U.S. Department of Housing and Urban Development 

Office of Inspector General

Semiannual Report to Congress

October 1, 2010, through March 31, 2011
Audit profile of performance 

for the period October 1, 2010, through March 31, 2011

Results This reporting period

Investigation profile of performance 

for the period October 1, 2010, through March 31, 2011

Results This reporting period

Hotline profile of performance 

for the period October 1, 2010, through March 31, 2011

Results This reporting period

1

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

2 Included in the arrests is our focus on the nationwide Fugitive Felon Initiative which amounts to 60 arrests. For 

more information on the Fugitive Felon Initiative, see page 43. 

Profile of Performance

Recommendations that funds be put to better use1

Recommended questioned costs1

Collections from audits

Administrative sanctions

$767,733,003

$96,031,267

$25,821,283

2

Funds put to better use

Recoveries/receivables

$799,973

$48,202

Funds put to better use

Recoveries/receivables

Arrests2

Indictments/informations

Convictions/pleas/pretrial diversions

Civil actions

Administrative sanctions

Suspensions

Debarments

Limited denial of participation

Program or professional license suspensions

Evictions or removal from subsidy program

Search warrants

Subpoenas issued

$58,832,240

$262,552,001

767

693

500

77

405

79

77

3

115

131

51

845
iii

It is an honor to present to you the U.S. Department of Housing 

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

Semiannual Report to Congress for the first half of fiscal year 2011. HUD 

OIG employees–auditors, agents, attorneys, and support staff–maintain 

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

United States. 

The scope and impact of HUD programs have always resulted in a 

robust agenda of OIG plenary oversight responsibilities. Over the past 

few years, these responsibilities have significantly expanded as the 

result of legislation and of Administration and departmental initiatives. 

Likewise, OIG’s investigative, audit, evaluative, and legal activities have 

evolved at a remarkable pace. 

During this reporting period, we had $767.7 million in funds put 

to better use, questioned costs of $96 million, and $262.5 million in 

recoveries and receivables while issuing 78 audits. We also had 693 

indictments and informations, 500 convictions, and 767 arrests during 

this reporting period. This exceptional work has had a dramatic effect in reducing fraud and the misuse 

of taxpayer dollars.

Our high profile audits and investigations continue to complement the Department’s strategic initiatives, 

with the health of the Federal Housing Administration’s (FHA) mortgage insurance fund receiving particular 

attention. HUD OIG staff continues to work with the Department to improve HUD’s effectiveness and as 

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

Some of our key investigations this reporting period include the case against Taylor, Bean & Whitaker 

Mortgage Corporation (Taylor, Bean & Whitaker), a former FHA-approved direct endorsement lender 

and Government National Mortgage Association (Ginnie Mae) issuer. Former Colonial Bank employees 

Catherine Kissick and Teresa Kelly each pled guilty in U.S. District Court, Alexandria, VA, to committing 

a conspiracy to commit bank, wire, and securities fraud or making false statements to Federal agents. 

Between 2002 and August 2009, Kissick and Kelly conspired with other individuals and provided funding 

to Taylor, Bean & Whitaker for phony or previously pledged loans, and Bowman, Ragland, Brown, and 

other individuals conspired and sold phony and previously pledged loans to investors in the secondary 

mortgage market. Their actions and those of other coconspirators caused Taylor, Bean & Whitaker to 

submit false statements to HUD, Ginnie Mae, and other financial entities. HUD, Ginnie Mae, and other 

financial entities realized losses in excess of $1.9 billion. 

In the area of public housing, Elias Castellanos, a former Housing Authority of New Orleans contract 

chief financial officer, was sentenced in U.S. District Court, New Orleans, LA, to 46 months incarceration 

and 36 months probation, ordered to pay the Authority $225,889 in restitution, and fined $75,000 for 

his earlier guilty plea to committing embezzlement. From September 2006 to June 2009, Castellanos 

submitted false billings for accounting services and fraudulently obtained $900,927 in Authority funds. 

In the area of Community Development Block Grants (CDBG), Kwame Kilpatrick, the former mayor 

of Detroit, MI; Bobby Ferguson, doing business as Ferguson Enterprises; and other individuals were each 

A Message from the Deputy Inspector 

General

A Message from the Deputy Inspector General
charged in U.S. District Court, Detroit, MI, with allegedly obstructing justice and committing bribery, 

extortion, Federal income tax evasion, an organized scheme to defraud, and mail and wire fraud. From 

2003 to 2004, Kilpatrick, Ferguson, and other individuals allegedly planned fraudulent activities and 

attempted to obtain $18 million in HUD CDBG loan guarantees for demolition work at the Book Cadillac 

Hotel. 

We audited the underwriting of a $45.6 million mortgage loan that was acquired by Deutsche Bank 

Berkshire Mortgage, Inc., Bethesda, MD (lender), to rehabilitate Wingate Towers and Garden Apartments. 

The lender acquired and became responsible for the loan origination activities, personnel, books, and 

records related to this loan from Berkshire Mortgage Finance Limited Partnership (underwriter) in October 

2004. The FHA-insured loan went into default in October 2009, and in May 2010, HUD paid a $44.3 million 

insurance claim to the lender. HUD sold the property in a note sale in September 2010 for $14.5 million, 

resulting in a loss of $29.8 million. The underwriter failed to properly assess the financial resources and 

the construction capabilities of the owner and the general contractor. 

We audited the District of Columbia’s administration of its HOME Investment Partnerships Program 

(HOME) and found that the grantee did not administer its program in accordance with Federal 

requirements. The grantee also accumulated funds that it could have used to improve its administration 

of its HOME program or fund additional eligible HOME projects. We recommended that HUD require 

the grantee to recover more than $1.6 million that it spent on ineligible expenses and provide support 

for nearly $6.5 million in expenses or repay that amount to the HOME program. In addition, the grantee 

should use nearly $1.6 million in accumulated funds to improve its administration of the program or fund 

additional eligible HOME projects. 

As we address an expanding mission to protect HUD’s vital programs, I would once again like to express 

my appreciation to Congress and to the Department for their sustained commitment to supporting the 

important work of our office. Also, I would also like to commend Secretary Donovan for his leadership 

and tireless efforts in these challenging times.

Michael P. Stephens

Deputy Inspector General 

iv Message from the Deputy Inspector General
Audit reports issued by program

Single-family housing, 13%

Multifamily housing, 8%

Public and Indian housing, 28%

Community planning and 

development, 36%

Other programs, 15%

Audit monetary benefits identified by program

Single-family housing, 1%

Multifamily housing, 3%

Public and Indian housing, 3%

Community planning and 

development, 5%

Other programs,* 88%

Audit monetary benefits identified in millions of dollars

$800

$700

$600

$500

$400

$300

$200

$100

$0

Single-family 

housing

Multifamily 

housing

Public and 

Indian housing

Community 

planning and 

development

Other 

programs

$6.6 $30.2 30.2 $39.2

$757.5

* Other programs include financial and information system audits.

Audit Charts v
Investigative cases opened by program area (total: 796)

Single-family housing, 32% (260)

Public and Indian housing, 43% 

(341)

Multifamily housing, 8% (64)

Community planning and 

development, 12% (93)

Other, 5% (38)

Investigative recoveries by program area (total: $262,552,001.10)

Single-family housing, 91% 

($237,664,629.96)

Public and Indian housing, 5% 

($13,496,929.49)

Multifamily housing, 1% 

($3,382,319.18)

Community planning and 

development, 3% ($7,912,335.14)

Other, 0% ($95,787.33)

Investigative cases closed by program area (total: 524)

Single-family housing, 29% (155)

Public and Indian housing, 43% 

(224)

Multifamily housing, 9% (49)

Community planning and 

development, 13% (66)

Other, 6% (30)

vi Investigation Charts
Acronyms List

AIGI Assistant Inspector General for Investigation

ARIGA Assistant Regional Inspector General for Audit

ARRA American Recovery and Reinvestment Act of 2009

ASAC Assistant Special Agent in Charge

CDBG Community Development Block Grant

CHDO Community Housing Development Organization

CFFP Capital Fund Financing Program

CFR Code of Federal Regulations

CPD Office of Community Planning and Development

FEMA Federal Emergency Management Agency

FFI Fugitive Felon Initiative

FFMIA Federal Financial Management Improvement Act of 1996

FHA Federal Housing Administration

FTE Full time equivalent

FY fiscal year

GAO Government Accountability Office

Ginnie Mae Government National Mortgage Association 

HECM home equity conversion mortgage

HERA Housing and Economic Recovery Act of 2008

HOME HOME Investment Partnerships Program

HPRP Homelessness Prevention and Rapid Re-Housing Program

HUD U.S. Department of Housing and Urban Development

IDIS Integrated Disbursement and Information System

IED Inspections and Evaluations Division

IRS Internal Revenue Service

IT information technology

MAP Multifamily Accelerated Processing

NAHRO National Association of Housing and Redevelopment Officials

NSP Neighborhood Stabilization Program

OI Office of Investigations

OIG Office of Inspector General

OMB Office of Management and Budget

PHA public housing agency

RIGA Regional Inspector General for Audit 

SA Special Agent

Acronyms List vii
SAC Special Agent in Charge

SHP Supportive Housing Program

SSA Social Security Administration

SSN Social Security number

TCAP Tax Credit Assistance Program

U.S.C. United States Code

USDA United States Department of Agriculture

USPS United States Postal Service

viii Acronyms List
Table of Contents

Executive Highlights 1

Chapter 1 - HUD’s Single Family Housing Programs 7

Audit 8

Investigations 13

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

Audit 28

Investigations 36

Chapter 3 - HUD’s Multifamily Housing Programs 47

Audit 48

Investigations 52 

Chapter 4 - HUD’s Community Planning and Development Programs 57

Audit 58

Investigations 66

Inspections and Evaluations 73 

Chapter 5 - American Recovery and Reinvestment Act of 2009 75

Introduction and Background 76 

Audit 77 

Investigations 84 

Inspections and Evaluations 85

Chapter 6 - Disaster Grant Programs 87

Introduction and Background 88 

Audit 89 

Investigations 91

Chapter 7 - Other Significant Audits and Investigations/OIG Hotline 97

Audit 98

Investigations 104 

Inspections and Evaluations 105

OIG Hotline 106

Chapter 8 - Outreach Efforts 109

Chapter 9 - Legislation, Regulation, and Other Directives 123

Enacted Legislation 124

Notices and Policy Issuances 125

Chapter 10 - Audit Resolution 127

Audit Reports Issued Before the Start of the Period With No Management Decision 128

Significantly Revised Management Decisions 130

Significant Management Decision With Which OIG Disagrees 131 

Federal Financial Management Improvement Act of 1996 132

Appendix 1 - Peer Review Reporting 135

Appendix 2 - Audit Reports Issued 137

Appendix 3 - Tables 145

Appendix 4 - Index 165

HUD OIG Operations Telephone Listing 169

Table of Contents ix
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. 124

Section 5(a)(1)-description of significant problems, abuses, and deficiencies relating to 1-107, 124

the administration of programs and operations of the Department.

Section 5(a)(2)-description of recommendations for corrective action with respect to 7-107

significant problems, abuses, and deficiencies.

Section 5(a)(3)-identification of each significant recommendation described in Appendix 3, 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 7-107 

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 2 

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

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

Section 5(a)(7)-summary of each particularly significant report and the total dollar value 7-107 

of questioned and unsupported costs.

Section 5(a)(8)-statistical tables showing the total number of audit reports and Appendix 3, Table C 

the total dollar value of questioned and unsupported costs. 

Section 5(a)(9)-statistical tables showing the total number of audit reports Appendix 3, 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 3, 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 130 

significant revised management decisions made during the reporting period.

Section 5(a)(12)-information concerning any significant management decision with which the 131

Inspector General is in disagreement.

Section 5(a)(13)-the information described under section 05(b) of the Federal Financial 132

Management Improvement Act of 1996.

Reporting Requirements

x Reporting Requirements
Executive Highlights
HUD Strategic Goal: Strengthen the Nation’s Housing Market to Bolster the 

Economy and Protect Consumers

Office of Inspector General (OIG) Strategy: Contribute to the increase of effectiveness in the 

single-family insurance programs through

• Audits uncovering single-family and loan origination abuse

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

determine whether controls are adequate

• A strategy for civil fraud initiatives

• A national strategy for single-family mortgage fraud task forces

• Outreach to industry and consumer groups and the Department

• Review of Federal Housing Administration’s (FHA) and Government National Mortgage Association’s 

(Ginnie Mae) ability and capacity to oversee their expanding market share

• Proactive enforcement measures through the use of real estate-owned (REO) properties in partnership 

with HUD

Highlights: Results or impact of significant OIG work

• Audits of five FHA single-family mortgage lenders found that lenders did not follow HUD requirements 

when underwriting loans and performing quality control procedures.

• HUD OIG summarized systemic issues identified from the Operation Watchdog initiative, which 

consisted of a review of the underwriting process of 15 direct endorsement lenders to determine 

whether loans were processed in accordance with FHA requirements. 

• HUD OIG audited a selection of management and marketing contractors for single-family properties 

owned by HUD to assess allegations of mismanagement, political influence, and possible violations of 

law.

• HUD OIG special agents are participating in 70 mortgage fraud working groups and task forces 

throughout the country.

• HUD OIG chaired the Mortgage Fraud Working Group’s (MFWG) Policy Committee and was 

instrumental in marshalling law enforcement support for the Financial Crimes Enforcement Network’s 

(FinCEN) notice of proposed rule making to include nonbank mortgage lenders and originators within 

the definition of financial institutions for purposes of the Bank Secrecy Act. 

• During the reporting period, special agents gave dozens of presentations to mortgage industry partners. 

In January 2011, special agents from HUD OIG and FinCEN, together with the Federal Bureau of 

Investigation, gave presentations on mortgage fraud and fraud schemes.

• A systemic implication report (SIR) was prepared and presented to HUD in relation to a home equity 

conversion mortgage (HECM) investigation of “fraudsters” who were duping seniors into purchasing 

homes using HECM mortgages and not advising them of certain important requirements. 

Emerging Issues: Areas of OIG interest

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

• FHA’s and Ginnie Mae’s ability and capacity to oversee their expanded market share

• Effectiveness of loan modification programs in the prevention of foreclosures

• Review of mortgage servicers’ processing of foreclosures

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

• Short sale frauds and foreclosure rescue schemes

• Impact of appraisers in mortgage fraud

Strategic Initiative 1

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

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

through

• Focus on grantees’ administration of American Recovery and Reinvestment Act (ARRA) funds

• Reducing erroneous payments

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

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

(PHA), multifamily developments, and those in receivership 

• Public and departmentwide outreach initiatives

Highlights: Results or impact of significant OIG work

• HUD OIG audited HUD’s oversight of PHAs’ Section 8 Project-Based Voucher programs to determine 

whether HUD had adequate oversight of PHAs’ programs to ensure that program funds were used in 

accordance with HUD’s requirements.

• HUD OIG audited the Philadelphia, PA, Housing Authority to determine whether the Authority’s 

payments to outside legal firms could be supported and complied with HUD regulations and other 

applicable requirements.

• The Office of Investigation (OI) has coordinated efforts with housing authorities and local law 

enforcement throughout the country to target erroneous rental assistance payments for the benefit of 

program participants who fraudulently underreported household income, failed to report household 

composition, or allowed registered sex offenders to reside in public housing units.

• Special agents gave dozens of presentations to industry partners and organizations on ARRA, the 

Neighborhood Stabilization Program (NSP), and rental assistance fraud schemes and investigations. 

• OI has focused investigative efforts on housing authority officials and public officials, including but not 

limited to investigations of bribery, embezzlement, bid rigging, and theft.

• HUD OIG completed 19 ARRA-related reviews of how HUD is administering the program and/or how the 

grantees are administrating the ARRA-related funds.

Emerging Issues: Areas of OIG interest

• Rental assistance fraud initiatives targeting PHAs in receivership or on HUD’s list of “troubled” housing 

authorities

• Eligibility of grantee expenditures, particularly ARRA

• HUD’s oversight of grantee ARRA expenditures

• Review and analysis of management of rural housing authorities

Strategic Initiative 2

Executive Highlights 3
HUD Strategic Goal: Build Inclusive and Sustainable Communities Free From 

Discrimination

OIG Strategy: 

• Promote integrity, efficiency, and effectiveness of programs

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

• ARRA – focus on grantees’ execution and administration of NSP2 and Community Development Block 

Grant (CDBG) grantees

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

• Audits of disaster activities

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

recipients

• Disaster relief fraud in HUD CDBG-funded programs

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

agencies and other community affairs agencies

Highlights: Results or impact of significant OIG work

• HUD OIG reviewed several CDBG recipients to determine whether the grant funds were administered 

for eligible activities and that the auditee met program objectives.

• HUD OIG audited the District of Columbia’s administration of its HOME program and found that the 

grantee did not administer its program in accordance with Federal requirements.

• HUD OIG conducted several NSPI reviews during the period to determine whether the grantees were 

properly obligating NSPI funds in accordance with the Housing and Economic Recovery Act of 2008.

• HUD OIG conducted audits of grantees receiving ARRA funding for NSP2, the Tax Credit Assistance 

Program, and the Homelessness Prevention and Rapid Re-Housing Program (HPRP).

• During the current reporting period, OI has made 15 outreach presentations to government and industry 

partners and to partner law enforcement agencies regarding risks and fraud trends relating to ARRA, 

NSP, CDBG, and HOME funds.

• OI has targeted frauds against HUD programs, including but not limited to HPRP. 

• OI continues to focus investigative efforts on disaster relief frauds in the Gulf States impacted by 

Hurricanes Katrina and Rita that received disaster relief funding.

Emerging Issues: Areas of OIG interest

• Audits and investigations of ARRA funding and NSP

• Review of Green Retrofit Program activities

• Focus on infrastructure projects

• Emergency Shelter Grants and programs

Strategic Initiative 3

4 Executive Highlights
HUD Strategic Goal: Transform the Way HUD Does Business

OIG Strategy: 

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

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

through

• Referring audits and investigations to the Departmental Enforcement Center and other management 

officials to ensure the accountability of individuals and firms committing fraud

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

• Audits of HUD’s financial statements

• Audits of HUD’s information systems and security management

• Participating in the U.S. Department of Justice Financial Fraud Enforcement Task Force (FFETF) and 

Procurement Fraud Task Force

Highlights: Results or impact of significant OIG work

• HUD OIG audited the underwriting of a $45.6 million mortgage loan that was acquired by Deutsche 

Bank Berkshire Mortgage, Inc., in Bethesda, MD, to rehabilitate Wingate Towers and Garden 

Apartments. 

• HUD OIG audited HUD’s, FHA’s, and Ginnie Mae’s financial statements and reported on significant 

deficiencies and instances of noncompliance with laws and regulations.

• HUD OIG audited ACORN Associates, Inc., regarding its use of its fiscal years 2004 and 2005 Lead 

Elimination Action Program grant funds to determine whether Associates expended program funds in 

accordance with HUD’s requirements.

• HUD OIG is cochair of FFETF MFWG, and HUD OIG chaired MFWG’s Policy Committee and Metrics 

Group.

• HUD OIG attended monthly meetings with the Mortgagee Review Board on all proposed actions. 

• HUD OIG special agents have conducted 6 outreach/training sessions for HUD employees who oversee 

government contracts at the request of the Office of Chief Procurement Officer. Sessions are conducted 

during regularly scheduled ethics training sessions for HUD employees and have been offered in 

Washington, DC, Colorado, Georgia, and California.

• During this current reporting period, HUD OIG special agents submitted three SIRs to HUD. The most 

recent suggested that each page of the form HUD-1 should be signed or initialed by all parties involved 

in the transaction, including the buyer, seller, and settlement agent.

• OI’s Inspections and Evaluations Division (IED) completed two reports, one memorandum report, and 

four research memorandums during the most recent reporting period. Among the reports, IED looked 

at the Departmental Enforcement Center and its practices of processing referrals for action from HUD 

OIG. 

Emerging Issues: Areas of OIG interest

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

• Continued modernization and enhancement of HUD’s information systems

• Contracts and procurement acquisition

• HUD’s method for contracting and monitoring of REO properties due to the increase in foreclosures

• Outreach and training to HUD’s Office of Procurements and Contracts on the procurement fund

Strategic Initiative 4

Executive Highlights 5

Chapter 1 - Single-Family Housing 

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

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

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

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

conducted a number of outreach efforts (see chapter 8, page 110).

Audit

Strategic Initiative 1: Contribute to the reduction of fraud

in single-family insurance programs

Key program results Questioned costs Funds put to better use

$600,000 $6 million

Page 9

Page 9

Page 10

Page 12

Audit 10 audits

Our

focus

• Underwriting review of 15 FHA lenders

• Review of management and marketing contractors for singlefamily properties

• Mortgagees, loan correspondents, and direct endorsement 

lenders

• Review of housing counseling services

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

during this reporting period

Region 1 - 20%

Region 2 - 0%

Region 3 - 10%

Washington DC - 20% 

Region 4 - 10%

Region 5 - 0%

Region 6 - 30%

Regions 7/8/10 - 0%

Region 9 - 10%

Region 11 - (N/A)*

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

8 Chapter 1 - Single-Family Housing Programs
Underwriting Review of 15 FHA Lenders

In January 2010, HUD OIG began Operation Watchdog, an initiative to review the underwriting of 

15 Federal Housing Administration (FHA) direct endorsement lenders having default and claim rates 

indicating lender performance problems. The objective was to determine whether each lender 

underwrote its respective loans in accordance with FHA requirements. 

OIG reviewed between 12 and 20 FHA loans underwritten by each of the 15 lenders that resulted in 

claims against the FHA insurance fund and reported the results in individual memorandums to HUD. 

OIG recommended in each of the 15 memorandums that HUD pursue appropriate remedies under 

the Program Fraud Civil Remedies Act against each lender and/or its principals for incorrectly certifying to 

the integrity of the data or that due diligence was exercised during the underwriting of the 140 questioned 

loans. These loans resulted in actual losses or were expected to result in losses to the FHA insurance 

fund of more than $11 million. Further, the lenders’ improper certifications could result in affirmative 

civil enforcement actions of more than $23 million. OIG recommended that HUD take appropriate 

administrative action against each lender and/or its principals.

Based on the overall results of the Operation Watchdog initiative and the systemic problems identified, 

OIG made an additional recommendation to HUD that (1) it develop and implement procedures for 

reviewing a statistical or risk-based selection of loans, for which FHA paid a claim on the mortgage 

insurance within the first 2 years of endorsement, to verify that the loans met FHA requirements and were 

qualified for insurance and (2) these procedures include a requirement for HUD to seek appropriate civil 

and administrative remedies to recover losses incurred on loans not qualified for FHA insurance. (Audit 

Report: 2011-CF-1801)

Review of Management and Marketing Contractors for Single-Family 

Properties

HUD OIG audited a selection of management and marketing contractors for single-family properties 

owned by HUD to determine whether allegations of mismanagement, political influence, and possible 

violations of law received in a hotline complaint were valid.

The allegation of mismanagement was credible; however, OIG did not find support to substantiate the 

allegations of political influence or violations of law. HUD did not have adequate controls to ensure that 

third generation management and marketing (M&M III) contracts were awarded in a timely and efficient 

manner. Specifically, key stakeholders were not included in the initial planning for these contracts, and 

acquisition plans were not developed in a timely manner. As a result, the M&M III contracts were delayed 

for nearly a year, and bridge contracts with an estimated cost of more than $275 million had to be awarded 

to the existing contractors to avoid a lapse in the management and marketing services. 

OIG recommended that HUD (1) develop controls to award contracts in a timely manner, thus 

avoiding unnecessary expenditures for extending contracts; (2) follow the established acquisition 

planning requirements and procurement acquisition lead time (PALT) guidance; (3) submit timely and 

complete performance work statements on all future contracts; (4) use in-house resources when forming 

the integrated program team for all significant acquisitions to avoid unnecessary expenditures such as 

Chapter 1 - Single-Family Housing Programs 9
those paid to a contractor for writing performance work statements; (5) assign significant acquisitions to 

offices that have sufficient staff and expertise to avoid unnecessary expenditures such as those paid to an 

administrative support contractor; and (6) ensure that the PALT schedule is followed and require written 

justification when significant delays are encountered. (Audit Report: 2011-HA-0001)

Mortgagees, Loan Correspondents, and Direct Endorsement Lenders

HUD OIG audited Nationwide Home Loans, Inc., an FHA-approved direct endorsement lender located 

in Miami, FL, to determine whether the lender followed HUD’s requirements when (1) originating and 

underwriting loans and (2) implementing its quality control program.

Nationwide did not follow HUD requirements when it used at least 16 various independent loan 

officers to originate 41 loans. These loan officers were also employed by or owned businesses involved 

with mortgage lending or related fields such as real estate sales and mortgage processing. In addition, 

Nationwide did not follow HUD requirements when originating and underwriting loans for FHA insurance. 

It used inaccurate and unsupported information to qualify borrowers for five of six FHA loans reviewed. 

As a result, it approved loans that did not qualify for FHA insurance and unnecessarily placed the FHA 

insurance fund at risk. 

Further, Nationwide did not conduct quality control reviews in compliance with requirements, and 

its written quality control plan did not contain the required provisions. As a result, Nationwide increased 

the risk to the FHA insurance fund because it did not have assurance regarding the accuracy, validity, and 

completeness of its loan origination and underwriting operations. 

OIG recommended that HUD require Nationwide to indemnify it for the 46 ineligible FHA loans with 

an estimated potential loss of $5 million. OIG also recommended that Nationwide be referred to the 

Mortgagee Review Board for consideration of imposing civil money penalties for the ineligible loans and 

taking appropriate administrative actions against the individuals and entities responsible. Finally, OIG 

recommended that Nationwide develop, implement, and enforce (1) written controls to ensure that loans 

are originated and underwritten in accordance with HUD requirements and (2) a quality control program 

that complies with HUD requirements. (Audit Report: 2011-AT-1001)

nnn

HUD OIG audited WR Starkey Mortgage, LLP, an FHA direct endorsement lender in Plano, TX, to 

determine whether WR Starkey complied with HUD and FHA loan origination requirements for loans 

endorsed between April 1, 2008, and April 30, 2010. 

WR Starkey did not follow HUD/FHA underwriting requirements in 13 of 14 loan originations reviewed. 

As a result, it improperly originated four loans that resulted in losses to FHA’s insurance fund and nine 

loans that increased the risk to the insurance fund.

OIG recommended that HUD require WR Starkey to (1) reimburse the FHA insurance fund more than 

$360,000 in actual losses on four loans and (2) indemnify nine loans that placed the FHA insurance fund 

at unnecessary risk with unpaid balances of nearly $906,000, thereby putting more than $543,000 in funds 

put to better use. (Audit Report: 2011-FW-1003) 

nnn

HUD OIG audited Semper Home Loans, Inc., in Providence, RI, an FHA lender approved to underwrite 

and close mortgage loans without prior FHA review or approval to determine whether (1) Semper acted 

10 Chapter 1 - Single-Family Housing Programs
Chapter 1 - Single-Family Housing Programs 11

in a prudent manner and complied with HUD regulations, procedures, and instructions for the origination, 

underwriting, and closing of the FHA-insured single-family loans and (2) Semper’s quality control plan, as 

implemented, fulfilled HUD’s requirements.

Semper generally met HUD requirements for the origination of FHA-insured single-family loans. 

However, OIG identified several underwriting deficiencies that negatively affected the insurability of two 

loans for which Semper acted as the loan correspondent and for which the underwriting was performed by 

one of Semper’s sponsors. The deficiencies consisted of qualifying ratios that exceeded HUD’s benchmarks 

without significant compensating factors. 

In addition, Semper did not fully implement its quality control plan. It failed to perform sufficient 

reviews, which prevented it from ensuring the accuracy, validity, and completeness of its loan origination 

operations. As a result, Semper may not have identified and corrected potential deficiencies in a timely 

manner, resulting in an unnecessary risk to the FHA insurance fund.

Semper was also incorrectly listed as the holding lender for 34 active loans and the servicing lender 

for 11 active loans. HUD will not pay a claim for insurance benefits for which the information on the claim 

and HUD’s FHA insurance system does not agree.

OIG recommended that HUD require the sponsor(s) of the respective loans to (1) reimburse the FHA 

insurance fund $169,000 in actual losses on one loan and (2) indemnify HUD for a potential loss of more 

than $179,000 that may be incurred related to one loan that did not meet FHA insurance requirements. 

OIG also recommended that HUD direct Semper to (1) implement its quality control plan as required and 

follow up with the lender in 9 months to ensure its compliance and (2) update its remaining mortgage 

records in HUD’s system to reflect the appropriate mortgage holder and implement procedures to ensure 

the timely submission of mortgage record changes for future loans sold to investing lenders. (Audit Report: 

2011-BO-1005)

nnn

HUD OIG audited Gold Financial Services, Inc., in San Antonio, TX, an FHA direct endorsement lender 

and a branch of AmericaHomeKey, Inc., to determine whether Gold Financial complied with HUD/FHA 

loan origination requirements. 

Gold Financial did not follow HUD/FHA underwriting requirements in two of seven loan originations 

reviewed. Its underwriter did not require two borrowers to explain recent poor credit. As a result, it 

originated two ineligible loans that resulted in a loss to HUD of more than $71,000 and an increased 

risk to the FHA insurance fund of nearly $87,000. It originated a third loan that did not violate HUD/FHA 

underwriting requirements but did violate its own internal controls concerning borrowers with poor credit. 

Specifically, the underwriter did not require the borrower to have 3 months’ reserves in accordance with 

Gold Financial’s closing instructions. 

OIG recommended that HUD require Gold Financial to (1) indemnify it for one ineligible loan with an 

unpaid principal balance of nearly $145,000 and (2) reimburse the FHA insurance fund for losses incurred 

on one loan. (Audit Report: 2011-FW-1002)

nnn

HUD OIG audited NFM, Inc., in Linthicum, MD, a nonsupervised lender approved to originate FHA singlefamily mortgage loans, to determine whether NFM complied with HUD requirements in the origination 

and quality control review of FHA loans.
NFM generally complied with HUD requirements in the origination of FHA loans. However, it had not 

implemented certain aspects of its quality control plan in accordance with HUD requirements. It did not 

perform routine quality control reviews within the timeframe required by HUD or review all loans that 

defaulted within the first six payments in a reasonable and timely manner. Consequently, the effectiveness 

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

process, was lessened.

OIG recommended that HUD direct NFM to fully implement its quality control functions as required and 

follow up in 9 months to ensure the lender’s compliance. (Audit Report: 2011-PH-1004) 

Review of Housing Counseling Services

HUD OIG audited the Neighborhood Assistance Corporation of America (NACA) in Jamaica Plains, 

MA, a HUD-approved organization providing housing counseling services to qualified home buyers or 

homeowners with unaffordable mortgage payments, to determine whether NACA properly administered 

its HUD grants used for housing counseling activities in accordance with HUD requirements. Specifically, 

OIG wanted to determine whether (1) NACA provided counseling services in accordance with the HUD 

grants and properly addressed client complaints, (2) HUD funds were properly accounted for and used to 

pay only counselor salaries, (3) NACA’s process for documenting and reporting program results/outcomes 

complied with HUD grant requirements, (4) NACA staff was adequately trained and experienced in housing 

counseling and management staff adequately monitored the work of the counselors, and (5) NACA complied 

with HUD disclosure and conflict-of-interest requirements.

NACA generally administered its HUD grants used for housing counseling activities in accordance with 

HUD requirements. With respect to HUD’s conflict-of-interest disclosure requirements, NACA adequately 

informed its counseling clients of its relationships with major industry partners. However, it needs to 

resolve issues raised by HUD with respect to how it discloses relationships that its local offices may have 

with local industry partners, such as lenders and realtors. 

