April 1, 2008, through September 30, 2008

U.S. Department of Housing and Urban Development

Office of Inspector General

Semiannual Report

to Congress
Profile of Performance

Audit profile of performance

for the period April 1, 2008, through September 30, 2008

Results

Recommendations that funds be put to better use $1,297,214,463

Recommended questioned costs $300,872,100

Collections from audits $81,386,829

Administrative sanctions 21

Investigation profile of performance

for the period April 1, 2008, through September 30, 2008

Results

Funds put to better use $69,667,391

Recoveries/receivables $81,182,624

Indictments/informations 1,180

Convictions/pleas/pretrial diversions 969

Civil actions 76

Administrative sanctions1 1,009

Personnel actions 46

Arrests2 1,524

Search warrants 119

Subpoenas issued 1,026

Hotline profile of performance

for the period April 1, 2008, through September 30, 2008

Results

Funds put to better use $5,051,806

Recoveries/receivables $254,864

1

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

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

this reporting category includes actions by Federal agencies to suspend, debar, or exclude parties from contracts, grants, loans,

and other forms of financial or nonfinancial transactions with the government, based on findings produced by OIG.

2

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

$75,395,363

This reporting period FY 08 totals

$157,090,205

$59,634,565

15

This reporting period FY 08 totals

$39,111,188

$60,621,689

578

525

50

587

20

770

22

613

This reporting period FY 08 totals

$2,695,138

$123,784
             

             

iii

Inspector General’s Message

Inspector General’s Message

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

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

to the Congress for the second half of fiscal year 2008. I am very thankful

to all the HUD OIG employees--auditors, agents, attorneys, and support

staff--for their excellent production on behalf of the taxpayers of the United

States. We have been deeply immersed in the issues, specifically activities

affecting the housing industry. We at HUD OIG are grateful to the Congress

for the passage of the new Housing and Economic Recovery Act (HERA)

of 2008 that increased the penalties for fraud involving the Federal Housing

Administration (FHA). We now have the tools to continue our pursuit of

corrupt corporate executives, as well as failed and troubled lending

institutions.

During this reporting period, we had $67.9 million in funds put to

better use, questioned costs of $154.8 million, and $60.5 million in

recoveries and receivables while closing 584 cases. This exceptional work

has had an impact on fraud and the misuse of taxpayer dollars, and it is with gratitude that I acknowledge the

HUD OIG staff who worked so hard to achieve these results and their associated deterrent effect.

With the enormous expansion of the FHA mortgage limit in the new HERA of 2008, this essential program

has expanded into urban markets that have not seen FHA activity, sometimes for decades. Another particular

interest and concern is the expansion in the use of FHA's home equity conversion mortgages (HECM)--better

known in the media as reverse mortgages--and the new opportunities that have arisen for fraud aimed at senior

citizens. The expansion of HECM and the impact of the subprime mortgage situation on the overall health of

FHA have drawn our investigative and audit resources to this issue. We continue to audit at-risk lenders, and

we have expanded our participation in mortgage fraud task forces across the country.

The collapse of the subprime mortgage market and resultant increase in FHA loan activity have also impacted

the Government National Mortgage Association (Ginnie Mae). Total outstanding Ginnie Mae mortgagebacked securities increased from $428 to $577 billion during fiscal year 2008. Due to the increased risk this

poses to the Department, we have directed additional audit and investigative resources toward Ginnie Mae

programs.

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

HUD OIG staff continue to work with the Department to improve its effectiveness and as a result, have

developed and implemented better and more effective audit recommendations. HUD OIG Office of

Investigation agents have also enhanced their association with the Department as a new source or indicator for

new investigative avenues.

During this reporting period, our audits recommended that HUD take appropriate actions to ensure that

FHA-approved lenders comply with Federal requirements for FHA loans located in flood hazard areas. We

recommended that HUD appropriately sanction violations of the Real Estates Settlement and Procedures Act

and make referrals to the Mortgagee Review Board, making lenders pay back loans for which HUD underwriting
             

             

iv Inspector General’s Message

requirements were not followed. We further recommended that HUD develop and implement adequate

oversight of and controls over the appraiser review process to address weaknesses, and we provided comments

to HUD, requesting that it assess risk while implementing the FHASecure program, which is intended to assist

subprime or high-risk borrowers harmed by questionable loan terms.

Our investigating agents have been hard at work as well. A cross-section of the types of cases pursued

during the reporting period included uncovering and prosecuting a loan origination scam that caused more

than $2.3 million in losses to HUD, a civil case against an FHA lender that netted HUD $4.6 million, and

prosecuting a real estate scheme involving identity fraud and false Social Security numbers that caused HUD

losses in excess of $1.5 million in three States.

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

post-September 11 redevelopment efforts, Section 8 rental subsidy fraud, and any activity involving waste or

abuse in HUD programs or operations.

It is with obvious and justifiable pride that I thank the staff of HUD OIG for their tireless work.

Kenneth M. Donohue

Inspector General
             

             

Audit Charts v

Audit reports issued by program

Public and Indian

housing

42%

Multifamily

housing

4% Community

planning and

development

21%

Hurricane

relief oversight

2%

Other programs

9% Single-family

housing

22%

Monetary benefits identified by program

Public and Indian

housing

49%

Multifamily

housing

5%

Community

planning and

development

41%

Hurricane

relief oversight

2%

Other

programs

1%

Single-family

housing

2%

Monetary benefits identified in millions of dollars

$120.0

$100.0

$90.0

$80.0

$60.0

$40.0

$20.0

$0.0

$6.0 $11.4

$114.0 $95.4

$4.4 $1.4

Single-family

housing

Multifamily

housing

Public &

Indian

housing

Community

planning and

development

Hurricane

relief

oversight

Other

programs
             

             

vi Investigation Charts

Investigative cases opened by program area (total: 652)

Public and Indian

housing

55% (360)

Single-family

housing

12% (75)

Multifamily

housing

9% (60)

Community planning

and development

18% (120)

Other programs

6% (37)

Investigative recoveries by program area (total: $60,621,689)

Single-family

housing

52%

($37,843,857)

Other

0% ($38,345)

Multifamily housing

5% ($2,892,389)

Public and Indian

housing

14% ($8,513,166)

Community planning

and development

19% ($11,333,932)
             

             

Acronyms List vii

Acronyms List

AFGE American Federation of Government Employees

AIGA Assistant Inspector General for Audit

AIGI Assistant Inspector General for Investigation

ARIGA Assistant Regional Inspector General for Audit

ASAC Assistant Special Agent in Charge

CDBG Community Development Block Grant

CPD Office of Community Planning and Development

DHAP Disaster Housing Assistance Program

DHS U.S. Department of Homeland Security

DOJ U.S. Department of Justice

EIV Enterprise Income Verification

FEMA Federal Emergency Management Agency

FFI Fugitive Felon Initiative

FFMIA Federal Financial Management Improvement Act of 1996

FHA Federal Housing Administration

FHAP Fair Housing Assistance Program

FHEO Office of Fair Housing and Equal Opportunity

FISMA Federal Information Security Management Act

FSS Family Self-Sufficiency

GAO U.S. Government Accountability Office

Ginnie Mae Government National Mortgage Association

GPRA Government Performance Results Act

HECM Home equity conversion mortgages

HERA Housing and Economic Recovery Act (HERA) of 2008

HOME HOME Investment Partnerships Program

HUD U.S. Department of Housing and Urban Development

IAA Interagency agreement

IG Inspector General

IOI Identity of interest

IRS Internal Revenue Service

IT Information technology

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

NAHRO National Association of Housing and Redevelopment Officials

NCDF National Center for Disaster Fraud
             

             

viii Acronyms List

OA Office of Audit

OI Office of Investigation

OIG Office of Inspector General

OMB Office of Management and Budget

PFCRA Program Fraud Civil Remedies Act

PHA Public housing agency

PIH Office of Public and Indian Housing

REAP Resource Estimation and Allocation Process

RESPA Real Estate Settlement Procedures Act

RIGA Regional Inspector General for Audit

SA Special Agent

SAC Special Agent in Charge

SBA Small Business Administration

SEMAP Section Eight Management Assessment Program

SFA Senior Forensic Auditor

SHP Supportive Housing Program

SSA Senior Special Agent

SSA Social Security Administration

SSN Social Security number

TEAM Total Estimation and Allocation Mechanism

U.S.C. United States Code

USMS United States Marshals Service

USPS United States Postal Service

VA U.S. Department of Veterans Affairs
             

             

Table of Contents ix

Table of Contents

Executive Highlights 1

Chapter 1 - HUD’s Single Family Housing Programs 7

Audits 8

Investigations 16

Chapter 2 - HUD’s Public and Indian Housing Programs 27

Audits 28

Investigations 45

Chapter 3 - HUD’s Multifamily Housing Programs 61

Audits 62

Investigations 65

Chapter 4 - HUD’s Community Planning and Development Programs 71

Audits 72

Investigations 81

Chapter 5 - Hurricane Relief Oversight 87

Introduction and Background 89

Audits 92

Investigations 94

Inspections and Evaluations 102

Chapter 6 - Other Significant Audits and Investigations/OIG Hotline 105

Audits 106

Inspections and Evaluations 109

Investigations 110

OIG Hotline 111

Chapter 7 - Outreach Efforts 113

Chapter 8 - Review of Policy Directives 127

Enacted Legislation Related to Single-Family Housing 128

Proposed Rules 128

Chapter 9 - Audit Resolution 129

Audit Reports Issued before Start of Period with No Management Decision 130

Significant Revised Management Decisions 131

Significant Management Decision with Which OIG Disagrees 133

Federal Financial Management Improvement Act of 1996 133

Appendix 1 - Audit Reports Issued 135

Appendix 2 - Tables 143

Appendix 3 - Index 163

HUD OIG Operations Telephone Listing 167
             

              x

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. 128

Section 5(a)(1)-description of significant problems, abuses, and deficiencies relating to 1-112, 128

the administration of programs and operations of the Department.

Section 5(a)(2)-description of recommendations for corrective action with respect to 7-112

significant problems, abuses, and deficiencies.

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

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

Section 5(a)(4)-summary of matters referred to prosecutive authorities and the 7-112

prosecutions and convictions that have resulted.

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

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

the Act.

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

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

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

Section 5(a)(7)-summary of each particularly significant report and the total dollar value 7-112

of questioned and unsupported costs.

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

total dollar value of questioned and unsupported costs.

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

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

management.

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

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

end of the period.

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

significant revised management decisions made during the reporting period.

Section 5(a)(12)-information concerning any significant management decision with which the 133

Inspector General is in disagreement.

Section 5(a)(13)-the information described under section 05(b) of the Federal Financial 133

Federal Financial Management Improvement Act of 1996.

Reporting Requirements
               

               

Executive

Highlights
             

             

2 Executive Highlights

Strategic Initiative 1

HUD Strategic Goal: Increase Homeownership Opportunities

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

- Audits uncovering single-family and loan origination abuse

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

 determine whether controls are adequate

- Audits of lenders' origination activities under the FHASecure and Hope for Homeowners programs

- National strategy for single-family mortgage fraud task forces

- Inspections and evaluations of program areas

- Outreach to industry and consumer groups and the Department

Highlights: Results or impact of significant OIG work

- Disclosed more than $1.5 million in questioned costs and nearly $2.9 million in recommendations page 8

 that funds be put to better use

- Recommended that HUD develop and implement adequate oversight of and controls over the page 9

 appraiser review process to address identified weaknesses

- Recommended that HUD take appropriate actions to ensure that Federal Housing Administration page 10

 (FHA)-approved lenders comply with federal requirements for FHA loans located in flood hazard areas

- Recommended that HUD take appropriate sanctions for Real Estate Settlement Procedures Act page 11

 violations, make referrals to the Mortgagee Review Board, and require the lender to indemnify

 loans for which HUD underwriting requirements were not followed

- Loan origination scam causes HUD more than $2.3 million in losses page 17

- Identity fraud and false Social Security numbers cause HUD losses in excess of $1.5 million in page 21

 Colorado, New Jersey, and Texas

- Civil settlement with direct endorsement lender nets HUD $4.6 million page 22

- More than 300 mortgage and real estate professionals attend a mortgage fraud presentation in page 115

 Michigan

- Provided comments for HUD to assess risk while implementing the FHASecure program, which page 130

 is intended to assist subprime or high-risk borrowers harmed by questionable loan terms

Emerging Issues: Areas of OIG interest

- FHASecure

- Hope for Homeowners program

- Home equity conversion mortgage program

- Licensing and certification of mortgage professionals
             

             

Executive Highlights 3

Strategic Initiative 2

HUD Strategic Goal: Promote Decent Affordable Housing

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

through

- Audits of Section 8 Housing Choice Voucher program activities

- Audits of the HUD’s internal policies to determine whether controls are adequate

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

 and multifamily developments

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

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

- Public and Department-wide outreach initiatives

Highlights: Results or impact of significant OIG work

- Disclosed nearly $73 million in questioned costs and nearly $40 million in recommendations that page 28

 funds be put to better use

- Recommended that HUD require a housing authority to reimburse more than $27 million in page 30

 restricted funds to the proper program and establish and implement adequate procedures

 and controls to ensure that no interprogram advances of restricted funds are made in the future

- Identified excessive assistance payments due to payments for units not meeting minimum housing page 32

 quality standards, errors in tenant files, and lack of controls

- Recommended that HUD require housing authorities that failed to administer its Family page 33

 Self-Sufficiency program to reimburse the applicable program from nonfederal funds

- Recommended that housing authorities enhance their quality controls and implement policies and page 34

 procedures to prevent improper payments

- Housing authority executive director and others indicted in North Carolina page 46

- New York, Miami, and Las Vegas Section 8 landlords and tenants cause HUD losses of about page 52

 $800,000

- Fugitive felons residing in HUD-subsidized housing arrested in Illinois, Kansas, Missouri, Utah, page 58

 and South Dakota

- Multifamily management company owner indicted for embezzling more than $500,000 in HUD page 66

 funds

- Loan officer charged in civil complaint after hospital defaults on a $7 million HUD-insured mortgage page 69

- Public housing fraud schemes described for 475 National Association of Housing and page 120

 Redevelopment officials in Massachusetts, New Jersey, California, Missouri, Arkansas, and Texas

Emerging Issues: Areas of OIG interest

- FHA-insured nursing homes and nursing home equity skimming

- Public housing corruption and multifamily mismanagement

- Landlord fraud

- Implementation of Section 8 Management Assessment Program/ controls to ensure HUD's Section 8

 housing stock is in material compliance with housing quality standards

- Evaluation of the Housing Authority of New Orleans in carrying out its public housing activities and

 Section 8, procurement, and financial functions
             

             

4 Executive Highlights

Strategic Initiative 3

HUD Strategic Goal: Strengthen Communities

OIG Strategy:

- Promote integrity, efficiency, and effectiveness of programs

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

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

 Investment Partnerships Program

- Department liaison

- Audits of Gulf Coast activities

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

 development programs in each OIG region

- Hurricane relief fraud in HUD CDBG-funded programs

- Inspections and evaluations of program areas

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

 agencies

Highlights: Results or impact of significant OIG work

- Disclosed more than $70 million in questioned costs and nearly $25 million in recommendations page 72

 that funds be put to better use.

- Recommended that HUD require the States of New Mexico and Arizona repay more than $8.4 page 73

 million and ensure that the States comply with the Act in relation to set-asides for colonias.

- The former executive director and treasurer of a youth-oriented nonprofit in Fairbanks, AK, sent to page 82

 prison for embezzlement

- The former treasurer of a HUD-funded nonprofit chose 30 days in prison in lieu of a public apology page 82

- Hurricane relief fraud involving CDBG funding for homeowners page 95

- HUD program director and contractor briefed on fraud prevention measures in the Disaster page 100

Housing Assistance program

- Inspection of housing assistance overpayments to multifamily property owners after Hurricane page 102

 Katrina

Emerging Issues: Areas of OIG interest

- Gulf Coast hurricane assistance fraud

- Neighborhood Stabilization Program

- Emergency Shelter and Homeless Grants

- Emergency supplementals for FY 2008 natural disasters
             

             

Executive Highlights 5

Strategic Initiative 4

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

OIG Strategy:

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

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

- Audits of HUD's financial statements

- Audits of HUD's information systems and security management

- Audits of Ginnie Mae activities

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

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

Highlights: Results or impact of significant OIG work

- HUD's Enterprise Income Verification System discovers U.S. Postal Service employees fleecing page 55

 Chicago area housing authorities

- Recommended that HUD take measures to enhance methods used to assess human resource needs page 106

- Recommended that HUD properly meet its information security responsibilities page 107

Emerging Issues: Areas of OIG interest

- Issuer accountability in loan portfolio defaults in Government National Mortgage Association mortgage-

 backed securities program
Acronyms List

               

               

Chapter 1

HUD’s Single-Family

Housing Programs
             

             

8

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

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

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

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

has conducted numerous outreach efforts (see chapter 7, page 120).

Audits

Strategic Initiative 1: Contribute to the reduction of fraud

in single-family insurance programs

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

during this reporting period

Chapter 1: HUD’s Single-Family Housing Programs

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

Region 1

5%

Region 3

5%

Region 2

10%

Region 4

5%

Region 11

(Disaster Relief Oversight)

%(N/A)*

Region 5

11%

Region 6

11%

Region 7-8

32%

Region 9-10

21%

Key program results Questioned costs Funds put to better use

Audit 20 audits $1.5 million $2.9 million

Our

focus

Page 9

Page 9

Page 9

Page 10

Page 11

Page 15

- HUD's Office of Single Family Housing’s control structure

- HUD's appraiser review process

- HUD's oversight of the home equity conversion mortgages program

- HUD's oversight of the underwriting for Federal Housing

 Administration loans located in flood hazard areas

- Mortgagees, loan correspondents, and direct endorsement lenders

- Review of Government National Mortgage Association-approved issuer
             

             

Chapter 1: HUD’s Single-Family Housing Programs 9

HUD's Office of Single Family Housing’s Control Structure

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

audited HUD's Office of Single Family Housing (Single Family) to determine whether it had implemented an

internal control structure in accordance with U.S. Government Accountability Office (GAO) internal control

standards and HUD requirements.

Single Family had not fully implemented an internal control structure in accordance with GAO internal

control standards and HUD requirements. Specifically, it did not (1) perform a formal, systematic annual risk

assessment of its programs and administrative functions, (2) plan and conduct ongoing management control

reviews or alternative management control reviews of its programs, (3) establish an overall strategy regarding its

risk-based monitoring of program activities and participants, or (4) identify corrective actions required to

improve its management controls in a timely manner.

OIG recommended that HUD ensure that Single Family fully implements an acceptable internal control

structure by preparing and implementing effective written policies and procedures that comply with GAO

internal control standards and HUD requirements. (Audit Report: 2008-KC-0006)

HUD's Appraiser Review Process

HUD OIG audited HUD's appraiser review process to determine whether homeownership centers’

appraiser review procedures and HUD's oversight of the appraiser review process were adequate to identify and

remedy deficiencies associated with an appraiser and to assess the overall effectiveness of the appraiser review

process.

HUD's appraiser review process was not adequate to reliably and consistently identify and remedy

deficiencies associated with an appraiser, and HUD did not maintain information necessary to assess the

effectiveness of its review process. Each major phase of the appraiser review process contained problems such

as inadequate or incomplete HUD guidance, weak quality controls over implementation of review procedures,

and inconsistent application of rating standards and sanctioning timeframes.

OIG recommended that HUD develop and implement adequate oversight of and controls over the

appraiser review process to address the weaknesses identified and ensure that it continuously evaluates the

efficiency and effectiveness of the process. (Audit Report: 2008-LA-0003)

HUD's Oversight of the Home Equity Conversion Mortgages Program

HUD OIG audited HUD's oversight of the Federal Housing Administration (FHA)-insured home equity

conversion mortgages (HECM) program to assess elements of HUD's oversight of the program, focusing on

lender notification of borrower deaths and payment of debenture interest.

HUD did not ensure that FHA lenders reported borrowers' deaths in accordance with Federal

requirements. For the 31 loans reviewed, HUD's contractor failed to provide documentation to support that

FHA lenders notified HUD of borrowers' deaths in writing. Further, the lenders failed to notify the contractor

of borrowers' deaths for 11 of the loans and for 13 loans did not report in a timely manner the dates of

borrowers' deaths. HUD also failed to pay debenture interest on HECM loans. For 13 of the 30 loans on
             

             

10 Chapter 1: HUD’s Single-Family Housing Programs

which HUD paid claims during the period March 1, 2006, through February 29, 2008, it did not pay

debenture interest to the lenders in accordance with Federal requirements.

As a result, HUD could not be assured that FHA lenders appropriately met HUD's time requirements for

initiating the foreclosure process or for recording the deeds-in-lieu to take possession of the property, which

impacts the amount of the lenders' insurance claims. Additionally, as a result of HUD's failure to pay lenders

debenture interest on HECM loans from the loans' due date to the claim payment date, it owes lenders

debenture interest on these loans.

OIG recommended that HUD improve its existing procedures and controls to ensure that lenders follow

its requirements for servicing HECM loans and implement adequate procedures and controls to ensure that it

complies with Federal requirements in the administration of the HECM program, including the proper

payment of claims, and curtail interest payments to the appropriate lenders for the loans identified that HUD

determines failed to meet all of its time requirements. (Audit Report: 2008-CH-0001)

HUD's Oversight of the Underwriting for FHA Loans Located in Flood

Hazard Areas

HUD OIG audited HUD's oversight of the underwriting of FHA-insured loans for new construction

properties located in the Federal Emergency Management Agency's (FEMA) designated special flood hazard

areas to determine whether HUD had adequate oversight of the underwriting of the loans.

HUD did not always ensure that FHA-approved lenders complied with Federal requirements when they

submitted 399 loans, totaling more than $55 million in original mortgage amounts, to HUD for insurance

endorsement. The loans were to finance the purchase of newly constructed properties located in FEMA's

designated special flood hazard areas. However, the lenders failed to provide evidence of a letter of map

revision/amendment or flood elevation certificate when the loans were submitted to HUD for insurance

endorsement. For 195 loans, totaling nearly $27 million in original mortgage amounts, the lenders did not

ensure that borrowers' escrow accounts included payments for flood insurance at the time the loans closed.

HUD also did not ensure that lenders servicing FHA-insured loans for 163 properties, totaling nearly $22

million in original mortgage amounts, kept apprised of whether borrowers maintained required flood

insurance. In addition, 30 FHA lenders incorrectly certified to the integrity of the data supporting the

underwriting deficiencies and that the loans were eligible for HUD mortgage insurance for 242 loans.

As a result, HUD inappropriately approved loans for FHA mortgage insurance, and the lenders' failure to

ensure that borrowers maintained flood insurance throughout the life of the loans could pose a significant risk

in the event of a natural flood disaster.

We recommended that HUD (1) seek appropriate administrative action for the active loans if the lenders

cannot provide documentation to show that the properties are not located in FEMA's designated special flood

hazard areas or the required elevation certification showing that the properties meet elevation requirements

and are covered by flood insurance, (2) require the applicable lenders to reimburse HUD for any future losses

from claims paid if they cannot provide the required documentation, (3) require the lenders for the loans

lacking flood insurance to provide evidence showing that the properties have flood insurance or are no longer

located in FEMA's designated special flood hazard areas or seek appropriate administrative action, (4) and

improve existing procedures and controls to ensure that lenders follow HUD's underwriting requirements for

new construction properties located in FEMA's designated special flood hazard areas. These improved
             

             

11

procedures and controls should result in a potential savings to the FHA insurance fund of nearly $261,000

over the next year. We also recommended that HUD determine legal sufficiency and if legally sufficient,

pursue remedies under the Program Fraud Civil Remedies Act (PFCRA) against the lenders with incorrect

certifications. (Audit Report: 2008-CH-0002)

Mortgagees, Loan Correspondents, and Direct Endorsement Lenders

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

semiannual period. Lenders are targeted for audit through the use of data mining techniques, along with

prioritizing audit requests from outside sources. During this period, HUD OIG reviewed 14 FHA

single-family mortgage lenders. While OIG's objectives varied by auditee, the majority of the reviews were to

determine whether the mortgage lender complied with HUD's regulations, procedures, and instructions for

the underwriting of FHA loans and whether the mortgage lender's quality assurance plan met HUD's

requirements. The following section illustrates the audits conducted in the single-family mortgage lender area.



HUD OIG audited Heartland Funding Corporation in Springfield, MO, and found that Heartland Funding

violated the Real Estate Settlement Procedures Act (RESPA) and HUD requirements when processing FHA

loans that involved downpayment assistance. In addition, it did not follow HUD requirements when it

underwrote 27 FHA loans, implemented its quality control plan, or reported staff compensation.

OIG recommended that HUD (1) take appropriate sanctions against Heartland Funding for violating

RESPA, (2) refer it to HUD's Mortgagee Review Board for review and appropriate actions, (3) require it to

indemnify HUD on 27 loans for which it did not follow HUD underwriting requirements, and (4) verify

that it fully implements a quality control program that complies with HUD requirements and has ceased

improperly reporting staff compensation. (Audit Report: 2008-KC-1006)



HUD OIG audited Mortgage Access Corporation in Morris Plains, NJ, doing business as Weichert

Financial Services, and found that Mortgage Access Corporation did not always comply with HUD

regulations. Seven loans exhibited significant underwriting deficiencies such as inadequate credit analysis,

inadequate verification of funds to close, minimum cash investment not met, and inadequate verification of

income/employment. As a result, loans were approved for potentially ineligible borrowers, which caused

FHA to incur an unnecessary insurance risk. In addition, one of these seven loans was approved for a property

that was not eligible for FHA insurance. Mortgage Access Corporation also failed to ensure that its quality

control plan was implemented in accordance with HUD's requirements. Consequently, the

effectiveness of the plan, which was designed to ensure accuracy, validity, and completeness in its loan

underwriting process, was lessened.

OIG recommended that HUD require Mortgage Access Corporation to reimburse it for one ineligible

loan, indemnify it against future losses on six loans with significant underwriting deficiencies, and implement

procedures to ensure compliance with HUD's and its own quality control requirements. (Audit Report:

2008-NY-1005)



Chapter 1: HUD’s Single-Family Housing Programs
             

             

12

HUD OIG audited the Wells Fargo Bank NA, Rochester, NY, Branch Office, a national bank and

supervised lender, and found that Wells Fargo did not always comply with HUD underwriting requirements.

Consequently, 16 of the 20 loans reviewed exhibited significant underwriting deficiencies such as minimum

cash investment not met, inaccurate calculation of income, inadequate verification of debt, inadequate review

of appraisals, and overinsured loans. In addition, 8 of the 16 loans contained origination deficiencies, such as

inadequate gift fund verification, inadequate assets available to close, questionable clear title to the property,

ineligible prior mortgage late payments, inadequate compensating factors, and various borrower credit issues.

As a result, mortgage loans were approved for potentially ineligible borrowers, causing the FHA insurance fund

to assume an unnecessary insurance risk. Wells Fargo also failed to ensure that its quality control plan was

properly implemented in accordance with HUD's and its own quality control requirements.

OIG recommended that HUD (1) require Wells Fargo to reimburse HUD for the loss incurred on one

loan with significant underwriting deficiencies, (2) indemnify HUD against future losses on 15 active loans

with significant underwriting deficiencies, (3) establish procedures to ensure that HUD underwriting

requirements are properly implemented and documented, and (4) implement procedures to ensure

compliance with HUD's and its own quality control requirements. (Audit Report: 2008-NY-1010)



HUD OIG reviewed 23 FHA loans underwritten by Peoples Bank of Overland Park, KS, and found that

Peoples Bank did not follow HUD's requirements when underwriting nine FHA loans. In addition, its quality

control program did not comply with HUD's requirements.

OIG recommended that HUD (1) require Peoples Bank to indemnify HUD for eight actively insured

loans and reimburse HUD for one loan for which HUD incurred losses when it sold the property, (2) verify

that Peoples Bank has implemented an adequate supervisory structure and adequately trained its underwriters

regarding HUD requirements for FHA loans, and (3) ensure that Peoples Bank implements a quality control

program that meets HUD requirements. (Audit Report: 2008-KC-1004)



HUD OIG audited the Newark, DE, branch office of Wells Fargo Home Mortgage, which is mainly

responsible for underwriting loans for 22 Wells Fargo sales branch offices in Pennsylvania. OIG found that the

Wells Fargo branch office did not always comply with HUD requirements in the origination of FHA-insured

single-family loans. Although it generally complied with HUD requirements in its quality control reviews of

FHA loans, four of eight loans reviewed were not originated in accordance with HUD requirements. As a

result, the FHA insurance fund was exposed to an unnecessarily increased risk.

OIG recommended that HUD require Wells Fargo to indemnify more than $816,000 for four loans,

which it issued contrary to HUD's loan origination requirements, and enforce its policies, procedures, and

controls to ensure that its staff consistently follows HUD's requirements. (Audit Report: 2008-PH-1011)



HUD OIG audited A Plus Mortgage, Inc., Tukwila, WA, and found that A Plus disregarded FHA

requirements and provisions of RESPA and engaged in deceptive lending practices. Although it informed

borrowers that they could receive a lower interest rate on their loans by paying up-front points and fees, A Plus

charged loan discount fees to borrowers without reducing interest rates on the mortgages. This practice

Chapter 1: HUD’s Single-Family Housing Programs
             

             

Chapter 1: HUD’s Single-Family Housing Programs 13

allowed A Plus to generate high-rate loans for which its sponsor lenders paid it a yield spread premium when

the loans closed escrow. As a result, borrowers paid excessive interest and fees for which they received no

associated benefit. In addition, all 28 FHA-insured A Plus loans reviewed were originated by independent

contractors, unapproved branches, or other non-FHA-approved mortgage broker firms.

OIG recommended that HUD require A Plus to (1) return unearned and excess yield spread premiums,

loan discount fees, and other fees, totaling more than $153,000, to the borrowers; (2) review and analyze all

other FHA-insured loans generated by A Plus with loan discount points when no interest rate reduction

occurred, report the results to the Mortgagee Review Board, and issue refunds to the borrowers;

(3) discontinue charging loan discount fees when it receives yield spread premiums on a loan; (4) cease

changing the names of fees from the initial disclosure to the final HUD-1 settlement statement; (5) instruct its

loan officers to ensure that the borrowers clearly understand the nature of all charges associated with their

loans; (6) return all loan origination fees, totaling more than $32,000, to the borrowers on all loans that were

originated by third-party independent contractors; (7) only submit loans for FHA insurance that were

originated by A Plus employees; and (8) register all of its branch offices with FHA. (Audit Report:

2008-SE-1004)



HUD OIG audited Meridian Lending, Inc., Monroe, GA, an FHA-approved direct endorsement lender,

and found that Meridian did not follow HUD requirements in originating two of the eight FHA-insured loans

reviewed. As a result, it placed HUD's insurance fund at risk for nearly $272,000. In addition, Meridian did

not review its early defaulting loans. As a result, the lender adversely impacted the goals of HUD's quality

control program, which is designed to protect the lender and HUD from unacceptable risk.

OIG recommended that HUD require Meridian to (1) indemnify HUD for the potential loss on the loan

with a significant deficiency and reimburse HUD for the claim loss on the other loan and (2) conduct its

quality reviews in a timely manner and review all early defaulting loans as required by HUD regulations.

(Audit Report: 2008-AT-1010)



HUD OIG audited the Milford, CT, branch office of Countrywide Bank, FSB, a supervised national bank

approved by HUD to originate, underwrite, and service FHA single-family insured loans. OIG expanded the

audit to cover the Madison, CT, branch office, which used the same FHA identification number. OIG found

that Countrywide's quality control plan and implementation were adequate. However, the lender did not fully

comply with HUD regulations, procedures, and instructions in the origination of FHA-insured single-family

mortgages. Specifically, Countrywide allowed some borrowers, using secondary financing from an agency

acting as an instrumentality of government, to incorrectly receive cash back at closing in excess of their total

cash deposit totaling nearly $6,000. It also did not properly notify HUD upon the sale and/or transfer of

FHA-insured loans.

OIG recommended that HUD require Countrywide to (1) pay down the principal for the five overinsured

loans and implement controls to prevent cash back when secondary financing is used and (2) update its

mortgages records in HUD's system to reflect the appropriate mortgage holder and implement procedures to

ensure the timely submission of mortgage record changes for future loans assigned or sold. (Audit Report:

2008-BO-1007)


             

             

14 Chapter 1: HUD’s Single-Family Housing Programs

HUD OIG audited the mortgage origination and business practices of First Magnus Financial Corporation's

corporate office in Tucson, AZ, and found that First Magnus violated RESPA when it paid quality incentives,

also known as volume-based incentives, to brokers for originating and processing FHA mortgages. As a result,

it paid brokers nearly $59,000 in quality incentives to originate and process 169 FHA mortgages totaling more

than $24 million.

OIG recommended that HUD (1) require First Magnus to ensure that the practice of issuing incentive

payments to brokers for originating and processing FHA mortgages is discontinued, (2) remove First Magnus'

active status and approval to perform FHA business, and (3) pursue administrative actions against the principal

owners and management of First Magnus for allowing the improper practice of issuing incentive payments to

brokers for originating and processing FHA mortgages. (Audit Report: 2008-LA-1013)



HUD OIG audited the mortgage origination and business practices of the First Magnus Financial

Corporation corporate office in Tucson, AZ, and found that First Magnus violated RESPA when it paid for the

referral of FHA mortgage business. As a result, it paid building and real estate companies more than $32,000

in marketing fees and noncompetition fees in exchange for the exclusive referral of 236 FHA-insured

mortgages totaling more than $30 million.

OIG recommended that HUD (1) require First Magnus, for any current or future FHA mortgage

operations for which it may exercise management control, to ensure that the practice of paying marketing fees

and noncompetition fees to real estate companies and builders for referrals of FHA mortgages is discontinued;

(2) remove First Magnus' active status and approval to perform FHA business; and (3) pursue administrative

actions against the principal owners and management of First Magnus for allowing the improper practice of

paying marketing fees and noncompetition fees to real estate companies and builders in exchange for referrals

of FHA mortgage business. (Audit Report: 2008-LA-1014)



HUD OIG audited First National Bank of Gillette, WY, an FHA-approved direct endorsement lender,

and found that First National Bank did not follow HUD regulations when originating and underwriting 18

FHA loans. In addition, it did not have a written quality control plan, and its third-party contractor, who

performed the quality control reviews, did not perform all reviews in accordance with HUD requirements.

OIG recommended that HUD require that First National Bank bring its procedures for the origination

and underwriting of insured loans into full compliance with HUD regulations and to develop and implement

a written quality control plan. (Audit Report: 2008-DE-1004)



HUD OIG audited Wells Fargo Mortgage, Minneapolis, MN, and found that Wells Fargo generally

complied with HUD's reverse mortgage requirements. However, 3 of the 47 loans reviewed did not meet

HUD's requirements. Wells Fargo originated one ineligible loan totaling more than $86,000 for a home that

was not the borrower's primary residence, one loan for nearly $149,000 for a home that the borrower no

longer occupied, and one loan for which the list of required repairs was not detailed enough to determine

requirements. In addition, for the loan to the borrower who no longer occupied the home, the borrower did

not complete repairs in an acceptable manner.
             

             

Chapter 1: HUD’s Single-Family Housing Programs 15

OIG recommended that HUD cancel the mortgage insurance on one loan, require Wells Fargo to

complete foreclosure proceedings for one loan, and ensure that inspectors list repairs in sufficient detail to

determine what repairs were required and ensure that the repairs are satisfactorily completed. (Audit Report:

2008-FW-1013)



HUD OIG reviewed Senior Reverse Mortgage Services, Incorporated, Bedford, TX, a HECM originator.

Generally, the originator complied with HUD regulations when it originated HECM loans. However, it could

have improved its service by consistently following requirements to (1) adequately disclose the financial aspects

of the loans to borrowers, (2) counsel the borrowers on other available financing options, and (3) complete

documents. Because the originator did not consistently follow these procedures, borrowers may not have been

fully aware of the financial implications of the loans.

OIG recommended that HUD require the originator to implement procedures to ensure that it

(1) provides at least two assumptions for at least two loan terms and two appreciation rates to borrowers,

(2) provides a list of eligible counselors to the borrowers so that they can select their counselor, and

(3) completes all loan documents. (Audit Report: 2008-FW-1010)



HUD OIG reviewed the quality control program of James B. Nutter and Company, Kansas City, MO,

and found that for 6 months in 2007 and 2008, J.B. Nutter did not meet HUD's or its own quality control

requirements regarding the number of loans to review.

OIG recommended that HUD ensure that J.B. Nutter follows HUD requirements regarding the

minimum number of endorsed loans to be reviewed for quality control purposes. (Audit Report:

2008-KC-1005)

Review of Government National Mortgage Association-Approved Issuer

HUD OIG audited Doral Bank Puerto Rico, San Juan, PR, an approved issuer for the Government

National Mortgage Association (Ginnie Mae), to determine whether Doral complied with Ginnie Mae

requirements associated with its mortgage-backed securities activities.

Doral did not fully comply with Ginnie Mae requirements because it maintained seven noninsured loans

in Ginnie Mae pools. It also failed to ensure that data on its pooled loans were accurate. As a result, it retained

defective loans with unpaid principal totaling more than $448,000 in its Ginnie Mae pools and reported

inaccurate information to Ginnie Mae and HUD.

OIG recommended that Ginnie Mae (1) require Doral to take corrective measures to ensure that the

defective loans identified during the review are reinsured or removed from the Ginnie Mae pools and that the

loans reflect complete and accurate mortgage information and (2) ensure that Doral establishes and

implements adequate controls and procedures to periodically verify that all of its Ginnie Mae pooled loans are

insured in accordance with Ginnie Mae requirements. (Audit Report: 2008-AT-1014)


             

             

16 Chapter 1: HUD’s Single-Family Housing Programs

Investigations

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

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

results of various significant investigations are described below.

Strategic Initiative 1: Contribute to the reduction of fraud

in single-family insurance programs

$

recovered

Admin/civil

actions

Investigations 99 $37,843,857 119

Our

focus

Page 17

Page 21

Page 22

Page 24

- Loan origination fraud

- Identity fraud and false Social Security numbers

- Civil and administrative actions

- Other single-family fraud

Convictions/pleas/

pretrials

Cases

closed

Key program

results

106

* This does not include hurricane relief cases. See chapter 5 for these cases.

Region 1

2%

Region 3

26%

Region 2

13%

Region 4

9%

Region 11

(Disaster Relief Oversight)

%(N/A)*

Region 5

17%

Region 6

14%

Region 7-8

5%

Region 9-10

14%

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

during this reporting period
             

             

Chapter 1: HUD’s Single-Family Housing Programs 17

Loan Origination Fraud

Clifford Shaw, the owner of Shaw Properties, was sentenced in U.S. District Court, Jacksonville, FL, to 3

years incarceration (time served), 10 months home detention, and 3 years supervised release and ordered to pay

restitution not yet determined and a $30,000 fine for his earlier guilty plea to making false statements to HUD

and conspiracy to commit bank and wire fraud. Shaw purchased, rehabilitated, and resold HUD real

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

FHA-insured mortgages. HUD realized losses in excess of $2.9 million after 87 mortgages defaulted.



Gerald Carti, a former loan officer and an owner of US Mortgage Corporation; Amer Mir, a loan officer for

United Home Mortgage Company; Frederick Ugwu, a controller for 253 East 33rd Street, LLC; and Renford

Davis, a property manager for Renhops Management, LLC, were each arrested after their indictments in U.S.

District Court, Newark, NJ, for allegedly committing wire fraud, money laundering, and conspiracy to

commit wire fraud and money laundering. In addition, Maurice Bethea, the owner of Blu Financial Group,

Inc., Urban Upliftment, Born Asiatic, and Greenfield Assets Holdings, and real estate brokers Norma, Maristane,

and Mara Silva each pled guilty to committing mail fraud or conspiracy to commit mail fraud. The above

defendants and others allegedly inflated home values through bogus appraisals, fabricated borrower deposit

amounts, and caused the falsification of loan documents used by unqualified

borrowers to obtain FHA-insured and conventional mortgages. HUD

realized losses of about $2.3 million after 30 mortgages defaulted.



James Boyle, a former loan officer for RBC Mortgage; Marie Caltagerone,

owner of Caltagerone Accounting; and Ray Talan, a former realtor for Remax

Realty, were collectively sentenced in U.S. District Court, Rockford, IL, to

15 months incarceration, 8 months home confinement, and 11 years

probation and ordered to pay HUD $145,289 and other lenders $84,905 in

restitution for their earlier guilty pleas to committing conspiracy or mail fraud.

Boyle, Caltagerone, Talan, and others created and provided fraudulent loan

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

HUD realized losses in excess of $2 million after more than 50 mortgages

defaulted.



Trudy Peters, a former escrow officer for Ticor Title Company; John Soto

and Larry Smith, former service representatives for Wells Fargo Home

Mortgage; Maria Felix, a Sahara Investments employee; and Tony Vasquez, a

HUD-certified housing counselor for Chicanos Por La Causa, were

collectively sentenced in U.S. District Court, Phoenix, AZ, to 120 days home

confinement and 15 years probation and fined $17,500 for their earlier guilty

Copyright, 2008. Rockford Register

Star - Rockford, IL. Reprinted

with permission.
             

             

18 Chapter 1: HUD’s Single-Family Housing Programs

pleas to submitting false statements to HUD. The above defendants and previously convicted Edward Carrillo,

the owner of Sahara Investments, submitted fraudulent appraisals and housing counseling certifications and

concealed mortgage loans encumbering properties sold through the HUD preforeclosure program. In

addition, Wells Fargo Bank and Ticor Title Agency of Arizona each entered into civil settlements and agreed to

collectively pay HUD and the U.S. Department of Justice more than $4.3 million. HUD realized losses in

excess of $2.1 million after 70 fraudulent claims for FHA-insurance benefits were submitted and paid.



