OFFICE OF INSPECTOR GENERAL

SEMIANNUAL REPORT TO CONGRESS

 FOR THE PERIOD ENDING MARCH 31, 2015

U.S. DEPARTMENT 

OF HOUSING 

AND URBAN 

DEVELOPMENT

SERVING THE PUBLIC

PUBLIC AND INDIAN HOUSING COMMUNITY PLANNING AND DEVELOPMENT MULTIFAMILY SINGLE FAMILY
As the Office of Inspector General (OIG) for the 

U.S. Department of Housing and Urban Development (HUD), 

we remain an independent and objective organization, conducting 

and supervising audits, evaluations, and investigations relating to 

the Department’s programs and operations. 

• We promote economy, efficiency, and effectiveness 

in these programs and operations as we also prevent and 

detect fraud, abuse, and mismanagement. 

• We are committed to keeping the HUD Secretary, Congress, and 

our stakeholders fully and currently informed about problems and 

deficiencies and the necessity for and progress of corrective action.

OUR MISSION

1 Collaboration: The commitment to work jointly with HUD, 

Congress, and our stakeholders for the benefit of all citizens.

2 Accountability: The obligation and willingness to accept 

responsibility and account for our actions. 3 Integrity: 

The firm adherence to high moral and professional standards, 

honesty, and fairness in all that we do. Acting with integrity is a core 

job responsibility for every employee. 4 Stewardship: The careful 

and responsible management of that which has been entrusted to 

our care. 5 Diversity: The promotion of high standards of equal 

employment opportunity for employees and job applicants at all levels 

so that our workforce is reflective of our country’s citizens.

OUR VALUES
OUR VISION

1 To promote fiscal responsibility and financial accountability in 

HUD programs and operations, 2 To improve the execution of and 

accountability for grant funds, 3 To strengthen the soundness of 

public and Indian housing programs, 4 To protect the integrity of 

housing insurance and guarantee programs, 

5 To assist HUD in determining whether it is successful in achieving 

its goals, 6 To look ahead for emerging trends or weaknesses that 

create risk and program inefficiencies, 7 To produce innovative 

work products that are timely and of high quality, 8 To benchmark 

best practices as a means to guide HUD, and 9 To have a significant 

impact on improving the way HUD does business.
The promotion of high standards and equal employment opportunity

for employees and job applicants at all levels. HUD OIG reaffirms its commitment 

to nondiscrimination in the workplace and the recruitment of qualified employees 

without prejudice regarding their gender, race, religion, color, national origin, 

sexual orientation, disability, or other classification protected by law. HUD OIG 

is committed and proactive in the prevention of discrimination and ensuring 

freedom from retaliation for participating in the equal employment opportunity 

process in accordance with departmental policies and procedures.

DIVERSITY AND EQUAL OPPORTUNITY
PROFILE OF PERFORMANCE

For the period October 1, 2014, to March 31, 2015

AUDIT RESULTS1 THIS REPORTING PERIOD

Recommendations that funds be put to better use $1,195,397,959

Recommended questioned costs $1,729,366,318

Collections from audits $457,149,983

Administrative sanctions 2

Civil actions 6

Subpoenas 12

Personnel action 1

INVESTIGATION RESULTS1 THIS REPORTING PERIOD

Total restitution and judgments $176,969,680

Total recoveries and receivables to HUD programs $38,496,636

Arrests1 106

Indictments and informations 133

Convictions, pleas, and pretrial diversions 179

Civil actions 20

Total administrative sanctions 255

 Suspensions 74

 Debarments 92

 Limited denial of participation 0

 Removal from program participation 58

 Evictions 6

 Other2 25

Systemic implication reports 5

Search warrants 37

Subpoenas 302

JOINT CIVIL FRAUD RESULTS1 THIS REPORTING PERIOD

Recoveries and receivables to HUD programs 

or HUD program participants $396,935,478

Recoveries and receivables for other entities $181,285,5223

Civil actions 5

Administrative sanctions 1

1 The Offices of Audit and Investigation and the Joint Civil Fraud Division periodically combine efforts and conduct joint civil fraud initiatives. Outcomes from these initiatives are shown in the 

Joint Civil Fraud Results profile and not duplicated in the Audit Results or Investigation Results. These results include civil settlements of $968 million from Suntrust Mortgage, Inc.; $123.5 

million from MetLife Bank, N.A.; and $36.3 million from Golden First Mortgage Corporation and its owner. Results are further detailed in chapter 7.

2 Includes reprimands, suspensions, demotions, or terminations of the employees of Federal, State, or local governments or of Federal contractors and grantees as the result of OIG activities

3 This amount represents funds that relate to HUD programs but were paid to other entities rather than to HUD for its benefit, such as funds paid to the U.S. Treasury for general government 

purposes. This amount does not include $540 million from the Suntrust Mortgage settlement that was designated for general consumer relief.
DURING THIS REPORTING PERIOD, WE 

HAD NEARLY $1.2 BILLION IN FUNDS PUT 

TO BETTER USE, QUESTIONED COSTS OF 

MORE THAN $1.7 BILLION, AND MORE THAN 

$457 MILLION IN COLLECTIONS, RESULTING 

FROM 38 AUDITS; OBTAINED MORE THAN 

$38 MILLION IN RECOVERIES AND RECEIVABLES 

DUE TO OUR INVESTIGATIVE EFFORTS; AND 

CONTRIBUTED TO NEARLY $400 MILLION

IN CIVIL FRAUD SETTLEMENTS DIRECTLY 

BENEFITING THE FEDERAL HOUSING 

ADMINISTRATION INSURANCE FUND.
A MESSAGE FROM INSPECTOR GENERAL DAVID A. MONTOYA

It is my pleasure to submit the 

U.S. Department of Housing and 

Urban Development (HUD), Office 

of Inspector General’s (OIG) 

Semiannual Report to Congress 

for the first half of fiscal year 

2015. This report describes the 

extraordinary accomplishments 

achieved by the talented public 

servants of HUD OIG. By 

promoting better stewardship and 

accountability, HUD OIG staff continues to make a significant 

impact on the Department and our communities for the benefit 

of all of our stakeholders and the public we serve.

During the first reporting period of fiscal year 2015, the 

Office of Audit issued 38 highly impactful reports. They 

resulted in the following:

• Nearly $1.2 billion in funds put to better use, 

• Questioned costs of more than $1.7 billion, and 

• More than $457 million in collections. 

The most monetarily significant of these audits was our audit 

of HUD’s fiscal year 2014 financial statements. We expressed a 

disclaimer of opinion on HUD’s consolidated financial statements 

because of the significant effects of certain unresolved audit 

matters, which restricted our ability to obtain sufficient, 

appropriate evidence to express an opinion. These unresolved 

audit matters related to (1) HUD’s improper use of cumulative and 

first-in, first-out budgetary accounting methods of disbursing 

community planning and development program funds and 

(2) $6.6 billion in Government National Mortgage Association 

(Ginnie Mae) nonpooled loan assets that we could not audit 

because Ginnie Mae could not provide adequate support for us 

to test these asset balances. We also expressed a disclaimer of 

opinion on Ginnie Mae’s stand-alone financial statements. 

During the first half of fiscal year 2015, the Office of Investigation 

completed 156 investigations to improve departmental operations 

and address program abuses, recovering $38.5 million. We 

continue to focus on HUD’s performance and accountability 

in single-family and public and Indian housing, both significant 

concerns for the Department and taxpayers. 

In one single-family case, a vice president and two loan 

officers were sentenced to prison terms ranging from 24 to 

30 months, and a branch manager was sentenced to 2 years 

probation following their conviction of mortgage fraud. They 

were also ordered to pay $24 million in restitution to HUD. 

These conspirators submitted false information involving 

Federal Housing Administration (FHA) loans. 

 During a joint investigation between the Office of Investigation 

and the Office of Audit, it was determined that HUD’s Office of 

Public and Indian Housing (PIH) misused the Intergovernmental 

Personnel Act (IPA) Mobility Program. The IPA Mobility Program 

provides for the temporary assignment of personnel between 

the Federal Government and State and local governments, 

colleges and universities, Indian tribal governments, federally 

funded research and development centers, and other eligible 

organizations. HUD inappropriately used the IPA program to 

appoint an individual from the Council of Large Public Housing 

Authorities (CLPHA – a housing industry group) as the Deputy 

Assistant Secretary for PIH’s Office of Policy, Program, and 

Legislative Initiatives. In doing so, a former PIH Assistant Secretary 

(previously head of the CLPHA organization) created an inherent 

conflict of interest because she placed the deputy director of 

an industry group in charge of PIH’s policy-making division, 

the division responsible for developing and coordinating the 

regulations applicable to the entities that CLPHA represents. In 

essence, HUD appointed someone who represented the regulated 

to be in charge of developing the regulations.

Joint civil fraud investigations continue to be an area 

of emphasis to combat fraud against FHA’s single-family 

programs. Through coordinated civil fraud efforts across 

the U.S. Government, HUD OIG substantively assisted in civil 

investigations of FHA’s largest lenders, providing a direct benefit 

to the FHA insurance fund of nearly $397 million. 

I have also joined with Secretary Castro to stress the 

importance of a strong whistleblower protection program for 

all HUD employees. To build on these efforts and maximize 

our impact on the people we serve, the Secretary and I signed a 

letter of cooperation last year, setting out our goals for a more 

transparent and accountable HUD for the future. Whistleblowers 

are a crucial source of information about waste, fraud, and 

abuse. Employees need to better understand their specific 

rights and remedies, while managers need to better understand 

prohibitions against retaliating against whistleblowers. To assist 

in this effort, HUD OIG has established a strong Whistleblower 

Ombudsman Program that focuses on outreach and training. 

In addition, we have worked with the Department to present 

whistleblower training in coordination with the Department’s 

ethics training. All new and current HUD employees are required 

to attend whistleblower training. 

I would like to express my gratitude to Congress and the 

Department for their sustained interest and commitment 

to improving HUD’s programs. I also want to express my 

sincere admiration to the staff of HUD OIG for its outstanding 

accomplishments and dedication to our mission. Through 

our collective effort, HUD OIG has achieved its annual goals, 

fulfilled its mission and responsibilities to its stakeholders, and 

had a significant and positive impact on the Department and 

our communities.

David A. Montoya | Inspector General
WHISTLEBLOWER OMBUDSMAN PROGRAM

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

to stress the importance of a strong Whistleblower Protection Program and recognizes that whistleblowers are 

a crucial source of information about waste, fraud, and abuse. Whistleblowing has become more high profile 

in recent times, and the poor treatment suffered by whistleblowers has been highlighted in the press. HUD 

OIG strives to create an environment in which allegations of waste, fraud, and abuse can be freely reported 

without fear of reprisal. One important aspect of HUD OIG’s Whistleblower Protection Program ensures 

that HUD employees are educated about prohibitions against retaliating against Federal whistleblowers 

and that employees understand their specific rights and remedies. Within the last 6 months, the HUD OIG 

Whistleblower Ombudsman Program has focused on outreach and training. All HUD employees were directed 

to attend mandatory whistleblower training in October of 2014. The training was presented live and then 

posted on our whistleblower Web page. HUD Secretary Julián Castro introduced the training and stressed its 

importance. This same training is incorporated into HUD’s new employee training, with required viewing 

within 30 days after coming onboard. It is also included in HUD’s supervisor training series. Our tracking of 

complaints coming into our whistleblower mailbox and via telephone is captured. The following chart reflects 

the volume and disposition of complaints received.

Number of complaints received 80

Number of complainants asserting whistleblower status4 71

Employee5 complaints referred for investigation to the HUD OIG Office of Investigation (OI) 16

Employee complaint investigations opened by OI 10

Complaints declined by OI 3

Complaints currently under review by OI 3

Employee complaint investigations closed by OI 1

HUD hosted an Open Government Open House for all of its employees in March of this year. The 

Whistleblower Ombudsman Program hosted a booth and provided brochures for HUD employees. 

The Whistleblower Ombudsman Program continues to work to find opportunities to highlight how 

whistleblower disclosures have the potential to save billions of taxpayer dollars. Whistleblowers play a critical 

role in keeping our Government honest, efficient, and accountable.

TRENDING

4 Many complainants raise questions regarding treatment by housing authorities following alleged wrongdoing by the same housing authority. They define themselves 

as whistleblowers. These complaints are referred to our hotline for appropriate referral and disposition. 

5 Employee complaints are those complaints received from employees, potential employees, and former employees of HUD as well as employees of contractors, 

subcontractors, and grantees.
TABLE OF CONTENTS

Chapter 1 – Single-Family Programs............................................................................................................. 12

Audit..........................................................................................................................................................................................12

Investigation............................................................................................................................................................................13

Chapter 2 – Public and Indian Housing Programs....................................................................................... 16

Audit..........................................................................................................................................................................................16

Investigation............................................................................................................................................................................19

Chapter 3 – Multifamily Housing Programs ................................................................................................. 21

Audit..........................................................................................................................................................................................21

Investigation............................................................................................................................................................................22

Chapter 4 – Community Planning and Development Programs ................................................................ 24

Audit..........................................................................................................................................................................................24

Investigation........................................................................................................................................................................... 26

Chapter 5 – Disaster Relief Programs............................................................................................................ 28

Audit......................................................................................................................................................................................... 28

Investigation........................................................................................................................................................................... 29

Chapter 6 – Other Significant Audits and Investigations ........................................................................... 31

Audit..........................................................................................................................................................................................31

Investigation............................................................................................................................................................................32

Chapter 7 – Joint Civil Fraud Initiatives ....................................................................................................... 34

Chapter 8 – Evaluation Initiatives ................................................................................................................. 37

Chapter 9 – Legislation, Regulation, and Other Directives ........................................................................ 38

Chapter 10 – Audit Resolution....................................................................................................................... 41

Appendix 1 – Peer Review Reporting ............................................................................................................ 55

Appendix 2 – Audit Reports Issued................................................................................................................ 56

Appendix 3 – Tables......................................................................................................................................... 57

OIG Telephone Directory ................................................................................................................................ 82

Acronyms List ................................................................................................................................................... 85

Reporting Requirements................................................................................................................................. 87
12

SEMIANNUAL REPORT TO CONGRESS

ONE SINGLE-FAMILY PROGRAMS 

AUDIT

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

lenders that, in turn, provide financing to enable individuals and families to purchase, rehabilitate, or construct 

homes. Some of the highlights from this semiannual period are noted below:

STRATEGIC INITIATIVE 1: CONTRIBUTE TO THE REDUCTION OF FRAUD 

IN SINGLE-FAMILY INSURANCE PROGRAMS

Key program results Questioned costs Funds put to better use

Audit 2 audits6 $ 1,486,544,478 $666,310,336

AUDIT OF FHA FISCAL YEARS 2014 AND 2013 FINANCIAL STATEMENTS

In accordance with the Chief Financial Officers Act of 1990 (Public Law 101-576) as amended, the U.S. 

Department of Housing and Urban Development, Office of Inspector General (HUD OIG), is responsible for 

conducting the annual financial statement audit of FHA. This work includes the audit of FHA’s balance 

sheets as of September 30, 2014 and 2013, and the related statements of net costs and changes in net 

position, the combined statements of budgetary resources for the years then ended, and the related notes to 

the financial statements.

HUD OIG conducted this audit in accordance with U.S. generally accepted government auditing standards 

and Office of Management and Budget Bulletin 14-02 as amended, Audit Requirements for Federal Financial 

Statements. Those standards require that OIG plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for its findings and conclusions based on its audit objectives.

OIG believes that the evidence obtained provides a reasonable basis for its findings and conclusions based on 

its audit objectives. In OIG’s opinion, FHA’s fiscal years 2014 and 2013 financial statements were presented fairly, in 

all material respects, in accordance with the generally accepted accounting principles for the Federal Government. 

6 The statistics shown in this chapter highlight values related to the financial audits of the FHA and Government National Mortgage Association programs. All other 

financial-related audits and their related statistics are located in Chapter 6, Other Significant Audits and Investigations.
13

CHAPTER ONE SINGLE-FAMILY PROGRAMS

Additionally, the audit disclosed one material weakness, two significant deficiencies in internal control, 

and one instance of noncompliance with applicable laws and regulations. This audit resulted in nearly 

$1.5 billion in questioned costs related to more than 57,000 paid partial claims, for which no corresponding 

mortgage notes were obtained by FHA from the insured lenders to support the claim payments, and $5.5 

million in funds to be put to better use, representing the amount of court settlement funds that FHA failed to 

establish as accrued receivables. (Audit Report: 2015-FO-0001)

AUDIT OF GOVERNMENT NATIONAL MORTGAGE ASSOCIATION FISCAL YEARS 2014 

AND 2013 FINANCIAL STATEMENTS

HUD OIG audited the Government National Mortgage Association’s (Ginnie Mae) fiscal year 2014 financial 

statements, including Ginnie Mae’s internal control and compliance with selected provisions of laws and 

regulations applicable to Ginnie Mae. OIG contracted with the independent certified public accounting firm 

of CliftonLarsonAllen LLP to audit Ginnie Mae’s fiscal year 2013 financial statements. CliftonLarsonAllen was 

responsible for its audit report and the conclusions expressed in that report.

In regard to the fiscal year 2014 audit, OIG was unable to obtain sufficient, appropriate evidence to 

express an opinion on the fairness of the $6.6 billion in nonpooled loan assets from Ginnie Mae’s defaulted 

issuers’ portfolio and $735 million in liability for loss on the mortgage-backed securities program guaranty.

Additionally, Ginnie Mae improperly accounted for FHA reimbursable costs as an expense instead of 

capitalizing the costs as an asset. This error resulted in the misstatement of the asset and net income. Overall, 

the issues cited were tied to problems associated with the acquisition and management of a multi-billiondollar defaulted issuers’ portfolio, which is a noncore segment of Ginnie Mae’s business. Due to the scope 

limitation in OIG’s audit work and the effects of material weaknesses in internal control, OIG was not able to 

obtain sufficient, appropriate evidence to provide a basis for an audit opinion on Ginnie Mae’s fiscal year 2014 

financial statements. Accordingly, it did not express an opinion on those statements.

OIG’s review noted four material weaknesses and one significant deficiency regarding internal controls 

over financial reporting. Its audit recommendations were directed toward strengthening Ginnie Mae’s 

governance of its financial operations. (Audit Report: 2015-FO-0003)

INVESTIGATION

PROGRAM RESULTS

Administrative-civil actions 91

Convictions-pleas-pretrial diversions 78

Financial recoveries $29,630,465

LOAN OFFICER SENTENCED FOR MORTGAGE FRAUD

A former loan officer was sentenced in U.S. District Court to 37 months incarceration and 2 years supervised 

release and ordered to pay $410,000 in restitution to FHA following his conviction of making false statements 

on mortgage loan applications. From August 2009 through November 2010, the loan officer conspired with 

others to provide false information on FHA loan documents to qualify borrowers. This investigation was 

conducted by HUD OIG, the Federal Bureau of Investigation (FBI), and the Indiana State Police. (Fort Wayne, IN) 
14

SEMIANNUAL REPORT TO CONGRESS

DEVELOPER SENTENCED IN LARGE-SCALE MORTGAGE FRAUD CONSPIRACY

A developer was sentenced in U.S. District Court to 51 months incarceration followed by 60 months supervised 

release following his conviction of conspiracy to commit bank fraud and wire fraud. From mid-2006 through 

December 2010, the developer, who owned or controlled several real estate properties in the Miami area, enlisted 

mortgage brokers and other industry professionals to recruit straw buyers to fraudulently purchase condominiums by providing false information on loan documents as well as advancing the borrowers cash to close through 

third parties. Many of those mortgages resulted in foreclosure. Losses to FHA totaled $1 million. This investigation was conducted by HUD OIG and the Federal Housing Finance Agency (FHFA) OIG. (Miami, FL) 

CONSULTANTS SENTENCED IN LOAN MODIFICATION SCAM

The owners of a foreclosure rescue business, who are members of a sovereign citizen movement, were each 

sentenced to 9 years incarceration and 5 years supervised release and ordered to pay $1.08 million in restitution, with $384,468 payable to FHA, following their convictions of conspiracy to commit wire fraud, mail fraud, 

and Social Security fraud. From August 2010 through April 2012, the owners, who also fraudulently represented that they were lawyers, preyed on financially distressed homeowners throughout the country by claiming to 

refinance existing home loans, conduct necessary legal processes, contact relevant parties, and implement 

administrative procedures. The owners convinced homeowners to stop making payments to their lenders, 

make payments to them, and not communicate with their lenders. Twenty-one of the properties involved in 

this scheme were FHA-insured mortgages totaling approximately $2.4 million. Losses to FHA totaled $384,468.

This investigation was conducted by HUD OIG, the FBI, the U.S. Secret Service (USSS), the Social Security 

Administration (SSA) OIG, the Johnson County District Attorney’s Office, and the Kansas City, MO, Police 

Department. (Kansas City, MO)

INVESTOR SENTENCED IN MORTGAGE FLIPPING SCHEME

An investor was sentenced in U.S. District Court to 97 months incarceration and 5 years supervised release and 

ordered to pay $478,534 in restitution to HUD following his conviction of conspiracy to commit bank fraud, 

mail fraud, and money laundering. The investor orchestrated a mortgage fraud scheme that resulted in losses 

to lenders of approximately $5.7 million. From June 2005 through July 2010, the investor and others conspired 

to defraud banks and mortgage lenders by recruiting straw borrowers and providing false information in 

support of the mortgage applications. The scheme involved more than 50 houses. The investor purchased 

properties in either his own name, the name of a limited liability corporation in which he had an interest, or 

the name of a co-conspirator. He then recruited borrowers to purchase the properties. The investor also 

engaged in a money laundering conspiracy with a closing attorney, who disbursed fraudulently obtained loan 

proceeds to private lenders that had loaned the investor money to purchase the properties. This investigation 

was conducted by HUD OIG, the FBI, the Internal Revenue Service – Criminal Investigation (IRS-CI), and the 

U.S. Postal Inspection Service (USPIS). (Hartford, CT) 

$24 MILLION IN RESTITUTION ORDERED FOR MORTGAGE FRAUD SCHEME

A vice president, two loan officers, and a branch manager of a modular housing retailer were sentenced in 

U.S. District Court following their convictions of conspiracy to defraud the United States through a mortgage 

fraud scheme. The vice president was sentenced to 24 months incarceration and ordered to pay $24 million in 

restitution to HUD. One loan officer was sentenced to 30 months incarceration and ordered to pay $6 million 

in restitution to HUD. A second loan officer was sentenced to 24 months incarceration and ordered to pay $5 

million in restitution to HUD. The branch manager was sentenced to 2 years probation and ordered to pay 
15

CHAPTER ONE SINGLE-FAMILY PROGRAMS

$4 million in restitution to HUD. From February 2004 to 2009, the conspirators and others submitted false 

information involving FHA loans to qualify borrowers, often without the borrowers’ knowledge. As a result of 

this scheme, HUD experienced losses of more than $23 million. This investigation was conducted by HUD 

OIG, USPIS, the U.S. Department of Agriculture OIG, the North Carolina Attorney General’s Office, the North 

Carolina State Bureau of Investigation, the North Carolina Commissioner of Banks, and the North Carolina 

Department of Justice. (Statesville, NC) 

BUSINESS OWNER SENTENCED FOR MORTGAGE FRAUD

A real estate business owner was sentenced in U.S. District Court to 6 years incarceration and 3 years 

supervised release and ordered to pay $1.53 million in restitution, with more than $700,000 payable to FHA, 

following a conviction of wire fraud, money laundering, and theft of government funds. From 2007 through 

2009, the business owner engaged in a mortgage fraud scheme in which mortgage lenders loaned cash to 

borrowers to obtain cashier’s checks for closings. The loan applications were falsified to reflect that the 

borrowers were making the downpayment, although the funds were supplied by the business owner. As part of 

the scheme, the business owner received funds for her fee and reimbursement for the funds advanced, neither 

of which was disclosed to the lenders. The investigation identified 45 fraudulent loans, which included 21 

FHA-insured loans. This investigation was conducted by HUD OIG, IRS-CI, and SSA OIG. (Kansas City, MO) 

MULTIPLE DEFENDANTS SENTENCED IN MORTGAGE FRAUD CONSPIRACIES

Three real estate agents and an associate were sentenced in U.S. District Court for their roles in two separate 

mortgage fraud schemes involving multiple co-conspirators. One real estate agent was sentenced to 57 

months incarceration and 5 years supervised release and ordered to pay more than $2.4 million in restitution, 

with $337,418 payable to FHA. Another real estate agent was sentenced to 5 months incarceration, 5 months 

home confinement, and 3 years supervised release and ordered to pay $352,091 in restitution, with $164,090 

payable to FHA. The third real estate agent was sentenced to 33 months incarceration and 5 years supervised 

release and ordered to pay $999,726 in restitution, with $168,055 payable to FHA. The associate was sentenced 

to 21 months incarceration and 24 months supervised release and ordered to pay $999,726 in restitution, with 

$168,055 payable to FHA. From March 2007 through November 2008, several of the conspirators were involved 

in two separate schemes to defraud FHA, the Federal Home Loan Mortgage Corporation (FHLMC), and 

lenders. The first scheme involved the use of false information, including stolen or false identities, to secure 

mortgage loans. The other scheme involved the use of a straw purchaser to obtain financing as an owner-occupant when the properties were immediately rented out to HUD-subsidized tenants. The false information 

used in both conspiracies was supplied by the owner of a real estate company, who was convicted of financial 

fraud. The owner would sell false credit histories with backdated lines of credit that were used to convince 

lenders to issue mortgage loans. The total loss involving the individuals charged in the two conspiracies was 

approximately $3.36 million and involved 14 properties, 7 of which were FHA insured. Three of the FHA-insured loans were indemnified, and FHA suffered a loss of $501,508 on the remaining four properties. FHLMC 

suffered a loss of more than $330,000, and lenders suffered losses of more than $2.5 million. This investigation 

was conducted by HUD OIG, FHFA OIG, the U.S. Department of Homeland Security OIG, the U.S. Department 

of the Treasury OIG, and USSS. (Greenbelt, MD)
16

SEMIANNUAL REPORT TO CONGRESS

AUDIT

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

3,100 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. Some of the highlights from this semiannual period are noted below.