OIG made no recommendations because HUD had already asked NACA to identify every industry partner 

with which it had a financial relationship and amend its disclosures to fully disclose these arrangements. 

Therefore, no further action is necessary. (Audit Report: 2011-BO-1004)

nnn

12 Chapter 1 - Single-Family Housing Programs
Chapter 1 - Single-Family Housing Programs 13

Investigations

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

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

The results of various significant investigations are described below.

Strategic Initiative 1: Contribute to the reduction of fraud

in single-family insurance programs

Key program 

results

$ 

recovered

Convictions/pleas/ 

pretrials

$237,664,630 152

Page 14

Page 20

Page 20

Page 22

Investigations 155

Our

focus

• Loan origination fraud

• Home Equity Conversion Mortgage program fraud

• Civil and administrative actions

• Other single-family fraud

Cases 

closed

Admin/civil 

actions

156

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

during this reporting period

Region 1 - 2%

Region 2 - 5%

Region 3 - 6%

Region 13 - 26% 

Region 4 - 10%

Region 14 - 7%

Region 5 - 3%

Region 15 - 10%

Region 6 - 6%

Regions 7/8 - 3%

Region 9 - 17%

Region 10 - 5%

Region 11 - 0%
Loan Origination Fraud

Michael McGrath, Jr., the former president of U.S. Mortgage Corporation (U.S. Mortgage) and CU Nations 

Mortgage, LLC; Frank Corallo and Jerry Carti, former loan officers for U.S. Mortgage; Renford Davis, a property 

manager for Renhops Management, LLC; William Ottaviano, an appraiser for Equity Appraisal Services, LLC 

(Equity Appraisal); Equity Appraisal; and eight additional individuals were collectively sentenced in U.S. 

District Court, Newark, NJ, to 357 months incarceration, 54 months home confinement, and 432 months 

supervised release; ordered to pay a number of victims more than $72.4 million in restitution and forfeit 

more than $140.7 million; and fined $5,800 for their earlier conviction of or guilty pleas to committing a 

conspiracy to commit money laundering or mail and wire fraud or making false statements in a Federal 

income tax return. From January 2004 to February 2009, McGrath conspired with others, fraudulently 

sold credit union mortgage loans to the Federal National Mortgage Association (Fannie Mae), and used 

more than $139 million in illicit proceeds to fund personal and business investments and U.S. Mortgage 

operations. In addition, between December 1998 and 2007, the above defendants and other individuals 

inflated home values, provided false information or fraudulent appraisals and other documents used by 

unqualified borrowers to obtain FHA-insured and conventional mortgages, and placed the fraudulent 

conventional mortgaged properties into the Paterson Housing Authority or the City of Paterson, NJ, Section 

8 programs. HUD realized losses of $2.7 million after 100 mortgages defaulted. 

nnn

Reyes Quintero, a former loan officer for American Residential Funding, was sentenced in U.S. District 

Court, Riverside, CA, to 5 years probation and ordered to pay HUD more than $1.6 million in restitution 

for his earlier guilty plea to committing a conspiracy. From 1997 to 2001, Quintero and other individuals 

conspired and caused the submission of fraudulent documents used by unqualified borrowers to obtain 

FHA-insured mortgages. HUD realized losses in excess of $1.6 million after 38 mortgages defaulted. 

nnn

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

First Mortgage, was sentenced in U.S. District Court, Fort Meyers, FL, to 18 months incarceration and 3 

years probation for her earlier guilty plea to committing loan application fraud. From June 2006 to July 

2007, Contreras created and submitted false information and fraudulent documents used by unqualified 

borrowers to obtain FHA-insured mortgages. HUD realized losses of more than $1 million after six mortgages 

defaulted. 

nnn

Eric Wendlandt, the owner of Pricise Mortgage, and Roni Watkins each pled guilty in U.S. District Court, 

Grand Rapids, MI, to making false statements to HUD or committing a conspiracy. From February 2008 

to April 2010, Wendlandt, Watkins, and other individuals produced or provided fraudulent documents 

used by unqualified borrowers to obtain FHA-insured mortgages. HUD realized losses of $553,000 after 

six mortgages defaulted. 

nnn

Harold Meza, a former real estate agent for JLF Properties, was sentenced in U.S. District Court, 

Riverside, CA, to 3 years incarceration and 3 years probation and ordered to pay victims that have not yet 

been identified $486,474 in restitution for his earlier guilty plea to committing a conspiracy. From 2002 to 

2005, Meza and other individuals created fraudulent documents used by unqualified borrowers to obtain 

FHA-insured mortgages. HUD realized losses of $486,474 after 16 mortgages defaulted. 

nnn

14 Chapter 1 - Single-Family Housing Programs
Chapter 1 - Single-Family Housing Programs 15

Henry and Elizabeth Robertson, the former owners of Elohim, Inc., were collectively sentenced in U.S. 

District Court, Chicago, IL, to 104 months incarceration and 60 months probation and ordered to pay HUD 

$459,000 and others $283,832 in restitution for their earlier guilty pleas to committing bank and wire fraud. 

From February 1997 to June 1999, Henry and Elizabeth Robertson provided fraudulent documents and 

downpayment funds used by unqualified borrowers to obtain FHA-insured and conventional mortgages. 

HUD realized losses of $459,000 after 20 mortgages defaulted. 

nnn

Olu Campbell, the owner of Metropolitan Housing Associates, LLC, was sentenced in U.S. District Court, 

Baltimore, MD, to 54 months incarceration and 3 years supervised release for his earlier conviction of 

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

2010, Campbell used the identities of other individuals to purchase properties, recruited straw borrowers, 

and provided or submitted false information and fraudulent documents used by unqualified borrowers 

to obtain FHA-insured and conventional mortgages. HUD realized losses of $395,000 after one mortgage 

defaulted. 

nnn

Timothy Johnson, Tamiko Davis, and former Social Security Administration (SSA) employee Pamela 

Terrell were collectively sentenced in U.S. District Court, Birmingham, AL, to 78 months, 14 days, and 1 

hour incarceration and 120 months probation, and Johnson was ordered to forfeit more than $2.5 million 

for their earlier guilty pleas to making false statements or committing mail fraud. Between 2007 and 

December 2009, Johnson created and mailed fictitious SSA award letters, assisted unqualified borrowers 

who fraudulently obtained FHA-insured and conventional mortgages, and provided false statements when 

questioned by Federal investigators; Davis created fraudulent documents used by unqualified borrowers to 

obtain FHA-insured and conventional mortgages; and Terrell used a fake SSA income award document to 

obtain and later default on an FHA-insured mortgage. HUD realized losses of $384,357 after four mortgages 

defaulted.

nnn

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

the execution of documents by deception. In addition, Jose Torres was sentenced to 6 months deferred 

adjudication and fined $500 for his earlier guilty plea to securing the execution of a document by deception. 

Between March 2002 and October 2004, Torres admittedly and the remaining defendants allegedly used 

false Social Security numbers (SSN) to obtain FHA-insured mortgages. HUD realized losses of $380,855 

after seven mortgages defaulted. 

nnn

Copyright 2010. The Birmingham News, Birmingham, AL. Reprinted with permission.
Ephrain Harris, the owner of Can Do Accounting; Darrell Booker, the owner of Boo Boo Wireless; and 

Tamiko Alston, the former owner of Above All Title & Escrow, were collectively sentenced in U.S. District 

Court, Norfolk, VA, to 87 months incarceration and 156 months supervised release and ordered to pay HUD 

$165,373, Fannie Mae $167,857, and First Horizon Home Loans $207,898 in restitution for their earlier guilty 

pleas to committing a conspiracy to commit mail and wire fraud. Between September 2007 and June 2008, 

Harris, Booker, Alston, and other individuals conspired and provided closing funds, false information, or 

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

addition, Alston created fraudulent HUD-1 settlement statements that failed to accurately report the receipt 

and disbursement of settlement funds. HUD realized losses of $275,271 after two mortgages defaulted. 

nnn

Derrick Boamah was sentenced in U.S. District Court, Worcester, MA, to 12 months home confinement 

and 60 months probation and ordered to pay FHA and CitiMortgage $280,315 in restitution for his earlier 

guilty plea to making false statements. In September 2006, Boamah provided false income, employment, 

and other information to obtain an FHA-insured mortgage. HUD realized a loss of $257,095 after his 

mortgage defaulted. 

nnn

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

an unlicensed real estate closer for Dedicated Closing; and former Re/Max real estate agent Christian Juan 

each pled guilty in U.S. District Court, St. Louis, MO, to making false statements to HUD or committing 

mail fraud. Between 2003 and 2010, Adewunmi and Juan assisted unqualified borrowers who obtained 

FHA-insured mortgages, and Rodawald created about 1,100 fraudulent HUD-1 settlement statements for 

FHA-insured and conventional mortgage loans that included about $98,000 in inflated and illegal fees and 

disbursements. HUD realized losses of about $200,000 after four mortgages defaulted. 

nnn

Dhia Abdulridha and Falah Tamimi were each indicted in U.S. District Court, St. Louis, MO, for allegedly 

committing bank fraud and a conspiracy to commit bank fraud. From March 2004 to September 2009, 

Abdulridha and Tamimi allegedly conspired and provided fraudulent documents used by unqualified 

borrowers to obtain FHA-insured mortgages. HUD realized losses of about $150,000 after three mortgages 

defaulted. 

nnn

Meggan and David Alexander were each convicted in U.S. District Court, Cedar Rapids, IA, of making 

false statements. In April 2007, Meggan Alexander provided false information when she obtained an FHAinsured mortgage, and in September 2007, Meggan and David Alexander provided false information when 

they attempted to avoid foreclosure. HUD realized a loss of $110,772 after their mortgage defaulted. 

nnn

Joseph Dintino was indicted in U.S. District Court, Kansas City, KS, for allegedly committing bank and 

wire fraud and money laundering. From March 2005 to April 2006, Dintino allegedly provided false Federal 

income tax returns when he obtained an FHA-insured mortgage and other consumer loans. HUD realized 

a loss of $82,404 after his mortgage defaulted. 

nnn

16 Chapter 1 - Single-Family Housing Programs
Nathan Russo, a former vice president of Action Mortgage Corporation, and five additional individuals 

each pled guilty in U.S. District Court, Hartford, CT, to making false statements or committing a conspiracy, 

mail and wire fraud, or a conspiracy to commit wire fraud. Between February 2007 and April 2010, the 

above defendants conspired and resold properties at inflated values or provided false information and 

fraudulent documents used by themselves or other unqualified borrowers to obtain FHA-insured and 

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

nnn

Kamal Hosn pled guilty in Maricopa County Superior Court, Phoenix, AZ, to committing residential 

mortgage fraud and attempted fraudulent schemes and artifices. Between February and May 2008, Hosn 

provided or submitted false information and fraudulent documents when he obtained an FHA-insured 

mortgage. HUD realized a loss of $73,160 after his mortgage defaulted. 

nnn

Juan Goytia and Maria Ponce were each charged in Colorado State Court, Yuma, CO, with allegedly 

committing identity theft, criminal impersonation, and forgery. In June 2005, Goytia and Ponce allegedly 

used a false SSN and resident alien card when they obtained an FHA-insured mortgage. HUD realized a 

loss of $48,465 after their mortgage defaulted. 

nnn

Michael Conley pled guilty in U.S. District Court, Roanoke, VA, to making false statements. In October 

2005, Conley provided false information and fraudulent documents when he obtained an FHA-insured 

mortgage. HUD realized a loss of about $38,000 after his mortgage defaulted. . 

nnn

LeeAnn Bible was sentenced in U.S. District Court, Fort Worth, TX, to 3 years probation and ordered 

to pay HUD $18,277 in restitution for her earlier guilty plea to making false statements to HUD. In October 

2002, Bible provided fraudulent documents when she obtained an FHA-insured mortgage. HUD realized 

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

nnn

Raquel Berger, a realtor for Exit Dream Home Realty, Inc.; Rui Talaia, a former real estate agent and 

broker for an unnamed business; Rosa Damasceno; and Jairo Nunes each pled guilty in U.S. District Court, 

Newark, NJ, to committing a conspiracy to commit wire fraud or attempting to commit wire fraud. In 

addition, Edivaldo Dos Santos, a former loan officer for Celebrity Mortgage; Maria Lourdes Sousa; and 

Ricardo Muniz were collectively sentenced to 23 months incarceration and 84 months supervised release for 

their earlier guilty pleas to committing a conspiracy to commit wire fraud. Dos Santos was also 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. 

From June 2008 to May 2010, the above defendants and other individuals conspired and created or provided 

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

HUD losses have not yet been determined. 

nnn

Chapter 1 - Single-Family Housing Programs 17
Edgar Argotte, a real estate agent for Millennium Real Estate Company, was arrested and charged in 

U.S. District Court, Brooklyn, NY, with allegedly committing a conspiracy to commit wire fraud. In addition, 

Lauro Gutierrez, the owner of Lauro G. Home Improvement, pled guilty to committing a conspiracy to 

commit wire fraud. From October 2005 to January 2007, Argotte and other individuals allegedly and 

Gutierrez admittedly provided false information or fraudulent documents used by unqualified borrowers 

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

nnn

David Vickers, a general contractor with J & G Homes, Inc., was convicted in U.S. District Court, 

Jacksonville, FL, of committing a conspiracy to commit wire, mail, and bank fraud. From December 2006 

to September 2009, Vickers and other individuals provided downpayment funds and assisted unqualified 

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

nnn

Daniel Nichter, a former licensed appraiser, loan originator for Preferred Mortgage Consultants, Hilliard 

City councilmember, and Franklin County development director, was indicted in Franklin County Court of 

Common Pleas, Columbus, OH, for allegedly committing theft and identity theft, engaging in a pattern of 

corrupt activity, and receiving stolen property. From February 2009 to December 2010, Nichter allegedly 

conducted and submitted 14 appraisals for FHA-insured mortgage loan approvals that contained false 

information and inflated property values. HUD losses have not yet been determined. 

nnn

Frederick Noland was charged in U.S. District Court, St. Louis, MO, with allegedly making false 

statements to HUD. In November 2008, Noland allegedly provided false documents used by an unqualified 

borrower who obtained and later defaulted on an FHA-insured mortgage. HUD losses have not yet been 

determined.

nnn

18 Chapter 1 - Single-Family Housing Programs

Copyright 2010. The Jacksonville Times Union, Jacksonville, FL. Reprinted with permission.
Elena Ramirez and Pablito DiazQuinon were collectively sentenced 

in Tillamook County Circuit Court, 

Ti l l a m o o k , O R, t o 6 m o n t h s 

incarceration and 108 months 

supervised probation for their earlier 

guilty pleas to committing forgery, 

aggravated or identity thefts, or a 

conspiracy to commit aggravated and 

identity thefts. Ramirez, Diaz-Quinon, 

and other individuals conspired and 

provided a false SSN used by Ramirez to 

obtain an FHA-insured mortgage. HUD 

losses have not yet been determined.

nnn

Patricia Chmura, a former mortgage processor for Aurora Financial Group, pled guilty in U.S. District 

Court, Scranton, PA, to committing a fraudulent FHA transaction. In November 2007, Chmura forged a 

document that was used to fraudulently originate an FHA-insured mortgage. HUD losses have not yet 

been determined. 

nnn

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

Bankers, were collectively sentenced in U.S. District Court, Miami, FL, to 90 months incarceration and 36 

months supervised release for their earlier guilty pleas to committing a conspiracy to commit wire fraud. 

In addition, Jose Cazas, a developer for Cedar Pointe Condominiums who was previously sentenced 

for his earlier guilty plea to committing a conspiracy to commit wire fraud, was ordered to pay Bank of 

America and Citibank more than $1.8 million in restitution. From April 2007 to January 2008, the above 

defendants and other individuals conspired and submitted false information and fraudulent documents 

used by unqualified borrowers who obtained more than $2.5 million in FHA-insured mortgages at Cedars 

Pointe condominiums. Since the City of Miami condemned the buildings and the units cannot convey, 

HUD paid no claims and realized no losses. 

nnn

Charles Schmalzried, a builder and partial owner of the Hull Prairie Development Company, was charged 

in Wood County Court of Common Pleas, Perrysburg, OH, with allegedly committing theft and complicity 

in defrauding creditors and securing writings by deception. Schmalzried allegedly concealed secondary 

loans he made with FHA-insured borrowers and caused erroneous HUD-1 settlement statements. 

nnn

Former Rhode Island State Senator Christopher Maselli was sentenced in U.S. District Court, Providence, 

RI, to 27 months incarceration and 3 years supervised release for his earlier guilty plea to committing 

bank fraud. From December 2007 to March 2009, Maselli provided false information and documents and 

fraudulently obtained four FHA-insured mortgages and other consumer loans. 

Chapter 1 - Single-Family Housing Programs 19

Copyright 2010. The Daily Astorian, Astoria, OR. Reprinted with permission.
Home Equity Conversion Mortgage Program Fraud

Mhilton Rimolo was sentenced in Kings County Criminal Court, Brooklyn, NY, to 1 to 3 years incarceration 

for his earlier guilty plea to making a false statement; offering a false instrument for filing; falsifying business 

records; and committing a conspiracy, grand larceny, criminal possession of a forged instrument, forgery, 

and criminal impersonation. From January 2003 to June of 2009, Rimolo and other individuals conspired 

and created or provided fraudulent documents used to obtain a $300,000 HUD home equity conversion 

mortgage (HECM) in the name of a deceased individual and $44,579 in SSA benefits. 

nnn

Carmen Szumilas and Melody Zuniga were each arrested and charged in Kings County Criminal 

Court, Manhattan, NY, with allegedly committing residential mortgage fraud and grand larceny, criminal 

possession of a forged instrument, and falsifying business records. In August 2010, Szumilas and Zuniga 

allegedly created, provided, and used a fraudulent document to obtain $369,670 in HUD HECM funds 

without authorization from the homeowner. 

nnn

Benjamin Okeke, a former loan officer for Beli Commercial Mortgage, entered into a pretrial diversion 

filed in Davidson County General Sessions Court, Nashville, TN, and agreed to perform an undetermined 

amount of community service and pay a victim $3,493 in restitution. In February 2010, an unnamed HUD 

HECM program applicant provided Okeke with $3,494 to settle a credit card debt before his loan closing, 

but Okeke stole and personally used these funds. 

Civil and Administrative Actions

Mitchell Cohen, president of Buy a Home, LLC, and Buy a Home, LLC, were each named in a civil 

complaint filed in U.S. District Court, Manhattan, NY, and issued a preliminary injunction that prohibits 

them from originating FHA-insured loans. From 2007 to January 2011, Cohen, Buy a Home, LLC, and other 

individuals allegedly conspired and provided closing funds or fraudulent documents used by unqualified 

borrowers to obtain FHA-insured mortgages on properties with inflated values. HUD losses have not yet 

been determined. 

nnn

The Phoenix Housing Group (Phoenix Housing) entered into a consent judgment filed in Wake County 

Superior Court, Raleigh, NC, and agreed to the removal of Phoenix Housing officers, the appointment 

of a receiver to liquidate Phoenix Housing assets, the forfeiture of any proceeds, and the payment of 

$50,000 in restitution to a number of victims. From 2007 to 2008, Phoenix Housing employees or agents 

allegedly engaged in unfair and deceptive practices involving the sale and financing of manufactured and 

modular homes and provided false information used by unqualified borrowers to obtain FHA-insured, 

U.S. Department of Agriculture-guaranteed, or conventional mortgages. HUD losses have not yet been 

determined. 

nnn

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

who was previously convicted in Adams County District Court, Brighton, CO, of attempting to influence 

a public servant and offering a false instrument for recording, and Louis Luevano, also known as Ray 

20 Chapter 1 - Single-Family Housing Programs
Luevano, a former Harvest Realty real estate agent who was previously convicted of offering a false 

instrument for recording and committing theft, forgery, a conspiracy, and other crimes, were each debarred 

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

the Federal Government for 3 years. Between July 2003 and September 2005, Vitale, Luevano, and other 

individuals provided false SSNs and fraudulent documents used by unqualified borrowers to obtain FHAinsured mortgages. HUD realized losses of $378,045 after five mortgages defaulted. 

nnn

Julie Weaver, a former Alliance Guaranty Mortgage Corporation loan officer who previously pled guilty 

in Denver County District Court, Denver, CO, to committing theft; Xochilt Alamillo, also known as Xochilt 

Campos, a former Frontier GMAC Real Estate Company real estate agent who previously pled guilty to 

offering a false instrument for recording; and Macarena Javalera, also known as Macarena Villalobos, a 

former Prestige Capital Funding loan officer who previously pled guilty to committing forgery, were each 

debarred from procurement and nonprocurement transactions with HUD and throughout the Executive 

Branch of the Federal Government for 3 years. In addition, former Alliance Mortgage Capital loan officer 

Kenya Hedges, also known as Kenya Ramos, who previously pled guilty to committing compounding, was 

debarred for 2 years. In March 2006, Weaver fraudulently signed closing documents for a straw buyer and 

stole $24,310 in FHA-insured mortgage loan proceeds, and between October 2000 and December 2004, 

the remaining defendants and other individuals assisted undocumented immigrants who used fraudulent 

SSNs or other documents to obtain FHA-insured mortgages. HUD realized losses of $372,195 after three 

mortgages defaulted. 

nnn

Kenneth Lagonie, the president of Quality Homes Are Us, doing business as Quality Homes R Us and 

Quality Land Development Corporation, and closing attorney Anthony Natale, both previously sentenced 

in U.S. District Court, Newark, NJ, for their earlier guilty pleas to committing a conspiracy to commit wire 

fraud, were each debarred from procurement and nonprocurement transactions with HUD and throughout 

the Executive Branch of the Federal Government for an indefinite period. From August 2003 to September 

2005, Lagonie, Natale, and other individuals provided false information to lure investors or submitted 

fraudulent appraisals and other documents used by unqualified borrowers to obtain FHA-insured and 

conventional mortgages. HUD realized losses of $327,839 after three mortgages defaulted. 

nnn

Scott Hinkley, a former ABK Mortgage Company loan officer who previously pled guilty in Adams 

County District Court, Aurora, CO, to committing forgery and violating the Colorado Organized Crime 

Control Act, was debarred from procurement and nonprocurement transactions with HUD and throughout 

the Executive Branch of the Federal Government for an indefinite period. In addition, Idara Ekiko, who 

previously pled guilty to committing computer crimes, was debarred for 3 years. Between April 2004 and 

January 2007, Hinkley, Ekiko, and other individuals provided false information or fraudulent documents 

used by themselves or other unqualified borrowers to obtain FHA-insured and conventional mortgages. 

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

nnn

John Morrison, a loan officer and previously approved FHA appraiser who pled guilty in U.S. District 

Court, Baltimore, MD, to committing mail fraud, was suspended from procurement and nonprocurement 

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

outcome of criminal proceedings or any related debarment action. Between 2005 and June 2006, Morrison 

Chapter 1 - Single-Family Housing Programs 21
sold property to an elderly home buyer at an inflated value and submitted a fraudulent appraisal for 

mortgage loan approval. 

Other Single-Family Fraud

Ray Bowman, Sean Ragland, and Desiree Brown, a former executive, accounting supervisor, and 

treasurer for Taylor, Bean & Whitaker Mortgage Corporation (Taylor, Bean & Whitaker), a former FHAapproved direct endorsement lender and Government National Mortgage Association (Ginnie Mae) issuer, 

and former Colonial Bank employees Catherine Kissick and Teresa Kelly each pled guilty in U.S. District 

Court, Alexandria, VA, to committing a conspiracy to commit bank, wire, and securities fraud or making 

false statements to Federal agents. Between 2002 and August 2009, Kissick and Kelly conspired with 

other individuals and provided funding to Taylor, Bean & Whitaker for phony or previously pledged loans, 

and Bowman, Ragland, Brown, and other individuals conspired and sold phony and previously pledged 

loans to investors in the secondary mortgage market and caused Taylor, Bean & Whitaker to submit false 

statements to HUD, Ginnie Mae, and other financial entities. HUD, Ginnie Mae, and other financial entities 

realized losses in excess of $1.9 billion. 

nnn

Stanley Miller, a registered agent for Canyon View Escrow, was sentenced in U.S. District Court, Salt Lake 

City, UT, to 30 months incarceration and 36 months supervised release and ordered to pay HUD $321,000 

in restitution for his earlier guilty plea to committing wire fraud. From July 2002 to December 2004, Miller 

and other individuals identified distressed properties in a number of States, posed as bankruptcy court or 

financial institution representatives and secured quit claim deeds from the property owners, rented about 

300 properties and collected rents but failed to remit mortgage loan payments, and used the rents collected 

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

nnn

Kenneth Perkins, a realtor for Virtual Realty Funding Company, pled guilty in U.S. District Court, Phoenix, 

AZ, to committing a misprision of a felony. From June 2003 to September 2004, Perkins failed to report that 

Copyright 2011. St. Petersburg Times, St. Petersburg, FL. Reprinted with permission.

22 Chapter 1 - Single-Family Housing Programs
an unnamed investor acted as a straw borrower and fraudulently obtained and resold HUD real estateowned properties. HUD realized losses of $440,000 after 20 mortgages defaulted. 

nnn

Paul Hariston, doing business as Pro-Fund Property Management, Ltd., Pro-Team Property Management, 

or Platinum Lending, was sentenced in Franklin County Court of Common Pleas, Columbus, OH, to 48 

months incarceration and 3 years supervised release for his earlier guilty plea to committing theft, securing 

writings by deception, and engaging in a pattern of corrupt activity. From March 2002 to January 2004, 

Hariston obtained the deeds to six distressed FHA-insured properties and collected the mortgage payments 

from the homeowners but failed to pay the mortgages as promised and filed fraudulent bankruptcies in 

the names of the homeowners to delay foreclosure proceedings. HUD realized losses of about $127,000 

after six mortgages defaulted. 

nnn

Kenyuano Jones, a HUD Good Neighbor Next Door program participant and assistant principal for 

the Detroit Public School System, was charged in Wayne County Circuit Court, Detroit, MI, with allegedly 

committing larceny by false pretenses and filing false State income tax returns. In March 2005, Jones 

obtained a HUD-owned property and received a $22,500 discount, but Jones allegedly failed to reside in 

the property or report his nonresidency on HUD certifications. In addition, Jones allegedly filed false State 

income tax returns. 

nnn

John Murphy, the former President of Alliance Mortgage Banking Corporation (Alliance Mortgage), a 

HUD-approved direct endorsement lender, was sentenced in U.S. District Court, Central Islip, NY, to 20 

months incarceration and 5 years probation and ordered to pay the Federal Deposit Insurance Corporation 

more than $3.3 million in restitution for his earlier guilty plea to committing bank fraud. From January 

to August 2007, Murphy fraudulently used Alliance Mortgage warehouse line-of-credit funds for Alliance 

Mortgage operations. HUD losses have not yet been determined. 

nnn

John Westbrook and Cynthia Thornsberry, former real estate agents for New Century Real Estate 

Group and Ultima Realty Service; William Dunham, a former real estate agent for Hilton Properties, LTD; 

and Clayton Aynesworth each pled guilty in U.S. District Court, Austin, TX, to making false statements to 

HUD or committing a conspiracy to commit wire fraud. Between 2004 and 2009, the above defendants 

provided false occupancy statements or conspired with other individuals and fraudulently obtained about 

26 HUD real estate-owned properties. HUD losses have not yet been determined. 

nnn

Quincy Harrington, the owner of Lunar Mortgage Services; Julila Allen, the owner of Allen Home 

Construction; Edward Rogers; Willis McMurran; and Sharetha Jackson were each indicted in U.S. District 

Court, Plano, TX, for allegedly making false statements or committing fee splitting or a conspiracy to 

commit money laundering. In addition, Rogers was arrested after his indictment. Between February 2006 

and May 2007, the above individuals and others allegedly conspired and assisted with property sales at 

inflated values to straw borrowers, obtained kickbacks without lender knowledge, caused the falsification 

of HUD-1 settlement statements, violated the Real Estate Settlement Procedures Act of 1974, or lied to 

Federal agents when questioned. HUD losses have not yet been determined. 

nnn

Chapter 1 - Single-Family Housing Programs 23
William Huston, Jr., a former owner of All-Star Mortgage, was charged in Madison County Superior 

Court, Anderson, IN, with allegedly committing theft, felony fraud on a financial institution, and conversion 

or misappropriation of money received or held in a title insurance escrow account. In July 2008, Huston 

originated a $217,700 FHA-insured refinance loan on behalf of a borrower but allegedly failed to pay off 

the first mortgage and diverted $217,700 into his personal accounts. 

nnn

Lawrence Luckett, the chief executive officer of Home Mortgage, Inc., a HUD-approved lender, was 

sentenced in U.S. District Court, Chicago, IL, to 24 months incarceration and 5 years probation and ordered 

to pay GMAC Bank $15 million in restitution for his earlier guilty plea to committing bank fraud. From 

August 2007 to March 2008, Luckett obtained fictitious mortgages on properties with outstanding mortgage 

loans, including properties with FHA-insured mortgages. 

nnn

Jennifer Wise, a former closing processor for an unnamed title company, was sentenced in U.S. District 

Court, Nashville, TN, to 8 months home detention and 3 years probation and ordered to pay a number of 

victims $64,019 in restitution for her earlier guilty plea to committing wire fraud. From August 2006 to May 

2009, Wise prepared and provided fraudulent HUD-1 settlement statements relating to 78 FHA-insured and 

conventional mortgage loans and embezzled more than $64,000 in inflated closing fees. 

nnn

John Hemphill, doing business as United States Mortgage Release Corporation (Mortgage Release), 

was sentenced in U.S. District Court, Chicago, IL, to 90 months incarceration and 3 years probation and 

ordered to pay a number of victims $166,910 in restitution for his earlier conviction of committing mail 

fraud and impersonating an officer, agent, or employee acting under the authority of the United States. 

From May to October 2009, Hemphill filed fictitious deeds and transferred the ownership of properties 

belonging to other individuals, including a HUD real estate-owned property, and posed as a Federal receiver 

to prospective buyers. 

nnn

Orlando Watson, the president of Woodstock Enterprises, was sentenced in U.S. District Court, Memphis, 

TN, to 51 months incarceration and 3 years probation for his earlier guilty plea to committing wire and 

mail fraud. From July 2004 to November 2006, Watson fraudulently obtained HUD real estate-owned 

properties, flipped the properties to straw buyers at inflated values, and provided or submitted fraudulent 

loan documents used by unqualified borrowers to obtain conventional mortgages. 

nnn

Attorney John Farano was charged in a superseding indictment filed in U.S. District Court, Chicago, IL, 

with allegedly committing mail and wire fraud. From 2002 to 2004, Farano and other individuals allegedly 

purchased 19 HUD real estate-owned properties and fraudulently resold the HUD properties at inflated 

values to investors. 

nnn

Kiya McNeal, a title agent for Lloyds and Handson Abstracts of Philadelphia (Lloyds and Handson), 

was sentenced in U.S. District Court, Philadelphia, PA, to 2 years incarceration and 3 years supervised 

24 Chapter 1 - Single-Family Housing Programs
Chapter 1 - Single-Family Housing Programs 25

release and ordered to pay New Jersey Title Insurance Company $159,397 in restitution for her earlier guilty 

plea to committing wire fraud. From May 2008 to January 2009, McNeal prepared false HUD-1 settlement 

statements and electronically diverted and personally use more than $225,000 in Lloyds and Handson 

settlement funds, including settlement funds associated with an FHA-insured mortgage. 

nnn

Chapter 2 - Public and Indian 

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

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

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

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

to enable low-income families, the elderly, and persons with disabilities to obtain and reside in housing 

that is safe, decent, sanitary, and in good repair. In addition to the audits and investigations described in 

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

chapter 8, page 116).