LaDonna Mullins, the owner of LaDonna's Realty, and Linda Edwards, a

real estate agent for Affable Realty, were each convicted in U.S. District Court,

Denver, CO, of making false statements, providing false Social Security

numbers (SSN), or committing wire fraud. In addition, Emmitt Cotton, a

former loan officer for Mid-America Mortgage, Fast Trac Mortgage, and

Mortgage Executives, was ordered to pay a $1,000 fine for his earlier guilty plea

to making false statements to HUD and aiding and abetting. Mullins, Edwards,

Cotton, and others submitted or caused the submission of fraudulent loan

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

HUD realized losses of about $1.25 million after 25 mortgages defaulted.



Tracey Rangell, an assistant escrow officer for Benefit Escrow, was sentenced

in U.S. District Court, Los Angeles, CA, to 6 months home detention and 36

months probation and ordered to pay HUD $972,162 in restitution for her

earlier guilty plea to making false statements and conspiracy. Rangell and others

provided fraudulent information and falcified downpayment funds used by

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

in excess of $972,162 after 21 mortgages defaulted.



Wendy Barker, a Dallas County Community College computer instructor;

Gloria Matlock and Latona Bates, former loan officers for Supreme Lending;

and Marlena Plesa-Pfeffer, a former real estate agent for Compass Real Estate,

were collectively sentenced in U.S. District Court, Dallas, TX, to 86 months

incarceration and 9 years supervised release and ordered to pay HUD more than

$1.3 million in restitution for their earlier guilty pleas to conspiracy to make

false statements to a Federal agency. From March 2002 through September

2007, the above defendants and others electronically altered or created

fraudulent income, employment, and other loan documents used by

unqualified borrowers to obtain FHA-insured mortgages. HUD

realized losses of $666,085 after 17 mortgages defaulted.



Copyright, 2008. The Denver

Post - Denver, CO. Reprinted

with permission.
             

             

Chapter 1: HUD’s Single-Family Housing Programs 19

Copyright, 2008. The Denver

Post - Denver, CO. Reprinted

with permission.

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

(Reserve), was convicted in U.S. District Court, Denver, CO, of committing

mail and wire fraud and witness tampering. In addition, Jesus Guevara, a real

estate sales assistant for Reserve, pled guilty to committing mail and wire

fraud and tampering with a witness. From June 1998 to February 2002,

Weiss, Guevara, and others submitted fraudulent loan documents and

provided downpayment funds used by unqualified borrowers to obtain

FHA-insured mortgages. HUD realized losses of about $852,000 after 18

mortgages defaulted.



David Paul, the president of DCP Investments Properties, LLC, and Diane

Flannery, a former loan officer for Source Mortgage Company, each pled

guilty in U.S. District Court, Reading, PA, to committing mail fraud and

aiding and abetting. Paul provided fraudulent loan documents and

downpayment funds used by unqualified borrowers to obtain FHA-insured

mortgages, and Flannery originated FHA-insured mortgages for the

unqualified borrowers knowing that Paul had provided the fraudulent loan

documents and downpayment assistance. HUD realized losses of about

$280,000 after six mortgages defaulted.



Alberto Hernandez, the president of ASH Homes Investment Corporation, and his silent partner, John

Fraga, were each indicted in U.S. District Court, Miami, FL, for allegedly making false statements and

committing conspiracy and wire and mail fraud. Hernandez allegedly sold his properties and provided

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

and others allegedly converted the downpayment or gift funds provided by Hernandez into the financial

instruments used by the unqualified borrowers. In addition, Fraga allegedly obtained an FHA-insured

mortgage on a property that he purchased from Hernandez as an investment. HUD realized losses of $232,060

after four mortgages defaulted.



FHA-insured mortgagor Heather Etuk pled guilty in Colorado District Court, Denver, CO, to

committing forgery, and ABK Mortgage loan processor Jennifer Wolsey was sentenced to 8 years probation

and ordered to perform 200 hours of community service for her earlier guilty plea to committing computer

crimes involving mortgage fraud. In addition, Uto Essien, owner of Essien & Co. Realty, Ltd.; Scott Hinkley,

a loan officer for ABK Mortgage; Etuk; Wolsey; and previously indicted FHA-insured mortgagor Idara Ekiko

were each suspended from procurement and nonprocurement transactions with HUD and throughout the

Executive Branch of the Federal Government pending the outcome of criminal proceedings or any related

debarment actions. Essien, Hinkley, and Ekiko allegedly and Etuk and Wolsey admittedly provided fraudulent

loan applications for themselves or other unqualified borrowers to obtain conventional and FHA-insured

mortgages. HUD realized losses of $153,814 after three FHA-insured mortgages defaulted.


             

             

20 Chapter 1: HUD’s Single-Family Housing Programs

Rene Ibarra, a real estate agent for Coldwell Banker, was sentenced in U.S. District Court, Los Angeles,

CA, to 8 months home detention and 2 years probation and ordered to pay victims not yet identified $175,287

in restitution for his earlier guilty plea to making false statements and committing conspiracy. Ibarra and

others provided fraudulent loan documents used by unqualified borrowers to obtain FHA-insured mortgages.

HUD realized losses of $128,496 after three mortgages defaulted.



Wander Colon was sentenced in U.S. District Court, Memphis, TN, to 1 year probation for his earlier

guilty plea to making a false statement. Colon submitted fraudulent income and employment information to

obtain an FHA-insured mortgage. HUD realized a loss of $100,000 after his mortgage defaulted.



Felix Guzman, Sr., and Felix Guzman, Jr., former real estate agents for AVI Realty; Walter Guzman and

Rodney Rhode, former loan officers for Dynasty Mortgage; Mary Vasquez, an escrow officer for Camelback

Title; Andrew Benjamin and Christopher Pirwitz, the owner of and a loan officer for Family Home Lending;

Carl Olson, the owner of Management Concepts; and home buyers Ana Valdez and Maria Guzman were each

indicted in U.S. District Court, Phoenix, AZ, for allegedly committing wire fraud, conspiracy, money

laundering, and aiding and abetting. The above defendants and others allegedly conspired and arranged 23

property sales at inflated values, obtained more than $2 million in kickbacks without lender knowledge,

falsified HUD settlement statements, and violated RESPA.



Dan Cimino, Ursula Gallucci, and Lisa Planche, current or former notary publics, were each charged in

Adams County District Court, Brighton, CO, with official misconduct by a notary public or false reporting to

authorities. Cimino and Gallucci allegedly notarized FHA-insured loan documents without witnessing the

borrower's signatures, and Planche allegedly provided authorities false information relating to documents she

notarized. HUD realized a loss of $81,626 after one mortgage defaulted.



Copyright, 2008. The Arizona Republic - Phoenix, AZ. Reprinted with permission.
             

             

Chapter 1: HUD’s Single-Family Housing Programs 21

Willie Brown was sentenced in U.S. District Court, Norfolk, VA, to 4 months home detention and 3 years

probation and ordered to pay HUD $69,048 in restitution for his earlier guilty plea to committing mail fraud.

Brown provided fraudulent information and loan documents used by an unqualified borrower to obtain an

FHA-insured mortgage. HUD realized a loss of about $80,000 after the mortgage defaulted.



FHA-insured mortgagor Leonel Miramontes Armendariz was sentenced in Adams County District Court,

Brighton, CO, to 24 months probation for his earlier guilty plea to offering a false instrument for recording.

Armendariz provided fraudulent loan documents to obtain and later defaulted on an FHA-insured mortgage.

HUD realized a loss of $59,736 after his mortgage defaulted.



Wayne Puff, the former owner of the now-defunct N.J. Affordable Homes (Affordable Homes), was

arrested and charged in U.S. District Court, Newark, NJ, with an alleged conspiracy to commit mail fraud. In

addition, Sydney Raposo, a former paralegal involved with real estate closings, pled guilty to making false

statements to HUD. Puff and others allegedly and Raposo admittedly provided false information to lure

investors or submitted fraudulent appraisals and other loan documents used by unqualified borrowers to

obtain FHA-insured and conventional mortgages. HUD losses are not yet determined.

Identity Fraud and False Social Security Numbers

Sonia, Doris, and Sylvia Toledo, former loan officers for Building and Loan Mortgage Company, were

collectively sentenced in Johnson County District Court, Olathe, KS, to 24 months incarceration (16 months

suspended) and 60 months probation, fined $75,000, and ordered to surrender their mortgage broker or real

estate licenses for their earlier guilty pleas to committing computer crimes or making false writings. From

2002 to 2005, the Toledos and others assisted undocumented immigrants who used false SSNs to obtain

approximately $5 million in FHA-insured mortgages. HUD realized losses of $680,581 after 13 mortgages

defaulted.



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

in U.S. District Court, Fort Worth, TX, with an alleged conspiracy to make false entries to HUD. Mahomed

allegedly provided fraudulent SSNs, inflated financial information, and provided downpayment funds used by

unqualified borrowers to obtain FHA-insured mortgages. HUD realized losses of $412,083 after 12

mortgages defaulted.



Straw buyers John Prados and Caridad Paz each pled guilty in U.S. District Court, Newark, NJ, to

conspiracy to defraud HUD and using a false SSN to obtain an FHA-insured loan. Prados, Paz, and others

used or supplied fraudulent employment, identity, and other loan documents for themselves or other

unqualified borrowers to obtain FHA-insured mortgages. HUD realized losses in excess of $349,000 after 12

mortgages defaulted.


             

             

22

Seven FHA-insured borrowers were each indicted in Dallas County District Court, Dallas, TX, for

allegedly securing execution of documents by deception. In addition, Alfredo and Judith De La Garza, Pascual

Melendez Perez, and Salvador Fuerte were each sentenced to 2 years probation and collectively fined $2,490

for their earlier guilty pleas to securing execution of documents by deception. The seven defendants allegedly

and the remaining defendants admittedly used false SSNs and fraudulent loan documents to obtain and later

defaulted on FHA-insured mortgages. HUD realized losses of $217,281 after eight mortgages defaulted.



Derrick and Sheila Lewis were each indicted in Suffolk Circuit Court, Suffolk, VA, for allegedly

committing identity fraud and obtaining money by false pretenses. Derrick and Sheila Lewis allegedly used

false identifications and financial documents to obtain and later defaulted on an FHA-insured mortgage.

HUD losses are not yet determined.



Michael Banks, Jr., also known as Richard Jones, an investor doing business as RJ Construction, was

indicted in U.S. District Court, Los Angeles, CA, for allegedly committing bank fraud and aiding and

abetting. Banks allegedly used a false identification when he purchased and fraudulently resold HUD-owned

properties.

Civil and Administrative Actions

National City Mortgage, Inc. (National), a HUD direct endorsement lender, entered into a civil settlement

filed in U.S. District Court, Detroit, MI, and agreed to pay HUD $4.6 million. From May 2002 through

April 2004, National violated FHA regulations when it allegedly endorsed and submitted FHA-insured

mortgages for insurance benefits after the loans became delinquent. HUD realized losses in excess of $2.1

million after 58 mortgages defaulted.



Dynamic Financial Consultants, Inc. (Dynamic Financial), located in Newark, NJ, entered into a PFCRA

settlement and agreed to pay HUD $25,000. Dynamic Financial allegedly certified FHA-insured loan

packages that contained false documents and submitted false claims for FHA-insurance benefits after the

borrowers defaulted. HUD realized losses in excess of $1.8 million after 39 mortgages defaulted.



Andy Pena, an owner of Crossmark Mortgage located in Los Angeles, CA, entered into a PFCRA

settlement and agreed to pay HUD $32,500. Pena, previously sentenced for his earlier guilty plea to

committing wire fraud, provided fraudulent loan documents used by unqualified borrowers to obtain

FHA-insured mortgages. HUD realized losses of $474,264 after 12 mortgages defaulted.



Delia Cervantes, an unlicensed realtor in Los Angeles, CA, entered into a PFCRA settlement and agreed to

pay HUD $57,353. Cervantes, previously sentenced for her earlier guilty plea to committing wire fraud,

Chapter 1: HUD’s Single-Family Housing Programs
             

             

Chapter 1: HUD’s Single-Family Housing Programs 23

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

mortgages. HUD realized losses of $421,843 after seven mortgages defaulted.



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

pled guilty to conspiracy to make false statements in U.S. District Court, Newark, NJ, was suspended from

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

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

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

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



Irwin Mortgage, located in Indianapolis, IN, entered into a PFCRA settlement and agreed to pay HUD

$150,000. Irwin Mortgage allegedly certified six fraudulent FHA-insured loan packages and submitted false

claims for FHA-insurance benefits after the borrowers defaulted. HUD realized losses of $239,218 after five

mortgages defaulted.



Dwayne Jones, a former loan officer for the now-defunct First Funding Mortgage Bankers (First Funding),

who previously pled guilty to committing conspiracy to defraud HUD in U.S. District Court, West Hempstead,

NY, was debarred from procurement and nonprocurement transactions with HUD and throughout the

Executive Branch of the Federal Government for 3 years. Jones submitted false statements to HUD and

Countrywide Home Loans (Countrywide) when he fraudulently flipped his personal property to a straw

borrower who obtained an FHA-insured mortgage from First Funding. The flipped property sale provided

Jones more than $51,000 in sale proceeds as well as a short payoff for his original FHA-insured mortgage, also

serviced by Countrywide. Countrywide was unaware that the Jones property was flipped for $75,000 more

than the stated purchase amount and submitted a claim to HUD for more than $85,000.



Ark Mortgage, Inc. (Ark), located in Newark, NJ, entered into a PFCRA settlement and agreed to pay

HUD $39,756. Laura Barlow, a former underwriter at Ark Mortgage, who was sentenced and debarred after

her guilty plea to committing conspiracy to provide false statements, allegedly approved unqualified borrowers

for FHA-insured mortgages in exchange for compensation. The fraudulent loan packages were submitted for

FHA-insurance benefits after the borrowers defaulted. HUD realized losses of $76,123 after six mortgages

defaulted.



Wells Fargo Bank (Wells Fargo) entered into a PFCRA settlement and agreed to pay HUD $49,000. Wells

Fargo acquired Crossland Mortgage (Crossland) located in Buffalo, NY, including a legal responsibility for

Crossland's false certifications. Crossland allegedly certified an FHA-insured loan package that contained false

documents and submitted a false claim for FHA-insurance benefits after the borrower defaulted.


             

             

24 Chapter 1: HUD’s Single-Family Housing Programs

Michael Massimini, a real estate broker and president of Mortgage Pros of Tampa and First Home Realty,

and James Cosentino, an appraiser and owner of Equitable Appraisal, Inc., each entered into PFCRA, False

Claims, and Contract Dispute Act civil settlements filed in U.S. District Court, Tampa, FL. Massimini agreed

to pay HUD $1,500 in damages, and Massimini and Cosentino each agreed to collectively pay the U.S.

Department of Justice $14,500 in civil penalties. Massimini allegedly brokered two owner-occupant mortgage

loans on a HUD-owned property through Mortgage Pros of Tampa for Cosentino, knowing that Cosentino

did not occupy the property as required.



Kenneth Germain, the chief executive officer for EQ Investments, was indicted in Denver County District

Court, Denver, CO, for allegedly committing theft, securities fraud, and Colorado Organized Crime Control

Act violations and was suspended from procurement and nonprocurement transactions with HUD and

throughout the Executive Branch of the Federal Government pending the outcome of criminal proceedings or

any related debarment actions. Germain allegedly obtained about 60 HUD-owned properties and resold the

properties to investors but failed to manage the properties or pay mortgage loans as promised. HUD realized

no losses.

Other Single-Family Fraud

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

Marathon, each pled guilty in U.S. District Court, Detroit, MI, to committing wire fraud. From July 1998 to

October 2007, Terbrack and Money failed to report 2,041 terminated or satisfied loans to Ginnie Mae and

then fraudulently used the funds obtained from the terminated or satisfied mortgages for personal stock

investments or to continue payments on the loans. Ginnie Mae realized losses of about $20 million.



Jamen Wood, a registered agent for BK Properties, LLC, pled guilty in U.S. District Court, Salt Lake City,

UT, to committing equity skimming and mail fraud. From July 2002 through December 2004, Wood and

others identified properties surrendered to bankruptcy courts in Utah, Colorado, Idaho, Arizona, Wyoming,

Minnesota, North Carolina, and Washington; posed as bankruptcy court or financial institution

representatives and secured quit claim deeds from the property owners; and rented the properties and collected

rents but failed to remit mortgage loan payments and used the rents collected for personal expenses. HUD

realized losses in excess of $1.5 million after 52 FHA-insured properties defaulted.



Debra Molina, a San Bernardino County probation officer and HUD Good Neighbor Next Door (Good

Neighbor) program participant, reimbursed HUD $67,500, pled guilty in U.S. District Court, Riverside, CA,

to making false statements, and was sentenced to 6 months home detention. Molina obtained a HUD-owned

property and received a $67,500 discount but failed to reside in her Good Neighbor property or report her

nonresidency on HUD certifications.


             

             

Chapter 1: HUD’s Single-Family Housing Programs 25

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

participant, was charged in U.S. District Court, Kansas City, MO, with allegedly making false statements.

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

Good Neighbor property or report his nonresidency on HUD certifications.



Shannon Thelen, a teacher and HUD Good Neighbor program participant, was sentenced in U.S. District

Court, Grand Rapids, MI, to 1 year probation and ordered to pay HUD $31,250 for her earlier pretrial

diversion agreement. Thelen obtained a HUD-owned property and received a $31,250 discount but failed to

reside in the Good Neighbor property or report her nonresidency on HUD certifications.



Eulalio Tordil, a U.S. Department of Homeland Security Federal Protective Service inspector and HUD

Good Neighbor program participant in Hyattsville, MD, entered into a civil settlement and agreed to pay

HUD $15,900. Tordil obtained a HUD-owned property and received a $26,500 discount but failed to reside

in the Good Neighbor property or report his nonresidency on HUD certifications.



Arthur Canada, a teacher and HUD Officer/Teacher Next Door program participant, was charged in

Oakland County Circuit Court, Detroit, MI, with allegedly committing false pretenses. Canada allegedly

obtained HUD-owned property and received a $12,150 discount but failed to reside in the property or report

his nonresidency on HUD certifications.



Robert Brunt and Tracy Skullark, investors doing business as Genesis Investment Group, Inc.; Armani

D'Aifallah, a loan officer for Evergreeen Mortgage; John Farano, an attorney doing business as Big Dog

Holdings; and appraisers Walter Jackson and Douglas Blanchard were each indicted in U.S. District Court,

Chicago, IL, for allegedly committing mail and wire fraud. The above defendants allegedly recruited

unqualified investors to purchase HUD-owned and other distressed properties and provided false loan

documents and appraisals to complete the fraudulent real estate sales. HUD realized no losses.



Erica Davis-Wells was sentenced in U.S. District Court, Chicago, IL, to 9 months incarceration and 1 year

probation and ordered to pay three conventional lenders $440,517 in restitution for her earlier guilty plea to

making false statements to HUD. Davis-Wells obtained a HUD-owned property but failed to reside in the

property as required and resold the property to unqualified straw borrowers who obtained and later defaulted

on conventional mortgages. HUD realized no losses.



Attorney Alan Mason was sentenced in U.S. District Court, Worcester, MA, to 9 years incarceration and 3

years probation and ordered to pay Stewart Title Guaranty Company more than $6.6 million in restitution for
             

             

26 Chapter 1: HUD’s Single-Family Housing Programs

Copyright, 2008. Worcester

Telegram and Gazette -

Worcester, MA. Reprinted

with permission.

his earlier guilty plea to committing wire fraud and Federal income tax evasion.

Mason failed to pay mortgage liens, including outstanding mortgages on three FHAinsured properties, and used the funds for personal expenditures. HUD realized no

losses.



Lorraine Miller, a former mortgage broker for America's Mortgage Resource,

pled guilty in U.S. District Court, New Orleans, LA, to submitting false

documents. Miller provided false employment and financial documents used by

unqualified borrowers to obtain conventional and FHA-insured mortgages. The

fraudulent mortgages were later packaged and sold to Fannie Mae. HUD realized

no losses.



Fabian and Anna Thorne, former loan officers for Prestige Mortgage, were

collectively sentenced in U.S. District Court, Richmond, VA, to 42 months

incarceration and 72 months supervised release and ordered to pay three FHAinsured homeowners and others $592,228 in restitution for their earlier guilty pleas

to conspiracy to commit wire fraud. From June 2005 through July 2006, Fabian

and Anna Thorne and others fraudulently acquired distressed properties after they

provided false representations to both homeowners and conventional mortgage

lenders. HUD realized no losses.



Kweku Fortune, who failed to appear in Kings County State Court, Brooklyn,

NY, for either his trial verdict, convicting him of committing grand larceny, or his

sentencing, was arrested on an outstanding warrant. Fortune impersonated a

HUD-approved real estate broker, attempted to sell HUD-owned and other

properties, and fraudulently retained $55,000 in downpayment funds

from prospective buyers.


Acronyms List

               

               

Chapter 2

HUD’s Public and

Indian Housing

Programs
             

             

28

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

3,496 public housing agencies (PHA) nationwide. Many PHAs administer both public housing and Section 8

programs. Programs administered by PHAs are designed to enable low-income families, the elderly, and

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

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

conducted numerous outreach efforts (see chapter 7, page 125).

Audits

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

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

Region 1

5%

Region 3

19%

Region 2

5%

Region 4

16%

Region 11

(Disaster Relief Oversight)

%(N/A)*

Region 5

24%

Region 6

5%

Region 7-8

5%

Region 9-10

21%

Key program results Questioned costs Funds put to better use

Audit 38 audits $73 million $40 million

Our

focus

Page 29

Page 29

Page 30

Page 39

Page 44

- Housing stock in the Housing Choice Voucher program

- HUD's Enterprise Income Verification system

- Section 8 Housing Choice Voucher and Leased Housing Program

 activities at public housing agencies

- Public housing program activities

- Native American program activities

Chapter 2: HUD’s Public and Indian Housing Programs

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

during this reporting period
             

             

Chapter 2: HUD’s Public and Indian Housing Programs 29

During this reporting period, the Office of Inspector General (OIG) reviewed HUD's controls over the

physical condition of housing stock in the Housing Choice Voucher program and HUD's Enterprise Income

Verification (EIV) system. In addition, OIG reviewed Section 8 Housing Choice Voucher and leased housing

program activities, public housing activities, and Native American program activities.

Housing Stock in the Housing Choice Voucher Program

HUD OIG audited HUD's controls over the physical condition of housing stock in the Housing Choice

Voucher program and found that HUD did not have adequate controls to ensure that its Section 8 housing

stock was in material compliance with housing quality standards. It had not fully implemented the Section

Eight Management Assessment Program (SEMAP) and, therefore, could not ensure that the primary mission

of the Section 8 program, paying rental subsidies so that eligible families can afford decent, safe, and sanitary

housing, was met. In addition, HUD's lack of knowledge regarding the condition of its Section 8 housing

stock resulted in public housing agencies being reported as high performers when a significant percentage of

the units they administered were in material noncompliance with housing quality standards. HUD was

revising its Section 8 regulations to include developing a physical inspection system to help ensure that HUD's

Section 8 housing stock is in material compliance with housing quality standards.

OIG recommended that HUD (1) complete the departmental clearance process of the proposed revised

Section 8 regulations by the end of the fiscal year (FY) 2008, (2) allow the proposed revisions to SEMAP and

housing quality standards to go through the proper process and carefully consider all questions and comments

made by the affected parties before publishing the final rule, and (3) fully develop and implement a physical

inspection system for the tenant-based Housing Choice Voucher program within 3 years. (Audit Report:

2008-AT-0003)

HUD's Enterprise Income Verification System

HUD OIG audited HUD's EIV system, used by public housing authorities to identify and reduce tenant

income and subsidy errors within the Section 8 and public housing programs, to determine whether HUD

provided adequate guidance and training to its EIV coordinators and housing authority users.

HUD provided adequate guidance and training to its EIV coordinators and housing authority users.

However, EIV users did not always take advantage of this training and guidance. Since use of EIV is not yet

mandatory, HUD did not require housing authorities to ensure that their users received EIV training before

granting them access to the system. As a result, housing authority users may not fully understand EIV's

capabilities and their responsibilities when using the system.

OIG recommended that HUD consider enhancing existing requirements to require housing authorities to

certify that their EIV users have received EIV training before granting access to the system. The housing

authorities would keep the certifications on file and have them available for review. (Audit Report:

2008-KC-0003)
             

             

30

Section 8 Housing Choice Voucher and Leased Housing Program Activities

at Public Housing Agencies

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

period. PHAs were selected for audit based on risk analysis and/or hotline complaints. While OIG's objectives

varied by auditee, the majority of the reviews were to determine whether the units met housing quality

standards, whether the PHA managed the program according to HUD requirements, and whether the

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

the Section 8 Housing Choice Voucher program area.



HUD OIG audited the financial transactions of the Section 8 Housing Choice Voucher program at the

Housing Authority of the City of Los Angeles, CA. During the audit, OIG expanded the scope to include a

review of the Authority's other HUD programs to determine the extent of its inappropriate interprogram fund

transfers.

The Authority could not show that it used program funds in accordance with its consolidated annual

contributions contracts, executed grant agreements, or HUD rules and regulations. Without the required

HUD approval, the Authority's accounting records showed that it improperly advanced and expended more

than $27 million in restricted funds to cover its operating losses for its other programs.

OIG recommended that HUD require the Authority to reimburse the restricted funds to the proper

programs and establish and implement adequate procedures and accounting controls to ensure that no

interprogram advances of restricted funds are made in the future. (Audit Report: 2008-LA-1015)



HUD OIG audited the Housing Choice Voucher program of the Dallas Housing Authority in Dallas, TX.

The Authority acknowledged its longstanding weaknesses and had made a commitment to improve its

operations. However, although it had reorganized its leased housing department and made other changes, it

failed to correct systemic weaknesses and continued to mismanage its voucher program. Further, it spent

almost $20 million in questionable costs in 2006 and 2007. This amount included payments for clients that

it did not report to HUD; payments for clients after they left its voucher program; duplicate payments to

landlords; and payments for clients who, based on their reported Social Security numbers, were deceased. In

addition, the Authority backdated 22 and 45 percent of the examinations it reported to HUD in 2006 and

2007, respectively.

OIG recommended that HUD require the Authority to (1) establish and implement policies and

procedures to address its systemic weaknesses, an effective quality control process, and an effective

accountability process and (2) support or repay nearly $20 million. (Audit Report: 2008-FW-1011)



HUD OIG audited the Section 8 Housing Choice Voucher program at the Indianapolis Housing Agency

in Indianapolis, IN, and found that the Agency's program administration regarding housing unit conditions,

Chapter 2: HUD’s Public and Indian Housing Programs
             

             

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

housing assistance payment calculations, and documentation to support the calculation of households'

housing assistance payments was inadequate. Of the 65 housing units inspected, 52 did not meet HUD's

housing quality standards and the Health and Hospital Corporation of Marion County, IN's housing

standards, and 38 had 402 violations that existed at the time of the Agency's previous inspections.

The Agency also failed to properly calculate housing assistance payments, ensure that its household files

contained required documentation to support its payment of housing assistance, and consistently use HUD's

EIV system. Of the 67 files reviewed, the Agency incorrectly calculated housing assistance payments for 63,

and 59 did not contain the documentation required by HUD and/or the Agency's program administrative

plan. The Agency overpaid more than $131,000 and underpaid more than $13,000 in housing assistance and

utility allowances and was unable to support more than $587,000 in housing assistance and utility allowance

payments. Further, it did not adequately use HUD's EIV system to determine that its reported zero-income

households had reported income, resulting in more than $47,000 in improper housing assistance payments.

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

improper use of more than $291,000 in program funds, provide documentation or reimburse its program

from nonfederal funds for the unsupported housing assistance payments, and implement adequate procedures

and controls to address the findings cited to prevent nearly $10 million from being spent on units with

material housing quality standards violations and excessive housing assistance and utility allowance payments

over the next year. (Audit Report: 2008-CH-1006)



HUD OIG audited the Section 8 Housing Choice Voucher program at the Cincinnati Metropolitan Housing

Authority, Cincinnati, OH, and found that the Authority's program administration regarding housing unit

conditions was inadequate. Of 65 housing units inspected, 56 did not meet HUD's housing quality standards,

and 50 had 284 violations that existed at the time of the Authority's previous inspections. The 50 units had

between 1 and 15 preexisting violations per unit.

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

the improper use of more than $35,000 in program funds and implement adequate procedures and controls to

address the findings cited to prevent more than $5.8 million from being spent on units with material housing

quality standards violations over the next year. (Audit Report: 2008-CH-1012)



HUD OIG audited the Housing Authority of the City of Fort Wayne, IN's Section 8 Housing Choice

Voucher program and found that the Authority's program administration regarding housing assistance

payment calculations, documentation to support households' eligibility for housing assistance, monitoring of

reported zero-income households, administration of the Family Self-Sufficiency (FSS) program, and voucher

use were inadequate. The Authority incorrectly calculated households' payments, resulting in more than

$73,000 in overpayments and nearly $7,000 in underpayments. It also did not ensure that its households' files

contained the required documentation to support its housing assistance and utility allowances. Of the 67 files

reviewed, 30 did not contain documentation required by HUD and the Authority's program administrative

plan to support nearly $195,000 in housing assistance and utility allowances. Further, the Authority did not

perform periodic reviews to determine that reported zero-income households had unreported income,

resulting in more than $28,000 in improper housing assistance and utility allowances.
             

             

32

The Authority failed to administer its FSS program according to Federal

requirements. As a result, it over/underfunded participants' escrow accounts by

more than $8,000 and nearly $4,000, respectively, had nearly $15,000 in escrow

funds that should have been reimbursed to the program, could not support more

than $151,000 in program funds, and failed to support nearly $890,000 that it

determined was to be forfeited from escrow accounts. Although the Authority had

nearly $6.2 million in program funds, which could be used to house

additional eligible households, its program was significantly underleased. As a

result, eligible participants were denied the opportunity to seek decent, safe, and

sanitary housing under the program.

OIG recommended that HUD require the Authority to reimburse the

applicable program from nonfederal funds for the improper use of more than

$135,000 in funds, provide documentation or reimburse the applicable program

nearly $1.3 million from nonfederal funds for the unsupported payments

identified, and implement adequate procedures and controls to address the

findings cited to prevent more than $1 million in program funds from being spent

on excessive housing assistance and utility allowances and more than $3 million not

being used to provide decent, safe, and sanitary housing to eligible households.

(Audit Report: 2008-CH-1007)



HUD OIG audited the Richmond Redevelopment and Housing Authority in

Richmond, VA, and found that the Authority's Housing Choice Voucher program

was significantly underleased, resulting in approximately 674 families not being

housed when the Authority had $7.6 million in excess program funds. The

Authority also failed to operate its FSS program according to the United States

Code, HUD requirements, and its FSS action plan. As a result, it inappropriately paid more than $84,000 to

program participants when it could not be determined that the participants had successfully met the applicable

requirements.

OIG recommended that HUD require the Authority to implement adequate controls and procedures to

house as many eligible participants as possible, thereby using approximately $3.4 million more in program

funds to house families. OIG also recommended that the Authority provide support or reimburse its program

more than $346,000 from nonfederal funds for the unsupported housing assistance payments, reimburse its

FSS program from nonfederal funds for its improper use of contract and program funds, and implement

adequate procedures and controls to address the findings cited. (Audit Report: 2008-PH-1006)



HUD OIG audited the Housing Authority of Baltimore City, Baltimore, MD, regarding the

administration of its leased housing under its Moving to Work Demonstration program to determine whether

the Authority ensured that its program units met housing quality standards.

The Authority failed to ensure that its program units met housing quality standards. Of 59 housing units

inspected, 57 did not meet HUD's housing quality standards. Moreover, 41 of the units had health and safety

Chapter 2: HUD’s Public and Indian Housing Programs

Copyright, 2008.

The Journal Gazette -

Fort Wayne, IN.

Reprinted with permission.
             

             

Chapter 2: HUD’s Public and Indian Housing Programs 33

violations that the Authority's inspectors neglected to report during their last inspection and/or repair based on

the outcome of their most recent inspection. The Authority spent nearly $48,000 in program and

administrative funds for these 41 units.

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

audit are repaired to meet HUD's housing quality standards, (2) reimburse its program for the improper use of

program funds for units that materially failed to meet HUD's housing quality standards, and (3) implement

adequate procedures and controls to ensure that in the future, program units meet housing quality standards to

prevent an estimated $3.5 million from being spent annually on units that materially fail to meet HUD's

housing quality standards. (Audit Report: 2008-PH-1013)



HUD OIG audited the State of Connecticut Department of Social Services (agency), Hartford, CT, and

found that the agency did not adequately use its Section 8 vouchers. As a result, (1) approximately 770

households in calendar year 2007 were not served, (2) the agency did not ensure that its contractor had

adequate controls over fraud recoveries and related interest income, and (3) the agency could not support the

allocation of more than $1.6 million in salary and benefits to the program and charged more than $14,000 to

the program for costs related to the State-funded housing program.

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

ensure that it is adequately leased up to at least the 95 percent threshold required by HUD and provide

additional housing assistance to eligible households; (2) recover more than $1 million from the contractor and

account for, report, and use the funds in accordance with HUD requirements; and (3) provide support to show

that more than $1.6 million in direct and indirect salaries was properly chargeable to the program or repay any

ineligible costs. (Audit Report: 2008-BO-1008)



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

Allentown, Allentown, PA, and found that the Authority did not adequately administer its inspection program

to ensure that its program units met housing quality standards as required. Of 57 housing units inspected, 51

did not meet HUD's housing quality standards, and 47 of the units had exigent health and safety violations

that the Authority's inspectors neglected to report during their last inspection. The Authority spent more than

$80,000 in program and administrative funds for these 47 units. It also did not properly abate rents when

units failed its housing quality standards inspections. The Authority should have abated housing assistance

payments for 13 of 30 program units that did not pass its housing quality standards inspections. However, it

failed to abate the program rents or terminate the contracts for these units, resulting in improper payments of

nearly $9,000 in housing assistance.

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

audit are repaired to meet HUD's housing quality standards; (2) reimburse its program for the improper use of

program funds for units that materially failed to meet HUD's housing quality standards; (3) implement

adequate procedures and controls to ensure that in the future, program units meet housing quality standards to

prevent an estimated $1.2 million from being spent annually on units that materially fail to meet HUD's

housing quality standards; (4) reimburse its program for the 13 units for which it did not abate assistance

payments; and (5) develop and implement management controls to ensure that employees comply with HUD
             

             

34

policies and procedures concerning abatements, thereby preventing an estimated $34,000 from being spent

annually on units that should have had assistance payments abated. (Audit Report: 2008-PH-1009)



HUD OIG audited the Section 8 Housing Choice Voucher program at the Delaware County Housing

Authority in Woodlyn, PA, and found that the Authority did not adequately administer its housing assistance

payments in compliance with HUD requirements and its own administrative plan. It incorrectly calculated

housing assistance and utility allowance payments and failed to execute housing assistance contracts in a timely

manner, resulting in nearly $59,000 in ineligible payments and more than $3,000 in tenant underpayments.

It also could not support nearly $27,000 in housing assistance and utility allowance payments.

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

ineligible payments, reimburse the appropriate tenants or households for the underpayment of housing

assistance and utility allowances, provide documentation or reimburse the program from nonfederal funds for

unsupported payments, and implement sufficient controls or procedures to prevent ineligible payments of

more than $926,000 in program funds over the next year. (Audit Report: 2008-PH-1012)



HUD OIG audited the administration of the housing quality standards inspection program for the

Section 8 Housing Choice Voucher program at the Harrisburg Housing Authority in Harrisburg, PA, and

found that the Authority did not adequately administer its inspection program to ensure that its program units

met housing quality standards as required. Of the 52 housing units inspected, 37 did not meet HUD's

housing quality standards, and 35 of the units had exigent health and safety violations that the Authority's

inspectors neglected to report during their last inspection. The Authority spent more than $34,000 in

program and administrative funds for these 35 units. In addition, it did not abate rents for units that failed its

housing quality standards inspections. For 11 units reviewed, the Authority failed to abate the program rents

or terminate the contracts, resulting in an improper payment of nearly $11,000 in housing assistance and

administrative fees.

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

audit are repaired to meet HUD's housing quality standards; (2) reimburse its program from nonfederal funds

for the improper use of program funds for units that materially failed to meet HUD's housing quality

standards; (3) implement adequate procedures and controls to ensure that in the future, program units

meet housing quality standards to prevent nearly $885,000 from being spent annually for units with material

housing quality standards violations; (4) reimburse its program from nonfederal funds for the 11 units for

which it did not abate payment or terminate the assistance contract in a timely manner; and (5) develop and

Chapter 2: HUD’s Public and Indian Housing Programs

Copyright, 2008. The Patriot-News - Harrisburg, PA. Reprinted with permission.
             

             

35

implement management controls to ensure that employees comply with its policies and procedures concerning

abatements. (Audit Report: 2008-PH-1007)



HUD OIG audited the Housing Choice Voucher program of the City of Phoenix, AZ, Housing

Department and found that the Housing Department did not ensure that tenant eligibility and associated

housing assistance payment amounts were properly supported. As a result, it paid unsupported and ineligible

housing assistance.

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

$371,000 in unsupported housing assistance payments, (2) reimburse nearly $13,000 in ineligible housing

assistance payments, (3) establish and implement an adequate training program to ensure that its staff has the

capability to perform tenant eligibility and housing assistance payment determinations in accordance with

HUD requirements, and (4) take appropriate action to ensure that a sufficient number of staff are available to

administer its Housing Choice Voucher program. (Audit Report: 2008-LA-1011)



HUD OIG audited the Housing Choice Voucher and public housing programs at the Woonsocket

Housing Authority in Woonsocket, RI and found that the Authority generally administered its programs in

compliance with its annual contributions contract and HUD regulations. In addition, HUD's Regional Counsel

rendered an opinion that the Authority's board members did not violate conflict-of-interest provisions of

section 19(A) of the contract. However, OIG identified several deficiencies, including more than $663,000 in

unsupported costs and more than $241,000 in opportunities for funds to be put to better use because the

Authority (1) improperly used Federal funds to subsidize the development activities of an affiliated nonprofit

entity, (2) did not establish an adequate cost allocation plan for administrative and indirect costs and

improperly advanced and used funds between its public housing and Housing Choice Voucher programs, (3)

did not always comply with HUD procurement regulations and its own procurement policy, (4) did not

establish a reasonable policy for travel per diem rates charged to Federal programs and ensure that board

members always submitted travel expense vouchers, and (5) did not always follow its HUD-approved waiting

list procedures.

OIG recommended that HUD require the Authority to (1) cease the practice of improperly using Federal

funds to pay nonprogram costs and repay nearly $3,000 in unreimbursed funds, (2) provide support for $587,000

in salary expenses and nearly $68,000 in indirect costs charged to the Housing Choice Voucher program or

reimburse these costs and cease the practice of advancing and using funds between its Federal programs, (3)

comply with HUD procurement regulations and its own procurement policy, (4) establish a reasonable policy

for travel per diem rates charged to Federal programs and ensure that board members always submit travel

expense vouchers, and (5) obtain HUD approval on all actions that are contrary to its waiting list procedures.

OIG also recommended that Authority establish controls to ensure that all interprogram transactions are

recorded and reconciled monthly, thereby eliminating the average daily balance of more than $241,000 that

was owed between Federal programs. Further, OIG recommended that HUD consider sanctions as

appropriate against the responsible parties for the improper use of Federal funds used to pay nonprogram costs

of an affiliated nonprofit entity. (Audit Report: 2008-BO-1006)



Chapter 2: HUD’s Public and Indian Housing Programs
             

             

36

HUD OIG audited the Housing Choice Voucher program of Union County, NJ, and found that of 58

Section 8 units inspected, 42 (72 percent) did not meet minimum housing quality standards. Of the 42 units,

21 were in material noncompliance with standards. As a result, HUD made housing assistance payments for

units that did not meet housing quality standards. In addition, the County's financial and program controls

were inadequate. As a result, more than $83,000 in transfers of funds and salary costs charged are questioned

pending an eligibility determination by HUD, while another nearly $22,000 in transfers and salary costs is

ineligible.

OIG recommended that HUD instruct the County to develop and implement procedures (1) to ensure

that units meet housing quality standards to prevent an estimated $762,000 from being spent on units that are

in material noncompliance, (2) for allocating and charging costs to the Housing Choice Voucher program to

include developing a cost allocation plan for salaries, and (3) to ensure that transfers from the Housing Choice

Voucher program to other programs are in accordance with regulations. (Audit Report: 2008-NY-1009)



HUD OIG audited the controls of the District of Columbia Housing Authority in Washington, DC, over

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

implemented adequate controls to prevent overhousing, ensured that it made assistance payments only for the

period when families resided in units, and effectively implemented an FSS program.

The Authority had not implemented adequate controls to prevent overhousing and prevent it from

making assistance payments for vacant units and had not effectively implemented an FSS program. It paid for

194 families to live in larger housing units than its policy allowed. As a result, it made ineligible housing

assistance payments totaling nearly $43,000 monthly. In addition, it made ineligible housing assistance

payments totaling more than $322,000 for vacant units. During the audit, the Authority recovered nearly

$279,000 of the more than $322,000 in ineligible payments. It needs to recover the remaining $44,000 in

housing assistance payments related to these units. Further, the Authority did not operate its FSS program

according to HUD requirements. As a result, it made ineligible and unsupported payments to participants'

escrow accounts totaling nearly $45,000 and did not make contributions of nearly $9,000 to the escrow

account for one participant.

