OFFICE OF INSPECTOR GENERAL

SEMIANNUAL REPORT TO CONGRESS

FOR THE PERIOD ENDING SEPTEMBER 30, 2014

U.S. DEPARTMENT 

OF HOUSING 

AND URBAN 

DEVELOPMENT
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 of 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 April 1 to September 30, 2014

AUDIT RESULTS1 THIS REPORTING PERIOD FISCAL YEAR 2014

Recommendations that funds be put to better use $839,233,684 $1,969,799,738

Recommended questioned costs $237,178,133 $362,239,829

Collections from audits $23,874,476 $57,771,975

Administrative sanctions 0 6

Civil actions 3 3

Subpoenas 60 114

INVESTIGATION RESULTS1 THIS REPORTING PERIOD FISCAL YEAR 2014

Total restitution and judgments $40,342,348 $88,910,315

Total recoveries and receivables to HUD programs $14,594,097 $38,486,127

Arrests 184 333

Indictments and informations 204 393

Convictions, pleas, and pretrial diversions 156 423

Civil actions 9 16

Total administrative sanctions 195 291

 Suspensions 72 108

 Debarments 86 129

 Limited denial of participation 3 6

 Removal from program participation 12 17

 Evictions 12 18

 Other 10 13

Systemic implication reports 0 1

Search warrants 16 40

Subpoenas 313 689

JOINT CIVIL FRAUD RESULTS1 THIS REPORTING PERIOD FISCAL YEAR 2014

Recoveries and receivables to HUD programs 

or HUD program participants $919,944,703 $919,944,703

Recoveries and receivables for other entities $646,753,547 $646,753,5472

Civil actions 8 8

1 The offiices of Audit, Investigation, and the Joint Civil Fraud Division periodically combine efforts and conduct joint civil fraud initiatives. Outcomes from those 

initiatives are shown in the Joint Civil Fraud Results profile and not duplicated in the Audit Results or Investigation Results. These initiatives are further detailed in 

chapter 7.

2 These amounts represent funds that relate to HUD programs but were paid to other entities and not paid directly to HUD, such as funds paid to the U.S. Treasury 

for general Government purposes and amounts retained by the U.S. Department of Justice under 28 U.S.C. (United States Code) Part 527. This amount does not 

include an additional $8.9 billion derived from these cases that benefited other entities but was not related to HUD programs.
DURING THIS REPORTING PERIOD, WE HAD 

MORE THAN $839 MILLION IN FUNDS PUT 

TO BETTER USE, QUESTIONED COSTS OF 

MORE THAN $237 MILLION, AND NEARLY 

$23.9 MILLION IN COLLECTIONS RESULTING 

FROM 104 AUDIT REPORTS AND MORE THAN 

$54 MILLION IN RECOVERIES DUE TO OUR 

INVESTIGATIVE EFFORTS.
During the second reporting 

period of fiscal year 2014, 

the Office of Audit issued 

104 reports. These reports 

resulted in more than $839 

million in funds put to better 

use, questioned costs of 

more than $237 million, 

and nearly $23.9 million in 

collections.

Some of the significant 

audits centered on reviewing 

HUD’s oversight of its property-flipping waiver requirements, 

where we found that the risk to FHA’s Mutual Mortgage 

Insurance Fund has increased by more than $2.5 million, and if 

HUD does not implement our recommendations, over the next 

year, nearly $274 million more will be put at risk.

We also conducted four audits of HUD’s controls over the 

environmental review process within the Detroit, MI, Kansas 

City, KS, Columbia, SC, and Greensboro, NC, Offices of Public 

and Indian Housing. The audits identified improvements 

needed to comply with environmental requirements.

Finally, I would like to highlight our audits centered on the 

Office of Public Housing’s Operating and Capital Fund Program 

central office cost center fees. We found that HUD could not 

adequately support the reasonableness of the Operating Fund 

management, book-keeping, and asset management fees and 

Capital Fund management fee limits, resulting in nearly $89 

million in questioned costs and funds put to better use.

During this reporting period the Office of Investigation 

conducted 605 investigations to improve departmental 

operations and address program abuses, recovering more 

than $54 million. For this fiscal year, it focused on HUD’s 

performance and accountability in single-family and public 

and Indian housing, both significant sources of concern for the 

Department and taxpayers. The vital work performed by the 

Office of Investigation helped OIG clear a path for HUD and 

Congress to identify and correct longstanding issues in these 

two areas.

Joint civil fraud investigations continue to be an area of 

emphasis in addressing fraud against the Federal Housing 

Administration’s (FHA) single-family programs. Through 

coordinated civil fraud efforts across the U.S. Government, 

HUD OIG’s Joint Civil Fraud Division substantively assisted in 

civil investigations of FHA’s largest lenders, recouping nearly 

$1 billion.

Congress provided HUD OIG funds to establish an Office 

of Evaluations. HUD OIG established the Office of Evaluations 

to optimize departmental decision making with independent, 

timely, credible reviews of its programs and operations. Its 

reviews provide actionable information to departmental 

leadership and management, identifying risks to HUD’s mission 

and making practical recommendations to drive improvements 

in HUD programs, operations, or policies. The Office of 

Evaluations reviewed the Departmental Enforcement Center to 

identify factors impacting improvements in multifamily housing 

enforcement efforts and expand those practices to other HUD 

program areas.

Congress also appropriated funds for HUD OIG to put the 

Department’s data to work. By creating a Data and Predictive 

Analytics Division within the Office of Management and 

Technology, HUD OIG has implemented a data virtualization 

environment with direct access to departmental databases. As 

HUD OIG continues to gain access to various HUD databases, 

it will continue to develop predictive models to identify and 

analyze trends and areas for audit or investigative focus.

I would like to express my gratitude to Congress and the 

Department for their sustained commitment to improving 

HUD’s programs. I also want to express my sincere admiration 

to the staff of HUD OIG for its dedication to our mission and 

outstanding accomplishments. 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 upon the Department and our communities. 

The members of the OIG staff have my deepest respect, and I 

am proud to be their Inspector General.

David A. Montoya | Inspector General

A MESSAGE FROM INSPECTOR GENERAL DAVID A. MONTOYA

IT IS MY SINCERE 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 second half of fiscal year 

2014. This report describes the extraordinary accomplishments achieved by the talented public servants of HUD 

OIG. By promoting better stewardship and accountability, the HUD OIG staff continues to make a significant 

impact upon the Department and our communities for the benefit of all of our stakeholders.
The Office of Inspector General enhanced our 

evaluation capability this period. The Office 

of Evaluations’ (OE) mission is to analyze and 

evaluate HUD programs and operations to provide 

insight into issues of concern to the Department, 

Congress, and the American public. A key attribute 

of OE independent assessments is to complete an 

evaluation within 120 days of project initiation. 

When implemented, OE recommendations enable 

HUD to better achieve its goals to strengthen the 

economy; support home ownership and access to 

affordable, equitable housing; and develop strong, 

self-sustaining communities. Working closely with 

HUD program managers, OE carries out its work 

using a multidisciplinary, collaborative approach. 

The office is directed by an Assistant Inspector 

General.

Additional responsibilities of OE include

• Conducting the annual Federal Information 

Security Management Act evaluation of the 

Department;

• Evaluating HUD information technology (IT) 

initiatives; 

• Evaluating the Department’s privacy program; 

• Monitoring departmental conference 

spending; 

• Evaluating disaster recovery efforts;

• Reviewing and commenting on draft 

departmental issuances; and

• Performing internal reviews of OIG products 

and processes to ensure that they comply with 

HUD standards, policies, and procedures.

HUD’s IT security and privacy programs continue 

to have major noncompliance with Federal 

guidance and impose risks to the HUD mission. 

OE will continue to be fully engaged with 

departmental offices as they proceed with a major 

IT infrastructure transition and address application 

modernization needs.

During this period, OE initiated a review of the 

effectiveness of the Departmental Enforcement 

Center (DEC). The review is assessing DEC’s 

success in multifamily enforcement and is exploring 

opportunities for DEC to expand accomplishments to 

other program offices.

In addition, OE began a review of subsidy payments 

for public housing vacancies. The project is gathering 

information on the processes for granting subsidies, 

related cost, data validity, and characteristics of 

vacancies. The assessment will include identifying 

the outcome of HUD’s priority goal to reduce 

vacancies and maximize the number of families 

receiving housing from Office of Public and Indian 

Housing-administered programs. 

TRENDING
TABLE OF CONTENTS

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

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

Investigation............................................................................................................................................................................ 15

Chapter 2 – Public and Indian Housing Programs........................................................................................17

Audit.......................................................................................................................................................................................... 17

Investigation............................................................................................................................................................................25

Chapter 3 – Multifamily Housing Programs ................................................................................................. 27

Audit..........................................................................................................................................................................................27

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

Chapter 4 – Community Planning and Development Programs ................................................................ 30

Audit......................................................................................................................................................................................... 30

Investigation............................................................................................................................................................................35

Chapter 5 – Disaster Recovery Programs ..................................................................................................... 37

Audit..........................................................................................................................................................................................37

Investigation........................................................................................................................................................................... 39

Chapter 6 – Other Significant Audits and Investigations ...........................................................................40

Audit......................................................................................................................................................................................... 40

Investigation............................................................................................................................................................................41

Chapter 7 – Joint Civil Fraud Initiatives .......................................................................................................44

Chapter 8 – Legislation, Regulation, and Other Directives ........................................................................48

Chapter 9 – Audit Resolution......................................................................................................................... 51

Appendix 1 – Peer Review Reporting ............................................................................................................ 61

Appendix 2 – Audit Reports Issued................................................................................................................ 62

Appendix 3 – Tables......................................................................................................................................... 70

HUD OIG Telephone Directory .......................................................................................................................88

Acronyms List ................................................................................................................................................... 91

Reporting Requirements................................................................................................................................. 93
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 12 audits $43,536,239 $338,746,903

REVIEW OF HUD’S OVERSIGHT OF PROPERTY FLIPPING

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

oversight of property flipping to determine whether HUD had adequate oversight of its property-flipping waiver.

HUD did not always (1) ensure that lenders complied with the additional underwriting conditions to be 

eligible for a waiver of its 90-day property-flipping regulation and (2) properly identify or track loans for 90-

day property flips. As a result, the risk to FHA’s insurance fund increased by more than $2.5 million. Further, 

HUD lacked assurance of the accuracy of the property-flipping data, which provided the basis for its decision 

to extend the waiver through 2014. Over the next year, the potential risk to the FHA insurance fund will be 

nearly $274 million for properties not meeting eligibility requirements for a waiver of HUD’s property-flipping 

regulation.

OIG recommended that HUD require lenders to (1) support or indemnify HUD for any future losses 

on 12 loans with an estimated loss of $1 million and (2) indemnify HUD for any future losses on 16 loans 

with an estimated loss of $1.5 million. OIG also recommended that HUD (1) discontinue the waiver or 

strengthen its controls over its property-flipping waiver requirements and (2) issue clarification on the criteria 

for determining a loan’s sales contract date and a property’s resale date to ensure consistent and accurate 

application by lenders. (Audit Report: 2014-CH-0001)
13

CHAPTER ONE SINGLE-FAMILY PROGRAMS

REVIEW OF HUD’S LOSS MITIGATION PROGRAM

HUD OIG audited HUD’s FHA loss mitigation program to determine the extent to which loans modified under 

the FHA program generated gains for the lenders.

Lenders generated an estimated $428 million in gains from the sale of Government National Mortgage 

Association securities when modifying defaulted FHA loans in fiscal year 2013. These loan modifications were 

completed as part of FHA’s loss mitigation program. None of these lender-generated gains were used to offset 

FHA’s insurance fund costs. As a result, FHA missed opportunities to strengthen its insurance fund.

OIG recommended that HUD perform a study of the loan modification program and evaluate whether any 

changes are needed to strengthen the insurance fund. (Audit Report: 2014-KC-0004)

REVIEW OF HUD’S CONTROLS OVER ITS LOAN INDEMNIFICATION PROGRAM 

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 program or the Claims Without Conveyance of Title program or loans that went into default 

before the indemnification agreement expired but were not in default on the expiration date. There were 486 

loans with losses of $37.1 million from January 2004 to February 2014 that had enforceable indemnification 

agreements and losses to HUD but were not billed.

In addition, HUD did not ensure that indemnification agreements were extended to 64 of 2,078 loans that 

were streamline refinanced. The indemnification agreement for 21 loans contained language indicating that 

the agreements should have extended to loans that were streamline refinanced. HUD incurred losses of more 

than $373,000 for 5 loans, and 16 loans had a potential loss of approximately $1 million.

OIG recommended that HUD (1) initiate the billing process for 491 loans that had an enforceable 

indemnification agreement and (2) develop and implement policies and procedures to ensure that lenders 

are billed for loans that have enforceable indemnification agreements and loans that went into default before 

the indemnification agreement expired. OIG also recommended that HUD (1) extend the indemnification 

agreements for 21 loans that were streamline refinanced and (2) develop policies and procedures to 

ensure that indemnification agreements are extended to all loans that are streamline refinanced. (Audit 

Report: 2014-LA-0005)

REVIEW OF HUD’S CREDIT ALERT VERIFICATION REPORTING SYSTEM 

HUD OIG audited HUD’s Credit Alert Verification Reporting System (CAIVRS) to determine whether the default 

and claims data in CAIVRS agreed with the data in FHA’s default and claims systems.

CAIVRS did not contain information on all borrowers’ default, foreclosure, and claim activity. It 

incorrectly returned 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, 

which bars delinquent Federal debtors from obtaining additional Federal loans or loan guarantees until such 

delinquency is resolved.
14

SEMIANNUAL REPORT TO CONGRESS

OIG recommended that HUD document the selection rules used for providing data to CAIVRS, update the 

rules to provide for complete reporting of all ineligible borrowers, and develop system error checks to identify 

potential issues. OIG also recommended that HUD report FHA borrowers with delinquent Federal debt 

beyond the 3-year claim period or obtain an exemption from the Secretary of the Treasury to exempt these 

loans after 3 years. (Audit Report: 2014-KC-0002)

REVIEW OF HUD’S HOME EQUITY CONVERSION MORTGAGE PROGRAM 

HUD OIG audited HUD’s oversight of its Home Equity Conversion Mortgage (HECM) program to determine 

whether HUD had effective controls to ensure that HECM loan borrowers complied with residency 

requirements when concurrently participating in the Housing Choice Voucher program.

HUD policies did not always ensure that HECM borrowers complied with residency requirements. As 

many as 136 of 159 borrowers reviewed were not living in the properties associated with their loans because 

they were receiving rental assistance under the Housing Choice Voucher program for a different address at 

the same time. As a result, 121 insured loans should be declared in default and due and payable to reduce the 

potential risk of loss to HUD’s insurance fund.

OIG recommended that HUD (1) direct the applicable lenders to verify borrowers’ compliance with the 

residency requirement or, for each noncompliant borrower, declare the loan due and payable, thereby putting 

about $3.4 million to better use; (2) implement controls to prevent or mitigate instances of borrowers violating 

residency requirements by concurrently participating in the Housing Choice Voucher program; and (3) update 

its guidance to detail the steps that servicing lenders should take for borrowers who fail to certify to residency. 

(Audit Report: 2014-PH-0001)

REVIEW OF FHA PREFORECLOSURE SALE PROGRAM 

HUD OIG audited the FHA Preforeclosure Sale Program of EverBank in Jacksonville, FL, to determine whether 

EverBank properly determined that borrowers were eligible to participate in the program.

EverBank did not properly determine that borrowers were eligible to participate in FHA’s Preforeclosure 

Sale Program in accordance with HUD requirements. It did not adequately (1) assess the borrowers’ financial 

information to ensure that it properly determined that their default was due to an adverse and unavoidable 

financial situation, (2) assess the borrowers’ ability to pay the FHA-insured mortgage, and (3) substantiate that 

the borrowers’ need to vacate the FHA-insured property was related to the cause of default. As a result, the 

FHA insurance fund paid nearly $1.6 million in improper claims for 11 preforeclosure sales, including lender 

and borrower incentives.

OIG recommended that HUD require EverBank to (1) reimburse HUD for the 11 ineligible preforeclosure 

sale claims and (2) develop and implement policies and procedures in accordance with HUD requirements to 

properly determine borrower eligibility for the program. (Audit Report: 2014-AT-1012)

REVIEW OF PEOPLES HOME EQUITY, INC.

HUD OIG audited Peoples Home Equity, Inc., in Brentwood, TN, an FHA-approved nonsupervised direct 

endorsement lender, to determine whether Peoples complied with HUD requirements when it originated and 

underwrote FHA loans and implemented its quality control program.
15

CHAPTER ONE SINGLE-FAMILY PROGRAMS

Peoples did not always originate and underwrite FHA-insured loans in accordance with HUD 

requirements. Specifically, 10 of 20 loans reviewed contained underwriting deficiencies. As a result, Peoples 

exposed HUD to unnecessary insurance risk for six loans and caused HUD to pay claims for four loans. 

Further, Peoples did not follow HUD’s requirements when implementing its quality control program. Its 

quality control reviews were not conducted in compliance with requirements, and its quality control plan 

did not have the required provisions. Because of Peoples’ noncompliance with HUD’s requirements and lack 

of due diligence, it placed the FHA insurance fund at risk. As a result, the effectiveness of its quality control 

program to guard against errors, omissions, and fraud and to protect HUD from unacceptable risk was 

diminished.

OIG recommended that HUD require Peoples to (1) indemnify six loans with unpaid balances of more 

than $965,000, thereby putting more than $521,000 to better use; (2) reimburse HUD for four claims totaling 

nearly $972,000; (3) continue training its staff; (4) enforce written controls; and (5) implement and enforce a 

quality control plan. (Audit Report: 2014-AT-1013)

REVIEW OF LOANS UNDERWRITTEN BY CORNERSTONE HOME LENDING

HUD OIG audited Cornerstone Home Lending in Houston, TX, formerly known as Cornerstone Mortgage 

Company, to determine whether Cornerstone (1) complied with HUD and FHA regulations when originating 

and underwriting FHA-insured mortgages and (2) implemented a quality control plan that met requirements.

During the review period, 2007-2009, Cornerstone (1) did not comply with HUD and FHA requirements 

when underwriting 16 of 34 loans, (2) violated the Real Estate Settlement Procedures Act when it paid 

marketing fees in exchange for the referral of FHA mortgage business, and (3) failed to properly implement a 

quality control plan. As a result, HUD paid claims for 13 of the loans, incurring losses of more than $981,000 

upon sale of the properties. Further, Cornerstone placed the FHA insurance fund at an increased risk of loss 

of nearly $154,000 if the three remaining loans are foreclosed upon and the properties are sold. In addition, 

Cornerstone could not ensure that its customers were able to shop for other lenders with better mortgage rates 

or that referral fees did not unnecessarily increase the costs of mortgage services. Lastly, Cornerstone was 

unable to ensure the accuracy, validity, and completeness of its loan origination operations, resulting in an 

increased risk to the FHA insurance fund.

OIG recommended that HUD require Cornerstone to (1) reimburse HUD for 13 loans, for which HUD 

has sold the properties and incurred losses, and (2) indemnify HUD for 3 actively insured loans, which would 

cause additional losses if they are foreclosed upon and resold. OIG also recommended that HUD pursue 

administrative actions against the owners and management of Cornerstone for the violations cited. (Audit 

Report: 2014-FW-1006)

INVESTIGATION

PROGRAM RESULTS

Administrative-civil actions 97

Convictions-pleas-pretrial diversions 56

Financial recoveries $7,234,072
16

SEMIANNUAL REPORT TO CONGRESS

ATTORNEY SENTENCED IN HECM CASE

An attorney-in-fact was sentenced in U.S. District Court to 30 months incarceration and 36 months supervised 

release, fined $10,000, and ordered to pay restitution in the amount of $75,663 to a HECM victim following a 

conviction of committing mail fraud and filing a false tax return. From November 2010 to August 2011, the 

attorney-in-fact devised a scheme to defraud an elderly victim and obtain HECM loan proceeds by falsifying 

a specific power of attorney. The attorney-in-fact diverted approximately $98,000 in HECM loan proceeds 

and Social Security Income funds for the benefit of herself and her family and also failed to report $60,000 

in income on her calendar year 2011 tax return. This investigation was conducted by HUD OIG, the Federal 

Bureau of Investigation (FBI), the Internal Revenue Service – Criminal Investigations (IRS-CI), and the Social 

Security Administration OIG. (West Orange, NJ)

MORTGAGE BROKER CONVICTED OF MORTGAGE FRAUD

A former mortgage broker pled guilty in U.S. District Court to conspiracy to submit false statements and 

making false statements relating to HUD-FHA transactions. The mortgage broker, who operated a mortgage 

company and an investments company, submitted to a bank approximately 19 mortgage loan applications, 

which contained false information pertaining to the borrowers. The loss to FHA is $831,607. This investigation 

was conducted by HUD OIG and the FBI. (Tacoma, WA)

PRESIDENT OF TITLE COMPANY SENTENCED

The president of a St. Louis-based title company and owner of an FHA-approved loan correspondent was 

sentenced in U.S. District Court to 24 months incarceration and 36 months probation and ordered to pay 

restitution in the amount of $494,407 to HUD, the IRS, and other financial institutions following a conviction 

of conspiracy to defraud the United States. As the owner of The Mortgage Store, an FHA-approved lender, 

the president falsely claimed $200,000 in liquid assets to HUD to fraudulently inflate the lender’s net worth, 

engaged in a criminal “check kiting” scheme, and failed to remit employment taxes to the IRS. Without those 

fraudulent activities and false representations, the lender would not have met the FHA net worth requirements 

and would not have been allowed to originate new mortgage loans. Mortgages originated by The Mortgage 

Store after the fraudulent representations to HUD resulted in 331 foreclosures with losses to FHA in excess 

of $20 million. This investigation was conducted by HUD OIG, the FBI, IRS-CI, and the U.S. Department of 

Labor. (St. Louis, MO)

LOAN OFFICER SENTENCED FOR MORTGAGE FRAUD

A loan officer and owner of a mortgage company was sentenced in U.S. District Court to 33 months 

incarceration and 5 years supervised release and ordered to pay restitution to FHA in the amount of $513,726 

following a conviction of conspiracy to commit mail and wire fraud. From August 2008 through June 2009, 

the loan officer, along with others, engaged in a mortgage fraud scheme, whereby straw buyers were used to 

purchase distressed properties. The scheme included multiple false statements, and the sellers’ proceeds were 

directed into accounts owned or controlled by the loan officer. Six properties were purchased by straw buyers 

using FHA-insured mortgages. The total loss to FHA was $513,726. This investigation was conducted by HUD 

OIG and the U.S. Postal Inspection Service. (Norfolk, VA)
17

CHAPTER TWO PUBLIC AND INDIAN HOUSING PROGRAMS

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

4,100 public housing agencies (PHA) nationwide. Many PHAs administer both public housing and Section 8 

programs. HUD also provides assistance directly to PHAs’ resident organizations to encourage increased resident 

management entities and resident skills programs. Programs administered by PHAs are designed to enable 

low-income families, the elderly, and persons with disabilities to obtain and reside in housing that is safe, decent, 

sanitary, and in good repair. Some of the highlights from this semiannual period are noted 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 41 audits $106,171,813 $273,512,685

SECTION 8 HOUSING CHOICE VOUCHER PROGRAM

HUD’s Office of Inspector General (OIG) audited the New York City Housing Authority in New York, NY, 

regarding its administration of its Section 8 Housing Choice Voucher program to determine whether the 

Authority ensured that its program units met HUD’s housing quality standards.