AUDITS

STRATEGIC INITIATIVE 2: CONTRIBUTE TO THE REDUCTION OF 

ERRONEOUS PAYMENTS IN RENTAL ASSISTANCE

Key program results Questioned costs Funds put to better use

Audit 8 audits $2,042,018 $455,876,648 

SECTION 8 HOUSING CHOICE VOUCHER PROGRAM

HUD’s Office of Inspector General (OIG) audited the Housing Choice Voucher program of the Chicago Housing 

Authority’s Moving to Work (MTW) program, in Chicago, IL, to determine whether the Authority complied 

with its MTW agreement, HUD’s requirements, and its own policies for the use of exception payment standards for its Housing Choice Voucher program.

The Authority lacked documentation to support that its policy increasing the exception payment 

standards up to 300 percent of HUD’s 50th percentile rents was reasonable and cost effective. As a result, 

HUD and the Authority lacked assurance that the housing assistance paid for program households using the 

exception payment standard amounts was appropriate. The Authority could pay nearly $5 million in housing 

assistance over the next year for households that exceed 110 percent of HUD’s 50th percentile rents.

PUBLIC AND INDIAN 

HOUSING PROGRAMS

TWO
17

CHAPTER TWO PUBLIC AND INDIAN HOUSING PROGRAMS

OIG recommended that HUD require the Authority to (1) conduct an analysis to determine whether its 

exception payment standards exceeding 110 percent of HUD’s 50th percentile rents were reasonable and cost 

effective and provide the results of the analysis, along with support, to HUD for review and approval and (2) 

reimburse its program from non-Federal funds for the excess housing assistance paid for these households. 

(Audit Report: 2015-CH-1001)

PUBLIC HOUSING

HUD OIG audited the Housing Authority of the City of Taylor, TX, to determine whether the Authority 

operated its public housing and related grant programs in accordance with HUD requirements and whether a 

complainant’s allegations were valid. Specifically, the complainant alleged that the former executive director 

gave away, sold, or transferred Authority-owned properties to other entities. HUD identified additional 

concerns regarding ineligible Section 8 Homeownership Voucher Program participants, unsupported salaries 

for employees working at multiple properties, and improper expenditures by a former executive director.

The Authority did not implement adequate policies and procedures and did not properly manage its 

public housing and related grant programs in accordance with HUD requirements. Specifically, it (1) did 

not properly account for its funds, (2) allowed director 1 to improperly transfer assets, (3) paid unsupported 

salaries to employees who worked on multiple activities, (4) allowed director 1 to transfer funds to lease and 

purchase a parking lot the Authority already owned, and (5) allowed director 2 to circumvent financial and 

procurement controls. In addition, the Authority violated the conflict-of-interest provisions of the Section 8 

Homeownership Voucher Program and the HOME Investment Partnerships Program (HOME). As a result, it 

lost control and possession of a $255,000 property it owned, lost control of two component units with net asset 

values of more than $1.7 million, and incurred more than $392,000 in questioned costs.

OIG recommended that HUD’s Office of Public Housing require the Authority to (1) implement 

controls, policies, and procedures; (2) correct its books and records; (3) take action to reclaim properties; 

and (4) support or repay questioned costs totaling more than $392,000. OIG also recommended that HUD’s 

Departmental Enforcement Center take appropriate administrative sanctions. OIG further recommended 

that HUD’s Associate General Counsel for Program Enforcement determine whether legal sufficiency exists 

to pursue remedies under the Program Fraud Civil Remedies Act (31 U.S.C. (United States Code) 3801-3812), 

civil money penalties (24 CFR (Code of Federal Regulations) 30.35), or both against director 1 and the Section 

8 program manager for submitting false claims for Section 8 Homeownership Voucher Program and HOME 

program assistance payments. (Audit Memorandum: 2015-FW-1801)

HUD OIG audited the Freeport Housing Authority in Freeport, NY, regarding the administration of its low-rent 

housing and home-ownership programs to determine whether the Authority administered the programs in 

accordance with HUD’s regulations.

The Authority did not administer its low-rent housing and home-ownership programs in accordance with 

HUD’s regulations. Specifically, former Authority officials did not (1) maintain adequate records to support 

the proper procurement of services, including justifications for not using customary procurement procedures; 

(2) administer its home-ownership program in compliance with the HUD-approved home-ownership plan; 

(3) comply with admissions and occupancy administrative requirements; and (4) implement financial and 

general administrative practices that were consistent with requirements. As a result, officials could not provide 

documentation to show that they spent more than $1 million in Federal funds for properly procured services.
18

SEMIANNUAL REPORT TO CONGRESS

Further, officials could not ensure the proper use of more than $1.25 million in home-ownership sale 

proceeds. Therefore, some proceeds may have been improperly spent, depriving the Authority of funds 

that could have been used to complete the sale of all scattered-site properties under the program. Former 

Authority officials also lacked records to support the integrity of the Authority’s tenant selection process and 

financial controls to ensure the proper allocation and disbursement of nearly $271,000 in Federal funds. 

OIG recommended that HUD require Authority officials to (1) implement controls to ensure that the 

emergency procurement procedures in the Authority’s procurement policy comply with Federal regulations 

and are consistently followed, (2) provide supporting documents for the use of home-ownership program sale 

proceeds, (3) maintain records to show the proper selection of applicants from the Authority’s waiting lists, 

and (4) develop and implement financial controls to ensure the proper allocation and disbursement of funds. 

(Audit Report: 2015-NY-1002)

LOBBYING ACTIVITIES

HUD OIG audited HUD’s oversight of PHAs’ lobbying activities to determine whether it was adequate to 

ensure that PHAs complied with Federal lobbying disclosure requirements and restrictions.

HUD policies generally did not ensure that the PHAs that lobbied complied with Federal lobbying disclosure 

requirements and restrictions. Only 12 of about 3,300 PHAs were reported to have engaged in lobbying activities 

during the audit period. However, of the 12 PHAs reported to have engaged in lobbying activities, 9 spent $2.5 

million on lobbying activities that they failed to disclose as required. Four of the nine PHAs were participants in 

HUD’s MTW program and spent $1.5 million on undisclosed lobbying activities. Therefore, the risk of violations 

appeared to be greater at PHAs participating in the MTW program. Three of the MTW PHAs incorrectly certified 

that they had not used Federal funds for lobbying. Also, HUD could not provide all of the required lobbying 

certifications and disclosures for the 12 PHAs on which lobbyists had reported during the review period. Because 

HUD failed to implement adequate policies to monitor PHAs’ compliance with lobbying requirements, (1) three 

PHAs improperly spent nearly $129,000 in Federal funds on lobbying activities, (2) HUD lacked assurance that 

other PHAs did not spend Federal funds on lobbying activities or violate other lobbying-related requirements, 

and (3) HUD risked creating an appearance of a lack of transparency.

OIG recommended that HUD require corrective action and pursue administrative sanctions, as 

appropriate, to address PHAs’ violations of Federal lobbying disclosure requirements and restrictions and 

implement additional control policies or procedures to ensure that PHAs comply with lobbying disclosure 

requirements and restrictions. (Audit Report: 2015-PH-0001)

COMMUNITY SERVICE AND SELF-SUFFICIENCY REQUIREMENT

HUD OIG audited HUD’s monitoring of the community service and self-sufficiency requirement (CSSR) to 

determine the extent to which HUD subsidized public housing units occupied by noncompliant tenants and 

housing for tenants whose CSSR status was misreported.

Of nearly 550,000 potentially CSSR-eligible units nationwide, HUD subsidized housing for 106,000 units 

occupied by noncompliant tenants. Of the nearly 740,000 adult tenants living in these units, HUD’s system 

contained incorrect CSSR status codes for 201,000. As a result, HUD paid more than $37 million in monthly 

subsidies for public housing units occupied by noncompliant tenants that otherwise could have housed 

compliant households.
19

CHAPTER TWO PUBLIC AND INDIAN HOUSING PROGRAMS

OIG recommended that HUD develop and implement a written monitoring policy for CSSR to ensure that 

PHAs comply with the Quality Housing and Work Responsibility Act of 1998 so that more than $448.5 million 

in public housing operating subsidies will be put to better use over the next year. OIG also recommended that 

HUD create clarifying guidance for PHAs, develop training, apply penalties or sanctions against PHAs that 

house ineligible households, produce improved monitoring reports for field offices, and fix the error codes 

resulting from form HUD-50058 submissions. (Audit Report: 2015-KC-0001)

REVIEW OF INTERGOVERNMENTAL PERSONNEL ACT APPOINTMENT

HUD OIG reviewed whether a conflict of interest existed within the HUD Office of Public and Indian Housing 

(PIH). Specifically, former Assistant Secretary for Public and Indian Housing Sandra B. Henriquez appointed 

Debra Gross, a former lobbyist and the deputy director of the Council of Large Public Housing Authorities 

(CLPHA), a housing industry group, to be responsible for PIH’s Office of Policy, Program, and Legislative 

Initiatives. The audit objectives were to determine whether (1) HUD complied with requirements in obtaining 

the services of the deputy director, (2) a conflict of interest existed under this arrangement, and (3) HUD took 

appropriate actions to mitigate the apparent conflict of interest.

Assistant Secretary Henriquez inappropriately used the Intergovernmental Personnel Act (IPA) to appoint 

CLPHA’s deputy director as HUD’s Deputy Assistant Secretary for Policy, Program, and Legislative Initiatives. 

In doing so, she created an inherent conflict of interest because she placed the deputy director of an industry 

group in charge of PIH’s policy-making division, the division responsible for developing and coordinating the 

regulations applicable to the entities that CLPHA represents. HUD’s lack of oversight in the IPA agreement 

process allowed this inherent conflict of interest to occur without a prior ethical review by HUD’s Office of 

General Counsel. Additionally, HUD did not obtain required financial disclosure reports from the deputy 

director, failed to provide the deputy director with required ethics training, and allowed her to hire permanent 

HUD employees. In her HUD policy-making role, it appeared that the deputy director supported the public 

housing industry’s regulation relief agenda at HUD while retaining her job at CLPHA. Apparent lobbying 

efforts by CLPHA and other housing industry groups during this period further complicated the matter. Due 

to the inherent conflict of interest and HUD’s failure to recognize and mitigate it, HUD cannot know whether 

the policy decisions enacted during the deputy director’s tenure were inappropriately influenced or in the best 

interest of HUD and all of its stakeholders.

OIG recommended that HUD (1) establish and implement procedures to use IPA agreements responsibly 

and ensure that conflicts of interest do not exist and (2) perform an independent review of the deputy 

director’s actions regarding policy making to determine whether they compromised HUD’s integrity or 

objectivity in managing, monitoring, and evaluating PIH programs. (Audit Memorandum: 2015-FW-0801)

INVESTIGATION

Administrative-civil actions 70

Convictions-pleas-pretrial diversions 86

Financial recoveries $4,367,194
20

SEMIANNUAL REPORT TO CONGRESS

MAN SENTENCED FOR HIS ROLE IN IDENTITY THEFT CONSPIRACY

The husband of the former onsite manager of the Clinton-Peabody Public Housing Complex was sentenced in 

U.S. District Court to 30 months incarceration and 36 months supervised release and ordered to pay $16,000 in 

restitution following his conviction of conspiracy to commit identity theft and aggravated identity theft. The former 

onsite manager was previously sentenced to 12 months and 1 day incarceration and 3 years supervised release 

and ordered to pay $113,000 in restitution. From December 2011 through May 2012, the former manager of the 

Complex, who was under contract employment by the St. Louis Housing Authority, used her position to steal Social 

Security numbers and other personally identifying information of Authority public housing applicants and tenants, 

which were then used to file false tax returns and obtain the tax refunds. This investigation was conducted by HUD 

OIG and the Internal Revenue Service – Criminal Investigation. (St. Louis, MO)

FINANCIAL ANALYST SENTENCED FOR EMBEZZLEMENT

A financial analyst for a company contracted to administer the Housing Choice Voucher program for the Miami-Dade Housing Agency was sentenced in U.S. District Court to 30 months incarceration and 2 years supervised release and ordered to pay $83,944 in restitution following her conviction of theft of government funds and 

aggravated identity theft. From June 2013 through February 2014, the financial analyst, who was responsible for 

distributing program-funded debit cards to landlords, took two debit cards issued in the names of landlords who 

had recently left the program. The financial analyst then funded the cards, as if the landlords were still active 

participants, and used them for personal gain. This investigation was conducted by HUD OIG. (Miami, FL) 

FORMER INSPECTOR PLEADS GUILTY TO THEFT

A former inspector with the Union City Community Development Agency pled guilty in U.S. District Court to 

conspiracy to commit theft of government funds. Between April 2007 and July 2011, the inspector conspired 

with contractors to submit higher, phony bids from fictitious construction competitors so that the collusive 

contractors would win the bid for the Agency projects. HUD’s losses exceeded $400,000. This investigation 

was conducted by HUD OIG and the Federal Bureau of Investigation. (Newark, NJ) 
21

CHAPTER THREE MULTIFAMILY HOUSING PROGRAMS

In addition to multifamily housing developments with U.S. Department of Housing and Urban Development 

(HUD)-held or HUD-insured mortgages, HUD subsidizes rents for low-income households, finances the 

construction or rehabilitation of rental housing, and provides support services for the elderly and handicapped. 

Some of the highlights from this semiannual period are shown below.

AUDIT

STRATEGIC INITIATIVE 2: CONTRIBUTE TO THE REDUCTION OF 

ERRONEOUS PAYMENTS IN RENTAL ASSISTANCE

Key program results Questioned costs Funds put to better use

Audit 3 audits $619,889 $10,036,763

REVIEW OF GLENBROOK MANOR MANAGEMENT ACTIVITIES

HUD’s Office of Inspector General (OIG) audited the multifamily project, Glenbrook Manor, in Stamford, 

CT, to determine whether it spent project funds for eligible activities and for costs that were reasonable and 

supported. OIG also wanted to determine whether surplus cash was properly calculated and deposited into 

the project’s residual receipts account.

Glenbrook Manor could not always show that project costs were eligible and supported in accordance 

with HUD requirements. Specifically, its management agent did not ensure that project costs paid through the 

agent’s revolving fund and salaries paid in 2011 were supported. In addition, surplus cash was not properly 

calculated and deposited into the project’s residual receipts account as required by its regulatory agreement.

As a result, officials paid nearly $497,000 in unsupported costs and did not deposit more than $61,000 in 

surplus cash into the residual receipts account as required.

OIG recommended that HUD require Glenbrook Manor officials to (1) provide support showing that the 

nearly $240,000 liability to the agent’s revolving fund and the $200,000 transferred to the agent’s revolving fund 

represented expenses for eligible project costs or repay the transferred funds and remove the liability from the 

project’s books, (2) provide documentation to support that more than $57,000 spent in 2011 was for eligible 

project salaries and repay any unsupported amounts from non-Federal funds, and (3) deposit the surplus cash 

into the residual receipts account. (Audit Report: 2015-BO-1001)

THREE MULTIFAMILY HOUSING PROGRAMS 
22

SEMIANNUAL REPORT TO CONGRESS

INVESTIGATION

Administrative-civil actions 14

Convictions-pleas-pretrial diversions 5

Financial recoveries $1,231,054

OWNER OF A MORTGAGE SUBSERVICING COMPANY SENTENCED 

FOR MONEY LAUNDERING

The owner of a mortgage company was sentenced to 97 months incarceration and 5 years supervised release 

and ordered to pay $7.8 million in restitution to the trustee and investors following his conviction of wire fraud 

and money laundering. From January 2008 through July 2010, the owner was responsible for the day-to-day 

management of mortgage loan accounts, including the receipt and crediting of mortgage payments, handling 

of escrow accounts, and forwarding of payments to investors in mortgage pools. Two of these mortgage pools 

contained seven Federal Housing Administration (FHA) commercial mortgages (under the Rental Assistance 

Payment Program, Section 236) in which investors purchased shares. The owner misappropriated funds 

provided to him by the borrowers of the FHA-insured loans in the mortgage pools and concealed this misappropriation by producing and transmitting fraudulent remittance reports to the trustee and investors in these two 

pools, which reflected that payments had been made. In addition to not passing monthly payments through the 

pool of investors, the owner received payoff funds for several of the properties and did not forward those payoff 

funds to investors. The owner continued to make monthly payments to investors as if monthly mortgage 

payments were being received from borrowers. The owner used some proceeds from the two mortgage pools 

to pay off a personal home equity line of credit. This investigation was conducted by HUD OIG and the 

Federal Bureau of Investigation. (Davenport, IA) 

MULTIFAMILY PROPERTY OWNER SENTENCED FOR EQUITY SKIMMING

The former owner of an identity-of-interest HUD management agent was sentenced in U.S. District Court to 

78 months incarceration and ordered to pay $543,000 in restitution to HUD and more than $1.2 million to 

other victims following a conviction of equity skimming for diverting more than $500,000 in rents, assets, 

proceeds, and income derived from an FHA-insured multifamily housing development. From February 2008, 

through June 2009, the owner violated HUD’s regulatory agreement by using project funds for a luxury car 

purchase, a personal PayPal account, and other non-HUD project expenses in lieu of paying the HUD-insured 

mortgage. The owner further admitted to violating terms of his pretrial release when he obtained a new 

passport and fled the country for the United Kingdom before his March 2013 trial. This investigation was 

conducted by HUD OIG. (Chicago, IL)

SECTION 8 MANAGER CAUGHT EMBEZZLING FUNDS FROM MULTIPLE VICTIMS

A former manager of three Section 8 project-based properties was sentenced in U.S. District Court to 366 

days incarceration and 3 years probation and ordered to pay approximately $180,000 in restitution to HUD 

following a conviction of embezzlement and theft of public funds. From October 2011 through October 

2013, the manager falsified tenant income and asset information on tenant recertifications, which caused 

HUD to make a greater housing assistance payment than should have been required. While HUD was 

making maximum housing assistance payments on the tenants’ behalf, the manager continued to accept 

full monthly payments from each tenant, which she deposited into her personal bank account. The manag-
23

CHAPTER THREE MULTIFAMILY HOUSING PROGRAMS

er embezzled approximately $180,000 by depositing 534 tenant checks into her personal accounts before her 

employment was terminated because of the theft. Immediately thereafter, the manager gained employment 

at another apartment complex, where her employment was terminated when she embezzled approximately 

$6,000 between November 2013 and January 2014. She altered rent payments from residents and deposited 

them into her personal bank account. The manager gained employment at a third apartment complex, but 

her employment was terminated after officials learned of her history. This investigation was conducted by 

HUD OIG. (Omaha, NE) 
24

SEMIANNUAL REPORT TO CONGRESS

FOUR COMMUNITY PLANNING AND 

DEVELOPMENT PROGRAMS

The Office of Community Planning and Development (CPD) seeks to develop viable communities by promoting 

integrated approaches that provide decent housing, suitable living environments, and expanded economic 

opportunities for low- and moderate-income persons. The primary means toward this end is the development of 

partnerships among all levels of government and the private sector. Some of the highlights from this semiannual 

period are shown below.

AUDIT

STRATEGIC INITIATIVE 3: CONTRIBUTE TO THE STRENGTHENING OF COMMUNITIES

Key program results Questioned costs Funds put to better use

Audit 9 audits7 $224,633,280 $63,043,774

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

HOME Investment Partnerships Program (HOME), Section 108 Loan Guarantee Program, and Neighborhood 

Stabilization Program (NSP). 

HOME INVESTMENT PARTNERSHIPS PROGRAM

HUD OIG audited the HOME program of Rhode Island Housing in Providence, RI, to determine whether 

Rhode Island Housing officials awarded HOME funds to grantees in a reasonable and supported manner and 

whether HOME funds were disbursed in accordance with HUD rules and regulations.

Rhode Island Housing officials disbursed HOME funds for questionable expenditures. Specifically, 

they disbursed HOME funds for (1) expenses incurred before the HOME agreement was executed, (2) 

expenses not included in the HOME agreement, (3) expenses that exceeded the budget allocation, and (4) 

an activity for which they did not obtain a deed restriction and support all of the costs incurred. In addition, 

officials executed a HOME agreement that did not comply with Federal regulations and approved a HOME 

application with inaccurate costs. As a result, they could not assure HUD that reasonable and necessary 

costs were charged to the HOME program, and more than $2.3 million in HOME funds was questioned. In 

7 The total community planning and development area audits, questioned costs, and funds put to better use amounts include any disaster recovery (two audits) type 

audits conducted in the community planning and development area. The writeups for these audits may be shown separately in chapter 5 of this semiannual report.
25

CHAPTER FOUR COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS

addition, officials did not always properly award and support HOME funds disbursed to community housing 

development organizations (CHDO). As a result, they could not assure HUD that nearly $84,000 in HOME 

funds was allocated and disbursed in compliance with HOME requirements.

OIG recommended that HUD require Rhode Island Housing officials to reimburse HUD nearly $888,000 

from non-Federal funds for ineligible costs and provide support for more than $1 million in costs. If sufficient 

support cannot be provided, officials should seek reimbursement from non-Federal funds and redistribute 

$500,000 in HOME funds to other eligible HOME activities. (Audit Report: 2015-BO-1002)

SECTION 108 LOAN GUARANTEE PROGRAM

HUD OIG audited the Section 108 Loan Guarantee program of the Office of the Commissioner for Municipal 

Affairs in San Juan, PR, to determine whether Section 108 funds were effectively used to meet a Community 

Development Block Grant (CDBG) program national objective and provide the intended benefits and whether 

borrowers complied with loan contract and HUD requirements.

Municipal Affairs did not ensure that borrowers completed three Section 108 Loan Guarantee activities 

that showed signs of slow progress. As a result, HUD had no assurance that more than $21 million awarded 

and disbursed for three Section 108-funded activities met a national objective of the CDBG program and fully 

provided the intended benefits. Further, (1) borrowers used more than $1 million for ineligible expenditures 

and did not support the eligibility of more than $367,000 in program disbursements, (2) loan proceeds 

were not disbursed within the established timeframe, (3) borrowers did not provide HUD the required 

loan collateral or establish a financial management system in accordance with HUD requirements, and (4) 

investments were not fully collateralized. As a result, HUD lacked assurance that funds were adequately 

accounted for, safeguarded, and used for authorized purposes and in accordance with HUD requirements.

OIG recommended that HUD (1) determine the eligibility of the unsupported Section 108 program costs 

and activities that showed signs of slow progress and (2) require the repayment of the ineligible expenditures. 

(Audit Report: 2015-AT-1001)

NEIGHBORHOOD STABILIZATION PROGRAM

HUD OIG audited the State of Rhode Island’s NSP to determine whether the State properly administered its 

program and ensured that costs incurred complied with HUD regulations.