OIG recommended that HUD require the Authority to (1) reimburse the applicable programs for its

improper use of more than $80,000 in funds, (2) provide documentation or reimburse the applicable program

more than $51,000 for the unsupported payments identified, and (3) implement adequate procedures and

controls to address the findings identified to prevent the Authority from spending more than $426,000 in

program funds for overhoused tenants. OIG also recommended that HUD verify that the Authority

contributed nearly $9,000 to the FSS escrow account for one participant. (Audit Report: 2008-PH-1010)



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

Authority, Ravenna, OH, and found that the Authority (1) incorrectly calculated households' payments,

resulting in more than $26,000 in overpayments and nearly $600 in underpayments; (2) did not ensure that its

households' files contained the required documentation to support more than $48,000 in housing assistance

and utility allowances; (3) had inadequate income verifications and calculations for households reporting zero

income, resulting in more than $27,000 in improper housing assistance and utility allowance payments; and

(4) failed to properly reinspect, abate, and terminate assistance for program units that failed housing quality

Chapter 2: HUD’s Public and Indian Housing Programs
             

             

37

standards inspections, thereby overpaying more than $12,000 in housing assistance and utility allowances and

allowing tenants to reside in units that were not decent, safe, and sanitary.

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

for the improper use of more than $90,000 in funds; (2) provide documentation or reimburse its program

more than $51,000 from nonfederal funds for the unsupported payments identified; and (3) implement

adequate policies, procedures, and controls to address the findings cited to prevent more than $606,000 in

program funds from being spent on excessive housing assistance and utility allowance payments. (Audit

Report: 2008-CH-1011)



HUD OIG audited the Section 8 Housing Choice Voucher program at the Springfield Housing Authority,

Springfield, IL, and found that the Authority's program administration regarding housing unit conditions and

timeliness of annual housing unit inspections was inadequate. Of 55 housing units inspected, 43 did not meet

HUD's housing quality standards, and 18 had exigent health and safety violations that existed at the time of

the Authority's previous inspections. In addition, 10 housing units had 55 health and safety violations that

existed at the time of the Authority's previous inspections. The Authority also failed to ensure that its housing

unit inspections were conducted in a timely manner. Of 65 household files reviewed, 25 indicated that

inspections were not conducted within the required 1 year of the previous inspections. The number of days

late ranged from 16 to 373.

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

the improper use of more than $50,000 in program funds and implement adequate procedures and controls to

address the findings cited. These procedures and controls should help to ensure that nearly $600,000 in

program funds is spent on housing units that meet HUD's requirements. (Audit Report: 2008-CH-1016)



HUD OIG audited the Section 8 Housing Choice Voucher program at the Peoria Housing Authority in

Peoria, IL, and found that the Authority's program administration regarding housing assistance payment

calculations, the FSS program, and zero-income households was inadequate. The Authority overpaid more

than $52,000 and underpaid nearly $1,000 in housing assistance and utility allowances due to calculation

errors. It failed to administer its FSS program according to the United States Code, HUD's requirements, and

its FSS action plan. As a result, it received more than $72,000 in grant funds but did not ensure that its FSS

program was managed effectively and efficiently, over/underfunded its participants' escrow accounts by nearly

$18,000, and inappropriately paid more than $14,000 in final escrow payments. Further, the Authority failed

to comply with its program administrative plan regarding zero-income household reviews. It did not

effectively use HUD's EIV system or other third-party verification methods to determine whether households

reporting zero income had unreported income. As a result, it unnecessarily paid housing assistance totaling

nearly $75,000 for households that were required to meet their rental obligations.

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

the improper use of nearly $185,000 in program funds, provide documentation or reimburse its program more

than $72,000, and implement adequate procedures and controls to address the findings cited. These

procedures and controls should help ensure that more than $296,000 in program funds is spent on program

administration that meets HUD's requirements over the next year. (Audit Report: 2008-CH-1005)



Chapter 2: HUD’s Public and Indian Housing Programs
             

             

38

HUD OIG audited the Housing Choice Voucher program of the Des Moines Municipal Housing Agency

in Des Moines, IA, and found that the Agency allowed 59 of the 148 households reviewed to have units that

were larger than permitted by regular subsidy standards. It also improperly processed 16 of the households

reviewed with indications of unreported income.

OIG recommended that HUD require the Agency to (1) reimburse its program more than $78,000 from

administrative fee reserves and pursue collection of nearly $21,000 from tenants with unreported income and

(2) develop and implement procedures and controls to ensure that each tenant receives the proper voucher size

and to ensure the proper correction for unreported income. (Audit Report: 2008-KC-1003)



HUD OIG audited the Chicago Housing Authority, Chicago, IL, regarding its Section 8 Housing Choice

Voucher program under its Moving to Work Demonstration program.

The Authority's program administration regarding housing assistance payment calculations,

documentation to support households' eligibility and calculations for housing assistance, and the recovery of

overpayments of housing assistance and utility allowances for deceased individuals was inadequate. The

Authority incorrectly calculated households' payments, resulting in more than $60,000 in overpayments and

nearly $5,800 in underpayments for the period January 1, 2006, through August 31, 2007. It also did not

ensure that its households' files contained the required documentation to support its housing assistance and

utility allowances. Of 71 files reviewed, 42 did not contain documentation required by HUD and the Authority's

program administrative plan to support nearly $157,000 in housing assistance and utility allowance payments.

Further, the Authority did not effectively recover more than $36,000 in housing assistance and utility

allowance overpayments for deceased individuals.

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

for the improper use of more than $113,000 in program funds, (2) provide documentation or reimburse its

program nearly $164,000 from nonfederal funds for the unsupported payments, and (3) implement adequate

procedures and controls to address the findings cited. Audit Report: 2008-CH-1017)



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

in Shreveport, LA.

The Authority's contracted Section 8 program administrator, Pendleton Development Corporation, made

errors in 96 of 107 tenant files reviewed, including incorrectly calculating family income, paying assistance

after families vacated units, using incorrect payment standards, miscalculating utility allowances, and making

other errors that resulted in incorrect assistance payments. Pendleton also made errors that did not affect

assistance payments but needed corrective action. As a result, the Authority paid nearly $19,000 in excess

assistance and overcharged families nearly $2,000, made excess assistance payments of more than $320,000,

and had inaccurate SEMAP scores for FY 2006.

OIG recommended that HUD require the Authority to (1) recertify within the next 6 months all families

receiving assistance, review their files for any errors occurring within the previous 12 months, and repay its

Section 8 program or the families as appropriate for any assistance payment errors for the 12 months; (2) repay

from nonfederal funds its Section 8 program for overpayments and reimburse families for underpayments

Chapter 2: HUD’s Public and Indian Housing Programs
             

             

Chapter 2: HUD’s Public and Indian Housing Programs 39

identified in the audit; and (3) implement adequate procedures and controls regarding its Section 8 program to

ensure that tenant eligibility and assistance payments are supported and determined in accordance with HUD

requirements to avoid paying more than $153,000 in excess assistance during the next 12 months. OIG also

recommended that HUD increase oversight of the Authority by entering into a memorandum of agreement

with the Authority, reduce the Authority's FY 2006 SEMAP scores, and ensure that the Authority submits

accurate SEMAP scores in the future. (Audit Report: 2008-FW-1009)



HUD OIG audited the Housing Authority of the City of Pittsburgh, Pittsburgh, PA, regarding the

administration of its housing assistance payments for leased housing under its Moving to Work Demonstration

program agreement to determine whether the Authority properly maintained documentation to support

housing assistance payments and accurately calculated them.

The Authority did not properly maintain documentation to support housing assistance payments and did

not always accurately calculate housing assistance payments for its leased housing. There were deficiencies in

28 of 30 tenant files reviewed. The Authority did not maintain complete documents required by HUD and its

own administrative plan, resulting in unsupported housing assistance payments of more than $58,000. It also

made ineligible housing assistance payments totaling more than $12,000 because it did not execute housing

assistance payments contracts within 60 days of the beginning of the lease term, and it made housing assistance

payments before the effective date of the related housing assistance payments contract. Also, the Authority

inaccurately calculated housing assistance payments, resulting in nearly $5,000 in overpayments and nearly

$2,000 in underpayments.

OIG recommended that HUD require the Authority to (1) correct the errors in the tenant files,

(2) provide documentation to support housing assistance payments or reimburse its leased housing program

for the payments that it cannot support, (3) reimburse its leased housing program for the ineligible payments

and overpayments, and (4) reimburse applicable tenants for the housing assistance underpayments. (Audit

Report: 2008-PH-1014)

Public Housing Program Activities

HUD OIG audited the capital fund program at the Miami Dade Housing Agency in Miami, FL, to

determine whether the Agency had adequate controls to ensure that contracts were awarded in accordance with

regulations and HUD requirements.

The Agency did not have adequate controls to ensure that contracts were awarded in accordance with

regulations and HUD requirements. It did not maintain documentation supporting that contracts were awarded

with full and open competition. As a result, it could not ensure that funds for contract payments were awarded

through full and open competition and that the costs were reasonable. In addition, the Agency did not

properly support multiple drawdowns of capital funds. It drew down capital funds from HUD to reimburse

itself for expenses associated with 2003 and 2004 capital fund program grants. It then transferred these

expenses to close out a 2002 capital fund program grant and drew down additional capital funds from HUD

using these same expenses as justification. It could not provide documentation to support that HUD was

reimbursed for the excess funds used to close out the grant.
             

             

40

OIG recommended that HUD require the Agency to (1) provide supporting documentation to justify the

eligibility and reasonableness of more than $12.1 million disbursed for five contracts and to Miami Dade

County for seven transactions or reimburse the capital fund program more than $2.2 million and the HOPE

VI program almost $9.9 million from nonfederal funds; (2) ensure that Federal procurement requirements for

maintaining supporting documentation are implemented and enforced; (3) ensure that any services obtained

through the County are purchased in compliance with Federal procurement requirements; (4) provide

documentation to support that the excess drawdown of more than $1.8 million was returned to HUD or

reimburse the capital fund program from nonfederal funds; (5) develop a system to track excess drawdowns

and reimbursement of capital funds to HUD and maintain supporting documentation for both; (6) hire an

independent accounting firm to reconcile capital fund program grants between HUD's Line of Credit Control

System and the Agency's financial system; and (7) incorporate the tracking system, maintenance of supporting

documentation, and reconciliation of capital fund program grants into existing procedures. (Audit Report:

2008-AT-0002)



HUD OIG audited the capital fund program of the Miami Dade Housing Agency, Miami, FL, to

determine whether the Agency used capital fund program drawdowns in accordance with HUD requirements.

The Agency did not use capital fund program drawdowns in accordance with HUD requirements. It drew

down more than $257,000 to close out the 2003 capital fund program grant using the same expenses it used

for previous drawdowns and drew down from its 2007 capital fund program grant more than $283,000 more

than was supported by expenses. It also used capital fund program drawdowns to reimburse itself for ineligible

and unsupported expenses. The Agency was reimbursed from capital funds for more than $62,000 that was

used for public housing operations and nearly $128,000 that it could not support was used for capital fund

activities. It was also unable to provide documentation to support nearly $258,000 in expenses transferred to

the 2007 capital fund program grant that had not been reimbursed.

OIG recommended that HUD (1) require the Agency to (a) provide supporting documentation showing

that the excess drawdown was returned to the program or reimburse HUD from nonfederal funds, (b) provide

supporting documentation for the expenses for the 2007 capital fund program grant or reimburse the capital

fund program from nonfederal funds, and (c) define the roles and responsibilities of its accountants for the

monthly reconciliation of capital fund program grants to HUD records and monitor capital fund drawdowns

and excess capital funds; (2) determine and place appropriate restrictions on the Agency's ability to draw down

capital funds; and (3) require the Agency to (a) reimburse HUD more than $62,000, (b) provide supporting

documentation for nearly $128,000 that it could not support was for capital fund activities and nearly $258,000

transferred to the 2007 capital fund program, and (c) implement and enforce policies and procedures to

improve controls over the program. (Audit Report: 2008-AT-0004)



HUD OIG audited the nonprofit development activities of the Lansing Housing Commission in Lansing,

MI, to determine whether the Commission diverted or pledged resources subject to its annual contributions

contract, other agreement, or regulation for the benefit of non-HUD developments.

The Commission defaulted substantially on its contract when it improperly pledged resources for the

benefit of the Lansing Housing Commission Nonprofit Development Corporation and the Oliver Gardens

Limited Dividend Housing Associated Limited Partnership, organizations created by the Commission without

Chapter 2: HUD’s Public and Indian Housing Programs
             

             

41

HUD approval. In May 2006, the Commission inappropriately and unconditionally guaranteed the

obligations of the Partnership's general partner, the Oliver Gardens Limited Liability Company, in a guaranty

agreement. The Commission executed another guaranty agreement in September 2006, unconditionally and

irrevocably guaranteeing the full and punctual payment of a loan entered into by the Corporation. As of

February 29, 2008, the Commission had placed $1.4 million in Federal assets at risk by entering into the

guaranty agreements, which made it responsible for all operating deficits and potential judgments of the

Corporation and Partnership. The Commission also inappropriately used more than $745,000 in public

housing funds for two nonfederal developments, Oliver Gardens and the Abigail. In addition, the

Commission managed and provided Section 8 housing assistance to Oliver Gardens, a 30-unit senior housing

project that the Partnership owns, and performed unit inspections of the project's units, thus creating a

conflict of interest.

OIG recommended that HUD require the Commission to (1) amend the guaranty agreements regarding

the Corporation and the Partnership to remove the Commission's pledging of its Federal assets, (2) submit the

amended guaranty agreements to HUD for review and approval to ensure that they comply with its contract

with HUD, (3) reimburse the applicable programs for the improper use of public housing funds and its receipt

of Section 8 administrative fees related to Oliver Gardens, (4) contract with an independent third party to

perform housing quality standards inspections of Oliver Gardens as required by HUD, and (5) implement

procedures and controls to address the findings cited. OIG also recommended that HUD take appropriate

action against the Commission for its substantial default of its contract. (Audit Report: 2008-CH-1008)



HUD OIG audited the Housing Authority of the City of Calexico, Calexico, CA, to determine whether

the Authority complied with HUD's rules and regulations with respect to its public housing program.

The Authority improperly used Section 5(h) program funds for the acquisition and operation of the

Second Street Apartments. In addition, it (1) did not provide replacement housing for the 37 Section 5(h)

units it sold, (2) incorrectly reported three of the five grants reviewed as fully obligated in HUD's electronic

Line of Credit Control System, (3) undertook force account activity without HUD's written approval, and

(4) undertook five inappropriate procurement actions.

OIG recommended that HUD require the Authority to (1) repay its Section 5(h) program more than

$174,000 from nonfederal sources for the inappropriate acquisition and operation of the Second Street

Apartments; (2) create and implement a new timeline for replacement of the Section 5(h) units and if the

Authority does not follow this new timeline, recapture the $1.2 million available in its program bank account

as of January 2008; (3) recapture more than $247,000 in grant funds that the Authority did not fully obligate

by the required deadline for grant years 2001, 2003, and 2005; (4) provide supporting documentation for

nearly $828,000 in unsupported procurement actions or repay HUD from nonfederal sources; and (5) repay

HUD nearly $185,000 from nonfederal sources for ineligible force account labor costs. (Audit Report:

2008-LA-1012)



HUD OIG audited the Housing Authority of the City of Eloy, AZ, because HUD had rated the Authority

as troubled for five years. In 2007, the Authority had significant financial problems and terminated its

executive director. It did not have adequate internal controls to safeguard assets and reasonably ensure that

HUD funds were used in accordance with program requirements. Because it did not fully implement

Chapter 2: HUD’s Public and Indian Housing Programs
             

             

42

corrective actions required by HUD, it was not in compliance with HUD rules and regulations and Office of

Management and Budget circulars. As a result, more than $2 million in Federal funds was placed at risk, and

the Authority incurred unnecessary expenses and struggled to meet its operating expenses.

OIG recommended that HUD require the Authority to immediately develop and implement effective

policies and procedures that include sound internal controls for its operations in all areas and to immediately

direct the Authority to negotiate with the Internal Revenue Service (IRS) to abate nearly $82,000 in interest

and penalties on employee withholding taxes owed. OIG further recommended that HUD closely monitor

the Authority and its board of commissioners until management weaknesses have been resolved, issue

proposed notices of the Authority's default of its public housing and Section 8 contracts, and take appropriate

actions that will result in better use of more than $700,000 in Federal funds. (Audit Report: 2008-LA-1009)



HUD OIG audited the Housing Authority of the City of San Buenaventura, CA, to determine whether

the Authority's financial activities, operations, and controls complied with HUD requirements.

The Authority did not use program funds in accordance with the requirements of its annual contributions

contract and HUD requirements. It (1) disregarded its payment-in-lieu-of-taxes obligations to the City for FY

2005 and 2006, (2) used more than $496,000 in low-rent public housing program funds to purchase nonfederal

housing without City or HUD approval, and (3) overspent its Section 8 Housing Choice Voucher program

funding for FY 2007 and used nearly $166,000 of its low-rent public housing program funds to cover the

deficit in violation of HUD requirements, placing both programs at risk.

OIG recommended that HUD require the Authority to (1) comply with the annual contributions contract

and the cooperation agreement with the City by settling its payment-in-lieu-of-taxes obligations to the City,

(2) reimburse the low-rent program from nonfederal funds for FY 2005 and 2006 funds paid to the ineligible

activity, (3) cease all transfers of payment-in-lieu-of-taxes obligated funds to the ineligible activity and

demonstrate that calendar year 2007 funding in the amount of more than $243,000 has not been transferred

to the housing trust fund or return the funds to the low-rent public housing program from nonfederal funds,

and (4) implement written procedures and controls to ensure that sufficient and appropriate program funds are

available before use and to prevent the use of low-rent public housing and Housing Choice Voucher program

funds to cover the expenditures of other programs. (Audit Report: 2008-LA-1010)



HUD OIG audited the public housing program of the Highland Park Housing Commission, Highland

Park, MI, to determine whether the Commission effectively maintained its program units in accordance with

HUD's requirements and appropriately used its program operating subsidies.

The Commission did not maintain 45 of 46 program units inspected in good repair, order, and condition.

There were 705 deficiencies in the 45 units including 43 hazards that HUD requires to be corrected within 24

hours. The Commission lacked an effective maintenance process to ensure that program unit deficiencies were

identified and repaired in a timely manner. It did not have an approved maintenance policy, failed to

implement a preventive maintenance program, did not complete work orders in accordance with HUD's

requirements and or/its maintenance policy, and failed to turn around program units in a timely manner. In

addition, it inappropriately received more than $29,000 in excess program operating subsidies for seven units

that were vacant for more than 12 months.

Chapter 2: HUD’s Public and Indian Housing Programs
             

             

43

OIG recommended that HUD require the Commission to (1) reimburse its program from nonfederal

funds for the improper use of funds, (2) provide support or reimburse its program from nonfederal funds for

the unsupported payments, and (3) implement adequate procedures and controls to address the findings cited.

These procedures and controls should help to ensure that nearly $400,000 in program funds is spent according

to HUD's requirements. (Audit Report: 2008-CH-1013)



HUD OIG performed corrective action verification for an audit recommendation cited in the audit

report, Cuthbert Housing Authority, Public Housing Programs (2004-AT-1001), issued January 15, 2004.

The purpose of the corrective action verification was to determine whether the Housing Authority of the City

of Cuthbert, GA, had implemented the selected audit recommendation and expended its funds in accordance

with HUD regulations.

The Authority did not comply with its HUD-approved agreement to obtain repayment of more than

$327,000 advanced to one of its affiliates, the Development Corporation, and did not stop advancing funds

until November 2004, although it had agreed it would stop by June 2004. The Authority collected sporadic

payments from the Development Corporation after the agreement was executed, leaving a balance of more

than $224,000. In addition, two other receivables of more than $148,000 and nearly $127,000 were advanced

by the Authority to the Development Corporation. Also, the Authority paid a law firm $9,000 to lobby the

Georgia State legislature to eliminate barriers to developing affordable housing in rural Georgia.

OIG recommended that HUD (1) continue to work with the Authority to collect more than $224,000

from the Development Corporation and reimburse its operating fund, (2) require the Authority to collect

nearly $275,000 from the Development Corporation and reimburse its operating fund, (3) apply appropriate

sanctions if the Authority does not comply with its payback agreement, and (4) require the Authority to

reimburse its operating fund $9,000 from nonfederal sources. (Audit Report: 2008-AT-0803)



HUD OIG audited the Tuckahoe Housing Authority, Tuckahoe, NY, to assess the merits of a complaint

and determine whether the Authority administered its low-rent housing program and nonprofit entity

activities in accordance with its annual contributions contract and HUD regulations.

The Authority did not adequately administer its low-rent program and nonprofit entity activities in

accordance with regulations. As a result, it incurred ineligible, unsupported, and unnecessary costs. In

addition, the Authority's nonprofit entity encountered delays in the construction of a planned senior citizen

complex on land approved by HUD for that purpose in 1999, for which it did not expect to break ground until

November 2008.

OIG recommended that HUD instruct the Authority to reimburse more than $64,000 in ineligible

expenses, provide documentation to substantiate nearly $183,000 in unsupported costs, and provide

justification for nearly $16,000 in unnecessary costs so that HUD can determine the reasonableness or

necessity of the costs. OIG recommended strengthening financial and operational controls to better ensure

compliance with HUD regulations and policy. (Audit Report: 2008-NY-1008)



Chapter 2: HUD’s Public and Indian Housing Programs
             

             

44

HUD OIG performed a corrective action verification of audit recommendations cited in an audit report

on the Opelika Housing Authority in Opelika, AL, entitled Opelika Housing Authority, Public Housing

Programs (2004-AT-1011), issued July 23, 2004, to determine whether the selected audit recommendations

had been implemented and the deficiencies cited in the report had been corrected.

The Authority had implemented the necessary corrective action for the recommendations, and no further

action is required. However, the Authority's Section 8 general ledger contained a receivable in the amount of

nearly $58,000 due from Opelika Housing Development Corporation, a not-for-profit corporation affiliated

with the Authority. The receivable represents ineligible payments made to the Corporation by the Section 8

program. HUD recovered the ineligible payments during 2005 through offset of administration fees from the

Authority's Section 8 program. However, the Corporation did not reimburse the Authority for the ineligible

payments.

OIG recommended that HUD require the Authority to collect the ineligible Section 8 payments from the

Corporation. (Audit Report: 2008-AT-0802)

Native American Program Activities

HUD OIG audited Salish and Kootenai Housing Authority in Pablo, MT, to determine whether the

Authority calculated program income for Native American Housing Assistance and Self-Determination Act of

1996 (NAHASDA)-assisted United States Housing Act of 1937 (1937 Act) properties in accordance with

applicable HUD guidance, regulations, and requirements and to observe uses of revenue from NAHASDAassisted 1937 Act properties.

The Authority did not have adequate accounting policies and procedures for allocating income from 1937

Act properties receiving Indian Housing Block Grant (Block Grant) program assistance between its general

fund and Block Grant programs. It failed to track Block Grant rehabilitation or capital expenses for each

property and recognize program income from substantially rehabilitated properties. It also miscalculated the

amount of NAHASDA revenue because it included units converted to non-NAHASDA tax credit units in its

average expense level calculation. As a result, more than $184,000 in low-rent housing receipts were

inappropriately excluded from Block Grant affordable housing funds and should be reclassified.

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

determine program income in accordance with HUD requirements; (2) update its computation of program

income, properly segregating the revenue and allowable expense level calculation for low-income housing tax

credit properties from other 1937 Act low-rent units and reclassifying as Block Grant funds more than $174,000

previously withdrawn from the 1937 Act low-rent program as nonprogram income; (3) reduce the number of

1937 Act units capable of producing nonprogram income by the nine units that received substantial

rehabilitation or capital expenses between 2002 and 2006 using Block Grant funds, which exceeded 40 percent

of the dwelling, construction, and equipment costs, and reclassify more than $10,000 as NAHASDA revenue;

and (4) adjust the annual 2007 and future 1937 Act program income calculations to include all revenue from

substantially rehabilitated units as NAHSDA revenue. (Audit Report: 2008-SE-1003)



Chapter 2: HUD’s Public and Indian Housing Programs
             

             

Chapter 2: HUD’s Public and Indian Housing Programs 45

Investigations

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

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

The results of various significant investigations are described below.

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

$

recovered

Admin/civil

actions

Investigations 322 $8,513,166 416

Our

focus

Page 46

Page 51

Page 55

Page 58

Page 59

- Public housing authority theft/embezzlement

- Rental assistance fraud

- FedRent Initiative

- Fugitive Felon Initiative

- Other fraud/crimes

Convictions/pleas/

pretrials

Cases

closed

Key program

results

367

Region 1

8%

Region 3

23%

Region 2

9%

Region 4

11%

Region 11

4%

Region 5

14%

Region 6

11%

Region 7-8

3%

Region 9-10

17%

Chart 2.2: Percentage of OIG public and Indian housing closed investigation

cases during this reporting period
             

             

46

Public Housing Authority Theft/Embezzlement

Four fictitious Tampa Housing Authority (Tampa) landlords each pled guilty in U.S. District Court, Tampa,

FL, to conspiracy to steal government funds, theft of government funds, or committing Federal program fraud.

In addition, former Tampa Section 8 counselors Calvin Coleman, Mario Lovett, and Carlton Miles and 14

fictitious Tampa landlords were collectively sentenced to 118 months incarceration, 8 months home

detention, 540 months supervised release, and 168 months probation and ordered to pay HUD $706,260 in

restitution for their earlier guilty pleas to committing theft of government funds or conspiracy. The above

defendants and others conspired and used the housing authority computer system to fraudulently generate and

obtain $455,168 in housing contract payments they were not entitled to receive.



James Lawrence, the former executive director for the Housing Authority of the City of Winston-Salem

(Winston-Salem); Ernest Pitt, the former chairman for the Winston-Salem Board of Commissioners; and

Thomas Trollinger, a partner with Pitt doing business as East Point Developers, LLC, were each indicted in

U.S. District Court, Greensboro, NC, for making false statements; aiding and abetting; and committing mail

and wire fraud, money laundering, honest service violations, and conspiracy. The above defendants allegedly

conspired and purchased property with $414,000 in Winston-Salem funds without authorization, failed to

report their financial interest in the property sold to Winston-Salem, and provided false information to Federal

agents when questioned.



Copyright, 2008. The Tampa Tribune - Tampa, FL. Reprinted with permission.

Chapter 2: HUD’s Public and Indian Housing Programs
             

             

Chapter 2: HUD’s Public and Indian Housing Programs 47

Cassandra Ashe, the former New London Housing Authority (New London) Section 8 coordinator and

current East Haven Housing Authority (East Haven) executive director, and her husband, Jonathan Ashe, a

New London employee, were each indicted in U.S. District Court, Hartford, CT, for committing conspiracy

and theft from a program receiving Federal funds. From August 2003 through August 2005, Cassandra and

Jonathan Ashe allegedly conspired and created a fictitious landlord to fraudulently obtain $204,951 in New

London housing contract payments, and from March 2007 through April 2008, they allegedly stole $192,600

in East Haven housing funds through unauthorized bank withdrawals. HUD losses are estimated at $397,191.



Brent Wells, the former Crow Creek Housing Authority (Crow Creek) executive director; Alyce McGhee,

the former Crow Creek finance officer; and former Crow Creek employees Velsworth Hawk, Carla Big Eagle,

and Terra Thompson were collectively sentenced in U.S. District Court, Pierre, SD, to 57 months

incarceration, 108 months supervised release, and 8 years probation and ordered to pay Crow Creek $79,682

in restitution and fines totaling $6,000 for their earlier guilty pleas to committing theft from an Indian tribal

organization. From May 2004 through December 2005, the above defendants submitted fictitious receipts

and invoices and embezzled $175,590 in Crow Creek funds.



Patricia Bobo, the former Gary Housing Authority (Gary) finance director, was sentenced in U.S. District

Court, Gary, IN, to 18 months incarceration and 3 years probation and ordered to pay Gary $111,000 and the

IRS $39,590 in restitution for her earlier guilty plea to embezzlement and filing false Federal income tax

returns. From August 2002 through September 2003, Bobo created, endorsed, and negotiated unauthorized

salary payments and failed to claim the embezzled funds on her Federal income tax returns.



Tracey White-Jenkins, the former Irvington Housing Authority (Irvington) Section 8 director, and her

sister, Ninetta White, a New Jersey parole officer, were each arrested and charged in U.S. District Court,

Copyright, 2008. The Hartford Courant - Hartford, CT. Reprinted with permission.
             

             

48 Chapter 2: HUD’s Public and Indian Housing Programs

Newark, NJ, with committing theft of government funds. White-Jenkins allegedly deposited more than

$95,000 in Irvington checks into her personal bank account, including $28,000 in Irvington checks written to

Exquisite Realty, a New Jersey company allegedly controlled by Ninetta White. In addition, White allegedly

obtained Irvington housing contract payments for a property she did not own.



Anslem and Rachelle Thompson, former employees of the Lukachukai Chapter Veterans Organization

Service Development, Inc. (Lukachukai), a Navajo Housing Authority contractor, were collectively sentenced

in U.S. District Court, Phoenix, AZ, to 10 years probation and ordered to pay the Navajo Housing Authority

$27,302 in restitution for their earlier guilty pleas to conspiracy to commit embezzlement and theft from an

Indian tribal organization. From May 2000 to November 2002, Anslem and Rachelle Thompson and others

embezzled $65,000 in Lukachukai funds for their personal use.



George Green, the former Union County Housing Authority (Union County) executive director, was

sentenced in Eighth Judicial Circuit Court, Lake Butler, FL, to 1 day incarceration (time served) and 3 years

probation and ordered to pay HUD $19,000 in restitution for his earlier nolo contendere plea to committing an

organized scheme to defraud HUD. From November 2002 to March 2006, Green allegedly received Union

County funds for fabricated work and vacation hours, directed Union County personnel to perform services at

private residences during Union County work hours, diverted Union County assets for his personal use,

disbursed Union County funds for unauthorized expenditures, and created fraudulent Union County rental

records for relatives and friends. HUD realized losses of $57,498.



Loren Goldtooth, Sr., a former certified public accountant

and executive director for the Tohono O'odham Ki:Ki

Association (Tohono O'odham), a HUD-funded Indian tribal

organization, was sentenced in U.S. District Court, Tucson, AZ,

to 1 year incarceration and 3 years probation and ordered to pay

Tohono O'odham $52,239 in restitution and the IRS an amount

not yet determined for his earlier conviction of committing

embezzlement and theft from an Indian tribal organization and

failing to file individual and corporate Federal income tax returns.

From February 2000 through July 2002, Goldtooth embezzled

more than $52,239 from Tohono O'odham when he obtained

unauthorized salary payments and used Tohono O'odham credit

cards for personal expenses. Goldtooth also failed to claim the

embezzled funds on his 2000, 2001, and 2002 individual Federal

income tax returns and failed to file 1999 or 2000 corporate

 Federal income tax returns for his accounting firm, Goldtooth &

 Company.



Copyright, 2008. Arizona Daily Star -

Tucson, AZ. Reprinted with permission.
             

             

Chapter 2: HUD’s Public and Indian Housing Programs 49

Frank Giannoccaro, a former Rochester Housing Authority, Rochester, NY, contractor and owner of

Giannoccaro Plumbing and Construction, Inc., was debarred from procurement and nonprocurement

transactions with HUD and throughout the Executive Branch of the Federal Government for three years.

Giannoccaro, who previously pled guilty to committing theft of government funds, submitted more than

$36,000 in fraudulent work orders and completion certifications to the Rochester Housing Authority.



Erica Spears, the former Omaha Tribal Housing Authority (Omaha Tribal) executive director, was indicted

in U.S. District Court, Omaha, NE, for committing theft from an organization receiving Federal funds and

embezzlement from an Indian tribal organization. Spears allegedly acquired unauthorized salary payments,

falsified travel reimbursement forms, and fraudulently obtained Omaha Tribal funds through loans she failed

to repay. HUD losses are estimated at $30,000.



Lesvia Barrera, the former executive director for the Eagle Pass Housing Authority, and her nephew, Juan

Sifuentes, were each charged in U.S. District Court, Eagle Pass, TX, with committing conspiracy to defraud

the government with respect to claims. In October 2001 and August 2003, Barrera and Sifuentes allegedly

submitted fraudulent claims totaling $17,800 to HUD for work unrelated to the housing authority.



Tonya Jackson, the former Claiborne Parish Section 8

program executive director, was arrested and charged in

Claiborne Parish District Court, Homer, LA, with

committing theft over $500. Jackson allegedly falsified FSS

program documents and obtained kickbacks from FSS

tenants after they received FSS graduation payments. HUD

realized losses of about $17,000.



Tequetta Cody, a former Indianapolis Housing

Authority housing manager, was indicted in Marion County

Superior Court, Indianapolis, IN, for committing theft.

Cody allegedly wrote off bad debts, falsified accounting

journals, and housed ineligible housing recipients in

HUD-subsidized housing units. HUD losses are estimated

at $9,047.



Rochelle Brown, a former Durham Housing Authority (Durham) commissioner and Section 8 landlord,

was arrested and charged in Durham County State Court, Durham, NC, with obtaining property by false

pretenses, and Elston Brown was sentenced to 12 months probation and ordered to perform 50 hours of

community service for his earlier guilty plea to obtaining property by false pretense. Rochelle Brown allegedly

Copyright, 2008. The Guardian-Journal -

Claiborne Parish, LA. Reprinted with permission.
             

             

50 Chapter 2: HUD’s Public and Indian Housing Programs

Copyright, 2008. The Republican - Springfield, MA. Reprinted with permission.

and her husband Elston Brown admittedly obtained $3,966 in housing contract payments after a Durham

Section 8 tenant vacated their property.



William Porfilio, a former Springfield Housing Authority (Springfield) contractor doing business as

Eastern Electronics and Security, Inc., was sentenced in U.S. District Court, Springfield, MA, to 2 years

probation, ordered to pay Springfield $12,500 in restitution, and fined $1,000 for his earlier guilty plea to

conspiracy to commit theft and mail fraud. Porfilio and others conspired with the former Springfield executive

director, Raymond Asselin, Sr., and embezzled more than $3.5 million in Springfield funds for their personal

benefit.



Joba Cottreal, a Housing Preservation and Development (Housing Preservation) Housing Choice Voucher

program administrator, and 15 additional defendants were each arrested and charged in Bronx County Court,

Bronx, NY, with committing bribery or bribery receiving. Cottreal allegedly sold housing choice vouchers to

more than 300 unqualified individuals waiting for Housing Preservation housing assistance. HUD losses are

not yet determined.



Benny Ramos, the former deputy director for the City of Paterson (Paterson) Section 8 program, pled

guilty in U.S. District Court, Newark, NJ, to accepting cash intending to be influenced and rewarded, and

Paterson deputy court administrator Princess Reaves, Paterson employees Victor Ortiz and Standley Williams,

and Passaic Valley Water Commission employee George Morgan were collectively sentenced to 51 months

incarceration and 132 months probation and fined $4,500 for their earlier guilty pleas to soliciting and

accepting cash payments intending to be influenced in connection with transactions of a local government or
             

             

Chapter 2: HUD’s Public and Indian Housing Programs 51

agency or soliciting and accepting corrupt payments under color of official right. In addition, Paterson

employees Yolanda Lane, Marie Rosa, and Elisa Griffin and Paterson Housing Authority Section 8 caseworkers

Marisol Cortez and Flora Cruz, each previously sentenced for their guilty pleas to conspiracy to defraud the

U.S. Government, soliciting and accepting corrupt payments under color of official right, or interfering with

commerce by threat or violence, were debarred from procurement and nonprocurement transactions with

HUD and throughout the Executive Branch of the Federal Government for 3 years. The above defendants and

others solicited and accepted bribes from an unnamed conspirator in exchange for steering Section 8 tenants to

specific properties.



John Fischer, a Buffalo Municipal Housing Authority (Buffalo) administrator, was arrested and charged in

U.S. District Court, Buffalo, NY, with committing bribery, extortion, obstruction of justice, and tampering

with a witness. Fischer allegedly pressured a Buffalo contractor to provide and install a roof at a private

residence in exchange for his assistance on a Buffalo project. In addition, Fischer allegedly attempted to

influence the official statements provided by others after he learned of an ongoing investigation.



Michael Macaruso, a former Providence, North Providence, and Cranston Housing Authorities contractor

doing business as Ocean State Building Wrecking and Asbestos Removal, Inc., pled guilty in U.S. District

Court, Providence, RI, to obtaining kickbacks from public works employees and filing false Federal income

tax returns. From July 2003 to December 2006, Macaruso submitted false employee wage and benefit

certifications to the above housing authorities and failed to report income on his 2005 and 2006 Federal

income tax returns.

Rental Assistance Fraud

Jonathon Hon, a former Chicago Housing Authority (Chicago) Section 8 landlord and owner of Burnham

Mortgage, Inc., and Sandra Pickett and Myrtis Burkhart, also known as Myrtis Griffin, Chicago Section 8

tenants, were each charged or indicted in U.S. District Court, Chicago, IL, for making false statements; theft

of government funds; or committing mail, wire, or bankruptcy fraud. Hon allegedly provided false documents

used by unqualified straw borrowers to obtain conventional mortgages, obtained and personally used $1.9

million in fraudulent loan proceeds, failed to report the sale of his Section 8-subsidized properties on housing

Copyright, 2008. The Providence Journal - Providence, RI. Reprinted with permission.
             

             

52 Chapter 2: HUD’s Public and Indian Housing Programs

certifications, and obtained more than $210,000 in

housing contract payments he was not entitled to

receive. Pickett and Burkhart allegedly failed to

report income or assets on housing and other

certifications and together obtained $50,800 in

housing assistance and $167,200 in Social Security

Administration (SSA) benefits they were not entitled

to receive. In addition, former Chicago Section 8

landlord Burnyss Perry pled guilty to committing

theft, and Chicago Section 8 landlord Joseph Payne

and Section 8 tenant Karla Smith entered into civil

settlements and agreed to collectively pay HUD

$56,000. Perry inflated the value of properties he

sold to unqualified straw borrowers who obtained

conventional mortgages, placed the properties

owned by others into the Chicago Section 8

program, and fraudulently obtained more than

$70,000 in housing assistance payments. Payne and

Smith failed to report income, assets, or their joint

residency on housing certifications. Collectively,

the above defendants caused HUD losses of

$386,800.



Sandra Dargon, Cynthia Howell, and Omaira Blalock, also known as Omaira Hernandez, New York City

Housing Authority (New York City) Section 8 tenants, were each arrested and charged in U.S. District or

Bronx County Courts, New York City, NY, with committing theft of government funds, grand larceny, or

welfare fraud. In addition, six New York City housing recipients were collectively sentenced to 24 months

incarceration, 12 months home confinement, and 192 months probation and ordered to pay New York City

$260,937 in restitution for their earlier guilty pleas to committing theft of government funds. Dargon, Howell,

and Blalock allegedly and remaining defendants admittedly failed to report income, accurate household

compositions, or unauthorized residents on housing certifications and together obtained $320,937 in housing

assistance they were not entitled to receive.



Irma Saucedo, a Miami-Dade Housing Authority (Miami-Dade) Housing Choice Voucher program

participant, was arrested after her indictment in U.S. District Court, Miami, FL, for committing theft of

government property and aggravated identity theft; Miami-Dade housing recipient Kendrick Davis, Jr., was

charged with committing public assistance fraud and grand theft; and Miami-Dade housing recipients Latrice

Cleveland and Thelma Thomas each pled guilty to committing public assistance fraud and grand theft. In

addition, 10 current or former Miami-Dade housing recipients were collectively sentenced to 366 days

incarceration and 73 years probation and ordered to perform 800 hours of community service and pay HUD

$204,681 in restitution for their earlier guilty pleas to making false statements, committing grand theft and

public assistance fraud, or fraudulently using identification documents. Saucedo and Davis allegedly and the

remaining defendants admittedly failed to report income, assets, accurate household compositions, criminal

Reprinted with permission of the Chicago Tribune;

copyright Chicago Tribune; all rights reserved.
             

             

Chapter 2: HUD’s Public and Indian Housing Programs 53

histories, or the subleasing of their subsidized units on housing certifications and together obtained $288,274

in housing assistance they were not entitled to receive.



Gaila Requena, Isa Buechner, and Aran and Marquita Tolliver, current or former Las Vegas Housing

Authority (Las Vegas) Section 8 tenants, were each charged in Clark County Justice Court, Las Vegas, NV, with

committing theft by misrepresentation or obtaining money under false pretenses. In addition, five former Las

Vegas Section 8 tenants were collectively sentenced to 12 months incarceration (suspended) and 3 years

probation and ordered to pay Las Vegas $54,584 in restitution for their earlier guilty pleas to conspiracy to

commit a crime or attempted theft. Requena, Buechner, and Aran and Marquita Tolliver allegedly and the

remaining defendants admittedly failed to report income, accurate household compositions, or their criminal

histories on housing certifications and together obtained $189,786 in housing assistance they were not entitled

to receive.



Jan Freeman, Victoria Shakoor, and Pamela Lovitt, former Prince Georges Department of Housing and

Community Development Housing Choice Voucher program participants, were each charged in Prince Georges

County Circuit Court, Upper Marlboro, MD, with committing theft over $500. The above defendants

allegedly failed to report unauthorized residents and their incomes or registered sex offender classifications on

housing certifications and collectively obtained $136,972 in housing assistance they were not entitled to

receive.