The Authority did not always ensure that its Housing Choice Voucher program units met HUD’s housing 

quality standards. Of the 119 units inspected, 99 did not meet HUD standards. Further, 24 of the 99 units 

were in material noncompliance with HUD standards. The Authority disbursed nearly $86,000 in housing 

assistance payments and received more than $7,000 in administrative fees for these 24 units. Authority 

officials did not adequately conduct unit inspections and implement procedures and controls to adequately 

ensure that program units met housing quality standards. As a result, tenants were subjected to inadequately 

maintained units, which created unsafe living conditions. Over the next year, if the Authority does not 

implement OIG’s recommendations, HUD will potentially pay more than $148 million in housing assistance 

for units that materially fail to meet its housing quality standards.

OIG recommended that HUD instruct Authority officials to (1) immediately certify that the violations cited 

for the remaining 41 units have been corrected, (2) reimburse its program nearly $93,000 from non-Federal funds, 

(3) implement procedures and controls to ensure that program units meet housing quality standards, (4) seek 

PUBLIC AND INDIAN 

HOUSING PROGRAMS

TWO
18

SEMIANNUAL REPORT TO CONGRESS

HUD approval to incorporate HUD and local city codes into the Authority’s Housing Choice Voucher program 

inspection checklists and administrative plan, and (5) increase the quality of unit inspections conducted daily by 

the Authority’s inspectors to help ensure the identification of 24-hour violations. (Audit Report: 2014-NY-1003)

HUD OIG audited the Memphis, TN, Housing Authority’s Housing Choice Voucher program to determine 

whether the Authority’s inspection process adequately ensured that its units were in material compliance with 

housing quality standards.

The Authority’s inspections were not adequate for enforcing HUD’s housing quality standards. Of 90 

program units inspected, 77 failed to comply with HUD’s minimum housing quality standards, and 58 were 

in material noncompliance with the standards. For the 58 units in material noncompliance, the Authority’s 

inspectors failed to observe or report 443 violations that existed when they conducted their last inspections.

As a result, some tenants lived in inadequately maintained units, and the Authority disbursed nearly $62,000 in 

housing assistance payments and received more than $6,000 in administrative fees for the 58 units in material 

noncompliance with the standards.

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

funds for the 58 units that materially failed to meet HUD’s housing quality standards and (2) improve its 

quality control inspection program to help ensure that program units meet housing quality standards. These 

measures will better ensure that $34 million in program funds will be expended for units that are decent, safe, 

and sanitary. (Audit Report: 2014-AT-1014)

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

Section 8 Housing Choice Voucher program to determine whether the Authority administered its program in 

accordance with HUD regulations and made housing assistance payments for eligible program participants.

The Authority did not always administer its Section 8 Housing Choice Voucher program in accordance 

with HUD regulations and did not execute or maintain documentation to support eligibility. Specifically, 

Authority officials did not document whether rent reasonableness determinations were always performed to 

properly ensure that rents paid for assisted units were reasonable in relation to rents for comparable units.

Therefore, Authority officials could not assure HUD that more than $4.3 million in administrative fees received 

was reasonable.

In addition, officials did not always maintain (1) executed housing assistance payments contracts, (2) 

executed lease agreements, and (3) documents to support the sources of tenant income for recertification.

As a result, the Authority could not assure HUD that more than $24,000 in housing assistance payments was 

disbursed and adequately supported in accordance with HUD regulations.

OIG recommended that HUD require Authority officials to (1) strengthen controls to ensure that rent 

reasonableness determinations are performed and documented and repay the unreasonable administrative 

fees from non-Federal funds and (2) provide justification for the Section 8 Housing Choice Voucher program 

funds related to tenant files that did not contain HUD-required support. Any costs determined to be ineligible 

should be repaid from non-Federal funds. (Audit Report: 2014-NY-1002)

HUD OIG audited the Section 8 program of the Goshen Housing Authority in Goshen, IN, to determine 

whether the Authority administered its program in accordance with HUD’s and its own requirements.

The Authority did not always administer its Section 8 program in accordance with HUD’s and its own 
19

CHAPTER TWO PUBLIC AND INDIAN HOUSING PROGRAMS

requirements. Specifically, it (1) did not correctly calculate and maintain its net restricted assets, (2) failed to 

maintain accurate books of record to support the appropriateness of credit card expenditures and employee 

loans, and (3) did not properly manage its operating bank account. As a result, HUD and the Authority lacked 

assurance that program funds were available to provide assistance to eligible families and used appropriately.

In addition, the Authority failed to ensure that 46 program units, including 19 that materially failed, 

complied with HUD’s housing quality standards and its program administration plan. As a result, the 

Authority’s households were subjected to health- and safety-related violations, and the Authority did not 

properly use its program funds.

Further, the Authority did not always (1) correctly calculate housing assistance payments, (2) apply the 

appropriate payment standards, (3) maintain required eligibility documentation, and (4) ensure that assisted 

units were affordable. As a result, HUD lacked assurance that the Authority used its program funds appropriately.

OIG recommended that HUD require the Authority to (1) reimburse its program more than $83,000 from 

non-Federal funds, (2) reimburse its net restricted assets account from non-Federal funds more than $640,000 

or the current amount owed, (3) support or reimburse its program more than $274,000 from non-Federal 

funds, (4) pursue repayment or reimburse its program more than $10,000 from non-Federal funds, and (5) 

reimburse its households or landlords nearly $7,000. OIG also recommended that HUD consider a declaration 

of substantial default based on the issues cited. (Audit Report: 2014-CH-1006)

HUD OIG audited the Housing Choice Voucher program of the Housing Authority of the County of 

Lackawanna in Dunmore, PA, to determine whether the Authority ensured that its program units met HUD’s 

housing quality standards and whether it abated housing assistance payments as required.

The Authority did not conduct adequate inspections to ensure that its program units met HUD’s housing 

quality standards as required. Of 80 program units inspected, 72 did not meet HUD standards. Further, 35 of 

the 72 units were in material noncompliance with the standards. The Authority disbursed more than $17,000 

in housing assistance payments and received more than $1,000 in administrative fees for these 35 units. Over 

the next year, if the Authority does not implement adequate procedures to ensure that its program units meet 

housing quality standards, HUD will pay more than $1.1 million in housing assistance for units that materially 

fail to meet those standards. Also, the Authority did not abate housing assistance payments as required. It 

improperly paid owners nearly $19,000 for units that did not meet housing quality standards, and it incorrectly 

certified in its Section 8 Management Assessment Program score that it enforced HUD’s housing quality 

standards as required.

OIG recommended that HUD require the Authority to (1) reimburse its program more than $18,000 from 

non-Federal funds for the 35 units that materially failed to meet HUD’s housing quality standards; (2) continue 

to implement procedures and controls to ensure that program units meet HUD standards, thereby ensuring 

that program funds are expended for units that are decent, safe, and sanitary; and (3) reimburse its program 

nearly $19,000 from non-Federal funds for the housing assistance payments that should have been abated. 

(Audit Report: 2014-PH-1006)

AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

HUD OIG audited the public housing programs of the Kenner Housing Authority in Kenner, LA, to determine 

whether the Authority administered its public housing programs in accordance with American Recovery and 

Reinvestment Act of 2009 (ARRA) requirements and HUD regulations and guidance.

The Authority did not comply with HUD regulations when administering its procurement and financial 
20

SEMIANNUAL REPORT TO CONGRESS

operations. Specifically, it did not always ensure that it (1) properly identified the source of funds used 

for expenditures or managed its interfund transfers, (2) complied with Federal and its own procurement 

requirements, (3) adequately supported and ensured the eligibility of payments to contractors, (4) maintained 

adequate documentation for its petty cash expenditures, and (5) submitted its financial data to HUD within 

specified timeframes. In addition, the Authority (1) did not have written policies or procedures for processing 

and accounting for its interfund activities, (2) lacked adequate segregation of duties, and (3) did not properly 

train or supervise its staff. As a result, the Authority (1) mismanaged and could not support more than $1.9 

million in interfund transfers, (2) made more than $800 in ineligible expenditures and nearly $887,000 in 

unsupported contractor payments, and (3) paid more than $1,000 in unsupported petty cash transactions.

OIG recommended that HUD require the Authority to (1) repay the ineligible payments; (2) support 

or repay the unsupported payments and transactions; (3) reconcile its accounting records to identify the 

appropriate funding source that should have been charged for each expenditure incurred from January 

1, 2009, to October 31, 2013; (4) implement policies and procedures governing its interfund transactions, 

ensuring that funds are not loaned between its housing programs, transfers are made in a timely manner, 

and interfund account balances are not present at yearend; and (5) update its procurement policy to include 

detailed working-level or separate procedures for its staff. (Audit Memorandum: 2014-FW-1805)

HUD OIG audited the Yakama Nation Housing Authority in Wapato, WA, regarding its use of its nearly $4.9 

million Native American Housing Block Grant provided under ARRA to determine whether the Authority 

properly spent its ARRA funds, correctly obtained small purchases, and properly reported ARRA information in 

FederalReporting.gov. 

The Authority did not always properly spend its ARRA funds. It (1) spent $1.2 million in ARRA funds 

without being able to show that the funds were used on the projects, (2) purchased more than $177,000 worth 

of unnecessary materials, (3) charged the grant for routine maintenance staff meetings, (4) did not always 

pay the prevailing Davis-Bacon Act wages, and (5) paid employees for hours not worked. In addition, it split 

purchases that would have required it to obtain multiple price quotations and did not properly report the 

project activity descriptions, the number of homes it planned to repair, the amount of its vendor payments, 

and the number of jobs created in FederalReporting.gov.

OIG recommended that HUD require the Authority to provide support showing that the ARRA funds were 

spent on the projects or reimburse HUD from non-Federal funds, for transmission to the U.S. Treasury, for 

expenditures it is unable to support and provide support showing that materials purchased with ARRA funds 

were the best value possible or reimburse HUD from non-Federal funds, for transmission to the U.S. Treasury. 

(Audit Report: 2014-SE-1002)

HUD OIG audited the Hamtramck, MI, Housing Commission’s ARRA Public Housing Capital Fund competitive 

grant to determine whether the Commission administered its grant in accordance with ARRA, HUD’s, and its 

own requirements.

The Commission did not comply with ARRA, HUD’s, or its own requirements. Specifically, it (1) improperly 

awarded a noncompetitive ARRA-funded contract, (2) lacked support for the reasonableness of the price paid 

for its ARRA-funded activities, and (3) used ARRA funds to pay for work activities that were not included in its 

approved annual or 5-year action plan. As a result, the Commission subverted full and open competition, and 

both HUD and the Commission lacked assurance that ARRA competitive grant funds were used appropriately.

Further, the Commission did not (1) support that the upgrades to its electrical utilities resulted in 

purported energy savings; (2) issue payments to its contractor in accordance with HUD’s requirements; (3) 
21

CHAPTER TWO PUBLIC AND INDIAN HOUSING PROGRAMS

ensure that its contractors complied with the buy American, Section 3, and Davis-Bacon Act requirements of 

ARRA; and (4) file the required declaration of trust. It also did not accurately report its ARRA grant activities 

in FederalReporting.gov. As a result, HUD and the Commission lacked assurance that the ARRA competitive 

grant was administered in accordance with HUD’s requirements.

OIG recommended that HUD require the Commission to (1) support or reimburse HUD more than 

$1.1 million from non-Federal funds, for transmission to the U.S. Treasury, for not complying with Federal 

procurement and ARRA requirements and (2) implement adequate procedures and controls to address the 

issues cited. (Audit Report: 2014-CH-1003)

HUD OIG audited the public housing programs of the South Landry Housing Authority in Grand Coteau, LA, 

to determine whether the Authority administered its HUD public housing programs in accordance with HUD 

regulations and guidance.

The Authority did not comply with HUD regulations when administering its procurement and financial 

operations. Specifically, it (1) violated HUD’s and its own procurement requirements, (2) improperly used its 

credits cards, (3) did not properly account for and track its inventory, (4) did not maintain proper time and leave 

records for employees, and (5) failed to maintain official board records or give public notice of board meetings.

As a result, it incurred questioned costs and could not provide assurance that it operated effectively, spent 

HUD funds in accordance with requirements, and protected those funds from waste and abuse.

OIG recommended that HUD require the Authority to (1) repay nearly $4,000 to HUD; (2) provide support 

for or repay more than $1 million to its public housing programs or HUD, including nearly $135,000 in ARRA 

funds; (3) perform a physical inventory of appliances; and (4) implement board-approved policies and 

procedures for its financial operations. (Audit Memorandum: 2014-FW-1806)

ENVIRONMENTAL REVIEWS

During the review period, HUD OIG conducted four environmental reviews as part of a nationwide audit of 

HUD’s oversight of the program. The highlights from these reviews are summarized below.

HUD OIG audited HUD’s Detroit, MI, Office of Public Housing to determine whether the Detroit Office’s 

oversight of public housing environmental reviews within its jurisdiction ensured that (1) the responsible entities 

performed the required reviews and (2) HUD did not release funds until all required documents were submitted.

The Detroit Office did not provide adequate oversight of three public housing commissions to ensure that 

the responsible entities properly completed and documented environmental reviews as required by 24 CFR 

(Code of Federal Regulations) Part 58. Further, it did not maintain sufficient internal control records. As a result, 

the Detroit Office may have increased the risk to the health and safety of PHA residents and the general public 

and may have failed to prevent or eliminate damage to the environment. Further, three housing commissions 

spent more than $34.7 million, including more than $18 million in ARRA grant funds, for projects that either did 

not have required environmental reviews or the environmental reviews were not adequately supported. 

OIG recommended that the three housing commissions repay HUD, for transmission to the U.S. Treasury, 

almost $1 million and support or repay more than $33 million. OIG also recommended that HUD take available 

actions against the three housing commissions and their responsible entities. (Audit Report: 2014-FW-0005)

HUD OIG audited HUD’s Kansas City, KS, Office of Public Housing to determine whether the Kansas City Office 

ensured that (1) the responsible entities or the Kansas City Office performed required environmental reviews and 

(2) HUD did not release funds until all requirements were met and required documents were submitted.
22

SEMIANNUAL REPORT TO CONGRESS

The Kansas City Office did not provide adequate oversight of two PHAs to ensure that the responsible 

entities properly completed and documented environmental reviews as required by 24 CFR Part 58. Further, it 

did not maintain sufficient internal control records. The Kansas City Office also did not follow environmental 

requirements of 24 CFR Part 50 for the nine PHAs reviewed. As a result, it may have increased the risk to the 

health and safety of residents and the general public and may have failed to prevent or eliminate damage to 

the environment. Further, the 11 PHAs spent more than $27 million, including more than $12 million in ARRA 

grant funds, for projects that either did not have environmental reviews or did not have adequately supported 

environmental reviews.

OIG recommended that two PHAs repay HUD, for transmission to the U.S. Treasury, more than $1 million 

and support or repay almost $19 million. OIG also recommended that HUD take available actions against two 

PHAs and their responsible entities. (Audit Report: 2014-FW-0002)

HUD OIG audited HUD’s Columbia, SC, Office of Public Housing to determine whether the Columbia Office 

ensured that it performed the required reviews and did not release funds until all requirements were met and 

required documents were submitted.

The Columbia Office did not follow environmental requirements at 24 CFR Part 50 when it determined 

compliance with National Environmental Protection Act of 1969-related laws and authorities for the 41 PHAs 

in its jurisdiction. Specifically, it did not properly evaluate environmental conditions or maintain required 

documentation. As a result, it may have increased the risk to the health and safety of PHA residents and the 

general public and may have failed to prevent or eliminate damage to the environment. Further, the Columbia 

Office approved 41 PHAs to spend more than $76.4 million, including more than $35.8 million in ARRA funds, 

on projects that did not have a proper environmental review and were not adequately supported.

OIG made no recommendations as it will recommend corrective actions to HUD in an upcoming 

nationwide audit report. (Audit Report: 2014-FW-0003)

HUD OIG audited HUD’s Greensboro, NC, Office of Public Housing to determine whether the Greensboro 

Office ensured that it performed the required reviews and did not release funds until all requirements were 

met and required documents were submitted.

The Greensboro Office did not follow environmental requirements at 24 CFR Part 50 when it determined 

compliance with National Environmental Policy Act of 1969-related laws and authorities for the 126 PHAs 

in its jurisdiction. Specifically, it did not properly evaluate environmental conditions or maintain required 

documentation and may have allowed a PHA to circumvent requirements. As a result, the Greensboro Office 

may have increased the risk to the health and safety of PHA residents and the general public and may have 

failed to prevent or eliminate damage to the environment. Further, the Greensboro Office approved 126 PHAs 

to spend more than $180 million, including more than $83 million in ARRA funds, on projects that did not have 

a proper environmental review or the environmental reviews were not adequately supported.

OIG recommended that the Greensboro Office implement policies and procedures to ensure that PHAs 

comply with public notification requirements at 24 CFR Part 58 or Part 50. (Audit Report: 2014-FW-0004)

PUBLIC HOUSING

HUD OIG audited the Chelsea, MA, Housing Authority to determine whether Authority officials properly 
23

CHAPTER TWO PUBLIC AND INDIAN HOUSING PROGRAMS

implemented financial controls over the allocation of costs and reasonableness of salaries.

Authority officials did not design their cost allocation plans appropriately and did not assign expenses 

properly. As a result, the improper allocations obscured the true cost of the Authority’s programs, and decision 

makers did not have proper financial information. Additionally, Authority officials could not assure HUD and 

other regulatory agencies that $6.7 million in salaries and $2.7 million in expenses were appropriately assigned 

to the programs that benefited from those expenses. The Authority also paid unreasonable wages of more 

than $697,000. Therefore, these funds were not available to further the objectives of the Authority’s programs.

OIG recommended that HUD instruct Authority officials to (1) develop an acceptable methodology to 

correctly allocate the 2010, 2011, and 2012 expenditures; (2) allocate the more than $9.4 million in expenses to 

the benefiting programs; (3) repay any ineligible, unsupported, and unreasonable expenses to the appropriate 

Federal programs; and (4) implement a policy to annually review the cost allocation plan with the Authority’s 

board of commissioners. In addition, the Authority should (1) reimburse its programs for the unreasonable 

salary expenditures, (2) examine its job descriptions to ensure that each job description reflects all of the work 

that each employee performs, (3) define a pay scale for each job, (4) ensure that each employee has a signed 

and dated job description, and (5) update these job descriptions regularly. (Audit Report: 2014-BO-1002)

HUD OIG audited HUD’s process for awarding asset repositioning fees (ARF) to PHAs with approved 

demolition and disposition projects to determine whether HUD had established adequate controls to ensure 

that ARFs were correctly calculated.

HUD had not established adequate controls to ensure that ARFs were correctly calculated. Specifically, 

ARFs awarded to 10 of the 14 PHAs with units approved for demolition or disposition were not always 

accurately calculated. As a result, the 10 PHAs were awarded more than $7.7 million in inaccurate funding for 

calendar years 2008 through 2013. HUD had taken actions to improve the ARF calculation process, including 

developing a more automated process, which should assist PHA officials and HUD field office staff in more 

accurately and efficiently calculating and awarding ARF funding.

OIG recommended that HUD (1) recapture $6.2 million in ineligible ARF funds provided to 7 PHAs from 

2008 through 2013, (2) reimburse $1.5 million in ARFs to 5 PHAs that were underfunded, (3) ensure that the 

2014 ARF funding to the 10 PHAs reviewed is adjusted for any necessary corrections, (4) provide training 

to PHA officials and HUD field office staff on the ARF calculation process, and (5) evaluate and adjust the 

ARF Tool to ensure that it will provide greater assurance that errors will be prevented or detected. (Audit 

Report: 2014-NY-0003)

HUD OIG audited the public housing program of the Housing Authority of the City of Spartanburg, SC, 

to determine whether the Authority’s performance in the areas of financial operations, procurement, and 

inventory practices met HUD requirements.

