD

Housing Authority of the City of Durham, 

NC

Washington Mutual Bank, Underwriting 

of FHA-Insured Loans, Downers Grove, IL

The Housing Authority of the City 

of Newark Bond Financing Activities 

and Section 8 Housing Choice Voucher 

Administrative Fee Reserves, Newark, NJ

Corporacion Para el Fomento Economico 

de la Ciudad Capital Did Not Administer 

Its Independent Capital Fund in 

Accordance with HUD Requirements, San 

Juan, PR

Real Estate Assessment Center’s Physical 

Condition Assessment Was Compromised

The Housing Authority of the City of 

Newark’s Controls Over Bond Financing 

Activities, Obtaining Supporting 

Documentation, and Legal Settlements 

Require Improvement, Newark, NJ

07/03/2002 

07/31/2002 

02/25/2004 

06/03/2004

09/10/2004

11/19/2004

11/29/2004

05/26/2005

09/15/2005

11/30/2005

02/14/2006

10/31/2002

11/22/2002

07/14/2004

08/31/2004

01/06/2005

03/15/2005

01/28/2005

09/23/2005

01/11/2006

01/10/2006

08/17/2006

07/01/2015

08/30/2011

12/31/2011

11/30/2010

Note 2

03/15/2015

Note 2

10/11/2011

Note 1

12/31/2011

09/13/2012

Appendix 3 - Tables

153
Report 

number

Report title Issue

date

Decision

date

Final

action

2006-BO-1009

2006-SE-0002

2006-KC-1013

2006-DP-0802

2007-LA-0001

2007-DP-0003

2007-KC-0002

2007-KC-0003

2007-BO-0002

2007-SE-0001

2007-FW-1011

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

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

Assessment of HUD’s Compliance with 

OMB Memorandum M-06-16, “Protection 

of Sensitive Agency Information”