The State did not properly administer its NSP and ensure that costs incurred complied with HUD 

regulations. Specifically, State officials did not ensure that their subrecipients (1) had an adequate process 

for selecting and approving applicants for NSP funding, (2) always funded activities that were eligible and 

supported program costs, and (3) charged only eligible and supported administrative costs directly related to 

NSP. Additionally, OIG found instances of potential conflicts of interest. As a result, HUD had no assurance 

that more than $6.3 million in NSP funds was effectively and efficiently used.

OIG recommended that HUD require State officials to (1) repay more than $1.4 million in ineligible costs, 

(2) provide adequate documentation to support or repay more than $4.5 million in NSP costs, (3) support 

the necessity and reasonableness of nearly $490,000 in unexpended NSP funds or reallocate the funds for 

other eligible NSP activities, (4) ensure that proper affordability restrictions are put in place, (5) establish an 

agreement between the State and Rhode Island Housing to define responsibilities, and (6) properly monitor 

and oversee the State’s subrecipients. (Audit Report: 2015-BO-1003)
26

SEMIANNUAL REPORT TO CONGRESS

AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

HUD OIG audited HUD’s NSP to provide an overall assessment of the program, including assessing the 

sufficiency of HUD’s controls and determining whether HUD had improved its controls as a result of its own 

monitoring efforts as well as audits or reviews by OIG or other entities.

HUD failed to take appropriate action regarding more than $22 million in unexpended NSP1 and NSP38

initial funding allocations. Since HUD had no assurance that these funds were used to help reduce the effects 

of the foreclosure crisis in a timely manner as Congress intended, the overall effectiveness of the program may 

have been lessened.

HUD had generally implemented sufficient controls and improvements, including providing guidance and 

technical assistance, as a result of its own assessments. However, it could improve its administration of NSP and 

similar programs by effectively using OIG reports on individual grantees to identify trends programwide.

HUD did not effectively use trends identified from OIG reports on individual grantees that highlighted 

common problems or regulatory gaps on which it could base national policy guidance or other directives. As a 

result, HUD may not have always recognized recurring issues or provided grantees the most effective guidance 

for improving overall program performance.

OIG recommended that HUD (1) provide support showing that it took action regarding more than $22 

million in unexpended funds or provide adequate support showing that grantees did not miss the expenditure 

deadlines, (2) work with grantees to ensure that the information reported is accurate and up to date, and (3) 

adopt a best practice to use OIG audit reports to help identify potential areas for improvement programwide 

for NSP and similar programs. (Audit Report: 2015-AT-0001)

INVESTIGATION

Administrative-civil actions 31

Convictions-pleas-pretrial diversions 10

Financial recoveries $2,365,596

CONTRACTORS SENTENCED IN CONSPIRACY TO COMMIT THEFT OF FUNDS

Two contractors were sentenced in U.S. District Court following their convictions of conspiracy to commit 

theft of government funds from New Orleans Affordable Homeownsership, an agency that received HUD 

CDBG funds. One contractor was sentenced to 6 months home confinement and 12 months supervised 

release and ordered to pay $173,424 in restitution to HUD. The other contractor was sentenced to 36 months 

probation and ordered to pay $133,872 in restitution to HUD. From January 2005 through August 2008, 

the contractors conspired with the executive director of the agency to overbill or bill for work that was not 

performed and provide a kickback to the executive director. The City of New Orleans administered the CDBG 

funds disbursed by HUD. This investigation was conducted by HUD OIG, the Federal Bureau of Investigation, 

the Internal Revenue Service - Criminal Investigation, the U.S. Postal Inspection Service, and the City of New 

Orleans OIG. (New Orleans, LA) 

8 HUD, through CPD, provided money to local governments, nonprofits, and all 50 States through three rounds of NSP funding totaling approximately $6.82 billion.  

The three rounds of NSP funding were for stabilizing communities through the purchase and redevelopment of foreclosed-upon and abandoned homes and 

residential properties.
27

CONTRACTOR SENTENCED FOR BRIBERY

A home construction contractor was sentenced in U.S. District Court to 3 years probation following his 

conviction of bribery of officials of a HOME grantee. From 2009 through 2011, the contractor had entered into 

an agreement with a senior property developer to “kick back” cash payments totaling $9,600 to her in exchange 

for contract awards for HOME-funded property rehabilitation work. This investigation was conducted by 

HUD OIG. (Bristol, PA) 

EXECUTIVE DIRECTOR SENTENCED FOR EMBEZZLEMENT

The former executive director of the defunct CHDO, East Orange Revitalization and Development Corporation, was sentenced in Essex County Court to 5 years incarceration following her conviction of theft. From 

2006 through 2009, the executive director submitted falsified invoices, acquired from a private developer, for 

payment as if they were expenses incurred for the project. The executive director then routed the funds to 

accounts that she controlled. She also used her relatives, former Internal Revenue Service agents, to prepare 

fraudulent financial statements for the CHDO to conceal the theft. She used the embezzled HOME funds to 

finance a lavish lifestyle that included refurnishing a former residence, taking trips to casinos and the Bahamas, and buying jewelry. (Essex County, NJ)

CHAPTER FOUR COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS
28

SEMIANNUAL REPORT TO CONGRESS

FIVE DISASTER RELIEF PROGRAMS

In response to disasters, Congress may appropriate additional funding as Disaster Recovery grants to rebuild the 

affected areas and provide crucial seed money to start the recovery process. Since fiscal year 1993, Congress has 

appropriated $47 billion to the U.S. Department of Housing and Urban Development (HUD), from which HUD 

provides flexible grants to help cities, counties, and States recover from presidentially declared disasters. The 

active disaster grants nationwide were allocated $44.2 billion and had nearly $32.7 billion obligated and $28.7 

billion disbursed as of March 31, 2015.

Disaster Funds allocated Funds obligated

Funds 

disbursed

Percentage of 

funds used

Hurricane Sandy $14.2 billion $3.2 billion $2.8 billion 20

Hurricanes Katrina, 

Rita & Wilma $19.6 billion $19.5 billion $18.4 billion 94

Hurricanes Ike, 

Gustav & Dolly $6.1 billion $6.0 billion $4.0 billion 66

9-11 $3.5 billion $3.4 billion $3.1 billion 89

Other $0.8 billion $0.6 billion $0.4 billion 50

Keeping up with communities in the recovery process can be a challenging position for HUD. HUD’s Office 

of Inspector General (OIG) continues to take steps to ensure that the Department remains diligent in assisting 

communities with their recovery efforts.

AUDIT

STRATEGIC INITIATIVE 3: CONTRIBUTE TO THE STRENGTHENING OF COMMUNITIES

Key program results Questioned costs Funds put to better use

Audit 2 audits9 $194,671,037 $40,000,000

9 The total disaster-related audits consist of community planning and development audits. The questioned costs and funds put to better use amounts relate only to 

disaster-related costs.
29

CHAPTER FIVE DISASTER RELIEF PROGRAMS

HUD OIG audited the City of New York, Office of Management and Budget’s administration of the Community 

Development Block Grant Disaster Recovery (CDBG-DR) funds awarded to the City as a result of damages 

caused by Hurricane Sandy to determine whether the City (1) disbursed CDBG-DR funds in accordance with the 

guidelines established under the HUD-approved action plan and HUD rules and regulations and (2) maintained 

effective program and financial management controls.

City officials did not always disburse CDBG-DR funds in accordance with Federal regulations. Specifically, 

they disbursed $183 million to the City’s subrecipient for unsupported salary and fringe benefits and 

unreasonable and unnecessary expenses and did not adequately monitor their subrecipient and sufficiently 

document national objectives. In addition, the City had weaknesses in its financial management controls and 

allowed the disbursement without a proper review to support the claim. As a result, City officials could not 

assure HUD that the CDBG-DR funds were disbursed for eligible, reasonable, and necessary program expenses 

in compliance with HUD rules and regulations. Further, the remaining allocation of $40 million would be 

considered funds put to their intended use if City officials establish adequate monitoring controls.

OIG recommended that HUD instruct City officials to (1) provide documentation to justify the 

unsupported salary and fringe benefits and associated expenses charged to the grant and (2) strengthen 

controls over disbursements to ensure that all costs charged to the program are eligible and adequately 

supported with source documentation in compliance with Federal regulations. (Audit Report: 2015-NY-1001)

HUD OIG audited the City of Minot, ND’s CDBG-DR program to determine whether the City complied with 

Federal and local procurement requirements.

The City did not fully comply with Federal and local procurement requirements. It did not prepare 

independent cost estimates before receiving bids or proposals for two grant administration and project 

delivery services contracts and the five amendments to those contracts or for the change orders for four 

construction projects. In addition, the City did not perform debarment checks before awarding three 

contracts. The mayor of Minot signed two amendments for the 2012 grant administration and project delivery 

services contract before the city council authorized the mayor to sign the documents on the City’s behalf.

Further, one construction contract was not dated and did not have an effective date of services.

OIG recommended that HUD (1) require the City to provide documentation demonstrating that the 

overall contract price for the two grant administration and project delivery services contracts and the five 

amendments to those contracts totaling more than $11.5 million was fair and reasonable and if not, require 

the City to repay HUD from non-Federal funds any amount that it cannot support; (2) require the City to 

provide documentation demonstrating that the overall price for the change orders for the four construction 

projects totaling nearly $122,000 was fair and reasonable and if not, require the City to repay HUD from nonFederal funds any amount that it cannot support; and (3) monitor the City to ensure that it follows its revised 

Federal grant procurement policy and newly adopted procurement checklist. (Audit Report: 2015-KC-1002)
30

SEMIANNUAL REPORT TO CONGRESS

INVESTIGATION10

Administrative-civil actions 6

Convictions-pleas-pretrial diversions 1

Financial recoveries $12,043

FORMER EXECUTIVE DIRECTOR SENTENCED FOR RECEIVING KICKBACKS

A former executive director of New Orleans Affordable Homeownership, an agency that received HUD CDBG 

funds, was sentenced in U.S. District Court to 60 months incarceration and 36 months probation, ordered to 

pay $424,107 in restitution to HUD, and fined $50,000 following a conviction of conspiracy to receive kickbacks 

from an agency receiving Federal funds. From January 2005 through August 2008, the former executive 

director conspired with contractors to overpay or pay for work not done and received kickbacks from those 

contractors. The former executive director also created and provided false invoices for at least one contractor 

to submit to the grand jury in an attempt to justify the overpayments. This investigation was conducted by 

HUD OIG, the Federal Bureau of Investigation, the Internal Revenue Service – Criminal Investigation, the U.S. 

Postal Inspection Service, and the City of New Orleans OIG. (New Orleans, LA)

10 Figures included in Office of Public and Indian Housing and Office of Community Planning and Development statistics
31

OTHER SIGNIFICANT 

AUDITS AND INVESTIGATIONS 

SIX

AUDIT

STRATEGIC INITIATIVE 4: CONTRIBUTE TO IMPROVING HUD’S EXECUTION OF 

AND ACCOUNTABILITY FOR FISCAL RESPONSIBILITIES AS A RELEVANT AND 

PROBLEM-SOLVING ADVISOR TO THE DEPARTMENT

Key program results Questioned costs Funds put to better use

Audit 11 Audits - $119,500

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

significant audits are discussed below.

AUDIT OF HUD’S FISCAL YEARS 2014 AND 2013 FINANCIAL STATEMENTS

In accordance with the Chief Financial Officers Act of 1990 as amended, HUD OIG is required to annually audit HUD’s 

consolidated financial statements and the stand-alone financial statements of the Federal Housing Administration 

(FHA) and the Government National Mortgage Association (Ginnie Mae). OIG’s objective was to express an opinion 

on the fairness of the financial statements in accordance with U.S. generally accepted accounting principles applicable to the Federal Government. OIG’s audit of HUD’s fiscal years 2014 and 2013 consolidated financial statements 

included reviewing HUD’s internal controls and compliance with applicable laws and regulations.

OIG expressed a disclaimer of opinion on HUD’s fiscal year 2014 consolidated financial statements because 

of the significant effects of certain unresolved audit matters, which restricted OIG’s ability to obtain sufficient, 

appropriate evidence to express an opinion. These unresolved audit matters related to (1) HUD’s improper use 

of cumulative and first-in, first-out budgetary accounting methods of disbursing Office of Community Planning 

and Development program funds and (2) $6.6 billion in nonpooled loan assets from Ginnie Mae’s stand-alone 

financial statements that OIG could not audit because Ginnie Mae could not provide adequate support for OIG 

to test these asset balances. OIG identified another matter regarding unvalidated grant accrual estimates that 

would have required a modification to the opinion due to materiality. However, this matter was not pervasive.

CHAPTER SIX OTHER SIGNIFICANT AUDITS AND INVESTIGATIONS
32

SEMIANNUAL REPORT TO CONGRESS

OIG found eight material weaknesses, eight significant deficiencies in internal controls, and five instances 

of noncompliance with applicable laws and regulations. The most significant findings related to

(1) The Office of Community Planning and Development’s noncompliance with generally accepted 

accounting principles regarding its formula grant accounting, 

(2) Continued weaknesses in the Office of Public and Indian Housing’s cash management process, 

(3) The lack of validation of grant accrual estimates, 

(4) HUD’s continued financial management system weaknesses,

(5) FHA’s failure to recognize accounts receivable when claims to cash were established,

(6) Material asset balances related to nonpooled loans not being auditable,

(7) Weaknesses in Ginnie Mae’s internal controls over financial reporting, and

(8) HUD’s and Ginnie Mae’s ineffective financial management governance.

OIG’s recommendations on its findings were included in Audit Report 2015-FO-0002, Interim Report on 

HUD’s Internal Controls Over Financial Reporting, issued December 8, 2014; Audit Report 2015-FO-0001, 

Federal Housing Administration Financial Statements Audit, issued November 14, 2014; and Audit Report 

2015-FO-0003, Government National Mortgage Association Financial Statement Audit, issued February 27, 

2015. These audit reports included more than $1.4 billion in questioned costs and more than $666 million in 

funds put to better use. (Audit Reports: 2015-FO-0004 and 2015-FO-0002)

REVIEW OF HUD’S PROCUREMENT AND ADMINISTRATION OF ITS MULTIFAMILY 

SERVICING CONTRACT

HUD OIG audited HUD’s procurement and administration of its multifamily mortgage loan and property 

management servicing and accounting contract to determine whether HUD officials (1) ensured that 

the contract scope of services was appropriate and necessary, (2) maximized competition, (3) provided 

sufficient oversight and monitoring, and (4) provided adequate communication and coordination among the 

departments involved.

While HUD officials ensured that the scope of services was appropriate and necessary, they did not always 

follow applicable requirements or use best practices in the procurement and administration of HUD’s contract 

for multifamily mortgage loan and property management servicing and accounting. Specifically, HUD 

officials did not sufficiently track contract payments, identify and deobligate excess funds at contract closeout, 

or ensure adequate communication and coordination with the departments involved with this contract. Also, 

HUD officials did not obtain sufficient bidders, ineffectively selected the procurement method used, and did 

not maximize vendor awareness and visibility for this contract.

OIG recommended that HUD (1) deobligate nearly $10 million in excess obligations in HUD’s most recent 

award of the contract for these services and ensure that these funds are put to better use and (2) implement 

procedures to ensure that obligated amounts are tracked and are consistent with funding needs; consistent 

oversight, accountability, and communication are promoted; best practices are followed to provide maximum 

competition; and decisions are made with input from all parties involved. (Audit Report: 2015-NY-0001)
33

CHAPTER SEVEN JOINT CIVIL FRAUD INITIATIVES

INVESTIGATION

LOAN GUARANTEE SPECIALIST SENTENCED FOR FRAUD

A former HUD Office of Native American Programs loan guarantee specialist was sentenced in U.S. District 

Court to 26 months incarceration, 36 months supervised release, and 400 hours community service and 

ordered to pay $843,400 in restitution to HUD following his conviction of wire fraud involving a HUD real 

estate-owned property fraud scheme. From April 2013 to April 2014, the loan guarantee specialist, in his 

official capacity as a HUD employee, sold five Section 184 real estate-owned properties in California and 

Florida and directed settlement agents handling the closings to send $843,400 in HUD sales proceeds to his 

personal bank accounts or accounts that he controlled. This investigation was conducted by HUD OIG and 

the U.S. Postal Inspection Service. (Washington, DC)

HUD EMPLOYEE RESIGNS AFTER INVESTIGATION

A HUD multifamily realty specialist resigned his employment with HUD while under investigation after it was 

discovered that he provided false information on his hiring documents, which concealed a prior termination 

of employment from the New York City Housing Authority. The employee was employed by the Authority from 

July to September 2010 as the director of leased housing for its public housing program. When interviewed by 

HUD OIG, the employee admitted that he purposely concealed the termination because of the unfavorable 

circumstances surrounding his departure. This investigation was conducted by HUD OIG. (Fort Worth, TX)

HUD OIG CONDUCTS SEX OFFENDER INITIATIVE

HUD OIG conducted a sex offender initiative, which involved the cross-referencing of HUD databases with the 

Virginia and West Virginia State Police’s violent sex offender records to determine whether registered sex offenders 

were receiving Federal housing assistance from HUD. The initiative resulted in one arrest for failure to register as 

a sex offender, the removal of 36 Housing Choice Voucher program recipients from HUD-assisted units, and six 

referrals to the State Police for potential false statements made on recertification paperwork. (Richmond, VA)
34

SEMIANNUAL REPORT TO CONGRESS

In recent years, the U.S. Department of Housing and Urban Development, Office of Inspector General (HUD 

OIG), has enhanced its efforts to identify and investigate civil fraud and pursue civil actions and administrative 

sanctions, frequently combining efforts from its multiple disciplines to create teams of auditors, special agents, 

attorneys, and data analysts to conduct civil investigations. The central hub of these efforts is HUD OIG’s Joint 

Civil Fraud Division, a distinct team of forensic auditors and special agents dedicated to investigating fraud and 

pursuing civil and administrative remedies.

HUD OIG’s joint civil fraud teams work closely with the U.S. Department of Justice (DOJ), U.S. Attorney’s 

Offices, HUD’s Office of General Counsel, and local prosecutors to pursue civil remedies under a variety of statutes 

and regulations, including the False Claims Act; Program Fraud Civil Remedies Act; and Financial Institutions 

Reform, Recovery, and Enforcement Act. HUD OIG also works with HUD’s Departmental Enforcement Center to 

pursue debarments, suspensions, and limited denials of participation when appropriate. 

HUD OIG’s internal joint efforts, in conjunction with partnerships with other enforcement groups, result in 

civil outcomes that are meant to help HUD recover from unwarranted damages sustained due to fraud. Some of 

the highlights from this semiannual period, resulting from these joint civil fraud efforts, are noted below.

STRATEGIC INITIATIVE 1: CONTRIBUTE TO THE REDUCTION OF FRAUD 

IN SINGLE-FAMILY INSURANCE PROGRAMS

PROGRAM RESULTS

Recoveries and receivables to HUD programs or HUD program participants $396,935,478

Recoveries and receivables for other entities $181,285,52211

Civil actions 5

Administrative sanctions 1

11 This amount represents funds that relate to HUD programs but were paid to other entities rather than to HUD for its benefit, such as funds paid to the U.S. Treasury 

for general government purposes. This amount does not include $540 million from the Suntrust Mortgage settlement that was designated for general consumer relief.

SEVEN JOINT CIVIL FRAUD INITIATIVES
35

SINGLE FAMILY

SUNTRUST MORTGAGE, INC., SETTLED ALLEGATIONS OF FAILING TO COMPLY WITH 

FHA LOAN REQUIREMENTS

HUD OIG assisted DOJ in conducting an investigation of SunTrust Mortgage, Inc.’s underwriting practices for 

Federal Housing Administration (FHA)-insured loans. SunTrust, based in Richmond, VA, has participated in 

the FHA program as a direct endorsement lender since 1984.

On June 17, 2014, DOJ and the Consumer Financial Protection Bureau, along with 49 State attorneys 

general and the District of Columbia’s attorney general, filed suit against SunTrust for misconduct related 

to the origination and servicing of single-family residential mortgages, based in part on OIG’s review of the 

underwriting of FHA loans. The lawsuit alleged that during the period January 2006 through March 2012, 

SunTrust knowingly failed to comply with HUD regulations and requirements of the direct endorsement 

lender program governing the origination and underwriting of FHA-insured loans. FHA insured loans based 

on annual and per loan certifications submitted by SunTrust that it had complied with FHA requirements.

When the borrowers defaulted on the loans, FHA incurred substantial losses.

On the same day, June 17, 2014, SunTrust entered into a settlement agreement to pay $968 million to end 

the lawsuit. Of the settlement total, the FHA insurance fund was to receive $300 million, and the remaining $668 

million was to be remitted to other entities involved in the suit. As part of the settlement, SunTrust admitted certain 

conduct, including endorsing for FHA insurance particular loans that did not meet underwriting requirements 

and self-reporting to FHA fewer deficient loans than required based on its internal quality control reports. On 

September 30, 2014, the United States District Court for the District of Columbia entered the consent judgment, 

which made SunTrust liable to pay the agreed settlement. (Memorandum: 2015-PH-1802; Office of Audit Region 3, 

Joint Civil Fraud Division, and Office of Investigation Region 3 with the assistance of other offices)

METLIFE BANK, N.A., SETTLED ALLEGATIONS OF FAILING TO COMPLY WITH FHA 

LOAN REQUIREMENTS

HUD OIG assisted DOJ, Washington, DC, and the U.S. Attorney’s Office, District of Columbia, in the civil 

investigation of MetLife Bank, N.A. MetLife has its principal place of business in Convent Station, NJ.

MetLife became an approved direct endorsement lender under HUD-FHA’s direct endorsement program on 

April 5, 2007. The program authorizes private-sector mortgage lenders to approve mortgage loans for FHA 

insurance. Lenders approved for the program must follow various FHA requirements. When a borrower 

defaults on an FHA-insured loan underwritten and endorsed by a direct endorsement lender, the lender (or its 

representative) has the option of submitting a claim to HUD to compensate the lender for any loss sustained 

as a result of the default. Therefore, once a mortgage loan is endorsed for FHA insurance, HUD insures the risk 

of the borrower’s defaulting on that mortgage, which is realized if an insurance claim is submitted.

On February 25, 2015, MetLife entered into a settlement agreement with the Federal Government to pay 

$123.5 million to avoid the delay, uncertainty, inconvenience, and expense of lengthy litigation of certain civil 

claims the Government contended that it had against MetLife. As part of the settlement, MetLife agreed that 

it engaged in certain conduct in connection with its origination; underwriting; quality control; self-reporting 

of loans with unacceptable risk, fraud, or other serious violations; certification of compliance with program 

requirements; and endorsement of certain single-family residential mortgage loans insured by FHA. As a 

result of MetLife’s conduct, HUD insured hundreds of loans approved by MetLife that were not eligible for 

FHA mortgage insurance under the direct endorsement program and that HUD-FHA would not otherwise 

have insured. HUD incurred substantial losses when it paid insurance claims on the loans covered by the 

CHAPTER SEVEN JOINT CIVIL FRAUD INITIATIVES
36

SEMIANNUAL REPORT TO CONGRESS

settlement agreement. Of the total settlement of $123.5 million, FHA will receive about $60.3 million, and 

other Federal entities will receive the remaining $63.2 million. (Memorandum: 2015-CF-1803; Joint Civil 

Fraud Division and Office of Investigation Region 8 with the assistance of other offices)

GOLDEN FIRST MORTGAGE CORPORATION SETTLED ALLEGATIONS OF FAILING TO 

COMPLY WITH FHA LOAN REQUIREMENTS

HUD OIG assisted in an investigation into alleged violations of FHA regulations applicable to the direct 

endorsement program by Golden First Mortgage Corporation and its owner. Golden First is a former FHAapproved mortgage lender, with its principal place of business located in Great Neck, NY. Golden First 

participated in the direct endorsement program from 1989 to 2010. As a direct endorsement lender, Golden 

First had the authority to approve mortgage loans for FHA insurance. On April 4 and August 13, 2013, the U.S. 

Attorney’s Office of the Southern District of New York filed a complaint and an amended complaint, respectively, 

against Golden First and its owner for not complying with FHA requirements. The Government alleged that from 

2002 to 2010, Golden First and its owner submitted false certifications to FHA and HUD concerning compliance 

with program rules and endorsed loans in violation of these rules. As a result, the Government incurred 

substantial losses in connection with loans that Golden First underwriters, including the owner, endorsed for 

FHA insurance during the covered period. The Government’s complaint further alleged that Golden First and its 

owner were liable under the False Claims Act, 31 U.S.C. (United States Code) 3729 et seq.