The Authority used HUD program funds for ineligible or unsupported expenses and failed to maintain 

an accurate accounting and financial control system. As a result, the Authority deprived its public housing 

program and possibly other HUD programs of needed funds and may have defaulted on its consolidated 

annual contributions contract with HUD. The Authority generally failed to follow HUD’s procurement 

regulations or its own procurement policy. It failed to maintain required documentation, paid for services 

without required contracts, and failed to perform cost analyses. As a result, the Authority could not assure 

HUD that it procured its goods and services at the lowest cost using full and open competition. For the 

procurements reviewed, the Authority had more than $1,000 in ineligible spending and was unable to support 

more than $2.2 million in spending.

OIG recommended that HUD require the Authority to (1) repay its public housing program for funds 
24

SEMIANNUAL REPORT TO CONGRESS

diverted to other activities, as identified in the Authority’s fiscal year 2013 audit, and more than $28,000 for 

other ineligible program expenses and (2) provide support showing that it used almost $2.4 million for eligible 

program expenses. OIG also recommended that HUD determine whether the Authority is in substantial 

default of its consolidated annual contributions contract. OIG further recommended that the Departmental 

Enforcement Center consider the need for administrative sanctions. (Audit Report: 2014-AT-1016)

HUD OIG audited the HOPE VI grant program of the Niagara Falls Housing Authority in Niagara Falls, NY, to 

determine whether the Authority administered its HOPE VI grant program and activities in accordance with 

HUD and 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. As a result, more than $1 million in phase I HOPE VI funds drawn was not applied to 

project expenditures. In addition, the Authority earned nearly $27,000 in accrued interest on these funds 

through February 2014, which should be returned to the U.S. Treasury. Further, Authority officials drew more 

than $403,000 more in HOPE VI funds than was needed to meet its share of the development costs for phase II.

OIG recommended that HUD instruct Authority officials to (1) reimburse the U.S. Treasury for the HOPE VI 

funds drawn in excess of those needed to cover project expenditures and (2) establish procedures to ensure that 

program funds are drawn in accordance with the grant agreement and regulations. (Audit Report: 2014-NY-1007)

CENTRAL OFFICE COST CENTERS

HUD OIG audited HUD’s methodology and monitoring regarding the Office of Public Housing’s asset 

management fees and central office cost centers to determine how HUD arrived at the asset management fee 

limits in its Public Housing Operating and Capital Fund programs and whether its methodology for setting 

these limits and its monitoring of these fees were reasonable. 

HUD could not adequately support the reasonableness of the Operating Fund management, book-keeping, 

and asset management fees and Capital Fund management fee limits. In addition, HUD lacked adequate 

justification for allowing PHAs to charge an asset management fee, resulting in more than $81 million in 

operating funds being unnecessarily defederalized annually. HUD also did not adequately monitor PHAs’ central 

office cost center fee charges. Among five PHAs reviewed, four inappropriately overcharged or transferred 

$2.3 million in excessive operating program funds from their asset management projects to their central office 

cost centers. Two of the PHAs were unable to support $6.7 million in management, book-keeping, and asset 

management fees charged. Since central office cost center funds are considered non-Federal funds and no 

longer subject to HUD requirements, there is a greater potential for fraud, waste, and abuse. Consequently, two 

PHAs used approximately $4.3 million in central office cost center fee revenue for questionable costs. 

OIG recommended that HUD (1) revise its asset management fee policy to refederalize the Operating and 

Capital Fund programs’ fee revenue, (2) eliminate the asset management fee, (3) require the San Francisco Housing 

Authority to support or repay $6.1 million in fees, (4) require the City of Los Angeles and Southern Nevada Regional 

Housing Authorities to repay nearly $752,000 in excessive fee charges, and (5) establish and implement policies and 

procedures for the assessment and monitoring of the fees. (Audit Report: 2014-LA-0004)
25

CHAPTER TWO PUBLIC AND INDIAN HOUSING PROGRAMS

INDIAN HOUSING BLOCK GRANT

HUD OIG audited the Indian Housing Block Grant (IHBG) awarded to the White Mountain Apache Housing Authority 

in Whiteriver, AZ, to determine whether the Authority used its IHBG funds in accordance with HUD requirements.

The Authority failed to use its IHBG funds in accordance with HUD requirements. It (1) charged its 

IHBG more than $2.2 million for ineligible charges and more than $48,000 for unsupported charges; (2) did not 

adequately procure vendors, ensure that it safeguarded grant assets, and support the categorization of $8.2 million 

as nonprogram income; and (3) incorrectly categorized $1 million in program income as nonprogram income.

Additionally, although it had a waiting list of more than 2,000 families, the Authority housed ineligible tenants 

whose incomes exceeded HUD limits. As a result, it charged nearly $85,000 to house eight ineligible families.

Additionally, it charged nearly $12,000 to house two families whose income eligibility was not supported.

OIG recommended that HUD require the Authority to (1) reimburse its grant for the duplicate, ineligible, 

and unsupported costs; (2) support the categorization of the questioned nonprogram funds or reclassify 

the funds to program income; (3) reclassify the nonprogram income funds to program income funds; and 

(4) develop and implement policies and procedures to ensure that IHBG requirements are met. OIG also 

recommended that HUD consider receivership until the Authority has demonstrated sufficient capacity and 

exhibits a strong IHBG control environment. (Audit Report: 2014-LA-1004)

HUD OIG audited HUD’s Office of Native American Programs’ (ONAP) Indian Community Development Block 

Grant (ICDBG) program grant closeout process to determine whether ONAP had adequate controls to ensure 

the timely closeout of program grants.

ONAP did not have adequate controls over the ICDBG closeout process. Specifically, it lacked written policies 

and procedures for management’s oversight to ensure that closeout data were accurately tracked and grants were 

closed in a timely manner. As a result, ONAP did not always initiate timely followup action to determine grant 

closeout eligibility, and management lacked sufficient tracking data to efficiently monitor grant closeouts.

Of 58 grants reviewed, ONAP did not take timely followup action to address indications of closeout 

eligibility for 18 grants totaling $13.1 million. Four of these grants totaling nearly $4 million were eligible 

for closeout yet remained open without timely followup action to pursue grant closeout. Further, ONAP’s 

Performance Tracking Database (PTD) reported erroneous data related to grant closeouts for 24 of the 58 

sample grants totaling $14.8 million.

OIG recommended that HUD (1) develop and implement policies and procedures for management’s 

oversight of the ICDBG closeout process, resulting in nearly $4 million in funds being put to better use; (2) 

review the PTD and identify and correct inaccurate or missing data; and (3) consider enhancing the PTD to 

track the current status of ONAP followup actions for grants that appear to be overdue for closeout. (Audit 

Report: 2014-LA-0006)

INVESTIGATION

PROGRAM RESULTS

Administrative-civil actions 66

Convictions-pleas-pretrial diversions 68

Financial recoveries $2,678,226
26

SEMIANNUAL REPORT TO CONGRESS

FORMER EXECUTIVE DIRECTOR SENTENCED FOR EMBEZZLEMENT

A former executive director for the Rockwall (Texas) Housing Development Corporation was sentenced in 

U.S. District Court to 12 months and 1 day incarceration and ordered to pay restitution to HUD in the amount 

of $195,421. From June 2009 through October 2012, the former executive director embezzled approximately 

$195,421 in Federal funds by writing checks to herself and others for work and services that were not provided.

The embezzled funds were then used to purchase illegal narcotics. This investigation was conducted by HUD OIG 

and the Federal Bureau of Investigation (FBI). (Rockwall, TX)

FORMER EXECUTIVE DIRECTOR GUILTY OF CONSPIRACY TO DEFRAUD REAC SYSTEM

A former executive director of the Chelsea (Massachusetts) Housing Authority was sentenced in U.S. District 

Court to 12 months incarceration and ordered to pay a $3,000 fine following a conviction of conspiracy 

to defraud HUD. From 2006 through November 2011, the executive director conspired with his assistant 

director and a Real Estate Assessment Center (REAC) consultant to identify in advance Authority units that 

were supposed to be randomly selected for HUD REAC inspections. These individuals would ensure that 

all necessary repairs were made to the units before the REAC inspections were conducted. As a result, the 

Authority had a significantly inflated REAC score, which enabled it to qualify for diminished HUD oversight.

This investigation was conducted by HUD OIG and the FBI. (Boston, MA)

FORMER EXECUTIVE DIRECTOR SENTENCED FOR BRIBERY

A former executive director of the Lafayette Housing Authority and Opelousas Housing Authority was 

sentenced in U.S. District Court to 28 months incarceration, 1 year supervised release, and a criminal forfeiture 

of $100,000 for receiving bribes and for his part in a conspiracy to award bids to a preferred contractor while 

running both PHAs. From 2006 through 2010, the former executive director sponsored a local baseball team 

and solicited donations in its name from vendors and contractors of both PHAs. The vendors were expected to 

make yearly donations in exchange for doing business with the PHAs. During this time, the executive director 

solicited and received more than $100,000 in bribes. The executive director also conspired with contractors 

to circumvent procurement regulations to award construction contracts to one company that performed 

construction work for the Opelousas Housing Authority. The conspiracy used fake bids to make it appear 

that several companies were placing bids on projects when only one company was being considered. The 

executive director approved these contracts with full knowledge that procurement regulations were not being 

followed. This investigation was conducted by HUD OIG and the FBI. (Lafayette, LA)

CITY EMPLOYEE SENTENCED FOR THEFT OF PUBLIC FUNDS

A former family self-sufficiency coordinator for the City of Marietta, GA, was sentenced in U.S. District Court to 

14 months incarceration and 3 years supervised release and ordered to pay restitution to HUD in the amount 

of $234,977 following a conviction of conspiracy and theft of public money from an organization receiving 

Federal funds. Between January 2011 and June 2013, the employee, along with coconspirators, manipulated 

city records, which caused approximately $230,000 in housing assistance payments to be disbursed to 

landlords for properties they did not own. The proceeds were then divided among the conspirators. This 

investigation was conducted by HUD OIG and the City of Marietta Police Department. (Atlanta, GA)
27

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

(HUD)-held or HUD-insured mortgages, the Department owns multifamily projects acquired through defaulted 

mortgages, subsidizes rents for low-income households, finances the construction or rehabilitation of rental 

housing, and provides support services for the elderly and handicapped. 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 7 audits $31,396,600 $174,995

REVIEW OF PRUDENTIAL HUNTOON PAIGE ASSOCIATES, LTD, 

UNDERWRITING ACTIVITIES

HUD Office of Inspetor General (OIG) audited Prudential Huntoon Paige Associates, LTD’s underwriting of 

a $49 million mortgage loan to develop the Preserve at Alafia, a multifamily project located in Riverview, FL, 

to determine whether Prudential underwrote and processed the loan for the Preserve of Alafia according to 

HUD’s requirements.

Prudential did not underwrite and process the loan for the Preserve at Alafia in accordance with HUD’s 

guidelines and regulations. Specifically, it did not properly analyze the appraisal and market study, accurately 

estimate the project income and rental rates, completely disclose all debts related to the property, adequately 

analyze the eligibility of the participants, and properly document prepaid costs. As a result, Prudential 

exposed the Federal Housing Administration (FHA) insurance fund to unnecessary risk and a loss of more than 

$20 million.

OIG recommended that HUD (1) refer Prudential to the Mortgagee Review Board to take appropriate 

action against its noncompliance, (2) take appropriate enforcement actions against the responsible parties 

and pursue civil remedies under the False Claims Act if legally sufficient, and (3) pursue administrative actions 

against Prudential officials if warranted. (Audit Report: 2014-AT-1015)

CHAPTER THREE MULTIFAMILY HOUSING PROGRAMS

THREE MULTIFAMILY HOUSING PROGRAMS 
28

SEMIANNUAL REPORT TO CONGRESS

REVIEW OF MULTIFAMILY MANAGEMENT AGENTS

HUD OIG audited the Lake Village of Auburn Hills multifamily project in Auburn Hills, MI, to determine 

whether the project’s owner and former management agents operated the project in accordance with the 

regulatory agreement and HUD’s requirements.

The project’s owner and former management agents did not ensure that (1) adequate documentation was 

maintained to support disbursements or that funds were used for reasonable operating expenses or necessary 

repairs of the project, (2) the project’s housing units were used for their intended purpose, and (3) tenants’ 

security deposits were appropriately maintained. As a result, HUD lacked assurance that more than $7.1 

million was used for reasonable operating expenses or necessary repairs of the project and nearly $116,000 in 

additional rental revenue was not lost. Further, more than $8,400 in project funds and nearly $134,000 in lost 

rental revenue was not available for reasonable operating expenses and necessary repairs of the project. In 

addition, nearly $192,000 in tenant security deposits was not available to (1) pay for damages to the project’s 

housing units, (2) apply toward tenants’ unpaid rent, or (3) reimburse households.

OIG recommended that HUD require the owner to (1) support or reimburse the project for the 

unsupported disbursements and rental credits; (2) reimburse the project from nonproject funds for the nonrevenue-generating housing units, ineligible expenditures, and underfunded security deposit account; and (3) 

implement adequate procedures and controls to address the finding cited. OIG also recommended that HUD 

pursue double damages, civil money penalties, and administrative sanctions, as appropriate, for the finding 

cited. (Audit Report: 2014-CH-1010)

HUD OIG audited Lake Village of Fairlane Apartments in Dearborn, MI, to determine whether the project’s 

owner and former management agents operated the project in accordance with HUD’s requirements and the 

regulatory agreement.

The owner and former management agents could not provide sufficient documentation to support that 

project funds were used for reasonable operating expenses or necessary repairs of the project. Further, (1) 

other project funds were not used for reasonable operating expenses or necessary repairs of the project, (2) 

the project’s security deposit account balance did not equal or exceed the total obligations associated with the 

account, and (3) the project lost rental revenue by providing a household rent-free housing. As a result, HUD 

and the owner lacked assurance that nearly $3 million in project funds was used for reasonable operating 

expenses or necessary repairs of the project and nearly $19,000 in additional rental revenue was not lost.

Further, nearly $8,000 in project funds and more than $10,000 in lost rental revenue were not available for 

reasonable operating expenses and necessary repairs of the project. In addition, nearly $47,000 in security 

deposits was not available to (1) reimburse the owner for damages to project units, (2) pay the owner for 

unpaid rent, or (3) reimburse households.

OIG recommended that HUD require the owner to (1) support disbursements and ensure that rental 

revenue was not lost or reimburse the project from nonproject funds, (2) reimburse the project for ineligible 

disbursements and lost rental revenue, (3) reimburse the project’s underfunded security deposit account, 

and (4) implement adequate procedures and controls to address the findings cited. OIG also recommended 

that HUD pursue double damages remedies, civil money penalties, and administrative sanctions against the 

responsible parties for their part in the violations of the regulatory agreement. (Audit Report: 2014-CH-1012)

HUD OIG audited Yale Court Apartments in Houston, TX, to determine whether the project owner used the 

project funds in accordance with its regulatory agreement and HUD regulations.
29

CHAPTER THREE MULTIFAMILY HOUSING PROGRAMS

The former owner used more than $3.5 million of the project funds for ineligible and unsupported 

expenses. Specifically, it (1) used $3.2 million for unauthorized distributions, transfers to non-HUD-insured 

properties, or repayments to the former owner for advances; (2) used several incorrect documents to support 

more than $88,000 in withdrawals from the repair escrow account; (3) paid more than $16,000 for other 

ineligible project expenses; (4) overpaid management fees by nearly $16,000; (5) underfunded the tenant 

security deposit account by more than $9,000; (6) made ineligible loans to employees; and (7) spent more 

than $160,000 in project funds for items that it could not properly support. Further, the former owner did not 

maintain accurate financial information and did not submit annual audited financial statements as required.

The former owner’s improper use of project funds reduced the amount available for physical repairs and 

payment of the mortgage, which resulted in the project’s being left in poor physical condition and contributed 

to HUD’s nearly $4 million loss when HUD resold the note in August 2012.

OIG recommended that HUD flag the form HUD-2530 for all appropriate parties for the regulatory 

agreement violations. OIG also recommended that HUD’s Departmental Enforcement Center pursue civil 

money penalties and administrative sanctions, as appropriate, against the owner, the operator, their principals 

or owners, or all parties involved for their part in the regulatory violations. (Audit Report: 2014-FW-1005)

INVESTIGATION

PROGRAM RESULTS

Administrative-civil actions 13

Convictions-pleas-pretrial diversions 16

Financial recoveries $1,157,971

FORMER PROPERTY MANAGER SENTENCED FOR EMBEZZLEMENT

A former manager of five project-based Section 8 properties was sentenced in U.S. District Court to 18 months 

incarceration and 36 months probation and ordered to pay restitution to HUD in the amount of $152,725 

following a conviction of theft of government funds. The manager embezzled HUD funds by writing 191 

checks, made payable to herself, from operating accounts for each of these properties. This investigation 

was conducted by HUD OIG, the Federal Bureau of Investigation (FBI), and the West Virginia State Police. 

(Huntington, WV)

OWNER GUILTY OF EQUITY SKIMMING

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

equity skimming for diverting more than $500,000 in rents, assets, proceeds, and income derived from an 

FHA-insured 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 pay pal 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) 
30

SEMIANNUAL REPORT TO CONGRESS

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 29 audits3 $55,138,905 $45,622,174

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

the Community Development Block Grant (CDBG) program, HOME Investment Partnerships Program 

(HOME), Supportive Housing Program, and Neighborhood Stabilization Program 1 (NSP 1). While OIG’s 

objectives varied by auditee, the majority of the reviews were to determine whether the grant funds were 

administered for eligible activities and the auditee met program objectives. 

COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAMS

HUD OIG audited the City of Los Angeles, CA’s CDBG program and found that the City did not always 

maintain the required documentation for its CDBG-funded projects to support its vested interest and ensure 

that national program objectives were met. More than $1.9 million in CDBG funds was at risk of not being 

used to meet the specified national program objectives. These funds may be lost due to the City’s not ensuring 

that developers completed projects to meet national program objectives.

OIG recommended that HUD require the City to (1) provide and implement a plan of action to show the 

use and progress of the projects in question, (2) review the CDBG-funded projects in its portfolio that were 

managed by its former redevelopment agency to ensure that all required executed agreements are in place with 

the relevant parties, and (3) review the CDBG-funded projects in its portfolio that were managed by its former 

redevelopment agency to ensure that all projects meet a national objective. (Audit Report: 2014-LA-1007)

COMMUNITY PLANNING AND 

DEVELOPMENT PROGRAMS

FOUR

3 The total community planning and development audits, questioned costs, and funds put to better use amounts include 

any disaster recovery (five 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.
31

HUD OIG audited the Jefferson Parish, LA, CDBG program and found that the Parish did not always (1) have 

documentation to support program expenditures, (2) comply with procurement requirements when procuring 

contractors for housing rehabilitation, and (3) provide adequate oversight for its subrecipients. As a result, it 

could not support that more than $1.4 million in program costs was eligible or reasonable or met a national 

objective. In addition, it increased the risk of fraud, waste, and abuse.

OIG recommended that HUD require the Parish to (1) support or repay its CDBG program from nonFederal funds for the unsupported costs; (2) implement written departmental expenditure, procurement, and 

monitoring procedures; (3) implement a departmental records management system for expenditures and 

national objective compliance; and (4) implement a departmental process to maintain and update the Parish’s 

prequalified bidder’s list. (Audit Report: 2014-FW-1007)

HUD OIG audited the Monmouth County, NJ, CDBG program and found that although County officials 

expended CDBG funds for eligible activities, there were several control weaknesses. Specifically, salary costs 

of employees who worked on multiple programs were disbursed without adequate support, disbursements 

recorded in County records did not always reconcile with those reported to HUD, accounting for program 

income was not adequate, housing rehabilitation assistance was not recovered from one recipient in 

accordance with the County’s policy, and a mortgage note on an assisted property was underrecorded. 

OIG recommended that HUD instruct County officials to (1) support the salary allocation of nearly 

$806,000 to the CDBG program or reimburse any unsupported amount, (2) reimburse the CDBG program 

for the ineligible cost of more than $1,000, (3) provide documents to support that more than $133,000 was 

expended for eligible activities, (4) provide support showing that more than $122,000 in program income 

was expended in a timely manner, (5) strengthen controls to ensure that the County’s books reconcile with 

drawdowns reported to HUD, (6) provide support showing that the disbursement of nearly $4,000 in program 

income was for eligible costs, (7) seek repayment of more than $50,000 for an ineligible housing rehabilitation 

loan, and (8) increase a lien on the assisted property by more than $4,000. (Audit Report: 2014-NY-1006)

HUD OIG audited the CDBG program administered by Hillsborough County, FL, and found that the County 

failed to properly administer its CDBG program in accordance with HUD requirements. Specifically, it did not 

ensure that its code enforcement and interim assistance activities met national objectives and charged allowable 

expenditures. As a result, HUD had no assurance that approximately $1 million charged was properly expended.

OIG recommended that HUD require the County to (1) support that national objectives and eligibility 

requirements were met or repay HUD more than $784,000 from non-Federal funds; (2) repay HUD nearly 

$232,000 from non-Federal funds for ineligible costs; (3) develop, implement, and enforce controls and 

sufficient levels of monitoring to ensure that CDBG requirements are met; and (4) train its staff on CDBG 

requirements. (Audit Report: 2014-AT-1006)

HOME INVESTMENT PARTNERSHIPS PROGRAM

HUD OIG audited the City of Jersey City, NJ, HOME program and found that the City’s HOME program was 

not always administered in compliance with program requirements. HOME funds were not always properly 

committed, expended, or reported in compliance with program requirements due to the City’s inadequate controls 

over recording and reconciling its commitment and expenditure of funds. Therefore, more than $1.5 million was 

not committed and expended in a timely manner, and commitments of more than $1.48 million were ineligible.