Audit

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

Region 1 - 18%

Region 2 - 23%

Region 3 - 4% 

Region 4 - 9%

Region 5 - 14%

Region 6 - 14%

Regions 7/8/10 - 4%

Region 9 - 9%

Region 11 - 5%

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

American Recovery and Reinvestment Act of 2009 (nine audits) type audits conducted in the public and Indian 

housing area. The writeups for these audits are shown separately in chapter 5 of this semiannual report.

Key program results Questioned costs Funds put to better use

$28.2 million $2 million

Page 29

Page 31

Page 32

Page 33

Page 34

Audit 22 audits*

Our

focus

• Section 8 Housing Choice Voucher

• HUD’s oversight of public housing agencies’ Section 8 

Project-Based Voucher programs

• Review of Philadelphia housing authority’s legal services

• Public Housing Capital Fund programs 

• Public housing program activities

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

during this reporting period

28 Chapter 2 - Public and Indian Housing Programs
During this reporting period, the Office of Inspector General (OIG) reviewed HUD’s controls over 

the Section 8 Housing Choice Voucher and Project-Based Voucher programs, the Philadelphia Housing 

Authority’s Legal Services, Public Housing Capital Fund (Capital Fund) programs, and public housing 

activities.

Section 8 Housing Choice Voucher 

Audits of the Section 8 Housing Choice Voucher program continued to be a priority during this 

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

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

met housing quality standards, the PHA managed the program according to HUD requirements, and the 

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

in the Section 8 Housing Choice Voucher program area. 

nnn

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

Wheaton, IL, and found that the Authority (1) did not maintain adequate documentation to support the 

eligibility of its Section 8 Project-Based Voucher program projects, (2) executed housing assistance payments 

contracts with inappropriate contract rents, (3) did not properly select Section 8 Project-Based Voucher 

program households from waiting lists, (4) lacked controls over housing assistance and utility allowance 

payments, (5) did not appropriately manage its program funds, and (6) did not properly select Section 8 

Housing Choice Voucher program households from its waiting list. As a result, HUD had no assurance that 

the Authority’s resources were used to benefit low- and moderate-income individuals. 

The Authority did not manage its program funds in accordance with HUD’s requirements and its policies. 

It had unallowable and questionable transactions, did not correctly report its financial standing to HUD, 

did not maintain complete and accurate records, and miscalculated its net restricted assets. As a result, 

the Authority used more than $2.3 million in program funds for transactions not related to its program and 

was unable to support the use of more than $330,000 in program funds. 

The Authority did not follow HUD’s requirements and directives and its program administrative plan 

regarding the selection of program households. It did not properly select all program households from its 

waiting list. Instead, it admitted 146 households based on referrals. As a result, it inappropriately paid more 

than $2.6 million in housing assistance to households that were inappropriately admitted to its program. 

In addition, it was unable to support that nearly $70,000 in funds received from the City of Chicago was 

used toward housing assistance payments.

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

for the improper use of nearly $5.1 million in program funds, (2) provide documentation or reimburse its 

program from non-Federal funds for the unsupported use of more than $400,000 in program funds, and 

(3) implement a detailed comprehensive plan to improve its programs.

OIG also recommended that HUD (1) take administrative action against the executive director and 

board of commissioners for failing to administer the Authority effectively and in accordance with HUD’s 

and its own requirements and (2) review the Authority’s household selections to ensure that they comply 

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

appropriate action against the Authority and/or its applicable employee(s). (Audit Report: 2011-CH-1006)

nnn

Chapter 2 - Public and Indian Housing Programs 29
HUD OIG audited the Hawthorne, CA, Housing Authority’s Section 8 program and found that the 

Authority and the City of Hawthorne failed to maintain an adequate financial management system to properly 

administer their Section 8 Housing Choice Voucher program according to HUD rules and regulations. 

Specifically, the Authority and City (1) did not properly document more than $1.4 million in Section 8 

investment and interfund activity, making the expended funds ineligible; (2) accumulated Section 8 deficits 

due partly to the City’s failure to record portability receivables in its accounting system; and (3) failed to 

implement adequate internal controls to safeguard and minimize the risk of operating a Section 8 program. 

OIG recommended that HUD require the City to repay the ineligible expenditures of Section 8 funds 

and implement adequate policies and procedures regarding its accounting for interfund activities and 

portability receivables. In addition, HUD should consider sanctions against the City for not complying with 

its annual contributions contract. (Audit Report: 2011-LA-1008)

nnn

HUD OIG audited the Housing Choice Voucher program at the Brockton, MA, Housing Authority and 

found that the Authority generally administered the program efficiently and effectively and in compliance 

with its annual contributions contract and HUD regulations. However, it did not properly account for and 

report interprogram fund transactions between its Federal and State programs during fiscal years (FY) 2008 

and 2009. During the audit, the Authority was able to reconcile its FY 2008 audited financial statement 

interprogram accounts of $3.8 million between State and Federal programs. However, it did not properly 

account for and report the remaining FY 2009 interprogram fund transactions, resulting in unsupported 

transactions being recorded in its program accounts. In addition, the Authority could not provide support 

and justification for program contracts to show that the contracts were properly awarded/documented.

OIG recommended that HUD require the Authority to (1) provide support for more than $885,000 

in interprogram fund transactions between Federal and State programs and (2) provide support and 

justification for more than $260,000 paid for contracts for inspection services and legal services or reimburse 

its operating funds from non-Federal funds for the applicable amounts. (Audit Report: 2011-BO-1002) 

nnn

HUD OIG audited the Housing Authority of the City of Wilson, NC’s Section 8 Housing Choice Voucher 

program and found that the Authority failed to comply with many of HUD’s Section 8 program requirements. 

It mismanaged its program funds, improperly selected tenants for assistance, improperly terminated tenants, 

made improper housing assistance payments, and had other areas of noncompliance. Inspection of 23 

units showed that none met minimum housing quality standards and 6 were in material noncompliance. 

The Authority also failed to ensure that quality control inspections were performed in accordance with 

HUD requirements. In addition, it mismanaged its Family Self-Sufficiency and home-ownership programs. 

It did not fully comply with HUD’s administrative requirements for either program and did not maintain 

accurate accountability of participant funds for its Family Self-Sufficiency program. 

OIG recommended that HUD require the Authority to follow its existing controls and develop and 

implement additional controls as needed to ensure that it complies with all Section 8 program requirements. 

The Authority must repay nearly $110,000 in ineligible expenses from non-Federal funds and provide 

documentation showing that nearly $15,000 in unsupported expenses was eligible or repay that amount 

from non-Federal funds. (Audit Report: 2011-AT-1003)

nnn

30 Chapter 2 - Public and Indian Housing Programs
HUD OIG audited the nonprofit development activities of the Housing Authority of the County of Cook 

in Chicago, IL, and found that the Authority’s administration of its Section 8 Housing Choice Voucher 

program housing assistance payments to its nonprofit instrumentality, Turnstone Development’s units was 

inadequate. The Authority failed to collect more than $30,000 in housing assistance payments made to 

an incorrect program landlord. The Authority also miscalculated program housing assistance payments 

for its project-based vouchers allocated to 21 Turnstone units, resulting in the underpayment of more than 

$10,000 in housing assistance to 21 households. Further, the Authority failed to recover housing assistance 

payments made for four program households after they were deceased, resulting in more than $4,000 in 

overpayments to Turnstone units.

OIG recommended that HUD require the Authority to (1) reimburse its program more than $30,000 

from non-Federal funds for the housing assistance payments owed by an incorrect program landlord, (2) 

reimburse the 21 program households more than $10,000 from program funds for the underpayment of 

housing assistance, and (3) reimburse its program more than $4,000 from non-Federal funds for the housing 

assistance payments made for deceased households. (Audit Report: 2011-CH-1005)

nnn

HUD OIG audited the East Point, GA, Housing Authority’s Housing Choice Voucher program and found 

that the Authority generally computed accurate housing assistance payments. However, it made excessive 

payments of more than $38,000 on behalf of a zero-income tenant who underreported her income and 

did not provide proof of financial assistance. Also, the Authority’s physical inspection process did not 

accurately identify the deficiencies, its quality control inspections were not performed on a timely basis, 

and the results were not communicated to the inspector. 

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

program for the ineligible housing assistance, (2) implement its policies and procedures to ensure that 

its program operates in compliance with HUD’s requirements, (3) reinspect the units and ensure that 

all deficiencies identified have been corrected, (4) evaluate the inspector’s workload and make the 

necessary adjustments to ensure that housing quality standards deficiencies are properly identified and 

corrected, (5) implement its policy and ensure that all quality control reviews are performed within the 

3-month timeframe, and (6) establish and implement procedures to ensure that its quality control review 

deficiencies are communicated to the inspector. (Audit Report: 2011-AT-1002) 

HUD’s Oversight of Public Housing Agencies’ Section 8 Project-Based 

Voucher Programs 

HUD OIG audited HUD’s oversight of PHAs’ Section 8 Project-Based Voucher programs to determine 

whether HUD had adequate oversight of PHAs’ programs to ensure that program funds were used in 

accordance with HUD’s requirements.

HUD lacked complete and accurate information with which to adequately monitor its program. It also 

did not adequately monitor the addition of new projects to its program or implement adequate procedures 

and controls to ensure that its program was operated according to its and the PHAs’ requirements.

OIG recommended that HUD provide additional guidance to PHAs to ensure accurate reporting 

by agencies of their information in HUD’s Public and Indian Housing Information Center, the Voucher 

Management System, and the agencies’ plans. The reporting requirements should include requiring 

agencies to certify to the accuracy of their information reported to HUD. In addition, HUD should (1) issue 

specific guidance to its field offices so they can ensure that the program’s reporting requirements are 

Chapter 2 - Public and Indian Housing Programs 31
adequately monitored and (2) implement adequate monitoring procedures and controls for the oversight 

of its program to ensure that PHAs select and adequately document only eligible projects and use program 

funds in accordance with program requirements. (Audit Report: 2011-CH-0001)

Review of Philadelphia Housing Authority’s Legal Services

HUD OIG audited the Philadelphia, PA, Housing Authority to determine whether the Authority’s 

payments to outside legal firms could be supported and complied with HUD regulations and other applicable 

requirements.

The Authority’s payments to outside attorneys did not comply with HUD regulations and other 

applicable requirements. Specifically, the Authority did not adequately support $4.5 million that it paid to 

outside attorneys during the period April 2007 to August 2010, nearly the entire amount reviewed. It made 

unreasonable and unnecessary payments of $1.1 million to outside attorneys to obstruct the progress of HUD 

OIG audits. It also did not obtain required HUD written concurrence before accepting all settlement offers 

arising from its litigations and allowed an apparent conflict-of-interest situation to exist. Further, although 

a previous HUD OIG audit found similar problems with the Authority’s payments to outside attorneys, the 

Authority failed to implement the recommendations made in the previous audit. 

OIG recommended that HUD require the Authority to (1) provide adequate documentation to support 

$4.5 million in unsupported costs or reimburse the applicable programs from non-Federal funds for any costs 

that it cannot support, (2) provide documentation to support the remaining $26 million in payments to law 

firms not reviewed if the Authority cannot support the $4.5 million or reimburse the applicable programs 

from non-Federal funds for any costs that it cannot support, (3) implement adequate procedures and 

controls to ensure that its payments for outside legal services comply with relevant laws and regulations, 

(4) develop and implement controls to ensure that invoices for legal services are adequately verified and 

payments are made in accordance with the terms of the related contracts, and (5) implement appropriate 

measures to prevent and resolve conflict-of-interest situations. 

OIG recommended that the Authority (1) implement controls to ensure that HUD is notified of pending 

litigation and that HUD’s written concurrence is obtained before accepting a settlement offer arising from 

litigation and that it implement controls to ensure that the use of attorneys is restricted on HUD OIG audits 

and other HUD oversight activities; (2) revise its contract provisions for future legal service contracts to 

reinstate sections that it removed, which required prior authorization for specific legal services, specifying 

work functions of various legal staff, and identifying activity descriptors needing additional explanation to 

be acceptable for payment; and (3) develop and implement a written policy and controls to ensure that 

contract requirements in its legal services contracts are enforced and have its OIG periodically audit a 

32 Chapter 2 - Public and Indian Housing Programs

Copyright 2011. The Philadelphia Inquirer, Philadelphia, PA. Reprinted with permission.
sample of current and future legal contracts and payments to ensure that the responsible personnel enforce 

the requirements and only reimburse law firms for allowable expenses. (Audit Report: 2011-PH-1007)

Public Housing Capital Fund Programs

HUD OIG audited the Jersey City Housing Authority in Jersey City, NJ, regarding the administration of 

its Capital Fund programs to determine whether the Authority (1) obligated and expended funds under the 

Capital Fund program and Capital Fund Financing Program (CFFP) in accordance with HUD regulations 

and (2) had a financial management system in place that complied with program requirements. 

The Authority did not always comply with HUD regulations while obligating and expending capital funds, 

and its financial management system did not always comply with program requirements. Specifically, 

the Authority (1) inadequately used capital funds for a development that was subject to be converted 

to tenant-based assistance, (2) drew down capital funds without proper supporting documentation, 

(3) inappropriately obligated bond proceeds under the CFFP, (4) inadequately disbursed CFFP bond 

proceeds for preaward costs, and (5) lacked a plan for using force account labor. Further, there were 

control weaknesses in the Authority’s financial management system. Specifically, accounting records 

and financial reports were not complete, accurate, and current, and the obligation of funds could not be 

effectively tracked and monitored. 

OIG recommended that HUD instruct the Authority to (1) provide supporting documents for the more 

than $3.3 million in capital funds spent on the Montgomery Gardens Development and for unsupported 

drawdowns and reimburse any costs determined to be ineligible; (2) conduct the required annual reviews 

to identify developments that should be converted to the tenant-based program; (3) deobligate more than 

$338,000 obligated for contingencies under the CFFP; (4) reimburse more than $53,000 in ineligible preaward 

costs to the CFFP bond proceeds from annual capital funds; (5) establish an adequate force account labor 

plan; and (6) develop procedures that will improve the accounting system and internal controls to ensure 

that accounting records and financial reports are accurate, current, complete, and adequately supported 

with source documents. OIG also recommended that HUD determine whether further administrative 

actions should be pursued regarding the Authority’s failure to carry out the actions certified to in its 5-year 

plans in relation to the conversion of Montgomery Gardens. (Audit Report: 2011-NY-1001)

nnn

HUD OIG audited the Jersey City, NJ, Housing Authority’s administration of its Replacement Housing 

Factor (RHF) grants received under the Capital Fund program to determine whether the Authority obligated 

and expended its RHF grants in accordance with HUD regulations. 

Authority officials did not always obligate or expend RHF funds in a timely manner. They failed to 

obligate at least 90 percent of the Authority’s 2007 RHF grants within 24 months and disburse 100 percent of 

its 2004 RHF grants within 48 months of the date of availability of the funds. Consequently, nearly $878,000 

of the Authority’s 2007 RHF funds was not obligated, and more than $2.2 million of its 2004 RHF funds was 

not expended within the specified period according to HUD regulations. Therefore, not all needed capital 

improvements were accomplished within program time limits. 

OIG recommended that HUD (1) recapture more than $3.1 million in RHF capital funds or reduce future 

capital funds by this amount because of the delayed obligation and expenditure of these funds and (2) 

direct Authority officials to establish and implement procedures to ensure that the Authority obligates and 

expends its capital fund grants within 24 and 48 months, respectively, from the date that funds become 

available to the Authority. (Audit Report: 2011-NY-1008)

nnn

Chapter 2 - Public and Indian Housing Programs 33
HUD OIG audited the Irvington, NJ, Housing Authority’s Capital Fund programs to determine whether 

Authority officials obligated and expended capital funds in accordance with HUD regulations and had 

a financial management system in place that complied with program requirements and whether the 

allegations in an anonymous complaint could be substantiated.

Authority officials did not always administer the Capital Fund programs in accordance with HUD 

regulations. Specifically, (1) controls over procurements were not adequate, and (2) Capital Fund and CFFP 

funds were expended without adequate support and for ineligible items. As a result, goods and services 

were not obtained in the most economical or efficient manner, funds were not properly safeguarded as 

expenses were unsupported or ineligible, and funds disbursed were not properly recorded. Consequently, 

more than $2.4 million in expenses was unsupported, and more than $209,000 was ineligible. In addition, 

the Authority’s financial management system did not always comply with program regulations. As a result, 

the Authority did not adequately account for and safeguard program funds, and more than $132,000 was 

inappropriately charged to the Section 8 program. The allegations in the complaint regarding inadequate 

management controls appeared to be valid.

OIG recommended that HUD require Authority officials to (1) provide supporting documentation so 

that HUD can determine the eligibility of the questioned costs, (2) repay the ineligible disbursements along 

with any additional amounts determined to be ineligible, and (3) establish adequate controls to ensure 

compliance with program requirements. (Audit Report: 2011-NY-1003)

nnn

HUD OIG audited the East St. Louis, IL, Housing Authority’s Capital Fund program to determine whether 

the Authority had proper support for its capital fund draws. 

The Authority drew down grant funds for ineligible items and without adequate support. Specifically, 

it made unsupported draws, excessive administration draws, draws for force account labor without prior 

approval, draws above the invoiced amount, and duplicate draws. As a result, HUD had no assurance that 

nearly $172,000 in capital funds was properly spent. 

OIG recommended that HUD require the Authority to (1) provide adequate support for the nearly $91,000 

drawn for unsupported costs or repay the funds, (2) repay the more than $81,000 in ineligible draws and 

calculate and repay additional ineligible draws outside the audit period, and (3) develop and implement 

procedures for assembling and maintaining adequate documentation before submitting vouchers. (Audit 

Report: 2011-KC-1002)

Public Housing Program Activities 

HUD OIG audited HUD’s oversight of PHAs’ energy conservation procedures through energy performance 

contracting (EPC) in the States of New York and New Jersey to determine whether HUD had adequate 

controls to ensure that (1) the costs of EPC had been properly repaid from the savings from energy 

conservation and/or add-on subsidy incentives, (2) utility cost savings on measurement and verification 

(M&V) reports had been reported in a timely manner, (3) utility cost savings were accurately calculated 

and energy service companies guaranteed that utility cost savings were achieved, and (4) its EPC inventory 

data were accurate and complete.

HUD did not always adequately monitor the PHAs with EPC or verify reported information regarding 

energy cost savings. Specifically, HUD did not have adequate controls in place to ensure that (1) the costs of 

EPC had been properly repaid from the savings from energy conservation and/or add-on subsidy incentives, 

(2) utility cost savings had been reported on M&V reports in a timely manner, (3) utility savings had been 

34 Chapter 2 - Public and Indian Housing Programs
accurately calculated and guaranteed utility cost savings were achieved, and (4) its EPC inventory data were 

accurate and complete. Therefore, HUD may not have assurance that utility cost savings as guaranteed 

by the energy service companies was achieved. HUD officials were aware of the control weaknesses and 

had taken corrective actions including making organizational changes to provide additional training and 

technical support to field office staff and participating PHAs.

OIG recommended that HUD (1) establish and implement controls to ensure that the costs of EPC 

have been properly repaid from the savings from energy conservation and/or add-on subsidy incentives, 

(2) establish and implement controls to ensure that M&V reports are submitted in a timely manner and 

that data are verified for accuracy, (3) establish and implement controls to verify that actual energy cost 

savings achieved are equal to or greater than the energy service companies’ guaranteed energy savings and/

or the add-on subsidy incentive amount, (4) provide mandatory training to the appropriate headquarters 

and field office staff and participating PHAs to ensure that they comply with the current and upcoming 

regulations related to EPC, and (5) establish and implement necessary control procedures to ensure that 

the EPC database is complete and accurate. (Audit Report: 2011-NY-0001)

nnn

Chapter 2 - Public and Indian Housing Programs 35
Investigations

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

and Indian housing program staff and conducted jointly with Federal, State, and local law enforcement 

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

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

Key program 

results

$ 

recovered

Convictions/pleas/ 

pretrials

$13,496,929 281

Page 37

Page 39

Page 42

Page 43

Page 44

Page 45

Investigations 224

Our

focus

• Public housing agency theft/embezzlement

• Rental assistance fraud

• FedRent Initiative

• Fugitive Felon Initiative

• Civil and administrative actions

• Other fraud/crimes

Cases 

closed

Admin/civil 

actions

272

Chart 2.2: Percentage of OIG public and Indian housing closed

 investigation cases during this reporting period

Region 1 - 5%

Region 2 - 5%

Region 3 - 6%

Region 13 - 15% 

Region 4 - 8%

Region 14 - 3%

Region 5 - 13%

Region 15 - 11%

Region 6 - 6%

Regions 7/8 - 4%

Region 9 - 14%

Region 10 - 6%

Region 11 - 4%

36 Chapter 2 - Public and Indian Housing Programs
Public Housing Agency Theft/Embezzlement

Terri Lucero, the former assistant executive director of the Alamosa Housing Authority (Alamosa), 

was sentenced in U.S. District Court, Denver, CO, to 1 year home confinement and 5 years probation and 

ordered to pay the Internal Revenue Service (IRS) $45,279 in restitution for her earlier guilty plea to filing a 

false Federal income tax return. In addition, former Alamosa executive director Patricia Martinez, who was 

previously sentenced for her earlier guilty plea to committing theft of Federal program funds and money 

laundering, was debarred from procurement and nonprocurement transactions with HUD and throughout 

the Executive Branch of the Federal Government indefinitely. From April 1998 to October 2007, Lucero, 

Martinez, and other individuals embezzled more than $1.3 million in Alamosa funds when they generated 

or negotiated unauthorized housing authority checks. 

nnn

Chapter 2 - Public and Indian Housing Programs 37

Copyright 2010. The Pueblo Chieftain, Pueblo, CO. Reprinted with permission.
Elias Castellanos, a former contract chief financial officer for the Housing Authority of 

New Orleans (New Orleans), was sentenced in U.S. District Court, New Orleans, LA, to 

46 months incarceration and 36 months probation, ordered to pay New Orleans $225,889 

in restitution, and fined $75,000 for his earlier guilty plea to committing embezzlement. 

From September 2006 to June 2009, Castellanos submitted false billings for accounting 

services and fraudulently obtained $900,927 in New Orleans funds. 

nnn

Joba Cotorreal and Damaris and Arielis Peralta, former New York City Housing 

Preservation and Development (Housing Preservation) employees, and five Housing 

Preservation housing recipients were collectively sentenced in Bronx Supreme Court, 

Bronx, NY, to 60 months incarceration and 194 months supervised release for their 

earlier guilty pleas to committing bribery or giving or receiving unlawful gratuities. From 

June 2003 to August 2006, Cotorreal, Damaris and Arielis Peralta, and other individuals 

fraudulently sold housing vouchers to unqualified housing applicants who obtained 

more than $635,185 in housing assistance they were not entitled to receive. 

nnn

Anthony Bandoh, a former accountant for the Syracuse Housing Authority (Syracuse), 

was sentenced in Onondaga County Court, Syracuse, NY, to 5 years probation and 

ordered to pay Syracuse $176,000 in restitution for his earlier guilty plea to committing 

larceny. From 1986 to 2003, Bandoh stole about $176,000 in Syracuse funds. 

nnn

William Deatrick, the former director of facilities for the Brevard Family of Housing 

(Brevard), was sentenced in U.S. District Court, Orlando, FL, to 60 months incarceration 

and 3 years supervised release and ordered to pay HUD $102,390 in restitution for his 

earlier guilty plea to committing a conspiracy to commit theft from a program receiving 

Federal funds. From August 2005 through October 2006, Deatrick solicited and accepted 

more than $100,000 in bribes from previously sentenced Brevard contractor Derrick 

O’Neal in exchange for Brevard contracts. 

nnn

Carlos Madrid, the former chairman of the board for the Bexar County Housing Authority (Bexar County), 

was sentenced in U.S. District Court, San Antonio, TX, to 18 months probation for his earlier guilty plea 

to committing mail fraud and deprivation of honest services. From July 2002 to September 2003, Madrid 

failed to disclose his involvement with or his receipt of more than $100,000 from Southwest Housing 

Development, a construction company under contract with Bexar County. 

nnn

Tonya Webber-Smith and Valerie Lewis, former Tallahassee Housing Authority employees, were each 

arrested and charged in the 11th Judicial Circuit Court, Tallahassee, FL, with allegedly committing grand 

theft, welfare management fraud, official misconduct, a scheme to defraud, or misuse of a public office. 

Between April 2008 to December 2009, Webber-Smith and Lewis allegedly provided housing vouchers 

to relatives and other unqualified housing applicants who obtained about $68,112 in housing assistance 

they were not entitled to receive.

nnn

38 Chapter 2 - Public and Indian Housing Programs

Copyright 2010. The 

Times-Picayune, 

New Orleans, LA. 

R e p r i n t e d w i t h 

permission.
Rosilyn Brown, the former executive director of the Narragansett Indian Wetuomuck Housing Authority 

(Wetuomuck), was charged in U.S. District Court, Providence, RI, with allegedly committing theft from 

a program receiving Federal funds. From October 2008 to June 2009, Brown allegedly embezzled more 

than $100,000 in Wetuomuck funds for her personal use. 

nnn

LaToya Logan, a former DeKalb County Housing Authority (DeKalb) employee, was arrested and 

charged in Rockdale County Court, Conyers, GA, with allegedly committing forgery. From April 2009 to 

May 2010, Logan allegedly created and negotiated $60,161 in DeKalb checks without authorization. 

nnn

Preston Carmon, a St. Bernard Parish Housing and Redevelopment 

employee, and Gregory Kennedy, a Housing Authority of New Orleans 

employee, were each charged in Louisiana State Court, St. Bernard, LA, 

with allegedly committing theft. From January 2010 to February 2011, 

Carmon and Kennedy allegedly created a fictitious landlord and tenants 

and fraudulently obtained about $45,000 in housing assistance payments. 

Rental Assistance Fraud

Suzette Charles and Victorin Murat, Palm Beach County Housing 

Authority (Palm Beach County) Section 8 landlords, each entered into 

pretrial diversions filed in the 15th Judicial Circuit Court, West Palm 

Beach, FL, and agreed to collectively perform 100 hours of community 

service. In addition, 16 former Palm Beach County, West Palm Beach, 

or Pahokee Housing Authority (Pahokee) housing recipients were 

collectively sentenced to 396 days incarceration and 52 years supervised 

release and ordered to pay Palm Beach County or Pahokee $669,206 and 

other agencies $47,854 in restitution for their earlier convictions of or guilty 

pleas to committing grand theft or public assistance fraud. Between 2007 

Chapter 2 - Public and Indian Housing Programs 39

Copyright 2011. The Providence Journal, Providence, RI. Reprinted with permission.

Copyright 2011. The Times-Picayune, 

New Orleans, LA. Reprinted with 

permission.
and 2009, Charles and Murat admittedly provided false information and obtained reduced property tax rates 

on their subsidized properties, and between December 2002 and August 2010, the remaining defendants 

failed to report income, accurate household compositions, or their prior criminal histories and collectively 

obtained $669,206 in housing assistance they were not entitled to receive. 

nnn

Eleven New York City Housing Authority (New York City) housing recipients and an unauthorized tenant 

were each arrested and charged in U.S. District or Brooklyn Criminal Courts, Manhattan or Brooklyn, NY, 

with allegedly making false statements; committing theft of government funds, a conspiracy to commit theft 

of government funds, or grand and petit larceny; falsifying business records; or possession of marijuana. 

In addition, New York City housing recipients Lashanda Navarro, Chris Santos, and Reina Brown and 

Section 8 landlord Jerry Melendez were collectively sentenced to 6 months home detention and 216 

months supervised release and ordered to pay New York City $222,914 in restitution for their earlier guilty 

pleas to conducting false transactions with HUD or committing theft of government funds. Between 1999 

and February 2011, the above defendants allegedly and Navarro, Santos, Brown, and Melendez admittedly 

failed to report assets, income, unauthorized residents, familial relationships, dual housing subsidies, or 

their nonresidency in their subsidized units and collectively obtained about $606,849 in housing assistance 

they were not entitled to receive. 

nnn

Welthea Singleton, a former Metropolitan Boston Housing Partnership Section 8 tenant and landlord, 

was indicted in U.S. District Court, Boston, MA, for allegedly committing theft of public funds. From January 

2001 to September 2010, Singleton allegedly used the identity of another individual and fraudulently obtained 

more than $140,000 in housing assistance at the same time she claimed to be the Section 8 landlord. 

nnn

Pennie Puckett and Laurie Price, current or former Yamhill County Housing Authority (Yamhill) Section 

8 tenants, and home care providers Jessica Molash, Ellen Hanson, and Deanna Michael were each charged 

or indicted in U.S. District or Yamhill County Circuit Courts, Portland or McMinnville, OR, for allegedly 

making false statements or false claims for health care, committing theft, or unlawfully obtaining public 

assistance and food stamps. In addition, former Yamhill Section 8 tenants Crystal Lindsay and David Foster 

were collectively sentenced to 15 days incarceration and 5 years probation and ordered to pay Yamhill 

$50,651 and others $15,483 in restitution for their earlier guilty pleas to committing theft, attempting to 

fraudulently obtain other benefits, and aiding and abetting. Between February 2003 and February 2011, 

the above defendants allegedly and Lindsay and Foster admittedly failed to report income, assets, accurate 

household compositions, or their previous criminal histories or provided false medical information on 

housing and other certifications and collectively obtained about $135,651 in housing and $75,483 in other 

assistance they were not entitled to receive. 

nnn

Tina Orji, a former Chicago Housing Authority (Chicago) Section 8 tenant, was indicted in Cook County 

Circuit Court, Chicago, IL, for allegedly committing theft by deception and forgery. In addition, former 

Chicago Section 8 tenant Katherine Jefferson pled guilty to committing theft, and former Chicago Section 8 

tenants Calvin Early and Veronica Eason were collectively sentenced to 54 months probation and ordered 

to pay HUD $118,060 in restitution for their earlier guilty pleas to committing theft by deception. Between 

July 2002 and June 2009, Orji allegedly and the remaining defendants admittedly failed to report income, 

40 Chapter 2 - Public and Indian Housing Programs
assets, or dual housing subsidies on housing and other certifications and collectively obtained $135,345 in 

housing assistance and $13,500 in Social Security Administration benefits they were not entitled to receive. 

nnn

Lesandra Witherspoon, a former Michigan State Housing Development Authority (Michigan State) 

Section 8 tenant, was charged in Kent County District Court, Grand Rapids, MI, with allegedly obtaining 

housing assistance by false pretenses and committing welfare fraud. In addition, former Michigan State 

Section 8 tenants Ebony Betts and Shakira Miles each pled guilty to committing welfare fraud or obtaining 

housing assistance under false pretenses; former Michigan State housing recipients Rickelle Brown and 

Aguel Gaines were collectively sentenced to 360 days incarceration and 10 years probation and ordered 

to pay Michigan State $28,755 and others $19,382 in restitution for their earlier guilty pleas to committing 

housing assistance and welfare fraud; and former Michigan State Section 8 landlord and tenant Ellis and 

Donna Richardson each pled nolo contendere to committing false pretenses. Between 2004 and 2010, 

Witherspoon and Ellis and Donna Richardson allegedly and the remaining defendants admittedly failed 

to report income, assets, an accurate household composition or marital status, or their joint ownership 

interest in and the subsequent sale of their subsidized housing unit on housing certifications. Collectively, 

the above defendants obtained about $125,294 in housing and about $69,382 in other assistance they were 

not entitled to receive. 

nnn

Jomarna Fuentes, a former Boston Housing Authority (Boston) Section 8 tenant, was charged in Boston 

Municipal Court, Boston, MA, with allegedly committing larceny over $250 by a single scheme and making 

a false claim to a government agency. In addition, former Boston Section 8 tenant Harvey Johnson was 

sentenced to 2 years supervised probation and ordered to pay Boston $34,826 in restitution for his earlier 

guilty plea to submitting a false claim to a government agency and committing larceny over $250. Between 

2001 and 2009, Fuentes allegedly and Johnson admittedly failed to report income on housing certifications 

and together obtained about $107,085 in housing assistance they were not entitled to receive. 

nnn

Sonny Vo and Denise Nguyen, a former Norwood Housing Authority (Norwood) Section 8 landlord and 

tenant, were collectively sentenced in U.S. District Court, Boston, MA, to 1 year intermittent community 

confinement, 12 months home confinement, and 6 years probation; ordered to pay HUD $104,496 in 

restitution; and fined $3,000 for their earlier guilty pleas to committing mail fraud. From August 2001 to 

September 2008, Vo and Nguyen failed to report their joint residency on housing certifications and together 

obtained $104,496 in housing assistance they were not entitled to receive. 

nnn

Five former Georgia Department of Community Affairs (Georgia Community Affairs) Section 8 tenants 

were each indicted in various Georgia Superior Courts for allegedly making false statements or committing 

theft by deception, public assistance fraud, or recidivism. In addition, former Georgia Community Affairs 

Section 8 tenant Andrea Travis was sentenced to 10 years probation and ordered to pay Georgia Community 

Affairs a not yet determined amount of restitution for her earlier guilty plea to committing theft by deception, 

and former Georgia Community Affairs Section 8 tenant Leslie Hinton was sentenced to 5 years probation 

and ordered to pay Community Affairs $10,766 in restitution before her adjudication of guilt. Between 

August 2005 and December 2009, the above defendants allegedly and Travis admittedly failed to report 

income or an accurate marital status on housing certifications and collectively obtained about $84,860 in 

housing assistance they were not entitled to receive. 

nnn

Chapter 2 - Public and Indian Housing Programs 41
Nine current or former Memphis or Shelby County Housing Authority Section 8 tenants were each 

arrested and charged in Shelby County Criminal Court, Memphis, TN, with allegedly committing forgery 

and theft. Between December 2003 and October 2010, the above defendants allegedly provided false 

information or failed to report income on housing certifications and collectively obtained about $92,251 

in housing assistance they were not entitled to receive. 

nnn

Hadiah Mcleod-Lambu, Jung Kim, and Aishah Bashir, Oakland Housing Authority (Oakland) Section 8 

landlords and a tenant, were each charged in Alameda County Superior Court, Oakland, CA, with allegedly 

defrauding a housing authority, and Kim was arrested after she was charged. Between 2004 and November 

2010, the above defendants allegedly failed to report their familial relationship or the nonresidency of 

their Section 8 tenants on housing certifications and collectively obtained more than $82,000 in housing 

assistance they were not entitled to receive. 