Blanca Martinez and Sonia Luciano, also known as Nancis Sepulveda, Yonkers Municipal Housing

Authority Section 8 tenants, were charged in U.S. District or Yonkers City Courts, Westchester, NY, with

filing a false instrument or committing grand larceny or identity theft. Martinez and Luciano allegedly

submitted false identity documents or failed to report income and assets on housing certifications and together

obtained about $134,478 in housing assistance they were not entitled to receive.



Mary Ann Miles, a former Arlington County Department of Human Services Housing Choice Voucher

program participant, pled guilty in Arlington County Circuit Court, Arlington, VA, to committing forgery of

public documents. From 1991 through 2004, Miles failed to report an unauthorized resident or his income on

housing certifications and obtained $120,195 in housing assistance she was not entitled to receive.



Tara Crespo, a Homestead Housing Authority Housing Choice Voucher program participant, was indicted

in U.S. District Court, Miami, FL, for making false statements and committing theft of government funds;

Stacey Chestnut and Evelyn Bessent, former Pompano or Palm Beach County Housing Authority Section 8

tenants, each pled guilty to making false statements and committing theft of government funds; and former

Broward County Section 8 tenant Natasha Bradley was sentenced to 180 days home detention and 3 years

probation and ordered to perform 100 hours of community service and pay HUD $33,854 in restitution for

her earlier guilty plea to committing theft of government funds. Crespo allegedly and Chestnut, Bessent, and
             

             

54 Chapter 2: HUD’s Public and Indian Housing Programs

Bradley admittedly failed to report income, assets, or the subleasing of their HUD-subsidized unit on housing

certifications and collectively obtained $107,332 in housing assistance they were not entitled to receive.



Ernestine Bumpass and Nakeisha Minor, also known as Nakeisha Taylor, Durham Housing Authority

(Durham) housing recipients, were each arrested and charged in Durham County District Court, Durham,

NC, with obtaining property by false pretenses. In addition, Durham housing recipients Larunatta Barlow

and Margaret Mangum each pled guilty to obtaining property by false pretenses, and former Durham housing

recipients Sheila Browder and Shronda Johnson were collectively sentenced to 45 days incarceration and 48

months probation and ordered to pay Durham $5,631 in restitution for their earlier pretrial diversion or guilty

plea to obtaining property by false pretenses. Bumpass and Minor allegedly and the remaining defendants

admittedly failed to report income, unauthorized residents, or their accurate marital status on housing

certifications and collectively obtained $103,433 in housing assistance they were not entitled to receive.



Aida Contreras and Brenda Grubisich, former Cook County Housing Authority (Cook County) Section 8

tenants, were each charged in Cook County Circuit Court, Chicago, IL, with committing theft by deception.

In addition, Cook County Section 8 landlord Julius Macklin, also known as Julius Heart, pled guilty to

committing wire fraud, and former Cook County Section 8 tenant Jean Marshal, also known as Jean Allen, was

sentenced to 3 years probation and ordered to pay HUD $10,122 and the SSA $81,788 in restitution for her

earlier guilty plea to committing theft of government funds. Contreras and Grubisich allegedly and Macklin

and Marshal admittedly failed to report income, assets, SSA benefits, fraudulent use of identification

documents, or familial relationships to Section 8 landlords on housing and other certifications and collectively

obtained $98,487 in housing assistance and $253,733 in SSA and other benefits they were not entitled to

receive.



Tomeka Jackson, Cynthia Milhouse, and Elodis Platt, former Saint Petersburg, Pinellas County, or Sarasota

Housing Authorities Section 8 or Housing Choice Voucher program participants, were each charged or

indicted in U.S. District Court, Tampa, FL, for making false statements and committing theft of government

funds. Jackson, Milhouse, and Platt allegedly failed to report income on housing certifications and together

obtained $96,496 in housing assistance they were not entitled to receive.



Kindole Roberson and her daughter Tiffanee Rankins, former Inglewood Housing Authority (Inglewood)

Section 8 tenants, and Erika Hamlet were each charged in Los Angeles County Superior Court, Inglewood,

CA, with filing a false instrument or committing forgery. In addition, former Inglewood Section 8 tenants

Karen Fleming and Kesha Burton were collectively sentenced to 8 years probation and ordered to perform 250

hours of community service and pay Inglewood $46,487 in restitution for their earlier guilty pleas to

committing grand theft and perjury. Roberson, Rankins, and Hamlet allegedly failed to report income or

provided forged documents, and Fleming and Burton failed to report income or an unauthorized resident on

housing certifications. HUD losses are estimated at $90,487.
             

             

Chapter 2: HUD’s Public and Indian Housing Programs 55

FedRent Initiative

Recent studies indicate that an estimated 60 percent of all subsidized housing rents are miscalculated, and

approximately $5.2 billion in erroneous and net annual subsidy overpayments are a result of both errors in

program administration and tenants underreporting income.

In an effort to combat administrative overpayments and tenant fraud, HUD and HUD OIG commenced

"Operation FedRent," a joint effort to address rental assistance fraud involving Federal employees. Operation

FedRent compares HUD tenant data to current and retired Federal employee information maintained by the

U.S. Office of Personnel Management. After the data comparison, an income eligibility determination is

made, and the Social Security numbers for family members six years of age and older are verified. If a

discrepancy exists, an investigation is opened and appropriate administrative or legal actions are initiated to

collect any overpaid housing assistance. Results of Operation FedRent during this semiannual reporting

period are described below.



Ten Chicago Housing Authority, Cook County Housing Authority, or Aurora Housing Authority public

housing or Section 8 tenants and current or former U.S. Postal Service (USPS) employees were each charged in

U.S. District Court, Chicago, IL, for making false statements and committing theft of government funds or

mail fraud. The above defendants allegedly failed to report income on housing certifications and collectively

obtained $247,000 in housing assistance they were not entitled to receive.



Lauton Joshua, a former San Francisco Housing Authority (San Francisco) Section 8 tenant and U.S. Army

employee, and her grandmother, Helen Lowe, a former San Francisco Section 8 landlord, were collectively

sentenced in U.S. District, San Francisco, CA, to 15 months incarceration and 6 years probation, fined $30,000,

and ordered to jointly pay HUD $126,934 in restitution for their earlier guilty pleas to making false

statements. In addition, Lowe was suspended from procurement and nonprocurement transactions as a

participant or principal with HUD and throughout the Executive Branch of the Federal Government pending

the outcome of any related debarment actions. From August 1998 to December 2006, Joshua and Lowe failed

to report income, assets, or their familial relationship on housing certifications and together obtained $126,934

in housing assistance they were not entitled to receive.



Latoya Mason, a former District of Columbia Housing Authority (DC Housing Authority) Section 8

tenant and former U.S. Department of Veterans Affairs (VA) employee, pled guilty in U.S. District Court,

Washington, DC, to making false claims and fraudulently obtaining public assistance. In addition, Barbara

Johnson and Gerry Coffee, former DC Housing Authority housing recipients and current VA or IRS

employees, were collectively sentenced to 5 years probation and ordered to perform 250 hours of community

service and pay DC Housing Authority $59,344 in restitution for their earlier guilty pleas to committing fraud

in obtaining public assistance. From 1999 through 2006, Mason, Johnson, and Coffee failed to report income

or unauthorized residents and their criminal histories on housing certifications and together obtained $110,233

in housing assistance they were not entitled to receive.


             

             

56 Chapter 2: HUD’s Public and Indian Housing Programs

Sonya Reshard, a former Housing Authority of the County of Los Angeles (Los Angeles County) Housing

Choice Voucher program participant and USPS employee, was sentenced in U.S. District Court, Los Angeles,

CA, to 6 months incarceration and 2 years probation and ordered to pay Los Angeles County $71,267 in

restitution for her earlier guilty plea to making false statements and willfully causing an offense against the

government. Reshard failed to report income on housing certifications and obtained $71,267 in housing

assistance she was not entitled to receive.



Antoinette Love, a former Compton Housing Authority (Compton) Section 8 tenant and current USPS

employee, was sentenced in U.S. District Court, Los Angeles, CA, to 5 years probation and 4 months home

detention with electronic monitoring and ordered to pay Compton $58,000 in restitution for her earlier guilty

plea to making false statements. From 1999 to 2007, Love failed to report income on housing certifications

and obtained more than $51,000 in housing assistance she was not entitled to receive.



Dinorah Cancel, a former Tampa Housing Authority (Tampa) Section 8 tenant and current USPS

employee, pled guilty in U.S. District Court, Tampa, FL, to committing theft of government funds. In

addition, former Tampa Section 8 tenants and USPS employees Luz Correa and Bienvenido Rosa Santos were

collectively sentenced to 90 days incarceration, 90 days home detention, 90 days in a residential reentry

program, and 7 years of supervised release and ordered to pay HUD $47,046 in restitution for their earlier

guilty pleas to committing theft of government funds. From February 2002 to August 2007, the above

defendants failed to report income on housing certifications and collectively obtained $47,046 in housing

assistance they were not entitled to receive.



Kim Carson, a former Santa Monica Housing Authority housing recipient and U.S. Department of

Defense auditor who previously pled guilty to committing theft of public monies, entered into a Program

Fraud Civil Remedies Act settlement filed in U.S. District Court, Santa Monica, CA, and agreed to pay HUD

$4,000. Carson submitted altered employment documents, failed to report income, and obtained $44,843 in

housing and FSS program assistance she was not entitled to receive.



Daniel Engle, a Cuyahoga Metropolitan Housing Authority (Cuyahoga Metropolitan) Section 8 landlord,

and Cindy Valentine, also known as Cindy Engle, a Cuyahoga Metropolitan Section 8 tenant and IRS

employee, were each charged in U.S. District Court, Cleveland, OH, with making false statements and

committing theft of government funds. In addition, Cuyahoga Metropolitan Section 8 tenant and IRS

employee Kenyada Spates was indicted in Cuyahoga County Court of Common Pleas for committing grand

theft and tampering with records. Engle, Valentine, and Spates allegedly failed to report income, assets, or

their accurate marital status and household compositions on housing certifications and collectively obtained

$35,928 in housing assistance they were not entitled to receive.


             

             

Chapter 2: HUD’s Public and Indian Housing Programs 57

Temeria Alexander, a former Charlotte Housing Authority Section 8 tenant and USPS employee, was

sentenced in U.S. District Court, Charlotte, NC, to 6 months incarceration and ordered to pay HUD $29,669

in restitution for her earlier guilty plea to making false statements and embezzlement of government funds.

Alexander failed to report income on housing certifications and obtained $29,669 in housing assistance she

was not entitled to receive.



Elizabeth Rosa, a former Orange County Housing Agency (Orange County) Section 8 tenant and current

USPS employee, pled guilty in U.S. District Court, Tampa, FL, to making false statements and theft of

government funds. From June 2001 to July 2006, Rosa failed to report income on housing certifications and

obtained $28,931 in housing assistance she was not entitled to receive.



Natasha Acoff, a Cook County Housing Authority Section 8 tenant and current U.S. Department of

Homeland Security employee, was charged in U.S. District Court, Chicago, IL, with making false statements.

Acoff allegedly failed to report income on housing certifications and obtained $27,200 in housing assistance

she was not entitled to receive.



Brenda Houston, a former Housing Authority of Kansas City (Kansas City) Section 8 tenant and IRS

employee, was sentenced in U.S. District Court, Kansas City, MO, to 4 months incarceration and 3 years

supervised probation and ordered to pay Kansas City $25,812 in restitution for her earlier guilty plea to

committing theft of government funds. From December 2001 through February 2005, Houston failed to

report income on housing certifications and obtained $25,812 in housing assistance she was not entitled to

receive.



Debra Freeman, a former East Chicago Housing Authority public housing tenant and USPS employee,

was sentenced in U.S. District Court, Hammond, IN, to 3 years probation and ordered to pay HUD $20,675

in restitution for her earlier guilty plea to committing theft of government funds. Freeman failed to report

income on housing certifications and obtained $20,675 in housing assistance she was not entitled to receive.



Lakeesha Jefferson, a San Francisco Housing Authority Section 8 tenant and current Federal Emergency

Management Agency (FEMA) employee, was indicted in U.S. District Court, San Francisco, CA, for

committing theft of government funds and making fraudulent claims. From October 2004 through October

2006, Jefferson allegedly failed to report income on housing certifications, submitted fraudulent FEMA travel

vouchers, and obtained $14,511 in housing assistance and $16,252 in travel reimbursements she was not

entitled to receive.


             

             

58 Chapter 2: HUD’s Public and Indian Housing Programs

Peter Ruach, a former Portland Housing Authority public housing tenant and USPS employee, was

sentenced in U.S. District Court, Portland, ME, to 36 months probation and ordered to pay HUD, the U.S.

Department of Health and Human Services, and the U.S. Department of Agriculture $7,596 in restitution for

his earlier guilty plea to making false statements and committing theft of government property. From

November 2004 through September 2005, Ruach failed to report income on housing and other certifications

and obtained $4,686 in housing assistance and $2,900 in welfare and other benefits he was not entitled to

receive.

Fugitive Felon Initiative

Enacted into law in 1996, Section 903 of Public Law 104-193, "Elimination of Housing Assistance with

Respect to Fugitive Felons and Probation and Parole Violators," amended 42 U.S.C. §§ 1437d, 1437z, and

allows for the termination of housing subsidies for public or assisted housing tenants who flee to avoid

prosecution, avoid confinement after conviction of a felony, or violate conditions of their parole or probation.

The law also authorizes Federal, State, and local law enforcement agencies to exchange information and

perform data matches.

OIG supports the Fugitive Felon Initiative (FFI) by matching HUD housing assistance information with

crime data from the National Crime Information Center, U.S. Marshals Service (USMS), and other

participating law enforcement data banks. In addition, OIG special agents actively participate in the USMS

"Operation FALCON," a joint Federal, State, city, and county law enforcement effort to locate and apprehend

fugitive felons wanted for violent crimes. Conducted in most major cities throughout the United States and its

territories, Operation FALCON places a strong emphasis on apprehending fugitive felons involved in gangs,

homicides, sexual assaults, or crimes against the elderly and children. Since the inception of OIG's FFI,

hundreds of cases have been opened and closed, resulting in more than 8,374 arrests. OIG strongly supports

Operation FALCON in an effort to make HUD public and assisted housing safe places for families to live. FFI

results during this semiannual reporting period are described below.



HUD OIG participated in Operation FALCON in Kansas City and St. Louis, MO. As a result, 219

individuals were arrested on outstanding warrants, and nine of those arrested resided in HUD-subsidized

housing.



HUD OIG participated in Operation FALCON in Wichita and Kansas City, KS. As a result, 28

individuals were arrested on outstanding warrants, and two individuals arrested resided in HUD-subsidized

housing.



HUD OIG participated in Operation FALCON in Salt Lake City, UT. As a result, 50 individuals were

arrested on outstanding warrants, and seven of those arrested resided in HUD-subsidized housing.


             

             

Chapter 2: HUD’s Public and Indian Housing Programs 59

HUD OIG participated in Operation FALCON in East St. Louis, IL. As a result, 19 individuals who

resided in HUD-subsidized housing were arrested on outstanding warrants.



HUD OIG participated in Operation FALCON in Newell, SD. As a result, one person who resided in

HUD-subsidized housing was arrested on outstanding warrants.



Staniford Griswold was sentenced in U.S. District Court, Kansas City, MO, to 30 months incarceration

and 36 months supervised release for his earlier guilty plea to assault on a Federal officer. Griswold assaulted a

HUD OIG special agent during Operation FALCON.



Jacqulyn McFarland was arrested and charged in U.S. District Court, Wichita, KS, with assaulting a

Federal officer. McFarland allegedly assaulted a HUD OIG special agent and a deputy U.S. marshal during

Operation FALCON.



Lamesha Ware, a former Pinellas County Housing Authority Section 8 tenant, was arrested on an

outstanding warrant for violating her conditions of release. Ware, who was previously sentenced in U.S.

District Court, Tampa, FL, to 4 months incarceration and 32 months supervised release and ordered to pay

HUD $36,997 in restitution for her earlier guilty plea to making false statements, allegedly failed to reside in

a residential reentry center, comply with the home detention program, or pay the court-ordered restitution.



Ruigui Xia and German Cruz, New York City Housing Authority Section 8 tenants, were each arrested in

New York City, NY, on outstanding warrants that charged them with deportation violations.



William Suffron and Leslie Weeks, Wichita Housing Authority Section 8 tenants, were each arrested in

Wichita, KS, on outstanding warrants that charged them with larceny, forgery, burglary, or probation

violations.



Twenty-two Ogden Housing Authority public housing, Section 8, or Housing Choice Voucher program

participants were arrested in Salt Lake City, UT, on outstanding warrants that charged them with narcotic,

assault, theft, or other violations.
             

             

60 Chapter 2: HUD’s Public and Indian Housing Programs

Other Fraud and Crimes

Michael Eliasof, a realtor and owner of Paterson Management, LLC, and MGE Investments; William

Ottaviano, an appraiser for Equity Appraisal Services, LLC (Equity Appraisal); and Equity Appraisal were each

suspended from procurement and nonprocurement transactions with HUD and throughout the Executive

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

action. Eliasof, Ottaviano, and others allegedly provided false loan documents and appraisals used by

unqualified investors to obtain conventional mortgages. The investors placed the fraudulent mortgaged

properties into the Paterson Housing Authority or the City of Paterson Section 8 housing programs and

obtained housing contract payments they were not entitled to receive. HUD losses are not yet determined.



David and Anna Delle Donna, the mayor of Guttenberg, NJ, a Guttenberg Planning Board member, and

Guttenberg Housing Authority Section 8 landlords, were each convicted in U.S. District Court, Newark, NJ,

of conspiracy to commit extortion and filing false Federal income tax returns. David Donna accepted payoffs

as campaign contributions, and David and Anna Donna failed to report $25,000 in housing contract

payments on their 2004 and 2005 Federal income tax returns.



Terry Rice was indicted in U.S. District Court, Kansas City, MO, for uttering a forged and counterfeit

security. Rice allegedly negotiated a counterfeit Independence Housing Authority check.



Felix Ortiz-Garcia, a former Harrisburg Housing Authority (Harrisburg) public housing tenant, was sentenced in U.S. District Court, Harrisburg, PA, to 13 years incarceration for his earlier guilty plea to unlawful

distribution of heroin. Ortiz-Garcia distributed heroin from his Harrisburg public housing unit.


               

               

Chapter 3

HUD’s Multifamily

Housing Programs
             

             

62

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

Development (HUD)-held or HUD-insured mortgages, the Department subsidizes rents for low-income

households, finances the construction or rehabilitation of rental housing, and provides support services for the

elderly and handicapped.

Audits

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

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

Region 1

0%

Region 3

0%

Region 2

0%

Region 4

33%

Region 11

(Disaster Relief Oversight)

%(N/A)*

Region 5

0%

Region 6

0%

Region 7-8

67%

Region 9-10

0%

Chart 3.1: Percentage of OIG multifamily housing audit reports

during this reporting period

Chapter 3: HUD’s Multifamily Housing Programs

Key program results Questioned costs Funds put to better use

Audit 3 audits $3.3 million ---

Our

focus

Page 63

Page 63

Page 63

- HUD’s use of residual receipts

- Owner and management agent operations

- Opt-out process for project-based Section 8
             

             

Chapter 3: HUD’s Multifamily Housing Programs 63

HUD's Use of Residual Receipts

The HUD Office of Inspector General (OIG) audited HUD's use of residual receipts in lieu of reserve for

replacement funds to determine whether HUD appropriately authorized residual receipt withdrawals in lieu of

reserve for replacement funds for new regulation multifamily projects.

HUD inappropriately authorized the use of more than $3.2 million in residual receipt funds for ineligible

project costs. Regional and field office staff nationwide were either not familiar with or overlooked the residual

receipt use requirements for new regulation multifamily projects. As a result, HUD lost $3.2 million that it

could have used more effectively for additional housing subsidies and other authorized taxpayer purposes.

OIG recommended that HUD, on a project-by-project basis for the 14 projects reviewed, ensure that the

projects reimburse the residual receipts account with reserve for replacement or operating funds, unless this

action negatively affects the project. In addition, HUD needs to ensure that regional and field office staff fully

understand and comply with the requirements regarding the use of residual receipts for new regulation

multifamily projects. (Audit Report: 2008-KC-0007)

Owner and Management Agent Operations

HUD OIG audited Bethany Towers Apartments, Tampa, FL, to determine whether the nonprofit owner

and management agents complied with the project's regulatory agreement, applicable laws, and other HUD

requirements pertaining to the sale and transfer of ownership interest in the project, use of project assets,

identity-of-interest (IOI) relationships, necessity and reasonableness of project costs, and record keeping.

The owner and its undisclosed IOI management agent did not provide proper oversight and management

of the project's financial affairs. The owner executed an unauthorized agreement to sell the project, diverted

$90,000 in funds paid toward the purchase to its church sponsor, selected an undisclosed IOI management

agent, allowed financial harm to the project from IOI dealings, incurred more than $16,000 in ineligible/

improperly supported costs, and maintained inadequate books and records.

OIG recommended that HUD (1) determine whether to declare the project in technical default of its

regulatory agreement and initiate foreclosure proceedings; (2) require the owner to repay or support more than

$106,000 in questioned costs, which include the diverted funds; (3) require the owner to establish and

implement policies and procedures to ensure compliance with HUD requirements; (4) take appropriate

administrative action against the owner and its IOI agent for the most significant reported violations; and

(5) seek double damages against the owner for diverting $90,000 received for the purchase of the project.

(Audit Report: 2008-AT-1013)

Opt-Out Process for Project-Based Section 8

HUD OIG reviewed HUD's oversight of projects that opted out of the Section 8 program between

January 1, 2004, and December 31, 2007, because the opt-out process involved large amounts of funds

potentially not accounted for or remitted to HUD.

With a few minor exceptions, HUD complied with applicable requirements while administering the

opt-out process for the nine Section 8 projects reviewed. In addition, for all nine projects, the responsible
             

             

64 Chapter 3: HUD’s Multifamily Housing Programs

depository properly remitted residual receipts to HUD or released the residual receipts to the projects' owners,

or the balance in the residual receipts account was zero so no action was required. (Audit Report:

2008-KC-0005)


             

             

Chapter 3: HUD’s Multifamily Housing Programs 65

Investigations

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

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

results of various significant investigations are described below.

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

$

recovered

Admin/civil

actions

Investigations 66 $2,892,389 62

Our

focus

Page 66

Page 67

Page 69

- Theft/embezzlement

- Rental assistance fraud

- Other fraud/crimes

Convictions/pleas/

pretrials

Cases

closed

Key program

results

30

Region 1

14%

Region 3

27%

Region 2

11%

Region 4

11%

Region 11

(Disaster Relief Oversight)

3%

Region 5

7%

Region 6

6%

Region 7-8

3%

Region 9-10

18%

Chart 3.2: Percentage of OIG multifamily housing closed investigation

cases during this reporting period
             

             

66

Theft/Embezzlement

Debbie Bethany, the owner of Southern Investment Management Company and the management agent

for Hillview Apartments, a HUD-subsidized multifamily housing development, was indicted in U.S. District

Court, Oxford, MS, for committing embezzlement, theft of government funds, and bribery. Bethany

allegedly embezzled $550,000 in HUD and U.S. Department of Agriculture housing funds.



Wynee Joyner, the vice president of National Housing Group, Inc., a HUD contractor who oversees the

management and maintenance of HUD-owned multifamily housing developments, was indicted in U.S.

District Court, New York City, NY, for conspiracy to commit mail fraud. Joyner allegedly falsified vendor

invoices and submitted false claims to HUD in an effort to circumvent contract terms and obtain HUD

reimbursements before paying third-party vendors. HUD losses are not yet determined.



Sentry Security entered into a settlement with HUD and agreed to pay Hunts Point I, a HUD-subsidized

multifamily housing development located in the Bronx, NY, $107,841 for work not performed. Sentry

Security allegedly submitted false invoices and obtained $107,841 for services not performed.



Denise Toce, a former housing manager for Luther Ridge Apartments (Luther Ridge), a HUD-subsidized

multifamily housing development, was sentenced in Connecticut Superior Court, Middletown, CT, to 4 years

incarceration (suspended) and 3 years probation and ordered to pay Luther Ridge $18,000 in restitution for

her earlier guilty plea to committing larceny. Toce embezzled about $25,000 in Luther Ridge rents and

security deposits.



Linda Copenhaver, a former manager for Kingston House, a HUD-subsidized multifamily housing

development for senior and disabled citizens, was charged in U.S. District Court, Harrisburg, PA, with

embezzlement. Copenhaver allegedly embezzled $12,000 from an elderly tenant.



Nickhoulas Vitale, a former painter for Co-Op City, a HUD-subsidized 15,372 unit multifamily housing

development, was sentenced in U.S. District Court, New York City, NY, to 3 months incarceration, 3 months

home confinement, and 3 years supervised release and ordered to forfeit $10,000 for his earlier guilty plea to

committing bribery. Vitale paid kickbacks to previously indicted Iris Baez, the former board president for

Co-Op City, in exchange for $3.5 million in painting contracts awarded to his employer, Stadium Interior

Painting.



Chapter 3: HUD’s Multifamily Housing Programs
             

             

Chapter 3: HUD’s Multifamily Housing Programs 67

Betty Jefferson, the former president of the St. Stephen Manor, Inc. (St. Stephen),

a HUD-subsidized multifamily housing development; her brother, Mose Jefferson;

and Angela Coleman, a St. Stephen manager, were each indicted in U.S. District

Court, New Orleans, LA, for making false statements; evading Federal income tax;

and committing conspiracy, aggravated identity theft, embezzlement, mail fraud,

and money laundering. From October 2001 to September 2006, the above

defendants allegedly embezzled and personally used about $931,225 in Federal and

State grant funds, including $9,230 in HUD housing assistance payments. In

addition, former St. Stephen employee Brenda Jefferson, also known as Brenda

Foster, pled guilty to misprision of a felony. Brenda Jefferson failed to report her

knowledge of the alleged fraudulent activities involving Betty Jefferson and the other

defendants identified above.

Rental Assistance Fraud

Christian Ighodaro and Uyi and Lucy Omo, former Section 8 tenants at Mandela

Homes, a HUD-subsidized multifamily housing development, were collectively

sentenced in Boston Municipal Court, Boston, MA, to 66 months probation and

ordered to pay HUD $19,000 for their earlier guilty pleas to committing larceny

over $250 by a single scheme. From January 2001 to August 2006, Ighodaro and

Uyi and Lucy Omo failed to report income or assets on housing certifications and

collectively obtained $97,292 in housing assistance they were not entitled to receive.



Hong Le, a former Section 8 tenant at the El Rancho Verde Apartments, a

HUD-subsidized multifamily housing development, was sentenced in California

Superior Court, San Jose, CA, to 28 months incarceration and ordered to pay

Choices for Children $9,418 in restitution for her earlier nolo contendere plea

to committing grand theft. Le allegedly failed to report an unauthorized resident on housing certifications and

obtained $80,356 in housing assistance she was not entitled to receive.



Jeri Hill, a former Section 8 tenant at Glenridge Cooperative Apartments, a HUD-subsidized multifamily

housing development, was sentenced in U.S. District Court, San Francisco, CA, to 3 years probation, ordered

to perform 100 hours of community service and pay HUD $54,754 in restitution, and fined $2,500 for her

earlier guilty plea to submitting false documents to HUD. From January 2003 through October 2007, Hill

failed to report income on HUD certifications and obtained $54,754 in housing assistance she was not entitled

to receive.



Trenell Peoples, a Section 8 tenant at Coral Gardens Apartments (Coral Gardens), a HUD-subsidized

multifamily housing development, was charged in Eleventh Judicial Circuit Court, Homestead, FL, with

organizing a scheme to defraud and committing public assistance fraud and grand theft. In addition, Coral

Gardens Section 8 tenants Prudencio Rodriguez entered into a pretrial diversion, Eliezer Cruz was sentenced

Copyright, 2008. The

Times-Picayune - New

Orleans, LA. Reprinted

with permission.
             

             

68 Chapter 3: HUD’s Multifamily Housing Programs

for his earlier guilty plea to making false statements, and Joann Thompson was given a suspended entry of

sentence for her earlier guilty plea to committing public assistance fraud. Rodriguez agreed to pay HUD

$3,726 in restitution, and Cruz was sentenced to 364 days incarceration and ordered to pay HUD $7,632 in

restitution. Peoples allegedly and the remaining defendants admittedly failed to report income or

unauthorized residents and their criminal histories on housing certifications and collectively obtained $54,176

in housing assistance they were not entitled to receive.



Shiray Savoy, a Housing Choice Voucher program participant through both the Housing Commission of

Anne Arundel County (Anne Arundel), an organization that receives HUD housing assistance, and Bay Ridge

Garden Apartments (Bay Ridge), a HUD-subsidized multifamily housing development, was charged in Anne

Arundel County District Court, Glen Burnie, MD, with committing theft by deception and making false

statements for housing assistance. From December 2002 through November 2007, Savoy allegedly failed to

report her Anne Arundel housing assistance on Bay Ridge housing certifications and obtained $48,583 in

housing assistance she was not entitled to receive.



Kathleen Lovett, a former Section 8 tenant at Woodridge Homes Apartments, a HUD-subsidized

multifamily housing development, was sentenced in Lawrence District Court, Lawrence, MA, to 5 years

probation and ordered to pay HUD $47,000 in restitution for her earlier guilty plea to committing larceny

over $250. From November 2001 to November 2006, Lovett failed to report income on housing certifications

and obtained $47,600 in housing assistance she was not entitled to receive.



Hasan Bajrami, a Section 8 tenant at Seaside Plaza, a HUD-subsidized multifamily housing development,

was arrested and charged in Staten Island Criminal Court, Staten Island, NY, with submitting a false

instrument and committing grand larceny and forgery. Bajrami allegedly failed to report income on housing

certifications and obtained $46,000 in housing assistance he was not entitled to receive.



Sade White and April Blackstone, current Section 8 tenants at Circle Terrace Apartments (Circle Terrace),

a HUD-subsidized multifamily housing development, were each charged in Baltimore County District Court,

Baltimore, MD, with making false statements and committing theft by deception. In addition, former Circle

Terrace Section 8 tenant Katrina Longhorne was sentenced to 3 years supervised probation and ordered to pay

Circle Terrace $12,720 in restitution for her earlier guilty plea to committing theft, and former Circle Terrace

Section 8 tenant Latasha Fisher was ordered to pay Circle Terrace $12,170 in restitution in exchange for the

dismissal of charges previously filed. From September 2005 through June 2008, White, Blackstone, and Fisher

allegedly and Longhorne admittedly failed to report income or unauthorized residents and their criminal

histories on housing certifications and collectively obtained $43,895 in housing assistance they were not

entitled to receive.


             

             

Chapter 3: HUD’s Multifamily Housing Programs 69

Mary Brown, a former Section 8 tenant at Cedar Park Apartments, a HUD-subsidized multifamily

housing development, and her husband, Michael Scalf, were each sentenced in U.S. District Court,

Davenport, IA, for their earlier guilty pleas to making false statements and committing conspiracy. Brown

was sentenced to 3 years supervised release, Scalf was sentenced to 6 months incarceration and 3 years

supervised release, and Brown and Scalf were ordered to pay HUD $19,036 and the State of Iowa $90,569,

jointly and severally. Brown failed to report Scalf's residency or income on housing and other certifications,

and together they obtained $19,036 in housing assistance and $90,569 in other benefits they were not entitled

to receive.



Five Section 8 tenants at Kenwood Apartments, a HUD-subsidized multifamily housing development,

were each charged in Jackson County Circuit Court, Kansas City, MO, with stealing by deceit. The above

defendants allegedly failed to report income on housing certifications and collectively obtained about $14,950

in housing assistance they were not entitled to receive.



Romesz Coleman, a housing assistance recipient at Pheasant Run Apartments, a HUD-subsidized

multifamily housing development, was charged in Montgomery County District Court, Harleysville, PA,

with committing theft by deception, receiving stolen property, making a false swearing, and tampering with

public records. Coleman allegedly failed to report assets, an accurate household composition, or his criminal

history on housing certifications and obtained $11,398 in housing assistance he was not entitled to receive.

Other Fraud/Crimes

Robert Corp, a former loan officer and originator, underwriter, and vice president of Continental

Securities, LLC, was charged in a civil complaint filed in U.S. District Court, Buffalo, NY, with violating the

False Claims Act and unjust enrichment. Corp allegedly made misrepresentations on loan documents he

submitted to HUD when he originated and underwrote a $7 million HUD-insured mortgage for Brylin

Hospital. Brylin Hospital defaulted on the HUD-insured mortgage, and HUD paid an adjusted claim of

more than $6.1 million to the lender.



Aaron Dare, the former owner of the three Federal Housing Administration (FHA)-insured multifamily

properties, and Berne Watkins, the previous owner of the three FHA-insured multifamily properties sold to

Dare, were each sentenced in U.S. District Court, Albany, NY, for their earlier guilty pleas to making false

statements to HUD or conspiracy to commit mortgage or wire fraud. Collectively, Dare and Watkins were

sentenced to 72 months incarceration and 72 months probation and ordered to perform 200 hours of

community service and pay HUD more than $1.9 million in restitution, $792,685 jointly and severally. In

2000 and 2001, Watkins and Dare executed two fraudulent promissory notes to create the appearance that

Dare held equity worth $2.5 million and to facilitate Dare's purchase of the three multifamily properties from

Watkins. Dare used the fake promissory notes to obtain FHA-insured mortgages for the three properties but

failed to make mortgage payments as promised. HUD realized losses of more than $1.9 million after the

mortgages defaulted.


             

             

70

Nine landlords and one property management company entered into a civil consent decree with HUD, the

U.S. Environmental Protection Agency, and the U. S. Attorney's Office in Minneapolis, MN, and each agreed

to pay $7,500 in fines to the U.S. Department of Justice, collectively provide $50,000 for a child health

improvement project, and eliminate 179 lead-based paint hazards in their respective housing developments.

The above defendants allegedly violated the Residential Lead-Based Paint Hazard Reduction Act when they

failed to disclose or provide records relating to lead-based paint or lead-based paint hazards.



Ottis Levine and Lionell Bradley were collectively sentenced in Thirteenth Judicial Circuit Court, Tampa,

FL, to time served and 24 months probation and ordered to perform 50 hours of community service for their

earlier guilty pleas to committing grand theft, conspiracy to commit a robbery with a firearm, or possession of

a firearm during the commission of a felony. Levine, Bradley, and others robbed Kenneth Court Apartments,

a HUD-subsidized multifamily housing development, and stole about $3,000 in utility assistance payments.



Chapter 3: HUD’s Multifamily Housing Programs
               

               

Chapter 4

HUD’s Community

Planning and Development

Programs
             

             

72

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

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

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

development of partnerships among all levels of government and the private sector. In addition to the audits

and investigations described in this chapter, the U.S. Department of Housing and Urban Development, Office

of Inspector General (HUD OIG), has conducted numerous outreach efforts (see chapter 7, page 129).

Audits

Strategic Initiative 3: Contribute to the strengthening of communities

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

Region 1

5%

Region 3

5%

Region 2

11%

Region 4

26%

Region 11

(Disaster Relief Oversight)

%(N/A)*

Region 5

26%

Region 6

11%

Region 7-8

11%

Region 9-10

5%

Chart 4.1: Percentage of OIG community planning and development

audit reports during this reporting period

Chapter 4: HUD’s Community Planning and Development Programs

Key program results Questioned costs Funds put to better use

Audit 19 audits $71 million $25 million

Our

focus

Page 73

Page 76

- Community Development Block Grant programs

- HOME Investment Partnerships program
             

             

Chapter 4: HUD’s Community Planning and Development Programs 73

The Office of Inspector General (OIG) audited the Community Development Block Grant (CDBG)

program, the HOME Investment Partnerships Program (HOME), and the Supportive Housing Program grants.

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

funds were administered for eligible activities and that the auditee met program objectives. The following

section illustrates the audits conducted in the CPD area.

Community Development Block Grant Programs

The U.S. Department of Housing and Urban Development (HUD) OIG audited HUD's administration

of CDBG set-aside for colonias because of concerns that surfaced during an audit survey of the State of Texas's

colonia set-aside funds. Colonias are rural communities located within 150 miles of the U.S.-Mexican border.

The objective was to determine whether HUD ensured that the States of New Mexico, Arizona, Texas, and

California expended colonia set-aside funds in compliance with the Cranston-Gonzalez National Affordable

Housing Act of 1990.

HUD did not issue regulations or handbooks specific to the administration of the set-aside funds or

develop performance measures to track accomplishments. Thus, it did not ensure that the States expended the

funds in compliance with the Act and could not track accomplishments. Rather, HUD allowed the States to

define colonias and determine how to distribute the funds. The States had different definitions of colonias and

did not always prioritize funding to the colonias with the greatest needs as required. As a result, between 2004

and 2007, New Mexico and Arizona allocated or expended colonia set-aside funds for projects that did not

meet the requirements of the Act and did not meet the intended beneficiaries' basic health and safety needs. In

addition, HUD could not report on the progress or effect of the set-aside funds in meeting the colonia

residents' needs regarding water, sewage, and housing.

OIG recommended that HUD (1) require the States of New Mexico and Arizona to support or repay more

than $8.4 million, (2) implement effective internal controls to ensure that the States comply with the Act, and

(3) implement performance measures specific to the colonia set-aside to help ensure that funds are used

effectively to meet water, sewage, and housing needs of the colonia residents. By implementing effective

controls, HUD can put more than $2.8 million to better use over the next 12 months. (Audit Report:

2008-FW-0001)



HUD OIG audited the City of Tulsa, OK's CDBG program and found that while the City generally

monitored other subrecipients, it did not monitor or supervise its largest subreceipient, the Tulsa Development

Authority (Authority). From October 1, 2005, through September 30, 2007, the Authority inappropriately

expended $1.5 million for its CDBG acquisition, clearance, and relocation activities. However, it did not have

specific disposition plans for its CDBG-acquired properties and only benefited the low- to moderate-income

community "whenever possible." In addition, the Authority's acquisition and clearance projects did not have

the HUD-required environmental reviews.

OIG recommended that HUD require the City to adopt written policies and procedures for its CDBG

program for day-to-day operations that include procedures to ensure that it monitors all of its subrecipients in

accordance with HUD and local requirements and require the Authority to (1) develop and implement

specific plans for its future CDBG acquisitions and currently owned CDBG properties that will benefit the
             

             

74

low- to moderate-income community as a whole and individually, which would put more than $8.9 million to

better use; (2) support or repay the funds that the Authority could not support in performing its acquisition,

clearance, relocation, and disposition activities; and (3) perform the necessary environmental reviews when

acquiring or clearing land. (Audit Report: 2008-FW-1012)



HUD OIG audited the CDBG program of the County of Essex, Verona, NJ, and found that the County

did not always follow applicable regulations and its submission to HUD while disbursing CDBG funds. It

disbursed CDBG funds for ineligible and defaulted float loans, it and its subgrantees did not always comply

with procurement requirements, grant agreements did not contain the requirements, and substantial changes

to program activities were not amended appropriately. In addition, there were control weaknesses in the

County's financial management system used to safeguard funds.

OIG recommended that HUD instruct the County to reimburse to the CDBG program from nonfederal

funds more than $1.2 million for ineligible and defaulted float loans, provide supporting documentation for

two procurements totaling more than $517,000, reimburse more than $2.6 million in excess checking account

funds to the CDBG program if the County does not immediately disburse the funds, remit more than $280,000

in bank interest, reimburse to the CDBG program more than $179,000 for the unnecessary drawdowns of

funds, and establish procedures to ensure that CDBG funds will be disbursed in a timely manner and in

accordance with program requirements. (Audit Report: 2008-NY-1007)



HUD OIG audited the State of Colorado, Division of Housing's CDBG program in Denver, CO, and

found that the Division used CDBG funds for ineligible and questionable projects. As a result, it awarded

more than $4.6 million in grants that did not effectively meet the needs of the intended nonentitlement

low- and moderate-income beneficiaries. The Division did not effectively identify, report, or classify program

income generated by its subrecipients. As a result, neither the Division nor HUD had assurance that subrecipients

used program income for its intended purpose. In addition, the Division did not realize the full benefits of the

allowable amounts for planning and administrative costs and for public service activities.

OIG recommended that HUD (1) require the Division to repay from nonfederal funds the $1.7 million in

ineligible grants, (2) require the Division to develop and implement effective controls over establishing and

administering projects and identifying and recording program income, and (3) determine the eligibility of the

questioned costs and require the Division to repay from nonfederal funds the amounts determined to be

unsupported or unnecessary. (Audit Report: 2008-DE-1003)



HUD OIG audited the operations of the City of Troy, NY, CDBG program and found that the City

generally complied with HUD program requirements when administering its overall CDBG program.

However, it did not establish adequate (1) procedures to ensure that its housing rehabilitation program was

administered in accordance with program regulations; (2) procedures to ensure that costs for its street

improvement activities were allowable and supported by adequate documentation; (3) administrative controls

to ensure that costs associated with its public facilities activities were eligible, necessary, and supported by

sufficient documentation; and (4) controls to ensure that program labor costs were adequately supported and

that costs incurred were current and accurately recorded.

Chapter 4: HUD’s Community Planning and Development Programs
             

             

Chapter 4: HUD’s Community Planning and Development Programs 75

OIG recommended that HUD instruct the City to (1) reimburse the CDBG program from nonfederal

funds more than $186,000 paid for ineligible program expenditures, (2) provide supporting documentation to

justify the eligibility of more than $1.2 million in CDBG disbursements or reimburse the program from

nonfederal funds any amounts not supported, and (3) establish adequate procedures to ensure compliance

with CDBG program requirements. (Audit Report: 2008-NY-1006)



HUD OIG audited the City of Dayton, OH's CDBG program and found that the City lacked sufficient

documentation to support that it followed federal requirements when it used program funds to pay staff

salaries from January through December 2003. As a result, it was unable to support its use of more than

$550,000 in program funds.