CHAPTER FOUR COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS
32

SEMIANNUAL REPORT TO CONGRESS

HOME funds were expended on ineligible and unsupported costs. Consequently, nearly $567,000 was not 

available for eligible activities, and there was no assurance that more than $949,000 was expended for eligible 

HOME activities.

HOME match contributions were not always eligible or adequately supported. Therefore, $4.36 million in 

ineligible match contribution was reported, and HOME rent limits were not established for properties assisted 

with more than $1.28 million in HOME match funds.

HOME program income was not properly reported and used before entitlement funds. Therefore, nearly 

$804,000 in program income was not recorded in HUD’s Integrated Disbursement and Information System (IDIS) 

and used before entitlement funds, and the use of nearly $290,000 in program income was not recorded in IDIS.

OIG recommended that HUD recapture the uncommitted and unexpended funds and instruct City 

officials to (1) deobligate a commitment of the funds expended for a canceled project, (2) reimburse the 

funds expended for an ineligible use and provide documentation to support that the unsupported funds were 

expended for eligible activities, (3) remove ineligible HOME match funds from the City’s match report, and (4) 

record in IDIS the receipt and use of program income. (Audit Report: 2014-NY-1009)

HUD OIG audited the Municipality of Carolina, PR, HOME program and found that the Municipality 

disbursed HOME funds for three activities that showed signs of slow progress without assurance that the 

activities would generate the intended benefits. In addition, it did not ensure that the principal residency 

requirement was met for the duration of the period of affordability for 35 home buyers. As a result, HUD had 

no assurance that more than $8.2 million disbursed for HOME-funded activities met program objectives and 

fully provided the intended benefits.

The Municipality’s financial management system did not properly identify the source and application 

of more than $726,000 in HOME funds and did not support the eligibility of more than $68,000 in program 

disbursements. In addition, the Municipality allowed the use of more than $62,000 for ineligible expenditures, 

did not remit to its treasury account more than $56,000 in unexpended drawdowns, and consistently 

maintained a high cash balance in its bank account. As a result, HUD lacked assurance that funds were 

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

requirements.

The Municipality did not ensure the accuracy of commitments and other information entered into IDIS.

It did not support more than $387,000 in HOME commitments and failed to report more than $233,000 in 

program income receipts. As a result, HUD had no assurance that the Municipality met HOME program 

commitment and disbursement requirements.

OIG recommended that HUD (1) determine the eligibility of the unsupported HOME program costs and 

activities that showed signs of slow progress, (2) deobligate overstated obligations and put these funds to 

better use, (3) require the repayment of the ineligible expenditures, and (4) remit the unexpended funds to its 

treasury account. (Audit Report: 2014-AT-1007)

HUD OIG audited the City of Chicago, IL, HOME program and found that the leases between the owners and 

the households for program-funded units in two projects included language prohibited by HUD’s regulations 

and the City’s regulatory agreements with the owners. As a result, the City drew down nearly $7.4 million in 

program funds for two projects in which the rights of 73 households were not protected.

The City did not always follow HUD’s requirements in its use and reporting of program income. It (1) 

inappropriately drew down nearly $25.2 million in program funds from its HOME investment trust fund 

treasury account from January 1, 2012, through December 31, 2013, when it had available program income, (2) 

inappropriately used program income, (3) did not report more than $4.3 million in program income in IDIS in 
33

CHAPTER FOUR COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS

a timely manner, and (4) did not deposit program income into its HOME investment trust fund local account.

As a result, (1) the U.S. Treasury paid more than $30,000 in unnecessary interest on the program funds that 

the City drew down from its treasury account when program income was available, (2) the City had more than 

$9,000 less in program income to be used for eligible program activities, and (3) HUD and the City lacked 

assurance regarding the amount of program income available to the City.

The City did not always conduct required annual compliance monitoring of projects in calendar year 

2013. As a result, HUD and the City lacked assurance that households were (1) living in units that met HUD’s 

property standards requirements, (2) income eligible, and (3) not paying excessive rents.

OIG recommended that HUD require the City to (1) ensure that leases between the owners and the 

households for program-funded units do not include prohibited language, (2) reimburse its program or HUD 

from non-Federal funds for transmission to the U.S. Treasury, (3) ensure that inspected units were programassisted units, and (4) implement adequate procedures and controls to address the findings cited. (Audit 

Report: 2014-CH-1011)

HUD OIG audited the City of Huntsville, AL, Community Development Department, which administers its 

CDBG and HOME programs, and found that the Department did not have adequate controls and procedures 

to ensure (1) appropriate accountability for and administration of the Mirabeau project and (2) that it used its 

HOME and CDBG funds for eligible activities. Specifically, the Department (1) inappropriately loaned more 

than $932,000 in HOME funds and more than $250,000 in community housing development organization 

(CHDO) funds to a developer, (2) did not fully document the use of more than $1 million in CDBG funds for 

five loans, (3) did not use $772,000 in HOME funds as intended, and (4) did not recover collateral of more 

than $323,000 in CDBG funds from its bank and $100,000 in HOME funds from its CHDO. In addition, the 

Department did not (1) realize potential income because 60 units were offline, (2) include all of the elements 

required by HUD regulations in its participation agreement with the developer of the Mirabeau Apartments, 

and (3) prepare a cost allocation plan to allocate the unit costs or identify the number of HOME-assisted units 

to support the HOME-assisted units in the project.

OIG recommended that HUD require the City to (1) reimburse nearly $2.4 million in ineligible costs and 

support or reimburse unsupported amounts to the Department’s CDBG and HOME program accounts from 

non-Federal funds, (2) inspect the project and correct all deficiencies, (3) review all participation agreements, 

and (4) prepare a cost allocation plan for HUD’s review. (Audit Report: 2014-AT-1005)

HUD OIG audited the Middlesex County, NJ, HOME program and found that County officials did not always 

expend and administer HOME funds in compliance with program requirements. Specifically, they lacked 

support to show that funds were committed in accordance with regulations and expended for eligible 

activities, HUD’s and the County’s interest in HOME-assisted properties was protected, and a CHDO was 

properly organized. Consequently, (1) nearly $834,000 was not committed in a timely manner as required; 

(2) nearly $25,000 and more than $220,000 in HOME funds were expended for ineligible and unsupported 

activities, respectively; (3) HUD’s and the County’s interest in more than $980,000 in HOME-assisted properties 

was not protected; and (4) the County lacked documentation showing that a CHDO was properly organized.

OIG recommended that HUD instruct County officials to (1) provide support showing that nearly $834,000 

was committed in a timely manner, (2) reimburse the County’s HOME program line of credit from non-Federal 

funds for nearly $25,000 in ineligible costs and any unsupported amount of the allocated costs of more than 

$220,000, (3) record liens or other appropriate notices of record on HOME-assisted properties to ensure 

that HUD’s and the County’s more than $980,000 interest in these properties is protected, and (4) provide 

support showing that officials complied with eligibility requirements at the time of the initial certification and 

recertification of the County’s CHDO. (Audit Report: 2014-NY-1005)
34

SEMIANNUAL REPORT TO CONGRESS

HUD OIG audited Pierce County, WA, and found that the County claimed nearly $242,000 in matching funds 

for three HOME projects. Since these three projects had already received HOME funding and were under 

affordability agreements, the matching funds reported were ineligible. Also, the County did not support $2.6 

million in HOME matching funds carried forward from prior years. As a result, it had a shortfall of nearly 

$395,000 in its match obligation for the program year beginning July 2008 and could be required to repay HUD 

almost $1.6 million in HOME funds, depriving low-income people in its jurisdiction of needed housing.

OIG recommended that HUD require the County to remove the ineligible matching funds from its HOME 

match carry forward and provide the eligible matching funds to its HOME trust fund from non-Federal sources 

or repay HUD. OIG also recommended that the County resubmit its match reports to calculate a new carry 

forward amount supported by a running match log and documentation and implement written policies and 

procedures for compliance with HOME requirements. (Audit Report: 2014-SE-1003)

HUD OIG audited the Miami-Dade County, FL, HOME program and found that the County did not always 

comply with HOME requirements. Specifically, it did not properly (1) commit HOME funds for 25 activities, (2) 

support that a beneficiary was income eligible for 1 activity, and (3) manage its HOME agreements. As a result, 

more than $1.4 million in HOME funds was not properly committed, and $250,000 in committed HOME funds 

was not supported.

OIG recommended that HUD (1) recalculate the commitment requirement as a result of the County’s 

invalid commitments, (2) require the County to implement policies and procedures to ensure compliance 

with HOME requirements, and (3) require the County to support homeowner rehabilitation for one activity or 

reimburse its program nearly $46,000 from non-Federal funds and put more than $204,000 in HOME funds to 

better use. (Audit Report: 2014-AT-1010)

SUPPORTIVE HOUSING PROGRAM

HUD OIG audited Palladia, Inc., in New York, NY, regarding the administration of its Supportive Housing 

Program and found that Palladia officials generally carried out their program-assisted activities with the 

appropriate beneficiaries; however, they did not provide support for how program grant funds were expended, 

and they did not maintain effective program and financial management controls.

Consequently, Palladia officials could not assure HUD that program grant funds were spent in accordance 

with HUD rules and regulations and that the effectiveness of the grant activities was fully maximized as 

intended by HUD. As a result, more than $1.6 million in program operating expenditures was unsupported, 

and nearly $585,000 in required non-Federal cash matching funds for operating and supportive services was 

unsubstantiated.

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

unsupported costs, (2) provide adequate supporting documentation to substantiate that the cash match was 

met for the operating and supportive services costs, and (3) maintain sufficient supporting documentation 

and strengthen oversight controls over disbursements to ensure compliance with applicable regulations. 

(Audit Report: 2014-NY-1008)
35

NEIGHBORHOOD STABILIZATION PROGRAM

HUD OIG audited the City of Richmond, CA’s NSP1 and found that the City did not administer its NSP1 in 

accordance with requirements related to procurement and cost eligibility. It awarded contracts to developers 

that lacked the capacity and financial resources to administer the program and did not monitor the 

rehabilitation progress or the quality of work performed by three developers. As a result, the rehabilitation 

of some properties suffered significant delays, while the rehabilitation of other properties had not been 

completed after more than 3 years. Further, the City paid more than $691,000 for rehabilitation work that was 

not performed and other ineligible and unreasonable costs and did not ensure that NSP1 properties were sold 

to eligible home buyers. These same issues likely occurred under the City’s NSP3 and will continue unless 

HUD closely monitors the City to ensure compliance.

OIG recommended that HUD require the City to (1) repay HUD the actual administrative costs charged or 

more than $223,000 for mismanaging three developers and (2) repay HUD for the ineligible or unreasonable 

costs and for work not performed. OIG also recommended that HUD review the City’s remaining NSP1 

activities and its $1.1 million NSP3 grant and require the City to reimburse the programs for any ineligible or 

unreasonable costs. Further, OIG recommended that HUD pursue civil and other administrative sanctions 

against the City, its developers, or both for allowing NSP1 funds to be used for ineligible costs. (Audit 

Report: 2014-LA-1005)

INVESTIGATION

PROGRAM RESULTS

Administrative-civil actions 12

Convictions-pleas-pretrial diversions 15

Financial recoveries $3,511,890

BUSINESS MAN SENTENCED IN FRAUDULENT BILLING SCHEME

A property developer was sentenced in U.S. District Court to 24 months incarceration and 2 years supervised 

release and ordered to pay restitution to HUD in the amount of $235,412 following a conviction of fraudulent 

claims. The developer received HUD CDBG-funded Downtown Façade Project and Downtown Rental 

Rehabilitation grants from the City of St. Johns and the Michigan State Housing Development Authority to 

rehabilitate commercial properties. Under the grants, the owner was supposed to replace windows, doors, and 

façade materials at four properties and rehabilitate apartment units for use as low-income rental units. None of the 

grant activities was performed as promised. Instead, fictitious companies controlled by the developer submitted 

fraudulent payment requests to the City for work that was either not done or for amounts exceeding actual costs. 

This investigation was conducted by HUD OIG and the Federal Bureau of Investigation (FBI). (Grand Rapids, MI)

CHAPTER FOUR COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS
36

SEMIANNUAL REPORT TO CONGRESS

FORMER CASE WORKER SENTENCED 

A former case worker for the City of Dallas Project Reconnect, a program funded by HUD CPD, was sentenced 

in U.S. District Court to 15 months incarceration and 12 months supervised release and ordered to pay 

restitution in the amount of $8,619 following earlier convictions of tampering with a witness, false statement to 

HUD, and deprivation of rights under color of law. The investigation determined that the former case worker 

lived in an apartment that was subsidized by Project Reconnect while the lease was under a third party’s 

name and that during the investigation, he contacted the third party and instructed him to lie to investigators. 

The investigation further determined that the former case worker also used his position to circumvent the 

program’s waiting list in exchange for sex with a client. When the client ended the relationship, he had her 

removed from the program. This investigation was conducted by HUD OIG, the FBI, and the Dallas Police 

Department. (Dallas, TX)
37

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. 

These active disaster grants nationwide have approximately $31.9 billion in obligations and $27.1 billion in 

disbursements. Since the passage of the Disaster Relief Appropriations Act of 2013, HUD has allocated $14 

billion of the $15.2 billion in available Community Development Block Grant Disaster Recovery (CDBG-DR) 

funds, including $13 billion to assist communities located in the regions impacted by Hurricane Sandy. Of 

the $13 billion in HUD disaster funds allocated for the Superstorm Sandy recovery area, $2.6 billion has been 

obligated, and $1.8 billion has been disbursed. Of the $19.6 billion that was provided for Hurricanes Katrina, 

Rita, and Wilma, $18.2 billion, or 93 percent of the funds, has been disbursed for the period ending September 30, 

2014. For the $6.1 billion that was provided for Hurricanes Ike, Gustav, and Dolly, $3.5 billion, or 59 percent of 

the funds, has been disbursed for the period ending September 30, 2014. Of the $3.4 billion provided for the “9-

11” disaster in New York, $3.0 billion, or 88 percent, has been disbursed for the period ending September 30, 2014. 

For the $794 million remaining for the other active disasters, $373 million, or 47 percent of the funds, has been 

disbursed for the period ending September 30, 2014.

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 5 audits4 $24,596,061 $21,856,700

CHAPTER FIVE DISASTER RELIEF PROGRAMS

DISASTER RECOVERY PROGRAMS FIVE

4 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.
38

SEMIANNUAL REPORT TO CONGRESS

HUD OIG audited the State of New Jersey, CDBG-DR-funded tourism marketing program to determine whether 

the content of its marketing campaign was proper and whether it procured services and products for its tourism 

marketing program in accordance with applicable Federal procurement and cost principle requirements.

The audit found nothing improper in the content of the State’s marketing campaign. The State was 

challenged to quickly launch the campaign before the 2013 summer beach season. However, although the 

State complied with HUD’s instructions by certifying that its policies and procedures were equivalent to 

Federal procurement requirements, it did not procure services and products for its tourism marketing program 

in a manner that fully met the intent of the Federal requirements. It did not immediately 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. Federal regulations required the State to make independent 

estimates before receiving bids or proposals. They also required the State to perform a cost analysis.

The State needed to fully demonstrate that the budgeted contract amount was fair and reasonable and 

that the $23 million it had disbursed under the contract was adequately supported. The State had begun 

taking corrective actions and providing documentation to resolve these deficiencies. HUD needs to assess the 

documentation to determine the appropriateness of all contract costs.

OIG recommended that HUD determine whether corrective actions and documentation provided by 

the State are adequate to show that (1) the overall contract price was fair and reasonable, (2) $19.5 million 

disbursed under the contract for marketing costs was fair and reasonable, and (3) $3.5 million disbursed under 

the contract for labor costs was allowable and supported or direct the State to repay HUD from non-Federal 

funds for any amount it cannot support. (Audit Report: 2014-PH-1008)

HUD OIG audited the disaster recovery programs of the State of Vermont, Department of Housing and 

Community Development, Montpelier, VT, to determine whether the State administered its disaster recovery 

programs effectively and efficiently in accordance with applicable regulations; specifically, whether it (1) had the 

capacity to administer its disaster programs, (2) established and implemented controls to ensure that program 

activities were adequately documented and administered, and (3) expended funds for eligible activities.

The State expended funds for eligible activities; however, it did not always administer its CDBG-DR1 

and -DR2 programs effectively and efficiently in accordance with all program requirements. Specifically, 

it did not (1) have the staffing capacity to administer its disaster recovery programs in accordance with 

all program requirements, (2) submit all quarterly performance reports in a timely manner, (3) perform 

adequate monitoring or oversight of funded activities, (4) follow HUD requirements regarding substantial 

and nonsubstantial amendments to action plans, and (5) correct discrepancies contained in quarterly 

progress reports submitted by subrecipients. As a result, there is a risk that the program mission will not be 

accomplished and that obligated CDBG-DR2 funding of $13.2 million will not be expended by the deadline 

of December 10, 2015. In addition, HUD lacked assurance that the State and its subrecipients complied with 

laws, regulations, grant agreements, and program requirements.

OIG recommended that HUD require the State to (1) determine the portion of the Disaster Recovery grant 

funds that it believes will not be expended by the December 10, 2015, deadline and request a waiver from 

HUD for an extension and (2) hire additional staff sufficient to ensure that its disaster recovery programs are 

administered effectively. (Audit Report: 2014-BO-1004)

HUD OIG audited the State of Texas, CDBG-DR program, based on a hotline complaint, to determine whether 

the State (1) ensured that the contractor limited the award of CDBG-DR funds to eligible homeowners and 

homes, (2) ensured that the contractor met critical performance benchmarks in the Lower Rio Grande Valley 

Development Council’s housing programs, and (3) adequately monitored the Development Council’s housing 

programs.
39

Except for assisting ineligible homes, the allegations in the complaint were unsubstantiated. The 

State, the Development Council, and its contractor generally ensured that homeowners met most eligibility 

requirements, and they supported the homes’ costs. However, (1) the State’s contractor did not adequately 

document Hurricane Dolly damages for 15 assisted homes costing $1.6 million; (2) the contractor’s 15 

inspections did not clearly show the damage or identify the repairs needed that were related to Hurricane 

Dolly as required; and (3) the contractor did not perform its inspections in a timely manner, performed the 

inspection as the last step in the eligibility process, and did not use the Federal Emergency Management 

Agency or other sources to verify Hurricane Dolly damage. The State could fund at least 84 ineligible 

homeowners, costing at least $8.6 million, if its contractor does not correct the inspection process.

The State also did not ensure that its contractor met critical performance benchmarks. In addition, the 

contractor appeared to have capacity issues, and its subcontractor did not appear to adequately staff the 

program. As result, the contractor had missed all of its benchmarks and had constructed only 137 (17 percent) 

of the 815 estimated homes required to be completed.

OIG recommended that HUD require the State to (1) repay HUD for the homes that were not eligible for 

assistance, (2) ensure that the contractor adequately inspects for and documents Hurricane Dolly damage, 

(3) monitor its contractor, and (4) continue to withhold payments until the contractor meets its benchmarks. 

(Audit Report: 2014-FW-1004)

INVESTIGATION

PROGRAM RESULTS

Administrative-civil actions 0

Convictions-pleas-pretrial diversions 3

Financial recoveries $474,395

FORMER EXECUTIVE DIRECTOR GUILTY OF RECEIVING KICKBACKS

A former executive director of New Orleans Affordable Homeownership, an agency that pled guilty in U.S. 

District Court to conspiracy to commit theft from an agency receiving Federal funds. 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. The total loss to HUD is approximately 

$400,000. This investigation was conducted by HUD OIG, the Federal Bureau of Investigation, the Internal 

Revenue Service – Criminal Investigations, the U.S. Postal Inspection Service, and the City of New Orleans OIG.

(New Orleans, LA)

CHAPTER FIVE DISASTER RELIEF PROGRAMS
40

SEMIANNUAL REPORT TO CONGRESS

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 7 Audits - -

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

significant audits are discussed below.

REVIEW OF HUD’S COMPLIANCE WITH THE IMPROPER PAYMENTS 

INFORMATION ACT OF 2002

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). IPERA was enacted to 

eliminate and recover improper payments by requiring agencies to identify and report on programs that are 

susceptible to significant improper payments. IPERA also requires each agency’s Inspector General to perform 

an annual review of the agency’s compliance with IPERA. The audit objectives were to (1) determine HUD’s 

compliance with IPERA reporting and improper payment reduction requirements and (2) determine whether 

corrective action plans addressed the root causes of HUD’s improper payments and were effectively implemented.

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 the prevention, detection, and recovery of improper payments due to rent 

component and billing errors, which are root causes identified by HUD’s contractor studies. 

OTHER SIGNIFICANT AUDITS 

AND INVESTIGATIONS

SIX
41

CHAPTER SIX OTHER SIGNIFICANT AUDIT AND INVESTIGATIONS

OIG recommended that HUD (1) enhance its IPERA reporting process to ensure that it accurately reports 

on its improper payments and actions it took to reduce and recover improper payments and (2) reassess its 

supplemental measures and corrective actions to ensure that they target all root causes of error identified in 

the quality control studies. (Audit Report: 2014-FO-0004)

REVIEW OF ANTIDEFICIENCY ACT

HUD OIG reviewed two Intergovernmental Personnel Act (IPA) agreements, as part of a joint assignment 

with OIG’s Office of Investigation and Office of Legal Counsel, to determine whether HUD violated the 

Antideficiency Act (ADA) when it obtained the services of two people through IPA agreements.