Fed Rent Initiative

HUD’s most recent study estimates the combined gross improper rental housing assistance payments to 

have been more than $1 billion in FY 2008. In an effort to combat administrative overpayments and tenant 

fraud, HUD and HUD OIG commenced “Operation FedRent,” a joint effort to address rental assistance 

fraud involving Federal employees. Operation FedRent compares HUD tenant data to current and retired 

Federal employee information maintained by the U.S. Office of Personnel Management. After the data 

comparison, an income eligibility determination is made, and the Social Security numbers for family 

members 6 years of age and older are verified. If a discrepancy exists, an investigation is opened, and 

appropriate administrative or legal actions are initiated to collect any overpaid housing assistance. Results 

of Operation FedRent during this semiannual reporting period are described below.

nnn

Arvay Smith, a former Chicago Housing Authority public housing tenant and U.S. Postal Service (USPS) 

employee, was sentenced in U. S. District Court, Chicago, IL, to 5 years probation and ordered to pay 

HUD $41,895 in restitution for her earlier guilty plea to committing theft of government funds. From 2000 

to 2006, Smith failed to report income or assets on housing certifications and obtained $41,895 in housing 

assistance she was not entitled to receive. 

nnn

42 Chapter 2 - Public and Indian Housing Programs

Copyright 2010. The Commercial Appeal, Memphis, TN. Reprinted with permission.
Birdie Toomes, a former Housing Authority for the City of Los Angeles (Los Angeles) Section 8 tenant 

and current U.S. Department of Veteran Affairs employee, was sentenced in U.S. District Court, Los Angeles, 

CA, to 1 year probation and ordered to pay Los Angeles $41,022 in restitution for her earlier guilty plea to 

committing theft of government funds. From 2004 to 2008, Toomes failed to report income on housing 

certifications and obtained $41,022 in housing assistance she was not entitled to receive. 

nnn

Candace Morrow, a former Pilgrim Village Housing Authority Housing Choice Voucher program 

participant and IRS employee, was sentenced in U.S. District Court, Buffalo, NY, to 3 months incarceration 

and 2 years supervised release and ordered to pay HUD $32,358 in restitution for her earlier guilty plea 

to committing theft of government funds. From 2005 to 2010, Morrow failed report income on housing 

certifications and obtained $32,358 in housing assistance she was not entitled to receive. 

nnn

Sheryl Prince, a former Housing Authority of the City of Los Angeles Section 8 tenant and current U.S. 

Department of Commerce employee, pled guilty in U.S. District Court, Los Angeles, CA, to making false 

statements. From 2004 to 2007, Prince failed to report income on housing certifications and obtained about 

$27,622 in housing assistance she was not entitled to receive. 

nnn

Lynette Harper-Green, a former Dupage Housing Authority (Dupage) Section 8 tenant and current 

USPS employee, was sentenced in U.S. District Court, Chicago, IL, to 3 years probation and ordered to pay 

Dupage $12,863 in restitution for her earlier guilty plea to committing mail fraud. From December 2003 to 

November 2005, Harper-Green failed to report income on housing certifications and obtained $12,863 in 

housing assistance she was not entitled to receive. 

nnn

Adriane Smith, a former Prince Georges County Housing Authority (Prince Georges County) Section 

8 tenant and current U.S. Department of Agriculture employee, was sentenced in Prince Georges County 

Circuit Court, Upper Marlboro, MD, to 2 years probation and ordered to pay Price Georges County $5,327 

in restitution for her earlier guilty plea to making a false statement. From September 2006 to March 2009, 

Smith failed to report income on housing certifications and obtained $5,327 in housing assistance she was 

not entitled to receive. 

Fugitive Felon Initiative

OIG supports a Fugitive Felon Initiative (FFI) by matching HUD housing assistance information with 

crime data from the National Crime Information Center, U.S. Marshals Service (Marshals), and other 

participating law enforcement data banks. In addition, OIG special agents actively participate in the 

Marshals’ “Operation FALCON,” a joint Federal, State, city, and county law enforcement effort to locate 

and apprehend fugitive felons wanted for violent crimes. Conducted in most major cities throughout the 

United States and its territories, Operation FALCON places a strong emphasis on apprehending fugitive 

felons involved in 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 8,801 

arrests. OIG strongly supports Operation FALCON in an effort to make HUD public and assisted housing 

a safe place for families to live. Below are examples of FFI efforts. 

nnn

Chapter 2 - Public and Indian Housing Programs 43
Twenty-three Memphis and Chattanooga Housing Authority Section 8 tenants were each arrested on 

outstanding State or county warrants in Memphis and Chattanooga, TN, for allegedly committing theft, 

probation violations, possession of dangerous drugs or a prohibited weapon, or simple or domestic assaults 

or for failing to appear. 

nnn

Seven Mississippi Regional Housing Authority VIII Housing Choice Voucher program participants were 

each arrested in Gulfport, MS, on outstanding State warrants for allegedly issuing bad checks, transferring 

a controlled substance, or committing embezzlement or probation violations. 

nnn

Six Springfield, Westfield, and North Adams Housing Authorities or Massachusetts Department of Housing 

and Community Development authorized and unauthorized housing recipients were each arrested in 

Springfield, MA, on outstanding warrants issued by Massachusetts, Connecticut, and New York State Courts 

for allegedly failing to appear, committing an assault with a dangerous weapon or larceny, threatening to 

commit a crime, receiving stolen property, or making harassing communications. 

nnn

Six Mississippi Regional Housing Authority Housing Choice Voucher program participants were each 

charged in Mississippi State Court, Jackson, MS, with allegedly possessing cocaine or committing statutory 

rape, aggravated assault, forgery, embezzlement, or fraud. 

nnn

Gloria Jackson and Graylyn Russell, former Harris County Housing Authority housing recipients, were 

each arrested in New Orleans, LA, on outstanding Texas State warrants for allegedly committing felony theft. 

nnn

Marnetta Allen, an East Baton Rouge Housing Authority Housing Choice Voucher program participant, 

was arrested in Baton Rouge, LA, on an outstanding warrant issued by Weld County Court, Weld County, 

CO, for allegedly committing theft between $1,000 and $20,000. 

nnn

Kesha Thomas, a Tampa Housing Authority Housing Choice Voucher program participant, was arrested 

in Tampa, FL, for allegedly violating her probation. 

Civil and Administrative Actions

Ronnie Faison, the former deputy director of the Englewood Housing Authority (Englewood), who 

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

of government funds, was debarred from procurement and nonprocurement transactions with HUD and 

throughout the Executive Branch of the Federal Government for 36 months. From September 2006 to 

August 2007, Faison and previously sentenced Englewood bookkeeper Sergio Gonzalez fraudulently used 

about $100,000 in Englewood funds for their personal gain. 

nnn

44 Chapter 2 - Public and Indian Housing Programs
Hector Claveria, a former commissioner of the Hoboken Housing Authority (Hoboken), who previously 

pled guilty in U.S. District Court, Newark, NJ, to committing official misconduct and bribery and accepting or 

receiving an unlawful benefit by a public servant for official behavior, 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. From March to August 

2009, Claveria accepted cash payments from a housing applicant in exchange for his efforts to circumvent 

the Hoboken housing waiting list. HUD losses have not yet been determined. 

Other Fraud/Crimes

Rodney Burrell and Brian Dodds, doing business as R&R Heavy Haulers and D&R Earth Moving, each 

pled guilty in U.S. District Court, Detroit, MI, to committing a misprision of a felony. In February 2009, 

during testimony before a Federal grand jury, Burrell and Dodds provided incomplete and misleading 

information relating to HOPE VI contracts used in the rehabilitation of Gardenview Estates, a Detroit 

Housing Commission property. 

nnn

Nicholas DeRosa, a New Castle, PA, councilman, and Castle Realty Appraisal Services, Inc. (Castle 

Realty), were collectively sentenced in U.S. District Court, Pittsburgh, PA, to 41 months incarceration 

and 60 months probation and ordered to pay Lawrence County Housing Authority (Lawrence County) 

$88,000 and First Commonwealth Bank $224,159 in restitution for their earlier guilty pleas to committing 

bank and mail fraud and a conspiracy to commit money laundering. Between October and December 

2005, DeRosa directed a Lawrence County employee and board members to facilitate the purchase of 

seven dilapidated properties that either DeRosa owned or were owned by his associates, and Castle Realty 

inflated the values of these properties that were later purchased by a nonprofit organization created and 

funded by Lawrence County. 

nnn

Dwayne Benjamin and Yves Mathieu, fabricated Nassau County (Nassau) and Hempstead Housing 

Authority (Hempstead) Section 8 landlords, and 16 additional individuals were each arrested after their 

indictments in Nassau County Court, Mineola, NY, for allegedly filing false instruments; falsifying business 

records; and committing money laundering, grand larceny, and a corrupt business enterprise. From 

October 2004 to May 2009, the above individuals allegedly participated in a conventional mortgage fraud 

scheme and illegally obtained properties that Benjamin and Mathieu fraudulently placed into the Nassau 

and Hempstead Section 8 programs. HUD losses have not yet been determined. 

nnn

Graeme Stinson, Darrick Jones, Yves Vaval, and Stephan Williams, Chicago Housing Authority Section 

8 landlords, were each charged in U.S. District Court, Chicago, IL, with allegedly committing wire fraud. 

From January 2005 to September 2006, the above defendants allegedly provided false information and 

assisted unqualified borrowers who fraudulently obtained conventional mortgages for properties placed 

into the Chicago Housing Authority Section 8 program. 

nnn

John O’ Shea, the president and owner of Start Elevators, Inc., a New York City Housing Authority 

contractor, was arrested after his indictment in U.S. District Court, Manhattan, NY, for allegedly making 

Chapter 2 - Public and Indian Housing Programs 45
false statements and committing mail fraud. From December 2000 to November 2010, O’Shea allegedly 

submitted fraudulent certified payrolls to the New York City Housing Authority and violated the Davis-Bacon 

Wage Act. 

nnn

46 Chapter 2 - Public and Indian Housing Programs
Chapter 3 - Multifamily Housing 

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

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

through defaulted mortgages, subsidizes rents for low-income households, finances the construction or 

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

Audit

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

Chart 3.1: Percentage of OIG multifamily housing audit reports

during this reporting period

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

Key program results Questioned costs Funds put to better use

$30 million ---

Page 49

Page 49

Page 49

Page 50

Audit 6 audits

Our

focus

• HUD’s multifamily accelerated processing program

• FHA-insured multifamily Section 231 project

• Owner and management agent operations

• Section 8 performance-based contract administration

Region 1 - 0%

Region 2 - 17%

Region 3 - 17% 

Region 4 - 0%

Region 5 - 0%

Region 6 - 0%

Regions 7/8/10 - 33%

Region 9 - 33%

Region 11 - (N/A)*

48 Chapter 3 - Multifamily Housing Programs
HUD’s Multifamily Accelerated Processing Program

HUD OIG audited the underwriting of a $45.6 million mortgage loan that was acquired by Deutsche Bank 

Berkshire Mortgage, Inc., Bethesda, MD (lender), to rehabilitate Wingate Towers and Garden Apartments. 

The lender acquired and became responsible for the loan origination activities, personnel, books, and 

records related to this loan from Berkshire Mortgage Finance Limited Partnership (underwriter) in October 

2004. The Federal Housing Administration (FHA)-insured loan went into default in October 2009, and in 

May 2010, HUD paid a $44.3 million insurance claim to the lender. HUD sold the property in a note sale in 

September 2010 for $14.5 million, resulting in a loss of $29.8 million. The audit objective was to determine 

whether the loan was underwritten in accordance with HUD requirements. 

The loan was not underwritten in accordance with HUD requirements. The underwriter failed to 

properly assess the financial resources of the owner and general contractor or the construction capabilities 

of the general contractor. The underwriter also significantly understated the amount of repairs needed 

to bring the property up to marketable condition. Based on the underwriter’s recommendation, HUD 

approved the project and the general contractor. The project failed.

OIG recommended that HUD perform a legal review of applicable documents to determine the 

responsible party that is liable for incorrectly certifying to the integrity of the data or that due diligence 

was exercised in the underwriting of the loan, which could result in affirmative civil enforcement action of 

more than $118 million, and to pursue remedies under the False Claims Act against the responsible party 

if it is determined legally sufficient to do so. Additionally, OIG recommended that HUD take appropriate 

administrative action against the responsible party for the material underwriting deficiencies cited. (Audit 

Report: 2011-PH-1009)

FHA-Insured Multifamily Section 231 Project

HUD OIG audited the Retreat at Santa Rita Springs, Green Valley, AZ, an FHA-insured multifamily property 

under Section 231 of the National Housing Act, in response to a congressional request from Representative 

Gabrielle Giffords of the 8th Congressional District of Arizona. 

In November 2009, the owners of the community defaulted on its $29.9 million HUD-insured loan 

less than 1 month after final endorsement. The community experienced huge operating shortfalls and 

eventually defaulted on the loan. As a result, the community’s loan note was sold to an outside party for 

approximately $9 million, or more than a $20 million loss to HUD.

OIG recommended that HUD update its Multifamily Accelerated Processing (MAP) Guide to include rules 

and requirements for processing Section 231 loans and discontinue processing these types of loans until the 

MAP Guide is updated. OIG also recommended that HUD (1) ensure that all conditions for underwriting 

are met in processing Section 231 multifamily properties and that there are clear roles, responsibilities, 

and communication among the HUD offices when conducting reviews to minimize potential problems 

such as those identified and (2) improve the regional field office’s property management and performance 

monitoring of Section 231 properties by beginning monitoring immediately upon occupancy to minimize 

potential financial, operational, and managerial problems related to the properties under the program. 

(Audit Report: 2011-LA-0001)

Owner and Management Agent Operations

HUD OIG audited Westbeth Artists Houses in New York, NY, to assess the merits of a hotline complaint 

and determine whether project operations generally complied with HUD regulations pertaining to financial, 

procurement, and tenant certification processes. 

Chapter 3 - Multifamily Housing Programs 49
The complaint had merit because the duties of the executive director position for which project funds 

were disbursed were not adequately supported. In addition, although tenant certifications were properly 

performed, the project’s financial management and procurement processes did not always comply with 

HUD regulations. Specifically, project funds were used to pay expenses that were inadequately supported, 

deemed unnecessary and unreasonable, and ineligible. In addition, auditee officials did not always follow 

prudent procurement practices when executing contracts, resulting in a lack of assurance that services 

were obtained at the most economical price. 

OIG recommended that HUD instruct auditee officials to (1) provide justification for the more than 

$304,000 expended for the costs related to the executive director’s position so that HUD can determine 

whether it is justified and provide documentation to substantiate more than $28,000 in unsupported 

expenses, (2) reimburse more than $7,000 in expenses deemed unnecessary and unreasonable along 

with the ineligible expenses of nearly $38,000, and (3) ensure that controls over financial management 

and procurement processes are strengthened. (Audit Report: 2011-NY-1006)

nnn

HUD OIG audited the Naomi Gardens housing project in Arcadia, CA, in response to a congressional 

request from Representative David Dreier of the 26th District of California, to determine whether the project 

was operated in accordance with HUD rules and regulations; specifically, whether HUD funds were misused. 

The project’s expenses were properly authorized and necessary for its operation; however, the project 

did not adequately support that it conducted procurement activities in accordance with HUD requirements. 

As a result, it did not ensure that it paid nearly $171,000 to contractors and suppliers at a reasonable 

cost and in accordance with HUD rules and regulations. The project also did not properly maintain and 

administer its waiting list. It skipped over eligible applicants on its waiting list to accommodate other 

applicants without proper justification, allowed applicants to remain on the waiting list longer than HUD 

rules and regulations allowed, and improperly allowed household members to transfer to additional units. 

Therefore, the project provided no assurance that tenants were properly admitted to the project in a fair 

and equitable manner. 

OIG recommended that HUD require the project to (1) implement additional procurement procedures 

and controls to ensure compliance with HUD handbook requirements, (2) follow and enforce its tenant 

selection plan and submit documentation to HUD showing that future waiting list pulls have been conducted 

according to its tenant selection plan, (3) maintain a transfer waiting list for current tenants, and (4) amend 

the tenant selection plan to clarify and address the transfer of household members into additional units. 

(Audit Report: 2011-LA-1003)

Section 8 Performance-Based Contract Administration

HUD OIG audited the Section 8 Performance-Based Contract Administration program of the Alaska 

Housing Finance Corporation in Anchorage, AK, to determine whether the Corporation fulfilled its 

contractual responsibilities as a performance-based contract administrator of project-based Section 8 

housing assistance payments contracts. 

The Corporation generally fulfilled its responsibilities as a contract administrator. However, its 

management and occupancy reviews were not always as comprehensive as required by its annual 

contributions contract. OIG noted deficiencies that existed at the time of the Corporation’s reviews but 

were either not identified or not reported. In addition, the Corporation did not always properly rate projects 

when deficiencies were identified. 

50 Chapter 3 - Multifamily Housing Programs
Chapter 3 - Multifamily Housing Programs 51

OIG recommended that the Corporation improve its management occupancy reviews to make them 

more comprehensive and review the annual contributions contract to gain a greater understanding of its 

responsibilities in monitoring the project owners’ compliance with their obligation to provide decent, safe, 

and sanitary housing to assisted residents. (Audit Report: 2011-SE-1001)

nnn
Investigations

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

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

The results of various significant investigations are described below.

Strategic Initiative 2: Contribute to the reduction of erroneous

payments in rental assistance

Chart 3.2: Percentage of OIG multifamily housing closed investigation cases

during this reporting period

Key program 

results

$ 

recovered

Convictions/pleas/ 

pretrials

$3,382,319 37

Page 53

Page 54

Page 55

Investigations 49

Our

focus

• Theft/embezzlement

• Rental assistance fraud

• Other fraud/crimes

Cases 

closed

Admin/civil 

actions

29

Region 1 - 4%

Region 2 - 16%

Region 3 - 25%

Region 13 - 19% 

Region 4 - 8%

Region 14 - 4%

Region 5 - 4%

Region 15 - 8%

Region 6 - 6%

Regions 7/8 - 2%

Region 9 - 2%

Region 10 - 2%

Region 11 - 0%

52 Chapter 3 - Multifamily Housing Programs
Chapter 3 - Multifamily Housing Programs 53

Theft/Embezzlement

Ann Edwards, a former employee of Associated Realty Services, Inc. (Associated Realty), a HUDsubsidized multifamily management contractor, was sentenced in U.S. District Court, Memphis, TN, to 42 

months incarceration and 3 years probation and ordered to pay HUD more than $1.3 million in restitution 

for her earlier guilty plea to committing bank fraud. From May 2004 to May 2008, Edwards embezzled 

more than $1.3 million from Associated Realty bank accounts when she issued, forged, and negotiated 

about 500 unauthorized checks. 

 

nnn

Patricia Goodwin, the former manager of Summerhill Cooperative (Summerhill), a HUD-subsidized 

elderly housing development, was sentenced in Hennepin County Court, Eden Prairie, MN, to 9 months 

incarceration and 5 years probation and ordered to pay Summerhill $93,700 in restitution for her earlier 

guilty plea to committing theft by swindle. From July 2006 to February 2008, Goodwin forged authorized 

signatures on 142 Summerhill checks, altered accounting records, and embezzled $93,700 in Summerhill 

funds. 

nnn

Maria Matilla, a former property manager for Campbell Arms Apartments, a HUD-subsidized multifamily 

housing development, was arrested and charged in the 11th Judicial Circuit Court, Miami, FL, with allegedly 

committing grand theft. From September 2007 to January 2008, Matilla allegedly stole $4,794 in Campbell 

Arms funds. 

nnn

Christopher Grimsley, a former construction manager for AIMCO Apartment Management, a HUDsubsidized multifamily management contractor, was sentenced in U.S. District Court, Kansas City, MO, 

to 41 months incarceration and 36 months probation and ordered to pay his former employers $538,340 

Copyright 2011. The Commercial Appeal, Memphis, TN. Reprinted with permission.
in restitution for his earlier guilty plea to committing mail fraud. From May 2003 to May 2009, Grimsley 

solicited and obtained $538,340 in kickbacks from a number of contractors in return for HUD-subsidized 

and other multifamily contracts. HUD losses have not yet been determined. 

Rental Assistance Fraud

Eight former Section 8 tenants at HUD-subsidized multifamily housing developments were each 

arrested and charged in U.S. District or Manhattan Criminal Courts, Manhattan, NY, with allegedly making 

false statements; falsifying business records; or committing theft of government funds, a conspiracy to 

steal government funds, or grand larceny. In addition, former Section 8 tenant Robert Lujan pled guilty 

to making false statements to HUD and committing theft of government funds. Between October 2005 

and October 2010, Lujan used the identity of another individual to obtain housing assistance, and the 

remaining defendants allegedly failed to report income or their receipt of dual housing subsidies on housing 

certifications. Collectively, the above defendants obtained more than $337,136 in housing assistance they 

were not entitled to receive. 

nnn

Ernestina Marimon, a New York City Housing Preservation and Development Housing Choice Voucher 

program participant, a New York City Housing Authority public housing tenant, and a Section 8 tenant at 

Charles Hill Houses, a HUD-subsidized multifamily housing development, was indicted in U.S. District Court, 

Manhattan, NY, for allegedly making false statements and committing theft of government funds. From 

March 2006 to December 2010, Marimon allegedly failed to report her simultaneous receipt of housing 

assistance for three subsidized housing units and obtained about $161,183 in housing assistance she was 

not entitled to receive. 

nnn

Thirteen Section 8 tenants at Haverstock Hills Apartments, a HUD-subsidized multifamily housing 

development, were each indicted in Harris County District Court, Houston, TX, for allegedly tampering 

with governmental records. Between October 2007 and October 2010, the above defendants allegedly 

failed to report their criminal histories on housing certifications and collectively obtained about $156,644 

in housing assistance they were not entitled to receive. 

nnn

Patrice Smith, a former Section 8 tenant at Universal City and Parkways Apartments, HUD-subsidized 

multifamily housing developments, was indicted in Cook County Circuit Court, Chicago, IL, for allegedly 

committing theft by deception. From 2002 to 2010, Smith allegedly failed to report her receipt of dual 

housing subsidies on housing certifications and obtained more than $100,000 in housing assistance she 

was not entitled to receive. 

nnn

Ava Driver, a former Section 8 tenant at Central Gardens I Apartments (Central Gardens), a HUDsubsidized multifamily housing development, was indicted in Prince Georges County Circuit Court, Upper 

Marlboro, MD, for allegedly making false statements and committing theft. In addition, former Central 

Gardens Section 8 tenants Annette Rhue and Crystal Bailey were collectively sentenced to 20 years 

incarceration (suspended) and 10 years supervised probation and ordered to pay HUD $8,514 and others 

$34,131 in restitution for their earlier conviction of or guilty plea to committing theft, aggregate theft, or 

welfare fraud. Between January 2000 and June 2008, Driver allegedly failed to report an unauthorized 

54 Chapter 3 - Multifamily Housing Programs
Chapter 3 - Multifamily Housing Programs 55

resident or his income, Rhue failed to report income on housing and other certifications, and Bailey was 

found guilty of failing to report an unauthorized resident or his registered sex offender status. Collectively, 

the above defendants obtained about $66,260 in housing and about $14,460 in other assistance they were 

not entitled to receive. 

nnn

Five former Section 8 tenants at Woodlake Apartments, a HUD-subsidized multifamily housing 

development, were each indicted in Gloucester County Court, Woodbury, NJ, for allegedly making false 

statements or committing theft. Between March 2006 and September 2009, the above defendants allegedly 

failed to report income on housing certifications and collectively obtained about $54,000 in housing 

assistance they were not entitled to receive. 

nnn

Terri and Melanie Robinson, Jessica Johnson, and Ivoriet Drake, former Section 8 tenants at Isle 

Parkway Apartments, a HUD-subsidized multifamily housing development, were collectively sentenced 

in U.S. District Court, Mobile, AL, to 168 months probation and ordered to pay HUD $41,624 in restitution 

for their earlier guilty pleas to committing theft of government funds. Between 2005 and 2009, the above 

defendants failed to report income on housing certifications and collectively obtained $44,656 in housing 

assistance they were not entitled to receive. 

nnn

Maria Martinez and Carmen Guzman, Section 8 tenants at HUD-subsidized multifamily housing 

developments, were each arrested and charged in Bronx Criminal Court, Bronx, NY, with allegedly 

committing grand larceny and offering a false instrument for filing. Between October 2006 and November 

2008, Martinez and Guzman allegedly failed to report income on housing certifications and together obtained 

about $43,764 in housing assistance they were not entitled to receive. 

nnn

John Martinez, a former unauthorized tenant at San Juan Del Centro Apartments, a HUD-subsidized 

multifamily housing development, was convicted in Boulder District Court, Boulder, CO, of committing 

theft and forgery and obtaining a signature by deception. From January 2000 to March 2010, Martinez 

duped a mentally challenged individual to claim residency and provide annual housing certifications for 

the subsidized housing unit, but Martinez resided in the subsidized housing unit and fraudulently obtained 

more than $40,500 in housing assistance he was not entitled to receive. 

Other Fraud/Crimes

Joseph Driscoll, the maintenance director of ARCO Management, a former HUD management 

contractor who previously oversaw the management and maintenance of HUD-owned multifamily housing 

developments, pled guilty in U.S. District Court, Brooklyn, NY, to making false transactions with HUD. In May 

and June 2000, Driscoll created false bids that enabled another contractor to receive a HUD contract, and 

in return, the contractor fraudulently subcontracted work to companies owned and controlled by Driscoll. 

nnn

Chapter 4 - Community Planning and 

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

by promoting integrated approaches that provide decent housing, suitable living environments, and 

expanded economic opportunities for low- and moderate-income persons. The primary means toward 

this end is the development of partnerships among all levels of government and the private sector. In 

addition to the audits and investigations described in this chapter, the U.S. Department of Housing and 

Urban Development, Office of Inspector General (HUD OIG), has conducted a number of outreach efforts

(see chapter 8, page 118).

Audit

Strategic Initiative 3: Contribute to the strengthening of communities

Chart 4.1: Percentage of OIG community planning and development 

audit reports during this reporting period

* The total CPD audits, questioned costs, and funds put to better use amounts include any American Recovery and 

Reinvestment Act of 2009 (10 audits) and disaster recovery (4 audits) type audits conducted in the CPD area. The 

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

Key program results Questioned costs Funds put to better use

$33.4 million $3.9 million

Page 59

Page 60

Page 64

Page 64

Audit 28 audits*

Our

focus

• Community Development Block Grant programs

• HOME Investment Partnerships Program

• Neighborhood Stabilization Program 

• Shelter Plus Care

Region 1 - 3%

Region 2 - 11%

Region 3 - 21% 

Region 4 - 11%

Region 5 - 11%

Region 6 - 4%

Regions 7/8/10 - 14%

Region 9 - 18%

Region 11 - 7%

58 Chapter 4 - Community Planning and Development Programs
HUD OIG audited the Community Development Block Grant (CDBG) program, the HOME Investment 

Partnerships Program (HOME), the Neighborhood Stabilization Program (NSP), and the Shelter Plus Care 

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

the grant funds were administered for eligible activities and that the auditee met program objectives. The 

following section illustrates the audits conducted in the CPD area.

Community Development Block Grant Programs

HUD OIG audited the City of Scranton, PA’s CDBG program and found that the City failed to adequately 

administer its CDBG funds and could not demonstrate that it used more than $11.7 million in CDBG funds 

in accordance with applicable HUD requirements. Specifically, it (1) failed to maintain adequate records 

identifying the source and application of funds for its HUD-sponsored activities, (2) did not maintain 

required documentation and budget controls demonstrating that its expenditures complied with program 

requirements, (3) did not use proper subrecipient agreements, and (4) failed to adequately monitor its 

subrecipients. Additionally, it did not ensure that its activities complied with program requirements and 

allowed an apparent conflict-of-interest situation to exist. 

OIG recommended that HUD (1) perform additional monitoring and provide technical assistance to the 

City, as needed, to ensure that the City properly administers the CDBG funding in accordance with applicable 

requirements and (2) evaluate issues identified and if appropriate, initiate administrative action against 

responsible officials. OIG further recommended that HUD direct the City to (1) provide documentation 

to demonstrate that CDBG funds were used for eligible activities that met the intent of its HUD-approved 

budget line items or repay HUD from non-Federal funds and (2) improve its financial management system 

and implement improved accounting procedures to ensure that it meets the requirements of 24 CFR (Code 

of Federal Regulations) 85.20 and 570.506 and Office of Management and Budget Circular A-87. OIG also 

recommended that HUD direct the City to (1) develop and implement controls to ensure that it monitors 

its subrecipients as required and maintains adequate documentation to support its monitoring efforts and 

(2) revise its subrecipient agreement to comply with HUD requirements. (Audit Report: 2011-PH-1002)

nnn

HUD OIG audited the operations of the City of Binghamton, NY, pertaining to its administration of its 

CDBG Section 108 Loan Guarantee program, and found that the City did not ensure that its Section 108 

loans and related activities were administered effectively, efficiently, and economically in accordance with 

applicable rules and regulations and that loan proceeds were expended on eligible activities that met a 

national objective of the program. In addition, the City did not ensure that additional expenditures of CDBG 

funds for subsequent Section 108 loan repayments and other related costs were necessary, reasonable, 

and in accordance with all applicable contracts, agreements, and Federal regulations. Consequently, 

significant CDBG funds were disbursed for Section 108 debt repayments, and future CDBG funds will be 

required until the Section 108 debts have been fully paid. Therefore, the ability to provide program benefits 

to low- and moderate-income residents of the City has been diminished. 