OIG recommended that HUD require the City to provide documentation or reimburse its program from

nonfederal funds for the unsupported salaries and implement adequate procedures and controls to address the

finding cited. (Audit Report: 2008-CH-1015)



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

Municipality generally complied with requirements of the CDBG program. However, there were deficiencies

associated with the procurement of its housing rehabilitation activities. The Municipality awarded 65 housing

rehabilitation contracts totaling more than $400,000 without following HUD's and its own procurement

requirements.

OIG recommended that HUD require the Municipality to (1) provide support showing the eligibility and

reasonableness of more than $81,000 in disbursements or reimburse the CDBG program from nonfederal

funds and (2) implement procurement procedures and controls that comply with HUD requirements to

ensure that goods and services are obtained at the most advantageous terms and in a manner that provides full

and open competition. (Audit Report: 2008-AT-1008)



HUD OIG reviewed HUD policies prohibiting the use of funds from the CDBG program to supplant

general government funds to determine whether HUD had management controls sufficient to ensure that

CDBG grantees had effective procedures to preclude them from supplanting general government funds with

CDBG program funds. OIG also examined whether there were practical ways to measure whether grantees

used CDBG program funds to supplant general State or local government funds and indicators that grantees

might be using Federal program funds to supplant general government funds.

HUD could not identify whether Federal funds were used to supplant general government funds. It could

not identify whether a grantee supplanted its local budget because it had not identified the requirements for

maintenance of effort included in the Housing and Community Development Act of 1974, either in policy or

CDBG program regulations. Without maintenance of effort management controls, CDBG program funds

may be at risk for substitution by grantees.

OIG recommended that HUD initiate efforts to address and establish maintenance of effort requirements

and continue its dialogue with its grantees to consider stakeholder input for establishing maintenance of effort
             

             

76 Chapter 4: HUD’s Community Planning and Development Programs

compliance requirements and determine whether or how to implement maintenance of effort requirements for

the program after consideration of stakeholders' input. (Audit Report: 2008-BO-0002)

HOME Investment Partnerships Program

HUD OIG audited the City of Los Angeles Housing Department, Los Angeles, CA, HOME

rehabilitation program and found that the Department did not comply with HOME affordability monitoring

and inspection requirements for its HOME-assisted rental housing. It failed to maintain the required tenant

eligibility information for 26 HOME-assisted rental housing projects totaling nearly $38 million. In addition,

it did not maintain complete tenant eligibility information for 27 tenants living in seven projects, resulting in

nearly $104,000 in unsupported costs. Further, it did not ensure that its contractor conducted occupancy

monitoring as required and failed to inspect HOME-assisted rental housing projects when required and ensure

that local housing code regulations were met. Improvements on controls would ensure that more than $226,000

could be put to better use.

OIG recommended that HUD require the Department to properly support or repay from nonfederal

funds more than $38 million in unsupported expenses and establish and implement more effective procedures

and controls. (Audit Report: 2008-LA-1016)



HUD OIG audited the HOME program of Cook County, IL, and

found that the County did not effectively administer its program income

and administrative costs and failed to follow HUD's requirements. It did

not comply with HUD's requirement in its use and reporting of program

income. As a result, the County had nearly $5.2 million in program

income in its HOME investment trust fund's local account, did not

allocate at least $641,000 in interest earned from program income in its

local account, and underreported at least $2.7 million in program income

in HUD's Integrated Disbursement and Information System. In addition,

the County did not comply with HUD's requirements in using HOME

funds for administrative costs. As a result, it used more than $28,000 in

HOME funds for improper administrative costs and lacked sufficient

documentation to support its use of nearly $56,000 in HOME funds for

eligible administrative costs.

OIG recommended that HUD require the County to (1) commit and

disburse program income, unallocated interest earned from program

income, and reimbursed program funds before drawing down additional

funds from its HOME trust fund treasury account; (2) provide support or

reimburse its program from nonfederal funds for the unsupported

payments; (3) provide sufficient documentation as to whether it earned

interest from program income before September 2002; and (4) report its

additional program income in HUD's system. OIG also recommended

Reprinted with permission of the

Chicago Tribune; copyright Chicago

Tribune; all rights reserved.
             

             

Chapter 4: HUD’s Community Planning and Development Programs 77

that HUD restrict the County's ability to draw down HOME funds from its treasury account until the County

disburses all program income, unallocated interest earned from program income, and reimbursed program

funds. (Audit Report: 2008-CH-1009)



HUD OIG audited the City of Cincinnati, OH's HOME program and found that the City did not

adequately manage its program. It incorrectly reported program contributions in its consolidated annual

performance and evaluation reports, lacked sufficient documentation to support program contributions

reported in its consolidated reports, inappropriately used program and American Dream Downpayment

Initiative (Initiative) funds, failed to ensure that it sufficiently protected program funds, and lacked

documentation to support its use of program and Initiative funds. In addition, the City did not comply with

HUD's requirements in determining and reporting contributions for its program. It incorrectly reported in its

consolidated reports to HUD nearly $2.6 million in program contributions from 31 Cincinnati Habitat for

Humanity (Habitat) projects that did not qualify as affordable housing and was unable to support more than

$1.8 million that it reported as program contributions in its consolidated reports to HUD. Further, the City

inappropriately provided more than $220,000 in program funds for the 31 Habitat projects in which it did not

sufficiently protect the program funds.

OIG recommended that HUD require the City to (1) implement a detailed comprehensive written action

plan to improve its procedures and controls to ensure that the City operates its program in accordance with

HUD's and its own requirements, (2) remove incorrectly reported program contributions of nearly $2.6

million from its consolidated reports to HUD, (3) provide support for more than $1.8 million or remove

program contributions from its consolidated reports to HUD and obtain program contributions from nonfederal

funds for housing that qualifies as affordable housing under the program, (4) reimburse its program from

nonfederal funds and decommit program funds for the insufficiently protected Habitat projects, and

(5) implement adequate procedures and controls to address the findings cited. (Audit Report:

2008-CH-1014)



HUD OIG audited the HOME program of the City of Cincinnati, OH, and found that the City did not

effectively administer its reporting of activity data in HUD's system and failed to follow HUD's and its own

requirements. It did not comply with HUD's requirements in its reporting of activity data in HUD's system.

As a result, it did not decommit more than $114,000 in program funds accurately and in a timely manner and

obligated more than $816,000 and drew down and disbursed nearly $442,000 in program funds for an activity

without entering into a written agreement or contract with the owner or developer of the property or having a

current specified plan for how the property would be used to provide affordable housing to low- and

moderate-income individuals. The City also did not comply with HUD's regulations and its rental

rehabilitation program manual in providing housing rehabilitation assistance for rental rehabilitation projects.

As a result, it provided more than $397,000 in program funds to assist 11 units in three projects that did not

qualify as affordable housing, was unable to support that it used more than $590,000 in program funds for

appropriate projects, and did not ensure that it sufficiently protected more than $561,000 in program funds.

OIG recommended that HUD ensure that the HOME funds the City decommitted as a result of the audit

are committed and used for eligible activities. OIG also recommended that HUD require the City to

(1) decommit HOME funds for completed activities, (2) move forward on providing housing for an activity or
             

             

78 Chapter 4: HUD’s Community Planning and Development Programs

reimburse its program from nonfederal funds and decommit HOME funds remaining for the activity,

(3) reimburse the appropriate parties from nonfederal funds for the overpayments of rents or reimburse its

program from nonfederal funds, (4) provide support or reimburse its program from nonfederal funds for the

unsupported payments, (5) ensure that projects' owners obtain title insurance naming the City as coinsured for

the projects or reimburse its program from nonfederal funds, and (6) implement adequate procedures and

controls to address the findings cited. These procedures and controls should help to ensure that nearly $304,000

in HOME funds is appropriately used over the next year. (Audit Report: 2008-CH-1010)



HUD OIG audited the City of Jacksonville, FL/Duval County's HOME program and found that the City

did not comply with program requirements for affordability/eligibility for three foreclosed multifamily rental

rehabilitation projects and record keeping. It also had not established and maintained an adequate system for

filing and retrieving program records. The review did not identify reportable violations concerning the City's

compliance with the HOME program's commitment and 5-year expenditure requirements.

OIG recommended that HUD require the City to (1) reimburse more than $2.7 million in funds

approved for three foreclosed multifamily rental rehabilitation projects that did not accomplish the program's

affordability requirement or meet other program eligibility requirements and (2) take appropriate actions to

ensure that management and staff follow program requirements for approval and oversight of multifamily

rental rehabilitation activities and improve its system for filing and maintaining program records. (Audit

Report: 2008-AT-1012)



HUD OIG audited the State of Maryland's HOME program and found that the State did not ensure that

its single-family owner-occupied rehabilitation projects complied with HUD regulations and/or met the State's

property standards. As a result, it used more than $42,000 in HOME funds for a project that did not comply

with Federal regulations and was unable to support its use of $2.3 million in HOME funds for projects.

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

ineligible project, provide documentation to support its use of more than $2 million or reimburse its program

from nonfederal funds, ensure that housing rehabilitation work and required repairs are completed in

accordance with HUD's or the State's standards or reimburse its program more than $205,000 from nonfederal

funds, and implement adequate procedures and controls to address the findings cited. These procedures and

controls should help ensure that nearly $75,000 in HOME funds is appropriately used over the next year for

projects that comply with HUD's regulations and meet the State's standards. (Audit Report: 2008-PH-1008)



HUD OIG audited the City of Muncie, IN's HOME Investment Partnerships program (HOME), and

found that the City did not maintain an adequate system of controls to ensure that it committed HOME funds

within HUD's 24-month commitment deadline and avoided losing the funds. As a result, it was required to

commit more than $1.2 million in HOME funds for eligible activities by July 31, 2008, to avoid losing the

funds. The City lacked documentation to support that it followed HUD's regulations and/or its requirements

when it used HOME funds and/or program income to provide rehabilitation assistance; downpayments,

closing costs, and/or gap financing; and tenant-based rental assistance for HOME activities. In addition, it
             

             

Chapter 4: HUD’s Community Planning and Development Programs 79

improperly used HOME funds after an operating agency agreement with a subrecipient expired. Therefore, it

was unable to support its use of more than $215,000 in HOME funds and income and improperly disbursed

more than $6,000 in HOME funds.

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

improper use of funds, provide support or reimburse its program from nonfederal funds for the unsupported

payments, and implement adequate procedures and controls to address the findings cited. These procedures

and controls should help ensure that HOME funds and income are used in accordance with HUD's

regulations and the City's requirements and that the City does not lose more than $1.1 million in HOME

funds over the next 5 months. (Audit Report: 2008-CH-1004)



HUD OIG audited the HOME program of the City of Augusta, GA, and found that the City's controls

over its HOME program were inadequate. As a result, more than $1 million in HOME funds involved

questioned costs and funds that were subject to recapture. Specifically, the City did not (1) properly commit

more than $755,000, (2) have proper documentation and analysis to support approvals and effectively address

project performance delays, (3) ensure proper support for nearly $197,000, (4) ensure the eligibility of more

than $92,000 for affordable housing compliance, and (5) properly maintain and manage program staff.

OIG recommended that HUD require the City to (1) properly support or repay nearly $567,000 in

questioned costs, (2) recapture more than $477,000 because of program violations, and (3) establish and

implement proper controls and procedures to ensure compliance with program requirements. (Audit Report:

2008-AT-1009)



HUD OIG audited the City of Durham, NC's HOME program and found that the City did not advertise

for homeowner rehabilitation contractors as required. Also, it did not take necessary affirmative steps to ensure

that minority firms, women's business enterprises, and labor surplus area firms were used when possible. As a

result, it could not support that the program activities were subject to full and open competition. In addition,

it could not ensure that minority firms, women's business enterprises, and labor surplus area firms were given

proper consideration.

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

program homeowner rehabilitation activities, totaling more than $790,000 for fiscal years 2006 and 2007,

were awarded to the most responsible firm with a proposal that was most advantageous to the program,

considering price and other factors, and (2) develop and implement procedures to ensure that future services

for homeowner rehabilitation are procured in accordance with applicable federal procurement requirements.

(Audit Report: 2008-AT-1015)



HUD OIG audited the City of Durham, NC's HOME program and found that the City did not always

perform required monitoring reviews or provide adequate evidence that monitoring reviews were performed.

As a result, the City and HUD lacked assurance that HOME activities were conducted in accordance with the

requirements or that the intended program benefits were realized. In addition, the City incorrectly used
             

             

80

HOME entitlement funds when program income funds were available for use and did not always make the

required program income entries in HUD's Integrated Disbursement and Information System. As a result, the

City's reporting to HUD was incorrect, and it unnecessarily drew down more than $158,000 to its local

HOME investment trust fund account.

OIG recommended that HUD require the City to (1) establish and implement effective written policies

and procedures for monitoring HOME activities and reporting and using program income; (2) repay interest

earned on program income that was not reported in a timely manner and used for HOME activities; and

(3) establish the eligibility of funds disbursed for tenant-based rental activities, recalculate tenant rents and

refund any overcharged tenants, and reimburse HUD for any payments determined to be ineligible. (Audit

Report: 2008-AT-1011)



HUD OIG reviewed the City of St. Louis, MO's use of HOME program funds and found that the City

used HOME funds for costs that were not reasonable and necessary to produce housing for low-income

families. Additionally, it did not establish adequate controls to ensure that it determined the proper amount of

subsidy for HOME-funded development activities.

OIG recommended that HUD require the City to design and implement a process to ensure that

HOME-funded project costs are reasonable and necessary. (Audit Report: 2008-KC-1007)



Chapter 4: HUD’s Community Planning and Development Programs
             

             

Chapter 4: HUD’s Community Planning and Development Programs 81

Investigation

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

staff or conducted jointly with Federal, State, and local law enforcement agencies. The results of various

significant investigations are described below.

Strategic Initiative 3: Contribute to the strengthening of communities

$

recovered

Admin/civil

actions

Investigations 97 $11,333,932 28

Our

focus

Page 82

Page 84

- Theft/embezzlement

- Other fraud/crimes

Convictions/pleas/

pretrials

Cases

closed

Key program

results

18

Region 1

0%

Region 3

7%

Region 2

9%

Region 4

3%

Region 11

(Disaster Relief Oversight)

61%

Region 5

5%

Region 6

7%

Region 7-8

1%

Region 9-10

7%

Chart 4.2: Percentage of OIG community planning and development

closed investigation cases during this reporting period
             

             

82 Chapter 4: HUD’s Community Planning and Development Programs

Theft/Embezzlement

Murilda and James Hayes, the former executive director and treasurer for the Love Social Services Center

(Love SSC), an organization that receives HUD Economic Development Initiative grants and U.S.

Department of Justice (DOJ) funding, were collectively sentenced in U.S. District Court, Fairbanks, AK, to

102 months incarceration and ordered to pay HUD $658,534 and DOJ $103,292 in restitution for their

earlier convictions of misapplication from an organization receiving Federal funds; filing a false Federal income

tax return; and committing conspiracy, money laundering, fraud, and theft. From 2000 through 2005, Murilda

and James Hayes embezzled and personally used more than $825,000 in Love SSC funds without

authorization.



Robert Broadway, the former executive director for the 21 Century Homestead, Inc., an organization that

receives HUD CDBG and other funds, was charged in Shawnee County District Court, Topeka, KS, with

making false writings. From 2003 through 2007, Broadway allegedly provided false information on HUD and

State funding applications and obtained $812,000 in HUD and State funds he was not entitled to receive.



Constance Post, also known as Gerrie Post, the executive director for the Mount Vernon Urban Renewal

Agency (Mount Vernon) and a commissioner for the Mount Vernon Department of Planning and

Community Development, organizations that receive HUD CDBG funds, and Wayne Charles, president of

the Charles Group and owner of Micros Only Computer Concepts (Micros), both previously indicted in U.S.

District Court, White Plains, NY, for conspiracy to commit mail fraud and making false statements, were each

suspended from procurement and nonprocurement transactions with HUD and throughout the Executive

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

actions. Post allegedly awarded $1.1 million in Mount Vernon computer contracts to Micros without

obtaining bids from others, provided the Charles Group with a $500,000 loan from Mount Vernon funds and

failed to disclose the loan in Mount Vernon books and records, and concealed about $30,000 she personally

received from Charles.



Gordon Choyce II, the director for Jubilee Restoration, Inc., a nonprofit organization that receives HUD

Supportive Housing program funds for homeless youths, was indicted in U.S. District Court, Oakland, CA,

for submitting fraudulent claims to HUD. From 2002 through 2004, Choyce allegedly submitted $199,476

in fraudulent claims for fabricated or previously compensated counseling services. Choyce was also suspended

from procurement and nonprocurement transactions as a participant or principal with HUD and throughout

the Executive Branch of the Federal Government pending the outcome of criminal proceedings or any related

debarment actions.



Leo Hardy, Jr., and Shirley Hardy Walden, the former president and treasurer of Southampton County

Assembly (Southampton), an organization that receives HUD HOME funds, were collectively sentenced in

U.S. District Court, Norfolk, VA, to 11 months incarceration, 11 months home detention, and 6 years
             

             

Chapter 4: HUD’s Community Planning and Development Programs 83

supervised release and ordered to pay HUD $125,000 in restitution for their earlier guilty pleas to making false

statements. Hardy and Walden used $125,000 in Southampton funds for projects not related to HUD

programs.



Phyllis Tate, the grant administrator for the Golden Triangle Planning and Development District (Golden

Triangle), an organization that receives HUD HOME funds, was sentenced in U.S. District Court, Oxford,

MS, to 18 months home detention and 3 years probation for her earlier guilty plea to conspiracy. From March

2004 to August 2005, Tate and others created fictitious invoices and building inspections for nonexistent

homes, deposited Golden Triangle payments into bank accounts controlled by others, and used about $80,751

in Golden Triangle funds for their personal benefit.



Connie Kuzma, a former program manager for the Northern Cambria Community Development

Corporation (Northern Cambria), an organization that receives HUD HOME funds, pled guilty in U.S.

District Court, Johnstown, PA, to embezzlement. Kuzma failed to report her correct income or actual

household composition on Northern Cambria loan applications, fraudulently obtained two HOME loans and

a grant totaling $49,450, and removed the Northern Cambria HOME liens from the property deed without

authorization.



James Fantroy, Sr., the former treasurer for the Paul Quinn College Community Development

Corporation (Paul Quinn CDC), the recipient of a HUD Historically Black College and University grant, was

sentenced in U.S. District Court, Dallas, TX, to 180 days home confinement and 2 years supervised release

and ordered to pay Paul Quinn College $17,938 in restitution for his previous conviction of committing theft

from a program receiving Federal funds. Fantroy remitted $30,062 to Paul Quinn CDC before sentencing and

chose 30 days incarceration after he was given the option to either publicly confess and apologize for his crime

or spend 30 days in prison. Fantroy obtained and personally used about $48,000 in Paul Quinn CDC funds

without authorization.



Copyright, 2008. The Dallas Morning News - Dallas, TX. Reprinted with permission.
             

             

84 Chapter 4: HUD’s Community Planning and Development Programs

Margare Segura, also known as Margare Lewis, a case manager for the

Catholic Charities of the Archdiocese of New Orleans (Catholic Charities),

an organization that receives HUD Supportive Housing program funds, was

indicted in U.S. District Court, New Orleans, LA, for conspiracy to defraud

the government. In addition, fabricated Catholic Charities landlords Deborah

Knighten and Lola Davis each pled guilty to conspiracy. Segura and others

allegedly and Knighten and Davis admittedly conspired and created fake

landlords and nonexistent homeless families to conceal their personal use of

$35,217 in Catholic Charities funds.



Steven Scott, a former City of New Brunswick housing inspector, was

sentenced in U.S. District Court, Newark, NJ, to 3 years probation and

ordered to pay HUD $19,940 in restitution for his earlier guilty plea to

committing theft of public funds. Scott used the identification of another

when he applied for and obtained $19,940 in HUD housing rehabilitation

grants funds.



Kip Wadsworth, a HUD Self-Help Homeownership Opportunity

Program (Self-Help) grant recipient, was named in a False Claims Act civil

complaint filed in U.S. District Court, Boise, ID. Wadsworth allegedly

submitted false income and asset information when he applied for and

received $10,000 in Self-Help grant funds and a $95,000 Rural

Development loan from the U.S. Department of Agriculture.



Anthony Roper was sentenced in U.S. District Court, New York City, NY, to 36 months probation and

ordered to perform 100 hours of community service and pay HUD $6,750 in restitution for his earlier guilty

plea to committing theft of government funds. Roper fraudulently applied for and received a HUD CDBG

Disaster Recovery Assistance 9/11 Residential grant, but Roper did not live or hold an apartment lease in the

lower Manhattan area on September 11, 2001.

Other Fraud/Crimes

Raymond Vella, the owner of Pavel Construction, a contractor for the Linden Neighborhood Preservation

program (Linden NP), an organization that receives HUD CDBG and HOME funds, was indicted in U.S.

District Court, Newark, NJ, for committing mail fraud, offering and giving a corrupt thing of value, and

obtaining property by fraud. From January 1998 to December 2006, Vella paid bribes to an unnamed

conspirator in exchange for more than $652,448 in Linden NP contracts. In addition, Venancio Ribeiro, a

partner in the Cota Corporation and a contractor for Linden NP, pled guilty to mail fraud and criminal

forfeiture. From January 1998 to December 2006, Ribeiro paid bribes to an unnamed conspirator in exchange

for more than $1.5 million in Linden NP program contracts.



Copyright, 2008. The TimesPicayune - New Orleans, LA.

Reprinted with permission.
             

             

Chapter 4: HUD’s Community Planning and Development Programs 85

Copyright, 2008. The Miami Herald - Miami, FL. Reprinted with permission.

Matthew Price, the former director for the Florida City Housing and Economic Development, an

organization that receives HUD HOME funds, and Jennifer Stimpson, a broker for Venture Mortgage Investments, were collectively sentenced in U.S. District Court, Miami, FL, to 123 months incarceration and 72

months supervised release and ordered to perform 1,500 hours of community service and pay restitution and

fines not yet determined for their earlier guilty pleas to conspiracy to commit mail and wire fraud. Price,

Stimpson, and others conspired to obtain mortgage funding from contractors in exchange for discounted sales

of city-owned properties, including a property constructed with HUD HOME and CDBG funds.



William Walker, the former director for both the City of New Brunswick Neighborhood Preservation and

the Housing Rehabilitation programs, organizations that receive HUD CDBG and HOME funds, pled guilty

in U.S. District Court, Newark, NJ, to conspiracy to extort under color of law, soliciting and accepting corrupt

payments, and filing a false Federal income tax return. Walker accepted $112,500 in bribes from construction

and maintenance companies under contract with both HUD-funded programs identified above and failed to

report the kickbacks on his Federal income tax return.



Linda Roach, a former supervisory clerk for the City of New Brunswick Department of Community

Planning and Economic Development (New Brunswick CPED), an organization that receives HUD CDBG

funds, was debarred from procurement and nonprocurement transactions with HUD and throughout the

Executive Branch of the Federal Government for three years. Roach, who was previously sentenced in U.S.

District Court, Newark, NJ, for her guilty plea to receiving corrupt payments, accepted cash payments from

New Brunswick CPED contractors in exchange for expedited contract payments.


             

             

86 Chapter 4: HUD’s Community Planning and Development Programs

Juanita Dennis, the former executive director for the Urban Youth Development Corporation, Inc., a

Newark, NJ, organization that receives HUD Supportive Housing and Shelter Plus Care funds, was issued a

limited denial of participation and prohibited from participating in specific HUD programs. Dennis allegedly

failed to comply with HUD regulations and contract provisions governing the HUD-funded Supportive Housing

and Shelter Plus Care programs. HUD losses are not yet determined.



Heather Little, an employee for the Columbus House, a homeless shelter that receives HUD Emergency

Shelter and CDBG funds, pled guilty in U.S. District Court, Bridgeport, CT, to possession of stolen mail. In

addition, Marie Smith, Colleen London, and Charmaine Wright, a Connecticut Housing Finance Authority

Section 8 tenant, were collectively sentenced to 24 months and 2 days incarceration, 6 months home confinement, and 3 years supervised release and ordered to pay the U.S. Department of the Treasury, the U.S. Postal

Service, and others $15,805 in restitution for their earlier guilty pleas to possession of stolen mail or altering

stolen U.S. Treasury checks. The above defendants and others stole, altered, and negotiated U.S. Treasury

checks delivered to the Columbus House.


               

               

Chapter 5

Hurricane Relief

Oversight
             

             

88

Investigation cases closed by program area*

Chapter 5: Hurricane Relief Oversight

Community

planning and

development

Multifamily

housing

Public

and Indian

 housing

59

13 2

60

50

40

30

20

10

0

* Total number of hurricane-related cases, some of which may have been worked in different States due to relocation

of evacuees.
             

             

Chapter 5: Hurricane Relief Oversight 89

Introduction and Background

Disasters in 2008 continue to be a challenge for the U.S. Department of Housing and Urban Development

(HUD). After the spring floods in the Midwest and fires in California, the Gulf Coast was hit by two more

major hurricanes: Gustav and Ike. Ike caused significant homeowner destruction in Texas along the Gulf

Coast including the cities of Galveston and Houston. Gustav caused damage in Louisiana, in and around New

Orleans, as well as in the city of Baton Rouge. In response, Congress enacted the "Consolidated Security

Disaster Assistance, and Continuing Appropriations Act, 2009." HUD received more than $6.1 billion in

emergency supplemental funding for rental assistance, the Public Housing Capital Fund, and community

development funds. As these disaster funds are awarded to various States, Office of Inspector General (OIG)

audit, investigative, and inspection staff resources will be allocated accordingly, since disaster funding is

particularly vulnerable to waste, fraud, and abuse.

After unprecedented storm damage caused by hurricanes Katrina, Rita, and Wilma, the OIG audit,

investigative, and inspections staff have been diligently providing oversight to the approximately $20 billion

allocated in three separate supplemental disaster fundings. For the period ending September 30, 2008, more

than $10.5 billion has been disbursed by the five Gulf States-Alabama, Florida, Louisiana, Mississippi, and

Texas-for disaster recovery.

During the past year, the OIG Office of Audit (OA), Gulf Coast Region has issued seven reports resulting

in findings of questioned costs of more than $20 million. During the current period, OA will continue to

pursue audits of Louisiana's largest disaster program, the Road Home program. In addition to this

homeowner program, OA has identified other high-risk areas that will require immediate attention. These

areas include the following: economic development, Texas Homeowner Program, and Gulf Coast regional

infrastructure programs.

During this reporting period, the Office of Investigation (OI) opened 120 and closed 77 investigations in

the Gulf Region disaster relief program areas. Judicial action taken on these cases included $510,221 in

investigative recoveries; more than $10.3 million in administrative recoveries; more than $10.2 million in

funds put to better use; 25 indictments or informations; 23 convictions, pleas, or pretrial diversions; 26

administrative actions; and 25 arrests.

Hurricane Financial Profiles of HUD Community Development Block

Grant Funds

The chart on the next page provides a status as of September 30, 2008, of the HUD Community

Development Block Grant (CDBG) disaster funds appropriated to the five Gulf States. Also on the next page

is a summary of the homeowners programs for Mississippi and Louisiana. HUD's distribution of the funds

and receipt and use of the funds by State agencies, contractors, consultants, homeowners, and evacuees are

being tracked and monitored for waste, fraud, and abuse by HUD OIG OA and OI.
             

             

90

States Allocations Disbursements Balance

Alabama

1st & 2nd

supplemental total

$95,613,574 $26,180,546 $69,433,028

Florida

1st & 2nd

supplemental total

$182,970,518 $11,902,620 $170,853,304

Louisiana

1st, 2nd & 3rd

supplemental total

$13,410,000,000 $8,015,609,109 $5,394,390,891

Mississippi

1st & 2nd

supplemental total

$5,481,221,059 $2,445,775,427 $3,035,445,632

Texas

1st & 2nd

supplemental total

$503,194,849 $71,446,554 $431,748,295

Totals $19,673,000,000 $10,570,914,257 $9,101,871,150

Disaster Community Development Block Grant

State of Louisiana

The Road Home Program (authorized $9.99 billion; disbursed $7.45 billion to the grantee)

The Road Home program is the major program set up to rebuild Louisiana's impacted communities.

Devastated communities will be subjected to abandoned homes, clouded land titles, and disinvestments if a

large portion of the financial assistance is not provided to homeowners. Some owner-occupants, however, may

choose none of the basic options to repair, rebuild, or relocate in Louisiana. In these instances, the State will

compensate the homeowner for 60 percent of the home's prestorm value, less insurance and Federal

Emergency Management Agency (FEMA) repair funds. The State of Louisiana received an additional $3

billion in emergency funding in November 2007. The status of the Road Home program is described below.

Chapter 5: Hurricane Relief Oversight
             

             

91

Community Planning and Development

Community Development Fund

The Road Home snapshot

Analysis of the homeowner applications

State of Louisiana

Status as of September 30, 2008

Line items Totals

Total applications received and recorded to date

Closings held

Average award

185,106 (final)

117,975

$59,900

Source of Funds: Emergency Supplemental Appropriations I, II, & III (P.L. 109-148, P.L. 109-234, & P.L. 110-116)

State of Mississippi

Homeowner Grant Assistance Program (authorized $2.6 billion; disbursed $1.8 billion to the

grantee)

The purpose of the Homeowner Grant Assistance program is to provide a one-time grant payment

(maximum $150,000) to eligible homeowners who had suffered flood damage to their primary residence as of

August 29, 2005, from Hurricane Katrina. The Homeowner Grant Assistance program is designed to provide

compensation to those impacted by the hurricane.

Also noted: There is no requirement that the homeowner occupy the property after replacement/

rehabilitation work is completed. After certain deductions, homeowners have complete discretion over the use

of grant funds, as allowable by State and Federal law, as they work through their personal disaster recovery

situation. The status of the Mississippi homeowner program is described below.

State of Louisiana homeowner program status

State of Mississippi homeowner program status

The Homeowner Grant Assistance Program

Snapshot analysis of the homeowner applications

State of Mississippi

Status as of September 30, 2008

Line items Totals

Applications received

Grants paid

Dollar value of grants paid

Average grant paid

31,019

23,651

$1.7 billion

$74,034

Source of Funds: Emergency Supplemental Appropriations I & II (P.L. 109-148 and P.L. 109-234) 96

Chapter 5: Hurricane Relief Oversight
             

             

92 Chapter 5: Hurricane Relief Oversight

Audits

Emerging Oversight Trends

Currently, auditors are evaluating the Housing Authority of New Orleans as part of a congressional

request. It should be noted that OA is monitoring the funding for Louisiana's Road Home program, which

exceeds $9 billion, and the amount obligated for Mississippi's homeowner program, which totals $2.6 billion.

In addition to these programs, OA has identified other high-risk areas that will require immediate attention.

These areas include the following:

- Economic development (Small Business Loan Program)

- Texas Homeowner Program

- Gulf Coast regional infrastructure programs

Final Audit Products

The HUD OIG OA Gulf Coast Region has completed seven audits of the supplemental funding during

fiscal year (FY) 2008 with two audits completed during the current semiannual period. For FY 2008,

questioned costs totaled more than $20 million, of which $4 million represents questioned costs for the

current semiannual period audit reports.

HUD OIG audited the State of Mississippi's Development Authority's Homeowners Assistance Program,

implemented by Reznick Mississippi, LLC, to determine whether the Authority ensured that the contingency

amounts were eligible and supported.
             

             

Chapter 5: Hurricane Relief Oversight 93

The Authority executed a contract, which included an ineligible provision that allowed its contractor to

bill and receive payment for ineligible and unsupported contingency amounts. The Authority paid these

amounts to its contractor because it was unaware of Federal prohibitions. As a result, it paid its contractor for

ineligible and unsupported contingency amounts. In addition, contingency amounts in the contract remained

unpaid and could be put to better use.

OIG recommended that HUD require the Authority to (1) repay the Program from nonfederal funds

more than $3.9 million, which it disbursed for ineligible and unsupported contingency amounts; (2) cease

making further contract payments for more than $243,000 in contingency amounts, which could be put to

better use; and (3) develop and implement a process to ensure that all future contracts and amendments

involving State of Mississippi CDBG disaster recovery funds do not include such ineligible provisions and

amounts. (Audit Report: 2008-AO-1003)



HUD OIG audited the State of Louisiana's additional grant component of the Road Home homeowner

assistance program, managed by the State's contractor, ICF Emeregency Management Services, LLC, Baton

Rouge, LA, in conjunction with the OIG Gulf Coast Region's audit plan and examination of relief efforts

provided by the Federal government in the aftermath of Hurricanes Katrina and Rita. The audit objectives

were to determine whether (1) applicants were eligible to receive the grant and (2) the State ensured that grant

income policies and procedures were in accordance with HUD rules and regulations and that its contractor

followed them.

The State implemented grant income policies and procedures as required by HUD rules and regulations.

However, those policies and procedures were not sufficient to ensure that all applicants were eligible to receive

their grant. Of 45 grants sampled, the State funded nine grants, totaling nearly $264,000, that were either

ineligible or unsupported. In addition, the State did not ensure that its contractor followed its policies and

procedures for another 24 grants, but the errors did not impact the grants' (or grantees') eligibility. These

conditions existed because the State did not ensure that its contractor's controls were sufficient to catch errors

and that its policies and procedures were followed when determining eligibility. Further, although the State's

contractor performed a review of all 45 grants sampled, issues remained undetected.

OIG recommended that HUD require the State to repay amounts disbursed for ineligible grants by its

Road Home program, either support or repay amounts disbursed for unsupported grants, ensure that its

contractor follows established policies and procedures, ensure that its contractor's postclosing reviews detect

and correct errors, and review the remaining 21,672 grants disbursed between June 12, 2006, and October 13,

2007, to ensure that grants were eligible and supported. By reviewing these grants, OIG estimates that the

value of questioned costs will total more than $70 million for grant disbursements to ineligible participants

and more than $57.4 million for grant disbursements to participants whose eligibility was not adequately

supported. (Audit Report: 2008-AO-1005)


             

             

94

Investigations

Chapter 5: Hurricane Relief Oversight

OI has focused on fraud in all major disasters during this reporting period. OI and OA have been actively

overseeing a program of combating waste, fraud, and abuse in the disbursements of more than $26 billion in

HUD funding for Hurricane Katrina and other major disasters in the Gulf Coast region, Florida, California,

and the Midwest.

In an effort to coordinate efforts, OI performs outreach actions to law enforcement partners, State

agencies, HUD multifamily owners and managers, HUD public housing agencies (PHA), and HUD

personnel. OI has been a dedicated partner in the Hurricane Katrina Fraud Task Force (HKFTF) Command

Center in Baton Rouge, LA., which was recently renamed the "National Center for Disaster Fraud" (NCDF)

Task Force. OI worked closely with law enforcement agencies on complaints, intelligence, and joint

investigations regarding disaster fraud. During this reporting period, the NCDF Task Force received 4,900

complaints and referred 2,122 complaints for investigation, to include 137 referred to HUD OIG OI.

Hurricane Katrina disaster fraud has been the primary disaster-related investigative focus since August

2005. A majority of Gulf Coast OI cases have been with the Mississippi and Louisiana homeowner assistance

programs and HUD's new Disaster Housing Assistance Program (DHAP).

The homeowners assistance programs have provided grants to Hurricane Katrina homeowners in both

States (for homes valued at $150,000 or less), who had flood damage to their primary residence. One example

of the program is the Louisiana homeowners assistance program, Road Home, which has received more than

185,000 applications and disbursed $7 billion in HUD CDBG funds since its inception. OI has hundreds of

joint agency investigations of false grant applications by State homeowners. Criminal information for

investigation was referred by both the Mississippi Development Authority (MDA) and Louisiana

Redevelopment Authority (State agencies).
             

             

Chapter 5: Hurricane Relief Oversight 95

DHAP is administered by HUD and the PHAs to provide temporary disaster housing assistance and case

management services for about 45,000 FEMA families. The HUD Office of Public and Indian Housing's

(PIH) interagency agreement (IAA) with FEMA has been operating DHAP with $565 million in FEMA grant

funds. OI has been working jointly with HUD PIH, the NCDF Task Force, and the U.S. Department of

Homeland Security OIG to investigate criminal cases of duplicate benefits by HUD and/or FEMA landlords

and other fraud by HUD tenants. Criminal information on DHAP was referred to OI by HUD PIH from its

computer matching operations.

OI has been working closely with HUD PIH on antifraud measures and investigations of another new

DHAP program, named DHAP-Ike, in response to the Hurricane Ike disaster in Texas and Louisiana. HUD

PIH has another IAA with FEMA for this program with $478 million in FEMA grant funds.

Some of the investigations discussed in this report were conducted jointly with Federal, State, and local law

enforcement agencies, including the NCDF Task Force. Following the Attorney General's policy of "zero

tolerance" in relation to Hurricane Katrina fraud and similar criminal activity following other major disasters,

OIG pursues all allegations of waste, fraud, and abuse in HUD's disaster benefit programs. The results of

various significant investigations are described below.

Homeowner Grant Fraud

Jerome and Catherine Foreman were each indicted in U.S. District Court, Jackson, MS, for committing

theft of government funds and making false claims and statements. They allegedly applied for and obtained

$150,000 in CDBG Disaster Recovery funds through MDA and $8,706 in FEMA

disaster assistance for hurricane-damaged residential property, but the property

damaged was not their primary residence during the storm.



Barbara Dowl was indicted in U.S. District Court, New Orleans, LA, for

committing theft of government funds and wire fraud. Dowl allegedly applied for and

obtained $132,000 in CDBG Disaster Recovery funds through Louisiana's Road Home

program and $46,000 in Small Business Administration (SBA) disaster assistance for

hurricane-damaged residential property, but she did not own or reside in the damaged

property during the storm.



Elaine Rougeau, the recipient of a Road Home disaster assistance grant, entered

into a civil settlement filed in U.S. District Court, Baton Rouge, LA, and agreed to pay

the Louisiana Redevelopment Authority $99,355. Rougeau filed for bankruptcy and

defaulted on her mortgage after she obtained $127,355 in Road Home funds.



Copyright, 2008. The

Advocate- New Orleans, LA.

Reprinted with permission.
             

             

96 Chapter 5: Hurricane Relief Oversight

Candice McMillian was charged in U.S. District Court, New Orleans, LA, with making a false statement.

McMillian applied for and received $150,000 in SBA disaster assistance for her hurricane-damaged primary

residence, but she allegedly submitted false invoices and used the SBA funds to rehabilitate a rental property

instead. After McMillian allegedly used the SBA disaster assistance to fraudulently rehabilitate a rental

property, she legitimately applied for and received $150,000 in CDBG Disaster Recovery funds through the

Road Home program. Her acceptance into the Road Home program caused the Road Home administrator to

remit $89,000 in CDBG funds to pay for McMillian's alleged fraudulent SBA loan.



Doris Wilkerson was sentenced in U.S. District Court, Gulfport, MS, to 7 months incarceration and 3

years supervised release, ordered to perform 100 hours of community service and pay FEMA $17,133 in

restitution, and fined $25,000 for her guilty plea to making false statements and committing theft of

government funds. Wilkerson applied for and received FEMA disaster assistance and $74,008 in CDBG

Disaster Recovery funds through MDA for hurricane-damaged residential property, but the property damaged

was not her primary residence during the storm.



Clinton Tapper, Jr., was indicted in U.S. District Court, Jackson, MS, for making false statements and

claims, committing theft of government funds and wire and mail fraud, and submitting fraudulent loan and

credit applications. Tapper allegedly applied for and received $14,006 in FEMA and $169,400 in SBA disaster

assistance and attempted to obtain $150,000 in CDBG Disaster Recovery funds through MDA for

hurricane-damaged residential property, but the property damaged was not his primary residence during the

storm.



Lee Taylor was sentenced in U.S. District Court, Gulfport, MS, to 30 months incarceration and 36 months

supervised release and ordered to perform 100 hours of community service and repay FEMA $30,241 and

Rebuild Jackson County $66,764 in restitution for his conviction of making false claims. Taylor applied for

and received FEMA and Rebuild Jackson County disaster assistance and attempted to obtain $150,000 in

CDBG Disaster Recovery funds through MDA for hurricane-damaged residential property, but Taylor did not

own or occupy the damaged property during the storm.



Roger and Annette Williams each pled guilty in U.S. District Court, Gulfport, MS, to making false

statements and committing theft of government funds and Federal program fraud. They applied for and

obtained $17,814 in FEMA, $80,600 in SBA, and $13,667 in U.S. Department of Agriculture (USDA)

disaster assistance and attempted to obtain $150,000 in CDBG Disaster Recovery funds through MDA for

hurricane-damaged residential property, but Roger and Annette Williams did not occupy the damaged

property during the storm.


             

             

Chapter 5: Hurricane Relief Oversight 97

William and Isabel Bates were collectively sentenced in U.S. District

Court, Gulfport, MS, to 5 months incarceration, 11 months home

confinement, and 8 years supervised release; ordered to perform 120 hours

of community service and pay FEMA $12,969 in restitution, jointly and

severally; and fined $22,500 for their guilty pleas to making false statements

and theft of government funds. They applied for and received $12,969 in

FEMA disaster assistance and attempted to obtain an SBA disaster loan and

$120,000 in CDBG Disaster Recovery funds through MDA for

hurricane-damaged residential property, but the property damaged was not

their primary residence during the storm.



Nealie and Joe Rudolph were each indicted in U.S. District Court,

Gulfport, MS, for making false claims and statements, committing wire and

mail fraud, and civil forfeiture. They allegedly applied for and received

$11,858 in FEMA and $1,810 in USDA disaster assistance and allegedly

attempted to obtain $71,887 in CDBG Disaster Recovery funds through

MDA for hurricane-damaged residential property, but the property

damaged was not their primary residence during the storm.