During the review, there were potential ADA violations with one of the agreements. Specifically, HUD 

incorrectly used more than $620,000 in Office of Public and Indian Housing and Office of Housing-Federal 

Housing Commissioner personnel compensation funds to pay the salary of a senior advisor to the HUD 

Secretary. Additionally, HUD paid more than the agreement allowed and made payments without an 

agreement in place. HUD did not have procedures in place to prevent these potential ADA violations.

OIG recommended that HUD take appropriate actions to investigate, resolve, and report the 

potential ADA violations. Further, HUD should implement controls to prevent future occurrences. (Audit 

Memorandum: 2014-FW-0801)

REVIEW OF HUD’S COMPLIANCE WITH THE USER FEE REQUIREMENTS

HUD OIG audited HUD’s fiscal year 2013 compliance with the user fee requirements in Office of Management 

and Budget Circular A-25 and the Chief Financial Officers (CFO) Act of 1990 to determine whether HUD 

complied with the user fee requirements of the CFO Act and Circular A-25.

HUD had not always implemented its user fee policy in HUD CFO Handbook 1830.6, REV-1, which is 

designed to comply with Circular A-25 and CFO Act requirements for user fee reviews. HUD did not consider 

other user fees material in comparison to primary collections from insurance fees and loan guarantee fees 

at the Federal Housing and Administration and the Government National Mortgage Association. As a result, 

HUD may not recover potential fee revenue from beneficiaries of its programs.

OIG recommended that HUD implement HUD CFO Handbook 1830.6, REV-1; publish a user fee schedule; 

and address HUD’s user fees in its CFO report. HUD planned to implement the HUD CFO Handbook 1830.6, 

REV-1, procedures in its next budget process. (Audit Report: 2014-KC-0006)

INVESTIGATION SPECIAL REPORTS

DATA MATCHING MAKING AN IMPACT

HUD OIG’s Office of Investigation routinely provides investigative assistance to the National Center for 

Missing and Exploited Children (NCMEC). Using data-matching techniques, HUD OIG assists NCMEC in 

locating missing children and sexual predators. This well-maintained relationship significantly improves the 

safety of the Nation’s communities and the families living in them.

NCMEC provides HUD OIG with access to several databases containing the names of thousands 

of missing children and convicted or absconded sex offenders. To identify any missing children or sex 

offenders in HUD-funded housing, HUD OIG routinely compares the names in the NCMEC database with 

the names in HUD records.
42

SEMIANNUAL REPORT TO CONGRESS

In September 2013, HUD OIG identified an unregistered sex offender who was residing in a HUDsubsidized apartment in southern Georgia. OIG’s regional office in Atlanta, GA, investigated the case, which 

led to the sex offender’s arrest and prosecution.

On May 7, 2014, the subject was indicted by a Federal grand jury for failure to register as a sex offender, 

a felony punishable by up to 10 years in prison. Additionally, the subject was sentenced to 20 years in State 

prison after local police arrested the subject for a shooting.

In a separate case in February 2014, HUD OIG identified an 11-year-old boy who was the victim of 

an interstate parental kidnapping. OIG investigated the case at the regional level in Nevada to verify the 

child’s identity.

The Nevada office obtained information from the local records and confirmed his identity. Working with 

local authorities, the regional office ensured the child’s welfare and allowed the local authorities to begin the 

complicated process of resolving the child’s custody.

HUD OIG is dedicated to detecting and deterring fraud and criminal activities throughout all Department 

programs. The diligent work of the Office of Investigation significantly impacts the way the Department does 

business and the security of the families living within the Nation’s communities.

Exterior of Cedars Pointe complex in state of disrepair

GREAT COUNTRY MORTGAGE BANKERS

The Great Country Mortgage Bankers (GCMB) 

was a Federal Housing Administration (FHA) 

direct endorsement lender headquartered in Coral 

Gables, FL, responsible for originating several 

thousand FHA loans over several years. The GCMB 

president had many other affiliated corporations, 

including Great Country Title Services (GCTS) and 

ERA Great Country Real Estate (GCRE). The GCMB 

president is also a partner and principal in several 

limited liability companies that were responsible 

for “condo conversions” in the South Florida 

area. Condominium conversion is the process 

of converting rental apartments to individual 

condominiums, which are then made available 

for sale to the public. GCMB was the sole lender 

for these condominium complexes, in which the 

vast majority of the units were sold and financed 

with FHA-insured loans. GCTS was the sole title 

company for these transactions. 

The GCMB president had business arrangements with other investors, who were officers of other limited 

liability companies responsible for other “condo conversions” in the south and central Florida areas. For those 

conversions, GCMB was the sole lender, and GCTS conducted the closings for most of them. Most of those 

condominium purchases were financed with FHA-insured loans. In almost every instance, seller-funded 

Copyright 2014, National Center for Missing and 

Exploited Children, Reprinted with permission
43

CHAPTER SIX OTHER SIGNIFICANT AUDIT AND INVESTIGATIONS

downpayment assistance was provided via a nonprofit entity, and a “buy down” agreement was in place, 

whereby the seller paid to lower the buyer’s interest rate temporarily. 

When the investigation began in 2008, GCMB had the highest default rate of any FHA lender in the Nation.

Soon after the investigation started, HUD terminated GCMB’s FHA approval, and the company was essentially 

dissolved. The initial investigative focus was on three condominium conversion complexes: Cedars Pointe, 

Dadeland Place, and The Courts of Oakland Park. It quickly expanded to include many others as the scope 

of the fraud became apparent. Based upon information provided by HUD, GCMB originated loans in 40 

condominium complexes, at least 10 of which the GCMB president either owned or had a financial interest 

in. The investigation uncovered that borrowers were given undisclosed financial incentives to purchase 

condominium homes in buildings where the president had a financial interest. The undisclosed incentives 

were paid either directly by one of the developers or partners or through GCRE as a purported refunded 

real estate commission. Allegedly, the GCRE refunds were a vehicle for the president to pay incentives 

to borrowers. In addition, borrowers’ incomes were routinely inflated or their employment information 

fabricated. Fraudulent verification of employment forms and other supporting documents were created and 

submitted to HUD. Investigators determined that it was common at GCMB for loan officers and processors to 

work together to qualify borrowers and that underwriters allegedly participated in or were aware of the activity.

Twenty-five individuals have been charged in this investigation. These include the president and chief 

executive officer of GCMB, 3 partner developers, and 20 former employees of GCMB (5 loan processors, 3 

underwriters, and 12 loan officers). One recruiter was also charged. Fourteen individuals have pled guilty. 

The following is a summary of FHA loan defaults and claims for GCMB:

• Approximately 2,400 FHA loans were originated by GCMB from 2006 to 2008 ($467 million).

• Approximately 1,480 claims were paid, resulting in at least $165 million in losses to HUD-FHA.

• Approximately 380 of those claims resulted in loss amounts that have not yet been determined.

There are approximately 760 actively insured loans (the majority of which are in default) with an unpaid 

principal balance of $136 million. 

Interior hallway showing the state of disrepair
44

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, 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

STRATEGIC INITIATIVE 2: CONTRIBUTE TO THE REDUCTION OF ERRONEOUS 

PAYMENTS IN RENTAL ASSISTANCE

PROGRAM RESULTS

Civil actions 8

Recoveries and receivables to HUD programs 

or HUD program participants $919,944,703

Recoveries and receivables for other entities $646,753,5475

SEVEN JOINT CIVIL FRAUD INITIATIVES

5 This amount represents funds that relate to HUD programs but were paid to other entities and not paid directly to HUD, such 

as fees paid to the U.S. Treasury for general Government purposes and amounts retained by the U.S. Department of Justice 

under 28 U.S.C. (United States Code) Part 527. This amount does not include an additional $8.9 billion derived from these 

cases that benefited other entities but was not related to HUD programs.
45

CHAPTER SEVEN JOINT CIVIL FRAUD INITIATIVES

SINGLE FAMILY

BANK OF AMERICA SETTLED ALLEGATIONS OF FAILING TO COMPLY WITH FHA LOAN 

REQUIREMENTS

HUD OIG assisted the U.S. Department of Justice, U.S. Attorney’s Office, Eastern District of New York, in 

conducting an investigation of Bank of America’s origination of mortgage loans insured by the Federal Housing 

Administration (FHA) from May 1, 2009, through March 31, 2012. On August 20, 2014, Bank of America of 

Charlotte, NC, entered into a settlement agreement to pay $16.65 billion, of which $9.65 billion was to resolve 

pending potential legal claims. Of the $9.65 billion, Bank of America agreed to pay $800 million to settle its 

submission of claims through December 31, 2013, for FHA loans it originated on or after May 1, 2009. Of the 

$800 million attributable to FHA’s direct endorsement lender program, the FHA insurance fund was to receive 

$437.6 million, with the remaining $362.4 million going to other Federal agencies. (Memorandum: 2014-FW1808; Office of Audit Region 6, Joint Civil Fraud Division)

JPMORGAN CHASE SETTLED ALLEGATIONS OF FAILING TO COMPLY WITH FHA 

LOAN REQUIREMENTS

HUD OIG assisted the U.S. Attorney’s Office, Southern District of New York, in conducting an investigation of 

JPMorgan Chase Bank, N.A., and JPMorgan Chase & Co. (Chase), of New York, NY. The investigation began due 

to a qui tam filing in the U.S. District Court for the Southern District of New York. The False Claims Act allows 

private persons to file suit for violations of the False Claims Act on behalf of the Government. A suit filed by 

an individual on behalf of the Government is known as a qui tam action, and the person bringing the action is 

referred to as a “relator.”

On February 4, 2014, the U.S. Attorney’s Office of the Southern District of New York filed suit against Chase 

for not complying with FHA requirements based in part on OIG’s review of the underwriting and refinancing 

of FHA loans. The U.S. Attorney’s Office sought damages and civil penalties under the False Claims Act and 

common law. The lawsuit alleged that during the period January 1, 2002, through February 4, 2014, Chase 

routinely approved loans for FHA insurance and refinancing that did not meet applicable underwriting 

requirements and were, therefore, ineligible for insurance. However, FHA had insured the loans based on per 

loan certifications submitted by Chase that it had complied with FHA requirements when underwriting the 

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

On the same date, February 4, 2014, Chase entered into a settlement agreement to pay $614 million to 

end the lawsuit. Of the settlement total, $564.6 million was attributable to FHA’s direct endorsement lender 

program. The FHA insurance fund was to receive $336 million of the $564.6 million before incurring related 

costs, and the remaining $228.6 million was to be remitted to other Federal entities and the relator. As part of 

the settlement, Chase admitted, acknowledged, and accepted responsibility for certain conduct and agreed 

to comply with all rules of HUD’s direct endorsement lender program and implement an enhanced quality 

control program to review FHA loans that it underwrites using TOTAL (a HUD program that works with lender 

underwriting programs to assess the credit worthiness of FHA borrowers). (Memorandum: 2014-CF-1807; 

Joint Civil Fraud Division, Office of Investigation Region 2)
46

SEMIANNUAL REPORT TO CONGRESS

U.S. BANK SETTLED ALLEGATIONS OF FAILING TO COMPLY WITH FHA LOAN 

REQUIREMENTS

HUD OIG, in conjunction with HUD, the U.S. Department of Justice, and the U.S. Attorney’s Offices for the 

Eastern District of Michigan and Northern District of Ohio, conducted a joint investigation of U.S. Bank National 

Association’s loan originations, underwriting practices, and quality control program for FHA-insured loans.

On June 30, 2014, U.S. Bank of Minneapolis, MN, entered into a settlement agreement to pay $200 million.

Of the settlement total, the FHA insurance fund received nearly $144.2 million before incurring related costs. As 

part of the settlement, U.S. Bank agreed that it engaged in certain conduct in connection with its origination, 

underwriting, quality control, and endorsement of single-family residential mortgage loans that were insured 

by FHA on or after January 1, 2006, and endorsed by U.S. Bank on or before December 31, 2011, and resulted 

in claims submitted to HUD. (Memorandum: 2014-CH-1801; Office of Audit Region 5, Office of Investigation 

Region 5, Joint Civil Fraud Division)

REUNION MORTGAGE SETTLED ALLEGATIONS OF FAILING TO COMPLY WITH FHA 

LOAN REQUIREMENTS

HUD OIG assisted the U.S. Attorney’s Office of the Northern District of California in the civil investigation 

of Reunion Mortgage, Inc. Reunion is a former FHA-approved mortgage lender, with its principal place 

of business located in Milpitas, CA. Based in large part on OIG’s review of loans underwritten by Reunion 

between December 2007 and October 2009, the U.S. Attorney’s Office filed a civil complaint against Reunion 

under the False Claims Act, multiple common law theories, and the Federal Debt Collection Procedures Act.

The initial complaint alleged that Reunion engaged in reckless underwriting of certain loans and falsely 

certified to FHA that those loans met HUD’s requirements and were eligible for FHA insurance. The complaint 

further alleged that FHA relied on Reunion’s certifications when insuring the loans, and as the borrowers on 

those loans defaulted, FHA incurred losses that it should not have incurred. The U.S. Attorney’s Office later 

amended its complaint and further alleged that Reunion improperly issued dividends to its former co-owners 

that rendered the company insolvent and unable to pay its debts to the United States in violation of the 

Federal Debt Collections Procedures Act.

On May 16, 2014, Reunion and its former co-owners entered into a settlement agreement to pay $1.04 

million to settle allegations that the company submitted false claims to FHA in violation of the False Claims 

Act, multiple common law theories, and the Federal Debt Collection Procedures Act. (Memorandum: 2014-

CF-1810; Joint Civil Fraud Division)
47

MULTIFAMILY HOUSING

NDC REAL ESTATE MANAGEMENT SETTLED ALLEGATIONS OF FALSIFYING 

OR MODIFYING RECORDS AND DOCUMENTS TO MAXIMIZE SECTION 8 HOUSING 

ASSISTANCE PAYMENTS

HUD OIG assisted the U.S. Attorney’s Office for the Eastern District of Kentucky in the investigation of NDC 

Real Estate Management, Inc. The investigation began due to a qui tam filing in the U.S. District Court for 

the Eastern District of Kentucky. The relator alleged that NDC falsified or modified records and documents to 

maximize the amount of rental subsidies, known as Section 8 housing assistance payments, received by the 

project owners of two properties located in Richmond, KY.

HUD distributes Federal funds through its Section 8 program to assist qualified individuals in obtaining 

housing. The Section 8 program provides rental subsidies in the form of housing assistance payments to 

multifamily rental property owners and is administered on HUD’s behalf by local public housing agencies. The 

Kentucky Housing Corporation administers the program for Kentucky. The housing corporation processed 

the subject project owners’ requests for assistance payments that NDC had submitted on the project owners’ 

behalf and that NDC had remitted to the project owners. Between January 2007 and December 2012, the 

housing corporation made assistance payments of more than $4 million for the Richmond properties.

Based in part on OIG’s investigation of the project owners’ requests for assistance payments and the 

supporting documentation, the U.S. Attorney’s Office contended that the Unites States had civil claims 

against NDC under the False Claims Act. These civil claims arose from NDC’s alleged falsification or wrongful 

modification of the project owners’ requests for assistance payment forms and the supporting documentation 

in an attempt to maximize the amount of assistance payments for the Richmond properties. On August 

4, 2014, NDC agreed to settle and pay HUD $750,000. The parties also agreed that the settlement did not 

constitute an admission of any liability or fault on the part of either NDC, the project owners, or others named. 

(Memorandum: 2014-CF-1808; Joint Civil Fraud Division, Office of Investigation Region 4)

CHAPTER SEVEN JOINT CIVIL FRAUD INITIATIVES
48

SEMIANNUAL REPORT TO CONGRESS

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 738 hours to reviewing 114 issuances. The draft directives 

consisted of 54 notices, 13 mortgagee letters, and 47 other directives. OIG provided comments on 41 (or 36 

percent) of the issuances and provided 4 nonconcurrences. A summary of selected reviews for this 6-month 

period is below. 

NOTICES, POLICY ISSUANCES, AND FINAL RULES

OFFICE OF SINGLE FAMILY HOUSING

Reverse mortgage – The Federal Housing administration (FHA) has been making needed changes to the 

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

letters (1) addressing the due and payable status when there is a nonborrowing spouse at the time of 

closing, (2) prohibiting misleading or deceptive advertising, (3) limiting the insurability of fixed-interest-rate 

mortgages with the single disbursement lump-sum payment option, and (4) announcing new principal limit 

factors. 

Of these four 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 through two mortgagee letters. 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 provision will eliminate the 

need for these nonborrowing spouses, including common law spouses, to refinance the reverse mortgage 

upon the death of the borrower. FHA intends to publish a rule for notice and comment that will revise its 

existing regulations to codify these revisions or to make such other or alternative changes as may then seem 

appropriate. 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 

U.S. Department and Housing and Urban Development (HUD) and the lender are adequately protected. 

FHA issued Mortgagee Letter 2014-11 to limit program risk from new variants of fixed-interest-rate 

options. The financial impact and operational difficulties posed by the statutory guarantee of payment by FHA 

LEGISLATION, REGULATION,

AND OTHER DIRECTIVES

EIGHT
49

on these products has led FHA to conclude that it can no longer insure fixed-interest-rate reverse mortgages 

that provide the borrower with options for ongoing monthly payments. Effective for reverse mortgages 

insured on or after June 25, 2014, FHA will limit insurance of fixed-rate mortgages under the reverse mortgage 

program to mortgages with a single disbursement payment option.

Single-family lender handbook – OIG also 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 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. OIG initially nonconcurred on the maximum combined 

loan-to-value limit. In response, FHA clarified that the current requirement of limiting the loan-to-value 

ratio to 125 percent when refinancing a loan prohibits borrowers from accessing the benefits of the loan 

modification programs. 

OFFICE OF COMMUNITY PLANNING AND DEVELOPMENT

Various waivers – OIG reviewed the fifth Notice on Clarifying Guidance, Waivers, and Alternative Requirements 

for Grantees in Receipt of Community Development Block Grant Disaster Recovery Funds Under the Disaster 

Relief Appropriations Act of 2013. After the review, HUD published a Federal Register notice on June 3, 2014, 

announcing additional funding of $436.6 million for the most impacted and distressed areas in Colorado, 

Illinois, and Oklahoma. This notice also granted a waiver to the State of Colorado to allow it to use up to 

$500,000 to support its tourism industry and promote travel to communities in the flood-impacted areas. This 

waiver had a significant impact as tourism is the primary economic contributor to the State economy and 

provides a valuable source of business revenue, taxes, and employment. 

On October 7, 2014, HUD issued an additional waiver for the City of Minot, ND, modifying the 

requirement that the City comply with Section 414 of the Stafford Act. The Department has determined that 

without a statutory waiver and the establishment of alternative requirements, the City is unlikely to achieve 

its goals of contributing to the restoration of its affordable housing stock. The 2011 flood damaged 20 to 

30 percent of the rental housing stock that was concentrated in an area that had the highest percentage of 

affordable housing. According to the City, 2,328 households were displaced as a result of the flood, and 2,062 

were provided with temporary housing, but only 20 households continue to reside in temporary housing 

units assisted through other programs with other forms of assistance. The destruction has contributed to an 

increase in housing cost burden for nearly half of all rental households. The waiver will prevent a violation of 

duplicating insurance proceeds for tenants moving into the rehabilitated housing.

OFFICE OF MULTIFAMILY HOUSING

Tenant participation - The Department issued Housing Notice 2014-12 on September 4, 2014, to implement 

the tenant participation requirements in accordance with 24 CFR (Code of Federal Regulations) Part 245 and 

specifically added the procedures for appealing findings of complaints filed with the hub or program center. 

Such requirements reflect the Department’s commitment to tenant participation individually and through 

legitimate tenant organizations. The Department believes that tenant participation is an important element in 

maintaining sustainable projects and communities.

Capturing excess bond proceeds – This final rule, effective August 28, 2014, amended HUD’s regulations 

addressing reimbursement to FHA of excess bond proceeds. When a lender finances mortgages through the 

issuance and sale of bonds or through bond anticipation notes, the lender uses the funds from the payment 

CHAPTER EIGHT LEGISLATION, REGULATION, AND OTHER DIRECTIVES
50

SEMIANNUAL REPORT TO CONGRESS

of a mortgage insurance claim to pay off the remaining bond debts. At times, the amount paid by the FHA 

multifamily insurance claim was greater than the remaining bond debts. This final rule required lenders that 

finance a project using a project-specific trust indenture agreement to include language in the trust indenture 

to require that excess bond funds be returned to FHA. HUD requires similar payments of excess bond funds 

on obligations of public housing agencies; thus, the final rule provides consistency in the administration of the 

Department’s bond-financed mortgages.

Section 207 refinancing – This final rule, which became effective on August 20, 2014, amended HUD’s 

regulations governing the eligibility for FHA insurance of mortgages used for the purchase or refinancing of 

existing Section 207 cooperatives under section 223(f) of the National Housing Act. Although the statutory 

language authorizing such insurance did not distinguish between rental and cooperative multifamily projects, 

HUD’s regulations limited FHA insurance to existing rental projects. Given the significant needs identified 

for multifamily cooperative financing, the Department determined that it was appropriate to reconsider the 

regulatory imposed limitation. Accordingly, this rule revised HUD’s regulations to enable existing multifamily 

cooperative project owners to obtain FHA insurance for the refinancing of existing indebtedness.