OIG recommended that HUD instruct the City to (1) establish a Section 108 repayment account and repay 

more than $1.5 million in Regency Hotel sales proceeds that were used for City expenses from non-Federal 

funds; (2) transfer the nearly $82,000 in hotel sales proceeds that remain in the City’s trust account to the 

established Section 108 repayment account; (3) submit documentation to justify the use of more than $2.4 

million in CDBG funds to pay for hotel Section 108 debt so that HUD can make an eligibility determination; 

and (4) establish controls to ensure that Section 108 loan proceeds are at all times adequately safeguarded, 

collateral for Section 108 loans is continually protected until all loan funds have been repaid, the provisions 

Chapter 4 - Community Planning and Development Programs 59
of all Section 108 loan contracts and agreements are followed and promptly enforced, and Section 108 

loan activities meet a national objective of the program. (Audit Report: 2011-NY-1004) 

nnn

HUD OIG audited the City of Bayonne, NJ’s CDBG economic development activities and found that 

the City did not adequately administer its economic development program. Specifically, it (1) did not 

adequately monitor its subrecipient, (2) made disbursements for ineligible items, (3) made disbursements 

for technical assistance and salary costs that were not reasonable, (4) did not maintain documentation to 

support accomplishment of the CDBG national objectives, and (5) did not reprogram unused economic 

development funds in a timely manner when its loan program ended. 

OIG recommended that HUD instruct the City to (1) strengthen procedures to monitor its subrecipients 

to ensure compliance with HUD rules and regulations; (2) repay from non-Federal funds the more than 

$5,000 in ineligible costs charged to the CDBG economic development program; (3) strengthen controls 

to ensure that costs charged to the CDBG program are eligible according to HUD regulations; (4) provide 

documentation to support the eligibility of more than $640,000 in unreasonable technical assistance costs, 

salaries, and payroll taxes charged to the economic development program so that HUD can make an 

eligibility determination; and (5) provide documentation to show that the City reprogrammed more than 

$196,000 in remaining economic development funds so that these funds can be put to better use. (Audit 

Report: 2011-NY-1002) 

nnn

HUD OIG audited the City of East St. Louis, IL’s CDBG program and found that the City awarded more 

than $1 million in CDBG funds for 124 of the 147 rehabilitation contracts reviewed without adequately 

ensuring that it complied with requirements and that the work was completed in an acceptable manner. 

Specifically, it (1) did not ensure that contractors completed all of the contracted work as required and at 

a reasonable cost, (2) created scopes of work for the rehabilitation contracts that were not detailed and 

specific in nature, and (3) did not comply with Federal procurement requirements and its own policies 

and procedures when it managed the rehabilitation contracts.

OIG recommended that HUD withhold $400,000 in 2010 CDBG funding for the City’s housing 

rehabilitation programs until it improves its controls and require the City to (1) collect more than $127,000 

paid to contractors for rehabilitation work not performed or improperly performed, (2) develop and 

implement adequate internal controls to ensure that all work is completed according to the scope of work, 

(3) update its inspection software, and (4) provide training to ensure future compliance. (Audit Report: 

2011-KC-1001)

HOME Investment Partnerships Program

HUD OIG audited the District of Columbia’s administration of its HOME program and found that the 

grantee did not administer its program in accordance with Federal requirements. It (1) obligated more 

than $2.5 million in HOME funds for an activity/project that was significantly delayed and not completed, 

(2) did not properly manage funds that it drew for downpayment assistance and financing of home repairs, 

(3) committed and disbursed community housing development organization (CHDO) operating funds 

for an ineligible CHDO, and (4) did not properly account for program administrative funds. As a result, it 

charged ineligible costs to its HOME program and could not support costs charged to the program. The 

grantee also accumulated funds that it could have used to improve its administration of its HOME program 

and/or fund additional eligible HOME projects.

60 Chapter 4 - Community Planning and Development Programs
OIG recommended that HUD require the grantee to recover more than $1.6 million that it spent on 

ineligible expenses and provide support for nearly $6.5 million in expenses or repay that amount to the 

HOME program. In addition, the grantee should use nearly $1.6 million in accumulated funds to improve 

its administration of the program and/or fund additional eligible HOME projects. Lastly, OIG recommended 

that the grantee create and implement procedures to ensure that HOME funds are disbursed and used in 

compliance with applicable requirements. (Audit Report: 2011-PH-1005)

nnn

HUD OIG audited the City of Flint, MI’s HOME program and found that the City did not comply with 

Federal requirements in its use of HOME funds for CHDOs’ home-buyer projects. It (1) did not ensure 

that CHDOs entered into lease-purchase agreements or appropriate lease-purchase agreements with 

households, (2) failed to ensure that a CHDO transferred homes to home buyers within 42 months of project 

completion and did not convert the home-buyer projects to rental projects, (3) did not reimburse its HOME 

trust fund treasury account for terminated projects, (4) inappropriately used HOME funds for home-buyer 

project costs that were administrative expenses, (5) did not prevent a CHDO from entering into a land 

contract with a home buyer, (6) inappropriately used HOME CHDO reserve funds for an owner-occupied 

single-family rehabilitation project, (7) used HOME funds for unreasonable acquisition costs, and (8) did 

not decommit and reprogram HOME funds for a terminated project. As a result, the City drew down and 

disbursed nearly $1.7 million in HOME funds for CHDOs’ home-buyer projects that did not meet Federal 

requirements and inappropriately drew down and disbursed more than $143,000 in additional HOME funds.

The City also did not comply with Federal requirements in its use of HOME funds for subrecipients’ 

activities and inappropriately drew down and disbursed nearly $427,000 in HOME funds and lacked sufficient 

documentation to support nearly $65,000 in HOME funds. Further, the City did not accurately report program 

accomplishments in HUD’s Integrated Disbursement and Information System (IDIS). 

OIG recommended, among other things, that HUD require the City to revise lease agreements, convert 

home-buyer projects to rental projects, reimburse its program or treasury account or reprogram or decommit 

Chapter 4 - Community Planning and Development Programs 61

Copyright 2010. The Washington Post, Washington, DC. Reprinted with permission.
various amounts identified in the audit, revise program accomplishments in IDIS as appropriate, and 

implement adequate procedures and controls to address the findings cited. (Audit Report: 2011-CH-1001)

nnn

HUD OIG audited the State of Indiana’s HOME program, administered by the Indiana Housing and 

Community Development Authority, and found that the Authority did not comply with HUD’s requirements 

in its use of HOME and American Dream Downpayment Initiative funds to provide interest-free second 

mortgage loans to home buyers through the State’s First Home/PLUS program and its use of recapture 

provisions for activities. It (1) lacked sufficient documentation to support that homes purchased under the 

First Home/PLUS program met HUD’s property standards requirements, (2) did not implement appropriate 

recapture provisions for all of the activities reviewed, (3) did not ensure that the State’s HOME program 

was reimbursed for HOME or Initiative funds used for activities in which the ownership of homes was later 

transferred through foreclosure, and (4) did not reimburse the State’s HOME trust fund treasury account 

for HOME funds used for activities that were later terminated. As a result, (1) it was unable to support its 

use of more than $803,000 in HOME or Initiative funds, (2) its HOME program was not reimbursed more 

than $130,000 in HOME or Initiative funds used for 32 activities in which the ownership of the homes was 

later transferred through foreclosure, and (3) its treasury account was not reimbursed more than $8,000 in 

HOME funds used for activities that were terminated. Further, the Authority is at risk of being required to 

reimburse the State’s HOME program additional non-Federal funds if the ownership of additional homes 

acquired under the First Home/PLUS program is transferred through foreclosure.

OIG recommended that HUD require the State to (1) provide sufficient supporting documentation or 

reimburse its Program from non-Federal funds, (2) reimburse its HOME program from non-Federal funds for 

activities in which ownership of the homes was transferred through foreclosure, (3) reimburse its treasury 

account from non-Federal funds for the activities that were terminated, (4) revise its consolidated plan 

and action plan to include the recapture provisions the Authority uses for the First Home/PLUS program 

or require the Authority to revise the recapture provisions it uses for the First Home/PLUS program to 

comply with the recapture provisions in the State’s consolidated plan and action plan, and (5) implement 

adequate procedures and controls to address the findings cited. These procedures and controls should 

help to ensure that over the next year, the State appropriately recaptures HOME and/or Initiative funds and/

or reimburses its HOME program from non-Federal funds for nearly $124,000 in HOME and/or Initiative funds 

used for homes acquired under its First Home/PLUS program of which ownership would be transferred 

due to foreclosure. (Audit Report: 2011-CH-1004)

nnn

HUD OIG audited the City of Cleveland’s HOME program and found that the City did not comply with 

HUD’s requirements in its use of HOME and American Dream Downpayment Initiative funds to provide 

interest-free second mortgage loans to home buyers through its Afford-A-Home program and its use of 

recapture provisions for activities. It (1) provided assistance for ineligible activities; (2) lacked sufficient 

documentation to support that activities were eligible; (3) included inappropriate recapture provisions 

in its action plans for program years 2007 to 2008, 2008 to 2009, and 2009 to 2010; (4) did not implement 

appropriate recapture provisions for all of the activities reviewed; and (5) did not ensure that its HOME 

program was reimbursed for HOME funds used to assist home buyers in purchasing homes that were later 

sold through a sheriff’s sale and ownership of the homes had been transferred. As a result, it inappropriately 

provided HOME funds to assist two households that were not income eligible and was unable to support 

its use of HOME and/or Initiative funds. Further, its HOME program was not reimbursed for HOME funds 

used for three homes that were sold through a sheriff’s sale and ownership of the homes had been 

transferred. In addition, the City is at risk of being required to reimburse its HOME program additional 

62 Chapter 4 - Community Planning and Development Programs
non-Federal funds if the ownership of additional homes acquired under its Afford-A-Home program is 

transferred through foreclosure.

OIG recommended that HUD require the City to 

(1) reimburse its HOME program from non-Federal 

funds for the $20,000 in HOME funds inappropriately 

used to assist two activities, (2) provide supporting 

documentation or reimburse its HOME program 

$760,000 from non-Federal funds, (3) reimburse its 

HOME program $30,000 from non-Federal funds for 

the three homes that had been sold through a sheriff’s 

sale and ownership of the homes had been transferred, 

and (4) implement adequate procedures and controls 

to address the findings identified. These procedures 

and controls should help to ensure that over the next 

year, the City appropriately recaptures HOME and/or 

Initiative funds and/or reimburses its HOME program 

from non-Federal funds for at least $90,000 in HOME 

and/or Initiative funds used for homes acquired under 

its Afford-A-Home program of which ownership would 

be transferred due to foreclosure. (Audit Report: 

2011-CH-1003)

nnn

HUD OIG audited the Municipality of Arecibo, 

PR’s HOME program and found that the Municipality 

committed and disbursed more than $115,000 in HOME 

funds for the purchase of land that could not be used to 

provide housing for low- and very low-income families. 

The commitment and disbursement of HOME funds to acquire land not intended to provide affordable 

housing was not consistent with program requirements and was an ineligible use of program funds. 

In addition, the Municipality disbursed more than $483,000 for the Bello Monte housing project, which 

reflected slow progress without assurance that the project was feasible. It executed an agreement in July 

2006 with a CHDO for site acquisition and construction of the Bello Monte housing project. According to 

the agreement, the construction of the housing units should have started in July 2007, with a completion 

date of July 2011. However, as of November 2010, the construction had not started. According to HUD, 

the project had encountered problems in complying with environmental requirements of a local agency. 

The Municipality failed to ensure the timely completion of the activity. As a result, HUD had no assurance 

that this activity provided the intended benefits and met HOME objectives.

Further, HUD’s system contained inaccurate information concerning the Bello Monte project. This 

information included incorrect funding amounts. The awarded amount shown in HUD’s system was 

incorrect, resulting in an overstatement of HOME commitments of more than $45,000. As a result, these 

funds were not available for use and to meet program objectives. 

OIG recommended that HUD require the Municipality to repay more than $52,000 in ineligible 

expenditures and reprogram and put to better use more than $108,000 in unexpended funds obligated for 

ineligible purposes or that were overstated. HUD should also determine the eligibility of the more than 

$431,000 disbursed for the Bello Monte housing project with signs of slow progress and reevaluate the 

feasibility of this activity. (Audit Report: 2011-AT-1802) 

Chapter 4 - Community Planning and Development Programs 63

Copyright 2011. The Plain Dealer, Cleveland, OH. Reprinted 

with permission.
Neighborhood Stabilization Program 

We audited the City of Mesa, AZ’s NSP1 grant and found that the City’s procedures for administering 

its NSP1 grant were not adequate to ensure that HUD’s program requirements were met. The City (1) 

did not maintain adequate controls over construction contractor draw requests, (2) failed to ensure the 

eligibility of labor costs claimed by its subrecipient, (3) did not require payment and performance bonds 

for construction contracts as required, (4) charged unsupported employee salary costs to the NSP1 grant, 

and (5) failed to properly enforce the program’s continued affordability requirements. 

OIG recommended that HUD require the City to (1) implement procedures to ensure that NSP1 

requirements are met and so that more than $328,000 in grant funds can be put to better use and (2) repay 

more than $22,000 in ineligible costs charged to the grant. (Audit Report: 2011-LA-1006)

nnn

HUD OIG audited the Community Development Programs Center of Nevada’s NSP1 program and found 

that the Center did not always efficiently and effectively administer grant funds in compliance with Housing 

and Economic Recovery Act of 2008 and other applicable program requirements. Specifically, it violated 

HUD requirements and its developer agreement with the City of North Las Vegas when it entered into a 

conflict-of-interest contract with a company that is 50 percent owned by the Center’s executive director. 

In addition, the Center was unable to support rehabilitation costs for two projects and did not check the 

debarred status of subcontractors.

OIG recommended that HUD require the grantee to ensure that the Center (1) stops awarding contracts 

to the general contractor that is 50 percent owned by its executive director unless granted a conflict-ofinterest waiver as permitted in 24 CFR (Code of Federal Regulations) 570.611, (2) provides documentation 

to support nearly $11,000 in rehabilitation costs billed to the City of North Las Vegas or submits a new 

request for payment that reflects only the supported costs, (3) updates its policies and procedures to 

ensure that future rehabilitation costs are properly supported and procured in a cost-effective manner, and 

(4) follows its recently developed procedures to check the debarred status of all subcontractors. (Audit 

Report: 2011-LA-1004)

nnn

HUD OIG audited the City of Columbus, GA’s NSP1 program and found that the City demonstrated the 

capacity to properly obligate its entire $3.1 million NSP1 grant by the September 5, 2010, statutory deadline. 

However, it (1) obligated nearly $220,000 in acquisition, rehabilitation, and downpayment assistance costs 

for two properties that were improperly classified as locality set-asides; (2) could not locate the procurement 

records for the lead-based paint contract it awarded and obligated and paid nearly $30,000 for lead-based 

paint abatement services provided by a contractor that was under contract with the City; and (3) did not 

maintain up-to-date NSP1 quarterly performance reports on its Web site. 

Overall, the City’s actions taken or planned regarding the issues indicated its willingness to make 

necessary improvements. Therefore, OIG made no recommendations, and no further action is required. 

(Audit Report: 2011-AT-1801)

Shelter Plus Care

HUD OIG audited Mecklenburg County, NC’s administration of its Shelter Plus Care program to 

determine whether the County only paid for eligible program administrative expenses; housed its 

participants in decent, safe, and sanitary units; and properly documented its program participant files. 

64 Chapter 4 - Community Planning and Development Programs
The County mismanaged its program. It paid program administration expenses without adequate 

supporting documentation; housed participants in units that were not decent, safe, and sanitary; and 

failed to ensure that participant files were properly documented in compliance with HUD’s requirements. 

As a result, the County spent more than $441,000 for unsupported program costs, more than $11,000 for 

ineligible costs, and more than $14,000 in housing assistance payments for units that were in material 

noncompliance with housing quality standards.

OIG recommended that HUD require the County to develop and implement an adequate system of 

internal controls to ensure that it complies with all program requirements. The County must also repay 

more than $25,000 in ineligible expenses from non-Federal funds and provide documentation showing 

that the unsupported expenses were eligible or repay that amount from non-Federal funds. (Audit Report: 

2011-AT-1004)

nnn

Chapter 4 - Community Planning and Development Programs 65
Investigations

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

staff or conducted jointly with Federal, State, and local law enforcement agencies. The results of various 

significant investigations are described below.

Strategic Initiative 3: Contribute to the strengthening 

of communities

Key program 

results

$ 

recovered

Convictions/pleas/ 

pretrials

$7,912,335 22

Page 67

Page 70

Page 71

Investigations 66

Our

focus

• Theft/embezzlement

• Civil and administrative actions

• Other fraud/crimes

Cases 

closed

Admin/civil 

actions

22

Chart 4.2: Percentage of OIG community planning and development 

closed investigation cases during this reporting period

Region 1 - 3%

Region 2 - 6%

Region 3 - 9%

Region 13 - 4% 

Region 4 - 5%

Region 14 - 1%

Region 5 - 2%

Region 15 - 6%

Region 6 - 6%

Regions 7/8 - 0%

Region 9 - 3%

Region 10 - 0%

Region 11 - 55%

66

66 Chapter 4 - Community Planning and Development Programs
6

Theft/Embezzlement

Kwame Kilpatrick, the former mayor of the City of Detroit, MI; Bobby 

Ferguson, doing business as Ferguson Enterprises; and other individuals were 

each charged in U.S. District Court, Detroit, MI, with allegedly obstructing justice 

and committing bribery, extortion, Federal income tax evasion, an organized 

scheme to defraud, and mail and wire fraud. From 2003 to 2004, Kilpatrick, 

Ferguson, and other individuals allegedly planned fraudulent activities and 

attempted to obtain $18 million in HUD CDBG loan guarantees for demolition 

work at the Book Cadillac Hotel. 

nnn

Henry Humphrey, the chief executive officer of the Shiloh Baptist Church 

Community Renewal Center, an organization that received HUD Economic 

Development Initiative grants, was sentenced in U.S. District Court, Louisville, 

KY, to 24 months incarceration and ordered to pay HUD $831,745 in restitution for 

his earlier guilty plea to making false statements and committing a conspiracy, 

wire fraud, embezzlement, and money laundering. From February 1998 to 

November 2005, Humphrey and other individuals applied for and received more 

than $1.2 million in HUD funding to convert an existing building into low-income 

elderly housing but failed to complete the project and fraudulently used HUD 

funds for other purposes or their personal gain. 

nnn

Eugene Telfair, the former president of the Florida Agriculture and 

Mechanical University Federal Credit Union (A&M Credit Union), and former 

A&M Credit Union grant administrator Robert Nixon were collectively sentenced 

in U.S. District Court, Tallahassee, FL, to 57 months incarceration and 10 

years supervised release and ordered to pay A&M Credit Union $134,253 in 

restitution for their earlier convictions of committing theft of government funds, 

a conspiracy to steal or misapply Federal funds and commit wire fraud, and 

aiding and abetting. Between January 2002 and August 2009, Telfair and Nixon 

provided false consulting and administrative billings and embezzled $134,253 

in HUD Historically Black College grant funds through the A&M Credit Union.

 

nnn

Chapter 4 - Community Planning and Development Programs 67

Copyright 2010. Detroit Free 

Press, Detroit, MI. Reprinted 

with permission.

Copyright 2011. Tallahassee Democrat, Tallahassee, FL. Reprinted with permission.
Seth Butterfield, the former CDBG grant administrator for the City of Layton, UT, a municipality that 

receives HUD CDBG funds, was indicted in U.S. District Court, Salt Lake City, UT, for allegedly committing 

theft from a program receiving Federal funds, money laundering, and wire fraud. Between October 2002 

and July 2006, Butterfield, while employed as the Layton CDBG grant administrator, allegedly created a 

community development based organization (CDBO) and became the CDBO’s executive director, awarded 

Layton CDBG contracts to fund the CDBO, and fraudulently obtained more than $116,000 in salary payments 

as the CDBO’s executive director at the same time he received salary payments from the City of Layton. 

 

nnn

Cheryl and Gregory Gray, doing business as Gray and Gray Productions, an organization that receives 

HUD CDBG funds through the Detroit Neighborhood Improvement Project (Neighborhood Improvement) 

and other nonprofit agencies, were each arrested after they were charged in Wayne County District Court, 

Detroit, MI, with allegedly committing embezzlement and larceny by conversion and failing to file State 

income tax returns. From 2005 to 2006, Cheryl and Gregory Gray allegedly provided $26,341 in fraudulent 

invoices to Neighborhood Improvement and embezzled about $100,276 in HUD CDBG funds from the 

Detroit Theatre for the Dramatic Arts project. HUD realized losses of about $126,617. 

nnn

68 Chapter 4 - Community Planning and Development Programs

Copyright 2010. Standard Examiner, Ogden, UT. Reprinted with permission.

Copyright 2011. Pine Bluff Commercial, Pine Bluff, MI. Reprinted with permission.
Sion Robert was charged in U.S. District Court, New Orleans, LA, with allegedly committing a conspiracy 

to steal Federal program funds. From July 2006 to July 2008, Robert and other individuals allegedly conspired 

and stole about $109,702 from the House of Ruth, an organization that receives HUD Supportive Housing 

Program (SHP) funds. 

nnn

Arthur Johnson, the director of East St. Louis Community Development (Community Development), an 

organization that receives HOME and other funds, and Harold Rosen, the owner of Kully Construction, Inc. 

(Kully), were each indicted in U.S. District Court, East St. Louis, IL, for allegedly committing bribery and 

wire fraud, corruptly accepting something of value in connection with a program receiving Federal funds, 

or aiding and abetting in the commission of wire fraud. From April 2009 to March 2010, Rosen allegedly 

submitted false information and fraudulent documents associated with the construction of Bowman 

Estates, a low-income housing development partially funded with Community Development funds, and 

Johnson allegedly approved the fraudulent Bowman Estate expenses submitted by Kully and accepted 

cash payments from Kully representatives in exchange for his future employment. HUD realized losses 

of about $100,000. 

nnn

Joseph Vas, a former New Jersey assemblyman and mayor of the City of Perth Amboy, NJ, pled guilty in 

New Jersey Superior Court, Trenton, NJ, to committing a pattern of misconduct, theft by unlawful taking, 

and financial facilitation of criminal activity. Vas conspired with a former City of Perth Amboy employee 

to rig a Perth Amboy lottery drawing that awarded the employee $90,000 in HOME funds. 

nnn

Kimberly Schultz, a former director of Habitat for Humanity, an organization that receives HUD Self-Help 

Homeownership Opportunity and other program funds, pled guilty in Louisiana State Court, Covington, 

LA, to committing theft. From June to November 2010, Schultz stole about $75,000 in cash from the Habitat 

for Humanity Re-Store. 

nnn

Brian Jeremiah, the former executive director of Shamokin Redevelopment Authority and city clerk 

of Shamokin, PA, was sentenced in U.S. District Court, Williamsport, PA, to 2 years probation, ordered to 

pay HUD $8,100 in restitution, and fined $1,000 for his earlier guilty plea to making fraudulent transactions 

with HUD. From 2006 to 2007, Jeremiah misapplied or fraudulently used City of Shamokin HOME funds 

without authorization. HUD realized losses of $8,100. 

nnn

Lori Macakanja, a former foreclosure prevention housing counselor for HomeFront, Inc., a HUD-funded 

housing counseling agency, was arrested and charged in U.S. District Court, Buffalo, NY, with allegedly 

making false statements to HUD and committing mail fraud. From October 2008 to October 2010, Macakanja 

allegedly solicited and accepted more than $200,000 from more than 100 distressed homeowners and used 

about $2,000 in HUD Owners Avoiding Homelessness program funds for her personal benefit. 

nnn

Chapter 4 - Community Planning and Development Programs 69
Steven Davis, a former employee of the Greater Rochester Housing Partnership (Rochester Housing), 

an organization that receives HUD CDBG funds, was sentenced in U.S. District Court, Rochester, NY, and 

fined $100 for his earlier guilty plea to committing fraud against HUD. From January 2005 to December 

2009, Davis manipulated the Rochester Housing bid process and submitted fraudulent bids in an effort to 

award Rochester Housing contracts to specific contractors. 

Civil and Administrative Actions

Joseph McNulty and Sam John, owners of Friendly Maintenance Group; George Thomas, the owner 

of TAJ Maintenance (TAJ); and Prakash Karot, a manager for TAJ and a housing inspector for the City of 

Perth Amboy, NJ, were each debarred from procurement and nonprocurement transactions with HUD and 

throughout the Executive Branch of the Federal Government for 36 months. From January 2004 to September 

2006, the above defendants, who were previously sentenced in U.S. District Court, Newark, NJ, for their 

earlier guilty pleas to committing bribery, provided payments to a number of New Brunswick Community 

Planning and Economic Development employees in exchange for monthly rehabilitation contracts, 

expedited and lenient inspections, and accelerated contract payments. In addition, William Walker, the 

former director of New Brunswick Neighborhood Preservation and Housing Rehabilitation, organizations 

that receive HUD CDBG and HOME funds, was debarred from procurement and nonprocurement 

transactions with HUD and throughout the Executive Branch of the Federal Government for 11 months. 

From January 2004 to October 2006, Walker, who was previously sentenced for his earlier guilty plea to 

committing a conspiracy to extort under color of law, soliciting and accepting corrupt payments, and filing 

a false Federal income tax return, accepted $112,500 in bribes in exchange for New Brunswick contracts 

and failed to report these kickbacks on his 2004 Federal income tax return. 

nnn

Janei Walker, a Healthy Homes and Lead Hazard Control grant recipient through the Buffalo 

Urban Renewal Agency, an organization that receives HUD CDBG and other funds, was debarred from 

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

Federal Government for 36 months. Walker, who was previously sentenced in U.S. District Court, Buffalo, 

NY, for her earlier guilty plea to committing embezzlement and bank fraud and filing false Federal income 

tax returns, provided false information and fraudulently obtained $16,960 in HUD funds. 

nnn

Ricky Cherry, a former housing manager for Housing First Homeless Coalition, an organization that 

receives HUD SHP funds, was debarred from procurement and nonprocurement transactions with HUD 

and throughout the Executive Branch of the Federal Government for 3 years. From August 2006 to August 

2008, Cherry, who was previously sentenced in U.S. District Court, Mobile, AL, for his earlier guilty plea to 

committing embezzlement, stole $14,179 in tenant rents. 

nnn

Stacie Billings, the former executive director of Adirondack Veterans House (Adirondack), an 

organization that receives HUD CDBG and SHP funds, was debarred from procurement and nonprocurement 

transactions with HUD and throughout the Executive Branch of the Federal Government for 36 months. 

Billings, who was previously sentenced in Warren County Court, Saratoga, NY, for her earlier guilty plea 

to committing grand larceny, diverted and personally used $11,600 in Adirondack funds. 

nnn

70 Chapter 4 - Community Planning and Development Programs
Anthony Saccomanno, the former director of the Cherry Hill Department of Code Enforcement and 

Inspections (Cherry Hill), 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 36 months. Saccomanno, who was previously sentenced in U.S. District Court, Newark, 

NJ, for his earlier guilty plea to committing mail fraud, caused a letter to be mailed after he accepted money 

from Building Inspections Underwriters, Inc., a Cherry Hill contractor. 

Other Fraud/Crimes

Josephine Moore, a HUD Community Block Lead Abatement grant recipient through the City of 

Rochester, a municipality that receives HUD CDBG funds, was sentenced in U.S. District Court, Rochester, 

NY, to 5 years probation and ordered to pay HUD $24,000 in restitution for her earlier guilty plea to committing 

theft of government funds. Between March and October 2008, Moore provided false information when 

she applied for and fraudulently obtained $24,000 in HUD program funds. 

nnn

Malcolm Crawford, also known as Calvin Gamble, a former West Valley City Housing Authority Housing 

Opportunities for Persons with Aids program recipient, pled guilty in U.S. District Court, Salt Lake City, UT, 

to committing mail fraud. From August 1993 to July 2010, Crawford used a number of names and Social 

Security numbers belonging to other individuals, failed to report income on housing and other certifications, 

and fraudulently obtained about $21,844 in housing assistance and $161,156 in Social Security Administration 

and other benefits he was not entitled to receive. 

nnn

Talbert Davis, a former realtor for Houston Associates Realty, was indicted in Harris County District 

Court, Houston, TX, for allegedly tampering with a governmental record. In October 2010, Davis allegedly 

provided a forged City of Houston proof of funds letter in an attempt to purchase two HUD real estateowned properties for Guiding Light Community Development, a nonprofit organization and Houston NSP 

participant. HUD losses have not yet been determined. 

nnn

Joseph Cardwell, a political consultant for Jersey City, NJ, pled guilty in U.S. District Court, Newark, 

NJ, to agreeing to give things of value to a public official with the intent to influence and reward. From 

July 2008 to April 2009, Cardwell agreed to accept $30,000 from a government informant posing as a real 

estate developer in return for his influence with a public official from Jersey City, NJ, a municipality that 

receives HUD CDBG funds. 

nnn

Vincent Tabbachino, the owner of Tabbachino Associates, was convicted in U.S. District Court, 

Newark, NJ, of attempting to commit extortion under color of an official right and giving and offering 

a corrupt payment and found not guilty of committing a conspiracy to obstruct commerce by extortion 

under color of official right. In addition, Anthony Suarez, the mayor of the Borough of Ridgefield, NJ, was 

found not guilty of committing a conspiracy to obstruct commerce by extortion under color of an official 

right, attempted extortion under color of an official right, and giving and offering a corrupt payment. From 

April to July 2009, Tabbachino agreed to accept $10,000 from a government informant in exchange for his 

influence involving commercial and residential real estate projects with the Borough of Ridgefield, NJ, a 

HUD-funded municipality. 

nnn

Chapter 4 - Community Planning and Development Programs 71
Anthony Sharpe, a former HUD Real Estate Assessment Center inspector, current building inspector 

for the City of Detroit, MI, and the owner of Sharpe Environmental, and Moreno Taylor, a former Detroit 

building inspector and the owner of Taylor Environmental Sampling & Testing (Taylor Environmental), 

each pled guilty in U.S. District Court, Detroit, MI, to making false statements to HUD or committing 

mail fraud. Between 2004 and 2007, Sharpe and Sharpe Environmental provided false residential lead 

inspection reports for Wayne Metropolitan Community Action Agency, an organization that receives HUD 

CDBG funding. In addition, Sharpe, Sharpe Environmental, Taylor, and Taylor Environmental created and 

provided false lead inspection reports for HUD-subsidized multifamily housing developments located in 

Cincinnati, OH, or Detroit, MI. 

nnn

72 Chapter 4 - Community Planning and Development Programs
Chapter 4 - Community Planning and Development Programs 73

Inspections and Evaluations

The HUD OIG Office of Investigation’s Inspections and Evaluations activities are designed to promote 

economy, efficiency, and effectiveness in the administration of HUD programs; detect and deter fraud and 

abuse in HUD programs and operations; and ensure compliance with applicable laws and regulations. 