Tax Credit Project Owners Are Allowed 

To Charge Higher Rents for Tenant-Based 

Section 8 Voucher Households than Nonvoucher Households

Review of HUD’s Procurement Systems

HUD Can Improve Its Use of Residual 

Receipts To Reduce Housing Assistance 

Payments

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

HUD’s Oversight of the Section 8 ProjectBased Contract

Capmark Finance, Inc., Misrepresented 

Asbury Square Apartments’ Financial and 

Physical Condition When Underwriting 

the $9.098 Million Loan, Tulsa, OK

07/06/2006

08/16/2006

08/30/2006

09/21/2006

11/08/2006

01/25/2007

01/29/2007 

04/30/2007

05/21/2007

06/07/2007

07/02/2007

10/24/2006

03/30/2007

10/17/2006

11/24/2006

07/05/2007

05/25/2007

01/29/2007

08/27/2007

09/07/2007

10/05/2007

10/23/2007

11/01/2010

Note 1

11/30/2012

Note 2

10/01/2010

Note 2

01/31/2011

Note 2

Note 2

Note 1

11/30/2010

154

Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2007-AT-1010

2007-DP-0006

2007-AT-0001

2007-KC-0801

2007-AT-1011

2007-CH-1017

2008-LA-0001

2008-LA-1003

2008-AT-1004

2008-AT-1005

2008-NY-1003

The Cathedral Foundation of Jacksonville 

Used More Than $2.65 Million in Project 

Funds for Questioned Costs, Jacksonville, 

FL

Review of HUD’s Personal Identity 

Verification and Privacy Program

HUD Needs To Improve Controls Over Its 

Contract Administration Processes

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

The City of Cincinnati Lacked Adequate 

Controls over Its HOME Investment 

Partnerships Program, Cincinnati, OH

The Los Angeles Multifamily Hub Did Not 

Properly Monitor Its Performance-Based 

Contract Administrator, Los Angeles 

LOMOD

Home for Life Foundation Did Not 

Properly Administer Its Supportive 

Housing Program Grants, Los Angeles, CA

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

The City of New York’s Department of 

Housing Preservation and Development 

Had Administrative Weaknesses in Its 

HOME Program, New York, NY

08/14/2007

08/28/2007

09/19/2007 

09/24/2007

09/26/2007

09/30/2007

11/05/2007

12/18/2007

01/09/2008 

01/11/2008 

01/23/2008

12/03/2007

12/20/2007

09/19/2007

03/11/2008

01/24/2008

01/28/2008

03/03/2008

02/26/2008

05/05/2008

05/05/2008

05/21/2008

Note 2

Note 2

Note 2

Note 2

01/01/2011

09/30/2011

Note 1

04/01/2013

05/01/2012

05/01/2012

Note 2

155

Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2008-AO-1002

2008-KC-0002

2008-AO-0801

2008-AT-0002

2008-AT-0003

2008-BO-0002

2008-CH-1010

2008-DP-0004

2008-LA-1012

2008-FW-0001

2008-AO-1005

State of Louisiana, Road Home Program, 

Funded 418 Grants Coded Ineligible or 

Lacking an Eligibility Determination, 

Baton Rouge, LA 

HUD Did Not Ensure That Housing 

Authorities Properly Administered the 

Community Service and Self-Sufficiency 

Requirement

Review of Duplication of Participants 

Benefits under HUD’s Katrina Disaster 

Housing Assistance Program and Disaster 

Voucher Program

The Miami Dade Housing Agency Did 

Not Maintain Adequate Controls over Its 

Capital Fund Program

HUD Lacked Adequate Controls over the 

Physical Condition of Section 8 Voucher 

Program Housing Stock

Maintenance of Effort Requirements Are 

Needed To Ensure Intended Use of CDBG 

Program Funds

The City of Cincinnati Lacked Adequate 

Controls over Its System Reporting and 

Rental Rehabilitation Projects for Its 

HOME Investment Partnerships Program, 

Cincinnati, OH

Review of Selected FHA Major 

Applications’ Information Security 

Controls

The Housing Authority of the City of 

Calexico Did Not Comply with Public 

Housing Program Rules and Regulations, 

Calexico, CA

HUD’s CDBG Set-Aside for Colonias Was 

Not Used for Its Intended Purposes

State of Louisiana, Road Home Program, 

Did Not Ensure That All Additional 

Compensation Grant Applicants Were 