OFFICE OF HEALTHCARE PROGRAMS 

Reporting requirements – The Department published an interim rule on September 16, 2014, which revised 

the financial reporting deadlines for operators of healthcare facilities. This rule brought them in line with 

the reporting periods prescribed in HUD’s Uniform Financial Reporting Standards, to which owners and 

borrowers of these properties are subject. The interim rule increased the amount of time operators have to 

comply with the reporting requirements. The interim rule provided that operators would have an additional 

30 calendar days or 60 calendar days following the end of a fiscal quarter and 90 calendar days following the 

end of the fiscal yearend to comply with HUD’s financial statement reporting requirements. 
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CHAPTER NINE 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 START OF PERIOD WITH 

NO MANAGEMENT DECISION AS OF SEPTEMBER 30, 2014

HUD LACKED ADEQUATE CONTROLS TO ENSURE THE TIMELY COMMITMENT AND 

EXPENDITURE OF HOME FUNDS, ISSUE DATE: SEPTEMBER 28, 2009

HUD OIG audited HUD’s HOME Investment Partnerships Program (HOME). The OIG report included 

a recommendation that the HUD Office of Community Planning and Development (CPD) establish and 

implement controls to ensure that field offices require participating jurisdictions to close out future HOME 

activities within a timeframe that will permit reallocation and use of the funds for eligible activities in time to 

avoid losing them to recapture by the United States Treasury under provisions of Public Law 101-510.

Since the report’s issuance, management has issued three proposals on how to address recommendation 

1D, with the latest proposal being presented on August 27, 2012. OIG rejected all three management decisions 

proposed by CPD to address the recommendation because they did not provide for the establishment and 

implementation of all of the controls needed to address the recommendation. 

A portion of the recommendations dealt with the first-in, first-out (FIFO) issue, on which OIG submitted 

a request to the U.S. Government Accountability Office (GAO) for an opinion. OIG received a response to 

that opinion on July 17, 2013. While both HUD and OIG agreed to wait on the final opinion from GAO before 

responding to the issues noted during the audit for recommendations 3A, 3B, and 3C, no agreement was 

reached in relation to recommendation 1D, which also addressed FIFO issues. This issue was referred to the 

Acting Assistant Secretary on March 28, 2014, and the decision was pending as of September 30, 2014. 

On June 5, 2014, HUD CPD entered its proposed management decisions for HUD OIG Audit Report 2014-

FO-0003. HUD OIG concurred on the proposed management decisions with HUD’s understanding that the 

NINE AUDIT RESOLUTION
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SEMIANNUAL REPORT TO CONGRESS

effects of not removing the FIFO methodology retroactively will have implications on future years’ financial 

statement audit opinions until the impact is assessed to be immaterial. HUD OIG found this methodology 

to be a departure from Federal generally accepted accounting principles (GAAP). OIG will also continue to 

report that HUD is not in compliance with laws and regulations until the cumulative method is no longer 

used (prospectively and retroactively) to determine whether commitment deadlines required by the HOME 

Investment Partnership Act are met by the grantees. 

Since an agreement has been reached on HUD OIG Audit Report 2014-FO-0003, recommendations 1A, 1B, 

1C, 15A, 15B, and 15C, which would affect recommendation 1D in this audit, HUD OIG is researching the best 

way to account for this recommendation. (Audit Report: 2009-AT-0001)

THE CITY OF WEST PALM BEACH DID NOT ALWAYS PROPERLY ADMINISTER ITS 

HOME PROGRAM, ISSUE DATE: SEPTEMBER 30, 2013

HUD OIG audited the City of West Palm Beach’s HOME program to determine whether the City administered 

its HOME program in accordance with applicable HUD requirements.

The City did not always administer its HOME program in accordance with applicable HUD requirements. 

Specifically, it did not properly commit HOME funds or accurately report activity information in HUD’s 

Integrated Disbursement and Information System (IDIS). These conditions occurred because the City did not 

enforce HUD’s 24-month commitment deadline requirement and did not have effective procedures to ensure 

that it reported current and accurate information in IDIS. This deficiency resulted in nearly $560,000 in HOME 

funds not being properly committed because activities were committed after the 24-month deadline, and two 

activities totaling $1 million were canceled, but the funds were not made available for other eligible HOME 

activities.

In addition, the City did not ensure that it charged adequately supported and eligible expenditures to the 

program. These expenditures were related to project delivery and operating costs. This condition occurred 

because City staff did not exercise due care in reviewing and supporting the City’s expenditures. As a result, 

the City charged the HOME program more than $1.2 million in unsupported costs and nearly $230,000 in 

ineligible costs.

Among other things, OIG recommended that HUD require the City to (1) recapture more than $559,000 in 

HOME funds that it did not commit by the 24-month statutory deadline (recommendation 1A), (2) recapture 

more than $157,000 in remaining HOME funds for activities not committed by the 24-month statutory 

deadline (recommendation 1B), and (3) reprogram more than $28,000 in remaining funds and deobligate 

nearly $43,000 for funds not expended by the 5-year deadline (recommendation 2C). 

HUD disagrees with OIG on recommendations 1A, 1B, and a portion of 2C related to the expenditure 

deadline. Regarding recommendations 1A and 1B, HUD states that the method used to determine 

compliance with the statutory HOME 24-month commitment requirement is detailed at 24 CFR (Code of 

Federal Regulations) 92.500(d)(2). Further explanation of this method is found in HUD Notice CPD 07-

06, Commitment, CHDO [community housing development organization] Reservation, and Expenditure 

Deadline Requirements for the HOME Program (June 1, 2007). While HUD understands that its method of 

determining compliance was recently found by GAO to be noncompliant with the statutory language found 

in section 218(g) of Title II of the Cranston-Gonzalez National Affordable Housing Act, as amended, HUD is 

making regulatory and systematic changes that will allow HOME participating jurisdictions to fully comply 

with the HOME statutory commitment requirement in the future. At the time the participating jurisdiction 

committed funds to the activities identified by OIG in finding 1, it was found to be in compliance with the 

HOME regulation at 24 CFR 92.500(d)(2). HUD cannot hold HOME participating jurisdictions accountable 

for requirements that are not set forth in regulation or guidance, especially when the participating jurisdiction 

was determined by HUD to be in compliance with the current regulation and guidance. 
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Regarding recommendation 2C, HUD agrees that the City must reprogram more than $28,000 in 

remaining funds for completed activity 699. However, HUD does not agree that nearly $43,000 in unexpended 

funds should be deobligated based on the rationale provided for recommendations 1A and 1B. 

OIG rejected HUD CPD’s proposed management decisions on March 12, 2014. OIG rejected the 

management decisions because at that time, HUD had not provided proposed corrective action on HUD 

OIG Audit Report 2014-FO-0003, recommendations 1A, 1B, 1C, 15A, 15B, and 15C, which address how HUD’s 

cumulative method for determining compliance and the FIFO method of accounting for grants violated 

statutes and Federal GAAP. Any corrective action provided needs to take into account the FIFO effect on past 

grants and its impact on the funding of the grantees. Thus, OIG cannot accept any management decision that 

does not take into account the corrective action the Department plans to take to address GAO’s and the Office 

of Management and Budget’s (OMB) decision. These issues were referred to the General Deputy Assistant 

Secretary on March 31, 2014. 

On June 5, 2014, HUD CPD entered its proposed management decisions for HUD OIG Audit Report 2014-

FO-0003. HUD OIG concurred on the proposed management decisions with HUD’s understanding that the 

effects of not removing the FIFO methodology retroactively will have implications on future years’ financial 

statement audit opinions until the impact is assessed to be immaterial. HUD OIG found this methodology to 

be a departure from Federal GAAP. We will also continue to report that HUD is not in compliance with laws 

and regulations until the cumulative method is no longer used (prospectively and retroactively) to determine 

whether commitment deadlines required by the HOME Investment Partnership Act are met by the grantees. 

Since an agreement has been reached on HUD OIG Audit Report 2014-FO-0003, recommendations 1A, 

1B, 1C, 15A, 15B, and 15C, which would affect recommendations 1A, 1B, and 2C in this audit, HUD OIG is 

researching the best way to account for these recommendations. (Audit Report: 2013-AT-1008)

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. 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 

GAAP. HUD OIG also reported that there were not sufficient internal controls over the process in place 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 the 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, the Department issued three proposals on how to address recommendation 

2C on March 31, 2014, April 17, 2014, 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. 

This issue was referred to the Assistant Secretary on June 19, 2014, and a 30-day extension was requested 

due to a change in leadership. The request was granted; however, a new proposal had not been made as of 

September 30, 2014. This issue was referred a second time to the Assistant Secretary on September 25, 2014. 

(Audit Report: 2014-FO-0003)
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SEMIANNUAL REPORT TO CONGRESS

THE BOSTON OFFICE OF PUBLIC HOUSING DID NOT PROVIDE 

ADEQUATE OVERSIGHT OF ENVIRONMENTAL REVIEWS OF THREE HOUSING 

AGENCIES, INCLUDING REVIEWS INVOLVING RECOVERY ACT FUNDS, ISSUE 

DATE: FEBRUARY 2, 2014

HUD OIG audited the Boston Office of Public and Indian Housing’s oversight of environmental reviews of 

three PHAs to determine whether the Boston Office’s oversight of public housing environmental reviews within 

its jurisdiction ensured that (1) the responsible entities performed the required reviews and (2) HUD did not 

release funds until all required documents were submitted.

The Boston Office did not provide adequate oversight of three PHAs to ensure that the responsible entities 

properly completed and documented environmental reviews. Further, it did not maintain sufficient internal 

control records. These conditions occurred because the Boston Office thought that CPD was responsible for 

monitoring responsible entities for compliance with requirements and because the Boston Office elected not 

to follow PIH guidance. As a result, three PHAs spent more than $85 million, including more than $39 million 

in American Recovery and Reinvestment Act of 2009 (ARRA) grant funds, for projects that either did not have 

required environmental reviews or the environmental reviews were not adequately supported. 

The Boston Office Did Not Provide Adequate Oversight To Ensure That the Responsible Entities Properly 

Completed Environmental Reviews for All Years.

Because the Boston Office did not provide adequate oversight, it did not determine that a contractor 

improperly performed environmental reviews for the Boston Housing Authority and made determinations 

of compliance with requirements. While a PHA may use consultants to perform a significant portion of the 

environmental review, only HUD or a responsible entity may perform the reviews and determine compliance 

with requirements. A responsible entity assumes responsibility for conducting the environmental reviews, 

decision making, and other actions that would otherwise apply to HUD under the National Environmental 

Policy Act of 1969 (NEPA) and other provisions of law that further the purposes of NEPA. The environmental 

review process consists of all actions that a responsible entity must take to determine compliance. The Boston 

Office did not determine that the City of Boston failed to meet the following regulatory requirements:

• Assume responsibility for decision making,

• Review consultant work to ensure proper compliance,

• Identify itself as the entity to receive public comments,

• Reevaluate substantial changes in projects,

• Maintain the environmental review record, and

• Inform HUD if it does not have the capacity to perform the environmental reviews for the PHA. 

The Boston Office did not maintain tracking logs or separate files for each PHA as required by HUD’s Field 

Office Environmental Review Guidance. The guidance required, at a minimum, maintaining tracking logs that 

detailed who performed the environmental reviews; whether the form HUD-7015.15, Request for Release of 

Funds and Certification, was received and cleared; and whether HUD performed the environmental reviews 

directly. The guidance further required maintaining a separate environmental file for each PHA. The Boston 

Office had one combined log that was most likely incomplete and not current and claimed that separate 

environmental review files were not necessary and the office did not maintain them. 

The Boston Office’s deputy director cited section A.1.h of a notice published in the Federal Register on 

May 30, 2012, that his office believed delegated the overall departmental responsibility for compliance with 

NEPA to CPD. However, according to the notice’s summary, its purpose was for the Assistant Secretary for 
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CHAPTER NINE AUDIT RESOLUTION

Community Planning and Development to redelegate to the Deputy Assistant Secretaries and other specified 

HUD officials all powers and authorities necessary to carry out CPD programs, except those powers and 

authorities specifically excluded. The notice did not delegate authority for CPD to conduct environmental 

reviews of PIH programs. Even if the notice had been interpreted to grant such authority, it was issued after 

most of the questioned environmental reviews should have been completed and certified. Thus, it would not 

have applied to the grants reviewed during the audit.

Because the environmental reviews did not comply with requirements, the PHAs incurred more than $85 

million in questioned costs, including more than $39 million in ARRA funds as detailed in table 1. 

TABLE 1: QUESTIONED COSTS

Year Boston Housing 

Authority

Nashua Housing 

Authority

New Bedford 

Housing 

Authority

Total

2009 ARRA funds $33,329,733 $1,169,494 $4,860,197 $39,359,424

2011 capital funds 21,478,604 874,261 3,154,021 25,506,886

2012 capital funds 17,058,105 728,596 2,989,066 20,775,767

Total $71,866,442 $2,772,351 $11,003,284 $85,642,077

OIG’s recommendations include requiring three PHAs to (1) repay HUD, for transmission to the U.S. 

Treasury, more than $4.8 million and provide support or repay more than $34 million in 2009 ARRA funds, 

(2) provide support for or repay HUD more than $45 million in Public Housing Capital Fund grant funds, and 

(3) take available actions against three PHAs and their responsible entities. To correct systemic weaknesses 

identified in this report, OIG will make recommendations to HUD headquarters officials in an upcoming 

nationwide audit report. 

At an exit conference on December 13, 2013, the Boston Office informed OIG that it disagreed with the 

recommendations in the audit report. On June 6, 2014, OIG received a nonconcurrence memorandum from 

the Acting Director of the Boston Office, stating that the Office’s position had not changed. He included 

an attachment in his response, which was a memorandum that the former Assistant Secretary for Public 

and Indian Housing sent to the Inspector General on April 29, 2014, stating that release of additional audits 

focusing on repayments threatens HUD’s position to support place-based determinations by potentially 

discouraging use of the Part 58 process. She requested that the Inspector General consider an elevated 

determination before more audits were publicly released. 

The Boston Office believes that CPD’s Office of Environment and Energy (OEE) is the delegated HUD 

office to monitor responsible entities performing environmental reviews. The Boston Office further believes 

that the responsible entities, not the PHAs, bear financial responsibility when environmental reviews are not 

properly completed. Regarding questioned expenditures identified in the audit, the Boston Office maintains 

that it has documentation supporting that environmental reviews were completed before the expenditure or 

release of funds to the PHAs. Further, the Boston Office stated in its response to the draft report that since the 
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SEMIANNUAL REPORT TO CONGRESS

record is clear, it can find no harm caused by the implementation of the capital projects associated with the 

grants cited in the report. It believes that the burden of proof that would be required to complete the actions 

recommended cannot be adjudicated by PIH since it is not delegated to act in this capacity.

Because OIG was unable to reach agreement with the Boston Office, it referred the matter to the Acting 

Assistant Secretary for Public and Indian Housing on July 22, 2014. On August 7, 2014, OIG met with the 

Acting Assistant Secretary for Public and Indian Housing and discussed the recommendations and possible 

resolution. On August 26, 2014, OIG received PIH’s management decisions on the actions it agreed to 

take to resolve the recommendations. PIH’s actions placed all of the responsibility on CPD OEE. In PIH’s 

management decisions, the Acting Assistant Secretary for Public and Indian Housing stated that PIH 

management decisions were to recommend concurring and closing the recommendations by referring the 

matter to OEE to perform compliance monitoring and take the actions necessary to enforce the requirements. 

Since PIH’s proposed resolution included another program office, OIG held a conference call on 

September 4, 2014, with the Director of OEE. The Director did not agree with PIH’s recommended actions. 

OEE does not believe that it owns all of the monitoring of responsible entities as each Assistant Secretary has 

a responsibility under the requirements. Further, OEE stated that the Office of Native American Programs 

does its own environmental monitoring and has provided PIH with examples of the monitoring process. OEE 

stated that PIH has responsibility for monitoring or training for environmental compliance. OEE stated that it 

will agree to take on a larger role in the process but cannot be the sole responsible department for all program 

areas as its resources are strictly from CPD and OEE has authority over only one program area, CPD.

OIG disagreed with PIH’s position. The Boston Office was unable to provide convincing documentation 

to support its assertion that CPD, more specifically OEE, was responsible for monitoring PHAs. While OEE 

has overall responsibility for environmental policy and procedures, this responsibility does not include 

implementation. As 24 CFR 50.10(a) states, it is the responsibility of all Assistant Secretaries, the General 

Counsel, and the HUD approving official to ensure that the requirements of this part are implemented. PIH 

has an Assistant Secretary who is responsible for ensuring implementation. Further, it has an environmental 

clearance officer whose role is to provide environmental compliance reviews.

The audit questioned PHA funding when the PHAs spent funds before or without an environmental 

review and when they could not provide adequate documentation to show that environmental reviews were 

properly completed. Further, the Boston Office files may contain certifications that the responsible entities 

performed environmental reviews, but the audit showed that they did not perform them or did not perform 

them correctly. OIG has not changed its position since the report was issued.

On September 30, 2014, OIG referred the recommendations to the Deputy Secretary because OIG could 

not resolve them with PIH. (Audit Report: 2014-FW-0001)

SIGNIFICANTLY REVISED MANAGEMENT DECISIONS

Section 5(a)(11) of the Inspector General Act, as amended, requires that OIG report information concerning 

the reasons for any significantly revised management decisions made during the reporting period. During the 

current reporting period, there were significantly revised management decisions on four audits.
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HUD SUBSIDIZED AN ESTIMATED 2,094 TO 3,046 HOUSEHOLDS THAT INCLUDED 

LIFETIME REGISTERED SEX OFFENDERS, ISSUE DATE: AUGUST 14, 2009

HUD OIG audited HUD’s requirement prohibiting lifetime registered sex offenders from admission to 

HUD-subsidized housing to determine the extent to which lifetime registered sex offenders occupied HUDsubsidized housing. OIG determined that HUD subsidized an estimated 2,094 to 3,046 households that 

included lifetime registered sex offenders. This number included individuals who were ineligible at the time 

of admission due to lifetime registration status, individuals who were admitted and convicted before the 

current law was enacted, and individuals who were eligible at the time of admission but later became lifetime 

registered sex offenders.

Among other things, OIG recommended that HUD urge properties to aggressively pursue termination 

of tenancy for lifetime sex offenders to the extent currently allowed by law, to include those who have lied on 

application or recertification forms or are otherwise excluded by property policy. In its original management 

decision, HUD agreed to issue a revised notice and create a lease addendum. On April 14, 2014, HUD 

submitted a revised management decision, stating that Housing Notice 2012-11, Handbook 4350.3, and 

existing language in the model lease covered the recommendation in full and made the previously proposed 

lease addendum duplicative and unnecessary.

OIG also recommended that HUD seek legislative changes and if legislative changes were passed, develop 

and implement a plan to detect lifetime registered sex offenders occupying subsidized housing, such as by 

matching the National Sex Offender Registry database to its own data and then following up on preliminary 

matches. In its original management decision, HUD stated that any legislation passed should contain 

language that allows HUD to send data from its systems to the National Crime Information Center to check 

for initial matches with the sex offender registry. On June 26, 2014, HUD submitted a revised management 

decision to close this recommendation without further action because the legislation submitted to OMB for 

consideration had not been acted on by Congress. 

On April 15, 2014, and June 27, 2014, OIG agreed with the revised significant management decisions and 

closed the recommendations. (Audit Report: 2009-KC-0001)

THE CITY OF EAST ST. LOUIS DID NOT PROPERLY ALLOCATE SALARY AND BUILDING 

EXPENSES OR PROPERLY DOCUMENT ITS PROCESS TO SECURE A CONSULTING 

SERVICES CONTRACT, ISSUE DATE: MARCH 26, 2010

HUD OIG audited the City of East St. Louis’ Community Development Block Grant (CDBG) program to 

determine whether the City properly expended CDBG funds for salaries and building expenses and followed 

proper procurement processes while awarding significant administration contracts. OIG determined that 

the City did not properly allocate salary and building expenses to the CDBG program. It also did not properly 

document the cost estimate and selection process used to procure a contract for developing its 5-year 

consolidated plan.

Among other things, OIG recommended that HUD require the City to provide supporting documentation 

showing that the funds paid for direct and indirect salary expenses were reasonable, necessary, allowable, and 

allocable to the CDBG program or reimburse its program nearly $918,000 from non-Federal funds. In addition, 

OIG recommended that HUD require the City to provide supporting documentation showing that the funds 

paid for the administration contract were reasonable and necessary or reimburse its CDBG program nearly 

$50,000 from non-Federal funds.

In its original management decision, HUD agreed to require the City to provide documentation 

of the amount that was reasonable for it to charge for administration for the past 5 years and repay the 

difference, if any. HUD also agreed to require the City to demonstrate that the amount it expended for 
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SEMIANNUAL REPORT TO CONGRESS

the administration contract was reasonable and reimburse its CDBG account for any amount determined 

to be unreasonable. HUD recently submitted a revised management decision documenting that the 

Deputy Secretary decided to exercise his discretion to not require repayment. Following the audit, HUD

took alternative corrective actions to address the City’s noncompliance and transferred full administrative 

responsibility for the grant program to St. Clair County, IL. Beginning in fiscal year 2012, the City became a 

member of the St. Clair County Urban County and did not have a CDBG program to administer. On September 

30, 2014, OIG agreed with the revised significant management decision. However, OIG disagrees with the 

process HUD used to forgive the costs, as the Deputy Secretary should have first sought concurrence of the 

Assistant Inspector General for Audit as required by HUD Handbook 2000.06, REV-4, paragraph 5-7(C)(2)

(b). (Audit Report: 2010-KC-1003)

THE CITY OF EAST ST. LOUIS AWARDED BLOCK GRANT PROGRAM FUNDS TO 

RECIPIENTS WITHOUT ADEQUATELY VERIFYING THEIR ELIGIBILITY, ISSUE DATE: 

SEPTEMBER 28, 2010

OIG audited the City of East St. Louis’ CDBG program to determine whether the City properly verified the eligibility of CDBG-funded housing rehabilitation recipients. OIG determined that the City awarded CDBG funds 

to 143 recipients without adequately verifying their eligibility to receive housing rehabilitation assistance. 