The office conducts inspections and evaluations using various study methods and evaluative techniques 

to provide timely information to improve policies, programs, and procedures.

HUD’s Supportive Housing Program - Survey of Grantee Monitoring of 

Project Sponsors 

HUD OIG conducted a survey of HUD SHP; specifically, the monitoring of nonprofit subgrantees 

(project sponsors) that deliver supportive housing and/or supportive services. The objective was to 

assess whether SHP grantees followed Federal regulations and HUD guidance on monitoring project 

sponsor activities and program expenditures and to examine HUD’s role in the grantees’ monitoring of 

project sponsors. Questionnaires were sent to all 44 HUD CPD regional and field offices and to a sample 

of 11 SHP grantees and 12 project sponsors.

Survey responses indicated that overall HUD was actively providing monitoring guidance to SHP 

grantees and that most grantees reported compliance with Federal regulations related to their monitoring 

of project sponsors. However, responses to the survey indicated that improvement is warranted in certain 

aspects of HUD’s guidance and grantee monitoring. 

Effective oversight and monitoring are crucial to ensuring that SHP funds are properly spent to assist in 

the transition of persons out of homelessness. Therefore, HUD should reinforce compliance with Federal 

regulations and monitoring guidance and ensure that its monitoring reviews include assessment of SHP 

grantee project sponsor management. 

nnn

Chapter 5 - American Recovery and 

Reinvestment Act of 2009
The U.S. Department of Housing and Urban Development (HUD) has received $13.61 billion in funding 

under the American Recovery and Reinvestment Act of 2009 (ARRA) in several housing program areas. 

Table 1 shows the HUD program areas receiving funding and the amounts appropriated to each program.

Table 1: HUD programs receiving ARRA funding

Program Area

• Public Housing Capital Fund

• Native American Housing Block 

Grant

• Community Development Block 

Grant

• Neighborhood Stabilization Program

• HOME Investment Partnerships 

Program-Tax Credit Assistance 

Program

• Homelessness Prevention Fund

• Assisted Housing Stability grant

• Green Retrofit grant 

• Lead Hazard Reduction 

Demonstration program

Office of Public and Indian 

Housing

Office of Community 

Planning and Development

Office of Multifamily Housing

Office of Healthy Homes and 

Lead Hazard Control

$4,000,000,000

$510,000,000

$1,000,000,000

$2,000,000,000

$2,250,000,000

$1,500,000,000

$2,000,000,000

$250,000,000

$100,000,000

Funding amount

Total $ 13,610,000,000

ARRA also provided $15 million to the HUD Office of Inspector General (OIG). This funding will remain 

available until September 2012. The purpose of the funding is for “oversight and audit of programs, 

grants, and activities funded by this Act and administered by the Department of Housing and Urban 

Development.”

Through its audit and investigative programs, HUD OIG will constantly tailor and adjust its short- and 

long-term activities for timely and effective oversight of the ARRA funds expended by HUD programs. 

OIG’s plan will be adjusted as the HUD programs develop plans and distribute their ARRA funds. OIG will 

continue outreach and training efforts for the prevention of fraud, waste, and abuse to the Department 

and recipients of ARRA funds.

nnn

Introduction and Background

76 Chapter 5 - American Recovery and Reinvestment Act of 2009
Audit

The Office of Audit has initiated a three-phased approach to conducting related audit work. The 

actions it has taken and plans to take will help position it to meet the increased workload under ARRA and 

protect the Federal investment over the long term. 

The Office of Audit’s overall oversight objectives for HUD funding under ARRA are to determine 

whether 

• Funds are awarded and distributed in a prompt, fair, and reasonable manner;

• The recipients and uses of all funds are transparent to the public, and the public benefits of these 

funds are reported clearly, accurately, and in a timely manner; 

• Funds are used for authorized purposes, and instances of fraud, waste, error, and abuse are 

mitigated; 

• Projects funded under ARRA avoid unnecessary delays and cost overruns; and 

• Program goals are achieved, including specific program outcomes and improved results on 

broader economic indicators. 

In the prior semiannual reporting periods, HUD OIG reviewed HUD’s front-end risk assessments, 

audited HUD’s formula allocation dictated in ARRA programs, and assessed the administrative capacity 

of selected grantees to effectively administer ARRA funds. During this semiannual reporting period, OIG’s 

focus has shifted from the capacity assessments to audits of the grantee expenditures. OIG has also 

started to focus on HUD’s oversight activities. 

The following section demonstrates the audit work that has been completed during this reporting 

period. 

Strategic Initiative 3: Contribute to the strengthening of communities

* The total ARRA-related audits consist of community planning and development and public and Indian housing 

audits. The questioned costs and funds put to better use amounts relate only to ARRA-related costs. 

Key program results Questioned costs Funds put to better use

$4.7 million ---

Page 78

Page 81

Page 81

Page 83

Audit 19 audits*

Our

focus

• Public Housing Capital Fund audits and reviews

• Community Development Block Grant audits and reviews

• Tax Credit Assistance Program

• Homelessness Prevention and Rapid Re-housing Program

Chapter 5 - American Recovery and Reinvestment Act of 2009 77
In addition to the audits described in this chapter, HUD OIG, has conducted a number of outreach 

efforts (see chapter 8, page 119).

Office of Public and Indian Housing Audits and Reviews

Public Housing Capital Fund Audits and Reviews

HUD OIG audited the Housing Authority of the City of New Haven, CT, to determine whether the 

Authority (1) obligated its Public Housing Capital Fund Stimulus Recovery Act Funded formula grant funds 

for eligible projects/activities, (2) properly supported obligations and expenditures, (3) had adequate 

controls over obligations and expenditures, and (4) procured contracts in accordance with ARRA 

requirements and HUD rules and regulations.

Overall, the Authority obligated its formula grant funds for eligible activities, supported its obligations, 

and had adequate controls over the obligation and expenditure process. However, it did not always 

procure contracts in accordance with ARRA and Federal requirements that involved more than $1.4 

million of its $6 million in ARRA funds. Specifically, the Authority could not show cost reasonableness for 

vacancy reduction contracts and did not obtain competitive bids for the renovations. As a result, ARRA 

funds may not have been used efficiently, and the maximum number of vacant housing units may not 

have been returned to service.

The Authority also did not properly obligate and execute its ARRA physical needs assessment contract. 

The contract was not properly obligated because it included a $60,000 contingency for additional work 

that may have required expenditure; thus, the Authority was not obligated to spend ARRA funds. The 

contract was not properly executed because the Authority used the contingency for a study that was not 

included in the contract scope of work and, thus, was not an eligible contract cost. 

OIG recommended that HUD require the Authority to support the cost reasonableness or repay any 

amounts it cannot support from the ARRA capital funds spent for vacancy reduction contracts. OIG 

also recommended that the Authority improve its procurement controls to include obtaining appropriate 

procurement training and fully implementing procurement requirements regarding cost estimates, 

cost analysis, and competitive bids. OIG further recommended that HUD require the Authority to pay 

for the Section 8 conversion study from non-ARRA funds and ensure that the contingency is expended 

according to the contract; however, if eligible costs cannot be identified, the funds should be recaptured 

in accordance with ARRA. (Audit Report: 2011-BO-1003)

nnn

HUD OIG audited the Housing Authority of the City of Shreveport, LA’s ARRA funds to determine 

whether fund obligations the Authority made between January 30 and March 17, 2010, were appropriate, 

prudent, eligible, and supported and whether procurements were made in accordance with requirements. 

The Authority mismanaged its ARRA funds by entering into imprudent contracts to meet the March 

17, 2010, obligation deadline. In addition, it could not provide assurance that the contracts were properly 

awarded or managed. By selecting an activity for expediency purposes instead of prioritizing capital work 

in its best interest, the Authority inefficiently and ineffectively managed more than $1.5 million in ARRA 

funding. 

78 Chapter 5 - American Recovery and Reinvestment Act of 2009
OIG recommended that HUD (1) require the Authority to deobligate more than $1.1 million in ARRA 

funds and (2) recapture and rescind the deobligated funds and deposit those funds with the U. S. Treasury 

in accordance with ARRA as amended. (Audit Report: 2011-FW-1001)

nnn

HUD OIG audited the Housing Authority of the City of Port Arthur, TX’s Public Housing Capital Fund 

Stimulus Recovery Act Funded activities to determine whether (1) Public Housing Capital Fund formula 

grant obligations made between January 30 and March 17, 2010, were appropriate, prudent, eligible, 

and supported and (2) related procurements were made in accordance with 24 CFR (Code of Federal 

Regulations) Part 85 and ARRA requirements. Additionally, OIG assessed the Authority’s compliance with 

ARRA reporting and environmental review requirements.

The Authority’s ARRA obligation was not appropriate, prudent, eligible, and supported because 

its related procurement was not made in accordance with 24 CFR Part 85 and ARRA requirements. 

The Authority violated procurement requirements designed to ensure full and open competition and 

reasonable cost and did not practice sound financial controls over the grant. As a result, the Authority’s 

obligation of its nearly $726,000 ARRA grant and its resulting expenditures were ineligible. In addition, the 

Authority did not comply with ARRA environmental review reporting requirements, and it commenced 

site work for its project before receiving environmental clearance to proceed. 

OIG recommended that HUD rescind the Authority’s ARRA grant, including the nearly $68,000 

expended, and return the entire allocation to the U. S. Treasury for the sole purpose of deficit reduction. 

HUD should also ensure that the Authority complies with procurement requirements, adopts adequate 

financial controls, and complies with environmental review requirements. OIG further recommended 

that HUD prohibit the Authority from conducting further site work until it receives environmental clearance 

to do so, regardless of the funding source. (Audit Report: 2011-FW-1005) 

nnn

HUD OIG audited the Housing Authority of the City of Los Angeles, CA’s Public Housing Capital Fund 

grant awarded under ARRA to evaluate the Authority’s capacity in the areas of internal controls, eligibility, 

financial controls, procurement, and output/outcomes in administering its ARRA funds. 

The Authority generally had adequate capacity to manage and administer its ARRA funding. However, 

OIG identified various weaknesses that could impact the Authority’s ability to effectively manage and 

administer its ARRA funding in the most economical and efficient manner. Specifically, the Authority 

(1) did not properly procure two of its contracts or evaluate compliance with requirements for a third 

contract, (2) failed to include all provisions required by 24 CFR 85.36(i) for five of its contracts, (3) did not 

record its employees’ time accurately and consistently in its manual and Oracle time cards, (4) did not 

develop sufficient written policies and procedures to monitor for Davis-Bacon compliance, and (5) did 

not maintain documentation to show that Davis-Bacon certified payrolls were received and reviewed for 

compliance.

OIG recommended that HUD (1) require the Authority to provide support showing the eligibility and 

reasonableness of more than $369,000 disbursed for the repair of 12 fire-damaged units at Nickerson 

Gardens or reimburse this amount to its ARRA program, as appropriate, from non-Federal funds; (2) 

closely monitor the intergovernmental purchasing agreement transactions of the Authority for the quarters 

ending December 31, 2010, March 31, 2011, and June 30, 2011, to ensure that it follows HUD’s and its own 

procurement requirements; (3) implement procedures to ensure that it includes all mandatory contract 

Chapter 5 - American Recovery and Reinvestment Act of 2009 79
provisions as required by 24 CFR 85.36(i); (4) rescind the Authority’s HA-2006-047 Home Depot contract 

and require the Authority to rebid it in compliance with 24 CFR 85.36(c) and its own internal procurement 

policy; and (5) monitor the Authority to ensure that it implements the procedures it has in place to establish 

project numbers before beginning work at each development. OIG also recommended that HUD require 

the Authority to (1) reallocate the payroll of force account employees in the Oracle system to the correct 

project numbers between September 12, 2009, and February 12, 2010, and (2) develop and implement 

formal written policies and procedures to assist staff in monitoring for Davis-Bacon compliance. (Audit 

Report: 2011-LA-1002) 

nnn

HUD OIG audited the West Memphis Housing Authority in West Memphis, AR, to determine whether 

ARRA obligations the Authority made between January 30 and March 17, 2010, were appropriate, prudent, 

eligible, and supported and whether procurements and disbursements were made in accordance with 

requirements.

Generally, the Authority complied with ARRA requirements regarding the obligation of capital funds, 

including complying with procurement requirements. However, it did not comply with all requirements 

and could strengthen its controls. OIG recommended actions to correct overobligations and strengthen 

controls. (Audit Report: 2011-FW-1004)

nnn

HUD OIG audited the Jersey City, NJ, Housing Authority’s administration of its Public Housing Capital 

Fund program funded under ARRA to determine whether the Authority obligated and expended its ARRA 

capital funds in accordance with HUD regulations.

Authority officials generally complied with HUD regulations; however, weaknesses existed in the 

Authority’s financial management system. Specifically, (1) it was difficult to trace the drawdowns to the 

source documentation, (2) Authority officials charged their ARRA Public Housing Capital Fund program 

with more expenses than were incurred, and (3) costs were miscategorized. Consequently, HUD was 

precluded from effectively and efficiently monitoring and evaluating the Authority’s administration of its 

ARRA capital funds. 

OIG recommended that HUD instruct Authority officials to (1) improve their financial controls and 

accounting procedures to ensure that drawdowns can be traced to source documentation as required by 

HUD regulations; (2) develop procedures to ensure that drawdowns are made only on a reimbursement 

basis so that the specific costs paid are identified for each drawdown; (3) reimburse more than $5,000 

from non-Federal funds to the ARRA Public Housing Capital Fund program; (4) reimburse more than 

$13,000 to the dwelling structure line item from the administrative costs line item and correct the financial 

records in HUD’s Line of Credit Control System to ensure that the proper categories were charged; and 

(5) develop procedures to improve the accounting system and internal controls to ensure that funds are 

drawn down and used as budgeted and financial reports are accurate, current, and complete. (Audit 

Report: 2011-NY-1007)

nnn

HUD OIG audited the ARRA Public Housing Capital Fund program obligations of the Housing Authority 

of East Baton Rouge Parish in Baton Rouge, LA, to determine whether the Authority met HUD and ARRA 

requirements when obligating and expending funds it received under ARRA.

80 Chapter 5 - American Recovery and Reinvestment Act of 2009
Overall, the Authority generally ensured that it met HUD and ARRA requirements. Specifically, it 

obligated ARRA capital funds for eligible projects, maintained proper support for its obligations, and 

ensured that it had adequate management controls over its obligation process. In addition, the Authority’s 

ARRA projects were in progress, and it appeared that the Authority would spend its ARRA funds within 

the required timeframes. However, it did not always ensure that ARRA expenditures were eligible. As a 

result, the Authority spent nearly $14,000 for ineligible costs. It corrected the transaction that generated 

the ineligible costs and charged the costs to the appropriate funding source. 

OIG recommended that HUD require the Authority to develop and implement adequate written 

accounting policies, which include procedures for processing and paying invoices, to ensure that ARRA 

funds are properly spent and accounted for. (Audit Report: 2011-AO-1003) 

Office of Community Planning and Development Audits and 

Reviews

Community Development Block Grant Audits and Reviews

HUD OIG audited the City of Pittsburgh, PA’s administration of its Community Development Block 

Grant funds that it received under ARRA to determine whether the City administered its street resurfacing 

and neighborhood business and economic development activities funded with ARRA funds according to 

the requirements of ARRA and applicable HUD rules and regulations. 

Although the City generally administered its street resurfacing and neighborhood business and 

economic development activities funded with ARRA funds according to ARRA requirements and 

applicable HUD rules and regulations, it can improve its administration of the funds. The City (1) did 

not comply with HUD guidance for implementing the “buy American” provision of ARRA, (2) could not 

demonstrate that jobs created in part by $400,000 in loaned funds benefitted or would benefit low- and 

moderate-income persons, (3) did not include a statement of work in its subrecipient agreement with the 

Urban Redevelopment Authority, and (4) did not accurately post the number of jobs created or retained 

to the Federal reporting Web site. 

OIG recommended that HUD require the City to (1) develop and implement controls to ensure that a 

“buy American” provision is included in requests for applications or proposals, subrecipient agreements, 

bidding documents, and contracts funded with ARRA funds; (2) provide documentation to demonstrate 

that funds loaned to two companies will comply with national objective criteria and benefit low- and 

moderate-income persons; (3) amend its subrecipient agreement with the Urban Redevelopment 

Authority to include a specific description of the work to be performed, a schedule for completing the 

work, and a detailed budget; and (4) develop and implement controls to ensure that ARRA job creation 

data it posts to the Federal reporting Web site are accurate. (Audit Report: 2011-PH-1006)

Tax Credit Assistance Program

HUD OIG audited the Pennsylvania Housing Finance Agency because it received $95.1 million in Tax 

Credit Assistance Program (TCAP) funds under ARRA. The objective was to determine whether the 

Agency administered its program in accordance with ARRA and applicable HUD requirements. 

The Agency generally administered its program in accordance with ARRA and HUD requirements. 

However, it incurred ineligible costs totaling nearly $136,000 and could not support costs totaling nearly 

Chapter 5 - American Recovery and Reinvestment Act of 2009 81
$152,000. In addition, it did not obtain required lobbying certifications from contractors and subcontractors, 

and it understated the job creation information that it posted to the Federal reporting Web site. 

OIG recommended that HUD require the Agency to reimburse its program for the ineligible costs and 

provide documentation to support the unsupported costs identified by the audit or reimburse its program 

from non-Federal funds for any costs that it cannot support. In addition, the Agency should obtain the 

required lobbying certifications from contractors and subcontractors and develop and implement controls 

to ensure that accurate job information is posted to the Federal reporting Web site. (Audit Report: 2011-

PH-1003)

nnn

HUD OIG audited the Washington State Housing Finance Commission in Seattle, WA, to determine 

whether the Commission established eligible grant projects, entered TCAP information into Recovery.gov 

accurately and completely, and paid eligible TCAP expenditures in accordance with ARRA requirements. 

The Commission complied with the applicable ARRA and HUD rules and regulations in establishing 

eligible grant projects and in entering TCAP information into the Federal reporting Web site. However, 

it did not always disburse TCAP funds in accordance with program requirements. The Commission 

reimbursed two project owners for ineligible permanent loan fees, appraisal fees, and unsupported legal 

costs. 

OIG recommended that HUD require the Commission to (1) reimburse more than $170,000 to its 

U.S. Treasury line of credit from non-Federal funds for the ineligible expenditures, (2) provide supporting 

documentation for more than $17,000 in unsupported costs or reimburse its U.S. Treasury line of credit 

from non-Federal funds, and (3) establish and implement written policies and procedures for the review 

and approval of budgets and draw requests. (Audit Report: 2011-SE-1002)

nnn

HUD OIG audited the Virginia Housing Development Authority in Richmond, VA, to determine whether 

the Authority administered its TCAP in accordance with ARRA and applicable HUD requirements. 

The Authority generally administered TCAP in accordance with ARRA and HUD requirements. 

However, it did not obtain lobbying certifications as required by ARRA. 

OIG recommended that the Authority obtain lobbying certifications from its TCAP contractors and 

subcontractors. It took immediate corrective action during the audit to obtain the required certifications. 

(Audit Report: 2011-PH-1001)

nnn

HUD OIG audited the TCAP funds awarded to the West Virginia Housing Development Fund in 

Charleston, WV, under ARRA to determine whether the Fund administered its program in accordance 

with ARRA and applicable HUD requirements. The Fund generally administered TCAP in accordance 

with ARRA and HUD requirements. However, it did not report 38 full-time equivalents (FTE) created 

during the first three quarters of 2010. 

OIG recommended that HUD require the Fund to maintain the FTE data that were not reported until 

the Federal Government requests the information. (Audit Report: 2011-PH-1008)

82 Chapter 5 - American Recovery and Reinvestment Act of 2009
Homelessness Prevention and Rapid Re-Housing Program

HUD OIG audited the City and County of San Francisco, CA, to determine whether the City disbursed 

its Homelessness Prevention and Rapid Re-Housing Program (HPRP) funding in accordance with program 

requirements. 

The City paid for HPRP services for ineligible participants and participants whose eligibility was not 

supported. It also paid for ineligible activities. Of 31 case files reviewed, 4 participants were ineligible, 

and 10 did not have adequate documentation to support eligibility. OIG also identified 17 additional 

participants that the City had reviewed during monitoring whose eligibility was not adequately supported. 

OIG recommended that HUD require the City to (1) reimburse the program nearly $9,000 from nonFederal funds for the ineligible participants and activities and determine and reimburse any amounts 

that have been spent since the audit for these participants; (2) provide supporting documentation for 

participants’ eligibility or reimburse its program accounts more than $31,000 for participants reviewed 

who lacked adequate documentation and determine and reimburse any amounts that have been spent 

since the audit for these participants; (3) provide supporting documentation for participants’ eligibility or 

reimburse its program accounts more than $23,000 based on the City’s monitoring review and determine 

and reimburse any amounts that have been spent since the audit for these participants; (4) develop 

and implement procedures to ensure that its subgrantees verify and document participant eligibility in 

accordance with HPRP requirements; and (5) develop and implement effective monitoring procedures 

to ensure, at a minimum, that reviews are timely, deficiencies and corrections are clearly documented, 

and reimbursements for ineligible participants or participants whose eligibility cannot be determined are 

repaid to the program. (Audit Report: 2011-LA-1005)

nnn

HUD OIG audited the HPRP at the City of Los Angeles, CA, Housing Department to determine whether 

the Department was efficiently and effectively administering its HPRP grant funds in compliance with 

ARRA and other applicable requirements. Specifically, OIG wanted to determine whether the Department 

had adequate policies and procedures in place to ensure that program expenditures were supported with 

adequate documentation and subrecipients were monitored to ensure compliance with all applicable 

regulations. 

The Department did not always efficiently and effectively administer its grant funds in compliance 

with ARRA and other applicable requirements. It did not ensure that expenditures were supported with 

adequate source documentation. Further, its policies and procedures were not adequate to ensure that 

its subrecipients complied with contractual requirements, maintained source documents for program 

expenditures, and received adequate monitoring for compliance with Federal requirements.

OIG recommended that HUD require the Department to (1) revise its policies and procedures to 

ensure that adequate source documentation is reviewed before disbursing HPRP funds and (2) enforce 

the Homeless Program services contract between itself and the Los Angeles Homeless Services Authority 

to ensure that the Authority collects, reviews, and maintains adequate source documentation from all 

of its subrecipients, thereby reducing the risk of fraud, waste, and abuse. Further, OIG recommended 

that the Department revise its policies and procedures to ensure that the day-to-day activities of all 

subrecipients are monitored during the grant term to ensure compliance with HPRP and other applicable 

Federal requirements. (Audit Report: 2011-LA-1001)

nnn

Chapter 5 - American Recovery and Reinvestment Act of 2009 83
84 Chapter 5 - American Recovery and Reinvestment Act of 2009

Investigations

The investigations shown below were conducted jointly with Federal, State, or local law enforcement 

agencies.

George and Elias Saad, Kristijan Kajtna, and Harlene Grullon were each indicted in U.S. District Court, 

Boston, MA, for allegedly making false statements in Federal Housing Administration (FHA) transactions, 

submitting false claims, and committing wire fraud and a conspiracy to defraud the United States. From 

2008 to 2011, George Saad and Harlene Grullon allegedly provided false information used by Elias Saad, 

Kristijan Kajtna, and other straw borrowers who fraudulently obtained FHA-insured mortgages and “First 

Time Homebuyer Tax Credits” funded by ARRA. HUD losses have not yet been determined. 

nnn

Jerry Janvier and Theresa Finocchio, a current Boston Housing Authority public housing tenant and 

former unauthorized resident; Junior Lopez; Christopher Proe; and five additional individuals were each 

indicted in U.S. District Court, Boston, MA, for allegedly committing a conspiracy to defraud the United 

States or making false claims. From 2009 to 2011, Lopez and Proe allegedly misused identification 

information belonging to other individuals, including a number of HUD-subsidized housing recipients, 

and submitted more than $600,000 in fraudulent ARRA-funded First Time Homebuyer Tax Credit claims. 

In addition, Janvier, Finocchio, and the remaining defendants allegedly submitted false information and 

documents, fraudulently claimed property ownership, and unlawfully obtained First Time Homebuyer 

Tax Credits. 

nnn

Ashley King, a HUD HPRP applicant through the Fair Housing Resource Center, and Curtis White each 

pled guilty in U.S. District Court, Cleveland, OH, to making false statements. In March 2010, King and 

White provided false information and fraudulent documents when they applied for $1,300 in housing 

assistance. 

nnn
Chapter 5 - American Recovery and Reinvestment Act of 2009 85

Inspections and Evaluations

The HUD OIG Office of Investigation’s Inspections and Evaluations activities are designed to promote 

economy, efficiency, and effectiveness in the administration of HUD programs; detect and deter fraud and 

abuse in HUD programs and operations; and ensure compliance with applicable laws and regulations. 

The office conducts inspections and evaluations using various study methods and evaluative techniques 

to provide timely information to improve policies, programs, and procedures.

Use of American Recovery and Reinvestment Act of 2009 Funds by the 

Housing Authority of the City of Fort Myers, FL

HUD OIG conducted an inspection to address concerns of OIG senior management regarding the 

Housing Authority of the City of Fort Myers’ (HACFM) use of ARRA funds to construct a new administration 

building. Specifically, OIG wanted to determine (1) whether HACFM could use ARRA funds to construct 

a new administration building and (2) whether HACFM used ARRA funds to purchase furniture and 

equipment for the new administration building and if so, whether this was an eligible activity. 

OIG determined that HACFM could use ARRA funds and its fiscal year public housing capital funds 

for the construction of a new administration building. Also, HACFM did not use ARRA funds to purchase 

furniture and equipment for the new administration building. These purchases were made from other 

eligible funding sources.

OIG made no recommendations for corrective action. 

nnn

Chapter 6 - Disaster Grant Programs
As the U.S. Department of Housing and Urban Development (HUD) provides recovery assistance 

through Community Development Block Grant (CDBG) funds, which are made available from supplemental 

appropriations for major disasters declared by the President, the Office of Inspector General (OIG) continues 

its oversight role. Over the past several years, HUD has allocated more than $29.4 billion to various States 

through its CDBG program. These active disaster grants nationwide have $24.5 billion in obligations 

and $19.2 billion in disbursements. Regarding the $19.6 billion in funds provided to Gulf Coast States for 

Hurricane Katrina, $15.6 billion, or 79.6 percent, of the funds has been disbursed for the period ending 

March 31, 2011. These Disaster Recovery grants are used to rebuild the affected areas and provide crucial 

seed money to start the recovery process. A significant management challenge for HUD is to ensure that 

States have the accountability controls in place to ensure that limited resources are used appropriately.

HUD OIG continues to take steps to ensure that the Department remains diligent in assisting communities 

with their recovery efforts. During the current semiannual period, Office of Audit completed two Hurricane 

Katrina audits and two audits of other disasters. For the four audits, OIG questioned costs of $2.8 million 

and provided recommendations for management improvements.

nnn

Introduction and Background

88 Chapter 6 - Disaster Grant Programs
During this period, OIG’s Office of Audit issued four audit reports on various HUD disaster programs. 

The reviews covered the CDBG disaster programs. HUD provides disaster assistance through the CDBG 

program, which is made available from supplemental appropriations for recovery from major disasters 

declared by the President. These reviews were performed by HUD OIG Office of Audit regional offices: 

(1) two by the Gulf Coast office (Region XI), (2) one by the Fort Worth, TX, office (Region VI), and (3) one 

by the New York, NY, office (Region II). 

Audit

* The total disaster audits, questioned costs, and funds put to better use amounts include four audits conducted in 

the community planning and development area. 

Key program results Questioned costs Funds put to better use

Audit 4 audits* $2.8 million ---

HUD OIG audited the HUD CDBG Supplemental Disaster Recovery program funds administered by 

the State of Louisiana, Office of Community Development, in Baton Rouge, LA, to determine whether 

the State ensured that disbursements to participants were eligible and supported under its Small Rental 

Property Program. 

In general, the State ensured that disbursements to program participants were eligible and supported 

by following the program policies and procedures and adequately documenting the program participants’ 

eligibility. 

Since the State generally ensured that disbursements to program participants were eligible and 

supported, OIG did not recommend corrective action. (Audit Report: 2011-AO-1001)

nnn

HUD OIG audited the HUD CDBG Supplemental Disaster Recovery program funds administered by the 

State of Louisiana, Office of Community Development, in Baton Rouge, LA, to determine whether the 

State ensured that disbursements made under its First Time Homebuyer Program complied with Federal 

regulations and the cooperative endeavor agreement with its subrecipient, the Finance Authority of New 

Orleans. 

The State did not always ensure that disbursements made under its program complied with Federal 

regulations and the agreement. Specifically, disbursements to program participants were not always eligible 

and supported. As a result, the State disbursed $268,415 for ineligible program costs and was unable to 

support more than $1.2 million in program costs. 

In addition, the State disbursed funds to the Finance Authority on a fee-per-loan basis, which was 

unallowable. It also did not ensure that the findings in its monitoring reviews were resolved before 

continuing disbursements to the Finance Authority. As a result, it disbursed more than $1.3 million for 

unallowable costs and did not have assurance that costs were reasonable or necessary. Further, the State 

did not have reasonable assurance that the Finance Authority used every opportunity to (1) maximize the 

disaster funds and (2) increase the number of individual families that were served by the program. 

Chapter 6 - Disaster Grant Programs 89
OIG recommended that HUD require the State to (1) repay its program for the ineligible costs, (2) 

support or repay its program for the unsupported costs, and (3) support or repay its program for the funds 

disbursed to the Finance Authority on a fee-per-loan basis and cease payment of the fee per loan to the 

Finance Authority. (Audit Report: 2011-AO-1002) 

nnn

HUD OIG audited the HUD CDBG Supplemental II Disaster Recovery program funds administered by the 

Texas Department of Housing and Community Affairs (TDHCA) to determine whether TDHCA monitored 

its program management firm to ensure compliance with Federal and State regulations and to ensure 

that costs reimbursed for the Housing Assistance Program and the Sabine Pass Restoration Program were 

adequately supported. 

TDHCA’s monitoring activities provided assurance that its program management firm generally complied 

with Federal and State regulations. Further, TDHCA’s reviews and monitoring generally ensured that program 

costs submitted for reimbursement by the firm were adequately supported. However, in a minor instance 

of noncompliance, TDHCA allowed the firm to budget and receive reimbursement for a $71,691 markup 

for “admin fees on subcontractors,” calculated using a “cost plus a percentage of cost method” that is not 

allowed under CDBG rules. TDHCA had originally questioned the costs but later allowed them because 

contractor staff provided support that made the expenditures seem plausible.

OIG recommended that HUD require TDHCA to recover from its program management firm all “admin 

fees on subcontractors” costs, reimburse its HUD Disaster Recovery program accounts for those costs, 

and continue to monitor and review program disbursements for the ineligible cost plus a percentage of 

cost payments. (Audit Report: 2011-FW-1006) 

nnn

HUD OIG audited the Lower Manhattan Development Corporation’s (LMDC) administration of the $2.783 

billion in CDBG Disaster Recovery Assistance funds provided to the State of New York in the aftermath of 

the September 11, 2001, terrorist attacks on the World Trade Center in New York City, NY, to determine 

whether LMDC disbursed CDBG Disaster Recovery Assistance funds for the Economic Development and 

East River Waterfront programs in accordance with the guidelines established under its action plans. 

LMDC officials generally disbursed the funds reviewed in accordance with applicable action plans. 

However, documentation for the award of Small Firm Assistance Program grants, administered under 

the Economic Development Program, was not always adequate to ensure that grants were awarded 

in accordance with LMDC guidelines. Further, additional program requirements could provide greater 

assurance that program objectives will be achieved. 