On December 31, 2014, the U.S. District Judge approved a settlement, in which Golden First and its 

owner admitted, acknowledged, and accepted responsibility for failing to follow certain requirements of the 

direct endorsement program. To settle the matter, Golden First and its owner agreed to a judgment of $36 

million against Golden First and a $300,000 payment from the owner. Additionally, the owner is permanently 

debarred from conducting business with the Federal Government. (Memorandum: 2015-CF-1802; Joint Civil 

Fraud Division and Office of Investigation Region 2)

GROUP ONE MORTGAGE, INC., SETTLED ALLEGATIONS OF FAILING TO COMPLY 

WITH FHA LOAN REQUIREMENTS

HUD OIG assisted the U.S. Attorney’s Office, Southern District of Florida, in the civil investigation of Group 

One Mortgage, Inc. Group One’s principal place of business is located in Jupiter, FL. Group One has 

participated in the FHA insurance program since 2004 and became a direct endorsement lender in 2005.

Based on OIG’s review of FHA loans underwritten by Group One, the United States contended that it had 

certain civil claims against the lender arising from false claims that Group One had made to FHA as a direct 

endorsement lender. The United States alleged that Group One approved four loans for FHA insurance but 

did not underwrite the loans in accordance with HUD-FHA regulations. It further alleged that Group One did 

not use due diligence to comply with HUD handbook requirements and ensure that the loans it approved on 

behalf of HUD were eligible for FHA insurance. Group One denied the allegations.

On November 19, 2014, Group One entered into a settlement agreement to pay $406,000 to settle 

allegations that it had submitted false claims to FHA in violation of the False Claims Act, 31 U.S.C. 3729-3733, 

and common law causes of action. Of the settlement total, the FHA insurance fund was to receive nearly 

$377,000, and the remaining more than $29,000 was to be paid to other Federal entities. The parties to the 

settlement agreement entered into the agreement to avoid the delay, uncertainty, inconvenience, and expense 

of lengthy litigation of the alleged claims. The parties also agreed that the settlement was neither an admission 

of liability by Group One nor a concession by the United States that its claims were not well founded. 

(Memorandum: 2015-CF-1801; Joint Civil Fraud Division)
37

EVALUATION INITIATIVES EIGHT

During this reporting period, the U.S. Department of Housing and Urban Development, Office of Inspector General 

(HUD OIG), Office of Evaluation (OE), expanded its capacity to evaluate HUD programs. The Integrated Data Analytics 

Division was realigned within OE to allow for greater integration between data analysis specialists and evaluators. 

This combination of personnel will better enable OE to use data from HUD’s major program management information 

systems to identify areas of interest and conduct detailed assessments to determine the root causes of trends and 

patterns. Ultimately, this joining of forces will increase OE’s operational intelligence concerning HUD programs and 

associated data systems, thereby accelerating and expanding OIG’s predictive analytic capability.

OE is headed by an Assistant Inspector General, and the office consists of three divisions and an internal quality 

assurance evaluator. The Integrated Data Analytics Division, Information Technology Evaluations Division, Program 

Evaluation Division, and Management Assistance Review together form a robust office focused on identifying, assessing, 

and making recommendations to address some of the greatest challenges and risks facing HUD. 

OE uses a multidisciplinary, collaborative approach to review specific issues in HUD programs and operations. 

Evaluation results will help HUD improve the efficiency and effectiveness of its programs and operations and 

contribute to its success. 

ADDITIONAL RESPONSIBILITIES OF OE INCLUDE

• Providing data statistical sampling and analytics to support audits, evaluations, and investigations; 

• Conducting HUD’s annual Federal Information Security Management Act evaluation;

• Evaluating HUD’s information technology (IT) initiatives; 

• Evaluating HUD’s privacy program; 

• Monitoring departmental conference spending; 

• Evaluating disaster recovery efforts; 

• Reviewing and commenting on draft departmental issuances of policy and guidance; and

• Performing internal reviews of OIG products and processes to ensure that they follow standards, 

policies, and procedures.

HUD’s IT security and privacy programs continue to have significant noncompliance with Federal guidance, 

and the vulnerabilities impose risks to the HUD mission. OE has an evaluation in progress to determine 

the accuracy of the IT investment information reported by HUD on the Office of Management and Budget’s 

public-facing IT dashboard Web site. OE found that the HUD processes were not consistently followed and 

the reported information was not verifiable. Additionally, OE evaluated HUD’s IT modernization efforts and 

identified weaknesses in its enterprise architecture, IT capital planning, and investment control processes. 

Those deficiencies compound the complexity of HUD’s efforts to modernize its infrastructure and hinder its 

ability to address duplicative and legacy applications supporting HUD programs and operations.

As of the end of this reporting period, OE had completed preliminary research on the departmental 

acquisition process. HUD’s Office of the Chief Procurement Officer (OCPO) has been working with program 

offices to improve the acquisition process. During fieldwork, OE will compare OCPO’s ongoing acquisition 

initiatives to program offices’ concerns, identify gaps, and make recommendations to increase the likelihood 

that efforts to improve the acquisition process will be successful. 

During its preliminary review of public housing agencies’ (PHA) needs following a disaster, OE identified 

five options for future fieldwork. The anticipated outcome of those evaluations will be to improve the 

resilience, preparedness, and mitigation activities of PHAs. 

CHAPTER EIGHT EVALUATION INITIATIVES
38

SEMIANNUAL REPORT TO CONGRESS

NINE LEGISLATION, REGULATION, 

AND OTHER DIRECTIVES

Reviewing and making recommendations on legislation, regulations, and policy issues is a critical part of 

the Office of Inspector General’s (OIG) responsibilities under the Inspector General Act. During this 6-month 

reporting period, OIG has committed approximately 623 hours to reviewing 99 issuances. The draft directives 

consisted of 47 notices, 21 mortgagee letters, and 31 other directives. OIG provided comments on 28 (or 28 

percent) of the issuances, provided 5 nonconcurrences, and was able to resolve 3. A summary of selected reviews 

for this 6-month period is below. 

NOTICES, POLICY ISSUANCES, AND FINAL RULES

SINGLE-FAMILY HOUSING

Reverse mortgages – The Federal Housing Administration (FHA) has been making needed changes to the 

reverse mortgage program to strengthen the Mutual Mortgage Insurance Fund. FHA issued various mortgagee 

letters, (1) requiring lenders to perform a financial assessment of prospective borrowers for all reverse mortgage 

transaction types and announcing property charge funding options for the payment of certain property charges, 

(2) addressing the due and payable status when there is a nonborrowing spouse at the time of closing, (3) 

prohibiting misleading or deceptive advertising, (4) limiting the insurability of fixed interest rate mortgages with 

the single disbursement lump-sum payment option, and (5) announcing new principal limit factors. 

Of these five program changes, FHA used the authority granted to it in the Reverse Mortgage Stabilization 

Act of 2013 to immediately implement protections to a nonborrowing spouse and also limited the insurability 

of fixed rate mortgages. Since the inception of the reverse mortgage program, FHA has interpreted provisions 

of the National Housing Act to require the reverse mortgage to be due and payable upon the death of the 

last surviving borrower, sale of the home, and other conditions, including failure to reside in the property 

and failure to pay required taxes and insurance. Mortgagee Letter 2014-07 was issued to provide another 

interpretation of the Act to extend the mortgage insurance eligibility requirements to any nonborrowing 

spouse of the borrower at the time of origination. This measure eliminated the need for these nonborrowing 

spouses, including common law spouses, to refinance the reverse mortgage upon the death of the borrower. 

In January 2015, FHA issued Mortgagee Letters 2015-02 and 2015-03 regarding requirements for a 

nonborrowing spouse. Mortgagee Letter 2015-02 defined an ineligible nonborrowing spouse and provided 

guidance and model certification language. Mortgagee Letter 2015-03 provided an alternative option for 

claim payment for an eligible reverse mortgage with an eligible surviving nonborrowing spouse. Through 

the clearance process, OIG recommended that FHA require certifications from both the borrower and 

the nonborrowing spouse at closing and annually thereafter to ensure that the interests of both the U.S. 

Department of Housing and Urban Development (HUD) and the lender are adequately protected. OIG 
39

continues to monitor FHA’s changes in this program. 

Single-family lender handbook – OIG reviewed FHA’s updated and consolidated single-family housing 

policy handbook. This update is part of an FHA initiative to provide borrowers with greater access to credit 

and to make working with FHA more efficient and effective for lenders. This handbook reconciled more than 

900 mortgagee letters and other policy guidance into a single, authoritative document to serve as the definitive 

guide on all aspects of FHA’s single-family programs. 

During this period, OIG reviewed handbook sections “Doing Business with FHA,” “Origination through 

Post Closing and Endorsement,” and “Quality Control, Oversight and Compliance.” It nonconcurred on 

several issues. For example, OIG disagreed on the description of how an employee’s misconduct is attributed 

to the lender as a whole. OIG was concerned that the handbook made references to multiple enforcement 

actions and also did not define the term “seriously improper conduct.” HUD maintained that the description 

was already contained in Handbook 4155.2. OIG lifted the nonconcurrence based on HUD’s agreeing to 

modify the current handbook to expressly limit the enforcement action to administrative sanctions. Further, 

HUD will clarify that in addition to imposing administrative sanctions, it may refer findings to the Mortgagee 

Review Board and the U.S. Department of Justice. 

In another example, OIG did not agree with several subsections of chapters stating “Pending, Under 

Construction.” OIG was concerned about whether it and other offices would have the opportunity to review 

and comment on those sections before issuance and, more importantly, what policies and requirements are 

to be used while those subsections are pending. The nonconcurrence was resolved by inserting the current 

requirements while the subsections are under construction. These sections were published March 18, 2015, 

with an implementation date of June 15, 2015, which was later extended to September 14, 2015. 

PUBLIC AND INDIAN HOUSING

Standards for internal controls – On September 10, 2014, the U.S. Government Accountability Office (GAO) 

issued its revision of Standards for Internal Control in the Federal Government (Green Book). The revision 

superseded the standards issued in November 1999. The Federal Managers’ Financial Integrity Act (FMFIA) 

requires that Federal agency executives periodically review and annually report on the agency’s internal 

control systems. FMFIA requires the Comptroller General to prescribe internal control standards for both 

program and financial management. The standards may also be adopted by State, local, and quasi-governmental entities, as well as public housing agencies, as a framework for their internal control system. GAO’s 

2014 revision will be effective for fiscal year 2016 and the FMFIA reports covering that year. Management, at its 

discretion, may elect early adoption. OIG has suggested, but HUD has not agreed that the Office of Public and 

Indian Housing should issue a policy statement directing the use of the new internal control process to 

improve the effectiveness of implementing the programs and as a means to safeguard limited resources. 

MULTIFAMILY HOUSING

Required actions for projects receiving failing inspection scores – In March 2015, HUD issued Notice H 2015-2, 

which applies to insured and noninsured projects with project-based assistance under Section 8 of the United 

States Housing Act of 1937 or a contract for similar project-based assistance. The Notice states that Section 

230 of the Consolidated Appropriations Act of 2014 and Section 226 of HUD’s Fiscal Year 2015 Appropriations 

Act require HUD to take certain steps in cases when a multifamily housing property receives a score of 59 or 

below on a Real Estate Assessment Center physical inspection report. In addition to the actions imposed in 

this Notice, HUD may consider proceeding with assignment or foreclosure of the loan or capital advance or 

may exclude the owner from further participation in HUD programs using a limited denial of participation, a 

suspension, or a debarment.

CHAPTER NINE LEGISLATION, REGULATION, AND OTHER DIRECTIVES
40

SEMIANNUAL REPORT TO CONGRESS

COMMUNITY PLANNING AND DEVELOPMENT

Various waivers – OIG reviewed two Federal Register notices related to the allocation of disaster funding. 

The first notice was the Third Allocation, Waivers, and Alternative Requirements for Grantees Receiving 

Community Development Block Grant Disaster Recovery Funds in Response to Hurricane Sandy. HUD 

published this Federal Register notice on October 16, 2014, announcing additional allocations for assisting 

recovery in the most impacted and distressed areas identified in major disaster declarations due to Hurricane 

Sandy and other eligible events in calendar years 2011, 2012, and 2013. This allocation provided $2.5 billion 

to assist Hurricane Sandy recovery, including $930 million to implement projects from the HUD-sponsored 

Rebuild by Design competition. Rebuild by Design was a planning and design competition to increase 

resilience in the Sandy-affected region as part of recovery from the storm. This third allocation brings total 

funding to recover from the impacts of Hurricane Sandy and other eligible events in the Sandy-affected region 

to $13 billion.

OIG also reviewed the Third Allocation, Waivers, and Alternative Requirements for Grantees Receiving 

Community Development Block Grant Disaster Recovery Funds in Response to Disasters Occurring in 2013. 

HUD published this Federal Register notice on January 8, 2015, announcing additional allocations for assisting 

recovery in the most impacted and distressed areas identified in major disaster declarations in calendar year 

2013. Based on further review of the impacts from presidentially declared disasters that occurred in 2013 and 

estimates of remaining unmet need, this notice allocated more than $89.7 million in funding to the State of 

Colorado, State of Illinois, City of Chicago, IL, Cook County, IL, Du Page County, IL, State of Oklahoma, and 

City of Moore, OK.

FAIR HOUSING AND EQUAL OPPORTUNITY

Increasing awareness of the Equal Access Rule requirements – In February 2015, HUD published a notice to 

increase the awareness of Office of Housing program participants and stakeholders of the requirements of the 

HUD Equal Access Rule for actual or perceived discrimination based on sexual orientation, gender identity, or 

marital status. The Equal Access Rule ensures that housing across HUD programs is open to all eligible 

individuals, regardless of actual or perceived sexual orientation, gender identity, or marital status. HUD’s 

general program requirements now provide, at 24 CFR (Code of Federal Regulations) 5.105(a)(2), that a 

determination of eligibility for housing that is assisted by HUD or subject to a mortgage insured by FHA must 

be made in accordance with the eligibility requirements provided for such program by HUD; such housing 

must be made available without regard to actual or perceived sexual orientation, gender identity, or marital 

status; and no owner or administrator of HUD-assisted or FHA-insured housing, approved lender in an FHA 

mortgage insurance program, or any other recipient or subrecipient of HUD funds may inquire about the 

sexual orientation or gender identity of an applicant for or occupant of HUD-assisted or FHA-insured housing 

for purposes of determining eligibility or otherwise making such housing available. However, inquiries into 

sex are permissible for temporary, emergency shelter with shared sleeping areas or bathrooms or to determine 

the number of bedrooms to which a household may be entitled.
41

TEN AUDIT RESOLUTION

CHAPTER TEN 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 needed actions and timeframes for resolving audit 

recommendations. Through this process, OIG strives to achieve measurable improvements in HUD programs and 

operations. The overall responsibility for ensuring that the agreed-upon changes are implemented rests with HUD 

managers. This chapter describes 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 for Which Final 

Action Had Not Been Completed Within 12 Months After the Date of the Inspector General’s Report.”

AUDIT REPORTS ISSUED BEFORE THE START OF PERIOD 

WITH NO MANAGEMENT DECISION AS OF MARCH 31, 2015

ADDITIONAL DETAILS TO SUPPLEMENT OUR REPORT ON HUD’S FISCAL YEARS 2013 

AND 2012 (RESTATED) FINANCIAL STATEMENTS, ISSUE DATE: DECEMBER 16, 2013

HUD OIG audited the Office of Public and Indian Housing’s (PIH) implementation of U.S. Department of the 

Treasury cash management regulations as part of the annual audit of HUD’s consolidated financial statements 

for fiscal years 2013 and 2012. The OIG report found that HUD’s implementation of the new cash management 

process for the Housing Choice Voucher program departed from Treasury cash management requirements and 

Federal generally accepted accounting principles. HUD OIG also reported that the internal controls over the 

process in place were not sufficient to ensure accurate and reliable financial reporting. The weaknesses in the 

process failed to ensure that material financial transactions were included in HUD’s consolidated financial 

statements and allowed public housing agencies (PHA) to continue to hold funds in excess of their immediate 

disbursing needs, which is in violation of Treasury cash management regulations. 

The OIG report included a recommendation that HUD PIH implement a cost-effective method for 

automating the cash management process to include an electronic interface of transactions to the standard 

general ledger.

Since the report’s issuance, HUD issued three proposals on how to address recommendation 2C on March 

31, April 17, and May 28, 2014. However, OIG rejected all three proposals because they were too vague and did 

not include a high-level plan showing the actions PIH will take from now until the final action date to implement corrective action. Further, the proposals included several contingencies; therefore, OIG has no reasonable way to determine PIH’s progress in addressing the recommendation. 
42

SEMIANNUAL REPORT TO CONGRESS

This issue was referred to the Assistant Secretary on June 19 and September 30, 2014; however, a new 

proposal had not been made as of March 31, 2015. Therefore, this issue was referred to the Deputy Secretary 

on March 31, 2015. (Audit Report: 2014-FO-0003)

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, WASHINGTON, DC, 

IMPROPER PAYMENTS ELIMINATION AND RECOVERY ACT OF 2012, ISSUE DATE: 

APRIL 15, 2014 

HUD OIG audited HUD’s fiscal year 2013 compliance with the Improper Payments Information Act 

of 2002 as amended by the Improper Payments Elimination and Recovery Act of 2010 (IPERA). The OIG 

report found that HUD did not comply with IPERA reporting requirements because it did not sufficiently 

and accurately report its (1) billing and program component improper payment rates; (2) actions to recover 

improper payments; (3) accountability; or (4) corrective actions, internal controls, human capital, and 

information systems as required by IPERA. In addition, HUD’s supplemental measures and associated 

corrective actions did not sufficiently target the root causes of its improper payments because they did not 

track and monitor processing entities to ensure prevention, detection, and recovery of improper payments due 

to rent component and billing errors, which are root causes identified by HUD’s contractor studies.

The OIG report included several recommendations that required the Office of the Chief Financial Officer 

(OCFO) to work with PIH and the Office of Multifamily Housing Programs to ensure sufficient and accurate 

IPERA reporting in its agency financial report. The report also recommended that OCFO conduct a current 

billing study and if it is not performed annually in future years, report the reason in the agency financial 

report and update the previous study to reflect program and inflationary changes. Similarly, the report 

recommended a study to assess improper payments arising from the Housing Choice Voucher program. 

Finally, the report recommended that OCFO report on multifamily, public housing, and Section 8 program 

improper payment rates separately in the agency financial reports.

OCFO disagreed with several of OIG’s recommendations, citing (1) funding issues to conduct current billing 

studies, which it believes do not produce tangible results; (2) disagreement regarding the need to determine 

whether improper payments exist due to changes in the funding of the Housing Choice Voucher program; 

and (3) management’s position that formal policies and procedures for the IPERA reporting process are not 

necessary. OIG generally disagrees with OCFO’s management decisions because they disregard IPERA reporting 

requirements and Office of Management and Budget (OMB) guidance and the management decisions do not 

reflect OCFO’s responsibility as the lead official for directing and overseeing HUD’s actions to address improper 

payments. OIG sent a referral memorandum to the Acting Chief Financial Officer on September 23, 2014, 

regarding its disagreement, along with an untimely referral memorandum for two recommendations that had 

not had management decisions entered. Following OIG’s memorandum, OCFO entered management decisions 

for seven of its nine recommendations, of which OIG agreed with only one. The remaining six recommendations, 

along with two recommendations for which management had not entered a management decision, were referred 

to the Deputy Secretary on March 31, 2015. (Audit Report: 2014-FO-0004)

HUD COULD NOT SUPPORT THE REASONABLENESS OF THE OPERATING AND 

CAPITAL FUND PROGRAMS’ FEES AND DID NOT ADEQUATELY MONITOR CENTRAL 

OFFICE COST CENTERS, ISSUE DATE: JUNE 30, 2014

HUD OIG audited HUD’s Public Housing Operating and Capital Fund program asset management safe harbor 

fees and HUD’s monitoring of central office cost centers. 
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CHAPTER TEN AUDIT RESOLUTION

The OIG report found that HUD could not adequately support the reasonableness of the Operating Fund 

management, bookkeeping, and asset management fees and Capital Fund management fee limits. Since HUD 

determined that the fee income earned by PHAs was not Federal funds, around $353 million in public housing 

operating funds was defederalized annually. HUD also lacked adequate justification for allowing PHAs to 

charge an asset management fee, resulting in more than $81 million of the above amount being unnecessary. 

Finally, HUD did not adequately monitor PHAs’ central office cost center fee charges. 

Among other things, the OIG report included recommendations that PIH revise its asset management fee 

policy to refederalize the Operating Fund program’s management and bookkeeping fees and the Capital Fund 

program’s management fees (recommendation 1A), eliminate the asset management fee (recommendation 

1B), and implement written procedures to ensure that fees and central office cost center expenses are used to 

support HUD’s mission (recommendation 1H).

Since the report’s issuance, management has issued two responses to address the three recommendations, 

with the latest issued on February 13, 2015. OIG rejected the latest management decisions proposed by 

the Office of Public Housing to address the recommendations on March 23, 2015. Although the proposed 

management decisions appeared to agree with some aspects of the OIG’s recommendations, they did not fully 

and clearly explain how PIH will address the recommendations. OIG referred this issue to the Deputy Secretary 

on February 12, 2015, and had not received a decision as of March 31, 2015. (Audit Report: 2014-LA-0004)

THE DATA IN CAIVRS DID NOT AGREE WITH THE DATA IN FHA’S DEFAULT AND 

CLAIMS SYSTEMS, ISSUE DATE: JULY 2, 2014

HUD OIG audited the Credit Alert Verification Reporting System (CAIVRS) to determine whether the default 

and claims data in CAIVRS agreed with the data in the Federal Housing Administration’s (FHA) default 

and claim systems. OIG determined that CAIVRS did not contain information on all borrowers’ default, 

foreclosure, and claim activity. It would incorrectly return accept codes for more than 260,000 borrowers 

who had been in default, foreclosure, or claim within the past 3 years. In addition, CAIVRS did not contain 

information for FHA borrowers with claims older than 3 years. Therefore, HUD did not provide other Federal 

agencies with sufficient information on FHA borrowers with delinquent Federal debt to meet the requirements 

of the Debt Collection Improvement Act of 1996 (DCIA).

Among other things, OIG recommended that HUD notify the users of CAIVRS that the system may 

have incomplete information for FHA delinquent debtors. In its October 17, 2014, management decision, 

HUD disagreed in part with this recommendation; however, it agreed to consult with the users of CAIVRS to 

determine their need for information on individuals with defaults or claims on FHA loans that do not result 

in delinquent Federal debt. On February 2, 2015, HUD submitted another management decision, stating that 

CAIVRS was being updated to ensure that it reports all delinquent Federal debt resulting from FHA insurance 

claims until such debt is resolved as provided for in DCIA. In connection with this revision to the system, the 

Office of Single Family Program Development agreed that it should consult with the users of CAIVRS, including 

Treasury, to ensure that they were aware that CAIVRS was being updated and would no longer report credit 

worthiness information – the mere existence of defaults and claims on FHA-insured loans – in addition to 

any actual delinquent Federal debt that has resulted from such defaults and claims. HUD will revise FHA’s 

computer matching agreements with relevant agency users of CAIVRS to ensure that these agreements 

accurately reflect the delinquent Federal debt being reported by FHA and the revised period for such reports. 

OIG also recommended that HUD obtain a determination from the Secretary of the Treasury of whether 

defaulted FHA-insured loans meet the definition of delinquent Federal debt that should be reported in 

CAIVRS. In its October 17, 2014, management decision, HUD disagreed with this recommendation. After 

discussions with OIG, HUD submitted another management decision on February 2, 2015, stating that HUD 
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SEMIANNUAL REPORT TO CONGRESS

believes DCIA and pertinent regulations provide for the Secretary of HUD to determine the existence of any 

debt owed to the agency. HUD believes it is clear that it is not left to the Secretary of the Treasury to make this 

determination. HUD believes it has significant discretion in determining whether money owed to HUD is a 

debt, whether the debt is delinquent, and whether the debt must be repaid. 