Specifically, it did not verify eligibility criteria such as evidence of flood insurance, homeowners insurance, 

code compliance, and income eligibility.

Among other things, OIG recommended that HUD require the City to provide documentation showing that the 

recipients were eligible or reimburse its CDBG program more than $1.2 million expended on ineligible recipients.

In its original management decision, HUD agreed to obtain documentation demonstrating eligibility or 

provide a copy of reimbursement documentation. HUD recently submitted a revised management decision 

documenting that the Deputy Secretary decided to exercise his discretion to not require repayment. Following 

the audit, HUD took alternative corrective actions to address the City’s noncompliance and transferred full 

administrative responsibility for the grant program to St. Clair County, IL. Beginning in fiscal year 2012, 

the City became a member of the St. Clair County Urban County and did not have a CDBG program to 

administer. On September 30, 2014, OIG agreed with the revised significant management decision. However, 

OIG disagrees with the process HUD used to forgive the costs, as the Deputy Secretary should have first sought 

concurrence of the Assistant Inspector General for Audit as required by HUD Handbook 2000.06, REV-4, 

paragraph 5-7(C)(2)(b). (Audit Report: 2010-KC-1008)

THE CITY OF EAST ST. LOUIS, IL, DID NOT PROPERLY MANAGE HOUSING 

REHABILITATION CONTRACTS FUNDED BY THE COMMUNITY DEVELOPMENT BLOCK 

GRANT PROGRAM, ISSUE DATE: FEBRUARY 9, 2011

HUD OIG audited the City of East St. Louis’ CDBG program to determine whether the City properly managed 

its housing rehabilitation contracts. OIG determined that the City awarded more than $1 million in CDBG 

funds for 124 of the 147 rehabilitation contracts reviewed without adequately ensuring that it complied with 

requirements and that the work was completed in an acceptable manner. Specifically, it did not ensure that 

contractors completed all of the contracted work as required and at a reasonable cost. Additionally, the City 

created scopes of work for the rehabilitation contracts that were not detailed and specific in nature. Finally, it 

did not comply with Federal procurement requirements and its own policies and procedures when it managed 

the rehabilitation contracts.
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Among other things, OIG recommended that HUD require the City to pursue collection of nearly $128,000 

paid to contractors for projects in which rehabilitation work was not performed or was performed improperly.

In its original management decision, HUD agreed to require the City to reimburse HUD by retrieving from 

the contractors nearly $128,000 or by other means determined by the City. HUD recently submitted a revised 

management decision documenting that the Deputy Secretary decided to exercise his discretion to not require 

repayment. Following the audit, HUD took alternative corrective actions to address the City’s noncompliance 

and transferred full administrative responsibility for the grant program to St. Clair County, IL. Beginning in 

fiscal year 2012, the City became a member of the St. Clair County Urban County and did not have a CDBG 

program to administer. On September 30, 2014, OIG agreed with the revised significant management decision.

However, OIG disagrees with the process HUD used to forgive the costs, as the Deputy Secretary should have 

first sought concurrence of the Assistant Inspector General for Audit as required by HUD Handbook 2000.06, 

REV-4, paragraph 5-7(C)(2)(b). (Audit Report: 2011-KC-1001)

SIGNIFICANT MANAGEMENT DECISION WITH WHICH OIG DISAGREES

During the reporting period, OIG did not have any reports in which it 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 United States Standard General Ledger and at the transaction level. While 

OIG has long reported on HUD’s lack of an integrated “core financial system” as an FFMIA noncompliance, 

OMB made substantial changes to the FFMIA framework that 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 that often led to costly and 

ineffective solutions. 

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 (HIFMIP), was based on plans to implement a solution that replaced two of the applications currently 

used for core processing. In March 2012, work on HIFMIP was stopped, and the project was later canceled. 

HUD spent more than $35 million on the failed HIFMIP project. In the fall of 2012, the New Core Project 

was created to move HUD forward to implement a new core financial system. The project migrates HUD’s 

financial transactions and systems to a shared service provider, the U.S. Department of Treasury, Bureau of 

Fiscal Services’ Administrative Resource Center (ARC). Specifically, ARC will provide support for (1) funds 

management, (2) purchasing, (3) accounts payable, (4) accounts receivable, (5) cash management, (6) cost 

accounting, (7) a core financial system, (8) a general ledger, (9) financial reporting, (10) grants management, 
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SEMIANNUAL REPORT TO CONGRESS

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 will 

cover time and attendance and is scheduled for implementation on February 8, 2015. Release 3 will cover 

migration of the core financial services that are owned by the Office of the Chief Financial Officer. These 

services include 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 the Federal 

Housing Administration and the Government National Mortgage Association as well as the migration of the 

functionality of the HUD 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 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 (1) the Integrated Disbursement and Information System (IDIS), (2) the Facilities 

Integrated Resources Management System (FIRMS), (3) the HUD Procurement System (HPS), and (4) the 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 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 resolve 

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 

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 the Department 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. 

Collectively and in the aggregate, systems deficiencies continued to exist. 
61

APPENDIX 1 PEER REVIEW REPORTING

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. 

OFFICE OF AUDIT

PEER REVIEW CONDUCTED ON HUD OIG

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

of pass (the highest rating) on the peer review report issued by 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, Office of Inspector General 

(DoD OIG), 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.

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 issue 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 the HUD OIG, 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 
62

SEMIANNUAL REPORT TO CONGRESS

INTERNAL REPORTS

AUDIT REPORTS

CHIEF FINANCIAL OFFICER

2014-DP-0006 Program Accounting System, 09/23/2014.

2014-FO-0004 HUD’s Fiscal Year 2013 Compliance With the Improper Payments Elimination and Recovery Act 

of 2010, 04/15/2014.

2014-KC-0006 The HUD Office of the Chief Financial Officer Had Not Always Implemented Its User Fee Policy, 

09/30/2014.

CHIEF INFORMATION OFFICER

2014-DP-0005 Fiscal Year 2013 Review of Information Systems Controls in Support of the Financial Statements 

Audit, 04/30/2014.

HOUSING

2014-CH-0001 HUD Did Not Always Provide Adequate Oversight of Its Property-Flipping Waiver Requirements, 

09/30/2014. Questioned: $2,535,235; unsupported: $1,047,314; better use: $273,881,986.

2014-KC-0002 The Data in CAIVRS Did Not Agree With the Data in FHA’s Default and Claims Systems, 

07/02/2014. Better use: $9,501,619.

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.

2014-KC-0004 Lenders Generated $428 Million in Gains From Modifying Defaulted FHA Loans, 09/24/2014. 

Better use: $50,286,000.

2014-LA-0005

HUD Did Not Always Recover FHA Single-Family Indemnification Losses and Ensure That 

Indemnification Agreements Were Extended, 08/08/2014. Questioned: $37,479,953; better use: 

$1,040,145.

2014-PH-0001 HUD Policies Did Not Always Ensure That HECM Borrowers Complied With Residency 

Requirements, 09/30/2014. Better use: $3,362,055.

PUBLIC AND INDIAN HOUSING

2014-FW-0002 Improvements Are Needed Over Environmental Reviews of Public Housing and Recovery Act Funds 

in the Kansas City Office, 05/12/2014. Questioned: $20,010,033; unsupported: $18,970,236.

APPENDIX 2 AUDIT REPORTS ISSUED 
63

APPENDIX 2 AUDIT REPORTS ISSUED

2014-FW-0003 Improvements Are Needed Over Environmental Reviews of Public Housing and Recovery Act 

Funds in the Columbia Office, 06/19/2014.

2014-FW-0004 Improvements Are Needed Over Environmental Reviews of Public Housing and Recovery Act 

Funds in the Greensboro Office, 07/14/2014.

2014-FW-0005 Improvements Are Needed Over Environmental Reviews of Public Housing and Recovery Act 

Funds in the Detroit Office, 09/24/2014. Questioned: $34,706,599; unsupported: $33,829,239.

2014-KC-0005 Wellston Housing Authority Improperly Administered the Community Service and SelfSufficiency Requirement, 09/24/2014. Better use: $301,938.

2014-LA-0003 HUD Adequately Implemented and Monitored the HUD-VASH Program, but Changes Are 

Needed To Improve Lease Rates, 06/18/2014.

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, 06/30/2014. Questioned: 

$6,943,181; unsupported: $6,191,321; better use: $81,613,671.

2014-LA-0006 HUD’s ONAP Lacked Adequate Controls Over the ICDBG Closeout Process, 08/19/2014. Better 

use: $3,999,955.

2014-NY-0002 HUD’s Monitoring of Public Housing Authority Demolition and Disposition Projects Was Not 

Always Adequate to Ensure Data in IMS/PIC Was Accurate, 06/11/2014. Questioned: $554,714.

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. Questioned: $6,206,924; 

better use: $1,516,882.

AUDIT-RELATED MEMORANDUMS6

CHIEF FINANCIAL OFFICER

2014-FW-0801 Potential Antideficiency Act Violations Intergovernmental Personnel Act Agreements, 05/30/2014.

COMMUNITY PLANNING AND DEVELOPMENT

2014-AT-0801 HUD’s Monitoring of the Vieques Sports City Complex’s Section 108 Loan Guarantee Program, 

09/18/2014.

HOUSING

2014-KC-0801 Memorandum Report on the Office of Inspector General’s Internal Audit of HUD’s Single Family 

Seven-Loan Limit, 09/30/2014.

6 The memorandum format is used to communicate the results of reviews not performed in accordance with generally accepted 

government auditing standards, to close out assignments with no findings and recommendations, to respond to requests for 

information, to report on the results of a survey, or to report the results of civil actions or settlements.
64

SEMIANNUAL REPORT TO CONGRESS

EXTERNAL REPORTS

AUDIT REPORTS

COMMUNITY PLANNING AND DEVELOPMENT

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. Questioned: 

$3,410,362; unsupported: $1,031,000.

2014-AT-1006 Hillsborough County Did Not Always Properly Administer Its CDBG Program, Tampa, FL, 

07/09/2014. Questioned: $1,016,092; unsupported: $784,469.

2014-AT-1007 The Municipality of Carolina Did Not Properly Administer Its HOME Program, Carolina, PR, 

08/08/2014. Questioned: $8,668,756; unsupported: $8,606,552; better use: $443,551.

2014-AT-1010 Miami-Dade County Did Not Always Properly Administer Its HOME Program, Miami, FL, 

09/11/2014. Questioned: $45,600; unsupported: $45,600; better use: $1,682,650.

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. Better use: $13,232,000.

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. Questioned: $285,123; better use: $7,116,489.

2014-DE-1003

The Colorado Coalition for the Homeless Incorrectly Allocated Its Employee Payroll Time and 

Charged Ineligible Cost to Its Grants, Denver, CO, 09/30/2014. Questioned: $178,753; 

unsupported: $63,180.

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. Questioned: 

$1,609,580; better use: $8,624,700.

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. Questioned: $1,400,577; unsupported: $1,400,577.

2014-LA-1003 The County of San Bernardino Adequately Ensured That NSP Developer Fees Met HUD 

Requirements, San Bernardino, CA, 06/05/2014.

2014-LA-1005 The City of Richmond Did Not Administer Its NSP in Accordance With Requirements, Richmond, 

CA, 08/22/2014. Questioned: $914,090; better use: $595,863.

2014-LA-1006 The City of Pomona Did Not Administer Its NSP in Accordance With HUD Rules and 

Requirements, Pomona, CA, 09/25/2014. Questioned: $662,303; unsupported: $584,148.

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. Questioned: $1,975,817; unsupported: $1,975,817.
65

APPENDIX 2 AUDIT REPORTS ISSUED

2014-NY-1004 The City of Elmira Did Not Always Administer Its CDBG Program in Accordance With HUD 

Requirements, Elmira, NY, 05/20/2014. Questioned: $822,110; unsupported: $797,048.

2014-NY-1005

Financial and Administrative Control Weaknesses Existed in Middlesex County, NJ’s HOME 

Investment Partnerships Program, Middlesex County, NJ, 06/10/2014. Questioned: $990,907; 

unsupported: $965,928; better use: $1,068,536.

2014-NY-1006

Monmouth County Expended CDBG Funds for Eligible Activities, But Control Weaknesses Need 

To Be Strengthened, Monmouth County, NJ, 07/02/2014. Questioned: $1,120,553; 

unsupported: $1,069,198.

2014-NY-1008

Palladia, Inc., Did Not Administer Its Supportive Housing Program in Accordance With HUD 

Requirements, New York, NY, 07/25/2014. Questioned: $1,615,057; unsupported: $1,615,057; 

better use: $584,579.

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. Questioned: 

$3,576,682; unsupported: $949,362; better use: $11,963,555.

2014-NY-1010

The City of Passaic Expended CDBG Funds for Eligible Activities but Needs To Address 

Administrative Weaknesses, Passaic, NJ, 09/30/2014. Questioned: $233,740; unsupported: 

$233,740; better use: $306,710.

2014-NY-1011 The Lower Manhattan Development Corporation Generally Administered CDBG Disaster 

Recovery Assistance Funds in Accordance With HUD Regulations, New York, NY, 09/30/2014.

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. 

Questioned: $174,332; unsupported: $159,149; better use: $3,541

2014-PH-1005

Catholic Social Services of the Diocese of Scranton, PA, Generally Administered Its Supportive 

Housing and HOME Program Funds for St. Hedwig’s Veterans Village in Accordance With 

Applicable Requirements, Scranton, PA, 05/23/2014.

2014-PH-1007 The Cumberland Plateau Regional Housing Authority Did Not Procure Services in Accordance With 

HUD Requirements, Lebanon, VA, 07/15/2014. Questioned: $620,874; unsupported: $308,797.

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, Trenton, NJ, 08/29/2014. 

Questioned: $22,986,481; unsupported: $22,986,481.

2014-PH-1009 The State of New Jersey Demonstrated Homeowner Eligibility for Its Homeowner Resettlement 

Program, Trenton, NJ, 09/05/2014.

2014-SE-1003 Pierce County Claimed Ineligible and Unsupported HOME Matching Funds, Tacoma, WA, 

07/17/2014. Questioned: $1,821,223; unsupported: $1,579,244.

2014-SE-1005 King County Did Not Meet Shelter Plus Care Matching Requirements, Seattle, WA, 07/28/2014. 

Questioned: $920,908; unsupported: $920,908.
66

SEMIANNUAL REPORT TO CONGRESS

HOUSING

2014-AT-1009 The Housing Authority of the City of Meridian Did Not Adequately Maintain Its FHA-Insured 

Rental Apartments, Meridian, MS, 08/25/2014.

2014-AT-1011

PK Management, LLC, Did Not Ensure Adequate Accountability and Administration of Its 

Multifamily Projects, Birmingham, AL, 09/22/2014. Questioned: $435,425; unsupported: 

$218,676; better use: $174,995.

2014-AT-1012 EverBank Did Not Properly Determine Mortgagor Eligibility for FHA’s Preforeclosure Sale 

Program, Jacksonville, FL, 09/29/2014. Questioned: $1,567,518.

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. Questioned: 

$971,959; better use: $521,242.

2014-AT-1015 Prudential Huntoon Paige Associates, LTD Did Not Underwrite and Process a $49 Million Loan in 

Accordance With HUD Requirements, Arlington, VA, 09/30/2014. Questioned: $20,157,329.

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. Questioned: $7,581,284; unsupported: $7,247,373.

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. Questioned: $3,045,300; 

unsupported: $2,980,798.

2014-FW-1001 Summit Bradford Apartments Did Not Comply With the Requirements of Its Housing Assistance 

Payments Contract, Tulsa, OK, 04/09/2014. Questioned: $177,262; unsupported: $98,818.

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.

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. Questioned: $981,574; better use: $153,856.

PUBLIC AND INDIAN HOUSING

2014-AT-1008

The Boca Raton Housing Authority’s Administration of Its Section 8 Housing Choice Voucher 

Program Tenant Files Had Some Deficiencies, Boca Raton, FL, 08/18/2014. Questioned: 

$18,507; better use: $1,025.

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. Questioned: 

$68,158; better use: $34,024,752.

2014-AT-1016 The Housing Authority of the City of Spartanburg Used HUD Program Funds for Ineligible 

Expenses, Spartanburg, SC, 09/30/2014. Questioned: $2,425,290; unsupported: $2,396,815.

2014-BO-1002 Chelsea Housing Authority, Review of Cost Allocations and Reasonableness of Salaries, Chelsea, 

MA, 04/30/2014. Questioned: $9,467,745; unsupported: $8,770,274.
67

APPENDIX 2 AUDIT REPORTS ISSUED

2014-BO-1003 Authority Officials Did Not Always Follow HUD Requirements, Bridgeport, CT, 07/31/2014. 

Questioned: $118,603; better use: $616,368.

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. Questioned: 

$1,125,000; unsupported: $1,024,192.

2014-CH-1004

The Moline Housing Authority Did Not Always Follow HUD’s Requirements and Its Own Policies 

Regarding the Administration of Its Program, Moline, IL, 07/14/2014. Questioned: $299,207; 

unsupported: $220,704; better use: $51,238.

2014-CH-1005 The Adams Metropolitan Housing Authority Generally Used Public Housing Program Funds in 

Accordance With HUD’s and Its Own Requirements, Manchester, OH, 07/31/2014.

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. Questioned: $367,989; 

unsupported: $274,406; better use: $1,051,687.

2014-CH-1007 The Jackson Housing Commission Needs To Improve Its Administration of Its Section 8 Housing 

Choice Voucher Program, Jackson, MI, 08/29/2014.

2014-CH-1008 The Ferndale Housing Commission Generally Administered Its Housing Choice Voucher Program 

Household Files in Accordance With HUD’s and Its Own Requirements, Ferndale, MI, 09/11/2014.

2014-CH-1009

The Pontiac Housing Commission Did Not Always Administer Its Section 8 Housing Choice 

Voucher Program in Accordance With HUD’s and Its Own Requirements, Pontiac, MI, 

09/12/2014. Questioned: $385,157; unsupported: $224,674; better use: $57,418.

2014-DE-1002 A Former Employee of the Helena Housing Authority Improperly Released Personally Identifiable 

Information, Helena, MT, 09/25/2014.

2014-FW-1002 The Truth or Consequences Housing Authority’s Financial Controls Were Not Adequate To 

Ensure That It Used Its Low-Rent Funds Appropriately, Truth or Consequences, NM, 05/27/2014.

2014-FW-1003 The St. Charles Parish Housing Authority Mismanaged Its Section 8 Housing Choice Voucher Program, 

Boutte, LA, 07/02/2014. Questioned: $605,575; unsupported: $570,834; better use: $1,325.

2014-KC-1004 The Nevada Housing Authority Did Not Properly Classify Tenants as Exempt From the Community 

Service and Self-Sufficiency Requirement, Nevada, MO, 09/11/2014. Better use: $33,547.

2014-LA-1002

Southern Nevada Regional Housing Authority Did Not Always Follow Requirements for Its 

Operating Funds and Public Housing Assets, Las Vegas, NV, 04/17/2014. Questioned: $700,710; 

unsupported: $193,231.

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. Questioned: $10,673,267; 

unsupported: $8,339,864; better use: $1,065,780.

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. Questioned: 

$4,379,009; unsupported: $24,009.
68

SEMIANNUAL REPORT TO CONGRESS

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. Questioned: 

$92,576; better use: $148,060,576.

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. Questioned: 

$1,514,296.

2014-PH-1006

The Housing Authority of the County of Lackawanna Needs To Improve Its Housing Quality 

Standards Inspections and Properly Abate Housing Assistance Payments as Required, Dunmore, 

PA, 07/01/2014. Questioned: $37,154; better use: $1,115,299.

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. Questioned: $1,464,314; 

unsupported: $1,281,761.

2014-SE-1004 Allegations Against the Northeast Oregon Housing Authority Were Unsubstantiated or Did Not 

Violate HUD Requirements, La Grande, OR, 07/28/2014.

AUDIT-RELATED MEMORANDUMS7

COMMUNITY PLANNING AND DEVELOPMENT

2014-DE-1802 Complaint Allegations Substantiated - City of Colorado Springs’ HOME and CDBG Programs, 

Colorado Springs, CO, 09/30/2014. Questioned: $88,985; unsupported: $20,304.

GENERAL COUNSEL

2014-CF-1805

Final Civil Action: Borrower Settled Allegations of Making a False Certification to HUD Regarding 

a Home Purchase Under the Federal Housing Administration Program, Brentwood, CA, 

08/11/2014. Questioned: $57,500.

2014-CF-1806 President of FHA-Approved Lender Settled Allegations of Causing a False Statement To Be Made 

to HUD Regarding an FHA-Insured Loan, Berea, OH, 08/21/2014. Better use: $750.

2014-CF-1807 JPMorgan Chase Settled Allegations of Failing to Comply With HUD’s FHA Loan Requirements, 

New York, NY, 09/02/2014. Questioned: $336,000,000.

2014-CF-1808

NDC Real Estate Management, Inc., Settled Allegations of Falsifying or Modifying Records and 

Documents to Maximize HUD’s Section 8 Housing Assistance Payments, Richmond, KY, 

09/02/2014. Questioned: $750,000.

2014-CF-1809

Final Civil Action: Judgement Imposed on Loan Officers Regarding Allegations of Making a 

False Certification to HUD for a Home Purchase Under the FHA Program, Brentwood, CA, 

09/25/2014. Questioned: $250,000.

2014-CF-1810 Reunion Mortgage, Inc., Settled Allegations of Making False Claims to the FHA, Milpitas, CA, 

09/25/2014. Questioned: $1,040,000.