Eligible, Baton Rouge, LA

01/30/2008 

03/24/2008

03/28/2008

04/24/2008

05/14/2008

05/21/2008

06/11/2008

06/12/2008

07/01/2008

07/29/2008

08/07/2008

05/12/2008 

07/22/2008

08/01/2008

08/22/2008

09/10/2008

10/02/2008

10/09/2008

10/08/2008

10/14/2008

11/24/2008

01/13/2009

Note 1 

10/01/2011

Note 2

Note 2

09/30/2012

Note 2

07/13/2011

Note 2

12/31/2013

12/31/2010

Note 2

156

Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2008-CH-1014

2009-CH-1001

2009-BO-1002

2009-FO-0002

2009-FO-0003

2009-FW-1002

2009-NY-1003

2009-DP-0003

2009-CH-1002

2009-NY-1006

2009-AO-0002

The City of Cincinnati Did Not 

Adequately Manage Its HOME Investment 

Partnerships Program, Cincinnati, OH

New Phoenix Assistance Center 

Substantially Failed To Manage Its 

Supportive Housing Program Grant, 

Chicago, IL

Orchard Court Multifamily Project Was 

Not Properly Managed in Accordance 

with HUD Regulations, Bath, ME

Audit of the FHA’s Financial Statements 

for Fiscal Years 2008 and 2007

Additional Details To Supplement Our 

Report on HUD’s Fiscal Years 2008 and 

2007 Financial Statements

The Owner of Ebony Lake Healthcare 

Center Violated Its Regulatory Agreement 

with HUD, Brownsville, TX

Lower Manhattan Development 

Corporation CDBG Disaster Recovery 

Assistance Funds, New York, NY

Review of the Centralized HUD Account 

Management Process

The Indianapolis Housing Agency Failed 

to Operate Its Housing Choice Voucher 

Program According to HUD’s and Its 

Requirements, Indianapolis, IN

The City of Rome Did Not Always 

Administer Its CDBG Program in 

Accordance with HUD Requirements, 

Rome, NY

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

09/26/2008

10/24/2008

11/06/2008

11/07/2008

11/14/2008

11/25/2008

12/04/2008

01/09/2009

01/23/2009

01/26/2009

01/29/2009

01/22/2009

02/20/2009

01/16/2009

03/13/2009

03/19/2009

03/25/2009

05/06/2009

04/30/2009

05/08/2009

05/27/2009

08/21/2009

01/31/2011

Note 2

02/25/2011

04/15/2011

12/31/2011

01/31/2011

01/12/2011

Note 2

11/30/2010

Note 2

Note 2

157

Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2009-FW-1005

2009-DE-1001

2009-NY-1008

2009-AT-1004

2009-AO-0003

2009-AO-1001

2009-AO-1002

2009-CH-1008

2009-NY-1012

2009-FW-0801

Allied Home Mortgage Capital 

Corporation Did Not Fully Follow HUD’s 

Branch Office Requirements, Houston, TX

The Adams County Office of Community 

and Development Did Not Comply with 

HOME Investment Partnerships Program 

Regulations, Denver, CO

The City of Newburgh Did Not Always 

Administer Its CDBG Program in 

Accordance with HUD Requirements, 

Newburgh, NY

The City of Durham Did Not Adequately 

Administer Its CDBG Program, Durham, 

NC

HUD Could Not Demonstrate That Its 

Receivership Improved the Housing 

Authority of New Orleans’ Performance

State of Louisiana, Road Home Program, 

Did Not Ensure That Road Home 

Employees Were Eligible To Receive 

Additional Compensation Grants, Baton 

Rouge, LA

State of Louisiana, Road Home 

Program, Did Not Ensure That Multiple 

Disbursements to a Single Damaged 

Residence Address Were Eligible, Baton 

Rouge, LA

The City of East Cleveland Did Not 

Adequately Manage Its HOME Investment 

Partnerships and CDBG Programs, East 

Cleveland, OH

The City of Rome Did Not Administer 

Its Economic Development Activity in 

Accordance with HUD Requirements, 

Rome, NY

Tenant Confirmation for Disaster Housing 

Assistance Program for March and April 

2009

02/10/2009

02/11/2009 

02/24/2009

03/31/2009

04/08/2009

05/05/2009

05/05/2009

05/11/2009

05/20/2009

05/28/2009

06/10/2009

04/29/2009

06/11/2009

06/09/2009

08/21/2009

09/16/2009

09/16/2009

09/08/2009

09/23/2009

09/25/2009

10/18/2010

Note 2

Note 2

Note 2

11/30/2010

Note 2

Note 2

09/08/2011

Note 2