OIG recommended that HUD direct LMDC officials to (1) strengthen Small Firm Assistance Program 

processing controls to ensure that adequate documentation is maintained for the basis of awarding 

grants, thus providing greater assurance that any grants awarded from the $3.1 million authorized under a 

subrecipient agreement but not yet expended will be adequately supported, and (2) consider administrative 

changes that might better ensure that program objectives will be met. (Audit Report: 2011-NY-1005)

nnn

90 Chapter 6 - Disaster Grant Programs
Chapter 6 - Disaster Grant Programs 91

The HUD OIG Office of Investigation continues to pursue HUD disaster assistance crimes with other 

law enforcement agencies, including the Federal Bureau of Investigation and other Federal, State, and 

local partners. While the majority of prosecutions during this reporting period involved individuals who 

obtained disaster assistance through fraud, OIG is vigorously pursuing public corruption, infrastructure, 

and procurement crimes. Working with the Louisiana Recovery and Mississippi Development Authorities, 

OIG is taking a proactive role to prevent fraudulent disaster-related claim payments and to assist with the 

recovery of deceptive or fraudulent grants. In addition, HUD OIG continues to be a dedicated partner in 

the National Center for Disaster Fraud Task Force (previously known as the Hurricane Katrina Fraud Task 

Force). HUD OIG provides personnel to support the joint command center in Baton Rouge, LA, continues 

to support disaster-related investigative efforts throughout the country, and actively participates in the 

sharing of information and the receipt and referral of complaints with other law enforcement agencies.

Homeowner Grant Fraud

Judy Carter was charged in U.S. District Court, Gulfport, MS, with allegedly making false statements 

and committing theft of government funds and mail and wire fraud. Carter applied for and received 

$300,000 in CDBG Disaster Recovery Assistance funds through the Mississippi Development Authority 

(MDA) and $49,517 in Federal Emergency Management Agency (FEMA) disaster assistance on behalf of 

another individual for hurricane-damaged residential property, but allegedly the damaged property was 

not their primary residence during Hurricane Katrina. 

nnn

Robert and Chressye Wallace were collectively sentenced in U.S. District Court, New Orleans, LA, 

to 18 months incarceration and 72 months supervised release and ordered to pay the Louisiana Road 

Home (Road Home) program $233,015 in restitution for their earlier guilty pleas to committing theft of 

government funds. Robert and Chressye Wallace applied for and received $150,000 in CDBG Disaster 

Recovery Assistance funds through the Road Home program for hurricane-damaged residential property, 

but the damaged property was not their primary residence during Hurricane Katrina. 

nnn

Former HUD attorney Diane Walder and her husband James Groomes were collectively sentenced 

in U.S. District Court, Gulfport, MS, to 8 years probation and ordered to perform 80 hours of community 

service and pay the Small Business Administration (SBA) $25,000 in restitution for their earlier guilty 

pleas to committing theft of government funds. Walder and Groomes applied for and received $150,000 

in CDBG Disaster Recovery Assistance funds through MDA and $50,000 in SBA disaster assistance for 

hurricane-damaged residential property, but the damaged property was not their primary residence 

during Hurricane Katrina. 

nnn

Lionel Perkins was sentenced in U.S. District Court, New Orleans, LA, to 78 months incarceration and 

3 years supervised release and ordered to pay the Road Home program $115,000, SBA $48,138, FEMA 

$5,514, and others $57,317 in restitution for his earlier guilty plea to obstructing justice and committing 

theft of government funds; identity theft; and wire, health care, Social Security Administration (SSA), 

and Medicaid fraud. Perkins applied for and received $150,000 in CDBG Disaster Recovery Assistance 

Investigation
92 Chapter 6 - Disaster Grant Programs

funds through the Road Home program and caused the Road Home administrator to remit $58,500 in 

CDBG funds to repay his SBA disaster assistance loan for hurricane-damaged residential property, but the 

damaged property was not his primary residence during Hurricane Katrina. In addition, Perkins applied 

for and fraudulently obtained SSA, food stamps, Medicaid, and other health care benefits. 

nnn

Ellaine Mullone pled guilty in U.S. District Court, New Orleans, LA, to committing theft of government 

funds. Mullone applied for and received $150,000 in CDBG Disaster Recovery Assistance funds through the 

Road Home program, $219,000 in SBA disaster assistance, and $26,676 in FEMA assistance for hurricanedamaged residential property, but the damaged property was not her primary residence during Hurricane 

Katrina. 

nnn

Ruth Goodman was sentenced in U.S. District Court, New Orleans, LA, to 37 months incarceration 

and 36 months probation and ordered to pay the Road Home program and others $476,904 in restitution 

for her earlier guilty plea to making false statements, committing theft of government funds and mail 

fraud, and possessing a false passport. Goodman applied for and received $132,146 in CDBG Disaster 

Recovery Assistance funds through the Road Home program and $342,000 in SBA disaster assistance 

for hurricane-damaged residential property, but the damaged property was not her primary residence 

during Hurricane Katrina. In addition, Goodman submitted false documents to FEMA and possessed a 

fraudulent passport. 

nnn

Casey Adams entered into a pretrial diversion filed in U.S. District Court, New Orleans, LA, and agreed 

to repay the Road Home program $10,000. Adams admitted that he applied for and received $130,000 

Copyright 2011. The Times-Picayune, New Orleans, LA Reprinted with permission.
Chapter 6 - Disaster Grant Programs 93

in CDBG Disaster Recovery Assistance funds through the Road Home program for hurricane-damaged 

residential property that was not his primary residence during Hurricane Katrina. 

nnn

Gerald and Michael Haydel were each charged in U.S. District Court, Jackson, MS, with allegedly 

making false statements and committing theft of government funds and mail fraud. Gerald and Michael 

Haydel applied for and received $92,856 in CDBG Disaster Recovery Assistance funds through MDA 

and $22,373 in FEMA disaster assistance for hurricane-damaged residential property, but allegedly the 

damaged property was not their primary residence during Hurricane Katrina. 

nnn

LaTanicia McMillan-Rogers and Wayne Rogers were collectively sentenced in U.S. District Court, 

Jackson, MS, to 27 months incarceration and 6 years supervised release and ordered to pay HUD, FEMA, 

and SBA $247,379 in restitution for their earlier guilty pleas to committing theft of government funds. 

LaTanicia McMillan-Rogers and Wayne Rogers applied for and received $91,021 in CDBG Disaster Recovery 

Assistance funds through MDA and $156,358 in SBA and FEMA disaster assistance for hurricane-damaged 

residential property, but the damaged property was not their primary residence during Hurricane Katrina. 

nnn

William Turnage, Jr., paid the Louisiana Office of Community Development $76,355 in restitution and 

a $5,000 fine and was sentenced in U.S. District Court, New Orleans, LA, to 18 months probation for his 

earlier guilty plea to making a false statement. Turnage applied for and received $89,355 in CDBG Disaster 

Recovery Assistance funds through the Road Home program and $12,500 in FEMA disaster assistance for 

hurricane-damaged residential property, but the damaged property was not his primary residence during 

Hurricane Katrina. 

nnn

Gordon Guidry was sentenced in U.S. District Court, Gulfport, MS, to 12 months incarceration and 2 

years supervised release, ordered to perform 100 hours of community service and pay MDA $69,742 and 

FEMA $10,688 in restitution, and fined $5,000 for his earlier guilty plea to making false statements and 

committing theft of government funds. Gordon and previously sentenced Mary Guidry applied for and 

received $69,742 in CDBG Disaster Recovery Assistance funds through MDA and $10,688 in FEMA disaster 

assistance for hurricane-damaged residential property, but the damaged property was not their primary 

residence during Hurricane Katrina. 

nnn

Rosalyn Kelsey was charged in U.S. District Court, Jackson, MS, with allegedly making false statements 

and committing theft of government funds and mail fraud. Kelsey applied for and received $64,875 in 

CDBG Disaster Recovery Assistance funds through MDA for hurricane-damaged residential property, but 

allegedly the damaged property was not her primary residence during Hurricane Katrina. 

nnn

Michelle Carroll and Steven Gardner were collectively sentenced in U.S. District Court, Gulfport, 

MS, to 45 months incarceration and 48 months supervised release and ordered to perform 160 hours of 

community service and jointly pay MDA $63,105 in restitution for their earlier guilty pleas to committing 
mail fraud or aggravated identity theft. Carroll and Gardner applied for and received $63,105 in CDBG 

Disaster Recovery Assistance funds through MDA for hurricane-damaged residential property as husband 

and wife, but Carroll and Gardner were not married, and Carroll provided fraudulent identity and other 

documents to obtain the funds. 

nnn

Hubert Sentino was sentenced in U.S. District Court, New Orleans, LA, to 6 months home confinement 

and 5 years probation, ordered to pay the Road Home program $60,000 in restitution, and fined $5,000 for 

his earlier guilty plea to committing theft of government funds. Sentino applied for and received $60,000 

in CDBG Disaster Recovery Assistance funds through the Road Home program for hurricane-damaged 

residential property, but the damaged property was not his primary residence during Hurricane Katrina. 

nnn

Annette Stallworth was charged in U.S. District Court, Gulfport, MS, with allegedly making false 

statements and committing theft of government funds. Stallworth applied for and received $53,790 

in CDBG Disaster Recovery Assistance funds through MDA and $38,800 in SBA disaster assistance for 

hurricane-damaged residential property, but allegedly the damaged property was not her primary 

residence during Hurricane Katrina. 

nnn

Carlas Williams pled guilty in U.S. District Court, Baton Rouge, LA, to making false statements. 

Williams provided false income information when she applied for and received $51,449 in CDBG Disaster 

Recovery Assistance funds through the Road Home program and $98,000 in SBA disaster assistance for 

hurricane-damaged residential property. 

nnn

David and Cindy Cole were collectively sentenced in U.S. District Court, Gulfport, MS, to 39 months 

incarceration and 6 years supervised release and ordered to pay MDA and FEMA $70,025 in restitution 

for their earlier guilty pleas to committing theft of government funds and mail fraud. David and Cindy 

Cole applied for and received $46,695 in CDBG Disaster Recovery Assistance funds through MDA for 

hurricane-damaged residential property, but the damaged property was not their primary residence 

during Hurricane Katrina. 

nnn

Anthony Spears, Sr., was charged in U.S. District Court, Gulfport, MS, with allegedly committing theft 

of government funds and mail fraud. Spears applied for and received $23,452 in CDBG Disaster Recovery 

Assistance funds through MDA and $128,858 in SBA and FEMA disaster assistance for hurricane-damaged 

residential property, but allegedly the damaged property was not his primary residence during Hurricane 

Katrina. 

nnn

Barbara Dennis was sentenced in U.S. District Court, Gulfport, MS, to 3 years probation and ordered 

to perform 70 hours of community service and pay FEMA $23,883 in restitution for her earlier guilty plea 

to committing theft of government funds. Dennis applied for and received $23,883 in FEMA disaster 

assistance and attempted to obtain $48,452 in CDBG Disaster Recovery Assistance funds through MDA for 

hurricane-damaged residential property, but the damaged property was not her primary residence during 

Hurricane Katrina. 

94 Chapter 6 - Disaster Grant Programs
HUD and FEMA Disaster Housing Assistance Fraud

Alicia Watt, a former Dupage Housing Authority (Dupage) Section 8 tenant and FEMA Disaster 

Housing Assistance program participant, was sentenced in U.S. District Court, Chicago, IL, to 21 months 

incarceration and 5 years probation and ordered to pay HUD $34,359, FEMA $29,751, and SSA $50,482 in 

restitution for her earlier guilty plea to committing mail fraud. From 2005 to 2009, Watt failed to report 

her receipt of FEMA disaster housing assistance on Dupage housing and other certifications and obtained 

$34,359 in housing and $80,233 in other assistance she was not entitled to receive. 

nnn

Zaimah Muhammad, a former Kansas City Housing Authority Disaster Housing Assistance program 

participant and FEMA disaster assistance recipient, pled guilty in U.S. District Court, Kansas City, MO, to 

committing theft of government funds. From December 2005 to July 2007, Muhammad submitted false 

information and documents and fraudulently obtained $10,243 in housing and $17,977 in FEMA disaster 

assistance. 

nnn

Alicia Williams, a Houston Housing Authority Disaster Housing Assistance program participant, was 

sentenced in Harris County District Court, Houston, TX, to 3 years supervised release and ordered to 

perform 120 hours of community service and pay HUD $5,336 in restitution for her earlier guilty plea 

to committing theft. From April to November 2006, Williams failed to report her nonresidency in her 

subsidized unit and obtained $5,336 in housing assistance she was not entitled to receive. 

nnn

Johnny Watson, a former Minnesota Housing Finance Agency (Minnesota) Section 8 tenant and FEMA 

disaster housing recipient, was indicted in U.S. District Court, Minneapolis, MN, for allegedly making false 

claims and committing mail fraud. In addition, former Minnesota Section 8 tenant Jovanta Schaffer pled 

guilty to making a false claim and committing mail fraud. From September 2006 to April 2008, Watson 

and Schaffer applied for and received more than $65,000 in FEMA disaster housing assistance after they 

claimed Hurricane Katrina evacuee status, but Watson allegedly and Schaffer admittedly resided in a 

Minnesota subsidized housing unit during the storm. 

nnn

Lee and Gayland Ridley, Montgomery County Housing Authority (Montgomery County) Section 8 

landlords, were each indicted in U.S. District Court, Norristown, PA, for allegedly making false statements 

to HUD and FEMA. From March to November 2007, Lee and Gayland Ridley allegedly received dual 

housing subsidies on behalf of Hurricane Katrina housing recipients and failed to report their receipt of 

$8,100 in FEMA assistance on Montgomery County certifications. 

Other Fraud

Tynisa Cobb, a former employee of First American Title Insurance Corporation, a HUD contractor 

responsible for Louisiana Road Home grant disbursements, was charged in Louisiana State Court, New 

Orleans, LA, with allegedly committing theft. In December 2007, Cobb allegedly embezzled $50,000 in 

Road Home program funds awarded to another individual. 

nnn

Chapter 6 - Disaster Grant Programs 95

Chapter 7 - Other Significant Audits 

and Investigations/OIG Hotline
In addition to the audits and investigations described in this chapter, the U.S. Department of Housing 

and Urban Development (HUD), Office of Inspector General (OIG), has conducted a number of outreach 

efforts (see chapter 8, page 121).

Audit

Strategic Initiative 4: Contribute to improving HUD’s execution 

and accountability of fiscal responsibilities as a relevant 

and problem-solving advisor to the Department’s execution

HUD OIG’s more significant audits are discussed below.

Audit of HUD’s Financial Statements

HUD OIG provided additional details to supplement the Report on HUD’s Fiscal Years 2010 and 2009 

Financial Statements, which is included in HUD’s Fiscal Year 2010 Agency Financial Report. Based on 

the audit and the reports of other auditors, the financial statements were presented fairly, in all material 

respects, in conformity with accounting principles generally accepted in the United States of America.

OIG identified the following significant deficiencies in internal controls related to the need to

• Have financial management systems comply with the Federal Financial Management 

Improvement Act of 1996 (FFMIA);

• Improve the processes for reviewing obligation balances; 

Key program results Questioned costs Funds put to better use

$3.2 million $754 million

Page 98

Page 100

Page 100

Page 100

Page 101

Page 101

Page 102

Page 102

Page 102

Page 103

Audit 12 audits

Our

focus

• Audit of HUD’s financial statements

• FHA financial statements

• Audit of the Government National Mortgage Association’s 

financial statements

• Evaluation of Federal Information Security Management 

Act of 2002

• Evaluation of HUD’s information technology services 

contracts

• Evaluation of ACORN Associates, Inc.

• Review of reducing improper payments

• Review of HUD’s hiring process

• Review of HUD’s efforts to rehost financial applications

• Review of HUD’s controls over selected configuration 

management activities

98 Chapter 7 - Other Significant Audits and Investigations/OIG Hotline
• Continue improvements in the oversight and monitoring of subsidy calculations, intermediaries’ 

program performance, and use of Housing Choice Voucher program funds;

• Establish internal controls over Office of Community Planning and Development grantees’ 

compliance with program requirements;

• Improve administrative control of funds;

• Further strengthen controls over HUD’s computing environment;

• Improve personnel security practices for access to the Department’s critical financial systems; 

• Effectively monitor modernization efforts and existing systems to mitigate near-term financial 

reporting risks; and

• Mitigate increased risks to management estimates caused by economic conditions and 

inherent model design. 

OIG’s findings included the following four instances of noncompliance with applicable laws and 

regulations:

• HUD did not substantially comply with FFMIA regarding system requirements; 

• HUD did not substantially comply with the Antideficiency Act; 

• HUD did not substantially comply with laws and regulations governing claims of the United 

States Government; and

• The Federal Housing Administrations’s (FHA) Mutual Mortgage Insurance Fund capitalization 

was not maintained at a minimum capital ratio of 2 percent, which is required under the 

Cranston-Gonzalez National Affordable Housing Act of 1990.

The audit also identified $341 million in excess obligations recorded in HUD’s records. 

OIG recommended that $27.5 million not be expended as originally intended and reprogrammed by 

the grantee and that HUD seek legislative authority to implement $385 million in offsets against public 

housing agencies’ (PHA) excess unusable funding held in net restricted assets accounts at the PHAs. These 

amounts represent funds that HUD could put to better use. (Audit Report: 2011-FO-0003)

nnn

HUD OIG reviewed general and application controls for selected information systems to assess 

management controls over HUD’s computing environments as part of the OIG audit of HUD’s financial 

statements for fiscal year (FY) 2010 under the Chief Financial Officer’s Act of 1990. The review was based 

on the Government Accountability Office’s “Federal Information Systems Controls Audit Manual” and 

information technology (IT) guidelines established by the Office of Management and Budget (OMB) and 

the National Institute of Standards and Technology. (Audit Report: 2011-DP-0004)

nnn

HUD OIG audited HUD’s ability to comply with the requirements of OMB Circular A-127. OIG conducted 

the audit as a component of the audit of HUD’s consolidated financial statements for FY 2010 under the 

Chief Financial Officer’s Act of 1990. 

HUD did not fully comply with the requirements of OMB Circular A-127. Specifically, HUD had not 

(1) initiated plans to review financial management systems for compliance with computer security and 

Chapter 7 - Other Significant Audits and Investigations/OIG Hotline 99
internal control guidelines and (2) accurately identified its financial management systems within its financial 

system inventory listing. Additionally, although progress had been made, OIG continued to have concerns 

regarding HUD’s integrated core financial system. 

OIG recommended that HUD take appropriate steps to move into compliance with the requirements 

of OMB Circular A-127. (Audit Report: 2011-DP-0003)

FHA Financial Statements

Clifton Gunderson (CG) audited the FY 2010 and 2009 financial statements of FHA. 

CG provided an unqualified opinion on FHA’s financial statements and reported two significant 

deficiencies in FHA’s internal controls and one reportable instance of noncompliance with laws and 

regulations. It made eight new recommendations and discussed the issues/conditions in detail, provided 

an assessment of management’s responses to the report, and recommended corrective actions. CG 

also noted other matters involving internal control and operations that were not material to the financial 

statements and were communicated separately to FHA’s management. (Audit Report: 2011-FO-0002)

Audit of the Government National Mortgage Association’s Financial 

Statements

Carmichael, Brasher, Tuvell, and Company (CBTC) audited the Government National Mortgage 

Association’s (Ginnie Mae) financial statements for the fiscal years ending September 30, 2010, and 2009. 

In CBTC’s opinion, the financial statements presented fairly, in all material respects, Ginnie Mae’s financial 

position as of September 30, 2010, and September 30, 2009, and the results of its operations and its cash 

flows for the years then ended in conformity with accounting principles generally accepted in the United 

States of America.

CBTC did not identify any deficiencies in internal control over financial reporting that might be considered 

significant deficiencies or material weaknesses. CBTC issued a separate letter to management regarding 

other less significant matters that came to its attention during the audit. (Audit Report: 2011-FO-0001)

Evaluation of Federal Information Security Management Act of 2002

HUD OIG audited HUD’s information security program because it is a required component of OIG’s FY 

2010 consolidated financial statements audit and its annual evaluation of HUD’s information system security 

program in accordance with the Federal Information Security Management Act of 2002. OIG evaluated 

whether HUD had developed security policies, implemented procedures, and continuously monitored its 

entitywide information system security program. 

HUD had continued its progress in implementing a comprehensive, entitywide information system 

security program. Specifically, HUD’s Office of Chief Information Officer (OCIO) had successfully certified 

and accredited its major application and general support systems; responded to and resolved reported 

computer incidents in a timely manner; conducted contingency plan testing; and tracked, prioritized, and 

remediated weaknesses identified in the plan of actions and milestones reports. 

OIG also found several matters that require management’s attention and recommended that OCIO 

improve overall policies and procedures with regard to entitywide security measures. (Audit Report: 

2011-DP-0005)

100 Chapter 7 - Other Significant Audits and Investigations/OIG Hotline
Evaluation of HUD’s Information Technology Services Contracts

HUD OIG audited HUD’s management and contractors’ performance of the HUD information technology 

services (HITS) contracts. OIG reviewed (1) the services provided by the contractors based on HUD’s 

core functional business needs, (2) the levels of contractor performance as outlined in the contracts, (3) 

HUD’s management of the HITS contracts, and (4) compliance with applicable Federal requirements. 

(Audit Report: 2011-DP-0001)

Evaluation of ACORN Associates, Inc.

HUD OIG audited ACORN Associates, Inc., in New Orleans, LA, regarding its use of its FY 2004 and 

2005 Lead Elimination Action Program grant funds to determine whether Associates expended program 

funds in accordance with HUD’s requirements.

Associates inappropriately expended more than $3.2 million from its FY 2004 and 2005 grants for the 

elimination of lead poisoning in its housing program. It paid program funds of more than $3 million to 

affiliate and nonaffiliate organizations without properly procuring their services and did not include the funds 

in a HUD-approved grant budget. For its 2004 and 2005 grants, Associates failed to (1) properly procure 

the services of 19 affiliate and 20 nonaffiliate organizations through free and open competition, (2) retain 

records and files documenting the basis for contractor selection, (3) justify the lack of competition and 

basis for the award cost, (4) ensure that it obtained the lowest, most reasonable cost, and (5) enter into a 

contract with each organization that performed an activity to accomplish grant goals. Additionally, it did not 

have adequate supporting documentation for disbursements to 11 affiliate and 4 nonaffiliate organizations.

Also, program funds were not used for approved purposes. Associates used program funds for purposes 

not identified in its grant applications’ detailed budgets. The unapproved uses included campaign services, 

grant fundraising activities, lead-based paint remediation work, payroll taxes and workmen’s compensation 

insurance, communication services, and financial- and audit-related expenditures for services performed 

by affiliate and nonaffiliate organizations. Further, improper expenses for bank service fees were disbursed 

from program funds. The repayment of total questioned costs will not exceed the amount of the funds 

drawn from Associates’ 2004 and 2005 grants.

OIG recommended that HUD require Associates to (1) provide procurement documentation or 

reimburse HUD from non-Federal funds more than $3.2 million in program funds, (2) provide documentation 

or reimburse HUD from non-Federal funds for nearly $218,000 in unsupported disbursements, and (3) 

reimburse HUD from non-Federal funds nearly $1.2 million for the unapproved and improper use of 

program funds. OIG also recommended that HUD withdraw Associates’ ability to draw down the more 

than $750,000 in program funds remaining in its grants.

Further, OIG recommended that HUD pursue appropriate administrative sanctions against Associates’ 

officers for their failure to adequately manage the program grants. (Audit Report: 2011-CH-1002) 

Review of Reducing Improper Payments

HUD OIG conducted an annual limited scope review of HUD’s compliance with Presidential Executive 

Order (EO) 13520, Reducing Improper Payments. 

HUD was in general compliance with EO 13520 annual reporting requirements. Its ongoing efforts in 

mitigating the risks of improper payments in the rental housing assistance programs were progressing 

in a positive direction. However, some areas were identified, in which HUD could make enhancements 

related to disclosure and procedural issues and strengthen its improper payment reduction strategies. 

Chapter 7 - Other Significant Audits and Investigations/OIG Hotline 101
OIG recommended that HUD (1) consider full disclosure of the error estimates related to public housing 

through a footnote disclosure in the performance accountability report and accountable official report to 

comply with the EO and OMB Memorandum M-10-13 requirements, (2) test the operating effectiveness 

of monitoring controls related to Office of Public and Indian Housing and Office of Housing supplemental 

measures as part of HUD’s annual OMB Circular A-123 assessment reviews, (3) establish and implement 

supplemental measures to address the ongoing issue of tenant overdue recertifications in the public 

housing and public housing voucher programs, (4) perform the required analysis to document its basis for 

arriving at annual and quarterly improper payment reduction goals and to establish 3-year supplemental 

targets to fully comply with EO 13520 and OMB Memorandum M-10-13 requirements, and (5)strengthen 

the transparency of the estimation methodology by incorporating additional information or analysis into 

the HUD contractor quality control study’s final report. (Audit Report: 2011-FO-0004)

Review of HUD’s Hiring Process

HUD OIG audited HUD’s process for hiring employees in accordance with Office of Personnel 

Management (OPM) guidelines to determine whether HUD effectively hired employees in accordance 

with OPM guidelines for streamlining the Federal hiring process. 

HUD generally hired employees in accordance with OPM’s 80-day timeframe goal for the Federal 

hiring cycle. HUD had made improvements that reduced its average cycle time for hiring employees 

by approximately 37 percent between FY 2008 and 2010 and met the staffing needs of HUD’s four 

Homeownership Centers within the confines of authorized staffing levels. 

OIG made no recommendations. (Audit Report: 2011-PH-0001)

Review of HUD’s Efforts to Rehost Financial Applications

HUD OIG audited HUD’s efforts to rehost important financial applications from the Unisys mainframe 

computing platform to the UNIX open system platform. This audit was initiated based upon work 

performed during the FY 2009 review of information system security controls in support of the annual 

financial statements audit. 

OIG identified weaknesses in the planning and execution of the rehost project. Although HUD had 

processes and procedures in place for managing and monitoring IT system development projects, 

improvements were needed. Specifically, better upfront planning was needed for the Unisys rehost project.

OIG recommended that HUD ensure that its system development methodology is used in all IT 

development projects and verify contractor capabilities before the initiation of IT development projects. 

(Audit Report: 2011-DP-0002)

Review of HUD’s Controls Over Selected Configuration Management 

Activities

HUD OIG audited HUD’s controls over selected configuration management (CM) activities. This audit 

was based on work performed during OIG’s FY 2009 and 2010 reviews of information system security 

controls in support of the annual financial statement audits, during which weaknesses in security controls 

over selected CM activities were identified. 

HUD had processes and procedures for managing the configurations of systems in its computing 

environment. However, those procedures were not always followed. Specifically, (1) CM documentation 

102 Chapter 7 - Other Significant Audits and Investigations/OIG Hotline
for the eTravel and Integrated Disbursement and Information System Online systems was outdated, and 

(2) HUD did not consistently follow its own Configuration Change Management Board (CCMB) review 

and approval process.

OIG recommended that HUD (1) update its CM plans and ensure that contractor support staff reviews 

application CM documentation at least annually and updates the documentation when changes occur and 

(2) ensure that all products running on the HUD IT infrastructure are CCMB approved and that products 

selected for pilot testing are CCMB approved before conducting the tests. (Audit Report: 2011-DP-0006)

nnn

Chapter 7 - Other Significant Audits and Investigations/OIG Hotline 103
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’s execution

Key program 

results

$ 

recovered

Convictions/pleas/ 

pretrials

Investigations 30 $95,787 8

Cases 

closed

Admin/civil 

actions

4

10

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

The investigation shown below was conducted jointly with Federal, State, and local law enforcement 

agencies. 

James Dunn, the president of Lamp Stand Institute (Lamp Stand), was sentenced in U.S. District Court, 

Houston, TX, to 27 months incarceration and 3 years supervised release and ordered to pay an unnamed 

victim $46,519 in restitution for his earlier guilty plea to misuse of a government seal. Between November 

2008 and May 2009, Dunn created a fake HUD “notice of grant award” letter with a HUD seal and fraudulently 

used the bogus letter to swindle money and property from a number of victims. 

Correction to Previous Report

HUD OIG’s Semiannual Report to Congress, No. 55, HUD-2006-03-OIG, which covered the period 

October 1, 2005, to March 31, 2006, incorrectly indicated that Toulu Thao, a HUD housing specialist, was 

indicted in U.S. District Court, Eastern District of California, Fresno, CA, for allegedly receiving $125,000 

from organizations doing business with HUD and failing to disclose the income and business arrangements 

and/or business agreements on his OGE (Office of Government Ethics) Form 450. The indictment, in 

actuality, charged Thao with failing to report the receipt of a total of $12,700 in outside income and failing 

to report his outside position, employment, and/or business arrangement with an entity doing business 

with HUD. The charges relating to Thao’s alleged failure to disclose outside employment and/or business 

arrangements with an entity doing business with HUD were ultimately dropped because the entity at issue 

did not receive money from or do business with HUD.

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05

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

Inspections and Evaluations

The HUD OIG Office of Investigation’s Inspections and Evaluations activities are designed to promote 

economy, efficiency, and effectiveness in the administration of HUD programs; detect and deter fraud and 

abuse in HUD programs and operations; and ensure compliance with applicable laws and regulations. 

The office conducts inspections and evaluations using various study methods and evaluative techniques 

to provide timely information to improve policies, programs, and procedures.

HUD’s Departmental Enforcement Center’s Compliance Division, 

Evaluation of Suspension and Debarment Referrals

HUD OIG conducted an evaluation of HUD’s Departmental Enforcement Center (DEC), specifically 

the Compliance Division, to (1) determine whether DEC processed suspension and debarment referrals 

in a timely manner and (2) identify ways to improve case management for suspensions and debarments. 

Between October 1, 2006, and December 9, 2009, the Compliance Division received a total of 978 suspension 

and/or debarment referrals (cases) from HUD OIG, various HUD program offices, and the U.S. Department 

of Justice. 

A review of 62 cases disclosed that suspension and debarment referrals were not processed in a 

timely manner and Federal requirements for entry of suspended or debarred individuals or entities were 

not met. Delays in the processing of suspension and debarment actions and late entry of information on 

excluded individuals or entities into the Excluded Parties List System ultimately place HUD and other Federal 

agencies at an increased risk of awarding contracts, grants, and other subsidies to unethical, dishonest, 

and irresponsible parties. Further, DEC’s record-keeping system for suspensions and debarments needed 

improvement.

To improve the effectiveness of HUD’s administrative sanctions program, steps must be taken by DEC 

to ensure that suspension and debarment actions are processed consistently and in a timely manner. 

OIG recommended that DEC develop formalized written policies and procedures for the Compliance 

Division and departmentwide guidance. Also, a uniform record-keeping system that provides for a complete 

historical record of the suspension and debarment process should be established. 

nnn
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 seven full-time OIG employees, who take allegations of waste, fraud, abuse, 

or serious mismanagement in HUD or HUD-funded programs from HUD employees, contractors, and 

the public. The hotline also coordinates reviews with internal audit and investigative units or with HUD 

program offices.

During this reporting period, the hotline received and processed 8,177 complaints – 59 percent 

(4,856) received by telephone, 5 percent (464) by mail, and 35 percent (2,857) by e-mail. Every allegation 

determined to be related to the OIG mission is logged into a database and tracked.

Of the complaints received, 489 were related to the mission of OIG and were addressed as hotline cases. 

Hotline cases are referred to OIG’s Offices of Audit and Investigation or to HUD program offices for action 

and response. The following illustration shows the distribution of hotline case referrals by percentage.