7

 The memorandum format is used to communicate the results of reviews not performed in accordance with generally accepted government 

auditing standards, to close out assignments with no findings and recommendations, to respond to requests for information, to report on the 

results of a survey, or to report the results of civil actions or settlements.
69

APPENDIX 2 AUDIT REPORTS ISSUED

2014-CH-1801 Final Civil Action: U. S. Bank Settled Allegations of Failing To Comply With HUD’s FHA Loan 

Requirements, Washington, DC, 09/30/2014. Questioned: $144,199,970.

2014-FW-1808 Final Civil Action: Bank of America Settled Allegations of Failing To Comply With HUD’s FHA 

Underwriting Requirements, Charlotte, NC, 09/30/2014. Questioned: $437,646,483.

2014-PH-1804 Final Civil Action: Borrower Settled Alleged Violations of Home Equity Conversion Mortgage 

Program, Washington, DC, 06/30/2014. Better use: $3,000.

2014-PH-1805 Final Civil Action Borrower Settled Alleged Violations of Home Equity Conversion Mortgage 

Program, Washington, DC, 07/30/2014. Better use: $5,000.

HOUSING

2014-DE-1801 Memorandum Report on the Wyoming Community Development Authority’s Role in the Village 

Creek Townhomes’ 51 FHA Mortgage Defaults, Cheyenne, WY, 08/12/2014.

2014-FW-1803 Southwest Stage Funding, LLC, dba Cascade Financial Services, Took Corrective Action on 

Loans That Did Not Meet All HUD and FHA Requirements, Gilbert, AZ, 07/23/2014.

PUBLIC AND INDIAN HOUSING

2014-BO-1801 The Housing Authority of the City of Stamford Took Appropriate Action To Resolve a Complaint 

While Complying With Procurement Regulations, Stamford, CT, 09/26/2014.

2014-FW-1804

The Management of the Housing Authority of the City of Beeville Did Not Exercise Adequate 

Oversight and Allowed Ineligible and Unsupported Costs, Beeville, TX, 08/01/2014. Questioned: 

$75,583; unsupported: $42,508.

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. Questioned: 

$2,806,655; unsupported: $2,805,806.

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. Questioned: $1,034,740; unsupported: $1,030,900.

2014-FW-1807 The Beaumont Housing Authority Needs To Improve Controls Over Its Housing Programs, 

Beaumont, TX, 09/22/2014. Questioned: $10,184; better use: $1,224.

2014-PH-1803

Review of the Housing Authority of the City of Pittsburgh’s Compliance With Federal Lobbying 

Disclosure Requirements and Restrictions, Pittsburgh, PA, 05/02/2014. Questioned: $80,000; 

unsupported: $80,000.

2014-PH-1806 Review of Home Forward’s Compliance With Federal Lobbying Disclosure Requirements and 

Restrictions, Portland, OR, 09/05/2014. Questioned: $643.
70

SEMIANNUAL REPORT TO CONGRESS

TABLE A

Audit reports issued before the start of period with no management 

decision at 09/30/2014 

REPORT NUMBER & TITLE REASON FOR LACK OF MANAGEMENT DECISION ISSUE DATE

* 2009-AT-0001 HUD Lacked Adequate 

Controls to Ensure the Timely Commitment and Expenditure of HOME fundsSee chapter 9, page 51 09/28/2009

* 2013-AT-1008 The City of West Palm 

Beach Did Not Always Properly Administer Its HOME ProgramSee chapter 9, page 52 09/30/2013

* 2014-FO-0003 Additional Details 

To Supplement Our Report on HUD’s 

Fiscal Years 2013 and 2012 (Restated) 

Financial Statements

See chapter 9, page 53 12/16/2013

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

See chapter 9, page 54 02/07/2014

APPENDIX 3 TABLES

*Significant audit reports described in previous semiannual reports
71

APPENDIX 3 TABLES

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

2006-KC-1013

The Columbus Housing Authority 

Improperly Expended and Encumbered Its 

Public Housing Funds, Columbus, NE

08/30/2006 10/17/2006 11/30/2014

2006-DP-0802

Assessment of HUD’s Compliance With 

OMB Memorandum M-06-16, “Protection 

of Sensitive Agency Information”

09/21/2006 11/24/2006 Note 2

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-AT-0003

HUD Lacked Adequate Controls Over 

the Physical Condition of Section 8 

Voucher Program Housing Stock

05/14/2008 09/10/2008 10/31/2014

2008-DP-0004 Review of Selected FHA Major Applications’ 

Information Security Controls

06/12/2008 10/08/2008 Note 1

2008-LA-1012

The Housing Authority of the City of Calexico 

Did Not Comply With Public Housing 

Program Rules and Regulations, Calexico, CA

07/01/2008 10/14/2008 12/31/2014

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 
72

SEMIANNUAL REPORT TO CONGRESS

REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2009-BO-1002

Orchard Court Multifamily Project Was 

Not Properly Managed in Accordance 

with HUD Regulations, Bath, ME

11/06/2008 01/16/2009 02/19/2015

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

2009-DP-0005 Review of Implementation of Security 

Controls Over HUD’s Business Partners

06/11/2009 11/17/2009 12/31/2014

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 04/01/2015

2009-AT-0001

HUD Lacked Adequate Controls To 

Ensure the Timely Commitment and 

Expenditure of HOME funds

09/28/2009 03/18/2011 Note 3

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
73

APPENDIX 3 TABLES

REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

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 01/30/2015

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-NY-1004

The City of Binghamton Did Not 

Always Administer Its Section 108 Loan 

Program in Accordance With HUD 

Requirements, Binghamton, NY 

12/21/2010 04/20/2012 Note 1

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

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-KC-1003

The Missouri Housing Development 

Commission Did Not Always Disburse 

Its Tax Credit Assistance Program 

Funds in Accordance With Recovery 

Act Requirements, Kansas City, MO

04/01/2011 07/29/2011 Note 1
74

REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

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 12/19/2014

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-CH-1008

The State of Michigan Lacked Adequate 

Controls Over Its NSP Regarding Awards, 

Obligations, Subgrantees’ Administrative 

Expenses and Procurement, and Reporting 

Accomplishments, Lansing, MI

06/03/2011 11/30/2011 Note 1

2011-AO-0001

The Lafayette Parish Housing 

Authority Violated HUD Procurement 

Requirements and Executed Unreasonable 

and Unnecessary Contracts

06/22/2011 10/13/2011 12/31/2014

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 11/03/2014

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

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 12/31/2014
75

APPENDIX 3 TABLES

REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

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 2

2011-CH-1015

The Springfield Metropolitan Housing 

Authority Did Not Administer Its Grant 

in Accordance With Recovery Act and 

HUD Requirements, Springfield, OH

09/30/2011 01/24/2012 05/01/2015

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 04/01/2015

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 12/31/2014

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 12/31/2014
76

SEMIANNUAL REPORT TO CONGRESS

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 03/31/2015

2012-PH-1008

Mountain CAP of WV, Inc., Did Not 

Administer Its HPRP in Accordance 

With Applicable Recovery Act and HUD 

Requirements, Buckhannon, WV

03/15/2012 07/12/2012 Note 1

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 Note 2

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 02/01/2015

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 2

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 2

2012-KC-0003

HUD Did Not Effectively Oversee 

and Manage the Receivership of the 

East St. Louis Housing Authority

09/05/2012 01/15/2013 12/31/2014

2012-AT-1015 Little Haiti Did Not Fully Comply With Federal 

Rules When Administering NSP2, Miami, FL

09/06/2012 01/03/2013 Note 2

2012-LA-0003 HUD Did Not Always Enforce REO 

M&M III Program Requirements

09/18/2012 01/09/2013 Note 2
77

APPENDIX 3 TABLES

REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

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

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 10/31/2014

2012-FO-0006 HUD’s Oversight of Recovery ActFunded Housing Programs09/27/2012 03/05/2013 Note 2

2012-CH-0801

HUD’s Office of Community Planning 

and Development Needs To Improve Its 

Tracking of HOME Investment Partnerships 

Program Technical Assistance Activities

09/28/2012 02/13/2013 Note 2

2012-CH-1803

A Summary of the Foreclosure and Claims 

Process Reviews for Five Mortgage 

Servicers That Engaged in Improper 

Foreclosure Practices, Washington, DC

09/28/2012 01/30/2013 Note 2

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 Note 2

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 2

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 12/31/2014
78

SEMIANNUAL REPORT TO CONGRESS

REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

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 2

2013-NY-1001 The City of Albany CDBG Recovery 

Act Program, Albany, NY

12/06/2012 04/03/2013 12/31/2014

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 2

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

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-DP-0004 Technical Security Control Weaknesses in 

Selected Ginnie Mae Applications

02/28/2013 06/26/2013 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 10/31/2014
79

APPENDIX 3 TABLES

REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

2013-LA-1802

Pulte Mortgage LLC, Allowed the 

Recording of Prohibited Restrictive 

Covenants, Englewood, CO

04/18/2013 01/10/2014 12/31/2014

2013-LA-1803

CTX Mortgage Company LLC 

Allowed the Recording of Prohibited 

Restrictive Covenants, Dallas, TX

04/18/2013 01/10/2014 01/29/2015

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 09/09/2015

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-LA-1006

The City of Santa Ana Did Not Administer 

NSP2 Funds in Accordance With HUD 

Rules and Requirements, Santa Ana, CA

06/17/2013 09/30/2013 12/05/2014

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

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 10/24/2014

2013-NY-0003

HUD Officials Did Not Always Monitor 

Grantee Compliance With the CDBG 

Timeliness Spending Requirement

07/19/2013 11/26/2013 11/26/2014

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 11/15/2014

2013-BO-1002 The City of Worcester Did Not Properly 

Administer Its CDBG Program, Worcester, MA

07/29/2013 03/28/2014 12/04/2014
80

SEMIANNUAL REPORT TO CONGRESS

REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

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 11/04/2014

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 12/24/2014

2013-AT-0003

Economic Development Programs 

Lacked Adequate Controls To 

Ensure Program Effectiveness

09/03/2013 02/04/2014 12/31/2014

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-DP-0006

Weaknesses Identified in HUD’s Fiscal 

Year 2012 Security Program

09/12/2013 01/13/2014 12/31/2014

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 12/23/2014

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 01/06/2015

2013-CH-1008

Community Advocates Did Not Properly 

Administer Its Program and Recovery 

Act Grant Funds, Milwaukee, WI

09/17/2013 01/15/2014 03/31/2015

2013-KC-0004

HUD Paid Claims That Lacked Contact or 

Collection Activities With Coborrowers

09/18/2013 01/07/2014 12/17/2014

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 12/23/2014

2013-KC-0005

HUD Had Made Progress in Reducing 

Oversubsidization in the Housing 

Choice Voucher Program, but the 

Problem Continued To Exist

09/23/2013 12/12/2013 10/30/2014
81

APPENDIX 3 TABLES

REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

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 01/14/2015

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 10/08/2014

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 11/11/2014

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 01/23/2015

2013-IE-0804 Evaluation of HUD’s Property 

Inventory System

09/27/2013 03/26/2014 09/30/2015

2013-PH-0004 HUD’s Oversight of Its Moving to Work 

Demonstration Program Needs Improvement

09/27/2013 01/24/2014 01/31/2015

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 Note 3

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 01/15/2015

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
82

SEMIANNUAL REPORT TO CONGRESS

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 01/23/2015

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

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 09/30/2014

REPORT 

NUMBER

REPORT TITLE

ISSUE 

DATE

DECISION 

DATE

FINAL 

ACTION

2014-DP-0001 Information System Control Weaknesses 

Identified in the Line of Credit Control System

11/07/2013 01/30/2014 10/10/2014

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 12/31/2014

2014-CH-1001

The City of Flint Lacked Adequate 

Controls Over Its HOME Investment 

Partnerships Program, Flint, MI

11/15/2013 03/13/2014 03/13/2015

2014-AT-1001 The Municipality of Arecibo Did Not Properly 

Administer Its HOME Program, Arecibo, PR

12/03/2013 01/24/2014 12/31/2014

2014-FO-0001

Government National Mortgage 

Association Fiscal Years 2013 and 

2012 Financial Statements Audit

12/06/2013 05/02/2014 03/31/2015

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
83

APPENDIX 3 TABLES

REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

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 11/21/2014

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 01/15/2015

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 04/30/2015

2014-NY-0001 HUD Did Not Provide Effective Oversight of 

Section 202 Multifamily Project Refinances

02/19/2014 06/10/2014 03/31/2015

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 10/31/2014

2014-PH-1003

The Housing Authority of the County 

of Lackawanna Needs To Improve Its 

Controls Over Its Operations To Comply 

With HUD Requirements, Dunmore, PA

02/28/2014 06/16/2014 12/31/2014

2014-DP-0004 Information System Control Weaknesses 

Identified in the Financial Data Mart

03/13/2014 04/03/2014 03/15/2015

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
84

SEMIANNUAL REPORT TO CONGRESS

REPORT 

NUMBER REPORT TITLE ISSUE DATE

DECISION 

DATE

FINAL 

ACTION

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

AUDITS EXCLUDED: 

84 audits under repayment plans

28 audits under debt claims collection processing, formal judicial review, investigation, or legislative solution

NOTES:

1 Management did not meet the target date. Target date is over 1 year old.

2 Management did not meet the target date. Target date is under 1 year old.

3 No management decision
85

APPENDIX 3 TABLES

TABLE C 

Inspector General-issued reports with questioned and unsupported costs at 

09/30/2014 (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

21 833,879 384,775 

A2 

For which litigation, legislation, or 

investigation was pending at the 

commencement of the reporting period

5 8,960 5,299 

A3 

For which additional costs were added 

to reports in beginning inventory - 312 0

A4 For which costs were added to noncost reports 0 0 0 

B1 Which were issued during the reporting period 69 1,156,810 144,583 

B2 Which were reopened during the reporting period 0 0 0 

SUBTOTALS (A + B) 95 1,999,961 534,657 

C For which a management decision was made during 

the reporting period

408 1,243,911 308,261

1) Dollar value of disallowed costs: 

Due HUD 

Due program participants

189

26

486,532

757,379

2,699

305,562

(2) Dollar value of costs not disallowed 0 0 0

D 

For which a management decision had been made 

not to determine costs until completion of litigation, 

legislation, or investigation

4 7,176 5,170 

E For which no management decision had made by the 

end of the reporting period

51

< 193 >10

748,874 

< 735,745 >10

221,226 

< 208,345 >10

8 Eleven audit reports also contain recommendations with funds to be put to better use. 

9 Four audit reports also contain recommendations with funds due program participants. 

10 The figures in brackets represent data at the recommendation level as compared to the report level. See Explanations of Tables C and D. 
86

SEMIANNUAL REPORT TO CONGRESS

TABLE D 

Inspector General-issued reports with recommendations that funds be put to 

better use at 09/30/2014 (thousands) 

AUDIT REPORTS

NUMBER 

OF AUDIT 

REPORTS

DOLLAR 

VALUE

A1 For which no management decision had been made by the 

commencement of the reporting period

13 $1,194,861

A2 For which litigation, legislation, or investigation was pending 

at the commencement of the reporting period

3 $4,811 

A3 For which additional costs were added to reports in beginning inventory - $181,169 

A4 For which costs were added to noncost reports 0 $0

B1 Which were issued during the reporting period 38 $658,065 

B2 Which were reopened during the reporting period 0 $0 

SUBTOTALS (A + B) 54 $2,038,906 

C For which a management decision was made during the reporting period 1911 $557,224 

(1) Dollar value of recommendations that were agreed to by management: 

Due HUD 

Due program participants

10

9

$104,642

$452,568

(2) Dollar value of recommendations that were not agreed 

to by management

112 $14

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

33

< 53 >13

$1,479,828 

< $508,036 >13

11 Eleven audit reports also contain recommendations with questioned costs. 

12 One audit report also contains recommendations with funds agreed to by management. 

13 The figures in brackets represent data at the recommendation level as compared to the report level. See Explanations of Tables C and D.
87

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 their 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.
88

SEMIANNUAL REPORT TO CONGRESS

HUD OIG TELEPHONE DIRECTORY

Office of Audit

HEADQUARTERS Washington, DC 202-708-0364

OFFICE OF AUDIT

REGION 1-2 New York, NY 212-264-4174

 Boston, MA 617-994-8380

 Buffalo, NY 716-551-5755

 Hartford, CT 860-240-4837

 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

 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

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
89

OIG TELEPHONE DIRECTORY

Office of Investigation

HEADQUARTERS Washington, DC 202-708-0390

OFFICE OF INVESTIGATION

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

 Washington, DC 202-287-4100

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

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 317-226-5427
90

SEMIANNUAL REPORT TO CONGRESS

 Minneapolis-St. Paul, MN 612-370-3130

REGION 6 Fort Worth, TX 817-978-5440

 Baton Rouge, LA 225-448-3941

 Houston, TX 713-718-3221

 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-INVESTIGATION Kansas City, KS 913-551-5566
91

ACRONYMS LIST

ACRONYMS LIST

ADA.........................................................................Antideficiency Act

ARC.........................................................................Administrative Resource Center

ARF .........................................................................asset repositioning fees

ARRA ......................................................................American Recovery and Reinvestment Act of 2009

CAIVRS...................................................................Credit Alert Verification Reporting System 

CDBG......................................................................Community Development Block Grant

CDBG-DR...............................................................Community Development Block Grant-Disaster Recovery

CFO.........................................................................Chief Financial Officer

CFR.........................................................................Code of Federal Regulations

CHDO.....................................................................community housing development organization

CPD.........................................................................Office of Community Planning and Development

DEC.........................................................................Departmental Enforcement Center

DOJ ........................................................................U.S. Department of Justice

FBI...........................................................................Federal Bureau of Investigation

FFMIA .....................................................................Federal Financial Management Improvement Act of 1996

FHA.........................................................................Federal Housing Administration

FIFO........................................................................first-in, first-out

FIRMS.....................................................................Facilities Integrated Resources Management System

GAO ........................................................................U.S. Government Accountability Office

GCMB.....................................................................Great Country Mortgage Bankers

GCRE ......................................................................Great Country Real Estate

GCTS ......................................................................Great Country Title Services

HECM .....................................................................home equity conversion mortgage

HIAMS ....................................................................HUD Integrated Acquisition Management System

HIFMIP ...................................................................HUD Integrated Financial Management Improvement Project

HOME.....................................................................HOME Investment Partnerships Program

HPS.........................................................................HUD Procurement System

HUD........................................................................U.S. Department of Housing and Urban Development

ICDBG ....................................................................Indian Community Development Block Grant
92

SEMIANNUAL REPORT TO CONGRESS

IDIS.........................................................................Integrated Disbursement and Information System

IHBG.......................................................................Indian Housing Block Grant

IPA ..........................................................................Intergovernmental Personnel Act

IPERA......................................................................Improper Payments Elimination and Recovery Act

IRS ..........................................................................Internal Revenue Service

IT.............................................................................information technology

NCMEC...................................................................National Center for Missing and Exploited Children

NEPA.......................................................................National Environment Policy Act of 1969

NSP.........................................................................Neighborhood Stabilization Program

OCPO .....................................................................Office of the Chief Procurement Officer

OE ...........................................................................Office of Evaluations

OEE.........................................................................Office of Environment and Energy

OIG .........................................................................Office of Inspector General

OMB........................................................................Office of Management and Budget

ONAP......................................................................Office of Native American Programs

PHA.........................................................................public housing agency

PIH..........................................................................Office of Public and Indian Housing

PTD.........................................................................Performance Tracking Database

REAC.......................................................................(HUD) Real Estate Assessment Center

SPS..........................................................................Small Purchase System

U.S.C.......................................................................United States Code

USPIS......................................................................U.S. Postal Inspection Service

ACRONYMS LIST (CONTINUED)
93

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 48

Section 5(a)(1)-description of significant problems, abuses, and deficiencies 

relating to the administration of programs and operations of the Department. 12 - 47

Section 5(a)(2)-description of recommendations for corrective action with 

respect to significant problems, abuses, and deficiencies. 51

Section 5(a)(3)-identification of each significant recommendation described 

in previous Semiannual Report on which corrective action has not been completed. Appendix 3, Table B, 71

Section 5(a)(4)-summary of matters referred to prosecutive authorities 

and the prosecutions and convictions that have resulted. 12 - 47

Section 5(a)(5)-summary of reports made on instances where information or assistance 

was unreasonably refused or not provided, as required by Section 6(b)(2) of the Act. No instances

Section 5(a)(6)-listing of each audit report completed during the reporting period, and 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. Appendix 2, 62

Section 5(a)(7)-summary of each particularly significant report. 12 - 47

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

and the total dollar value of questioned and unsupported costs. Appendix 3, Table C, 85

Section 5(a)(9)-statistical tables showing the total number of audit reports and the 

dollar value of recommendations that funds be put to better use by management. Appendix 3, Table D, 86

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

period for which no management decision had been made by the end of the period. Appendix 3, Table A, 70

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

revised management decisions made during the reporting period. 56

Section 5(a)(12)-information concerning any significant management decision 

with which the Inspector General is in disagreement. 59

Section 5(a)(13)-the information described under section 05(b) of the 59

Federal Financial Management Improvement Act of 1996.
94

SEMIANNUAL REPORT TO CONGRESS

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. 

IF YOU SUSPECT FRAUD, CALL THE U.S. DEPARTMENT OF HOUSING AND URBAN 

DEVELOPMENT, OFFICE OF INSPECTOR GENERAL. 
95

APPENDIX THREE CHARTS

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 72

www.hudoig.gov

HUD OIG Hotline: 1-800-347-3735