10/01/2011

158

Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2009-DP-0004

2009-DP-0005

2009-AT-1008 

2009-PH-0801

2009-FW-0001

2009-LA-1011

2009-FW-1012

2009-AT-1009

2009-KC-1008

2009-CH-1011

FY 2008 Review of Information Systems 

Controls in Support of the Financial 

Statements Audit

Review of Implementation of Security 

Controls over HUD’s Business Partners

Miami-Dade County Did Not Properly 

Administer Its CDBG Program, Miami, FL

Corrective Action Verification Review, 

Upfront Grant for Ridgecrest Heights 

Apartments, CEMI-Ridgecrest, Inc., 

Washington, DC, Audit Memorandum 

98-AO-219-1804

HUD’s Disaster Recovery Grant Reporting 

System Can Collect the Basic Information 

Needed To Monitor the Neighborhood 

Stabilization Program

City of Los Angeles Housing Department 

Did Not Ensure That the Buckingham 

Place Project Met HOME Program 

Requirements, Los Angeles, CA

Financial Freedom Senior Funding 

Corporation Did Not Fully Follow HUD’s 

Reverse Mortgage Requirements for Loans 

in the San Antonio, Texas Area, Irvine, CA

The Housing Authority of the City of 

Newnan Inappropriately Encumbered 

Assets and Advanced Funds To Support 

Its Nonprofit Organization, Newnan, GA

Grace Hill Used Neighborhood Initiative 

Grant Funds To Pay Unsupported Payroll 

Expenses and Duplicated Computer 

Support Costs, St. Louis, MO

The Housing Authority of the City of 

Terre Haute Failed To Follow Federal 

Requirements and Its Employment 

Contract Regarding Nonprofit 

Development Activities, Terre Haute, IN

05/29/2009

06/11/2009

06/19/2009

06/19/2009

06/25/2009

07/01/2009

07/14/2009

07/20/2009

07/24/2009

07/31/2009

09/25/2009

11/17/2009

09/25/2009

07/09/2009

10/23/2009

10/21/2009

11/20/2009

11/16/2009

10/13/2009

11/24/2009

10/31/2010

12/31/2014

Note 2

Note 2

03/25/2011

09/01/2011

Note 2

06/30/2011

Note 2

01/01/2030

159

Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2009-NY-1014

2009-BO-1010

2009-KC-0001

2009-FW-1015

2009-FW-1801

2009-AT-1011

2009-BO-1011

2009-CH-0002

2009-LA-1018

2009-LA-1019

2009-CH-1013

The Lackawanna Municipal Housing 

Authority Needs To Improve Controls 

and Operational Procedures Regarding Its 

Capital Fund Program, Lackawanna, NY

The City of New London Housing 

Authority Lacks the Capacity to Properly 

Administer Its Capital Fund Program and 

Recovery Act Funds, New London, CT

HUD Subsidized an Estimated 2,094 to 

3,046 Households That Included Lifetime 

Registered Sex Offenders

The Housing Authority of Travis County 

Could Not Adequately Account For or 

Support Its Use of Federal Program Funds, 

Austin, TX

Travis County Housing Authority Lacks 

Capacity To Administer ARRA Public 

Housing Capital Funds, Austin, TX

The City of Miami Did Not Properly 

Administer Its CDBG Program, Miami, FL

The City of Boston’s Department of 

Neighborhood Development in Boston, 

MA, Did Not Administer Its HOME 

Program in Compliance with HUD 

Requirements

The Office of Affordable Housing 

Programs’ Oversight of HOME Investment 

Partnerships Program Income Was 

Inadequate

DHI Mortgage Company, LTD’s Scottsdale 

and Tucson, AZ, Branches Did Not Always 

Follow FHA-Insured Loan Underwriting 

and Quality Control Requirements

The Owner of Park Lee Apartments 

Violated Its Regulatory Agreement with 

HUD, Phoenix, AZ

The Housing Authority of the City of 

Milwaukee Did Not Adequately Maintain 

a Separate Identity for Commingled 

Funds, Milwaukee, WI

07/31/2009

08/07/2009

08/14/2009 

08/17/2009

08/17/2009

08/18/2009

08/19/2009

08/28/2009

09/10/2009

09/15/2009

09/17/2009

11/06/2009

03/31/2010

07/23/2010

12/03/2009

10/27/2009

12/15/2009

09/29/2010

12/26/2009

01/08/2010

01/13/2010

01/14/2010

10/08/2010

03/31/2011

Note 3

10/27/2010

10/15/2010

12/15/2010

12/17/2010