Beatrice and Leverne Moses were each indicted in U.S. District Court,

Jackson, MS, for making false statements, submitting false claims,

committing theft of government funds and mail fraud, and aiding

and abetting. They allegedly applied for and received $24,790 in FEMA disaster

assistance and allegedly attempted to obtain $52,300 in CDBG Disaster Recovery funds

through MDA for hurricane-damaged residential property, but the property damaged

was not their primary residence during the storm.



Catherine Pruitt was sentenced in U.S. District Court, Gulfport, MS, to 10 months

incarceration and 36 months supervised release and ordered to perform 40 hours of

community service and pay FEMA $4,358 in restitution for her guilty plea to making

false statements and committing mail fraud. Pruitt applied for and received $4,358 in

FEMA disaster assistance and attempted to obtain $100,000 in CDBG Disaster

Recovery funds and $30,000 in Elevation grant funds through MDA for hurricanedamaged residential property, but the property damaged was not her primary residence

during the storm.

Copyright, 2008. The ClarionLedger - Jackson, MS. Reprinted

with permission.

Copyright, 2008. Hattiesburg

American - Hattiesburg , MS.

Reprinted with permission.
             

             

98 Chapter 5: Hurricane Relief Oversight

HUD and FEMA Disaster Housing Assistance Fraud

Kim Pounds, a HUD and FEMA Hurricane Katrina DHAP participant, was indicted in U.S. District

Court, Los Angeles, CA, for committing mail fraud. From September 2005 to May 2008, Pounds allegedly

applied for and received $34,507 in FEMA and $6,710 in HUD disaster housing assistance after she claimed

Hurricane Katrina evacuee status, but Pounds resided in California during the storm.



Phyllis Taylor, a former Housing Authority of New Orleans public housing

tenant and current Hurricane Katrina DHAP participant, was indicted in U.S.

District Court, Houston, TX, for committing disaster assistance fraud, aggravated

identity theft, and mail fraud. Taylor allegedly used numerous false Social Security

numbers and Louisiana addresses when she submitted 12 fraudulent claims for FEMA

disaster assistance. In addition, Taylor allegedly applied for FEMA disaster

assistance after she claimed hurricane-damaged residential property in Galveston,

TX, but Taylor resided in Houston, TX, during Hurricane Ike.



Eric Gibbs, a HUD and FEMA Hurricane Katrina DHAP participant, was

indicted in U.S. District Court, Houston, TX, for making false claims. Gibbs

allegedly applied for and received FEMA disaster assistance and HUD and FEMA

disaster housing assistance after he claimed residential property damage from

Hurricane Katrina, but Gibbs never owned property in Louisiana and resided in

Houston, TX, during the storm.

FEMA and Other Fraud by HUD Tenants

Erica Prince, a former Houston Housing Authority Section 8 tenant, and eight

conspirators were each sentenced in U.S. District Court, Houston, TX, for their

earlier guilty pleas to conspiracy to file false, fictitious, or fraudulent claims.

Collectively, the above defendants were sentenced to 68 months incarceration and

28 years probation and ordered to pay FEMA $104,958 in restitution. Prince and

others filed 77 fraudulent claims and obtained $92,958 in FEMA disaster assistance

they were not entitled to receive.



Renada Thornton, a former Slidell Housing Authority Section 8 tenant,

was sentenced in U.S. District Court, New Orleans, LA, to 5 years probation

and ordered to pay the American Red Cross (Red Cross) $17,015 in restitution

for her earlier guilty plea to committing wire and mail fraud. Thornton fraudulently claimed hurricane evacuee

status on 14 separate occasions and obtained $17,015 in Red Cross disaster assistance she was not entitled to

receive.



Copyright, 2008. The Houston

Chronicle - Houston, TX.

Reprinted with permission.
             

             

Chapter 5: Hurricane Relief Oversight 99

Mark Johnson, a Baton Rouge Housing Authority public housing tenant, was sentenced in U.S. District

Court, Baton Rouge, LA, to 3 months incarceration and 36 months supervised release and ordered to pay

FEMA $8,017 in restitution for his earlier guilty plea to making false claims. Johnson applied for and received

FEMA disaster assistance after he claimed personal property damage from Hurricane Katrina, but the Baton

Rouge Housing Authority suffered no storm damage, nor were tenants evacuated.



Shaunena Staple, a former Mississippi Regional Housing Authority VIII Section 8 tenant, was sentenced

in U.S. District Court, Minneapolis, MN, to 5 years probation and ordered to pay FEMA $8,225 in

restitution for her earlier guilty plea to making a false claim. Staple applied for and received $5,688 in housing

assistance and $2,537 in FEMA disaster assistance after she claimed Hurricane Katrina evacuee status and

personal property damage, but Staple resided in Minnesota during the storm.



Tameka Laflore, a Mississippi Regional Housing Authority VIII Section 8 tenant, was indicted in U.S.

District Court, Hattiesburg, MS, for unauthorized use of an automatic teller machine. Laflore allegedly

claimed Hurricane Katrina evacuee status on four separate occasions at the Red Cross centers in Mississippi

and Alabama and allegedly obtained $6,495 in Red Cross disaster assistance she was not entitled to receive.



Sharon Dailey, a Fairfield Housing Authority (Fairfield) Section 8 applicant, was sentenced in U.S. District

Court, Sacramento, CA, to 25 months incarceration and 60 months supervised release and ordered to pay

FEMA $4,358 in restitution for her earlier guilty plea to submitting false claims and committing credit

application fraud. Dailey applied for and received FEMA disaster assistance after she claimed Hurricane Katrina

evacuee status, but Dailey resided in California during the storm. Dailey also used a false Social Security

number to apply for Fairfield housing assistance, obtain a bank loan, and cash fraudulent checks.



Linda Southall, a former Thibodaux Housing Authority public housing tenant, was sentenced in U.S.

District Court, New Orleans, LA, to 3 years supervised probation and ordered to pay FEMA $2,377 in

restitution for her earlier guilty plea to committing theft of government funds. Southall applied for and

received FEMA disaster assistance after she claimed personal property damage from Hurricane Katrina, but the

Thibodaux Housing Authority suffered no storm damage, nor were tenants evacuated.



Debra Jackson, an East Baton Rouge Housing Authority (East Baton Rouge) Section 8 tenant, was

indicted in U.S. District Court, Baton Rouge, LA, for allegedly making false claims and committing wire

fraud. In addition, former East Baton Rouge public housing tenant Tammy Dabney was sentenced to 3 years

probation and ordered to perform 25 hours of community service and pay FEMA $2,000 in restitution for her

earlier guilty plea to making false claims. Jackson allegedly and Dabney admittedly applied for and received

FEMA disaster assistance after they claimed personal property damage or Hurricane Katrina evacuee status,

but East Baton Rouge suffered no storm damage, nor were tenants evacuated.


             

             

100 Chapter 5: Hurricane Relief Oversight

Michelle Chapman and Janale King, San Francisco Housing Authority (San Francisco) Section 8 tenants,

each pled guilty in U.S. District Court, San Francisco, CA, to committing theft of government funds. In

addition, San Francisco housing recipients Chemeca Gant and Aaron Jones were collectively sentenced to 3

years probation and ordered to pay FEMA $4,358 in restitution for their earlier guilty pleas to committing

theft of government funds. The above defendants each applied for and received FEMA disaster assistance after

they claimed to be displaced victims of Hurricane Katrina, but each defendant resided in San Francisco

subsidized housing during the storm.



Brenda Frazier, a current Housing Authority for the City of Fresno Section 8 tenant, was indicted in U.S.

District Court, Fresno, CA, for filing a false claim, making false statements, and committing mail fraud.

Frazier allegedly applied for and received FEMA disaster assistance after she claimed Hurricane Katrina evacuee

status, but Frazier resided in California during the storm.

Other Fraud

Bernard McCann, also known as Bernard Mitchell, Bernard Marshall, or Johnny Jordan, was indicted in

Cook County Circuit Court, Chicago, IL, for committing theft by deception, false impersonation of a

government official, aggravated false impersonation of a police officer, and wire fraud. McCann allegedly

posed as a Chicago Housing Authority employee and a police officer for the Cook County Sheriff's Office,

fraudulently sold bogus Hurricane Katrina Section 8 vouchers, and collected $9,100 from numerous victims.

Hurricane-Related Outreach

Special Agent in Charge (SAC) Thomas Luke provided an overview of DHAP, explained the process for

receiving Federal Housing Administration (FHA) foreclosure information through the HUD New Orleans

field office, and described the current status of the Louisiana Road Home properties conveyed to the State of

Louisiana at a Jefferson Parish Crime Prevention and Reduction Task Force meeting in Gretna, LA.

Approximately 30 Jefferson Parish Council members, representatives from the District Attorney's Office, and

local police department personnel attended.



SAC Thomas Luke and Assistant Special Agent in Charge (ASAC) Kevin Whalen provided an overview of

fraud found in the Hurricane Katrina DHAP and discussed the implementation of fraud prevention measures

for Hurricane Ike DHAP recipients during a meeting in Washington, DC. In attendance were HUD Housing

Choice Voucher program director David Fleischman and staff from the Reznick Group, LLC, the HUD

contractor overseeing DHAP. In addition, SAC Luke and ASAC Whalen described HUD OIG's successful

partnership with HUD in identifying and investigating DHAP fraud and provided disaster assistance fraud

information for distribution at DHAP centers nationwide.


             

             

Chapter 5: Hurricane Relief Oversight 101

ASAC Fernando Ramos provided an overview of demolition projects at the Housing Authority of New

Orleans, HUD rental assistance programs including DHAP, and the Louisiana Road Home buy-back program

for Project Safe Neighborhood executive committee members meeting in New Orleans, LA. Project Safe

Neighborhood, a program funded by the U.S. Department of Justice, targets violent crimes in New Orleans

metropolitan neighborhoods and housing developments with high percentages of vacant or rental properties.

Executive committee members in attendance included the U.S. Attorney for the Eastern District of Louisiana;

the New Orleans Police Department chief; sheriffs from the Orleans, Jefferson, and St. Bernard Parishes; and

representatives from the Federal Bureau of Investigation, the U.S. Drug Enforcement Administration, and the

Bureau of Alcohol, Tobacco, Firearms, and Explosives.



SAC Thomas Luke and Special Agent (SA) Wyatt Achord provided an overview of HUD OIG's mission,

Rental Assistance and Sex Offender Initiatives, investigative fraud indicators, and criminal and civil statutes at

a Louisiana Housing Council meeting held in Baton Rouge, LA. Approximately 75 executive directors and

housing authority board members attended.



ASAC Fernando Ramos and SA Robert Anderson provided an overview of HUD OIG's mission in

relation to Louisiana's Road Home program and described homeowner assistance grant fraud for personnel

from ICF International and KPMG, Road Home program contractors meeting in Baton Rouge, LA.

Approximately 15 ICF International and KPMG employees attended.



ASAC Fernando Ramos and Senior Forensic Auditor (SFA) Windell Durant participated as panelists and

provided an overview of HUD OIG's response to Hurricanes Katrina and Rita at the North American

Consumer Protection Investigators annual conference held in New Orleans, LA. Approximately 75 civil and

criminal consumer protection investigators from across the country and Canada attended.



ASAC Fernando Ramos and SFA Windell Durant provided an overview of the Road Home program and

described the impact on FHA-insured properties in relation to OIG foreclosure initiatives and properties

conveyed to the State of Louisiana at a HUD senior staff meeting held at the HUD Homeownership Center in

Denver, CO. Approximately six HUD personnel attended.

Disaster-Related OIG Hotline

During this reporting period, the Hotline received five complaints and closed 25 complaints related to

Hurricanes Katrina, Rita, Wilma, Gustav, and Ike and other major disasters.
             

             

102 Chapter 5: Hurricane Relief Oversight

Inspections and Evaluations

Housing Assistance Overpayments to Multifamily Property Owners after

Hurricane Katrina

In August 2005, HUD-subsidized multifamily Section 8 tenants vacated Louisiana properties that were

severely damaged or destroyed by Hurricane Katrina. Although many of these vacated properties were

uninhabitable, HUD and the Louisiana Housing Finance Agency continued to pay the property owners

housing subsidies. In November 2005, HUD notified the New Orleans, LA, field office that HUD-subsidized

multifamily property owners were only entitled to housing assistance payments for 1 month following the

hurricane. The 1-month grace period ended in September 2005.

HUD OIG conducted an inspection of the HUD housing assistance payments provided to Louisiana

multifamily property owners after Hurricane Katrina. This inspection found that HUD and the Louisiana

Housing Finance Agency overpaid more than $1.6 million in housing assistance to 27 multifamily property

owners. Since HUD did not formally suspend housing assistance electronic fund transactions until November

2005, most of these overpayments are attributable to October 2005 electronic fund transactions. As of July 24,

2008, HUD and the Louisiana Housing Finance Agency had recovered $527,407 in overpayments from 7 of

the 27 multifamily property owners, and HUD intends to send out collection letters to the remaining property

owners who have yet to make any repayments. OIG recommended continued collection efforts and the

pursuit of administrative sanctions against the multifamily property owners or management agents, if

warranted. (I&E Report: IED 07 003)

Reconstruction of Mississippi Gulf Coast Public Housing damaged by

Hurricane Katrina

As of August 2008, the State of

Mississippi had approved up to $100

million in HUD CDBG funds to

rebuild 24 Gulf Coast public housing

developments. Thirteen of these

public housing developments are

situated in floodplains and were

devastated by the Hurricane Katrina

storm surge and subsequent flooding.

The $231 million estimated total

construction costs for the 24 proposed

developments will be funded through

tax credit programs, loans, and other

grants.

Architect’s Drawing of Buildings in East End Homes Project, Biloxi

Housing Authority, Biloxi, MS, which illustrates the use of the

requirement for housing authorities to elevate replacement

housing to meet new FEMA standards.
             

             

Chapter 5: Hurricane Relief Oversight 103



HUD OIG completed an evaluation of the Mississippi Gulf Coast public housing reconstruction. The

objective of this evaluation was to determine both the status of recovery efforts and the risks involved with

rebuilding on sites located in designated flood plain areas. The results of our evaluation found that MDA, the

State agency responsible for construction regulation compliance in flood plain areas, followed the HUD

floodplain management and eight-step environmental review processes during its project funding decisions.

In addition, the approved projects require housing authorities to elevate replacement housing to meet the new

FEMA standards. (I&E Report: IED 08 0003)
               

               

Chapter 6

Other Significant

Audits and Investigations/

OIG Hotline
             

             

106

In addition to the audits and investigations described in this chapter, the U.S. Department of Housing and

Urban Development (HUD) Office of Inspector General (OIG), has conducted numerous outreach efforts

(see chapter 7, page 130).

Audits

Strategic Initiative 4: Contribute to improving HUD’s execution and

accountability of fiscal responsibilities as a relevant and problem-solving

advisor to the Department

Chapter 6: Other Significant Audits and Investigations/OIG Hotline

Key program results Questioned costs Funds put to better use

Audit 8 audits $1.4 million ---

Our

focus

Page 106

Page 107

 Page 107

Page 107

Page 108

Page 108

- HUD's management of human resources

- Review of HUD's information technology security program

- OIG response to questions from the Office of Management and Budget

 under the Federal Information Security Management Act of 2002

- Evaluation of HUD's security controls over databases

- Review of controls over the removal of local and remote user access

- Office of fair housing and equal opportunity

HUD's Management of Human Resources

HUD OIG reviewed HUD's management of human resources to determine the adequacy of HUD's

staffing resources in meeting its program objectives and whether HUD's offices used HUD's Resource

Estimation and Allocation Process (REAP) studies when they had the ability to hire.

HUD lacked a valid basis for assessing its human resource needs and allocating staff within its program

offices. Three of the five offices reviewed could not provide adequate documentation to support their

assessment of human resource needs and allocation of staff among their headquarters and field office locations.

As a result, HUD lacked assurance that its allocation of staff was based on supportable need and it accurately

determined the human resources required to meet its performance goals under the Government Performance

Results Act (GPRA).

HUD's program offices used the REAP studies when they had the ability to hire; however, they lacked

adequate documentation to support their hiring practices. In particular, five of the seven HUD program

offices reviewed were unable to provide adequate documentation to support their hiring of staff. As a result,

HUD lacked assurance that its program offices' hiring was appropriate.

OIG recommended that HUD (1) implement a plan detailing how HUD's program offices will use REAP

and the Total Estimation and Allocation Mechanism (TEAM) system to determine which program offices
             

             

Chapter 6: Other Significant Audits and Investigations/OIG Hotline 107

need to be reassessed, (2) continue providing training, and (3) obtain feedback from the Office of Fair Housing

and Equal Opportunity (FHEO) regarding the pilot of the TEAM system's allocation module. If the pilot is

determined to be successful, HUD should take the necessary steps to implement the allocation module in its

program offices. We also recommend that HUD implement adequate controls to ensure that its program

offices comply with its internal hiring procedures. (Audit Report: 2008-CH-0003)

Review of HUD's Information Technology Security Program (Reports Not

Available to the Public)

HUD OIG audited the Federal Housing Administration's (FHA) management of its information

technology (IT) resources and compliance with HUD and other Federal information security requirements to

determine whether FHA effectively managed security controls relating to its IT resources. This audit

supported our financial statement audits of FHA and HUD as well as our annual Federal Information Security

Management Act (FISMA) review. OIG has determined that the contents of this report would not be available

for public disclosure; therefore, we have limited its distribution to selected HUD officials. (Audit Report:

2008-DP-0004)



HUD OIG reviewed HUD's IT security program to evaluate HUD's entity-wide compliance with FISMA

requirements. Specifically, OIG evaluated the overall quality of HUD's certification and accreditation process

for its systems, HUD program officials' and system owners' implementation of their assigned information

security responsibilities, and whether HUD had developed security policies and implemented and monitored

enterprise-wide controls. OIG determined that the contents of this report would not be appropriate for public

disclosure; therefore, OIG limited its distribution to selected HUD officials. (Audit Report: 2008-DP-0006)

OIG Response to Questions from the Office of Management and Budget

under the Federal Information Security Management Act of 2002 (Report

Not Available to the Public)

HUD OIG performed an annual independent evaluation of HUD's information security program and

practices mandated by FISMA. OIG has determined that the contents of this report would not be appropriate

for public disclosure and has, therefore, limited its distribution to selected officials. (Audit Report:

2008-DP-0802)

Evaluation of HUD's Security Controls over Databases (Report Not

Available to the Public)

HUD OIG evaluated HUD's security controls over databases to determine whether the security

implemented on HUD's network provides adequate controls to prevent abuse or unauthorized access to its

information resources. OIG has determined that the contents of this report would not be appropriate for

public disclosure and, therefore, has limited its distribution to selected HUD officials. (Audit Report:

2008-DP-0007)
             

             

108

Review of Controls over the Removal of Local and Remote User Access

(Report Not Available to the Public)

HUD OIG audited HUD's processes and controls regarding the removal of the computer system access

rights of retired employees. This audit was initiated based upon work performed during the fiscal year 2007

review of information system controls in support of the annual financial statement audit. OIG determined

that the contents of this report would not be appropriate for public disclosure; therefore, OIG limited its

distribution to select HUD officials. (Audit Report: 2008-DP-0005)

Office of Fair Housing and Equal Opportunity

HUD OIG audited the HUD Office of Fair Housing and Equal Opportunity (FHEO) to determine

whether FHEO complied with the requirements of 42 U.S.C. (United States Code) chapter 45, subpart I,

section 3616a(d), entitled Fair Housing Initiatives Program, Education and Outreach, when it published the

2007 Fair Housing Initiatives Program notice of funding availability.

FHEO generally complied with the applicable requirements. However, it issued the 2007 Fair Housing

Initiatives Program notice of funding availability with an error related to applicant eligibility, and it did not

fully document the criteria used to determine eligibility of the applicant awarded the 2007 Education and

Outreach Initiative national program media campaign. Additionally, FHEO lacked a policy regarding whether

a portion of each fiscal year's Education and Outreach Initiative funds was to be used for a national program

for Fair Housing Month activities.

OIG recommended that FHEO (1) strengthen its internal control procedures regarding the development

of future super notices of funding availability to ensure that notice language complies with statutory

requirements, (2) obtain guidance on the meaning of a nonprofit organization representing groups of persons

protected under the Fair Housing Act, and (3) develop policy on whether funds from each fiscal year's Fair

Housing Initiatives Program appropriation are intended to be used for a national program for annual Fair

Housing Month activities. (Audit Report: 2008-NY-0002)



Chapter 6: Other Significant Audits and Investigations/OIG Hotline
             

             

Chapter 6: Other Significant Audits and Investigations/OIG Hotline 109

Inspections and Evaluations

Evaluation of the Fair Housing and Equal Opportunity Housing

Discrimination Complaint Process and Compliance

In October 2005, the U.S. Government Accountability Office (GAO) reported deficiencies in the HUD

Office of Fair Housing and Equal Opportunity (FHEO) and its affiliated nonprofits, State and local

governments administering fair housing laws under the Fair Housing Assistance program (FHAP). The GAO

report cited deficiencies in the timeliness and processing of housing discrimination complaints, the sufficiency

of documentation, and the integrity of data maintained in the Title VIII Automated Paperless Tracking Office

System, also known as TEAPOTS (GAO-06-79).

HUD OIG completed an evaluation that followed the GAO review and addressed similar program

management issues. This evaluation randomly sampled nationwide FHEO and FHAP investigations for two

periods: January through June 2006 and October through December 2007. Although several improvements

were noted in relation to case file documentation, our evaluation found the same or similar processing

deficiencies as noted in the GAO report. OIG recommended that FHEO conduct aggressive monitoring and

testing for current case documentation compliance within the guidelines found in the Fair Housing Act and

related handbooks and regulations. (I&E Report: IED07001)


             

             

110

Investigations

Strategic Initiative 4: Contribute to improving HUD’s execution and

accountability of fiscal responsibilities as a relevant and problem-solving

advisor to the Department

$

recovered

Admin/civil

actions

Investigations 26 $38,345 12

Convictions/pleas/

pretrials

Cases

closed

Key program

results

4

The investigations discussed below were generated from leads provided by HUD program staff and

conducted jointly with Federal, State, or local law enforcement agencies.

Michelle Meek, a former HUD employee and treasurer for the American Federation of Government

Employees (AFGE) Local Union 3435, was sentenced in U.S. District Court, Columbus, OH, to 5 years

probation and ordered to perform 50 hours of community service and pay AFGE $4,845 in restitution for her

earlier guilty plea to committing theft. Meek provided false accounting statements and embezzled AFGE

Local Union 3435 funds.



HUD housing specialist Toulu Thao entered into a 12-month deferred prosecution agreement with the

U.S. Attorney's Office in Fresno, CA, and agreed to perform 200 hours of community service under the

supervision of the U.S. Pretrial Services Office and comply with all Federal, State, and local laws. At the

conclusion of the 12-month period, and if Thao is in full compliance with all obligations under this

agreement, the U.S. Attorney's Office will seek dismissal of Thao's previous indictment for making false

statements on his Office of Government Ethics Form 450.



Chapter 6: Other Significant Audits and Investigations/OIG Hotline
             

             

Chapter 6: Other Significant Audits and Investigations/OIG Hotline 111

OIG Hotline

The HUD OIG Hotline is operational 5 days a week, Monday through Friday, from 10:00 a.m. to 4:30

p.m. The Hotline is staffed by 10 full-time OIG employees, who take allegations of waste, fraud, abuse, or

serious mismanagement in HUD or HUD-funded programs from HUD employees, contractors, and the

public. The Hotline also coordinates reviews with internal audit and investigative units or with HUD program

offices.

During this reporting period, the Hotline received and processed 9,931 complaints: 77 percent received

by telephone, 12 percent by mail, and 11 percent by e-mail. Every allegation received by the Hotline is logged

into a database and tracked.

Of the complaints received, 1,093 were related to the mission of OIG and were addressed as Hotline cases.

Hotline cases are referred to OIG's Offices of Audit and Investigation or to HUD program offices for action

and response. The following illustration shows the distribution of Hotline case referrals by percentage.

Chart 6.1: Hotline cases opened by program area

Public and Indian

housing

60%

Multifamily

housing

11%

Community

planning and

development

5%

OIG audit and

investigation

17%

Other HUD

offices

3%

Single-family

housing

4%

The Hotline closed 1,662 cases this reporting period. The closed Hotline cases included 177 substantiated

allegations. The substantiated allegations resulted in 15 administrative sanctions, including action taken against

a nonprofit organization that failed to properly document HUD-funded expenditures. The Department also

took 107 corrective actions that resulted in $123,784 in recoveries of losses and nearly $2.7 million in HUD

funding that could be put to better use. The recoveries included repayments of overpaid rental subsidies.

Some of the funds that could be put to better use were the result of cases in which tenants were terminated

from public housing or multifamily housing programs for improperly reporting their incomes or family

composition to qualify for rental assistance.
             

             

112 Chapter 6: Other Significant Audits and Investigations/OIG Hotline

Chart 6.2: Hotline dollar impact from program offices

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$0 Public and Indian

housing

Multifamily

housing

Recoveries Funds put to better use

Rental fraud and

improprieties

94%

Mismanagement

5%

Owner/occupant violations

1%

Chart 6.3: Substantiated cases by type of complaint received by Hotline



$2,461,878

$113,501 $233,260 $10,283
               

               

Chapter 7

Outreach

Efforts
             

             

114

To foster cooperative, informative, and mutually beneficial relationships with agencies and organizations

assisting the U.S. Department of Housing and Urban Development (HUD) in accomplishing its mission, the

Office of Inspector General (OIG) participates in special outreach efforts. The outreach efforts described

below complement routine coordination with Federal, State, and local law enforcement agencies; various

congressional committees or subcommittees; and other OIGs. During outreach efforts, OIG personnel present

information about HUD OIG's role and function, provide audit and investigative results, and discuss desired

goals and objectives.

Single-Family Housing Programs

Special Agent in Charge (SAC) Phyllis Robinson and Special Agent (SA) Karen Gleich provided an

overview of HUD OIG's mission and authority, described common mortgage fraud schemes and "red flag"

indicators, and hosted a question and answer forum for members of the Ozark Gateway Women's Council of

Realtors meeting in Joplin, MO. Approximately 50 real estate agents and mortgage and title company

representatives attended.



SAC Barry McLaughlin and Regional Inspector General for Audit (RIGA) Heath Wolfe provided an

overview of HUD's role and responsibilities in the single-family housing program and described common

audit findings and problems with home equity conversion mortgages at the American Association of

Residential Mortgage Regulators annual conference in Minneapolis, MN. Approximately 180 association

members attended.



SAC Herschell Harvell, Jr., presented a

plaque to Dallas Assistant District Attorney

Alex Zocchi in Dallas, TX, in recognition

of his continued support of the HUD OIG

mission and his assistance with prosecuting

mortgage fraud investigations.



SAC James Todak and Assistant Special

Agent in Charge (ASAC) Tony Meeks

provided an overview of HUD OIG's

mission and described Federal Housing

Administration ( FHA)-insured mortgage

issues and the FHASecure Initiative at an

International Association of Financial

Crimes Investigators meeting held in

Los Angeles, CA. Approximately 60

members attended.



Chapter 7: Outreach Efforts

From Left to Right: Herschell Harvell, Jr., Special Agent in Charge,

Region 6; Robert Jones, Special Agent, Region 6; Dallas Assistant

District Attorney Alex Zocchi, Chief of Special Crimes, Richard Zadina
             

             

Chapter 7: Outreach Efforts 115

SAC Barry McLaughlin and RIGA Heath Wolfe provided an overview of HUD's role and responsibilities

in the single-family housing program and described common audit findings and problems with home equity

conversion mortgages at the Association of Certified Fraud Specialists annual conference held in San

Francisco, CA. Approximately 75 members attended.



ASAC Juan Juarez provided an overview of the FHASecure and modernization programs at a Houston

Mortgage Fraud Task Force meeting in Houston, TX. Approximately 30 Texas Real Estate Appraisal Board

members and representatives from the U.S. Attorney's Office, the Harris County District Attorney's Office,

and Federal and local law enforcement personnel attended.



ASAC Brad Geary discussed current real estate and mortgage fraud trends and provided an overview of

HUD's role in the current lending crisis at a white-collar crime seminar sponsored by the Western District of

Michigan U.S. Attorney's Office in East Lansing, MI. More than 300 financial institution and Federal, State,

and local law enforcement personnel attended.



ASAC Wallace Merriman provided an overview of the FHASecure program and described HUD OIG's

mission and mortgage fraud at an FHA lender training seminar hosted by the HUD Philadelphia

Homeownership Center in Springfield, VA. Approximately 200 mortgage bankers, lenders, and underwriters

from Virginia, Maryland, and Washington, DC, attended.



ASAC Ray Espinosa hosted an Illinois Mortgage Bankers Association Risk Management Committee

meeting in Chicago, IL. Topics discussed included FHA lending and appraisals, lender options for risk

management, quality control and compliance procedures, and changes in the lending industry. Approximately

16 Federal, State, and financial institution investigators and HUD program staff members attended.



ASAC Cary Rubenstein and Senior Special Agent (SSA) Daniel Ellis presented an overview of HUD

OIG's mission and described HUD's role in mortgage and bankruptcy fraud investigations at a bankruptcy

fraud training seminar hosted by the U.S. Trustee's Office in Wilmington, DE. Approximately 30 assistant

U.S. attorneys, U.S. Trustees, and bankruptcy fraud task force members attended.



ASAC George Dobrovic and Assistant Regional Inspector General for Audit (ARIGA) Ron Farrell were

panelists at a "HUD/FHA Ohio Partners Day 2008" conference held at Cleveland State University in

Cleveland, OH. ASAC Dobrovic and ARIGA Farrell participated in panel discussions involving fraud, waste,

and abuse in HUD programs; Inspector General initiatives; and the costs involved and tools available to fight

fraud, including the HUD Enterprise Income Verification (EIV) system. Approximately 40 city council
             

             

116 Chapter 7: Outreach Efforts

members, State and local law enforcement officials, attorneys, mortgage and housing industry personnel, and

HUD representatives attended.



ASAC Wallace Merriman provided an overview of HUD OIG's investigative mission as it relates to

predatory lending, property flipping, equity skimming, appraisal fraud, and identity theft at an "FHASecure"

community outreach forum hosted by the Columbia Housing Finance Agency and the HUD District of

Columbia field office in Washington, DC. Approximately 90 representatives from State and local

governmental agencies; community planning and development grantees; and housing counseling, community

housing development, and faith-based organizations attended.



ASAC Brad Geary provided an overview of the current trends in rescue fraud and equity theft and

described "red-flag" indicators and HUD's role in the current mortgage crisis at a mortgage and bankruptcy

fraud training seminar sponsored by the U.S. Trustee's Office in Grand Rapids, MI. Approximately 25 U.S.

Bankruptcy Court Chapter 7 Trustees attended.



ASAC Wallace Merriman and SA Neil McMullen provided an overview of HUD OIG's mission and

described predatory lending, property flipping, equity skimming, appraisal fraud, and fraud schemes involving

the home equity conversion mortgage program for Baltimore Housing Coalition members meeting in

Baltimore, MD. Approximately 40 members representing State and local government agencies and mortgage

and financial institutions attended.



ASAC Ray Espinosa and SA Jim Siwek provided a presentation, entitled "Latest Trends in Mortgage and

Real Estate Fraud," and described property flipping, rescue and bankruptcy fraud, and HUD's role in the

current lending crisis for bank and trust examiners attending an Illinois Department of Financial and

Professional Regulations conference in Bloomington, IL. More than 130 bank and trust examiners and others

attended.



ASAC Cary Rubenstein and SA Christopher Prout provided an overview of HUD OIG's mission and the

home equity conversion mortgage program and described current fraud schemes and prevention techniques at

a meeting of the Lower Bucks County AARP in Middletown, PA. Approximately 40 AARP members

attended.



ASAC Wallace Merriman provided an overview of HUD OIG's mission and described predatory lending,

property flipping, equity skimming, appraisal fraud, and home equity conversion mortgage fraud at meetings

held with members of the Baltimore Homeownership Preservation Coalition and Maryland Homeownership
             

             

Chapter 7: Outreach Efforts 117

Preservation Task Force in Baltimore, MD. Approximately 20 State and local government agency

representatives and mortgage and financial institution personnel attended.



ASAC Brad Geary described the latest trends in equity theft, mortgage rescue fraud, and "red flag"

indicators at a mortgage and bankruptcy fraud training seminar sponsored by the U.S. Trustee's Office in

Minneapolis, MN. At the conclusion of his presentation, ASAC Geary hosted a question and answer forum

for the approximately 25 U.S. Bankruptcy Court Trustees in attendance.



 ASAC Nadine Gurley described common mortgage fraud schemes as a panelist for a "Foreclosure Forum"

hosted by Congressman John Lewis in Atlanta, GA. Additional panelists included representatives from HUD,

the U.S. Attorney's Office, the Federal Reserve Bank, the Federal Trade Commission, the Georgia Real Estate

Fraud Prevention Commission, and HUD-approved counseling agencies. Approximately 50 mortgage and

real estate industry personnel attended.



ASACs Brad Geary and Ray Espinosa provided an overview of the mortgage crisis and FHA's role in

mortgage insurance, refinancing, and block grant funding for foreclosed properties and described law

enforcement efforts in mortgage and housing schemes for Crime Analysts of Illinois members meeting at the

Illinois Department of Financial and Professional Regulation in Chicago, IL. Approximately 25 intelligence

analysts and Federal and local law enforcement personnel attended.



ASAC Lisa Gore provided an overview of HUD OIG's mission and described efforts to address

Government National Mortgage Association fraud trends and program flaws for members of the New York

Mortgage Fraud Working Group meeting in New York City, NY. Approximately 20 U.S. Attorneys and

Federal and State investigators attended.



ASAC Juan Juarez provided an overview of HUD OIG's mission and jurisdiction and described mortgage

fraud investigations for members of the South West Automated Clearing House Association meeting in

Houston, TX. Approximately 40 association members, along with Federal, State, and local law enforcement

personnel, attended.



ASAC Brad Geary provided a presentation, entitled "How to Get Your Case Prosecuted," and described

Federal and State mortgage fraud statutes, the referral process, report preparation, and overcoming prosecution

obstacles at an Association of Certified Fraud Examiners meeting held in Chicago, IL. Approximately 75

individuals attended.


             

             

118 Chapter 7: Outreach Efforts

ASAC Wallace Merriman provided an overview of HUD OIG's mission and described predatory lending,

property flipping, equity skimming, appraisal fraud, and identity theft for Coalition for Homeownership

Preservation members meeting in Prince Georges County, MD. Approximately 35 members representing

State and local government agencies, mortgage and financial institutions, and nonprofit and community

faith-based organizations attended.



ASAC Brad Geary provided a presentation, entitled "Practice and Ethics," and described the latest trends

in mortgage and real estate fraud schemes and HUD's role in the national foreclosure crisis at a Ticor Title

Company meeting in Chicago, IL. More than 300 Ticor Title officials, attorneys, and employees attended.



SA Karen Gleich provided an overview of mortgage fraud schemes, described HUD OIG's role in

mortgage fraud investigations, and hosted a question and answer forum for First American Title Company

personnel in Joplin, MO. Approximately 10 employees attended.



SA Jim Siwek described the latest trends in foreclosure scams at a seminar, entitled "Bridging the Gap III,

Foreclosure Crisis in Chicago's Communities," held in Chicago, IL, and sponsored by the Chicago Police

Department and the Chicago Housing Authority. Approximately 30 nonprofit representatives and

community leaders attended.



SA James Carrieres provided an overview of mortgage fraud and described Arizona mortgage fraud prosecutions at a Las Vegas Chapter of the Appraisal Institute meeting in Las Vegas, NV. Approximately 25

appraisers attended.



SA Matthew Nutt provided an overview of HUD OIG, illustrated public corruption, and described

fraudulent activities in the HUD FHA, real estate-owned, and rental assistance programs for Rotary Club

members meeting in Plymouth, MI. Approximately 40 district court judges, attorneys, and business leaders

attended.



SA Jim Siwek provided a presentation, entitled "Latest Trends in Mortgage and Real Estate Fraud," and

described property flipping, rescue and bankruptcy fraud, and HUD's role in the current lending crisis during

a Financial Crimes seminar for Chicago Metropolitan Identity Fraud Task Force members meeting in Vernon

Hills, IL. More than 55 Federal, State, and local law enforcement personnel, along with financial and retail

representatives, attended.


             

             

Chapter 7: Outreach Efforts 119

SA James Carrieres provided a presentation, entitled "Arizona Mortgage Fraud," and described successful

Arizona mortgage fraud investigations at an Arizona Trustee Association meeting held in Gold Canyon, AZ.

Approximately 40 U.S. Trustees attended.

Public Housing and Rental Assistance Programs

Assistant Inspector General for Investigation (AIGI) John McCarty and SAC Rene Febles were guest speakers

at the HUD Public Housing Director's national conference held in Nashville, TN. AIGI McCarty and SAC

Febles spoke about the partnership between HUD and HUD OIG and working together to affect positive

changes in HUD programs.



SAC James Todak provided an overview of fraud, waste, and abuse and described HUD OIG's perspective

on the "Project Safe Neighborhood" initiative in public housing developments at a Project Safe

Neighborhood-Public Housing workshop hosted by the U.S. Attorney's Office in Las Vegas, NV.

Approximately 350 Federal, State, and local law enforcement and other officials attended.



RIGA Heath Wolfe and SAC Barry McLaughlin provided an overview of HUD OIG, the audit process,

and common audit findings and fraud schemes in the Housing Choice Voucher and Home Investment

Partnerships programs for Indiana Housing and Community Development Authority contractors and staff

members meeting in Indianapolis, IN. Approximately 15 housing representatives attended.



SAC Peter Emerzian, ASACs Michael Wixted and Diane DeChellis, and ARIGA Kevin Smullen provided

an overview of HUD housing assistance fraud schemes and detection methods at a Massachusetts Association

of Section 8 Administrators meeting in Dedham, MA. At the conclusion of their presentation, a question and

answer forum was held for the approximately 100 Section 8 administrators and HUD personnel in attendance.



SAC Rene Febles, ASAC Louis Mancini, and Supervisory Forensic Auditor Mark Klein provided an

overview of HUD OIG's Rental Assistance, Fugitive Felon, and Sex Offender Initiatives at a meeting with

New York State Department of Housing and Community Renewal representatives in New York City, NY.

Approximately 50 personnel attended.



SAC Phyllis Robinson and SAs Melissa McFadden and Karen Gleich described HUD OIG's mission and

authority and provided presentations, entitled "Tenant Fraud," at three HUD-sponsored EIV seminars held in

Kansas City, KS, and Lincoln, NE. At the conclusion of their presentations, SAC Robinson and SAs McFadden

and Gleich hosted question and answer forums for approximately 231 HUD and housing industry personnel

in attendance.


             

             

120 Chapter 7: Outreach Efforts

SAC Barry McLaughlin and RIGA Heath Wolfe described public housing fraud schemes and recent audits

at an Illinois Association of Housing Authorities conference in Decatur, IL. More than 25 housing authority

representatives attended.



SAC Rene Febles provided an overview of HUD OIG's mission and described rental assistance fraud and

public corruption within HUD programs at the New York State Division of Housing and Community

Renewal annual conference held in Saratoga, NY. Approximately 75 individuals attended.



SAC Peter Emerzian, ASAC Diane DeChellis, and SAs Jessica Piecuch and Alex Rosania assisted HUD

personnel with EIV training sessions for Massachusetts and Maine National Association of Housing and

Redevelopment Officials (NAHRO) members in Boston, MA. In addition, SAC Emerzian and ASAC DeChellis

provided guidance for reporting EIV discrepancies to HUD OIG, and SAs Rosania and Piecuch answered

questions relating to EIV fraud. More than 120 NAHRO members participated.



RIGA Heath Wolfe provided an overview of the HUD OIG audit process and common audit findings in

public housing authority nonprofit development activities at the annual Indiana NAHRO conference held in

Lafayette, IN. Approximately 25 housing representatives attended.



SACs Rene Febles and Joseph Clarke provided an overview of HUD OIG fraud referrals and investigations

as panelists at the MidAtlantic NAHRO regional conference in Galloway Township, NJ. Approximately 50

NAHRO members representing housing authorities in New Jersey, Pennsylvania, Maryland, and Delaware

attended.



SAC James Todak, ASAC Herschell Harvell, and SAs John Rodriguez and David Carter provided an

overview of HUD OIG rental assistance fraud investigations at a Southern California NAHRO seminar in

Los Angeles, CA. Approximately 40 NAHRO members attended.



SAC Rene Febles provided an overview of HUD OIG's mission and described rental assistance fraud and

public corruption within HUD programs at a New Jersey Association of Housing and Redevelopment

Officials conference held in Atlantic City, NJ. Approximately 30 housing representatives attended.



ARIGA Fred Smith provided an overview of HUD OIG and described current initiatives and fraud

detection methods at the Kansas NAHRO conference held in Kansas City, KS. Approximately 40 housing

representatives attended.


             

             

Chapter 7: Outreach Efforts 121

ASAC Gene Westerlind and SA Karen Gleich provided an overview of HUD OIG's mission and authority

and described rental assistance fraud schemes and "red flag" indicators at a Missouri NAHRO conference held

in Jefferson City, MO. At the conclusion of their presentation, a question and answer forum was held for the

110 housing representatives in attendance.



ASAC Michael Wilson provided an overview of HUD OIG's mission for the Arkansas Chapter of NAHRO

meeting in Little Rock, AR. Approximately 100 housing officials attended the conference.