OIG rejected these management decisions because they do not resolve the recommendations. Since HUD 

has not indicated that it will identify all past claims that constitute unresolved delinquent Federal debt and 

update the system accordingly, certain Federal delinquent debts may be omitted based on HUD’s prior policy. 

Therefore, OIG continues to recommend that HUD notify the users of CAIVRS that the system may have 

incomplete information for FHA delinquent Federal debtors so that these users do not unknowingly violate 

DCIA. For the second recommendation, OIG disagrees with HUD’s position and continues to recommend 

that HUD seek a determination from the Secretary of the Treasury of whether FHA-insured loans meet the 

definition of delinquent Federal debt for the purposes of including or excluding them from CAIVRS. On March 

23, 2015, OIG referred the recommendations to the Deputy Secretary because OIG could not resolve them with 

the Office of Housing. (Audit Report: 2014-KC-0002)

THE NIAGARA FALLS HOUSING AUTHORITY DID NOT ALWAYS ADMINISTER ITS HOPE 

VI GRANT PROGRAM AND ACTIVITIES IN ACCORDANCE WITH HUD REQUIREMENTS, 

ISSUE DATE: JULY 10, 2014

HUD OIG audited the Niagara Falls Housing Authority’s HOPE VI grant program based on an OIG risk analysis 

and the amount of funding the Authority received. The objectives of the audit were to determine whether the 

Authority administered its HOPE VI grant program and activities in accordance with HUD and HOPE VI grant 

program requirements. 

The Authority did not always administer its HOPE VI grant program and activities in accordance with 

requirements. Specifically, contrary to Federal regulations and the HOPE VI grant agreement, Authority 

officials drew more HOPE VI funds from HUD’s Line of Credit Control System than were needed to cover 

project expenditures. 

OIG recommended that HUD instruct Authority officials to (1) reimburse Treasury for nearly $1.5 million 

in HOPE VI funds drawn in excess of need to cover project expenditures and (2) establish procedures to ensure 

that program funds are drawn in accordance with the grant agreement and regulations. 

The Office of Public Housing Investments (OPHI) disagreed with recommendations 1A, 1B, and 1C and 

believed the funds questioned by OIG were non-Federal cost savings, which could be better used for HOPE 

VI-eligible activities in the Center Court neighborhood. OPHI believed there was no authority to require nonFederal cost savings to be returned to Treasury. OIG disagrees with the proposed management decisions for 

recommendations 1A, 1B, and 1C and believes that all of the questioned funds should be returned to Treasury 

absent a suitable legal opinion. As a result of November 25, 2014, discussions with OIG, OPHI agreed to obtain 

a legal determination from the Office of General Counsel regarding the proposed management decisions. On 

March 26, 2015, OIG referred the disagreement to the Acting Assistant Secretary for Public and Indian Housing 

as a legal determination had not been provided. (Audit Report: 2014-NY-1007) 
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HUD DID NOT ALWAYS RECOVER FHA SINGLE-FAMILY INDEMNIFICATION LOSSES 

AND ENSURE THAT INDEMNIFICATION AGREEMENTS WERE EXTENDED, ISSUE DATE: 

AUGUST 8, 2014

HUD OIG audited HUD’s controls over its FHA loan indemnification recovery process to determine whether 

HUD had adequate controls in place to monitor indemnification agreements and recover losses on FHA 

single-family loans.

HUD did not always bill lenders for FHA single-family loans that had an indemnification agreement 

and a loss to HUD. Specifically, it did not bill lenders for any loans that were part of the Accelerated Claims 

Disposition (ACD) program or the Claims Without Conveyance of Title (CWCOT) program or loans that went 

into default before the indemnification agreement expired but were not in default on the expiration date. 

There were a total of 486 loans from January 2004 to February 2014 that had enforceable indemnification 

agreements and losses to HUD but were not billed. This condition occurred because HUD’s Financial 

Operations Center was not able to determine loss amounts for loans that were part of the ACD program, was 

not aware of the CWCOT program, and considered the final default date for billing only. As a result, HUD did 

not attempt to recover a loss of $37.1 million for 486 loans that had enforceable indemnification agreements.

In addition, HUD did not ensure that indemnification agreements were extended to 64 of 2,078 loans that 

were streamline refinanced. As a result, HUD incurred losses of more than $373,000 for 5 loans, and 16 loans 

had a potential loss to HUD of nearly $1 million. The remaining 43 loans were either terminated or did not go 

into delinquency before the indemnification agreement expired, or the agreement did not state that it would 

extend to loans that were streamline refinanced.

OIG rejected three management decisions proposed by the Offices of Single Family Housing and Finance 

and Budget because they did not follow the plain language explicitly stated in signed indemnification 

agreements. The Offices of Single Family Housing and Finance and Budget disagree with OIG’s determination 

that HUD should have billed lenders for FHA loans that either were in default or went into default during the 

indemnification agreement period.

OIG referred the matter to the Assistant Secretary for Housing – Federal Housing Commissioner on 

January 8, 2015. OIG met with the HUD Offices of General Counsel, Housing, Single Family Housing, and 

Finance and Budget on January 30, 2015. The meeting ended in disagreement; however, the HUD Office of 

General Counsel and OIG Office of Legal Counsel continued discussions. 

The Office of Single Family Housing received two legal opinions from HUD’s Office of General Counsel, 

dated January 26 and February 24, 2015, respectively. Combined, the legal opinions support the Offices of 

Single Family Housing and Finance and Budget’s position that they have collected in a manner consistent 

with longstanding policy that emphasized the definition of the “date of default.” The Office of Single Family 

Housing maintains that its collection practice is consistent with FHA’s regulatory definition of “date of default” 

found in 24 CFR (Code of Federal Regulations) 203.331, which refers to the first “uncorrected” failure and the 

first failure to pay that is not satisfied by later payments.

OIG disagrees and believes that the Offices of Single Family Housing and Finance and Budget have 

adopted a collection practice not supported by the plain language of the indemnification agreements or 

required by HUD regulations. Based on the plain language explicitly stated in signed indemnification 

agreements, OIG believes that the indemnification agreement should be enforced for any loan that “goes into 

default” during the indemnification agreement term, regardless of whether the loan emerged from a default 

status after the agreement expired. In response to HUD’s legal opinions, OIG received its own legal opinion 

from the OIG Office of Legal Counsel that supports OIG’s position. 

OIG has had discussions with HUD’s Offices of General Counsel, Single Family Housing, and Finance and 

Budget regarding the recommendations in question but has not reached agreeable management decisions. 

On March 31, 2015, OIG referred the recommendations to the Deputy Secretary for a decision. (Audit Report: 

2014-LA-0005)
46

SEMIANNUAL REPORT TO CONGRESS

THE STATE OF NEW JERSEY, TRENTON, NJ, COMMUNITY DEVELOPMENT BLOCK 

GRANT DISASTER RECOVERY-FUNDED TOURISM MARKETING PROGRAM, ISSUE 

DATE: AUGUST 29, 2014

HUD OIG audited the State of New Jersey’s Community Development Block Grant Disaster Recovery (CDBGDR)-funded tourism marketing program to determine whether the content of the marketing campaign was 

proper and whether the State procured services and products for its tourism marketing program in accordance 

with applicable Federal procurement and cost principle requirements.

While the audit found nothing improper in the content of the State’s marketing campaign, the State did 

not procure services and products for its tourism marketing program in a manner that fully met the intent of 

the Federal procurement requirements. It did not address the need for a required independent cost estimate 

and cost analysis before awarding a contract with a budget of up to $25 million for marketing and outreach 

services. The regulations required the State to make independent estimates before receiving bids or proposals.

They also required the State to perform a cost analysis. Also, the State could not demonstrate that purchases 

of marketing services and products were made competitively and that the winning contractor had timesheets 

to support wages and salaries it charged to the program. These deficiencies occurred because the State was 

not fully aware of Federal procurement and cost principle requirements. As a result, the State needed to fully 

demonstrate that the budgeted contract amount was fair and reasonable and that $23 million it had disbursed 

under the contract was adequately supported. The State began taking corrective actions at the end of the 

audit and began providing some documentation to resolve these deficiencies. HUD needed to assess the 

documentation to determine the appropriateness of all contract costs.

OIG recommended that HUD (1) determine whether the documentation the State provided was adequate 

to show that the overall contract price was fair and reasonable and if not, direct the State to repay HUD 

from non-Federal funds any amount that it cannot support (excluding any amounts repaid as a result of 

recommendations 1B and 1C) (recommendation 1A); (2) determine whether the documentation the State 

provided was adequate to show that $19.5 million disbursed for marketing costs was fair and reasonable 

and if not, direct the State to repay HUD from non-Federal funds any amount that it cannot support 

(recommendation 1B); and (3) determine whether the documentation the State provided was adequate to 

support $3.5 million disbursed for wages and salaries charged to the program by the contractors’ employees 

and if not, direct the State to repay HUD from non-Federal funds any amount that it cannot support 

(recommendation 1C). OIG also recommended that HUD direct the State to update its procurement processes 

and standards to ensure that they are fully aligned with applicable Federal procurement and cost principle 

requirements (recommendation 1D). 

HUD disagreed with OIG on recommendations 1A, 1B, 1C, and 1D. Regarding recommendation 1A, 

HUD stated that it concurred with the State’s position that the provisions of 24 CFR 85.36 did not apply, 

specifically the requirement to perform a cost estimate as required by 24 CFR 85.36(f). HUD contended that 

the State’s contract price for tourism marketing services appeared fair and reasonable based on the open 

competitive process that it used to select the winning bidder. There were four bids within a similar range, 

and the State selected the lowest bidder. HUD also said that the cost estimate supplied by the State to OIG 

and HUD in response to the audit confirmed the four bids and the State’s selection of the lowest bidder. HUD 

recommended that OIG close the recommendation. OIG maintains the position that the State needed to 

perform a cost estimate and cost analysis. For this disaster recovery effort, unlike previous efforts, a HUD 

notice12 required the State to either adopt the specific procurement standards identified in 24 CFR 85.36 or 

have a procurement process and standards that were equivalent to the procurement standards at 24 CFR 

85.36. The State certified that its policies and procedures were equivalent to the procurement standards at 

24 CFR 85.36.

12 78 FR 14336, dated March 5, 2013
47

While it made this certification, it also acknowledged in its procurement policy for CDBG-DR grants that 

it was required as a grantee to follow the requirements at 24 CFR 85.36. Further, a HUD monitoring letter from 

its March 2014 onsite monitoring review noted that the State had adopted 24 CFR 85.36 with regard to Federal 

procurement standards. 

Federal regulations at 24 CFR 85.36(f) state that a cost analysis is necessary when price competition 

is lacking; however, the regulations also state that a cost analysis must be performed when the offeror is 

required to submit the elements (for example, labor, materials, etc.) that make up the offeror’s total cost 

proposal to determine whether they are allowable, directly related to the requirement, and reasonable. In 

this case, the bids the State received from contractors included the elements of their total costs. Therefore, 

the State should have performed a cost analysis. Ultimately, the State was responsible for the accuracy of its 

certification to HUD and needed to ensure that its alternate policies and procedures met the intent of the 

Federal requirements. Therefore, it needed to demonstrate that it had developed a measure for evaluating the 

reasonableness of contractors’ proposed costs or prices and evaluate the separate elements that made up the 

contractors’ total costs. 

HUD stated that the independent cost estimate supplied by the State confirmed its selection of the 

lowest bidder. However HUD did not provide details on how it assessed the adequacy of the cost estimate. 

Therefore, to close the audit recommendation, HUD needs to provide the details on how it determined that 

the independent cost estimate the State provided was adequate to show that the overall contract price was fair 

and reasonable.

Regarding recommendation 1B, HUD maintains that States are not required to follow the standards at 24 

CFR 85.36(b) through (i). While the State’s contract with the vendor originally called for three quotes when 

submitting invoices for payment, the State waived this requirement when it determined that requiring that 

number of quotes was a higher standard than State law required. Pursuing additional quotes would have also 

precluded the State from advertising in areas with smaller populations that did not have a sufficient number 

of advertising firms in the region. Further, the marketing venues were procured by a vendor chosen by the 

State specifically for its ability to procure these venues in a cost-effective manner. HUD recommended that 

OIG close the recommendation since there was no requirement for the State to adopt the provisions of 24 

CFR 85.36(b) through (i). OIG maintains its position regarding the audit recommendation. For this disaster 

recovery effort, HUD required the State to either adopt the specific procurement standards identified in 24 

CFR 85.36 or have a procurement process and standards that were equivalent. HUD implemented these new 

requirements because of prior OIG recommendations that were based on lessons learned from prior audits of 

disaster recovery activities and a review of program data. The State certified that its policies and procedures 

were equivalent to the procurement standards at 24 CFR 85.36. 

Regulations at 24 CFR 85.36(c) required the State to conduct all procurement transactions in a manner 

providing full and open competition. Also, regulations at 24 CFR 85.36(d) required the State to obtain bids 

from an adequate number of sources regardless of the procurement method unless the noncompetitive 

proposal method was selected.

The State failed to properly document justifications for deviating from key requirements during its 

procurement process. Since the State did not perform a prebid cost estimate or postbid cost analysis 

in relation to its tourism marketing program, it is particularly important for HUD to assess whether the 

documentation the State provided at the end of the audit and any additional documentation it provides after 

the audit are sufficient to demonstrate that the prices the contractor paid for marketing services and products 

were fair and reasonable. 

Regarding recommendation 1C, HUD stated that it had reviewed signed timesheets for the State’s 

contractor and subcontractor and repeated to the State that timesheets should be signed and submitted 

weekly. HUD also stated that the State had described its voucher review process and that it noted that the 

vouchers were subjected to three levels of review before the State made payment. HUD stated that it was in 

CHAPTER TEN AUDIT RESOLUTION
48

SEMIANNUAL REPORT TO CONGRESS

the process of acquiring and reviewing the invoices and source documentation associated with the timesheets 

that were submitted to the State to ensure that the invoices met the requirements of Federal cost principles. 

HUD stated that it would provide a status update to OIG by March 30, 2015. OIG maintains that HUD needed 

to fully address the audit recommendation by indicating what action it would take if the documentation the 

State provided was not adequate to support the $3.5 million disbursed for wages and salaries charged to the 

program by the contractors’ employees. HUD also needed to indicate what evidence it proposed to submit for 

closure of the audit recommendation and the related final action target date. HUD did not provide the status 

update by March 30, 2015.

Regarding recommendation 1D, HUD stated that it had reviewed the State’s procurement policies and 

procedures as part of a statutorily required certification before execution of the State’s grant agreement 

and found those policies and procedures to comply with all applicable procurement and cost principle 

requirements. Also, HUD stated that it monitors the State’s procurements to ensure that those policies and 

procedures are followed. HUD recommended that OIG close the recommendation since it had certified that 

the State had proficient financial controls and procedures, including procurement. OIG maintains its position 

regarding the audit recommendation. The State certified that its policies and procedures were equivalent to 

the procurement standards at 24 CFR 85.36. The State was responsible for the accuracy of its certification 

to HUD. The audit found that that the State did not procure services and products for its tourism marketing 

program in a manner that met the intent of all Federal procurement requirements because its procedures were 

not fully aligned with those requirements. Therefore, the State needs to develop and implement procedures to 

ensure that it complies with all applicable procurement and cost principle requirements.

HUD stated that it had reviewed the State’s procurement policies and procedures as part of a statutorily 

required certification before execution of the State’s grant agreement and found those policies and procedures 

to comply with all applicable procurement and cost principle requirements. If the State’s policies and 

procedures had complied with all applicable procurement and cost principle requirements and it had followed 

them, the State would have conducted an independent cost estimate and had documentation to demonstrate 

that the prices the contractor paid for marketing services and products were fair and reasonable. 

Since management decisions could not be reached, these issues were referred to the Acting Assistant 

Secretary for Community Planning and Development. (Audit Report: 2014-PH-1008)

THE STATE OF NEW JERSEY, TRENTON, NJ, COMMUNITY DEVELOPMENT BLOCK 

GRANT DISASTER RECOVERY-FUNDED HOMEOWNER RESETTLEMENT PROGRAM, 

ISSUE DATE:  SEPTEMBER 5, 2014

HUD OIG audited the State of New Jersey’s CDBG-DR-funded Homeowner Resettlement program to 

determine whether the State used CDBG-DR funds for its Homeowner Resettlement program to assist eligible 

homeowners in accordance with applicable HUD and Federal requirements.

The State demonstrated that it used CDBG-DR funds to assist eligible homeowners for its program.

Although the State obtained and provided documentation to demonstrate that homeowners in OIG’s sample 

occupied damaged residences as their primary residence at the time of the storm, it can strengthen its controls 

over this requirement for future homeowner grants.

OIG recommended that HUD require the State to strengthen its controls over homeowner eligibility for 

future homeowner grants by maintaining documentation in its files to fully demonstrate compliance with the 

primary residency requirement before disbursing funds.

HUD provided a proposed management decision via email on January 15, 2015. On January 21, 2015, 

OIG informed HUD of concerns that the proposed management decision was not fully responsive to the audit 

recommendation. The proposed management decision did not indicate what action HUD would take if, based 
49

on its review of sample files, it determined that the State’s process for determining residency was not adequate.

Further, it did not indicate whether any changes it required of the State would apply to future homeowner 

grants in all relevant programs or only for grants through the State’s Homeowner Resettlement program.

Lastly, the proposed management decision did not address the evidence necessary to provide closure of the 

audit recommendation and include a final action target date.

As of March 31, 2015, HUD had not provided a responsive proposed management decision. Since a 

timely management decision could not be reached, this issue was referred to the Acting Assistant Secretary for 

Community Planning and Development. (Audit Report: 2014-PH-1009)

SIGNIFICANTLY REVISED MANAGEMENT DECISIONS

Section 5(a)(11) of the Inspector General Act, as amended, requires that OIG report information concerning 

the reasons for any significantly revised management decisions made during the reporting period. During the 

current reporting period, there were significantly revised management decisions on six audits.

THE LAFAYETTE PARISH HOUSING AUTHORITY VIOLATED HUD PROCUREMENT 

REQUIREMENTS AND EXECUTED UNREASONABLE AND UNNECESSARY CONTRACTS, 

ISSUE DATE: JUNE 22, 2011

OIG issued an audit report entitled “The Lafayette Parish Housing Authority Violated HUD Procurement 

Requirements and Executed Unreasonable and Unnecessary Contracts.” For recommendation 1K, the New 

Orleans Office of Public Housing agreed with the recommendation that the Authority should remain under 

HUD receivership for at least a year or until it can demonstrate to HUD that its procurement and other 

practices consistently meet Federal requirements. After the HUD receivership was lifted and an executive 

director was hired, HUD agreed to place the Authority on a zero dollar threshold for at least a year or until it 

can demonstrate to HUD that its procurement and other practices consistently meet Federal requirements. 

In September of 2012, HUD placed the Authority under HUD receivership with HUD staff assigned as the 

receiver, and the Authority hired a chief operating officer. It was the intent that the chief operating officer 

would benefit from the receiver’s presence and ultimately be considered as the potential executive director of 

the Authority when it was returned to local control. However, resolution had not been reached by September 

of 2012, and HUD requested OIG approval to extend the final action target date until September 30, 2014. OIG 

denied this request due to a lack of adequate information to justify an extension. 

In March of 2013, HUD again requested OIG approval to extend the final action target date until 

December 31, 2013. At that time, the next board of commissioners could not be appointed by the mayor of 

Lafayette until after a court hearing, scheduled for March 27, 2013. The purpose for the hearing was for the 

court to render a decision on the mayor’s appeal to a contempt of court citation against him by the deciding 

judge. The court’s decision was needed to determine whether the mayor would be required to reappoint the 

removed board members or to appoint new board members. After the court hearing, HUD planned to request 

that the mayor appoint a new board and require the board to participate in 3 months of training before HUD 

could determine when the Authority would be released from receivership. OIG agreed to extend the final 

action target date to December 31, 2013. 

By December 24, 2013, HUD’s many attempts to get the parish president or mayor to appoint a new 

board had failed, thereby making it impossible for HUD to return the Authority to local control and meet the 

December 31, 2013, final action target date. Therefore, on December 27, 2013, HUD proposed to change the 

management decision to (1) request that HUD’s Assistant Secretary-General Deputy Assistant Secretary reach 

CHAPTER TEN AUDIT RESOLUTION
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SEMIANNUAL REPORT TO CONGRESS

out to the parish president to discuss the urgency of making the appointments and give the parish president 

60 days to have the advisory board in place and (2) if the parish president continues to refuse to appoint 

the advisory board, notify the parish president that HUD may consider taking alternate actions, such as 

withholding HUD funding, including CDBG and HOME Investment Partnerships Program funding, or merging 

the PHA with another PHA. HUD also proposed extending the final action target date to December 31, 2014. 

OIG concurred with the revised management decision and extended the final action target date to December 

31, 2014, effective December 31, 2013. 

By December 16, 2014, HUD’s many attempts to get the parish president or mayor to appoint a new 

board had failed, thereby making it impossible for HUD to return the Authority to local control and meet the 

December 31, 2014, final action target date. HUD stated that the appointment of a board was outside of HUD’s 

authority. The appointment of the board is under the authority of the appointing official of the jurisdiction, 

which is the Lafayette Parish government. The current appointing official term is set to expire within 2 years, 

and HUD believed that it would receive the cooperation of the newly elected official. Therefore, on January 26, 

2015, HUD submitted a revised management decision, proposing to await the appointment of the new mayor 

to influence the appointment of a board and extend the management decision to May 31, 2016, to allow the 

new mayor to take office, HUD to engage in conversation regarding the appointment of a board, and a new 

board to be seated. OIG concurred with the revised management decision and extended the final action target 

date to May 31, 2016, effective January 27, 2015. (Audit report: 2011-AO-0001)

 

THE MANAGEMENT AND BOARD OF COMMISSIONERS OF THE HARRIS COUNTY 

HOUSING AUTHORITY MISMANAGED THE AUTHORITY, ISSUE DATE: JUNE 19, 2013

OIG issued an audit report entitled “The Management and Board of Commissioners of the Harris County 

Housing Authority Mismanaged the Authority.” For recommendation 3G, OIG recommended that the Director 

of the Houston Office of Community Planning and Development (CPD) recapture $320,000 in Neighborhood 

Stabilization Program (NSP) funds that was to be spent for a local development using an ineligible cost plus 

contract. CPD agreed to recapture the funds if it determined that they were ineligible. CPD reviewed all of the 

development invoices and determined that the Authority spent only $315,000 in NSP funds for the property. 

Further, more than $74,000 was used as an ineligible contract incentive, while the remaining nearly $241,000 

was an eligible use of the funds. CPD recaptured the more than $74,000 and submitted a revised management 

decision requesting reversal of the remaining funds. OIG concurred with the revised management decision on 

March 31, 2015. (Audit report: 2013-FW-1006)

THE CITY OF BRACKETTVILLE HOUSING AUTHORITY, BRACKETTVILLE, TX, FAILED 

TO PROPERLY OPERATE ITS LOW-RENT PROGRAM BUT GENERALLY OVERSAW ITS 

CAPITAL FUND GRANTS PROPERLY, ISSUE DATE: SEPTEMBER 18, 2013

The September 2013 audit memorandum on the City of Brackettville Housing Authority, Brackettville, TX, 

found that the Authority failed to properly operate its low-rent program. The memorandum contained 12 

recommendations and questioned costs and funds put to better use totaling nearly $32,000. After working 

with the Authority, the San Antonio Office of Public Housing asked OIG in January 2015 to write off more than 

$16,000 for three recommendations (1C, 1E, and 1F) since the Authority lacked non-Federal funds to repay 

the remaining questioned amounts after it had taken recovery actions. Since the former executive director 

and maintenance employee had left the Authority, OIG agreed to the reductions in the outstanding finding 

balances. As of January 2015, the Office of Public Housing had taken action to close all recommendations on 

the memorandum. (Audit memorandum: 2013-FW-1803)
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CHAPTER TEN AUDIT RESOLUTION

THE KENNER HOUSING AUTHORITY, KENNER, LA, DID NOT ADMINISTER ITS 

HOUSING CHOICE VOUCHER PROGRAM IN COMPLIANCE WITH PORTABILITY 

REQUIREMENTS, ISSUE DATE: SEPTEMBER 24, 2013

OIG issued an audit report entitled “The Kenner Housing Authority Did Not Administer Its Housing Choice 

Voucher Program in Compliance With Portability Requirements.” For recommendation 1A, the New Orleans 

Office of Public Housing agreed with the recommendation that the Authority should repay its program more 

than $13,000 from non-Federal funds for ineligible housing assistance paid on behalf of one family. For 

recommendation 1B, the New Orleans Office of Public Housing agreed with the recommendation that the 

Authority support or repay its program nearly $172,000 from non-Federal funds for unsupported housing 

assistance paid on behalf of four program families. The concurrence date on these recommendations was 

December 31, 2013, and the final action target date was December 31, 2014. 