03/31/2011

01/08/2011

07/13/2011

01/07/2011

160

Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2009-CH-1802

2009-DE-1005

2009-AO-1003

2009-DE-1801

2009-LA-1020

2009-AT-1012

2009-AT-0001

2009-AT-1013

2009-AT-1014

2009-CH-1017

Cook County Needs To Improve Its 

Capacity To Effectively and Efficiently 

Administer Its Neighborhood Stabilization 

Program, Chicago, IL

Adams County Did Not Have Adequate 

Controls over Its Block Grant Funds, 

Westminster, CO

Louisiana Land Trust, As the State of 

Louisiana’s Subrecipient, Did Not Always 

Ensure That Properties Were Properly 

Maintained, Baton Rouge, LA

Adams County, Colorado, Had 

Weaknesses That Could Significantly 

Affect Its Capacity To Administer Its 

Recovery Act Funding, Commerce City, 

CO

The Housing Authority of the City of 

Richmond Did Not Follow Procurement 

Requirements and Had Internal Control 

Weaknesses, Richmond, CA

The Municipality of Río Grande Needs 

To Improve Administration of Its CDBG 

Program and Its Recovery Act Funds, Rio 

Grande, PR

HUD Lacked Adequate Controls To 

Ensure the Timely Commitment and 

Expenditure of HOME funds

The City of Atlanta Entered Incorrect 

Commitments into HUD’s Integrated 

Disbursement and Information System for 

its HOME Program, Atlanta, GA

The Housing Authority of the City 

of Winston-Salem Needs To Improve 

Financial Controls, Winston-Salem, NC

The Housing Authority of the City of 

Terre Haute Failed To Follow Federal 

Requirements Regarding Its Turnkey III 

Homeownership Program Units’ Sales 

Proceeds, Terre Haute, IN

09/17/2009

09/17/2009

09/23/2009 

09/24/2009 

09/24/2009

09/25/2009

09/28/2009

09/28/2009

09/29/2009

09/29/2009

01/15/2010

01/15/2010 

01/26/2010

01/14/2010

12/29/2009

01/22/2010

03/03/2010

11/05/2009

12/01/2009

01/22/2010

10/31/2010

01/07/2011 

Note 2

01/11/2011

12/29/2010

01/27/2011

Note 3

03/25/2011

12/01/2010

12/30/2010

161

Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2009-DP-0006

2009-AT-1015

2009-CH-0003

2009-CH-1019

2009-CH-1020

2009-DP-0007

2009-DP-0008

2009-FW-1016

2009-SE-0004

Review of HUD’s Web Application 

Systems

The Puerto Rico Public Housing 

Administration Mismanaged Its 

Capital Fund Financing Program and 

Inappropriately Obligated $32 Million in 

Recovery Act Funds, San Juan, PR 

HUD’s Oversight of FHA Lenders 

Underwriting of Home Equity Conversion 

Mortgages Was Generally Adequate

The Michigan State Housing Development 

Authority Failed To Operate Its Section 8 

Project-Based Voucher Program According 

to HUD’s and Its Requirements, Lansing, 

MI

The City of Flint Lacked Adequate 

Controls over Its Commitment and 

Disbursement of HOME Investment 

Partnerships Program Funds, Flint, MI

Review of Selected Controls within the 

Disaster Recovery Grant Reporting System

Review of Recovery Act Management and 

Reporting System

The Texas Department of Housing and 

Community Affair’s Disaster Recovery 

Action Plan Needs Improvement, Austin, 

TX

Controls over FHA’s Single-Family Lender 

Approval Process Need Improvement

09/29/2009

09/30/2009 

09/30/2009 

09/30/2009

09/30/2009

09/30/2009

09/30/2009

09/30/2009

09/30/2009

12/17/2009

01/27/2010 

03/02/2010

01/27/2010

01/27/2010

03/26/2010

01/12/2010

01/26/2010

01/27/2010

09/30/2011

04/15/2011 

11/30/2010

02/01/2012

10/01/2010

Note 2

12/31/2010

11/30/2010

Note 2

162

Appendix 3 - Tables
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

on which final action had not been completed

as of September 30, 2010

2010-PH-1002

2010-NY-1002

2010-BO-1001

2010-FW-0001

2010-LA-0001

2010-FO-0002

2010-FO-0003

2010-AT-1801

2010-BO-1002

2010-CH-1003

The Philadelphia Housing Authority 

Needs To Improve Its Controls over 

Housing Assistance Payments, 

Philadelphia, PA