ASACs Michael Wilson and Cortez Richardson provided an overview of HUD OIG's mission and

described rental assistance, multifamily FHA insurance, and Community Development Block Grant (CDBG)

investigations at the annual Texas NAHRO conference held in Fort Worth, TX. Approximately 25 NAHRO

members attended.



ASAC Timothy Mowery and SA Malinda Antonik presented an overview of HUD OIG's mission,

investigations, and fraud prevention methods at a HUD 2008 Partners and Planning seminar held in Tampa,

FL. Approximately 150 individuals representing public housing authorities, State and local governments, the

mortgage industry, nonprofit organizations, and a congressional representative attended.



ASAC Michael Wixted, ARIGA Kevin Smullen, and SA Brian Gosselin provided an overview of public

housing fraud schemes and detection methods at a Vermont housing authority executive directors meeting

held in Rutland, VT. At the conclusion of the presentation, a question and answer forum was held for

approximately 20 Vermont public housing authority executive directors and HUD personnel in attendance.



ASAC Kathleen Hatcher was the lead presenter during a workshop, entitled "The IG - Our Partner," at the

Maryland Association of Housing and Redevelopment Agencies annual conference in Ocean City, MD. ASAC

Hatcher described HUD OIG's mission and priorities, assisted housing fraud schemes and avenues to identify

fraud, and the fraud referral and administrative and judicial processes. In addition, ASAC Hatcher hosted a

question and answer forum for approximately 70 housing representatives in attendance.



ASAC Tony Meeks provided a presentation, entitled "Preventing and Identifying Section 8 Fraud," at a

housing authority colloquium held at the Hawaii Government Employees Association in Honolulu, HI. ASAC

Meeks provided an overview of HUD OIG initiatives relating to rental assistance programs and described

fraud indicators; criminal and civil statutes; administrative remedies; general fraud prevention measures; and

investigations involving sex offenders, unreported income, and unauthorized tenants. Approximately 60
             

             

122 Chapter 7: Outreach Efforts

representatives from the housing authorities in the Hawaiian Islands, Guam, Saipan, American Samoa, and the

Commonwealth of the Northern Mariana Islands attended.



SA Anthony Troeger provided a presentation, entitled "Selling Honesty," at the North Carolina Program

Integrity Investigators annual conference in Asheville, NC. In addition, SA Troeger presented an overview of

HUD OIG, discussed program administration improvement, and described fraud detection methods.

Following the conference, SA Troeger was the keynote speaker at the conference banquet. Approximately 140

North Carolina Department of Social Services investigators attended.



SA James Carrieres participated as a panelist and provided information on Native American fraud

investigations at a Native American Indian Summit held in Scottsdale, AZ. Approximately 45 tribal

representatives and Federal prosecutors attended.



SAs Trevor Christensen and Michael White provided an overview of HUD OIG and described rental

assistance fraud at the annual Tennessee Association of Housing and Redevelopment Agency conference held

in Franklin, TN. Approximately 325 association representatives attended.



SAs Edward Redmond and Stephen Tufts provided an overview of HUD OIG's mission and described

current and future HUD OIG initiatives at the New England Regional Council of NAHRO conference held

in Dixville Notch, NH. Approximately 133 participants representing 53 public housing agencies (PHA) from

New Hampshire, Maine, and Vermont attended.



SA Jeffrey Pittano provided an overview of HUD OIG's mission and role in rental assistance fraud

investigations at a Maryland Association of Housing and Redevelopment Agency conference held in Crownsville,

MD. More than 50 association members attended.



SA Alexander Rosania provided an overview of HUD OIG's mission and priorities and described the

HUD EIV system and rental assistance fraud for multifamily management agents, board members, and

residents meeting at Mandela Homes Apartments, a HUD-subsidized multifamily housing development in

Boston, MA. Approximately 50 individuals attended.



SA Theron Hanes provided an overview of HUD OIG's mission and authority and described investigative

referrals and prosecutions at the annual Mountain Plains NAHRO conference held in Helena, MT.

Approximately 60 NAHRO members and others attended.


             

             

Chapter 7: Outreach Efforts 123

SAs Korey Brinkman and Ray Essman provided an overview of HUD OIG's mission and authority at a

HUD EIV conference held in St. Louis, MO. Approximately 120 HUD and housing industry personnel from

Missouri, Iowa, and Illinois attended.



SA Alexander Rosania provided an overview of HUD OIG's mission and priorities and described HUDsubsidized multifamily housing fraud at a New England Affordable Housing Management Association

meeting in Boston, MA. More than 50 multifamily property managers and executive directors attended.



RIGA Heath Wolfe and SAC Barry McLaughlin gave presentations to the staff of the Peoria Housing

Authority in Peoria, IL. SAC McLaughlin presented an overview of the Office of Investigation's (OI)

operations and "red flag" indicators of fraud and provided information on OI's partnering with PHAs. RIGA

Wolfe presented information on common audit findings/problems in PHAs' public housing and Public

Housing Capital Fund programs and the need for PHAs to establish good internal controls. There were more

than 60 individuals in attendance.



ARIGA William Nixon, Senior Auditor Lynelle Kunst, and SA Kedric McKnightwere were asked by the

North Texas Association of Housing Authorities in Dallas, TX, to sit on a panel to discuss reasonable

accommodation. They answered questions from approximately 30 housing executives and HUD staff

regarding reasonable accommodation and the recently issued fraud bulletin. Further, SA McKnight discussed

OI's Fugitive Felon program and its impacts on housing as well as the collaboration with the National Center

for Missing and Exploited Children.



RIGA John Buck and ASAC Kathleen Hatcher were guest speakers at the National Leased Housing

Association "Mastering the Housing Choice Voucher Program" conference held in Washington, DC. RIGA

Buck and SAC Hatcher facilitated a presentation entitled "IG Audits and Investigations - What to Expect."

ASAC Hatcher described HUD OIG's mission and priorities, specifically concerning assisted housing

programs, fraud schemes, and techniques for housing authority staff to use to identify fraud during the

application and recertification stages. RIGA Buck described Office of Audit functions and highlighted some

recent audits conducted in Region 3. At the conclusion of the presentation, RIGA Buck and ASAC Hatcher

participated in a question and answer session. Approximately 70 housing representatives from all over the

United States were in attendance.

Community Planning and Development

SAC Peter Emerzian, RIGA John Dvorak, and ASACs Michael Wixted and Diane DeChellis described

HUD OIG's role in detecting fraud in HUD-funded cmmunity planning and development (CPD) programs

for National Community Development Association members meeting at Holy Cross College in Worcester,

MA. At the conclusion of their presentation, a question and answer forum was held for approximately 150

State and local delegates, nonprofit agency representatives, and HUD personnel in attendance.


             

             

124

SAC Rene Febles and ARIGA Joseph Vizer described how HUD OIG can work with community

development organizations to prevent fraud, waste, and abuse at a monthly meeting of the New Jersey

Community Development Organizations held in Elizabeth, NJ. The New Jersey CPD division director Kathy

Naymola and 30 directors from New Jersey community development organizations attended.



ARIGA Fred Smith and Senior Auditor Beth Archibald met with staff members from the Office of the

Auditor for both the city and county of Denver, CO. ARIGA Smith and Senior Auditor Archibald provided

information on determining risks and developing objectives for city and county performance audits of CPD

programs.



SAs Frank Aeillo and Dennis Madarang provided an overview of HUD OIG's mission and described

housing and CPD programs for New Castle County Abatement Project members meeting in New Castle, DE.

Approximately 20 State and local prosecutors, investigators, and law enforcement officers attended.



SA Frank Aeillo provided an overview of HUD OIG's mission and described CDBG program fraud at a

meeting hosted by the Delaware County Housing and Community Development Office in Media, PA.

Approximately 40 representatives from nonprofit organizations and the Delaware County Housing and

Community Development Office attended.

Audit Outreach

Assistant Inspector General for Audit (AIGA) James Heist provided a presentation, entitled "Challenges

Facing the Accountability Community," at the 2008 Spring Mid-America Intergovernmental Audit Forum

held in Kansas City, MO. AIGA Heist described succession planning, training, and technology challenges and

solutions. In addition, AIGA Heist participated as a panelist and described HUD OIG audit results of

manufactured housing foundations and community service and self-sufficiency requirements during a session

that addressed significant audits. Approximately 85 Federal, State, and local government audit representatives

and individuals from State societies of certified public accountants attended.



ARIGA Ronald Farrell and Auditor Julie Piotrowski participated in the Raj Soin College of Business

recruiting day held at Wright State University in Dayton, OH. ARIGA Farrell and Auditor Piotrowski

described HUD OIG's mission and student volunteer positions with the HUD OIG Office of Audit.

Approximately 40 students attended the presentation.



ARIGA Kim Randall and Senior Auditor Ashley Eis participated in a career fair held at the University of

Missouri in Kansas City, MO. ARIGA Randall and Senior Auditor Eis described HUD OIG's mission and

Chapter 7: Outreach Efforts
             

             

125

provided information relating to student volunteer and career positions with the HUD OIG Office of Audit.

More than 40 students attended.



ARIGA Kim Randall participated in a career fair held at Missouri State University in Springfield, MO.

ARIGA Randall provided students with information about internships and careers with the HUD OIG Office

of Audit.



Computer Audit Specialist (CAS) Cliff Cole participated as a guest speaker in the Mid-America

Intergovernmental Audit Forum's annual spring/summer conference in Kansas City, MO. The Forum is a

consortium of Federal, State, and local audit executives from audit organizations in the States of Iowa, Kansas,

Missouri, and Nebraska. CAS Cole provided an overview of HUD OIG's organizational structure and mission

and a detailed discussion on OIG's progressive use of data mining techniques and computer-assisted analytics

focused on geographic information systems and complex geospatial audit analyses. He applied this

information to his recent experiences in assisting Region 5 auditors in identifying HUD-insured single-family

properties located in designated flood zones.



ARIGA Kevin Smullen and SAC Peter Emerzian made a presentation to the staff of the Vermont Housing

Finance Agency in Burlington, VT, on HUD OIG's mission, role, and responsibility with regard to detecting

and investigating fraud, waste, and mismanagement in programs administered by the Agency. They discussed

HUD programs, including the CDBG, HOME Investment Partnerships, Section 8, multifamily, and FHA

programs. Also discussed were Agency origination of FHA loans, FHA-insured multifamily developments to

assist with the mortgage crisis in Vermont, and OIG's role in monitoring these programs.



RIGA Heath Wolfe and ARIGA Ronald Farrell participated in the Office of Personnel Management's

Federal Career Fair at Ohio State University in Columbus, OH. They spoke to students about HUD OIG's

mission and the benefits of pursuing student volunteer and auditing positions with HUD OIG. Students were

informed that OIG has student volunteer opportunities in its Chicago, IL, Detroit, MI, and Columbus, OH,

offices. RIGA Wolfe and ARIGA Farrell accepted resumes from students interested in career and student

volunteer positions with HUD OIG.

Law Enforcement Outreach

SAs Amy Trebino and Malinda Antonik staffed the HUD OIG exhibit booth and provided information

relating to HUD OIG's mission and investigations at the Ninth Annual Women in Federal Law Enforcement

Leadership conference held in Tampa, FL. Approximately 700 Federal law enforcement personnel and others

attended.



Chapter 7: Outreach Efforts
             

             

126

SA Julien Kubesh described the latest trends in mortgage and real estate fraud, flipping and rescue fraud,

and HUD's role in the national foreclosure crisis for the Hennepin County Crime Prevention Advisory

Committee in Minneapolis, MN. More than 30 Hennepin County law enforcement representatives attended.



SAs Neil McMullen and Jeffrey Lowery provided an overview of HUD OIG's mission and authority and

described the HUD OIG Sex Offender Initiative for subcommittee members of the Alexandria Community

Criminal Justice Board in Alexandria, VA. Approximately 12 representatives from the Commonwealth of

Virginia Attorney's Office and State and local law enforcement personnel attended.



Special agents from HUD OIG participated in a "National Marrow Donor Drive" at the University of

Kansas Hospital in Kansas City, KS. Organized by SAs Amy Durso and Francis Novak, HUD OIG special

agents were tested and registered in a national database for a potential match with Leukemia victims.



SA Carissa Barnes and 11 team members from the Federal Bureau of Investigation participated in a

181-mile relay race from Logan, UT, to Park City, UT. Proceeds from the relay race, known as the "Wasatch

Back Ragnar Relay Race," were donated to Operation Kids, an organization that supports disadvantaged youth.


               

               

Chapter 8

Review of

Policy Directives
             

             

128

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

the Office of Inspector General's (OIG) responsibilities under the Inspector General Act. During this

6-month reporting period, OIG reviewed 149 issuances. This chapter highlights some of OIG's prior

comments on notices, comments for this reporting period, and other policy directives.

Enacted Legislation Related to Single-Family Housing

Due to the collapse of the subprime mortgage market and resulting increase in foreclosures, Congress and

the President approved the Housing and Economic Recovery Act of 2008. The legislation contained two

significant new programs for the U.S. Department of Housing and Urban Development (HUD): the

Neighborhood Stabilization Program ($3.92 billion) and the Hope for Homeowners Program. The programs

and their related rules create new challenges and risks to the Department and its partners. OIG plans to closely

monitor proposed guidance and regulations and to work in cooperation with the Department on these new

programs.

In addition, the Housing and Economic Recovery Act of 2008 provided four items that OIG believes will

reduce fraud and strengthen the Federal Housing Administration (FHA) single-family mortgage programs.

Specifically,

- Section 2129 amended Title 18, Section 1014, to include FHA loans. Therefore, it is a criminal

offense for a person to make a false statement on an FHA loan commitment, insurance agreement, or

application for insurance or guarantee. The person may receive up to 30 years in jail and/or up to a $1

million fine.

- Section 2113 prohibited seller-funded downpayment assistance. Seller-funded downpayment

assistance has resulted in substantial losses to the FHA fund.

- Section 2113 increased the cash investment of the buyer. Therefore, buyers must have an equity

investment in the FHA loan.

- The Act also placed a moratorium on FHA's proposed risk-based insurance premium structure, thus

maintaining the current treatment of program participants.

Proposed Rules

OIG nonconcurred on a number of HUD proposed rules. Working cooperatively with the Department,

OIG was able to reach agreement on these nonconcurrences, which in turn strengthened HUD's oversight

role, resolved inconsistencies between the proposed rule and OIG recommendations, and put into place

mechanisms to better assess risks for new programs. OIG continues to work cooperatively with HUD to

resolve other outstanding nonconcurrences.



Chapter 8: Review of Policy Directives
               

               

Chapter 9

Audit

Resolution
             

             

130

In the audit resolution process, Office of Inspector General (OIG) and U.S. Department of Housing and

Urban Development (HUD) management agree upon the needed actions and timeframes for resolving audit

recommendations. Through this process, OIG hopes to achieve measurable improvements in HUD programs

and operations. The overall responsibility for assuring that the agreed-upon changes are implemented rests

with HUD managers. This chapter describes significant management decisions with which OIG disagrees. It

also contains a status report on HUD's implementation of the Federal Financial Management Improvement

Act of 1996 (FFMIA). In addition to this chapter on audit resolution, see appendix 2, table B, "Significant

Audit Reports Described in Previous Semiannual Reports in Which Final Action Had Not Been Completed as

of September 30, 2008."

Audit Reports Issued before Start of Period with No Management

Decision as of September 30, 2008

Office of Housing, Washington, DC

Single-Family Mortgage Insurance Claims, Issued July 11, 2006. The Inspector General referred this issue to

the Deputy Secretary on December 4, 2006, because agreement could not be reached with the Office of

Housing. The three recommendations relate to the Office of Housing's not independently determining that

mortgage loans insured under the Mutual Mortgage Insurance Fund met program requirements after paying

billions in single-family insurance claims. During the period October 1, 2003, through June 3, 2005, HUD

received and paid claims on loans for which the lender did not show that the borrower (1) was able to make the

required monthly payments, (2) made the minimum investment in the property, and (3) was creditworthy.

HUD paid the claims and did not subsequently review the loan files for compliance with the program

requirements, fraud, and/or misrepresentations. HUD relied upon lender certifications that loans were

eligible and contained all required supporting documents, a preendorsement review of the insurance

applications for key documents, and risk-based compliance testing of recently insured loans. We estimate that

final HUD costs for claims that HUD's files did not support as meeting program requirements during the

period reviewed totaled $356 million on those claims for which all revenues and expenses were finalized.

In his February 23, 2007, response, the Deputy Secretary stated support of OIG's objective and agreed

with the overall conclusions reached. The Deputy Secretary directed the Office of Housing to immediately

begin implementing procedures in conjunction with and acceptable to OIG to effect the recommendations.

However, the Office of Housing did not submit its plan to implement the Deputy Secretary's directive until

March 30, 2007. Even then, the plan was unacceptable. Then on June 11, 2007, the Office of Housing

submitted an additional proposal, which was also rejected by OIG. OIG met again with Office of Housing

officials on September 30, 2008, and an agreement was reached on proposed actions by the Office of Housing

that satisfied two of the three outstanding recommendations, 1A and 1C. However, recommendation 1B

remains open until the Office of Housing seeks recovery of or provides adequate documentation in support for

claims paid on 39 of the loans from OIG's audit sample that did not meet FHA eligibility requirements.

(Report No. 2006-SE-0001).

Chapter 9: Audit Resolution
             

             

Chapter 9: Audit Resolution 131

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 two audits.

Domicile Property Management, Inc. - San Antonio, TX

Issue Date: November 19, 2004. In violation of the properties' regulatory agreements, Domicile Property

Management diverted property income totaling more than $771,000 to pay its own expenses and paid nearly

$1.5 million from property accounts without documentation to show that the payments were for necessary

and reasonable operating costs. Further, Domicile did not abide by the 1995 settlement agreement for a

previous HUD claim involving project overcharges during 1992 and 1993. Under that agreement, Domicile

paid more than $272,000 but did not report and pay an additional $49,000 for self-funded health insurance.

Because of Domicile's current diversions and failure to pay the previous settlement obligation, it deprived the

properties of operating funds, thereby reducing HUD's security interests and increasing HUD's risks.

We recommended that HUD, through the Office of Regional Counsel and the United States Attorney's

Office, require Domicile and Mr. John T. Condit, owner of Domicile, to repay nearly $2.3 million and pay

audit costs of more than $352,000. We also recommended that HUD take administrative action against

Domicile and Mr. Condit.

On October 24, 2004, the United States Attorney's Office filed a civil complaint against Mr. Condit,

alleging false claims and equity skimming seeking the above amounts.

In a separate matter, Washington Mutual Bank filed suit in a Federal district court on August 29, 2001, for

the repayment of debts owed by the Condit family. Washington Mutual Bank received a judgment against the

Condit family on February 27, 2002, and the court appointed a receiver for the Condit family assets on April

10, 2003. The receiver took control of Mr. Condit's assets on July 24, 2003.

Mr. Condit filed for bankruptcy protection on December 24, 2003, listing no appreciable assets. After

extensive discussions among all parties, including the United States Attorney, HUD, OIG, the receiver, and

Mr. Condit, an agreement was reached on February 13, 2006. Mr. Condit agreed to a 10-year

voluntary exclusion. The receiver agreed to the Government's unsecured nonpriority claim against Mr. Condit's

assets held by the receiver. The Government agreed to drop the civil false claim and equity skimming

complaint.

Following various communications between HUD and OIG, on March 13, 2008, HUD requested that

OIG write off the disallowed costs due to the above events. On April 23, 2008, disallowed costs of more than

$2.6 million were written off, and the audit was closed. (Audit Report: 2005-FW-1002)

United States Veterans Initiative, Inc. - Inglewood, CA

Issue Date: September 27, 2004. HUD OIG conducted an audit, which disclosed that contrary to Federal

regulations and grant requirements, United States Veterans Initiative, Inc., was unable to support that it met

cash matching funds requirements for any of the more than $7.2 million in Supportive Housing Program

(SHP) grant funds expended during the audit period. U.S. Veterans Initiative also spent more than $633,000
             

             

132 Chapter 9: Audit Resolution

in SHP funds for ineligible and unsupported salaries and other expenses. In addition, it did not administer its

SHP grants in accordance with requirements because it failed to (1) develop an adequate financial

management system, (2) comply with procurement and contract administration requirements, (3) establish

and implement indirect cost rates as required, and (4) close out expired grants.

We recommended that HUD require U.S. Veterans Initiative and/or its continuums, Los Angeles

Homeless Services Authority and the City of Long Beach, to (1) repay HUD from nonfederal funds for nearly

$6.6 million in SHP grant expenditures that did not have the required matching funds unless it can provide

the supporting documentation, (2) comply with Federal requirements in carrying out its SHP grant activities,

(3) reimburse the SHP grants and/or repay HUD from nonfederal funds for the more than $633,000 in

ineligible and unsupported expenses, (4) revise U.S. Veterans Initiative's financial management system,

(5) competitively procure the services in the business services agreement, (6) develop and/or update the

indirect cost rates, and (7) submit financial closeout reports for expired grants.

On April 6, 2005, OIG reached management decisions on all of the findings with the Office of

Community Planning and Development (CPD). With regard to finding 1, in September 2006, CPD stated

that it had sent letters to the U.S. Departments of Labor and Veterans Affairs and also to AmeriCorps asking

for legal opinions regarding whether their funds could be used to match CPD's SHP. This action was

necessary, as the Comptroller General has ruled that in order for a Federal agency's funds to be used as a match,

its statutes must explicitly permit it. CPD had not received definitive responses from the agencies.

Nevertheless, it determined that a decision on any possible repayment due to the unauthorized use of matching

funds could no longer be prolonged. CPD determined that the noncompliance resulted from ambiguities in

the program regulations and applicable Office of Management and Budget (OMB) circulars. At that time,

CPD concluded that it would not seek repayment from U.S. Veterans Initiative. Instead, it plans to request

approval from the U.S. Department of Justice to write off any debt associated with the confusion over match

requirements. In addition, CPD plans to revise its regulations to clearly reflect the Comptroller General's

opinions.

On April 23, 2008, CPD proposed a revised course of corrective action. It stated that it would take two

final steps. The first was to issue a letter to U.S. Veterans Initiative requiring it to secure and provide to CPD

written documentation from each Federal source used as match for its SHP grants, stating whether that agency

prohibits the use of its program funds as match for SHP grants. CPD had already sent the letter to U.S.

Veterans Initiative on April 7, 2008. At OIG's request, it agreed to also inform any Federal agency that states

that its funds are a prohibited match source that it is incumbent upon that agency, not HUD, to pursue

collection activities as appropriate. The second requirement was that CPD would commit to issuing a

regulation pertaining to cash match. The regulation should state that homeless assistance grantees are

responsible to use only allowable sources of Federal funds as cash match. This regulation would put grantees

on notice to use only allowable cash match sources. If HUD becomes aware of any Federal program that is

prohibited by the cognizant agency as a cash match source, HUD will specifically cite that program in the next

annual notice of funding availability for the continuum of care homeless assistance programs competition.

Based on this commitment to issue a regulation, the audit recommendations were closed, and the unsupported

costs were written off.

With regard to the second finding, U.S. Veterans Initiative has established a repayment agreement with

HUD for more than $363,000 and is currently repaying the disallowed expenses. The final payment should be

made by April 15, 2013. The recommendations for finding 3 have been closed. (Audit Report:

2004-LA-1008)
             

             

133

Significant Management Decision with Which OIG Disagrees

There are no reports issued before the beginning of the reporting period for which a management decision

had not been made by the end of the period.

Federal Financial Management Improvement Act of 1996

In fiscal year 2008, HUD did not fully comply with FFMIA. Specifically, HUD's financial management

systems did not substantially comply with Federal financial management system requirements.

FFMIA requires that HUD implement a remediation plan that will bring financial systems into compliance with Federal financial management system requirements within 3 years or obtain OMB concurrence if

more time is needed.

FFMIA requires OIG to report in its Semiannual Reports to the Congress instances and reasons when an

agency has not met the intermediate target dates established in its mediation plan required by FFMIA. In April

1998, HUD determined that 38 of its systems were not in substantial compliance with FFMIA. At the end of

2008, the Department reported that 2 of its 42 financial management systems were not in substantial

compliance with FFMIA. These two systems are the HUD Procurement System and Small Purchase System.



Chapter 9: Audit Resolution
               

               

Appendix 1

Audit Reports

Issued
             

             

136

Internal Reports

22 Audit Reports

Administration (1 Report)

2008-CH-0003 HUD Needs to Improve Its Existing Procedures and Controls Regarding Its

Management of Human Capital, 09/30/2008.

Chief Information Officer (3 Reports)

2008-DP-0005 Review of Controls over the Removal of Local and Remote User Access, 07/21/2008.

2008-DP-0006 Review of HUD's Information Technology Security Program, 07/23/2008.

2008-DP-0007 Evaluation of HUD's Security Controls over Databases, 09/11/2008.

Community Planning and Development (2 Reports)

2008-BO-0002 Maintenance of Effort Requirements Are Needed to Ensure Intended Use of CDBG

Program Funds, 05/21/2008.

2008-FW-0001 HUD's CDBG Set-Aside for Colonias Was Not Used for Its Intended Purposes,

07/29/2008. Questioned: $8,448,000; Unsupported: $8,448,000; Better

Use: $2,816,000.

Fair Housing and Equal Opportunity (1 Report)

2008-NY-0002 Weaknesses in the Office of Fair Housing and Equal Opportunity's 2007 Award

Process for the Fair Housing Initiative Program, National-Based Media Campaign,

08/27/2008.

Housing (8 Reports)

2008-CH-0001 HUD Did Not Always Ensure That FHA Lenders Complied with Federal

Requirements Regarding Home Equity Conversion Mortgages, 09/29/2008.

2008-CH-0002 HUD Did Not Always Ensure That FHA Lenders Complied with Federal

Requirements When Submitting Loans for New Construction Properties Located

in FEMA's Designated Special Flood Hazard Areas, 09/29/2008. Questioned: $432,058;

Unsupported: $432,058; Better Use: $260,670.

2008-DP-0004 Review of Selected FHA Major Applications' Information Security Controls,

06/12/2008.

2008-KC-0004 HUD's Office of Single Family Housing Could Improve the Reliability of Its Process

for Reporting Performance Measure Results, 06/24/2008.

2008-KC-0005 HUD's Office of Multifamily Housing Generally Met Requirements While

Administering the Opt-Out Process for Section 8 Projects, 07/15/2008.

2008-KC-0006 HUD's Office of Single Family Housing Had Not Fully Implemented an Internal

Control Structure in Accordance with Requirements, Washington, DC, 09/08/2008.

2008-KC-0007 HUD Inappropriately Authorized the Use of Residual Receipts in Lieu of Reserve for

Replacement or Operating Funds, 09/29/2008. Questioned: $3,203,135.

2008-LA-0003 Implementation Weaknesses Existed in All Major Phases of the FHA Appraiser Review

Process, 09/04/2008.

Appendix 1: Audit Reports Issued
             

             

Appendix 1: Audit Reports Issued 137

Public and Indian Housing (4 Reports)

2008-AT-0002 The Miami-Dade Housing Agency Did Not Maintain Adequate Controls over Its Capital

Fund Program, 04/24/2008. Questioned: $13,912,124; Unsupported: $13,912,124.

2008-AT-0003 HUD Lacked Adequate Controls over the Physical Condition of Section 8 Voucher

Program Housing Stock, 05/14/2008.

2008-AT-0004 The Miami-Dade Housing Agency Did Not Maintain Adequate Controls over Capital

Fund Program Drawdowns, Miami, FL, 09/17/2008. Questioned: $730,137;

Unsupported: $668,014; Better Use: $257,694.

2008-KC-0003 EIV Users Did Not Always Take Advantage of HUD's Training and Guidance,

04/14/2008.

Audit-Related Memorandums1

Chief Information Officer (1 Report)

2008-DP-0802 OIG Response to Questions from the OMB under the FISMA, 09/30/2008.

Public and Indian Housing (2 Reports)

2008-AT-0802 Corrective Action Verification, Opelika Housing Authority, Public Housing Programs,

Audit Report 2004-AT-1011, 05/12/2008. Questioned: $57,900.

2008-AT-0803 Corrective Action Verification, Housing Authority of the City of Cuthbert, GA, Public

Housing Programs, Audit Report 2004-AT-1001, 09/30/2008. Questioned: $283,914.



External Reports

68 Audit Reports

Community Planning and Development (19 Reports)

2008-AO-1003 The Mississippi Development Authority's Homeowners Assistance Program Contract

Included Ineligible Provisions, Jackson, MS, 04/25/2008. Questioned: $3,907,378;

Better Use: $243,210.

2008-AO-1005 State of Louisiana, Road Home Program, Did Not Ensure That All Additional

Compensation Grant Applicants Were Eligible, Baton Rouge, LA, 08/07/2008.

Questioned: $263,959; Unsupported: $118,885.

2008-AT-1008 The Municipality of Carolina Needs to Improve Procurement of Its Housing

Rehabilitation Activities, Carolina, PR, 06/06/2008. Questioned: $81,143;

Unsupported: $81,143.

1

 The memorandum format is used to communicate the results of reviews not performed in accordance with

generally accepted government audit standards, to close out assignments with no findings and recommendations,

to respond to requests for information, to report on the results of a survey, to report results, or to report the results

of civil actions or settlements.
             

             

138

2008-AT-1009 The City of Augusta’s Controls over Its HOME Program Were Inadequate, Augusta,

GA, 06/09/2008. Questioned: $566,697; Unsupported: $196,657; Better

Use: $477,373.

2008-AT-1011 The City of Durham Did Not Comply with HOME Investment Partnerships

Requirements, Durham, NC, 08/07/2008. Questioned: $113,103; Unsupported:

$99,831; Better Use: $258,392.

2008-AT-1012 The City of Jacksonville Lacked Adequate Controls over Its HOME Program,

Jacksonville, FL, 09/05/2008. Questioned: $2,780,433; Unsupported: $500,000.

2008-AT-1015 The City of Durham Did Not Comply with All Federal Procurement Requirements,

Durham, NC, 09/24/2008. Questioned: $790,364; Unsupported: $790,364.

2008-CH-1004 The City of Muncie Lacked Adequate Controls over Its HOME Investment

Partnerships Program, Muncie, IN, 04/07/2008. Questioned: $221,652; Unsupported:

$215,575; Better Use: $1,120,325.

2008-CH-1009 Cook County Lacked Adequate Controls over Its HOME Investment Partnerships

Program Income and Administrative Costs, Chicago, IL, 06/07/2008. Questioned:

$63,852; Unsupported: $55,527; Better Use: $5,852,258.

2008-CH-1010 The City of Cincinnati Lacked Adequate Controls over Its System Reporting and Rental

Rehabilitation Projects for Its HOME Investment Partnerships Program, Cincinnati,

OH, 06/11/2008. Questioned: $1,990,846; Unsupported: $590,458; Better Use:

$792,283.

2008-CH-1014 The City of Cincinnati Did Not Adequately Manage Its HOME Investment

Partnerships Program, Cincinnati, OH, 09/26/2008. Questioned: $4,600,968;

Unsupported: $1,822,102; Better Use: $12,146.

2008-CH-1015 The City of Dayton Lacked Adequate Controls Regarding Staff Salaries Paid from Its

CDBG Program, Dayton, OH, 09/26/2008. Questioned: $556,455; Unsupported:

$556,455.

2008-DE-1003 The State of Colorado Did Not Comply with CDBG Program Requirements, Denver,

CO, 09/23/2008. Questioned: $4,635,464; Unsupported: $2,887,423.

2008-FW-1012 The City of Tulsa Allowed Its Largest Subrecipient to Expend $1.5 Million in

Unsupported CDBG Funding, Tulsa, OK, 08/04/2008. Questioned: $1,506,582;

Unsupported: $1,391,367; Better Use: $8,982,150.

2008-KC-1007 The City of St. Louis Used HOME Program Funds to Provide Excessive Development

Subsidies, St. Louis, MO, 09/30/2008.

2008-LA-1016 The City of Los Angeles Housing Department Did Not Comply with HOME

Affordability Monitoring and Inspection Requirements for Its HOME-Assisted Rental

Housing, Los Angeles, CA, 09/18/2008. Questioned: $38,102,707; Unsupported:

$38,102,707; Better Use: $226,483.

2008-NY-1006 The City of Troy Did Not Always Administer Its CDBG Program in Accordance with

HUD Requirements, Troy, NY, 05/21/2008. Questioned: $1,418,088; Unsupported:

$1,232,000; Better Use: $288,874.

Appendix 1: Audit Reports Issued
             

             

Appendix 1: Audit Reports Issued 139

2008-NY-1007 The County of Essex Did Not Always Administer Its CDBG Program in Accordance

with HUD Requirements, Verona, NJ, 05/29/2008. Questioned: $2,567,327;

Unsupported: $517,125; Better Use: $3,678,823.

2008-PH-1008 The State of Maryland Did Not Always Administer Its HOME-Assisted Single-Family

Owner-Occupied Rehabilitation Program in Accordance with Federal Regulations,

Crownsville, MD, 04/30/2008. Questioned: $2,319,124; Unsupported: $2,276,834;

Better Use: $74,648.

Government National Mortgage Association (1 Report)

2008-AT-1014 Doral Bank Needs to Improve Controls over Its Mortgage-Backed Securities Program,

San Juan, PR, 09/22/2008. Questioned: $291,094.

Housing (15 Reports)

2008-AT-1010 Meridian Lending, Inc., Did Not Follow HUD Requirements in Originating Two

Insured Loans, Monroe, GA, 07/25/2008. Questioned: $34,172; Better Use: $50,720.

2008-AT-1013 Bethany Housing, Inc., Did Not Conduct Proper Oversight of Project Operations

Resulting in Financial Harm to the Project, South Pasadena, FL, 09/18/2008.

Questioned: $106,686; Unsupported: $12,994.

2008-BO-1007 Countrywide Bank, Milford and Madison, CT, Did Not Comply with Certain HUD

Requirements in Administering Its FHA Insured Loan Programs, 07/24/2008.

Questioned: $5,767.

2008-DE-1004 First National Bank Did Not Follow HUD Requirements in Originating and

Underwriting Insured Loans and Did Not Have a Quality Control Plan, Gillette, WY,

09/24/2008.

2008-FW-1010 Senior Reverse Mortgage Services Generally Complied with HUD Regulations but

Could Improve, Bedford, TX, 07/14/2008.

2008-FW-1013 Wells Fargo Mortgage Loans Generally Complied with Reverse Mortgage

Requirements, San Antonio, TX, 09/25/2008. Questioned: $239,750; Unsupported:

$5,000.

2008-KC-1004 Peoples Bank Did Not Follow HUD's Requirements When Underwriting Nine FHA

Loans and Implementing Its Quality Control Program, Overland Park, KS,

08/20/2008. Questioned: $41,938; Better Use: $353,304.

2008-KC-1005 James B. Nutter Did Not Meet HUD's or Its Own Quality Control Requirements

Regarding the Number of Loans to Review, Kansas City, MO, 09/03/2008.

2008-KC-1006 Heartland Funding Corporation Violated the Real Estate Settlement Procedures Act

and Did Not Fully Comply with HUD's Underwriting, Quality Control, or Employee

Compensation Requirements, Springfield, MO, 09/08/2008. Questioned: $138,170;

Better Use: $885,291.

2008-LA-1013 First Magnus Financial Corporation Violated the Real Estate Settlement Procedures

Act When Paying Incentives to Brokers for Generating FHA Mortgages, Tucson, AZ,

07/14/2008.
             

             

140

2008-LA-1014 First Magnus Financial Corporation Violated the Real Estate Settlement Procedures

Act When Paying Builders and Real Estate Companies Marketing Fees and

Noncompetition Fees in Exchange for FHA Mortgage Business, Tucson, AZ,

08/01/2008.

2008-NY-1005 Mortgage Access Corporation Did Not Always Comply with HUD/FHA Loan

Origination Requirements, Morris Plains, NJ, 05/12/2008. Questioned: $93,500; Better

Use: $480,897.

2008-NY-1010 Wells Fargo Bank NA, Rochester, NY, Branch Office, Did Not Always Comply with

HUD/FHA Loan Origination Requirements, 08/26/2008. Questioned: $50,297;

Better Use: $514,134.

2008-PH-1011 Wells Fargo Home Mortgage Did Not Always Comply with HUD Requirements in

the Origination of FHA-Insured Single-Family Loans, Newark, DE, 07/31/2008.

Better Use: $318,596.

2008-SE-1004 A Plus Mortgage, Inc., Overcharged Borrowers and Allowed Independent Contractors

and Unapproved Branches to Originate Loans, Tukwila, WA, 05/07/2008. Questioned:

$185,146.

Public and Indian Housing (32 Reports)

2008-AT-1007 The Municipality of Caguas Needs to Improve Controls over Its Section 8 Program,

Caguas, PR, 05/30/2008. Questioned: $15,043; Unsupported: $1,957; Better Use:

$7,792.

2008-BO-1006 Woonsocket Housing Authority Housing Choice Voucher Program and Public

Housing Program Deficiencies Resulted in Cost Exceptions Totaling $904,494,

Woonsocket, RI, 05/14/2008. Questioned: $663,413; Unsupported: $660,805;

Better Use: $241,081.

2008-BO-1008 The State of Connecticut Department of Social Services Significantly Underleased Its

Housing Choice Voucher Program and Did Not Always Comply with Its Annual

Contributions Contracts and HUD Regulations, Hartford, CT, 09/04/2008.

Questioned: $1,643,809; Unsupported: $1,629,369; Better Use: $1,033,400.

2008-CH-1005 The Peoria Housing Authority Did Not Effectively Administer Its Section 8 Housing

Choice Voucher Program, Peoria, IL, 04/10/2008. Questioned: $256,962; Unsupported:

$72,235; Better Use: $296,822.

2008-CH-1006 The Indianapolis Housing Agency Did Not Effectively Operate Its Section 8 Housing

Choice Voucher Program, Indianapolis, IN, 04/15/2008. Questioned: $878,328;

Unsupported: $587,022; Better Use: $9,967,963.

2008-CH-1007 The Housing Authority of the City of Fort Wayne Needs to Improve Its Section 8

Housing Choice Voucher Program Administration, Fort Wayne, IN, 04/18/2008.

Questioned: $1,405,669; Unsupported: $1,269,955; Better Use: $4,143,788.

2008-CH-1008 The Lansing Housing Commission Failed to Follow HUD's Requirements for Its

Nonprofit Development Activities, Lansing, MI, 04/30/2008. Questioned: $753,842;

Better Use: $2,096,824.

Appendix 1: Audit Reports Issued
             

             

141

2008-CH-1011 The Portage Metropolitan Housing Authority Needs to Improve Its Section 8 Housing

Choice Voucher Program Administration, Ravenna, OH, 06/30/2008. Questioned:

$142,360; Unsupported: $51,490; Better Use: $609,504.

2008-CH-1012 The Cincinnati Metropolitan Housing Authority Did Not Effectively Operate Its

Section 8 Housing Quality Standards Inspection Program, Cincinnati, OH,

09/23/2008. Questioned: $35,594; Better Use: $5,870,016.

2008-CH-1013 The Highland Park Housing Commission Lacked Adequate Controls over Unit

Conditions and Maintenance Program, Highland Park, MI, 09/24/2008. Questioned:

$75,626; Better Use: $399,120.

2008-CH-1016 The Springfield Housing Authority Did Not Always Ensure That Section 8 Units Met

HUD's Housing Quality Standards, Springfield, IL, 09/29/2008. Questioned: $59,770;

Better Use: $591,815.

2008-CH-1017 The Chicago Housing Authority Needs to Improve Its Controls over Housing

Assistance and Utility Allowance Payments, Chicago, IL, 09/30/2008. Questioned:

$276,983; Unsupported: $163,794; Better Use: $7,141.

2008-FW-1009 The Shreveport Housing Authority Made Excessive Housing Assistance Payments in

Its Section 8 Housing Choice Voucher Program, Shreveport, LA, 05/08/2008.

Questioned: $18,517; Better Use: $155,674.

2008-FW-1011 The Dallas Housing Authority Mismanaged Its Housing Choice Voucher Program,

Dallas, TX, 07/31/2008. Questioned: $19,584,256; Unsupported: $19,330,423.

2008-KC-1003 The Des Moines Municipal Housing Agency Did Not Always Assign Proper Voucher

Sizes or Accurately Calculate Overpayments from Unreported Income in Its Section 8

Housing Choice Voucher Program, Des Moines, IA, 04/22/2008. Questioned: $99,347;

Better Use: $206,064.

2008-LA-1009 The Housing Authority of the City of Eloy Did Not Have Adequate Internal Controls

to Safeguard Assets and Ensure Compliance with HUD's Requirements, Eloy, AZ,

05/05/2008. Better Use: $755,365.

2008-LA-1010 The Housing Authority of the City of San Buenaventura Did Not Manage HUD

Program Funds in Accordance with HUD Requirements, San Buenaventura, CA,

05/28/2008. Questioned: $496,137; Better Use: $243,352.

2008-LA-1011 The City of Phoenix Housing Department's Controls over Section 8 Tenant Eligibility

and Rent Determinations Were Not Adequate, Phoenix, AZ, 06/17/2008. Questioned:

$384,085; Unsupported: $371,469; Better Use: $540,427.

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. Questioned: $1,446,319;

Unsupported: $840,586; Better Use: $1,210,852.

2008-LA-1015 The Housing Authority of the City of Los Angeles Could Not Show That It Used

HUD Program Funds in Accordance with HUD Requirements, Los Angeles, CA,

08/21/2008. Questioned: $27,801,379.

2008-NY-1008 Tuckahoe Housing Authority Had Weaknesses in the Administration of Its Low-Rent

Housing and Nonprofit Entity Activities, Tuckahoe, NY, 06/19/2008. Questioned:

$262,557; Unsupported: $182,547.