In December of 2014, OIG met with HUD, and HUD agreed that the Authority incurred these questioned costs 

and should repay. However, HUD’s initial review of the Authority’s ability to repay the questioned costs showed that 

the Authority had neither non-Federal funds nor assets that could be sold in an effort to repay a portion or all of the 

questioned costs. HUD considered requesting a writeoff of the funds but did not submit the request to OIG.

On March 25, 2015, HUD submitted a revised management decision, stating that it had issued a demand letter 

to the Authority for all ineligible funds. In response, the Authority agreed to repay all ineligible and unsupported 

funds. HUD stated that once it received an official response from the Authority, it would enter into a repayment 

agreement with the Authority. The final action date proposed for these recommendations is June 30, 2015. OIG 

concurred with the revised management decision, effective March 25, 2015. (Audit memorandum: 2013-FW-1804)

THE MALAKOFF HOUSING AUTHORITY, MALAKOFF, TX, DID NOT HAVE SUFFICIENT 

CONTROLS OVER ITS PUBLIC HOUSING PROGRAMS, INCLUDING ITS RECOVERY 

ACT FUNDS, ISSUE DATE: SEPTEMBER 26, 2013

OIG’s September 2013 audit memorandum on the Malakoff Housing Authority found that it did not have 

sufficient controls over its public housing programs, including its American Recovery and Reinvestment Act 

funds. The Authority incurred more than $577,000 in questioned costs and could not support that it properly 

spent or managed the more than $981,000 in HUD funds provided. The Fort Worth Office of Public Housing 

agreed with the 14 recommendations. Public Housing worked with the Authority and recovered funds from 

various sources, such as the Authority’s bonding company. In January 2015, five recommendations (1A, 1B, 

1C, 1D, and 1G) with questioned costs totaling more than $500,000 remained unresolved, and the Authority 

does not have non-Federal or other sources of funds to repay the amounts to HUD. Since the individuals 

who caused the ineligible amounts had left, Public Housing revised the remaining management decisions in 

February 2015 to indicate that it would seek permission to write off the remaining balances as nonrecovered 

from HUD’s Chief Financial Officer and OIG’s Assistant Inspector General for Audit. OIG concurred with the 

revised management decisions. (Audit memorandum: 2013-FW-1805)

THE COLFAX HOUSING AUTHORITY, COLFAX, LA, DID NOT PROPERLY ADMINISTER 

ITS PROGRAMS, INCLUDING ITS 2009 AMERICAN RECOVERY AND REINVESTMENT 

ACT GRANT, ISSUE DATE: NOVEMBER 13, 2013

OIG issued an audit report entitled “The Colfax Housing Authority, Colfax, LA, Did Not Properly Administer Its 

Programs, Including Its 2009 American Recovery and Reinvestment Act Grant.” Effective February 5, 2015, OIG 

and HUD concurred on the proposed management decision for recommendations 1A, 1B, 1D, 1E, 1F, 1G, and 1K.
52

SEMIANNUAL REPORT TO CONGRESS

The final action target date on these recommendations was October 31, 2014, for recommendation 1A and 

December 31, 2014, for the remaining recommendations. 

In December 2014, OIG met with HUD, and HUD requested an extension of the final action target 

date on recommendations 1D, 1F, 1G, and 1K. HUD stated that it had made many attempts to resolve the 

recommendations to no avail and requested that OIG extend the final action target date from December 31, 2014, 

to March 31, 2015, in an effort to resolve the recommendations or take further action against the Authority, the 

executive director, or both. However, since the original management decision agreement date was February 5, 

2014, HUD had until February 5, 2015, to resolve the recommendations and still meet its goal of completing final 

actions within 1 year. Therefore, OIG believed that HUD had ample time to determine what action it planned to 

take against the Authority, based upon its noncompliance, and denied the extension request.

On March 13, 2015, HUD proposed to revise the recommendations. HUD stated that it had worked with 

the Authority to resolve the recommendations. However, the Authority was not able to produce records to 

show that proper procedures were followed before the award of contracts. HUD also stated that it knew that 

in many cases, otherwise eligible work items were completed using these funds. In its revised management 

decision for recommendations 1A, 1B, 1D, 1E, 1F, 1G, and 1K, HUD proposed having its staff or another third 

party approved by HUD perform an after-the-fact cost estimate to identify a conservative estimate of the value 

of the actual work completed. Thereafter, HUD will work with HUD headquarters staff to take action to offset 

future funding for any funds spent in excess of the value of work completed or any other expenditures deemed 

unsupported or ineligible. The third-party procurement review is applicable to 1F, 1G, and 1K. However, the 

offset of funds applies to all recommendations, which, in effect, revised the management decision from repay 

to offset. The amounts to be offset for the recommendations would be finalized based upon the third-party 

review and the review of additional documentation provided by the Authority. The final action target date 

proposed for the recommendations is September 30, 2015. OIG concurred with the revised management 

decision, effective March 17, 2015. (Audit memorandum: 2014-FW-1801)

SIGNIFICANT MANAGEMENT DECISION WITH WHICH OIG DISAGREES

During the reporting period, OIG did not have any reports in which OIG disagreed with the significant 

management decision.

FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT OF 1996

HUD did not substantially comply with FFMIA during fiscal year 2014. HUD’s continued noncompliance is 

largely due to a reliance on legacy financial systems and information security weaknesses. While HUD has 

continued to work toward financial management system modernization and FFMIA compliance, significant 

challenges remain. Section 803(A) of FFMIA requires that each agency establish and maintain financial 

management systems that comply with (1) Federal financial management system requirements, (2) Federal 

accounting standards, and (3) the U.S. Standard General Ledger at the transaction level. While OIG has 

long reported on HUD’s lack of an integrated “core financial system” as FFMIA noncompliance, OMB made 

substantial changes to the FFMIA framework, which took effect in 2014, eliminating the term. With its 

issuance of appendix D to Circular A-123, OMB noted the need to reduce the cost, risk, and complexity of 

financial system modernizations and add flexibility to a burdensome framework, which often led to costly and 

ineffective solutions. 
53

CHAPTER TEN AUDIT RESOLUTION

Like many other agencies, HUD struggled to modernize its legacy financial systems within the context of 

the previous FFMIA framework. 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 has been working to modernize its legacy financial management 

system since fiscal year 2003. The previous project, the HUD Integrated Financial Management Improvement 

Project, was based on plans to implement a solution that replaced two of the applications currently used for 

core processing. In March 2012, work on the project was stopped, and it was later canceled. HUD spent more 

than $35 million on the failed project. In the fall of 2012, the New Core Project was created to move HUD 

forward in implementing a new core financial system. The project migrates HUD’s financial transactions and 

systems to a shared service provider, Treasury’s Bureau of Fiscal Services’ Administrative Resource Center. 

The Center will provide support for (1) funds management, (2) purchasing, (3) accounts payable, (4) accounts 

receivable, (5) cash management, (6) cost accounting, (7) the core financial system, (8) the general ledger, (9) 

financial reporting, (10) grants management, and (11) loans management. 

The project includes three phases. Phase 1 of the project has been separated into four different releases. 

Each release defines a particular function that will be transferred to Treasury’s shared services platform. 

Release 1 transferred the travel and relocation functions to Treasury on October 1, 2014. Release 2, which 

covers time and attendance, was implemented on February 8, 2015. Release 3 will cover migration of the core 

financial services that are owned by OCFO. This release includes the migration of accounting system services 

associated with budget execution, accounting, finance, data warehouse reporting, and an interface solution. 

Release 3 is scheduled for implementation in the fourth quarter of fiscal year 2015 or the first quarter of fiscal 

year 2016. Release 4 will address HUD’s grant and loan accounting systems. Details regarding this release 

have not been finalized, and there is no scheduled date for implementation. Phase 2 of the project will address 

managerial cost accounting, budget formulation, and a fixed assets system. Phase 3 of the project will address 

the consolidation of FHA and the Government National Mortgage Association as well as the migration of the 

functionality of HUD’s Line of Credit Control System. Details regarding phases 2 and 3 have not been finalized, 

and there are no scheduled dates for implementation. 

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 remediation plan required by FFMIA.

At the end of 2014, HUD reported that 4 of 40 financial systems were not in substantial compliance with 

FFMIA. These four systems are the (1) Integrated Disbursement and Information System (IDIS), (2) Facilities 

Integrated Resources Management System (FIRMS), (3) HUD Procurement System (HPS), and (4) Small 

Purchase System (SPS).

IDIS does not comply with applicable Federal accounting standards or the U.S. Standard General Ledger 

at the transaction level. IDIS uses the first-in, first-Out (FIFO) method to account for the disbursement 

of formula grant obligations and lacks key data elements essential to properly track or account for grant 

disbursement. In addition to eliminating FIFO for fiscal year 2015 grant year funds and later, HUD plans 

to add new data elements and configure new automated controls and accounting logic to achieve FFMIA 

compliance.

The FIRMS application does not comply with Federal financial management systems requirements. 

While HUD had identified FIRMS as FFMIA noncompliant since 2010, technical issues, including a lapsed 

maintenance contract, have rendered FIRMS nonfunctional. As a result, HUD did not have a functional, 

automated property management system during fiscal year 2014. While HUD had initially hoped to remediate 

the issue by February 2014, resource constraints have resulted in significant delays. To achieve eventual 

FFMIA compliance and meet business requirements regarding property management, HUD plans to 
54

SEMIANNUAL REPORT TO CONGRESS

decommission FIRMS and transition to a shared service provider, the Federal Aviation Administration.

HUD’s legacy procurement applications, HPS and SPS, do not comply with Federal financial management 

systems requirements. During fiscal year 2012, the Office of the Chief Procurement Officer (OCPO) 

implemented a new procurement system, the HUD Integrated Acquisition Management System (HIAMS), to 

replace these noncompliant systems. With the implementation of HIAMS in January 2012, no new contract 

actions were entered into HPS, but modification and deobligation actions were being created to perform 

closeout of the contracts in the system. SPS was still being used by HUD to modify purchase orders open as of 

January 2012, while HIAMS was enabled to use the contracting number system for the few existing purchase 

orders. In fiscal year 2014, OCPO was working to migrate the data in HPS and SPS to the HIAMS Enterprise 

Acquisition Reporting Tool so that historical data can be reported. HUD hopes to decommission the HPS and 

SPS procurement applications once technical issues associated with the migration have been addressed and 

the data transfer is complete. 

In fiscal year 2014, OIG determined that HUD’s information security program had significant deficiencies 

and many areas of the program did not comply with the Federal Information Security Management Act 

(FISMA). Collectively and in the aggregate, systems deficiencies continued to exist. 

In addition to the information security deficiencies (such as FISMA) and specific financial system 

weaknesses identified above, financial process weaknesses will need to be remediated for HUD to achieve 

FFMIA compliance; for example, manual cash management processes implemented by PIH that do not 

comply with FFMIA requirements. OIG will continue to assess HUD’s ongoing efforts to modernize its legacy 

systems and financial processes.
55

APPENDIX 1 PEER REVIEW REPORTING

OFFICE OF AUDIT

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 review is to ensure that the work completed by the respective organizations meets the 

applicable requirements and standards. The following is a summary of the status of the latest round of peer 

reviews for the organization. 

PEER REVIEW CONDUCTED ON HUD OIG

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

a grade of pass (the highest rating) on the peer review report issued by the U.S. Department of Education 

Inspector General on September 28, 2012.  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, 2012, 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 DOD

HUD OIG conducted an external peer review of the U.S. Department of Defense (DoD), OIG’s Office of Audit 

and issued a final report November 13, 2012. DoD OIG received a peer review rating of pass (with a scope 

limitation). There are no outstanding recommendations. A copy of the external quality control review report 

can be viewed at www.dodig.mil/pubs/reviews.html.

APPENDIX 1 PEER REVIEW REPORTING 
56

SEMIANNUAL REPORT TO CONGRESS

OFFICE OF INVESTIGATION

PEER REVIEW CONDUCTED BY HUD OIG ON SSA OIG

HUD OIG conducted an external peer review of the U.S. Social Security Administration (SSA) OIG, Office of 

Investigation, and issued a final report on August 12, 2013. HUD OIG determined that SSA OIG complied with 

applicable quality standards.

PEER REVIEW CONDUCTED ON HUD OIG BY DOJ OIG

The U.S. Department of Justice (DOJ) OIG conducted a peer review of HUD OIG’s Office of Investigation and 

issued a final report on April 28, 2014. DOJ OIG determined that HUD OIG was in compliance with the 

quality standards established by the Council of Inspectors General on Integrity and Efficiency and the 

Attorney General’s guidelines.

APPENDIX 1 PEER REVIEW REPORTING (CONCLUDED)
57

APPENDIX 2 AUDIT REPORTS ISSUED

INTERNAL REPORTS

AUDIT REPORTS

CHIEF FINANCIAL OFFICER

2015-DP-0004 Office of the Chief Financial Officer Loan Accounting System, 12/09/2014.

2015-FO-0002 Interim Report on HUD’s Internal Controls Over Financial Reporting, 12/08/2014. Better use: 

$660,810,336.

2015-FO-0004

Independent Auditor’s Report on HUD’s Consolidated Financial Statements and Reports on 

Internal Controls Over Financial Reporting and Compliance With Laws and Regulations, 

03/06/2015.

CHIEF INFORMATION OFFICER

2015-DP-0005 Fiscal Year 2014 Review of Information Systems Controls in Support of the Financial Statements 

Audit, 02/24/2015.

CHIEF PROCUREMENT OFFICER

2015-NY-0001 HUD Did Not Always Follow Applicable Requirements or Use Best Practices in the Procurement 

and Administration of Its Multifamily Servicing Contract, 12/02/2014. Better use: $9,975,696.

COMMUNITY PLANNING AND DEVELOPMENT

2015-AT-0001

HUD’s Office of Community Planning and Development Did Not Always Pursue Remedial Actions 

but Generally Implemented Sufficient Controls for Administering Its Neighborhood Stabilization 

Program, 03/31/2015. Better use: $22,054,256.

2015-DP-0002

2015-FO-0003

Information System Control Weaknesses Identified in the Ginnie Mae Financial Accounting 

System, 10/29/2014.

Fiscal Years 2014 and 2013 Financial Statements Audit, 02/27/2015.

APPENDIX 2 AUDIT REPORTS ISSUED 
58

HOUSING

2015-DP-0001 Information System Control Weaknesses Identified in the Single Family Housing Enterprise Data 

Warehouse, 10/21/2014.

2015-DP-0003 Information System Control Weaknesses Identified in the FHA Subsidiary Ledger, 11/07/2014.

2015-FO-0001

Audit of the Federal Housing Administration’s Financial Statements for Fiscal Years 2014 and 

2013, 11/14/2014. Questioned: $1,486,544,478; unsupported: $1,486,544,478; better use: 

$5,500,000.

PUBLIC AND INDIAN HOUSING

2015-KC-0001 HUD Subsidized More Than 106,000 Noncompliant Households, 02/13/2015. Better use: 

$448,580,654.

2015-PH-0001 HUD Lacked Adequate Oversight To Ensure That Public Housing Agencies Complied With 

Federal Lobbying Disclosure Requirements and Restrictions, 01/30/2015.

AUDIT-RELATED MEMORANDUMS13

DEPUTY SECRETARY

2015-FW-0801 Intergovernmental Personnel Act Appointment Created an Inherent Conflict of Interest in the 

Office of Public and Indian Housing, 01/20/2015.

EXTERNAL REPORTS

AUDIT REPORTS

COMMUNITY PLANNING AND DEVELOPMENT

2015-AT-1001

The Office of the Commissioner for Municipal Affairs Needs To Make Improvements in 

Administering Its Section 108 Loan Guarantee Program, San Juan, PR, 12/05/2014. Questioned: 

$21,301,734; unsupported: $20,221,492.

2015-BO-1002

Rhode Island Housing Did Not Always Adequately Support HOME Fund Expenditures, 

Providence, RI, 02/04/2015. Questioned: $1,967,220; unsupported: $1,084,128; better use: 

$500,000.

2015-BO-1003

The State of Rhode Island Did Not Always Operate Its NSP in Compliance With HUD 

Regulations, Providence, RI, 03/04/2015. Questioned: $5,907,800; unsupported: $4,501,345; 

better use: $489,518.

2015-KC-1002 The City of Minot Did Not Fully Comply With Federal and Local Procurement Requirements, 

Minot, ND, 03/13/2015. Questioned: $11,671,037; unsupported: $11,671,037.

13 The memorandum format is used to communicate the results of reviews not performed in accordance with generally accepted 

government auditing standards, to close out assignments with no findings and recommendations, to respond to requests for 

information, or to report the results of civil or administrative outcomes from civil fraud efforts.
59

APPENDIX 2 AUDIT REPORTS ISSUED

2015-LA-1001 New Image Emergency Shelter Did Not Adequately Support HOPWA Salary and Operating 

Expenses, Long Beach, CA, 01/30/2015. Questioned: $266,205; unsupported: $266,205.

2015-NY-1001

The City of New York Did Not Always Disburse CDBG Disaster Recovery Assistance Funds to Its 

Subrecipient in Accordance With Federal Regulations, New York, NY, 11/24/2014. Questioned: 

$183,000,000; unsupported: $183,000,000; better use: $40,000,000.

2015-PH-1001

The County of Beaver Did Not Always Administer Its HOME Program in Accordance With 

Applicable HUD and Federal Requirements, Beaver Falls, PA, 01/30/2015. Questioned: 

$519,284; unsupported: $519,284.

HOUSING

2015-BO-1001

Glenbrook Manor Could Not Always Show That Project Costs Were Eligible and Supported in 

Accordance With HUD Requirements, Stamford, CT, 12/16/2014. Questioned: $496,980; 

unsupported: $496,980; better use: $61,067.

2015-KC-1001 Breakthrough Living Program Did Not Administer Its Program in Accordance With HUD Rules 

and Regulations, Topeka, KS, 03/05/2015. Questioned: $122,909.

PUBLIC AND INDIAN HOUSING

2015-CH-1001 The Chicago Housing Authority Moving to Work Housing Choice Voucher Program, Chicago, IL, 

02/24/2015. Better use: $4,877,592.

2015-NY-1002

The Freeport Housing Authority Did Not Administer Its Low-Rent Housing and Homeownership 

Programs in Accordance With HUD’s Regulations, Freeport, NY, 12/01/2014. Questioned: 

$1,270,102; unsupported: $1,270,102; better use: $3,919.

2015-NY-1003

The Buffalo Municipal Housing Authority Did Not Always Adequately Support Legal Expenses 

and Police Service Cost Allocation, Buffalo, NY, 02/24/2015. Questioned: $290,460; 

unsupported: $290,460.

AUDIT-RELATED MEMORANDUMS14

COMMUNITY PLANNING AND DEVELOPMENT

2015-FW-1803 The City of Albuquerque Generally Administered Its Continuum of Care Program in Accordance 

With Applicable HUD Regulations and Grant Agreements, Albuquerque, NM, 01/13/2015.

GENERAL COUNSEL

2015-CF-1801 Group One Mortgage, Inc., Settled Allegations of Failing To Comply With Federal Housing 

Administration Underwriting Requirements, Jupiter, FL, 03/27/2015. Questioned: $376,523.

2015-CF-1802

Golden First Mortgage Corporation and Its Owner Settled Alleged Violations of Failing To 

Comply With Federal Housing Administration Underwriting Requirements (FHA #34475), Great 

Neck, NY, 03/27/2015. Questioned: $300,000.

14 The memorandum format is used to communicate the results of reviews not performed in accordance with generally accepted government 

auditing standards, to close out assignments with no findings and recommendations, to respond to requests for information, or to report the 

results of civil or administrative outcomes from civil fraud efforts.
60

SEMIANNUAL REPORT TO CONGRESS

2015-CF-1803

MetLife Home Loans, LLC, Settled Allegations of Failing To Comply With HUD’s Federal Housing 

Administration Loan Requirements, Convent Station, NJ, 03/27/2015. Questioned: 

$60,258,955.

2015-CF-1804 Borrower Settled Allegations of Not Complying With the Primary Residence Requirement of the 

Federal Housing Administration Program, Tempe, AZ, 03/27/2015. Questioned: $15,000.

2015-PH-1801 Wells Fargo Bank, NA, Lender Settled Alleged Violations of Home Equity Conversion Mortgage 

Program, Washington, DC, 10/21/2014. Better use: $7,500.

2015-PH-1802 SunTrust Mortgage, Inc., Settled Allegations of Failing To Comply With HUD’s FHA Loan 

Requirements, Washington, DC, 12/09/2014. Questioned: $300,000,000.

2015-PH-1803 Borrower Settled Alleged Violations of Home Equity Conversion Mortgage Program, 

Washington, DC, 01/30/2015. Better use: $3,000.

2015-PH-1804

Court Ordered a Former Executive Director of the Philadelphia Housing Authority To Pay Civil 

Penalties for Violating Federal Lobbying Disclosure Requirements and Restrictions, Washington, 

DC, 02/19/2015. Better use: $75,000.

2015-SE-1801 Civic Construction, LLC, Settled Allegations of Making False Claims to the Seattle Housing 

Authority, Portland, OR, 03/30/2015. Better use: $34,000.

PUBLIC AND INDIAN HOUSING

2015-FW-1801

The Management of the Housing Authority of the City of Taylor Did Not Exercise Adequate 

Oversight of Its Programs, Taylor, TX, 10/02/2014. Questioned: $392,059; unsupported: 

$272,256; better use: $2,032,266.