Jersey Mortgage Company Did Not 

Always Comply with HUD/FHA Loan 

Underwriting Requirements, Cranford, NJ

The State of Connecticut Department of 

Social Services’ Section 8 Housing Units 

Did Not Always Meet HUD’s Housing 

Quality Standards, Hartford, CT

HUD Did Not Maintain Documentation 

To Determine whether Public Housing 

Agencies Took Corrective Action on its 

January 7, 2008 Memorandum and Public 

Housing Agencies Paid an Estimated $7 

Million for Deceased Tenants

HUD’s Performance-Based Contract 

Administration Contract Was Not Cost 

Effective

Audit of the FHA’s Financial Statements 

for Fiscal Years 2009 and 2008

Additional Details To Supplement Our 

Report on HUD’s Fiscal Years 2009 and 

2008 Financial Statements

Miami-Dade County Needs To Strengthen 

Controls over Its NSP, Miami, FL

The City of Holyoke, Office of Community 

Development, Needs To Improve Its 

Administration of HOME- and CDBGFunded Housing Programs, Holyoke, MA

The Grand Rapids Housing Commission 

Needs To Improve Its Administration 

of Its Section 8 Project-Based Voucher 

Program, Grand Rapids, MI

10/06/2009 

10/09/2009 

11/02/2009 

11/10/2009

11/12/2009

11/13/2009

11/16/2009

11/20/2009

11/23/2009

11/24/2009

12/03/2009

03/19/2010

03/01/2010

01/08/2010

03/12/2010

03/05/2010

04/02/2010

03/15/2010

09/30/2010

03/22/2010

11/30/2010

10/09/2010

10/29/2010

10/31/2010

01/01/2011

01/31/2011

10/26/2010

11/19/2010

04/01/2011

10/01/2011

163

Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2010-NY-1004

2010-LA-1003

2010-AT-1802

2010-AO-0801

2010-AO-1001

2010-PH-1801

2010-DE-1001

2010-NY-1005

2010-NY-1006

2010-LA-1004

Ark Mortgage, Incorporated, Did Not 

Always Comply with HUD/FHA 

Loan Origination Requirements, North 

Brunswick, NJ

City of Los Angeles’ Community 

Development Department Projects 

Did Not Comply with CDBG Program 

Requirements, Los Angeles, CA

The City of Atlanta Needs To Improve 

Certain Aspects of Its NSP To Meet the 

Program’s 18-Month Obligation Deadline, 

Atlanta, GA

HUD Needs To Ensure That the Housing 

Authority of New Orleans Strengthens 

Its Capacity To Adequately Administer 

Recovery Funding

Mississippi Development Authority Did 

Not Always Ensure Compliance under Its 

Public Housing Program, Jackson, MS

Audit of the Scranton Housing Authority, 

Scranton, PA

Kier Paid or Recorded Ineligible Costs 

and Did Not Properly Compute Subsidies, 

Denver, CO

The City of Paterson Did Not Always 

Administer Its CDBG Program in 

Accordance with HUD Requirements, 

Paterson, NJ

SFDS Development Corporation Had 

Weaknesses in Its Financial, Procurement 

and Administrative Controls, New York, 

NY

Although the County of Riverside Had 

Sufficient Overall Capacity, It Lacked 

Necessary Controls To Administer Its NSP, 

Riverside, CA

11/24/2009 

12/04/2009 

12/14/2009 

12/15/2009

12/15/2009

12/17/2009

12/18/2009

12/18/2009

12/22/2009

12/29/2009

04/02/2010

03/11/2010

02/03/2010

04/19/2010

04/27/2010

02/23/2010

02/24/2010

03/19/2010

01/13/2010

04/26/2010

11/30/2010

12/04/2010

12/13/2010

04/30/2012

Note 2

01/31/2011

11/08/2010

03/03/2011

11/16/2010

12/29/2010

164

Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2010-AO-1002

2010-CH-1801

2010-NY-1802

2010-LA-1005

2010-BO-1004

2010-FW-1002

2010-PH-1004

2010-BO-1804

2010-NY-1007

State of Louisiana Did Not Always Ensure 

Compliance Under Its Recovery Workforce 

Training Program, Baton Rouge, LA

Wayne County Needs To Improve Its 

Capacity To Effectively and Efficiently 

Administer Its NSP, Wayne County, MI

Control Weaknesses at the Syracuse 

Housing Authority May Affect Its 

Capacity To Administer American 

Recovery and Reinvestment Act Funds, 

Syracuse, NY

The Department of Hawaiian Home Lands 

Generally Had Capacity To Manage; 