Appendix 1: Audit Reports Issued
             

             

142

2008-NY-1009 Union County Had Weaknesses in Its Housing Choice Voucher Program, Elizabeth,

NJ, 06/30/2008. Questioned: $105,338; Unsupported: $83,476; Better Use: $762,000.

2008-PH-1006 The Richmond Redevelopment and Housing Authority Did Not Effectively Operate

Its Housing Choice Voucher Program, Richmond, VA, 04/15/2008. Questioned:

$430,441; Unsupported: $346,432; Better Use: $3,361,534.

2008-PH-1007 The Harrisburg Housing Authority Did Not Ensure That Its Section 8 Housing Choice

Voucher Program Units Met Housing Quality Standards, Harrisburg, PA, 04/15/2008.

Questioned: $44,909; Better Use: $884,917.

2008-PH-1009 The Housing Authority of the City of Allentown Did Not Ensure That Its Section 8

Housing Choice Voucher Program Units Met Housing Quality Standards, Allentown,

PA, 07/14/2008. Questioned: $88,820; Better Use: $1,278,005.

2008-PH-1010 The District of Columbia Housing Authority Did Not Implement Effective Controls

for Its Leased Housing under Its MTW Program, Washington, DC, 07/30/2008.

Questioned: $410,046; Unsupported: $51,258; Better Use: $435,140.

2008-PH-1012 The Delaware County Housing Authority Did Not Adequately Administer Its

Housing Assistance Payments, Woodlyn, PA, 08/15/2008. Questioned: $85,584;

Unsupported: $26,596; Better Use: $929,688.

2008-PH-1013 The Housing Authority of Baltimore City Did Not Ensure That Its Program Units Met

Housing Quality Standards under Its MTW Program, Baltimore, MD, 09/19/2008.

Questioned: $47,862; Better Use: $3,457,428.

2008-PH-1014 The Housing Authority of the City of Pittsburgh Did Not Adequately Administer Its

Housing Assistance Payments for Leased Housing, Pittsburgh, PA, 09/30/2008.

Questioned: $75,461; Unsupported: $58,470; Better Use: $1,708.

2008-SE-1003 Salish and Kootenai Housing Authority Did Not Properly Recognize and Account for

Program Income from 1937 Act Housing Projects, Pablo, MT, 04/28/2008. Better

Use: $184,226.

2008-SE-1005 Renton Housing Authority Overpaid Rental Assistance and Did Not Have Sufficient

Controls over Rent Reasonableness, Renton, WA, 06/03/2008. Questioned: $11,024.

2008-SE-1006 The Richland Housing Authority Did Not Adequately Account for Housing Choice

Voucher Funds, Richland, WA, 07/07/2008. Questioned: $57,574; Unsupported:

$15,391.

Audit-Related Memorandums1

General Counsel (1 Report)

2008-LA-1801 Actions under PFCRA, First Source Financial USA, Henderson, NV, 09/03/2008.

Questioned: $1,405,201.



1

 The memorandum format is used to communicate the results of reviews not performed in accordance with

generallyaccepted government audit standards, to close out assignments with no findings and recommendations,

to respond to requests for information, to report on the results of a survey, to report results, or to report the results

of civil actions or settlements.

Appendix 1: Audit Reports Issued
               

               

Appendix 2

Tables
             

             

144 Appendix 2: Tables

Table A

Audit reports issued prior to start of period

with no management decision at September 30, 2008

* Significant audit reports described in previous semiannual reports

Report number

and title

Reason for lack of

management decision

Issue date/target

for management decision

*2006-SE-0001 Single

Family Mortgage

Insurance Claims

See chapter 9, page 130 07/11/2006
             

             

Appendix 2: Tables 145

Table B

Significant audit reports in which final action had not been completed

within 12 months after the date of the

Inspector General’s report

Report

number

Report title Issue

date

1997-AT-1003

2002-AT-1002

2002-KC-0002

2002-PH-1005

2003-SE-1002

2004-PH-0001

2004-BO-1004

2004-PH-1003

2004-DP-0002

2004-PH-1008

Municipality of Mayaguez, CDBG and

Section 108 Loan Guarantee Assistance

Programs, Mayaguez, PR

Housing Authority of the City of

Tupelo, Housing Programs Operations,

Tupelo, MS

Nationwide Survey of HUD's Office of

Housing Section 232 Nursing Home

Program

Philadelphia Regional Alliance of

HUD Tenants, Outreach and Training

Assistance Grant and Intermediary

Technical Assistance Grant,

Philadelphia PA

Tenants Union, Outreach and Training

Assistance Grant and Intermediary

Training Assistance Grant, Seattle, WA

Procedures for Filing Uniform

Commercial Code Continuation

Statements

Danbury Housing Authority, Capital

Fund Program, Boston, MA

The Congress of National Black

Churches, Incorporated, Housing

Counseling Program, Washington, DC

Application Control Review of the

Tenant Rental Assistance Certification

System

Safe Haven Outreach Ministry,

Incorporated, Washington, DC

07/01/1997

07/03/2002

07/31/2002

09/30/2002

12/02/2002

11/26/2003

12/05/2003

02/19/2004

02/25/2004

06/03/2004

Decision

date

Final

action

10/29/1997

10/31/2002

11/22/2002

03/31/2003

03/31/2003

04/14/2004

04/05/2004

06/18/2004

07/14/2004

08/31/2004

06/30/2009

04/30/2010

12/31/2008

11/03/2008

11/03/2008

05/31/2009

12/01/2008

11/15/2008

02/28/2009

10/31/2008
             

             

146

Report

number

Report title Issue

date

2004-CH-1803

2004-PH-1012

2004-FW-1009

2005-AT-1004

2005-CH-1003

2005-AT-1013

2005-CH-1017

2005-CH-1020

2006-CH-0001

2006-AT-1001

2006-AT-1004

Somerset Point Nursing Home,

Multifamily Equity Skimming,

Shaker Heights, OH

Mortgage America Bankers, LLC,

Nonsupervised Loan Correspondent,

Kensington, MD

Mays Property Management,Inc.,

Multifamily Management Agent,

Little Rock, AR

Housing Authority of the City of

Durham, NC

Royal Oak Township Housing

Commission, Public Housing

Program, Ferndale, MI

Corporacion Para el Fomento

Economico de la Ciudad Capital

Did Not Administer Its Independent

Capital Fund in Accordance with

HUD Requirements, San Juan,

PR

Flint Housing Commission, Section 8

Housing Program, Flint, MI

Housing Authority of the City of

Gary, Section 8 Housing Program,

Gary, IN

Real Estate Assessment Center's

Physical Condition Assessment

Was Compromised

Miami-Dade Housing Agency Did

Not Ensure Section 8 Assisted Units

Met Housing Quality Standards,

Miami, FL

The Housing Authority of the City

of Prichard Did Not Ensure Section 8

Subsidy Payments Were for Eligible

Units, Tenants, and Landlords,

Prichard, AL

08/09/2004

09/10/2004

09/17/2004

11/19/2004

11/29/2004

09/15/2005

09/23/2005

09/29/2005

11/30/2005

12/21/2005

01/13/2006

Decision

date

Final

action

08/09/2004

01/06/2005

02/23/2005

03/15/2005

03/29/2005

01/11/2006

01/20/2006

01/25/2006

01/10/2006

05/31/2006

04/25/2006

07/31/2009

Note 1

10/01/2008

03/15/2015

10/31/2008

11/30/2008

01/20/2016

12/31/2052

11/30/2008

01/01/2009

06/30/2010

Appendix 2: Tables
             

             

147

Report

number

Report title Issue

date

2006-SE-1001

2006-NY-1003

2006-LA-1009

2006-LA-1010

2006-LA-1011

2006-PH-0002

2006-NY-0001

2006-KC-1011

2006-KC-1012

Idaho Housing and Finance

Association Did Not Monitor

Subsidized Multifamily Projects in

Accordance with Regulations or Its

Annual Contributions Contract

with HUD, Boise, ID

The Housing Authority of the City

of Newark's Controls over Bond

Financing Activities, Obtaining

Supporting Documentation, and

Legal Settlements Require

Improvement, Newark, NJ

Fontana Native American Indian

Center Did Not Adequately

Administer Its Supportive Housing

Program Grant, Fontana, CA

The Owner and Agent of Holiday

Apartments, LA PRO 30, and Two

Worlds II Mismanaged Project

Finances and Operations, Los

Angeles, CA

Sundial Care Center Used $659,746

in Project Funds for Ineligible and

Undocumented Costs and Was Unable

to Account for Revenue Totaling

$407,454, Modesto, CA

HUD Improperly Admitted the

Housing Authority of Baltimore

City into the MTW Demonstration

Program, Baltimore, MD

HUD's Controls over the Reporting,

Oversight, and Monitoring of the

Housing Counseling Assistance

Program Were Not Adequate

The Owner of Wellston Townhouses

in St. Louis County Violated Its

Regulatory Agreement, Wellston, MO

The Owner of HDC Retirement

Village in St. Louis Violated Its

Regulatory Agreement, St. Louis, MO

01/26/2006

02/14/2006

03/03/2006

03/03/2006

05/18/2006

05/31/2006

06/08/2006

06/29/2006

06/29/2006

Decision

date

Final

action

05/23/2006

08/17/2006

03/17/2006

06/23/2006

09/14/2006

10/24/2006

01/08/2007

09/06/2006

08/31/2006

12/31/2008

01/01/2015

03/15/2009

01/01/2013

01/20/2009

01/01/2009

01/31/2009

10/28/2008

10/30/2008

Appendix 2: Tables
             

             

148

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2006-BO-1009

2006-BO-0001

2006-CH-0002

2006-CH-1013

2006-AT-1016

2006-CH-1014

2006-SE-0002

2006-KC-1013

2006-DP-0005

The Rhode Island Housing and

Mortgage Finance Corporation

Incorrectly Made More Than $1.8

Million in Section 8 Subsidy Payments

and Released More Than $900,000

from Restricted Residual Receipts

Accounts, Providence, RI

HUD Incorrectly Approved $42

Million in Operating Subsidies for

Phase-Down for Demolition

Add-On Funding

PIH Is Taking Action to Oversee the

Section 202 Mandatory Conversion

Program,Washington, DC

The Ann Arbor Housing

Commission's Administration of Its

Section 8 Housing Choice Voucher

Program Needs to Be Improved, Ann

Arbor, MI

The Municipality of Humacao Did

Not Administer Its CDBG in

Accordance with HUD

Requirements, Humacao, PR

National City Mortgage Company,

Nonsupervised Lender, Did Not

Comply with HUD's Requirements

Regarding Underwriting of Loans

and Quality Control Reviews,

Miamisburg, OH

The Office of Single Family

Housing Expanded Late

Endorsement Eligibility without

Studying Associated Risks

The Columbus Housing Authority

Improperly Expended and

Encumbered Its Public Housing

Funds, Columbus, NE

Review of HUD's Information

Technology Contingency Planning

and Preparedness

07/06/2006

07/11/2006

07/13/2006

07/21/2006

07/28/2006

07/31/2006

08/16/2006

08/30/2006

08/31/2006

10/24/2006

10/13/2006

07/13/2006

11/15/2006

11/17/2006

01/31/2007

03/30/2007

10/17/2006

11/17/2006

12/01/2009

10/01/2008

12/31/2009

12/31/2016

01/30/2009

09/08/2009

Note 1

11/30/2012

12/15/2008
             

             

149

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2006-AT-1019

2006-DP-0802

2006-CH-1018

2007-AT-1002

2007-LA-0001

2007-PH-1002

2007-DP-0002

2007-CH-1002

2007-DP-0003

The Municipality of Toa Baja Did

Not Administer Its Section 108 Loan

Guarantee Assistance Program in

Accordance with HUD Requirements,

Toa Baja, PR

Assessment of HUD's Compliance

with OMB Memorandum

M-06-16, "Protection of Sensitive

Agency Information"

Saginaw Housing Commission

Improperly Used Public Housing

Funds to Purchase Property,

Saginaw, MI

Pine State Mortgage Company Did

Not Always Comply with FHA

Underwriting and Quality Control

Requirements, Atlanta, GA

Tax Credit Project Owners Are

Allowed to Charge Higher Rents for

Tenant-Based Section 8 Voucher

Households Than Nonvoucher

Households

The Montgomery County Housing

Authority Improperly Used HUD

Funds to Purchase, Renovate, and

Maintain Its Main Office,

Norristown, PA

Review of HUD's Information

Technology Services Contracts

Benton Harbor Housing Commission

Did Not Effectively Manage Its Public

Housing Program and Has Not Used

Special Purpose Grant Funds It

Received More Than Nine Years

Ago, Benton Harbor, MI

Review of HUD's Procurement

Systems

09/06/2006

09/21/2006

09/28/2006

11/03/2006

11/08/2006

12/13/2006

01/18/2007

01/25/2007

01/25/2007

12/11/2006

11/24/2006

01/19/2007

03/02/2007

07/05/2007

04/12/2007

05/25/2007

05/25/2007

05/25/2007

12/31/2008

10/01/2009

12/31/2021

12/31/2008

10/01/2010

02/06/2009

Note 1

05/13/2009

09/30/2010
             

             

150

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2007-KC-0002

2007-CH-1003

2007-LA-1005

2007-DP-0004

2007-AT-1004

2007-BO-1003

2007-DP-0005

2007-LA-1008

2007-AT-1007

2007-KC-0003

HUD Can Improve Its Use of

Residual Receipts to Reduce

Housing Assistance Payments

The Housing Authority of the City

of Evansville Needs to Improve Its

Section 8 Housing Choice Voucher

Program Administration,

Evansville, IN

Oakland Housing Authority Did

Not Comply with Procurement

and Contracting Requirements,

Oakland, CA

FY 2006 Review of Information

Systems Controls in Support of

the Financial Statements Audit

The Wilmington Housing Authority

Needs to Improve Internal Controls

over Its Program, Wilmington, NC

The Office of Community

Development, City of Chicopee,

Did Not Properly Award and

Administer CDBG and HOME

Funds Used for its Housing

Activities, Chicopee, MA

Review of HUD's Information

Technology Security Program

The Navajo Housing Authority

Should Discontinue Its Use of

Subgrantees for Development Projects

or Implement Additional Program

Controls, Window Rock, AZ

The Municipality of Toa Baja Needs

to Improve Its CDBG Program

Administration, Toa Baja, PR

HUD Did Not Recapture Excess

Funds from Assigned Bond-Financed

Projects

01/29/2007

02/13/2007

02/14/2007

02/22/2007

03/09/2007

03/21/2007

04/05/2007

04/09/2007

04/11/2007

04/30/2007

01/29/2007

06/11/2007

06/14/2007

06/21/2007

06/25/2007

07/19/2007

08/03/2007

08/02/2007

07/16/2007

08/27/2007

01/31/2011

12/31/2016

10/31/2008

12/30/2008

06/28/2010

01/16/2009

11/30/2008

Note 1

05/30/2009

01/31/2009
             

             

151

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2007-BO-0002

2007-LA-1011

2007-LA-1012

2007-SE-0001

2007-NY-1008

2007-FW-1011

2007-FW-1012

2007-CH-1009

HUD Did Not Process Multifamily

Accelerated Processing Applications

within Established Processing Goals

and the Multifamily Accelerated

Processing Guide Is Outdated

Suburban Mortgage Company Did

Not Comply with HUD

Requirements in the Origination

of FHA-Insured Single-Family

Mortgages, Phoenix, AZ

Central City Lutheran Mission

Did Not Properly Administer Its

Supportive Housing Program

Grants, San Bernardino, CA

HUD Did Not Ensure That

Payments to Contract

Administrators Were for Work

Performed or That Interest Was

Earned on Advances and Recovered

The City of Newark Did Not Always

Administer Its CDBG Program in

Accordance with HUD Requirements,

Newark, NJ

Capmark Finance, Inc.,

Misrepresented Asbury Square

Apartments' Financial and Physical

Condition When Underwriting the

$9.098 Million Loan, Tulsa, OK

Fallbrook Apartments' Owner

and/or Management Agent Made

Unauthorized Distributions of the

Project's Funds, Houston, TX

The Boyne City Housing

Commission Failed to Follow

HUD's Requirements for Its

Nonprofit Development Activities,

Boyne City, MI

05/21/2007

05/29/2007

06/04/2007

06/07/2007

06/22/2007

07/02/2007

07/06/2007

07/17/2007

09/07/2007

12/31/2007

09/21/2007

10/05/2007

10/17/2007

10/23/2007

10/10/2007

11/06/2007

10/15/2009

12/31/2008

Note 1

10/31/2008

10/17/2008

10/29/2008

12/31/2008

10/31/2017
             

             

152

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2007-CH-1010

2007-CH-1011

2007-LA-1014

2007-CH-1012

2007-AT-1010

2007-PH-1011

2007-NY-1011

2007-PH-0002

2007-DP-0006

The Madison County Housing

Authority Did Not Effectively

Administer Its Section 8 Housing

Choice Voucher Program,

Collinsville, IL

The Indianapolis Housing Agency

Lacked Adequate Controls over

Expenses Charged to Its Section 8

Program, Indianapolis, IN

The Housing Authority of the

County of San Mateo Did Not Use

HUD Program Funds in Accordance

with HUD Requirements, San

Mateo, CA

The Plymouth Housing Commission

Needs to Improve Its Section 8

Housing Choice Voucher Program

Administration, Plymouth, MI

The Cathedral Foundation of

Jacksonville Used More Than $2.65

Million in Project Funds for Questioned

Costs, Jacksonville, FL

The Housing Commission of Anne

Arundel County Did Not Always

Operate Its Housing Choice Voucher

Program in Accordance with Federal

Requirements, Glen Burnie, MD

The Hoboken Housing Authority

Requires Improved Controls over

Its Capital Fund Program and Cash

Disbursement Process, Hoboken, NJ

HUD's Oversight of Contractors'

Marketing of Its Real Estate-Owned

Properties

Review of HUD's Personal Identity

Verification and Privacy Program

07/20/2007

07/23/2007

07/27/2007

08/03/2007

08/14/2007

08/14/2007

08/17/2007

08/17/2007

08/28/2007

11/16/2007

11/19/2007

11/23/2007

11/23/2007

12/03/2007

12/11/2007

12/11/2007

12/12/2007

12/20/2007

11/14/2008

11/18/2008

11/24/2017

11/30/2008

12/31/2008

11/03/2008

10/31/2008

12/31/2008

04/30/2009
             

             

153

Report

number

Report title Issue

date

Decision

date

Final

action

Appendix 2: Tables

2007-NY-1012

2007-AT-0001

2007-DP-0007

2007-LA-1016

2007-CH-1014

2007-KC-0004

2007-KC-0801

2007-AT-1011

2007-CH-1015

2007-PH-1013

The City of Passaic's Community

Development Department Has

Weaknesses in Its HOME Investment

Partnerships Program, Passaic, NJ

HUD Needs to Improve Controls

over Its Contract Administration

Processes

Vulnerability Assessment of HUD's

Computer Network

A Community of Friends Did Not

Always Administer Its Cash Match

in Compliance with HUD

Requirements, Los Angeles, CA

The Peoria Housing Authority Did

Not Effectively Administer Its Section

8 Housing Choice Voucher Program,

Peoria, IL

More Than 80 Percent of Recently

Insured Title II Manufactured

Housing Loans Are on Homes

with Substandard Foundations

Lenders Submitted Title II

Manufactured Housing Loans for

Endorsement without the Required

Foundation Certifications

The Wilmington Housing Authority

Did Not Follow HUD Requirements

for Its Nonprofit Development

Activities, Wilmington, NC

Cook County Lacked Adequate

Controls over Its HOME Investment

Partnerships Program, Chicago, IL

The Harrisburg Housing Authority

Did Not Properly Administer Its

Low-Rent Public Housing Program,

Harrisburg, PA

09/12/2007

09/19/2007

09/19/2007

09/21/2007

09/24/2007

09/24/2007

09/24/2007

09/26/2007

09/26/2007

09/27/2007

12/17/2007

09/19/2007

01/28/2008

01/18/2008

01/14/2008

03/28/2008

03/11/2008

01/24/2008

01/24/2008

11/28/2007

12/12/2008

09/30/2009

12/15/2008

01/17/2009

11/14/2008

11/30/2008

03/07/2009

01/01/2011

10/30/2008

11/26/2008
             

             

154

Report

number

Report title Issue

date

2007-CH-1016

2007-FW-0001

2007-CH-1017

2007-CH-1018

2007-SE-1004

The Plymouth Housing Commission

Failed to Adequately Administer Its

Section 8 Housing Choice Voucher

Program, Plymouth, MI

Overpayments in the Housing

Choice Voucher Program Occurred

When Public Housing Agencies

Subsidized Rental Units with More

Bedrooms Than Authorized

The City of Cincinnati Lacked

Adequate Controls over Its HOME

Investment Partnerships Program,

Cincinnati, OH

The City of Milwaukee Needs to

Improve Existing Controls over Its

HOME Program Regarding Housing

Conditions and Contracting,

Milwaukee, WI

The Tacoma Consortium Did Not

Properly Administer Its HOME

Investment Partnerships Grants,

Tacoma, WA

09/28/2007

09/28/2007

09/30/2007

09/30/2007

09/30/2007

Decision

date

Final

action

01/24/2008

01/24/2008

01/28/2008

03/20/2008

01/25/2008

01/24/2009

12/31/2008

10/15/2008

10/30/2009

12/31/2008

Appendix 2: Tables
             

             

155

Significant audit reports issued within the past 12 months

that were described in previous semiannual reports in which final action had not

been completed as of 09/30/2008

Report

number

Report title Issue

date

2008-DP-0001

2008-NY-0801

2008-FW-1001

2008-SE-1001

2008-DP-0002

2008-LA-0001

2008-BO-1001

2008-AT-1001

2008-FO-0003

2008-AT-1002

Review of Unisys Performance and

Security Controls

CDBG Disaster Recovery Assistance

Funds Lower Manhattan Development

Corporation

The Housing Authorities of the City of

Konawa, City of Langston, City of Pauls

Valley, City of Wynnewood, Town

of Cheyenne, and Caddo Electric

Cooperative Improperly Awarded Their

Management Contracts and Did Not

Manage Certain Operations or

Administer Funds Properly, Ada, OK

Accounting for Program Income from

NAHASDA-Assisted 1937 Act Housing

Projects at Warm Springs Housing

Authority, Warm Springs, OR

Review of FHA Controls over Its

Information Technology Resources

The Los Angeles Multifamily Hub Did

Not Properly Monitor Its PerformanceBased Contract Administrator,

Los Angeles LOMOD

The City of Chicopee Did Not Properly

Administer More Than $4.3 Million in

CDBG Funds, Chicopee, MA

The Municipality of Ponce Needs to

Improve Controls over Its Section 8

Program, Ponce, PR

Additional Details to Supplement Our

Report on HUD's FY 2007and 2006

Financial Statements

The Municipality of Canovanas Needs

to Improve Administration of Its

CDBG Program, Canovanas, PR

10/19/2007

10/23/2007

10/26/2007

10/30/2007

10/31/2007

11/05/2007

11/07/2007

11/08/2007

11/14/2007

11/15/2007

Decision

date

Final

action

02/08/2008

04/03/2008

02/22/2008

07/23/2008

02/26/2008

03/03/2008

09/24/2008

01/16/2008

05/14/2008

03/07/2008

01/30/2009

10/10/2008

05/01/2009

03/31/2009

12/05/2008

03/02/2009

02/15/2009

12/31/2008

12/31/2008

11/14/2008

Appendix 2: Tables
             

             

156

Report

number

Report title Issue

date

2008-CH-1001

2008-DE-1001

2008-FW-1002

2008-AO-0001

2008-FW-1003

2008-NY-1002

2008-FW-1004

2008-LA-1003

2008-NY-0001

The Housing Authority of the City of

Michigan City Failed to Follow Federal

Requirements for Its Nonprofit

Development Activities, Michigan City,

IN

The Housing Authority of the City of

Colorado Springs Improperly Managed

Contracts and Improperly Maintained

Its Section 8 Waiting List, Colorado

Springs, CO

The Shreveport Housing Authority Did

Not Ensure That Section 8 Units Met

Housing Quality Standards, Shreveport,

LA

HUD Had a Less Than 1 Percent Error

Rate in Housing Ineligible Participants

for Katrina Disaster Housing Assistance

Program and Disaster Voucher Program

Disaster Housing Assistance

The Dallas Housing Authority

Mismanaged Its Portable Vouchers,

Dallas, TX

Richard A. Hutchens and Associates,

Management Agent, Used Project Funds

for Ineligible and/or Unsupported

Costs, Buffalo, NY

Community Development Corporation

of Brownsville Did Not Use Its Housing

Counseling Grants for the Intended

Purpose, Brownsville, TX

Home for Life Foundation Did Not

Properly Administer Its Supportive

Housing Program Grants, Los Angeles,

CA

HUD's Monitoring Controls and

Procedures Regarding the CDBG

Program Were Not Adequate

11/19/2007

11/27/2007

11/28/2007

12/04/2007

12/05/2007

12/05/2007

12/18/2007

12/18/2007

12/31/2007

Decision

date

Final

action

03/10/2008

01/10/2008

03/27/2008

04/01/2008

03/19/2008

03/05/2008

04/16/2008

02/26/2008

03/27/2008

01/23/2023

01/31/2009

03/01/2009

12/31/2009

03/31/2011

11/14/2008

03/09/2009

02/22/2009

06/30/2009

Appendix 2: Tables
             

             

Appendix 2: Tables 157

Report

number

Report title Issue

date

2008-FW-1005

2008-AT-1004

2008-CH-1002

2008-AT-0001

2008-AT-1005

2008-KC-0001

2008-LA-1004

2008-NY-1003

2008-AO-1002

2008-LA-1006

The Housing Authority of the City of

McKinney Inappropriately Advanced

Funds and Transferred Real Estate to Its

Not-for-Profit Affiliate, McKinney, TX

The City of West Palm Beach Did Not

Properly Administer Its CDBG

Program, West Palm Beach, FL

The Akron Metropolitan Housing

Authority Lacked Adequate Controls

over Its 5(h) Homeownership Proceeds,

Akron, OH

The Atlanta PIH Did Not Ensure That

the Housing Authority of DeKalb

County Accurately Implemented Its

Memorandum of Agreement

The City of Fort Lauderdale Did Not

Properly Administer Its CDBG

Program, Fort Lauderdale, FL

HUD's Quality Assurance Division

Did Not Always Resolve Materially

Deficient or Potentially Fraudulent

Loans Consistently

The City of Los Angeles Housing

Department Did Not Adequately

Monitor HOME Program-Assisted

Rehabilitation Construction, Los

Angeles, CA

The City of New York's Department of

Housing Preservation and Development

Had Administrative Weaknesses in Its

HOME Program, New York, NY

State of Louisiana, Road Home

Program, Funded 418 Grants Coded

Ineligible or Lacking an Eligibility

Determination, Baton Rouge, LA

Phoenix Apartments Did Not Use

Project Funds in Accordance with HUD

Requirements, Concord, CA

01/07/2008

01/09/2008

01/09/2008

01/10/2008

01/11/2008

01/14/2008

01/15/2008

01/23/2008

01/30/2008

02/04/2008

Decision

date

Final

action

04/24/2008

05/05/2008

03/12/2008

01/10/2008

05/05/2008

06/05/2008

05/14/2008

05/21/2008

05/12/2008

05/28/2008

03/25/2009

01/09/2009

12/31/2008

12/31/2008

01/11/2009

12/31/2008

05/14/2009

12/01/2008

11/30/2008

05/28/2009
             

             

158

Report

number

Report title Issue

date

2008-LA-1007

2008-KC-1001

2008-CH-1003

2008-KC-1002

2008-SE-1002

2008-DP-0003

2008-LA-0002

2008-LA-1008

2008-AT-1006

2008-DE-1002

The Housing Authority of the County

of Los Angeles Did Not Adequately

Administer Its Section 8 Voucher

Program, Los Angeles, CA

The Douglas County Housing

Authority Improperly Encumbered and

Spent Its Public Housing Funds,

Omaha, NE

The Highland Park Housing

Commission Did Not Effectively

Administer Its Public Housing and

Capital Fund Programs, Highland Park,

MI

The Schuyler Housing Authority

Improperly Used Public Housing Funds

to Support a Non-HUD Assisted Living

Program, Schuyler, NE

Oneida Housing Authority Did Not

Properly Recognize and Use Program

Income from Native American Housing

Assistance and Self-Determination

Act-Assisted 1937 Act Housing Projects,

Oneida, WI

FY 2007 Review of Information Systems

Controls in Support of the Financial

Statements Audit

HUD Did Not Have Adequate Internal

Controls over Its FHA Appraiser Roster

The Housing Authority of the County

of San Joaquin Did Not Administer

Capital Funds in Accordance with

HUD Requirements, Stockton, CA

Fulton County Lacked Adequate

Controls over Its HOME Program,

Atlanta, GA

The Housing Authority of the City of

Brighton Did Not Maintain Proper

Inventory Records and Improperly

Awarded Contracts, Brighton, CO

02/08/2008

02/11/2008

02/15/2008

02/20/2008

02/20/2008

03/04/2008

03/04/2008

03/06/2008

03/07/2008

03/18/2008

Decision

date

Final

action

09/24/2008

05/28/2008

03/19/2008

06/11/2008

06/10/2008

06/26/2008

06/17/2008

05/08/2008

06/13/2008

03/18/2008

09/24/2009

03/31/2017

04/01/2009

02/28/2018

03/31/2009

12/30/2008

10/31/2008

05/08/2009

06/01/2009

11/30/2010

Appendix 2: Tables
             

             

159

Report

number

Report title Issue

date

2008-FW-1006

2008-FW-1008

2008-KC-0002

2008-AO-0801

2008-PH-1005

Dallas Housing Authority Management

Failed to Implement Internal Controls

over Its Housing Choice Voucher

Program, Dallas, TX

The Owner of Century Mission Oaks

Violated Its Regulatory Agreement with

HUD, San Antonio, TX

HUD Did Not Ensure That Housing

Authorities Properly Administered the

Community Service and Self-Sufficiency

Requirement

Review of Duplication of Participants

Benefits under HUD's Katrina Disaster

Housing Assistance Program and

Disaster Voucher Program

Elders Place, Incorporated, Did Not

Administer Project Operating Funds in

Accordance with HUD Requirements,

Philadelphia, PA

03/20/2008

03/21/2008

03/24/2008

03/28/2008

03/28/2008

Decision

date

Final

action

07/07/2008

06/26/2008

07/22/2008

08/01/2008

07/23/2008

12/15/2009

07/11/2009

10/01/2011

08/01/2009

07/10/2009

Appendix 2: Tables



Audits excluded

46 audits under repayment plans

32 audits under formal judicial review,

investigation, or legislative solution

Notes

1 Management did not meet the target date.

Target date is under 1 year old.
             

             

160

Table C

Inspector General-issued reports with questioned and

unsupported costs at September 30, 2008

(thousands)

Audit reports Number of

audit reports

Unsupported

costs

For which no management decision had been made

by the commencement of the reporting period

For which litigation, legislation, or investigation was

pending at the commencement of the reporting

period

For which additional costs were added to reports in

beginning inventory

For which costs were added to noncost reports

Which were issued during the reporting period

Which were reopened during the reporting period

Subtotals (A+B)

76,787

14,768

813

0

100,656

0

193,024

Questioned

costs

125,644

21,423

3,288

0

153,802

0

304,157

28

8

-

0

66

0

102

A1

A2

A3

A4

B1

B2

For which a management decision was made during

the reporting period

(1) Dollar value of disallowed costs:

 - Due HUD

 - Due program participants

(2) Dollar value of costs not disallowed

For which management decision had been made not

to determine costs until completion of litigation,

legislation, or investigation

For which no management decision had been made

by the end of the reporting period

100,822

8,690

85,577

6,555

11,524

80,678

<80,671>4

193,609

24,400

160,584

8,625

14,317

96,231

<95,897>4

561

142

48

133

6

40

<96>4

C

D

E

1

 38 audit reports also contain recommendations with funds be put to better use.

2

 7 audit reports also contain recommendations with funds due program participants.

3

 12 audit reports also contain recommendations with funds agreed to by management.

4

 The figures in brackets represent data at the recommendation level as compared to the report level.

 See explanations of tables C and D.

Appendix 2: Tables
             

             

161

Table D

Inspector General-issued reports with recommendations

that funds be put to better use at September 30, 2008

(thousands)

Audit reports Number of

audit reports

Dollar

value

For which no management decision had been made by the

commencement of the reporting period

For which litigation, legislation, or investigation was

pending at the commencement of the reporting period

For which additional costs were added to reports in

beginning inventory

For which costs were added to noncost reports

Which were issued during the reporting period

Which were reopened during the reporting period

Subtotals (A+B)

1,401,634

87,487

7,779

0

67,616

0

1,564,516

21

8

-

0

48

0

77

A1

A2

A3

A4

B1

B2

For which a management decision was made during the

reporting period

(1) Dollar value of disallowed costs:

- Due HUD

- Due program participants

(2) Dollar value of costs not disallowed

For which management decision had been made not to

determine costs until completion of litigation, legislation,

or investigation

For which no management decision had been made by the

end of the reporting period

1,297,490

940,972

33,243

323,275

15,863

251,163

<36,736>4

451

82

35

73

4

28

<45>4

C

D

E

1

 38 audit reports also contain recommendations with questioned costs.

2

 1 audit report also contains recommendations with funds due program participants.

3

 4 audit reports also contain recommendations with funds agreed to by management.

4

 The figures in brackets represent data at the recommendation level as compared to the report level.

 See explanations of tables C and D.

Appendix 2: Tables
             

             

162

Explanations of tables C and D

Appendix 2: Tables

The Inspector General Act Amendments of 1988 require Inspectors General and agency heads to report

cost data on management decisions and final actions on audit reports. The current method of reporting at the

"report" level rather than at the individual audit "recommendation" level results in misleading reporting of

cost data. Under the Act, an audit "report" does not have a management decision or final action until all

questioned cost items or other recommendations have a management decision or final action. Under these

circumstances, the use of the "report" based rather than the "recommendation" based method of reporting

distorts the actual agency efforts to resolve and complete action on audit recommendations. For example,

certain cost items or recommendations could have a management decision and repayment (final action) in a

short period of time. Other cost items or nonmonetary recommendation issues in the same audit report may

be more complex, requiring a longer period of time for management's decision or final action. Although

management may have taken timely action on all but one of many recommendations in an audit report, the

current "all or nothing" reporting format does not take recognition of their efforts.

The closing inventory for items with no management decision on tables C and D (line E) reflects figures at

the report level as well as the recommendation level.


               

               

Appendix 3

Index
             

             

164

State Page numbers

Alaska 82

Alabama 44

Arkansas 121

Arizona 14, 17, 20, 35, 41, 48, 119, 122

California 18, 20, 22, 24, 30, 41, 42, 54, 55, 56, 57, 67, 76, 82, 98, 99, 100, 110,

114, 115, 120, 131

Colorado 18, 19, 20, 21, 24, 74, 101, 124

Connecticut 13, 33, 47, 66, 86

District of Columbia 36, 55, 100, 116, 123, 130

Delaware 12, 115, 124

Florida 17, 19, 24, 39, 40, 46, 48, 52, 53, 54, 56, 57, 59, 63, 67, 70, 78, 85, 121,

125

Georgia 13, 43, 79, 117

Hawaii 121

Iowa 38, 69

Idaho 84

Illinois 17, 25, 37, 38, 51, 54, 55, 57, 59, 76, 100, 115, 116, 117, 118, 120, 123

Indiana 23, 30, 31, 47, 49, 57, 78, 119, 120

Kansas 12, 21, 58, 59, 82, 119, 120, 126

Louisiana 26, 38, 49, 67, 84, 93, 94, 95, 96, 98, 99, 100, 101

Maine 58

Maryland 25, 32, 53, 68, 116, 117, 118, 121, 122

Massachusetts 25, 50, 67, 68, 119, 120, 122, 123

Michigan 22, 24, 25, 40, 42, 115, 116, 118

Minneapolis 14, 70, 99, 114, 117, 126

Mississippi 66, 83, 95, 96, 97, 99, 102

Missouri 11, 15, 25, 57, 58, 59, 60, 69, 80, 114, 118, 121, 123, 124, 125

Montana 44, 122

Nebraska 49, 119

Nevada 53, 118, 119

New Hampshire 122

New Jersey 11, 17, 21, 22, 23, 36, 48, 50, 60, 74, 84, 85, 86, 120, 124

New York 12, 23, 26, 43, 49, 50, 51, 52, 53, 59, 66, 68, 69, 74, 82, 84, 117, 119,

120

Appendix 3: Index
             

             

Appendix 3: Index 165

State Page numbers

North Carolina 46, 49, 54, 57, 79, 122

Ohio 31, 36, 56, 75, 77, 110, 115, 124, 125

Oklahoma 73

Pennsylvania 19, 33, 34, 39, 60, 66, 69, 83, 116, 124

Puerto Rico 15, 75

Rhode Island 35, 51

South Dakota 47, 59

Tennessee 20, 119, 122

Texas 15, 18, 21, 22, 30, 49, 83, 98, 114, 115, 117, 121, 123, 131

Utah 24, 59, 126

Virginia 21, 22, 26, 32, 53, 82, 115, 126

Washington 12

Wyoming 14


               

               

HUD OIG

Operations

Telephone Listing
             

             

168

Office of Audit

Headquarters Office of Audit, Washington, DC 202-708-0364

Region 1 Boston, MA 617-994-8380

Hartford, CT 860-240-4800

Region2 New York, NY 212-264-4174

Albany, NY 518-464-4200

Buffalo, NY 716-551-5755

Newark, NJ 973-622-7900

Region 3 Philadelphia, PA 215-656-0500

Baltimore, MD 410-962-2520

Pittsburgh, PA 412-644-6372

Richmond, VA 804-771-2100

Region 4 Atlanta, GA 404-331-3369

Miami, FL 305-536-5387

Greensboro, NC 336-547-4001

Jacksonville, FL 904-232-1226

Knoxville, TN 865-545-4369

San Juan, PR 787-766-5202

Region 5 Chicago, IL 312-353-7832

Columbus, OH 614-469-5745

Detroit, MI 313-226-6190

Region 6 Fort Worth, TX 817-978-9309

Houston, TX 713-718-3199

Oklahoma City, OK 405-609-8606

San Antonio, TX 210-475-6898

Regions 7/8 Kansas City, KS 913-551-5870

St. Louis, MO 314-539-6339

Denver, CO 303-672-5452

Regions 9/10 Los Angeles, CA 213-894-8016

Phoenix, AZ 602-379-7250

San Francisco, CA 415-489-6400

Seattle, WA 206-220-5360

Gulf Coast Region New Orleans, LA 504-671-3715

Jackson, MS 601-965-4700

HUD OIG Operations Telephone Listing
             

             

HUD OIG Operations Telephone Listing 169

Office of Investigation

Headquarters Office of Investigation, Washington, DC 202-708-0390

Region 1 Boston, MA 617-994-8450

Hartford, CT 860-240-4800

Manchester, NH 603-666-7988

Region 2 New York, NY 212-264-8062

Buffalo, NY 716-551-5755

Newark, NJ 973-776-7347

Region 3 Philadelphia, PA 215-656-0500

Baltimore, MD 410-962-4502

Pittsburgh, PA 412-644-6598

Richmond, VA 804-771-2100

Region 4 Atlanta, GA 404-331-3359

Miami, FL 305-536-3087

Greensboro, NC 336-547-4000

Knoxville, TN 865-545-4000

San Juan, PR 787-766-5868

Tampa, FL 813-228-2026

Region 5 Chicago, IL 312-353-4196

Cleveland, OH 216-522-4421

Columbus, OH 614-469-6677

Detroit, MI 313-226-6280

Indianapolis, IN 317-226-5427

Minneapolis-St. Paul, MN 612-370-3130

Region 6 Arlington, TX 817-978-5440

Houston, TX 713-718-3196

Oklahoma City, OK 405-609-8601

San Antonio, TX 210-475-6819

Region 7/8 Kansas City, KS 913-551-5866

St. Louis, MO 314-539-6559

Denver, CO 303-672-5350

Billings, MT 406-247-4080

Salt Lake City, UT 801-524-6090

Region 9/10 Los Angeles, CA 213-894-0219

San Francisco, CA 415-489-6683

Phoenix, AZ 602-379-7255

Sacramento, CA 916-930-5691

Las Vegas, NV 702-366-2144

Seattle, WA 206-220-5380
             

             

170

Gulf Coast Region New Orleans, LA 504-671-3701

Arlington, TX 817-978-5440

Baton Rouge, LA 225-334-4913

Hattiesburg, MS 601-299-4279

Houston, TX 713-718-3196

Jackson, MS 601-965-5772

Washington, DC 202-708-0390

HUD OIG Operations Telephone Listing


Report fraud, waste, and mismanagement in HUD

programs and operations by

Calling the OIG Hotline: 1-800-347-3735

Faxing the OIG Hotline: 202-708-4829

Sending written information to:

Department of Housing and Urban Development

Inspector General Hotline (GFI)

451 7th Street, SW

Washington, DC 20410

E-mailing the OIG Hotline: hotline@hudoig.gov

Internet:http://www.hud.gov/complaints/fraud_waste.cfm

All information is confidential,

and you may remain anonymous.
               

               

This Semiannual Report to Congress is dedicated to the brave men and

women of the armed forces. We especially honor those who have been

wounded and pay tribute to those who have paid the ultimate price to

defend our country.

Semiannual Report to Congress

April 1, 2008, through September 30, 2008

www.hud.gov/offices/oig

No. 60 HUD-2008-10-OIG