2015-FW-1802

The Rotan Housing Authority Did Not Administer Its Public Housing and Recovery Act Programs 

in Accordance With Regulations and Other Requirements, Rotan, TX, 10/31/2014. Questioned: 

$89,397; unsupported: $89,397; better use: $382,217.
61

APPENDIX 3 TABLES

TABLE A

Audit reports issued before the start of period with no management 

decision at 03/31/2015

*Significant audit reports described in previous semiannual reports

REPORT NUMBER & TITLE

REASON FOR LACK OF 

MANAGEMENT DECISION

ISSUE DATE

* 2014-FO-0003 Additional Details To Supplement Our Report on 

HUD’s Fiscal Years 2013 and 2012 (Restated) Financial Statements See chapter 10, page 41 12/16/2013

* 2014-FO-0004 HUD’s Fiscal Year 2013 Compliance With the 

Improper Payments Elimination and Recovery Act of 2010 See chapter 10, page 42 04/15/2014

* 2014-LA-0004 HUD Could Not Support the Reasonableness 

of the Operating and Capital Fund Programs’ Fees and Did Not 

Adequately Monitor Central Office Cost Centers

See chapter 10, page 42 06/30/2014

* 2014-KC-0002 The Data in CAIVRS Did Not Agree With the Data 

in FHA’s Default and Claims Systems See chapter 10, page 43 07/02/2014

* 2014-NY-1007 The Niagara Falls Housing Authority Did Not 

Always Administer Its HOPE VI Grant Program and Activities in 

Accordance With HUD Requirements

See chapter 10, page 44 07/10/2014

* 2014-LA-0005 HUD Did Not Always Recover FHA SingleFamily Indemnification Losses and Ensure That Indemnification 

Agreements Were Extended

See chapter 10, page 45 08/08/2014

2014-PH-1008 The State of New Jersey Did Not Fully Comply 

With Federal Procurement and Cost Principle Requirements in 

Implementing Its Tourism Marketing Program

See chapter 10, page 46 08/29/2014

2014-PH-1009 The State of New Jersey Demonstrated 

Homeowner Eligibility for Its Homeowner Resettlement Program See chapter 10, page 48 09/05/2014

APPENDIX 3 TABLES
62

SEMIANNUAL REPORT TO CONGRESS

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2002-AT-1002 Housing Authority of the City of Tupelo, 

Housing Programs Operations, Tupelo, MS

07/03/2002 10/31/2002 07/01/2015

2005-AT-1013

Corporacion Para el Fomento Economico 

de la Ciudad Capital Did Not Administer Its 

Independent Capital Fund in Accordance 

With HUD Requirements, San Juan, PR

09/15/2005 01/11/2006 Note 1

2006-NY-0001

HUD’s Controls over the Reporting, Oversight, 

and Monitoring of the Housing Counseling 

Assistance Program Were Not Adequate

06/08/2006 01/08/2007 10/01/2015

2007-AT-1010

The Cathedral Foundation of Jacksonville 

Used More Than $2.65 Million in Project 

Funds for Questioned Costs, Jacksonville, FL

08/14/2007 12/03/2007 04/10/2017

2008-AO-1002

State of Louisiana, Road Home 

Program, Funded 418 Grants Coded 

Ineligible or Lacking an Eligibility 

Determination, Baton Rouge, LA

01/30/2008 05/12/2008 Note 1

2008-DP-0004 Review of Selected FHA Major Applications’ 

Information Security Controls

06/12/2008 10/08/2008 Note 1

2009-AO-1001

State of Louisiana, Road Home Program, 

Did Not Ensure That Road Home Employees 

Were Eligible To Receive Additional 

Compensation Grants, Baton Rouge, LA

05/05/2009 09/16/2009 Note 1

2009-AO-1002

State of Louisiana, Road Home Program, 

Did Not Ensure That Multiple Disbursements 

to a Single Damaged Residence Address 

Were Eligible, Baton Rouge, LA

05/05/2009 09/16/2009 Note 1

2009-NY-1012

The City of Rome Did Not Administer 

Its Economic Development 

Activity in Accordance With HUD 

Requirements, Rome, NY

05/20/2009 09/23/2009 01/30/2032

TABLE B 

Significant audit reports for which final action had not been completed within

12 months after the date of the Inspector General’s report 
63

APPENDIX 3 TABLES

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2009-DP-0005 Review of Implementation of Security 

Controls Over HUD’s Business Partners

06/11/2009 11/17/2009 Note 2

2009-CH-1011

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

07/31/2009 11/24/2009 10/01/2015

2009-AT-0001

HUD Lacked Adequate Controls To 

Ensure the Timely Commitment and 

Expenditure of HOME funds

09/28/2009 03/18/2011 Note 1

2010-AT-1003 The Housing Authority of Whitesburg 

Mismanaged Its Operations, Whitesburg, KY

04/28/2010 08/26/2010 11/29/2035

2010-PH-1008

Sasha Bruce Youthwork, Incorporated, 

Did Not Support More Than $1.9 Million 

in Expenditures, Washington, DC

05/11/2010 11/03/2010 Note 2

2010-CH-1008

The DuPage Housing Authority 

Inappropriately Administered Its Section 8 

Project-Based Voucher Program, Wheaton, IL

06/15/2010 10/08/2010 07/31/2015

2011-CH-1001

The City of Flint Lacked Adequate Controls 

Over Its HOME Program Regarding 

Community Housing Development 

Organizations’ Home-Buyer Projects, 

Subrecipients’ Activities, and Reporting 

Accomplishments in HUD’s System, Flint, MI

10/13/2010 02/03/2011 Note 2

2011-FO-0003

Additional Details To Supplement Our 

Report on HUD’s Fiscal Years 2010 

and 2009 Financial Statements

11/15/2010 08/08/2011 06/15/2015

2011-PH-1005

The District of Columbia Did Not Administer 

Its HOME Program in Accordance With 

Federal Requirements, Washington, DC

12/23/2010 04/22/2011 Note 1

2011-CH-1003

The City of Cleveland Lacked Adequate 

Controls Over Its HOME Investment 

Partnerships Program and American 

Dream Downpayment Initiative-Funded 

Afford-A-Home Program, Cleveland, OH

12/27/2010 04/26/2011 Note 2
64

SEMIANNUAL REPORT TO CONGRESS

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2011-CH-1004

The State of Indiana’s Administrator 

Lacked Adequate Controls Over the 

State’s HOME Investment Partnerships 

Program and American Dream 

Downpayment Initiative-Funded First 

Home/PLUS Program, Indianapolis, IN

01/31/2011 05/25/2011 04/30/2015

2011-CH-1006

The DuPage Housing Authority 

Inappropriately Administered Its 

Section 8 Housing Choice Voucher 

Program, Wheaton, IL

03/23/2011 07/28/2011 07/31/2015

2011-NY-1009

The East Orange Revitalization and 

Development Corporation Did Not Always 

Comply With HOME Program Requirements 

and Federal Regulations, East Orange, NJ

04/07/2011 08/03/2011 07/01/2015

2011-AT-1006

The Municipality of Mayaguez Did 

Not Ensure Compliance With HOME 

Program Objectives, Mayaguez, PR

04/08/2011 08/05/2011 Note 1

2011-NY-1010

The City of Buffalo Did Not Always 

Administer Its CDBG Program in Accordance 

With HUD Requirements, Buffalo, NY

04/15/2011 01/25/2012 Note 2

2011-AO-1005

The State of Mississippi Generally Ensured 

That Disbursements to Program Participants 

Were Eligible and Supported, Jackson, MS

04/18/2011 08/16/2011 Note 1

2011-FW-0002

The Office of Healthcare Programs Could 

Increase Its Controls To More Effectively 

Monitor the Section 232 Program

04/26/2011 08/17/2011 06/30/2015

2011-AO-0001

The Lafayette Parish Housing 

Authority Violated HUD Procurement 

Requirements and Executed Unreasonable 

and Unnecessary Contracts

06/22/2011 10/13/2011 05/31/2016

2011-LA-1016

The City of Compton Did Not Administer 

Its HOME Program in Compliance With 

HOME Requirements, Compton, CA

08/18/2011 12/15/2011 Note 2

2011-NY-1016

The City of Buffalo Did Not Always 

Disburse Homelessness Prevention and 

Rapid Re-Housing Program Funds in 

Accordance With Regulations, Buffalo, NY

09/22/2011 01/25/2012 Note 1
65

APPENDIX 3 TABLES

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2011-AT-1018

The Municipality of San Juan Did Not 

Properly Manage Its HOME Investment 

Partnerships Program, San Juan, PR

09/28/2011 01/12/2012 Note 2

2011-CH-1014

The City of Cleveland Lacked Adequate 

Controls Over Its HOME Investment 

Partnerships Program-Funded 

Housing Trust Fund Program HomeBuyer Activities, Cleveland, OH

09/29/2011 01/26/2012 Note 1

2011-CH-1018

The Pontiac Housing Commission 

Did Not Adequately Administer Its 

American Recovery and Reinvestment 

Act Capital Fund Grant, Pontiac, MI

09/30/2011 01/10/2012 12/31/2015

2012-NY-1002 The City of New York Charged Questionable 

Expenditures to Its HPRP, New York, NY

10/18/2011 02/16/2012 Note 1

2012-NY-1003

The City of Syracuse Did Not Always 

Administer Its CDBG Program in Accordance 

With HUD Requirements, Syracuse, NY

10/25/2011 02/22/2012 06/01/2015

2012-PH-0001

HUD Needed To Improve Its Use of Its 

Integrated Disbursement and Information 

System To Oversee Its CDBG Program

10/31/2011 02/28/2012 Note 1

2012-FO-0003

Additional Details To Supplement Our 

Report on HUD’s Fiscal Years 2011 

and 2010 Financial Statements

11/15/2011 05/10/2012 Note 2

2012-LA-0001

HUD Did Not Adequately Support the 

Reasonableness of the Fee-for-Service 

Amounts or Monitor the Amounts Charged

11/16/2011 03/27/2012 04/15/2015

2012-CH-1004

The State of Indiana’s Administrator Lacked 

Adequate Controls Over the State’s HOME 

Investment Partnerships Program Regarding 

CHDOs’ Activities and Income, Indianapolis, IN

02/24/2012 06/22/2012 04/30/2015

2012-FW-1005

The State of Texas Did Not Follow 

Requirements for Its Infrastructure and 

Revitalization Contracts Funded With CDBG 

Disaster Recovery Program Funds, Austin, TX

03/07/2012 07/05/2012 Note 2
66

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2012-LA-1005

The City of Los Angeles Did Not Expend 

Brownfields Economic Development Initiative 

and Section 108 Funds for the Goodyear 

Industrial Tract Project in Accordance With 

HUD Requirements, Los Angeles, CA

03/13/2012 09/19/2012 Note 2

2012-AT-1009

The Municipality of Bayamón Did Not 

Always Ensure Compliance With HOME 

Investment Partnerships Program 

Requirements, Bayamon, PR

05/23/2012 09/18/2012 Note 1

2012-LA-1008

The City of Phoenix Did Not Always 

Comply With Program Requirements 

When Administering Its NSP1 and 

NSP2 Grants, Phoenix, AZ

06/15/2012 10/15/2012 10/30/2015

2012-CH-1009

The Hammond Housing Authority Did 

Not Administer Its Recovery Act Grants in 

Accordance With Recovery Act, HUD’s, and 

Its Own Requirements, Hammond, IN

08/03/2012 11/30/2012 11/30/2015

2012-PH-1011

Prince George’s County Generally Did Not 

Administer Its HOME Program in Accordance 

With Federal Requirements, Largo, MD

08/03/2012 11/30/2012 Note 1

2012-NY-1011

The City of Elizabeth Did Not Always 

Administer Its CDBG Program in Accordance 

With Regulations, Elizabeth, NJ

08/15/2012 12/07/2012 Note 1

2012-AT-1015 Little Haiti Did Not Fully Comply With Federal 

Rules When Administering NSP2, Miami, FL

09/06/2012 01/03/2013 Note 1

2012-CH-1011

The Stark Metropolitan Housing Authority 

Did Not Always Administer Its Grant in 

Accordance With Recovery Act, HUD’s, 

and Its Own Requirements, Canton, OH

09/27/2012 01/15/2013 12/31/2018

2012-CH-1012

The Saginaw Housing Commission 

Did Not Always Administer Its Section 

8 Housing Choice Voucher Program 

in Accordance With HUD’s and Its 

Own Requirements, Saginaw, MI

09/27/2012 01/07/2013 01/01/2023
67

APPENDIX 3 TABLES

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2012-CH-1013

The Flint Housing Commission Did 

Not Always Administer Its Grants in 

Accordance With Recovery Act, HUD’s, 

and Its Own Requirements, Flint, MI

09/27/2012 01/24/2013 09/30/2015

2012-FO-0006 HUD’s Oversight of Recovery ActFunded Housing Programs09/27/2012 03/05/2013 Note 1

2012-DP-0005

Review of Controls Over 

HUD’s Mobile Devices

09/28/2012 12/18/2012 09/30/2015

2012-CH-1015

Allen Mortgage, LLC, Did Not Comply 

With HUD Requirements for Underwriting 

FHA Loans and Fully Implement Its Quality 

Control Program in Accordance With 

HUD’s Requirement, Centennial Park, AZ

09/30/2012 02/04/2013 06/01/2015

2013-PH-1001

Luzerne County Did Not Properly 

Evaluate, Underwrite, and Monitor a 

High-Risk Loan, Wilkes-Barre, PA

10/31/2012 01/31/2013 Note 1

2013-FO-0003

Additional Details To Supplement Our 

Report on HUD’s Fiscal Years 2012 

and 2011 Financial Statements

11/15/2012 05/15/2013 10/01/2015

2013-AT-1001

The Municipality of Ponce Did Not 

Always Ensure Compliance With 

HOME Investment Partnerships 

Program Requirements, Ponce, PR

11/30/2012 03/29/2013 Note 1

2013-NY-1001 The City of Albany CDBG Recovery 

Act Program, Albany, NY

12/06/2012 04/03/2013 Note 2

2013-PH-0002

HUD Policies Did Not Always Ensure 

That Borrowers Complied With 

Program Residency Requirements

12/20/2012 04/19/2013 Note 2

2013-SE-1001

The Idaho Housing and Finance 

Association Did Not Always Comply 

With HOME Investment Partnerships 

Program Match and Compliance 

Monitoring Requirements, Boise, ID

12/21/2012 12/21/2012 Note 1

2013-FO-0004

Information System Deficiencies Noted 

During Federal Housing Administration’s 

Fiscal Year 2012 Financial Statement Audit

01/15/2013 08/22/2013 Note 2
68

SEMIANNUAL REPORT TO CONGRESS

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2013-NY-1004

The City of Paterson Had Weaknesses in the 

Administration of Its Housing Opportunities 

for Persons with AIDS Program, Paterson, NJ

02/25/2013 04/15/2013 Note 2

2013-LA-1003

Bay Vista Methodist Heights Violated Its 

Agreement With HUD When Administering 

Its Trust Funds, San Diego, CA

03/14/2013 05/15/2013 Note 2

2013-AT-1003

The Municipality of Arecibo Did Not 

Always Ensure Compliance With CDBG 

Program Requirements, Arecibo, PR

03/22/2013 06/14/2013 Note 2

2013-IE-0803

Follow-up of the Inspections and 

Evaluations Division on Its Inspection 

of the State of Louisiana’s Road Home 

Elevation Incentive Program Homeowner 

Compliance (IED-09-002, March 2010)

03/29/2013 09/29/2014 04/30/2015

2013-FW-1004

The Housing Authority of the City 

of El Paso Did Not Follow Recovery 

Act Obligation Requirements or 

Procurement Policies, El Paso, TX

04/12/2013 08/27/2013 Note 2

2013-LA-1803

CTX Mortgage Company LLC 

Allowed the Recording of Prohibited 

Restrictive Covenants, Dallas, TX

04/18/2013 01/10/2014 Note 2

2013-LA-1004

The City of San Bernardino Did Not 

Administer Its CDBG and CDBG-Recovery 

Act Programs in Accordance With HUD 

Rules and Regulations, San Bernardino, CA

04/23/2013 09/06/2013 09/30/2017

2013-NY-1006

Nassau County Did Not Administer 

Its HOME Investment Partnerships 

Program in Accordance With HUD 

Requirements, Nassau County, NY

05/13/2013 09/06/2013 Note 2

2013-FW-1006

The Management and Board of 

Commissioners of the Harris County 

Housing Authority Mismanaged 

the Authority, Houston, TX

06/19/2013 02/11/2014 08/13/2016

2013-KC-0002

HUD Did Not Enforce the Reporting 

Requirements of Section 3 of the 

Housing and Urban Development Act of 

1968 for Public Housing Authorities

06/26/2013 10/24/2013 07/31/2015
69

APPENDIX 3 TABLES

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2013-LA-1007

The County of Santa Barbara Did Not 

Comply With HOME Investment Partnerships 

Program Requirements, Santa Barbara, CA

07/09/2013 11/04/2013 03/16/2016

2013-NY-0003

HUD Officials Did Not Always Monitor 

Grantee Compliance With the CDBG 

Timeliness Spending Requirement

07/19/2013 11/26/2013 Note 2

2013-AT-1006

The Puerto Rico Housing Finance 

Authority Did Not Always Comply With 

HOME Requirements, San Juan, PR

07/23/2013 11/20/2013 Note 2

2013-NY-1009

Essex County’s HOME Investment 

Partnerships Program Was Not Always 

Administered in Compliance With 

Program Requirements and Federal 

Regulations, Essex County, NJ

08/09/2013 11/05/2013 Note 2

2013-LA-1008

The Lending Company, Inc., Did Not Always 

Comply With FHA Underwriting and Quality 

Control Program Requirements, Phoenix, AZ

08/20/2013 12/24/2013 06/24/2015

2013-AT-0003

Economic Development Programs 

Lacked Adequate Controls To 

Ensure Program Effectiveness

09/03/2013 02/04/2014 Note 2

2013-LA-0002

FHA Paid Claims for Approximately 4,457 

Preforeclosure Sales That Did Not Meet 

Minimum Net Sales Proceeds Requirements

09/05/2013 03/31/2014 Note 2

2013-LA-1009

The City of Hawthorne Inappropriately 

Used Nearly $1.6 Million in HOME Funds 

for Section 8 Tenants, Hawthorne, CA

09/13/2013 01/06/2014 Note 2

2013-CH-1006

The State of Michigan Lacked Adequate 

Controls Over Its NSP Under the 

American Recovery and Reinvestment 

Act of 2009, Lansing, MI

09/15/2013 01/13/2014 Note 2

2013-CH-1008

Community Advocates Did Not Properly 

Administer Its Program and Recovery 

Act Grant Funds, Milwaukee, WI

09/17/2013 01/15/2014 Note 2

2013-KC-0004

HUD Paid Claims That Lacked Contact or 

Collection Activities With Coborrowers

09/18/2013 01/07/2014 Note 2
70

SEMIANNUAL REPORT TO CONGRESS

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2013-LA-1010

The City of Hawthorne Did Not Administer 

Its CDBG Program Cost Allocations 

in Accordance With HUD Rules and 

Requirements, Hawthorne, CA

09/20/2013 01/06/2014 Note 2

2013-LA-0803

Reviews of Six FHA Lenders Demonstrated 

That HUD Needs To Strengthen Its Oversight 

of Prohibited Restrictive Covenants

09/23/2013 03/27/2014 10/15/2015

2013-FW-1008

The City of New Orleans Did Not Have 

Adequate Financial and Programmatic 

Controls To Ensure That It Expended 

and Reported Funds in Accordance With 

Program Requirements, New Orleans, LA

09/24/2013 01/06/2014 Note 2

2013-FW-1805

The Malakoff Housing Authority Did 

Not Have Sufficient Controls Over Its 

Public Housing Programs, Including Its 

Recovery Act Funds, Malakoff, TX

09/26/2013 12/19/2013 12/01/2015

2013-NY-1010

The City of Auburn Did Not Always 

Administer Its CDBG Program in Accordance 

With HUD Requirements, Auburn, NY

09/26/2013 01/24/2014 06/30/2015

2013-CH-1009

The Flint Housing Commission Did 

Not Always Administer Its Grant in 

Accordance With Recovery Act, HUD’s, 

and Its Own Requirements, Flint, MI

09/27/2013 01/14/2014 01/23/2016

2013-IE-0804 Evaluation of HUD’s Property 

Inventory System

09/27/2013 03/26/2014 Note 2

2013-AT-1008

The City of West Palm Beach Did Not 

Always Properly Administer Its HOME 

Program, West Palm Beach, FL

09/30/2013 01/17/2014 09/30/2015

2013-CH-1010

The City of Toledo Did Not Always Administer 

Its CDBG-R Program in Accordance With 

HUD’s and Its Own Requirements, Toledo, OH

09/30/2013 01/15/2014 Note 2

2013-CH-1011

The Michigan State Housing Development 

Authority Did Not Follow HUD’s 

Requirements Regarding the Administration 

of Its Program, Lansing, MI

09/30/2013 01/15/2014 07/31/2029
71

APPENDIX 3 TABLES

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2013-CH-1012

The Hamtramck Housing Commission Did 

Not Administer Its Grant in Accordance 

With Recovery Act, HUD’s, and Its Own 

Requirements, Hamtramck, MI

09/30/2013 01/21/2014 01/23/2016

2013-DE-1005

The Jefferson County Housing Authority 

Did Not Properly Use Its Disposition 

Sales Proceeds, Wheat Ridge, CO

09/30/2013 01/24/2014 02/28/2020

2014-DP-0001 Information System Control Weaknesses 

Identified in the Line of Credit Control System

11/07/2013 01/30/2014 08/30/2015

2014-FW-1801

The Colfax Housing Authority Did 

Not Properly Administer Its Programs, 

Including Its 2009 American Recovery 

and Reinvestment Act Grant, Colfax, LA

11/08/2013 02/05/2014 09/30/2015

2014-CH-1001

The City of Flint Lacked Adequate 

Controls Over Its HOME Investment 

Partnerships Program, Flint, MI

11/15/2013 03/13/2014 Note 2

2014-AT-1001 The Municipality of Arecibo Did Not Properly 

Administer Its HOME Program, Arecibo, PR

12/03/2013 01/24/2014 Note 2

2014-FO-0001

Government National Mortgage 

Association Fiscal Years 2013 and 

2012 Financial Statements Audit

12/06/2013 05/02/2014 Note 2

2014-FO-0002 Federal Housing Administration Fiscal Years 

2013 and 2012 Financial Statements Audit

12/13/2013 04/14/2014 Note 2

2014-FO-0003

Additional Details To Supplement Our 

Report on HUD’s Fiscal Years 2013 and 

2012 (Restated) Financial Statements

12/16/2013 07/09/2014 Note 3

2014-PH-1001 The City of Norfolk Generally Failed To 

Justify Its CDBG Activities, Norfolk, VA

12/17/2013 04/16/2014 04/15/2015

2014-AT-1004

The State of Mississippi Did Not Ensure That 

Its Subrecipient and Appraisers Complied 

With Requirements, and It Did Not Fully 

Implement Adequate Procedures For Its 

Disaster Infrastructure Program, Jackson, MS

12/30/2013 04/15/2014 04/15/2015
72

SEMIANNUAL REPORT TO CONGRESS

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2014-CH-1002

The City of Detroit Lacked Adequate 

Controls Over Its Neighborhood Stabilization 

Program-Funded Demolition Activities 

Under the Housing and Economic 

Recovery Act of 2008, Detroit, MI

01/06/2014 05/05/2014 05/01/2015

2014-DP-0002

Application Control Weaknesses 

Identified in the Asset Disposition 

and Management System

01/14/2014 05/13/2014 06/30/2015

2014-NY-1001

The Paterson Housing Authority Had 

Weaknesses in Administration of Its Housing 

Choice Voucher Program, Paterson, NJ

01/15/2014 06/12/2014 07/01/2025

2014-BO-1001

The Housing Authority of the City of 

Bridgeport Did Not Always Ensure 

That Expenses Charged to Its Federal 

Programs Were Eligible, Reasonable, 

and Supported, Bridgeport, CT

01/23/2014 05/19/2014 05/19/2015

2014-FW-0001

The Boston Office of Public Housing Did Not 

Provide Adequate Oversight of Environmental 

Reviews of Three Housing Agencies, Including 

Reviews Involving Recovery Act Funds

02/07/2014 03/17/2015 10/01/2016

2014-NY-0001 HUD Did Not Provide Effective Oversight of 

Section 202 Multifamily Project Refinances

02/19/2014 06/10/2014 Note 2

2014-LA-0001

CPD Did Not Monitor Grantees’ CPD-Funded 

Assets Transferred by Former Redevelopment 

Agencies To Minimize HUD’s Risk

02/28/2014 06/19/2014 06/19/2015

2014-DP-0004 Information System Control Weaknesses 

Identified in the Financial Data Mart

03/13/2014 04/03/2014 Note 2

2014-AT-0001 Violations Increased the Cost of Housing’s 

Administration of Its Bond Refund Program

03/14/2014 07/11/2014 06/30/2015

2014-AT-1801

Vieques Sports City Complex, Office of the 

Commissioner for Municipal Affairs, Section 

108 Loan Guarantee Program, San Juan, PR

03/20/2014 07/11/2014 06/18/2015

2014-BO-0001

HUD's Procedures Do Not Always 

Ensure the Proper Use and Timely 

Reimbursement of Public Housing 

Agency Interfund Transaction Balances

03/21/2014 07/02/2014 04/15/2015
73

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 for which final action had not been completed as of 03/31/2015