However, It Needs To Improve Controls 

Over Its Administration of Recovery Act 

Funds, Kapolei, HI

The City of Waterbury’s Subrecipient, 

Waterbury Development Corporation, 

Needs To Improve Its Capacity To 

Effectively Administer Its Neighborhood 

Stabilization Program, Waterbury, CT

The Housing Authority of the Sac and Fox 

Nation of Oklahoma Improperly Spent 

More Than $800,000 in Contracts and Did 

Not Always Operate in Accordance with 

HUD Rules and Regulations or Its Own 

Policies, Shawnee, OK

Residential Home Funding Corporation 

Did Not Always Comply With HUD 

Requirements in Originating FHA-Insured 

Single-Family Loans, Gaithersburg, MD

The City of Meriden Had Sufficient 

Capacity To Effectively Administer Its 

NSP, Meriden, CT

The City of Jersey City Needs To 

Strengthen Its Controls To Ensure That 

It Will Be Able To Effectively Administer 

CDBG-R Funds, Jersey City, NJ

01/04/2010 

01/12/2010 

01/14/2010 

01/19/2010

01/20/2010

01/20/2010

01/21/2010

01/27/2010

02/02/2010

05/14/2010

05/12/2010

03/04/2010

04/09/2010

03/18/2010

04/23/2010

05/21/2010

04/07/2010

04/05/2010

11/05/2010

10/01/2010

08/31/2011

04/09/2011

10/05/2010

03/31/2011

01/11/2011

10/05/2010

04/01/2011

165

Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2010-LA-1007

2010-BO-0001

2010-CH-1803

2010-PH-0001

2010-DE-1002

2010-KC-1001

2010-NY-1803

2010-LA-1009

2010-KC-1003

2010-NY-1009

The County of San Bernardino Had 

Questionable Capacity To Administer Its 

Allocation of NSP Funds, San Bernardino, 

CA

HUD Was Not Effective in Recovering the 

New London Housing Authority From 

Troubled Status and Did Not Take the 

Required Regulatory or Statutory Action

The State of Indiana’s Administrator 

Awarded NSP Funds for an Inappropriate 

Project, Indianapolis, IN

HUD’s Philadelphia, PA, Homeownership 

Center Did Not Always Ensure That 

Required Background Investigations Were 

Completed for Its Contracted Employees

Fort Belknap Indian Community Did Not 

Properly Administer Its Indian Housing 

Block Grant Funds, Harlem, MT

The State of Iowa Misspent CDBG Disaster 

Assistance Funds and Failed To Check for 

Duplicate Benefits, Des Moines, IA

The New York City Housing Authority 

Had the Capacity To Administer Capital 

Funds Provided Under the American 

Recovery and Reinvestment Act, New 

York, NY

DHI Mortgage Company, LTD’s 

Scottsdale, AZ, Branches Did Not 

Follow FHA-Insured Loan Underwriting 

Requirements

The City of East St. Louis Did Not 

Properly Allocate Salary and Building 

Expenses or Properly Document Its 

Process To Secure a Consulting Services 

Contract, East St. Louis, IL

Somerset Investors Corporation Did Not 

Always Comply With HUD/FHA Loan 

Underwriting Requirements, Melville, NY

02/11/2010 

02/18/2010 

02/25/2010 

02/26/2010

03/07/2010

03/10/2010

03/12/2010

03/19/2010

03/26/2010

03/26/2010

06/09/2010

06/18/2010

06/11/2010

06/25/2010

06/25/2010

09/13/2010

06/03/2010

07/16/2010

07/22/2010

06/30/2010

12/31/2010

05/01/2011

01/31/2011

10/31/2010

06/30/2011

10/31/2012

06/01/2011

03/19/2011

03/30/2011

06/30/2011

166

Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2010-CH-0001

2010-AT-1002

2010-CH-1804

The Office of Block Grant Assistance 

Lacked Adequate Controls Over the 

Inclusion of Special Conditions in NSP 

Grant Agreements

Broward County Needs To Strengthen 

Controls Over Its NSP, Fort Lauderdale, FL

The City of Saginaw Needs To Improve 

Its Capacity To Effectively and Efficiently 

Administer Its CDBG Program Under the 

ARRA, Saginaw, MI

03/29/2010 

03/31/2010 

03/31/2010

07/27/2010

07/12/2010

07/21/2010

06/01/2011

01/01/2011

12/15/2010

Audits Excluded:

78 audits under repayment plans

29 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. 

3 No management decision

167

Appendix 3 - Tables
Table C

Inspector General-issued reports with questioned and

unsupported costs at September 30, 2010

(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)

38,009 

4,599 

0 

0 

69,793 

0

112,401 

Questioned

costs

43,737 

7,247 

54 

0 

111,475 

0

162,513 

15 

5 

- 

0 

63

0

83

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

31,679 

6,532

9,616

15,531 

4,424 

76,298 

<64,663>4 

39,324 

7,432

14,558

17,334 

7,041 

116,148 

<104,001>4

 

321

62

25

73

 

4

47 

<102>4

 

C

D 

E

1

 15 audit reports also contain recommendations with funds be put to better use. 

2

 1 audit report also contains recommendations with funds due program participants. 

3

 5 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.

168

Appendix 3 - Tables
Table D

Inspector General-issued reports with recommendations 

that funds be put to better use at September 30, 2010

(thousands)

Audit reports Number of

audit reports

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)

Questioned

costs

618,633 

2,957 

58,637 

0 

166,499 

0

846,726 

17 

1 

- 

0 

38

0

56

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

625,214 

580,759

37,066

7,389 

2,957 

218,555 

<155,642>4 

251

82

17

43

 

1

30 

<43>4

 

C

D 

E

1

 15 audit reports also contain recommendations with questioned costs. 

2

 1 audit report also contains recommendations with funds due program participants. 

3

 3 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.

169

Appendix 3 - Tables
Explanations of Tables C and D

The Inspector General Act Amendments of 1988 require Inspectors General and agency heads to report 

cost data on management decisions and final actions on audit reports. The current method of reporting at 

the “report” level rather than at the individual audit “recommendation” level results in misleading reporting 

of cost data. Under the Act, an audit “report” does not have a management decision or final action until all 

questioned cost items or other recommendations have a management decision or final action. Under these 

circumstances, the use of the “report” based rather than the “recommendation” based method of reporting 

distorts the actual agency efforts to resolve and complete action on audit recommendations. For example, 

certain cost items or recommendations could have a management decision and repayment (final action) in 

a short period of time. Other cost items or nonmonetary recommendation issues in the same audit report 

may be more complex, requiring a longer period of time for management’s decision or final action. Although 

management may have taken timely action on all but one of many recommendations in an audit report, the 

current “all or nothing” reporting format does not 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.

ppp

170

Appendix 3 - Tables
Appendix 4

Index
State Page numbers

Alabama 19, 52, 54, 69

Arizona 28, 46, 59, 116, 117

Arkansas 124, 134

California 13, 18, 19, 22, 33, 36, 50, 51, 70, 71, 75, 77, 102, 115, 116, 117, 122, 123, 124, 125

Colorado 12, 19, 25, 26, 43, 48, 64, 71, 86, 115, 117, 118, 120, 127, 128

Connecticut 21, 25, 83, 103, 115

Delaware 123

District of Columbia 72, 122, 126, 135, 137

Florida 12, 17, 18, 22, 26, 44, 47, 52, 53, 67, 68, 70, 75, 76, 126

Georgia 20, 23, 35, 48, 72, 102, 116, 119, 121, 127

Hawaii 126

Idaho 25, 119

Illinois 20, 22, 24, 27, 34, 45, 47, 50, 51, 67, 101, 107, 114, 115, 116, 117, 118, 127