2014-FO-0004

HUD’s Fiscal Year 2013 Compliance 

With the Improper Payments Elimination 

and Recovery Act of 2010

04/15/2014 01/07/2015 Note 3

2014-SE-1002

The Yakama Nation Housing Authority Did 

Not Always Spend Its Recovery Act Funds in 

Accordance With Requirements, Wapato, WA

04/29/2014 08/26/2014 08/20/2015

2014-BO-1002

Chelsea Housing Authority, Review of 

Cost Allocations and Reasonableness 

of Salaries, Chelsea, MA

04/30/2014 08/28/2014 06/30/2015

2014-CH-1003

The Hamtramck Housing Commission 

Did Not Always Administer Its Grant in 

Accordance With Recovery Act, HUD’s, or 

Its Own Requirements, Hamtramck, MI

04/30/2014 08/08/2014 08/31/2015

2014-DP-0005

Fiscal Year 2013 Review of Information 

Systems Controls in Support of the 

Financial Statements Audit

04/30/2014 02/09/2015 10/31/2015

2014-PH-1004

The County of Northumberland Did Not 

Administer Its Homelessness Prevention and 

Rapid Re-Housing Program Grant According 

to Recovery Act Requirements, Sunbury, PA

04/30/2014 08/28/2014 04/29/2015

2014-NY-1002

The New York City Housing Authority Did 

Not Always Administer Its Section 8 Housing 

Choice Voucher Program in Accordance 

With Regulations, New York, NY

05/01/2014 08/28/2014 06/30/2015

2014-NY-1003

The New York City Housing Authority 

Did Not Always Ensure that Its Housing 

Choice Voucher Program Units Met HUD’s 

Housing Quality Standards, New York, NY

05/01/2014 08/28/2014 04/30/2015

2014-FW-0002

Improvements Are Needed Over 

Environmental Reviews of Public Housing and 

Recovery Act Funds in the Kansas City Office

05/12/2014 03/17/2015 10/01/2016
74

SEMIANNUAL REPORT TO CONGRESS

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2014-AT-1005

The City of Huntsville, Community 

Development Department, Did Not 

Adequately Account for and Administer the 

Mirabeau Apartments Project, Huntsville, AL

05/29/2014 09/23/2014 09/22/2015

2014-FW-0801 Potential Antideficiency Act Violations 

Intergovernmental Personnel Act Agreements

05/30/2014 09/22/2014 06/30/2015

2014-NY-1005

Financial and Administrative Control 

Weaknesses Existed in Middlesex County, 

NJ’s HOME Investment Partnerships 

Program, Middlesex County, NJ

06/10/2014 07/17/2014 05/15/2015

2014-LA-0003

HUD Adequately Implemented and Monitored 

the HUD-VASH Program, but Changes 

Are Needed To Improve Lease Rates

06/18/2014 10/08/2014 12/01/2015

2014-LA-0004

HUD Could Not Support the Reasonableness 

of the Operating and Capital Fund 

Programs’ Fees and Did Not Adequately 

Monitor Central Office Cost Centers

06/30/2014 10/20/2014 Note 3

2014-KC-0002 The Data in CAIVRS Did Not Agree With the 

Data in FHA’s Default and Claims Systems

07/02/2014 10/27/2014 Note 3

2014-NY-1006

Monmouth County Expended CDBG 

Funds for Eligible Activities, But 

Control Weaknesses Need To Be 

Strengthened, Monmouth County, NJ

07/02/2014 08/06/2014 07/02/2015

2014-LA-1004

The White Mountain Apache Housing 

Authority Did Not Always Comply 

With Its Indian Housing Block Grant 

Requirements, White River, AZ

07/08/2014 10/24/2014 07/31/2015

2014-NY-1007

The Niagara Falls Housing Authority Did 

Not Always Administer Its HOPE VI Grant 

Program and Activities in Accordance With 

HUD Requirements, Niagara Falls, NY

07/10/2014 10/28/2014 Note 3

2014-FW-0004

Improvements Are Needed Over 

Environmental Reviews of Public Housing and 

Recovery Act Funds in the Greensboro Office

07/14/2014 10/27/2014 10/27/2015
75

APPENDIX 3 TABLES

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2014-FW-1004

The State of Texas’ Contractor Did Not 

Perform Adequate Hurricane Dolly Damage 

Inspections and Failed To Meet Critical 

Performance Benchmarks, Austin, TX

07/15/2014 11/12/2014 11/10/2015

2014-PH-1007

The Cumberland Plateau Regional 

Housing Authority Did Not Procure 

Services in Accordance With HUD 

Requirements, Lebanon, VA

07/15/2014 09/05/2014 07/31/2015

2014-SE-1003

Pierce County Claimed Ineligible 

and Unsupported HOME Matching 

Funds, Tacoma, WA

07/17/2014 11/13/2014 04/30/2015

2014-NY-1008

Palladia, Inc., Did Not Administer Its 

Supportive Housing Program in Accordance 

With HUD Requirements, New York, NY

07/25/2014 11/21/2014 11/20/2015

2014-AT-1007 The Municipality of Carolina Did Not Properly 

Administer Its HOME Program, Carolina, PR

08/08/2014 12/05/2014 12/31/2015

2014-LA-0005

HUD Did Not Always Recover FHA 

Single-Family Indemnification Losses 

and Ensure That Indemnification 

Agreements Were Extended

08/08/2014 12/03/2014 Note 3

2014-FW-1805

The Kenner Housing Authority Did 

Not Administer Its Public Housing and 

Recovery Act Programs in Accordance With 

Regulations and Guidance, Kenner, LA

08/13/2014 11/10/2014 10/27/2015

2014-CH-1006

The Goshen Housing Authority 

Failed To Follow HUD’s and Its Own 

Requirements Regarding the Administration 

of Its Program, Goshen, IN

08/14/2014 01/21/2015 11/30/2015

2014-FW-1806

The South Landry Housing Authority 

Did Not Always Comply With Federal 

Procurement and Financial Requirements, 

Including a Procurement Using Recovery 

Act Funds, Grand Coteau, LA

08/19/2014 12/09/2014 08/19/2015

2014-LA-0006 HUD’s ONAP Lacked Adequate Controls 

Over the ICDBG Closeout Process

08/19/2014 12/09/2014 07/31/2015
76

SEMIANNUAL REPORT TO CONGRESS

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2014-LA-1005

The City of Richmond Did Not 

Administer Its NSP in Accordance With 

Requirements, Richmond, CA

08/22/2014 12/19/2014 10/31/2015

2014-NY-0003

Asset Repositioning Fees for Public 

Housing Authorities With Units Approved 

for Demolition or Disposition Were 

Not Always Accurately Calculated

09/04/2014 12/29/2014 01/01/2016

2014-AT-1010 Miami-Dade County Did Not Always Properly 

Administer Its HOME Program, Miami, FL

09/11/2014 12/11/2014 09/11/2015

2014-KC-0003

HUD Did Not Always Enforce the 

Requirements of the Regulatory Agreements 

and HUD Handbooks Pertaining to 

Owner Advances and Distributions

09/17/2014 11/25/2014 04/30/2015

2014-NY-1009

The City of Jersey City’s HOME Investment 

Partnerships Program Administration Had 

Financial and Administrative Controls 

Weaknesses, City of Jersey City, NJ

09/18/2014 01/13/2015 08/18/2015

2014-FW-1005

The Former Owner of Yale Court 

Apartments Used Project Funds in 

Violation of the Regulatory Agreement 

With HUD, Houston, TX

09/22/2014 02/19/2015 10/30/2015

2014-DP-0006 Program Accounting System 09/23/2014 12/01/2014 08/30/2015

2014-FW-0005

Improvements Are Needed Over 

Environmental Reviews of Public Housing 

and Recovery Act Funds in the Detroit Office

09/24/2014 03/17/2015 10/01/2016

2014-KC-0004 Lenders Generated $428 Million in Gains 

From Modifying Defaulted FHA Loans

09/24/2014 01/22/2015 12/10/2015

2014-KC-0005

Wellston Housing Authority Improperly 

Administered the Community Service 

and Self-Sufficiency Requirement

09/24/2014 01/20/2015 05/31/2015

2014-LA-1006

The City of Pomona Did Not Administer 

Its NSP in Accordance With HUD Rules 

and Requirements, Pomona, CA

09/25/2014 01/23/2015 10/27/2015
77

APPENDIX 3 TABLES

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2014-FW-1006

Cornerstone Home Lending Did Not 

Adequately Underwrite 16 Loans, 

Violated the Real Estate Settlement 

Procedures Act, and Did Not Implement 

an Adequate Quality Control Plan During 

Our Review Period, Houston, TX

09/26/2014 03/30/2015 09/26/2015

2014-AT-1012

EverBank Did Not Properly Determine 

Mortgagor Eligibility for FHA’s Preforeclosure 

Sale Program, Jacksonville, FL

09/29/2014 01/30/2015 09/29/2015

2014-BO-1004

The Department of Housing and 

Community Development Did Not Always 

Operate Its Disaster Recovery Programs 

Effectively and Efficiently, Montpelier, VT

09/29/2014 12/12/2014 11/25/2015

2014-CH-1010

The Owner and Former Management 

Agents Lacked Adequate Controls Over the 

Operation of Lake Village of Auburn Hills, MI

09/29/2014 01/27/2015 02/24/2016

2014-LA-1007

The City of Los Angeles Did Not Always 

Ensure That CDBG-Funded Projects Met 

National Program Objectives, Los Angeles, CA

09/29/2014 01/27/2015 01/27/2016

2014-AT-1013

Peoples Home Equity, Inc., Did Not 

Follow HUD Requirements in Approving 

FHA Loans and Implementing Its Quality 

Control Program, Brentwood, TN

09/30/2014 02/10/2015 09/30/2015

2014-AT-1014

The Memphis Housing Authority Did Not 

Always Ensure That Its Housing Choice 

Voucher Program Units Met HUD’s 

Housing Quality Standards, Memphis, TN

09/30/2014 01/27/2015 10/01/2015

2014-AT-1016

The Housing Authority of the City of 

Spartanburg Used HUD Program Funds 

for Ineligible Expenses, Spartanburg, SC

09/30/2014 01/28/2015 03/02/2016

2014-CH-0001

HUD Did Not Always Provide 

Adequate Oversight of Its PropertyFlipping Waiver Requirements09/30/2014 03/24/2015 07/30/2015
78

SEMIANNUAL REPORT TO CONGRESS

 REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2014-CH-1011

The City of Chicago Lacked Adequate 

Controls Over Its HOME Investment 

Partnerships Program-Funded Rental 

New Construction Projects and 

Program Income, Chicago, IL

09/30/2014 01/28/2015 08/29/2016

2014-CH-1012

The Owner and Former Management 

Agents Lacked Adequate Controls 

Over the Operation of Lake Village of 

Fairlane Apartments, Dearborn, MI

09/30/2014 01/28/2015 02/19/2016

2014-DE-1802

Complaint Allegations Substantiated - City 

of Colorado Springs’ HOME and CDBG 

Programs, Colorado Springs, CO

09/30/2014 02/02/2015 01/29/2016

2014-FW-1007

The Jefferson Parish Department of 

Community Development Did Not 

Always Support Expenditures, Comply 

With Procurement Requirements, 

or Provide Adequate Oversight of 

Subrecipients, Jefferson, LA

09/30/2014 01/26/2015 06/30/2015

2014-KC-0006

The HUD Office of the Chief 

Financial Officer Had Not Always 

Implemented Its User Fee Policy

09/30/2014 01/22/2015 11/30/2016

2014-PH-0001

HUD Policies Did Not Always Ensure 

That HECM Borrowers Complied 

With Residency Requirements

09/30/2014 01/28/2015 09/29/2015

AUDITS EXCLUDED: 

80 audits under repayment plans

33 audits under debt claims collection processing, formal judicial review, investigation, or legislative solution

NOTES:

1. Management did not meet the target date. Target date is more than 1 year old.

2. Management did not meet the target date. Target date is less than 1 year old.

3. No management decision
79

APPENDIX 3 TABLES

TABLE C 

Inspector General-issued reports with questioned and unsupported costs at 

03/31/2015 (thousands) 

AUDIT REPORTS

NUMBER 

OF AUDIT 

REPORTS

QUESTIONED 

COSTS

UNSUPPORTED 

COSTS

A1 For which no management decision had been made 

by the commencement of the reporting period

51 748,874 221,226 

A2 

For which litigation, legislation, or 

investigation was pending at the 

commencement of the reporting period

4 7,176 5,170 

A3 

For which additional costs were added 

to reports in beginning inventory - 15,527 2,739 

A4 For which costs were added to noncost reports 0 0 0 

B1 Which were issued during the reporting period 19 2,074,790 1,710,227 

B2 Which were reopened during the reporting period 0 0 0 

SUBTOTALS (A + B) 74 2,846,367 1,939,362 

C For which a management decision was made during 

the reporting period

5215 1,160,362 379,709 

1) Dollar value of disallowed costs: 

Due HUD 

Due program participants

2316

40

894,236

261,340

122,771

253,894

(2) Dollar value of costs not disallowed 1117 4,786 3,044 

D 

For which a management decision had been made 

not to determine costs until completion of litigation, 

legislation, or investigation

5 27,333 5,170 

E For which no management decision had made by the 

end of the reporting period

17

< 38 >18

1,658,672

< 1,629,347 >18

1,554,483 

< 1,548,291 >18 

15 Twenty-seven audit reports also contain recommendations with funds to be put to better use. 

16 Eleven audit reports also contain recommendations with funds due program participants. 

17 Eleven audit reports also contain recommendations with funds agreed to by management. 

18 The figures in brackets represent data at the recommendation level as compared to the report level. See Explanations of Tables C and D. 
80

SEMIANNUAL REPORT TO CONGRESS

TABLE D 

Inspector General-issued reports with recommendations that funds be put to 

better use at 03/31/2015 (dollars)

AUDIT REPORTS

NUMBER 

OF AUDIT 

REPORTS

DOLLAR VALUE

A1 For which no management decision had been made by the 

commencement of the reporting period

33 1,479,828

A2 For which litigation, legislation, or investigation was pending 

at the commencement of the reporting periodd

2 1,854 

A3 For which additional costs were added to reports in beginning inventory - 11

A4 For which costs were added to noncost reports 0 0

B1 Which were issued during the reporting period 17 1,195,387 

B2 Which were reopened during the reporting period 0 0 

SUBTOTALS (A + B) 52 2,677,080 

C For which a management decision was made during the reporting period 3419 521,507 

(1) Dollar value of recommendations that were agreed to by management: 

Due HUD 

Due program participants

8

26

329,185

189,834

(2) Dollar value of recommendations that were not agreed to 

by management

420 2,488 

D For which a management decision had been made not to determine 

costs until completion of litigation, legislation, or investigation

2 1,854 

E For which no management decision had made by the end of the 

reporting period

16

< 21 >21

2,153,719 

< 1,004,874 >21

19 Twenty-seven audit reports also contain recommendations with questioned costs. 

20 Four audit reports also contain recommendations with funds agreed to by management. 

21 The figures in brackets represent data at the recommendation level as compared to the report level. See Explanations of Tables C and D.
81

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 recognize its efforts.

The closing inventory for items with no management decision in tables C and D (line E) reflects figures at 

the report level as well as the recommendation level.
82

SEMIANNUAL REPORT TO CONGRESS

HUD OIG TELEPHONE DIRECTORY

HEADQUARTERS OFFICE Washington, DC 202-708-0364

OFFICE OF AUDIT

REGION 1 Boston, MA 617-994-8380

 Hartford, CT 860-240-4837

 

REGION 2 New York, NY 212-264-4174

 Albany, NY 518-462-2892

 Buffalo, NY 716-551-5755

 Newark, NJ 973-776-7339

 

REGION 3 Philadelphia, PA 215-656-0500

 Baltimore, MD 410-962-2520

 Pittsburgh, PA 412-644-6372

 Richmond, VA 804-771-2100

REGION 4 Atlanta, GA 404-331-3369

 Greensboro, NC 336-547-4001

 Jacksonville, FL 904-232-1226

 Knoxville, TN 865-545-4400

 Miami, FL 305-536-5387

 San Juan, PR 787-766-5540

REGION 5 Chicago, IL 312-353-7832

 Columbus, OH 614-469-5745

 Detroit, MI 313-226-6280

REGION 6 Fort Worth, TX 817-978-9309

 Baton Rouge, LA 225-448-3976

 Houston, TX 713-718-3199

 New Orleans, LA 504-671-3715

 Albuquerque, NM 505-346-7270

 Oklahoma City, OK 405-609-8606

 San Antonio, TX 210-475-6800
83

HUD OIG TELEPHONE DIRECTORY

REGION 7-8-10 Kansas City, KS 913-551-5870

 St. Louis, MO 314-539-6339

 Denver, CO 303-672-5452

 Seattle, WA 206-220-5360

REGION 9 Los Angeles, CA 213-894-8016

 Las Vegas, NV 702-366-2100

 Phoenix, AZ 602-379-7250

 San Francisco, CA 415-489-6400

OFFICE OF INVESTIGATION

HEADQUARTERS Washington, DC Office of Investigation 202-708-0390

REGION 1-2 New York, NY 212-264-8062

 Boston, MA 617-994-8450

 Hartford, CT 860-240-4800

 Manchester, NH 603-666-7988

 Newark, NJ 973-776-7355

REGION 3 Philadelphia, PA 215-430-6758

 Baltimore, MD 410-209-6533

 Pittsburgh, PA 412-644-6598

 Richmond, VA 804-822-4890

REGION 4 Atlanta, GA 404-331-5001

 Birmingham, AL 205-745-4314

 Columbia, SC 803-451-4318

 Greensboro, NC 336-547-4000

 Memphis, TN 901-554-3148

 Miami, FL 305-536-3087

 San Juan, PR 787-766-5868

 Tampa, FL 813-228-2026

 Jackson, MS 601-329-6924

REGION 5 Chicago, IL 312-353-4196

 Cleveland, OH 216-357-7800

 Columbus, OH 614-469-6677

 Detroit, MI 313-226-6280

 Grand Rapids, MI 313-226-6280

 Indianapolis, IN 317-957-7377

 Minneapolis-St. Paul, MN 612-370-3130
84

SEMIANNUAL REPORT TO CONGRESS

REGION 6 Fort Worth, TX 817-978-5440

 Baton Rouge, LA 225-448-3941

 Houston, TX 713-718-3227

 Little Rock, AR 501-324-5931

 New Orleans, LA 504-671-3700

 Oklahoma City, LA 405-609-8601

 San Antonio, TX 210-475-6822

REGION 7-8-10 Denver, CO 303-672-5350

 Billings, MT 406-247-4080

 Kansas City, KS 913-551-5866

 Salt Lake City, UT 801-524-6090

 St. Louis, MO 314-539-6559

 Seattle, WA 206-220-5380

REGION 9 Los Angeles, CA 213-894-0219

 Las Vegas, NV 702-366-2144

 Phoenix, AZ 602-379-7252

 Sacramento, CA 916-930-5691

 San Francisco, CA 415-489-6683

JOINT CIVIL FRAUD DIVISION

AUDIT AND Kansas City, KS 913-551-5566

INVESTIGATION 
85

ACRONYMS LIST

ACRONYMS LIST

ACD.........................................................................Accelerated Claims Disposition (HUD program)

CAIVRS...................................................................Credit Alert Verification Reporting System

CDBG......................................................................Community Development Block Grant

CDBG-DR...............................................................Community Development Block Grant Disaster Recovery

CFR.........................................................................Code of Federal Regulations

CLPHA....................................................................Council of Large Public Housing Authorities

CPD.........................................................................Office of Community Planning and Development

CSSR.......................................................................community service and self sufficiency requirement

CWCOT..................................................................Claims Without Conveyance of the Title (HUD program)

DoD.........................................................................U.S. Department of Defense

DOJ ........................................................................U.S. Department of Justice

FBI...........................................................................Federal Bureau of Investigation

FFMIA .....................................................................Federal Financial Management Improvement Act of 1996

FHA.........................................................................Federal Housing Administration

FHFA.......................................................................Federal Housing Finance Agency

FHLMC ...................................................................Federal Home Loan Mortgage Corporation

FIFO........................................................................first-in, first-out

FIRMS.....................................................................Facilities Integrated Resources Management System

FISMA.....................................................................Federal Information Security Management Act

FMFIA .....................................................................Federal Managers’ Financial Integrity Act

GAO ........................................................................U.S. Government Accountability Office

HIAMS ....................................................................HUD Integrated Acquisition Management System

HOME.....................................................................HOME Investment Partnerships Program

HPS.........................................................................HUD Procurement System

HUD........................................................................U.S. Department of Housing and Urban Development

IDIS.........................................................................Integrated Disbursement and Information System

IPA ..........................................................................Intergovernmental Personnel Act

IPERA......................................................................Improper Payments Elimination and Recovery Act of 2010

IRS-CI.....................................................................Internal Revenue Service – Criminal Investigation
86

SEMIANNUAL REPORT TO CONGRESS

IT.............................................................................information technology

MTW.......................................................................HUD Moving to Work program

OCFO......................................................................Office of the Chief Financial Officer

OCPO .....................................................................Office of the Chief Procurement Officer

OE ...........................................................................Office of Evaluation

OI............................................................................Office of Investigation

OIG .........................................................................Office of Inspector General

OMB........................................................................Office of Management and Budget

OPHI.......................................................................Office of Public Housing Investments

PHA.........................................................................public housing agency

PIH..........................................................................Office of Public and Indian Housing

SPS..........................................................................Small Purchase System

SSA..........................................................................Social Security Administration

U.S.C.......................................................................United States Code

USPIS......................................................................U.S. Postal Inspection Service

USSS .......................................................................U.S. Secret Service

ACRONYMS LIST (CONCLUDED)
87

REPORTING REQUIREMENTS

REPORTING REQUIREMENTS

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

Inspector General Act of 1988, are listed below:

SOURCE-REQUIREMENT PAGES

Section 4(a)(2)-review of existing and proposed legislation and regulations 38

Section 5(a)(1)-description of significant problems, abuses, and deficiencies 12-37

relating to the administration of programs and operations of the Department.

Section 5(a)(2)-description of recommendations for corrective action with 41

respect to significant problems, abuses, and deficiencies.

Section 5(a)(3)-identification of each significant recommendation described in Appendix 3, Table B, 62

previous Semiannual Report on which corrective action has not been completed.

Section 5(a)(4)-summary of matters referred to prosecutive authorities and the 12-37

prosecutions and convictions that have resulted.

Section 5(a)(5)-summary of reports made on instances where information or assistance No instances

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 2, 57

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. 12-37

Section 5(a)(8)-statistical tables showing the total number of audit reports and the Appendix 3, Table C, 79

total dollar value of questioned and unsupported costs.

Section 5(a)(9)-statistical tables showing the total number of audit reports and the Appendix 3, Table D, 80

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 of Appendix 3, Table A, 61

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 significant 49

revised management decisions made during the reporting period.

Section 5(a)(12)-information concerning any significant management decision with 52

which the Inspector General is in disagreement.

Section 5(a)(13)-the information described under section 5(b) of the Federal 52

Financial Management Improvement Act of 1996.
FRAUD ALERT

Every day, loan modification and foreclosure rescue scams rob vulnerable homeowners of their money and their 

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

Department’s law enforcement arm and is responsible for investigating complaints and allegations of mortgage 

fraud. Following are some of the more common scams:

COMMON LOAN MODIFICATION SCAMS

Phony counseling scams: The scam artist says that he or she can negotiate a deal with the lender to modify 

the mortgage — for an upfront fee. 

Phony foreclosure rescue scams: Some scammers advise homeowners to make their mortgage payments 

directly to the scammer while he or she negotiates with the lender. Once the homeowner has made a few 

mortgage payments, the scammer disappears with the homeowner’s money.

Fake “government” modification programs: Some scammers claim to be affiliated with or approved by the 

government. The scammer’s company name and Web site may appear to be a real government agency, but the 

Web site address will end with .com or .net instead of .gov. 

Forensic loan audit: Because advance fees for loan counseling services are prohibited, scammers may sell 

their services as “forensic mortgage audits.” The scammer will say that the audit report can be used to avoid 

foreclosure, force a mortgage modification, or even cancel a loan. The fraudster typically will request an 

upfront fee for this service.

Mass joinder lawsuit: The scam artist, usually a lawyer, law firm, or marketing partner, will promise that he 

or she can force lenders to modify loans. The scammers will try to “sell” participation in a lawsuit against the 

mortgage lender, claiming that the homeowner cannot participate in the lawsuit until he or she pays some 

type of upfront fee. 

Rent-to-own or leaseback scheme: The homeowner surrenders the title or deed as part of a deal that will let 

the homeowner stay in the home as a renter and then buy it back in a few years. However, the scammer has 

no intention of selling the home back to the homeowner and, instead, takes the monthly “rent” payments and 

allows the home to go into foreclosure.

Remember, only work with a HUD-approved housing counselor to understand your options for assistance. 

HUD-approved housing counseling agencies are available to provide information and assistance. Call 888-

995-HOPE to speak with an expert about your situation. HUD-approved counseling is free of charge. 
89

Faxing the OIG hotline: 202-708-4829

Emailing the OIG hotline: hotline@hudoig.gov

Sending written information to

Department of Housing and Urban Development

Inspector General Hotline (GFI)

451 7th Street, SW

Room 8254

Washington, DC 20410

Internet

http://www.hudoig.gov/hotline/index.php

ALL INFORMATION IS CONFIDENTIAL, AND YOU MAY REMAIN ANONYMOUS.

Report fraud, waste, and mismanagement 

in HUD programs and operations by
U.S. DEPARTMENT 

OF HOUSING 

AND URBAN 

DEVELOPMENT

Report Number 73

www.hudoig.gov