Indiana 26, 36, 43, 46, 49, 64, 83, 119

Iowa 21

Kansas 12, 43, 54, 62, 77, 109

Kentucky 39, 53, 72, 121, 122

Louisiana 45, 52, 53, 55, 62, 76, 93, 94, 97, 98, 99, 100, 101, 103

Maine 59

Maryland 18, 19, 48, 54, 63, 76, 85, 116, 121, 122, 128

Massachusetts 20, 34, 48, 49, 50, 63, 122, 125

Michigan 14, 27, 28, 35, 44, 53, 54, 76, 119

Minnesota 115

Mississippi 52, 97, 99, 100, 101

Missouri 20, 21, 24, 44, 45, 54, 62, 89, 117, 119, 120, 123, 124, 125, 126, 135

Montana 44, 87

Nebraska 86

Nevada 50, 72, 123, 124, 128

New Hampshire 12, 121

New Jersey 18, 19, 22, 23, 24, 43, 51, 52, 67, 76, 124

New Mexico 127

Appendix 4 - Index

172


New York 22, 23, 24, 26, 27, 39, 40, 45, 46, 48, 49, 54, 62, 63, 76, 77, 84, 114, 119, 120, 121, 

123, 125, 126

North Carolina 25, 39, 82, 116

North Dakota 118

Ohio 13, 14, 21, 37, 46, 50, 54, 59, 90, 120, 121, 124, 125

Oklahoma 85, 118

Pennsylvania 17, 26, 33, 38, 46, 49, 87

Puerto Rico 38, 55, 68, 69, 136

Rhode Island 23, 122

South Carolina 20, 23, 64, 114

South Dakota 46, 121

Tennessee 24, 44, 52, 71, 114, 115 

Texas 17, 21, 25, 40, 43, 44, 45, 46, 51, 102, 103, 109, 115, 117, 118, 123, 125

Utah 18, 27, 49, 77, 84, 123

Vermont 118

Virginia 13, 20, 120, 128

Washington 23, 119, 122, 125, 127

ppp

State Page numbers

Appendix 4 - Index

173

HUD OIG

Operations Telephone

Listing
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

Minneapolis, MN 612-370-3000

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 7/8/10 Kansas City, KS 913-551-5870

St. Louis, MO 314-539-6339

Denver, CO 303-672-5452 

Seattle, WA 206-220-5360

Regions 9 Los Angeles, CA 213-894-8016

Phoenix, AZ 602-379-7250

San Francisco, CA 415-489-6400

Sacramento, CA 415-489-6400

Region 11 New Orleans, LA 504-671-3715

Jackson, MS 601-965-4700

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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

Region 3 Philadelphia, PA 215-656-0500

Newark, NJ 973-776-7347 

Pittsburgh, PA 412-644-6598

Region 4 Atlanta, GA 404-331-3359

Birmingham, AL 205-731-2630

Columbia, SC 803-451-4320

Knoxville, TN 865-545-4369

Louisville, KY 502-618-8127

Memphis, TN 901-229-6997

Nashville, TN 615-426-6171

Region 5 Chicago, IL 312-353-4196

Indianapolis, IN 317-226-5427

Minneapolis/St. Paul, MN 612-370-3000

Region 6 Arlington, TX 817-978-5440

Houston, TX 713-718-3196

Little Rock, AR 501-353-8115

Oklahoma City, OK 405-609-8601

San Antonio, TX 210-475-6819

Regions 7/8 Kansas City, KS 913-551-5866

Denver, CO 303-672-5350

Salt Lake City, UT 801-524-6090

St. Louis, MO 314-539-6559

Regions 9 Los Angeles, CA 213-894-0219

Las Vegas, NV 702-336-2144

Phoenix, AZ 602-379-7255

Region 10 Seattle, WA 206-220-5380

Billings, MT 406-247-4080

Sacramento, MT 916-930-5691

San Francisco, CA 415-489-6683

Region 11 New Orleans, LA 504-671-3701

Baton Rouge, LA 225-334-4913 

Hattiesburg, MS 601-299-4279

Jackson, MS 601-965-5772

Region 13 Baltimore, MD 410-962-4502

Greensboro, NC 336-547-4000

Richmond, VA 804-771-2100

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Region 14 Tampa, FL 813-228-2026

Jacksonville, FL 904-208-6126

Miami, FL 305-536-3087

San Juan, PR 787-766-5868

Region 15 Detroit, MI 313-226-6280

Cleveland, OH 216-522-4421

Columbus, OH 614-469-6677

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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

April 1, 2010, through September 30, 2010

www.hud.gov/offices/oig

No. 64