Chart 7.1: Hotline cases opened by program area

Public and Indian housing, 62%

Multifamily housing, 12%

Community planning and 

development, 3%

OIG audit and investigation, 15%

Single-family housing, 4%

Other, 4%

The hotline closed 209 cases this reporting period. The closed hotline cases included 42 substantiated 

allegations. The substantiated allegations resulted in 19 administrative sanctions, including action 

taken against a tenant for failing to report all income and allowing unauthorized live-ins to reside in her 

HUD-subsidized residence. The Department also took 30 corrective actions that resulted in $48,202 in 

recoveries of losses and $799,973 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. 

106 Chapter 7 - Other Significant Audits and Investigations/OIG Hotline
Chart 7.2: Hotline dollar impact from program offices

$800,000

$700,000

$600,000

$500,000

$400,000

$300,000

$200,000

$100,000

$0

Public and Indian housing Multifamily housing

$758,501

$45,832 $41,472 $2,370

Funds put to better use Recoveries

nnn

Chapter 7 - Other Significant Audits and Investigations/OIG Hotline 107

Chapter 8 - Outreach Efforts
To foster cooperative, informative, and mutually beneficial relationships with agencies and organizations 

assisting the U.S. Department of Housing and Urban Development (HUD) in accomplishing its mission, the 

Office of Inspector General (OIG) participates in special outreach efforts. The outreach efforts described 

below complement routine coordination with Federal, State, and local law enforcement agencies; various 

congressional committees or subcommittees; and other OIGs. During outreach efforts, OIG personnel 

present information about HUD OIG’s role and function, provide audit and investigative results, and discuss 

desired goals and objectives. 

Single-Family Housing Programs

Deputy Assistant Inspector General for Audit (DAIGA) for Special Operations Joan Hobbs, Civil Fraud 

Division Director Kim Randall, Regional Inspector General for Audit (RIGA) Heath Wolfe, and Supervisory 

Forensic Auditor (SFA) Muhammad Akhtar met with the Chief of the Civil Division of the Northern District 

of Illinois, Eastern Division, in Chicago, IL. DAIGA Hobbs described HUD OIG’s new Civil Fraud Division 

and its pursuit of civil actions, particularly with regard to mortgage fraud. The group discussed current and 

potential cases and the recent focus on foreclosure fraud. The HUD OIG staff members expressed their 

plan to look for civil action potential with each criminal case and to continually look for opportunities to 

work cases as parallel proceedings.

nnn

Special Agent in Charge (SAC) Barry McLaughlin and RIGA Heath Wolfe provided an overview of HUD 

OIG’s Civil Fraud Division and described audit expectations, mortgage fraud and prevention methods, and 

current mortgage fraud trends at a Mainstreet Organization of Realtors meeting in Downers Grove, IL. 

Approximately 60 realtors attended or participated through a simulcast broadcast. 

nnn

SAC Breck Nowlin and RIGA Heath Wolfe provided an overview of HUD OIG’s investigative role and 

responsibilities and described the Office of Audit civil enforcement initiative, mortgage fraud, and OIG’s 

actions to address the foreclosure crisis at a meeting held in Columbus, OH, with personnel from the 

Ohio Attorney General’s Office. 

nnn

RIGA John Dvorak, SAC Cortez Richardson, Assistant Regional Inspector General for Audit (ARIGA) 

Mike Motulski, and Assistant Special Agents in Charge (ASAC) Gene Westland and Michael Wixted met 

in Concord, NH, with Attorney General Michael Delaney, his deputy Mike Finch, and Karen Gorham, 

an attorney for the Consumer Protection Bureau, to explain the role of HUD OIG, develop lines of 

communication, and provide information on the organizational structure and the functions of the Offices 

of Audit and Investigation. The discussion also included exchanging information regarding mortgage fraud 

efforts and the State’s role in the national investigation into “robo-signing.” The challenges faced were 

discussed, including the significant influx of HUD Federal Housing Administration (FHA) mortgages and 

identification of fraud. Other items discussed included HUD’s Neighborhood Watch, recent relevant State 

legislation regarding licensing of mortgage companies within the State, and the State’s willingness to share 

information on FHA mortgage fraud when identified. Additionally, HUD OIG audit and investigation results 

and experience in pursuing fraud were shared. The presentation provided the opportunity to explore the 

possibility of leveraging resources and sharing information between organizations.

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110 Chapter 8 - Outreach Efforts
SAC Barry McLaughlin and ARIGA Kelly Anderson provided an overview of HUD OIG’s Office of Audit 

and Civil Fraud Division and described mortgage fraud trends, enforcement efforts, and investor protection 

tips at a Chicago Area Real Estate Investors Association meeting in Glendale Heights, IL. Approximately 

50 association members attended. 

nnn

RIGA John Dvorak, SAC Cortez Richardson, and ASACs Gene Westland and Michael Wixted met with 

attorneys Scott Schaefer and Jean Hillary from the Attorney General’s Office’s Consumer Protection 

Division in Boston, MA, to explain the role of HUD OIG, develop lines of communication, and provide 

information on OIG’s organizational structure and the functions of the Offices of Audit and Investigation. 

The discussion included exchanging information regarding mortgage fraud efforts and the State’s role in 

the national investigation into robo-signing. Other information was exchanged, including how to identify 

FHA mortgages, relevant State legislation regarding a restriction on the sharing of mortgage information 

received though the State’s civil investigative disclosure process, the State’s willingness to identify areas 

in which OIG could assist in pursuing foreclosure fraud, and the possibility of establishing an agreement 

to work together and share information including potential foreclosure fraud involving FHA mortgages. 

The presentation provided the opportunity to explore the possibility of leveraging resources and sharing 

information between organizations.

nnn

SAC Barry McLaughlin provided an overview of HUD programs and HUD OIG and described mortgage 

fraud and current fraud schemes at a meeting in Chicago, IL, sponsored by the Federal Reserve Bank. 

Approximately 25 Federal law enforcement and regulatory personnel attended. 

nnn

RIGA John Dvorak, SAC Cortez Richardson, ASAC Gene Westland, and ARIGA Kristen Ekmalian met 

in Montpelier, VT, with Deputy Attorney General Janet Murane and Assistant Attorneys General Wendy 

Morgan and Elliot Burg to explain the role of HUD OIG, develop lines of communication, and provide 

information on OIG’s organizational structure and the functions of the Offices of Audit and Investigation. 

The meeting included an exchange of information regarding mortgage fraud efforts and the State’s role in 

the national investigation into robo-signing. Other information exchanged included the State’s interest in 

pursuing servicers’ misconduct in unfair foreclosure practices. The meeting provided the opportunity to 

explore the possibility of leveraging resources and sharing information between organizations.

nnn

SAC Kenneth Taylor provided an overview of foreclosure scams and prevention options and described 

the HUD OIG hotline and the reporting of fraud, waste, and abuse as a panelist at a foreclosure prevention 

event in Riverdale, MD, sponsored by the Coalition for Homeowner Preservation. Approximately 25 

homeowners facing foreclosure attended. 

nnn

RIGA Heath Wolfe, SAC Nowlin, and ARIGA Ronald Farrell met with the U.S. Attorney for the Southern 

District of Ohio, the Chiefs of the Civil and Criminal Divisions, and the First Assistant U.S. Attorney in 

Columbus, OH. RIGA Wolfe described HUD OIG’s new Civil Fraud Division and its pursuit of civil actions, 

particularly with regard to mortgage fraud. The group discussed current and potential cases and the recent 

focus on foreclosure fraud. RIGA Wolfe, SAC Nowlin, and ARIGA Farrell discussed their plan to look for 

Chapter 8 - Outreach Efforts 111
civil action potential with each criminal case and to continually look for opportunities to work cases as 

parallel proceedings.

nnn

SAC Wayne North, ASAC Jim Siwek, and Special Agent (SA) Dana Papesh provided an overview of 

HUD OIG and described mortgage fraud trends, “red flag” indicators, and OIG’s role in mortgage fraud 

investigations at an Eastside Regional Escrow Association meeting in Bellevue, WA. Approximately 100 

escrow agents attended. 

nnn

RIGA John Dvorak, SAC Cortez Richardson, ASAC Gene Westland, and ARIGA Mike Motulski met in 

Augusta, ME, with Assistant Attorney General Linda Conti, head of the Consumer Protection Division, 

to explain the role of HUD OIG, develop lines of communication, and provide information on OIG’s 

organizational structure and the functions of the Offices of Audit and Investigation. Discussion included 

the State’s mortgage fraud efforts and role in the national investigation into robo-signing. Other information 

exchanged included OIG’s interest in pursuing servicers’ misconduct in unfair foreclosure practices and 

the possibility of the State’s providing OIG information on any FHA loans that are being foreclosed. The 

meeting provided the opportunity to explore the possibility of leveraging resources for both criminal and 

civil actions.

nnn

Civil Fraud Division Director Kim Randall met with two assistant United States attorneys (AUSA) from 

the Western District of Missouri, Civil Division, in Kansas City, MO. The attorneys specialize in affirmative 

civil enforcement actions (primarily using the False Claims Act), civil mortgage fraud, and financial litigation 

cases. Director Randall described HUD OIG’s new Civil Fraud Division and its pursuit of civil actions against 

those that commit fraud against HUD programs, particularly with regard to mortgage fraud. The attorneys 

offered their services and expressed their desire to work with HUD OIG on mortgage fraud cases.

nnn

Civil Fraud Division Director Kim Randall and SFA Fran Ranzie met in New York City, NY, with the Civil 

Division of the U.S. Attorney’s Office for the Southern District of New York. Director Randall described 

HUD OIG’s new Civil Fraud Division and how HUD OIG expects to work civil actions with HUD and the 

U.S. Department of Justice. The U.S. Attorney’s Office described its new unit that will handle HUD civil 

fraud cases and expressed its desire to focus on mortgage fraud cases. The group also discussed several 

ongoing civil cases and the best protocols to employ to bring about effective coordination and outcomes.

nnn

ARIGA Ed Schmidt, SAC Wayne North, and ASAC Jim Siwek met with several officials from the State 

of Washington Attorney General’s offices located in Seattle, WA. The parties explained their respective 

interests and positions relating to the current foreclosure crisis. SAC North and ARIGA Schmidt offered to 

work with the Washington Attorney General’s office on FHA foreclosure issues.

nnn

ASACs Brad Geary and Ray Espinosa provided presentations, entitled “Introduction to Mortgage Fraud,” 

“The Mortgage Process,” and “Mortgage Fraud Schemes,” during a mortgage fraud training seminar in 

112 Chapter 8 - Outreach Efforts
Milwaukee, WI, sponsored by the U.S. Attorney’s Office. Approximately 80 Federal, State, and local law 

enforcement personnel and banking institution representatives attended. 

nnn

ASAC James Luu provided an overview of HUD OIG and the FHA program at a mortgage fraud conference 

sponsored by the American Conference Institute in San Francisco, CA. Approximately 50 financial institution 

representatives, attorneys, and law enforcement personnel attended.

nnn

ASAC Brad Geary and Federal Bureau of Investigation (FBI) intelligence analyst Christa Greco provided 

an overview of FHA and HUD Home Equity Conversion Mortgage (HECM) programs and described property 

flipping, deed thefts, and current trends in short sales at a CoreLogic meeting in Chicago, IL. Approximately 

50 financial institution representatives attended. 

nnn

ASAC Lisa Gore and SA James Fincher provided an overview of HUD and HUD OIG’s mission and 

goals, described the functions of the Offices of Investigation and Audit, and discussed HUD program and 

mortgage fraud and the Real Estate Settlement Procedures Act (RESPA) at an ethics seminar sponsored 

by the Tennessee Land Title Association in Nashville, TN. Approximately 40 title attorneys and closing 

agents attended.

nnn

ASACs Brad Geary and Ray Espinosa provided an overview of HUD OIG and described various home 

buying and rental assistance strategies for about 100 individuals attending a National Consumer Protection 

event in Hammond, IN. 

nnn

ASAC Edwin Bonano and SA Scott Tanchak provided an overview of HUD OIG’s mission and goals and 

described FHA and HECM programs and fraud schemes at a Collateral Risk Network convention in Fort 

Lauderdale, FL. Approximately 40 appraisers and mortgage professionals attended.

nnn

ASAC Brad Geary provided a presentation, entitled “The Role of Bankruptcy in Single Family Fraud 

Prosecutions,” and described bankruptcy fraud schemes, Federal statutes, and “red flag” fraud indicators at 

a meeting held in Chicago, IL, for members of the Association of Government Accountants. Approximately 

25 individuals attended. 

nnn

ARIGA Tracey Vargas and ASAC Jim Siwek met in Boise, ID, with staff from the Idaho Attorney General’s 

Office. The discussion focused on the recent foreclosure crisis and specifically addressed the issue of robosigning. It was agreed that the offices would keep each other informed with respect to work performed 

in Idaho dealing with FHA foreclosures.

nnn

Chapter 8 - Outreach Efforts 113
ASAC Brad Geary and HUD Quality Assurance Division Field Supervisor Charles Martinez provided an 

overview of FHA mortgage fraud, “red flag” indicators, and mortgage fraud schemes and described the 

HUD Quality Assurance Division and quality assurance review expectations for Harris Bank employees 

meeting in Rolling Meadows, IL. Twelve employees responsible for the management, servicing, and 

quality control of the bank’s FHA-insured mortgage portfolio attended. 

nnn

Senior Auditor Chad Gagon and Auditor Stacey Streeter gave a presentation to approximately 300 

realtors at the 2010 Las Vegas Realtor Summit in Las Vegas, NV. Auditor Streeter discussed the new HUD 

OIG office in the Las Vegas area and HUD OIG’s mission, roles, and responsibilities. Senior Auditor Gagon 

discussed the results of recent single-family audits and recent HUD OIG mortgage fraud initiatives. The 

event panel consisted of Freddie Mac’s chief economist, a certified appraiser, loan officers, a legal analyst, 

HUD officials, and HUD OIG. 

nnn

SA Steve Tsourkas provided an overview of HUD OIG’s mission, goals, and priorities and described the 

functions of the Office of Investigation and current mortgage fraud trends at meetings held in Cleveland, 

Columbus, and Cincinnati, OH, for members of the Ohio Land Title Association. Collectively, about 400 

individuals attended. 

nnn

SAs Christina Scaringi and Elizabeth Peralta provided an overview of the FHA program and mortgage 

fraud, described mortgage fraud schemes, and illustrated the process for detecting and preventing fraud 

and selecting and conducting investigations at a New York Association of Mortgage Brokers conference 

in Melville, NY. Approximately 120 mortgage industry representatives attended. 

nnn

SAs Carissa Barnes and David Smith provided an overview of HUD OIG’s mission and role in FHA 

mortgage fraud and described mortgage fraud detection and prevention strategies at an “Instructor 

Development” workshop during a Utah Real Estate Mortgage and Appraiser Education seminar in Salt 

Lake City, UT. Approximately 90 individuals attended. 

nnn

SA Heather Yannello and AUSA Kathleen Lynch provided an overview of mortgage and foreclosure 

fraud and described the Federal Government’s response to recent mortgage and foreclosure scams at a 

Western New York Mortgage Bankers and Credit Association training conference in Amherst, NY. More than 

60 appraisers, attorneys, bank compliance personnel, and financial institution security officers attended. 

nnn

SA Gregory Williams provided an overview of HUD OIG’s role and responsibilities involving mortgage 

fraud investigations and described “red flag” fraud indicators at a meeting in Holyoke, MA, for Western 

Massachusetts Banking and Credit Union Compliance Association members. Approximately 60 financial 

institution representatives and Federal and State law enforcement personnel attended.

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114 Chapter 8 - Outreach Efforts
SA Heather Yannello, AUSA Kathleen Lynch, and U.S. Postal Inspector Shelly Carosella provided an 

overview of the Federal response to mortgage and foreclosure scams at a consumer protection “Financial 

Literacy” seminar in Buffalo, NY, sponsored by the United Way. Approximately 65 individuals attended.

nnn

SA José Laureano provided an overview of HUD OIG’s mission; provided a presentation describing 

FHA mortgage fraud and criminal, civil, and administrative consequences; and illustrated mortgage 

fraud detection and prevention techniques at a Mortgage Bankers Association seminar in San Juan, PR. 

Approximately 60 banking industry personnel attended. 

nnn

SAs Patrick Fox and Matt Nutt provided an overview of HUD OIG’s mission, goals, and priorities and 

described the functions of the Office of Investigation and current mortgage fraud trends for members 

of the International Association of Special Investigative Units meeting in Livonia, MI. Approximately 60 

individuals attended.

nnn

SA Stacie Wilson, AUSA Kathleen Lynch, and other members of the Western New York Mortgage Fraud 

Task Force provided an overview of the FHA program, mortgage fraud, and mortgage fraud schemes and 

illustrated the process of detecting and preventing fraud and selecting and conducting investigations for 

HSBC Mortgage Bank employees meeting in Buffalo, NY. Approximately 50 employees attended.

nnn

SA Heather Yannello and AUSA Kathleen Lynch provided an overview of mortgage and foreclosure 

fraud and described the Federal Government’s response to recent mortgage and foreclosure scams at 

an Appraisal Institute of America training conference in Ellicottville, NY. More than 45 residential and 

commercial real estate appraisers and property assessors attended. 

nnn

SAs James Fincher and Harvey Martin provided an overview of HUD and HUD OIG’s mission and 

goals, described the functions of the Offices of Investigation and Audit, and discussed HUD program and 

mortgage fraud and RESPA at an ethics seminar in Nashville, TN, sponsored by the Tennessee Land Title 

Association. Approximately 30 title attorneys and closing agents attended.

nnn

SA Ronnyne Bannister provided an overview of HUD OIG’s mission and role in FHA-insured mortgage 

fraud investigations at a mortgage fraud training seminar in Upper Marlboro, MD. At the conclusion, a 

question and answer forum was held for 20 Federal, State, and local prosecutors and regulatory personnel 

in attendance. 

nnn

SA Heather Yannello and AUSA Kathleen Lynch provided an overview of bankruptcy fraud and described 

the HUD HECM program and recent scams involving mortgages and foreclosures at a U.S. Bankruptcy 

Trustee meeting in Buffalo, NY. Approximately 18 bankruptcy trustees attended.

nnn

Chapter 8 - Outreach Efforts 115
SAs Amy Durso and Eric Kolb provided an overview of HUD OIG’s mission and role in FHA mortgage 

fraud and described mortgage fraud detection and prevention strategies for Missouri Secretary of State 

Securities Division personnel meeting in Kansas City, MO. Approximately 10 individuals attended.

Public Housing and Rental Assistance Programs

SAC Herschell Harvell, Jr., provided an overview of HUD OIG’s mission and described the Federal 

oversight of public housing funds and the role and responsibilities of housing authority commissioners 

relating to funding, contracts, and procurement procedures at a meeting in Milledgeville, GA. Approximately 

18 Milledgeville public housing commissioners, local law enforcement personnel, and others attended. 

nnn

RIGA Tanya Schulze and SAC James Todak spoke at the 2010 National Association of Housing and 

Redevelopment Officials (NAHRO) conference in Reno, NV. RIGA Schulze and SAC Todak were part of 

a panel session entitled “Accountability in Administering the Housing Choice Voucher Program.” RIGA 

Schulze spoke about the OIG organization and mission, recent Section 8 audits, the American Recovery and 

Reinvestment Act of 2009 (ARRA), and civil fraud priorities. SAC Todak gave an overview of the investigative 

priorities and prevention and detection of fraud in administering Section 8 program funds. The session 

had about 75 participants from various housing authorities across the country. After the panelists spoke, 

the session was opened up to a question and answer period.

nnn

ASAC Wyatt Achord, ARIGA Tracey Carney, and SA Aimee Peralta provided an overview of HUD OIG’s 

mission and role at a Louisiana Housing Council meeting in New Orleans, LA. Approximately 80 public 

housing executive directors, board members, and others attended. 

nnn

ARIGA Kelly Anderson provided a presentation to approximately 40 employees of the Housing Authority 

of Cook County in Chicago, IL. ARIGA Anderson explained the makeup of HUD OIG, its authority in 

conducting audits, and the audit process. 

nnn

ASAC Gene Westerlind, HUD Office of Public and Indian Housing Deputy Director Robert Cweika, and 

HUD Associate Regional Counsel Jack Brandwein provided an ethics presentation at a Massachusetts 

NAHRO meeting in Norwood, MA. At the conclusion, a question and answer forum was held for 

approximately 20 housing officials in attendance.

nnn

ASACs Brad Geary and Ray Espinosa described current trends and the interwoven aspects of rental 

assistance and mortgage fraud for about 40 landlords attending a Chicago Alternative Policing Strategy 

meeting in Chicago, IL. 

nnn

SA Anthony Troeger provided a presentation, entitled “Fighting Fraud, Waste, Abuse, and Mismanagement 

in Housing Authority Procurement,” at two procurement training seminars in Raleigh and Asheville, NC. At 

116 Chapter 8 - Outreach Efforts
the conclusion, OIG hotline posters and tenant fraud leaflets were given to 120 housing authority executive 

directors who attended these HUD-sponsored events. 

nnn

SA Jeffrey Lowery provided an overview of public housing authority fraud and conflicts of interest at 

a Council of Housing Redevelopment and Codes Officials Commissioner’s conference in Myrtle Beach, 

SC. Approximately 100 executive directors and board members from North and South Carolina housing 

authorities attended.

nnn

SA Rafael Galindo described multifamily rental assistance fraud relating to tenant criminal histories 

at a community meeting held at the Haverstock Hills Apartments, a HUD-subsidized multifamily housing 

development in Houston, TX. More than 30 county government leaders, faith-based religious organization 

representatives, and nonprofit and school officials attended. 

nnn

SAs Robert Petrole and Lisa Carling provided an overview of HUD OIG’s mission and role in HUD rental 

assistance programs, described current trends in rental assistance fraud investigations, and illustrated fraud 

detection methods at a fraud awareness training seminar in Cambridge, MD, sponsored by the Maryland 

Association of Housing and Redevelopment Agencies. Approximately 30 executive directors and housing 

specialists attended. 

nnn

SAs Trevor Wood and Timothy Lishner provided an overview of HUD OIG’s mission and role and 

described methods to prevent, detect, and report rental assistance fraud at a multifamily housing manager’s 

meeting in Aurora, CO, sponsored by the Aurora Housing Authority. Approximately 20 multifamily housing 

managers and others attended.

nnn

SA Gregory Williams provided an overview of HUD OIG’s mission, role, and priorities and described 

methods to prevent, detect, and report fraud at a Worcester Housing Authority public safety meeting 

in Worcester, MA. Approximately 20 housing authority officials, law enforcement personnel, and local 

citizens attended. 

nnn

SAs Michael Weinstein and Robert Petrole provided an overview of HUD OIG’s mission and role in HUD 

housing programs, described current trends in rental assistance fraud investigations, and illustrated fraud 

detection methods at a Baltimore County Sex Offenders Containment meeting in Towson, MD. Twelve 

State and local government officials attended. 

nnn

SAs Neil McMullen and Jennifer Landon provided an overview of HUD OIG, described current rental 

assistance fraud schemes, and provided avenues for detecting rental assistance fraud for personnel from 

Chapter 8 - Outreach Efforts 117
Irvine Company, a HUD multifamily management contractor in Irvine, CA. Approximately 10 managers 

attended. 

nnn

SAs Vicky Vazquez and Michael Granatstein provided an overview of HUD OIG’s mission, goals, and 

priorities; explained the function of the Office of Investigation; and described a number of OIG investigations 

at a meeting in Manhattan, NY, held for staff members from Reliant Realty, a HUD multifamily management 

contractor. At the conclusion, a question and answer forum was held for 10 employees in attendance. 

Community Planning and Development

SAC Breck Nowlin and RIGA Heath Wolfe provided an overview of the Offices of Investigation and Audit; 

described investigative priorities and the audit process and functions; described the HUD Neighborhood 

Stabilization Program (NSP), HOME Investment Partnerships Program (HOME), and Homelessness 

Prevention and Rapid Re-Housing Program (HPRP); presented information relating to the False Claims and 

Program Fraud Civil Remedies Acts; and illustrated OIG’s zero tolerance stance, oversight of HUD funding 

in ARRA, and grantee and contractor fraud within State and local community development programs at a 

National Association for County Community and Economic Development conference in Ann Arbor, MI. 

More than 25 individuals attended.

nnn

SAC Phyllis Robinson and ASAC Michael White provided an overview of HUD OIG initiatives and 

accomplishments and described OIG’s role and responsibilities involving Office of Community Planning 

and Development (CPD) investigations during a meeting for area CPD administrators in Fort Worth, TX. 

Approximately 30 CPD administrators and HUD personnel attended. 

nnn

ASAC Wyatt Achord and ARIGA Tracey Carney provided an overview of HUD OIG’s mission and role 

at a “Grant Writing and Capacity Building” training seminar in New Orleans, LA, sponsored by HUD. 

Approximately 150 potential grant recipients and Federal, State, and local government representatives 

attended. 

nnn

ASAC Brad Geary and ARIGA Brent Bowen provided an overview of HUD OIG’s Offices of Investigation 

and Audit; described the False Claims and Program Fraud Civil Remedies Acts; and explained documentation 

requirements, file maintenance, and the OIG referral process for grantees and subgrantees attending a Cook 

County Bureau of Community Development’s Community Development Block Grant (CDBG) agreement 

workshop in Chicago, IL. More than 75 individuals attended.

nnn

ASAC Edwin Bonano provided an overview of HUD OIG’s mission and goals and described previous 

HUD OIG investigations at a meeting in Pompano Beach, FL. Approximately 35 Pompano Beach City 

commissioners and other community leaders attended. 

nnn

118 Chapter 8 - Outreach Efforts
ASAC Robert Jones provided an overview of HUD OIG’s mission, goals, and priorities; explained the 

functions of the Offices of Audit and Investigation; and described OIG initiatives relating to HUD programs, 

HUD funding in ARRA, and the Disaster Housing Assistance and NSP programs at a Coalition for the Homeless 

meeting in Houston, TX. Approximately 12 representatives attended. 

 nnn

SAs Michael Weinstein and Lori DiCriscio provided an overview of HUD OIG’s mission, presented a 

CPD fraud awareness briefing, and described the resources available for grantees and subgrantees at a 

CDBG application workshop in Baltimore, MD, sponsored by the Maryland Department of Housing and 

Community Development. Approximately 85 individuals attended. 

nnn

SAs Jessica Thompson and Alexander Rosania provided an overview of HUD’s HPRP and described 

program fraud vulnerabilities at a meeting held at the Rhode Island Office of Housing and Community 

Development in Warwick, RI. At the conclusion, a question and answer forum was held for approximately 

30 State and city employees in attendance. 

nnn

Auditors Roleen Milton and Dana Young gave a presentation to the New Mexico Coalition to End 

Homelessness meeting hosted by HUD CPD at the Albuquerque, NM, field office. Attendees included 

representatives from the Coalition and nine different providers. The presentation covered OIG’s mission 

and goals, the new Albuquerque Office of Audit, and typical audit issues and problems in this program area.

nnn

SA Victoria Marquez provided an overview of HUD OIG’s mission and priorities at a HUD-sponsored 

HPRP seminar in San Antonio, TX. Approximately 85 grantees and subgrantees attended. 

American Recovery and Reinvestment Act

RIGA Heath Wolfe and SAC Breck Nowlin made presentations at the National Association for County 

& Community Economic Development annual conference in Ypsilanti, MI. RIGA Wolfe presented 

information on the functions of the Office of Audit; the audit process; NSP, HOME, and HPRP; the False 

Claims and Program Fraud Civil Remedies Acts; and OIG’s oversight of HUD’s ARRA funding. SAC Nowlin’s 

presentation provided an overview of the Office of Investigation; investigative priorities with a focus on 

corruption within the administration of State and local community development programs; and fraud by 

grantees, subgrantees, and contractors. SAC Nowlin and RIGA Wolfe also emphasized the zero tolerance 

approach that is being taken by HUD OIG concerning fraud related to HUD’s ARRA programs. There were 

more than 25 individuals in attendance.

nnn

RIGA Heath Wolfe and ASAC Ray Espinosa provided an overview of the functions of the Offices of Audit 

and Investigation; described the audit process, investigative priorities, the HUD HOME and NSP programs, 

and the False Claims and Program Fraud Civil Remedies Acts; and illustrated OIG’s oversight in relation 

to HUD ARRA funding, corruption within State and local community development programs, and grantee 

and contractor fraud at a Community Development conference in Indianapolis, IN, sponsored by HUD. 

Approximately 45 State and local grantees attended. 

nnn

Chapter 8 - Outreach Efforts 119
RIGA Heath Wolfe made presentations to more than 50 individuals at the Michigan Housing Directors 

Association’s fall conference on Mackinac Island, MI. He discussed the Public Housing Capital Fund 

program being funded by ARRA plus ARRA accountability and reporting requirements. His presentation 

covered the audit process, common findings in public housing agency nonprofit development activities 

and HUD’s Section 8 Housing Choice Voucher and Project-Based Voucher programs, and the Office of 

Audit’s affirmative civil enforcement initiative. 

nnn

ARIGA Brent Bowen and SAC Breck Nowlin provided an overview of the roles and responsibilities of the 

HUD OIG Offices of Investigation and Audit and ARRA programs and described “red flag” fraud indicators, 

the audit process, common audit findings in community planning and development programs, and the 

False Claims and Program Fraud Civil Remedies Acts at the Michigan Community Development Association 

technical assistance conference in Lansing, MI. More than 100 individuals attended.

nnn

ARIGA Vince Mussetter and SA Vicky Lawson made a presentation in the Los Angeles, CA, HUD office 

with the assistance of ARIGA James Brady as part of HUD’s NSP 3 training to about 20 Southern California 

grantees. They informed the participants of OIG’s mission and structure, recent ARRA review efforts, and 

continuing focus on the area. 

Law Enforcement Outreach

SAC Rene Febles and ASAC Steven Perez provided an overview of HUD OIG’s jurisdiction and investigative 

scope and described potential victims impacted by HUD program and mortgage fraud at a financial crimes 

and money laundering symposium in New York City, NY, sponsored by the Manhattan District Attorney’s 

Office and the NY/NJ High Intensity Financial Crimes task force. Approximately 250 financial and law 

enforcement personnel attended. 

nnn

SAC Phyllis Robinson provided an overview of HUD OIG’s mission, goals, and priorities and described 

OIG initiatives relating to HUD programs and HUD funding in ARRA at a regional public corruption working 

group meeting in Albuquerque, NM, sponsored by the FBI. Approximately 40 Federal, State, and local 

law enforcement personnel and others attended.

nnn

SAC Breck Nowlin provided an overview of OIG’s Office of Investigation and described investigative 

priorities relating to FHA and HECM program fraud, public corruption, and the planned oversight of 

HUD ARRA funding for members of the Michigan Chapter of the International Association of Financial 

Crimes Investigators meeting in Livonia, MI. Approximately 150 financial institution representatives and 

investigators and law enforcement personnel attended. 

nnn

SAC Wayne North provided an overview of HUD OIG’s mission and described recent financial fraud 

prosecutions at a meeting sponsored by the U.S. Attorney’s Office in Portland, OR. Approximately 60 

financial institution representatives and law enforcement personnel attended. 

nnn

120 Chapter 8 - Outreach Efforts
ASAC Brad Geary provided a presentation, entitled “How to Get Your Case Prosecuted,” described 

prosecutor presentations and trial preparations, and illustrated current mortgage fraud schemes and the 

changes to the FHA and single-family mortgage industry at an Association of Certified Fraud Examiners 

meeting in Chicago, IL. Approximately 50 law enforcement, State regulatory, and bank security personnel 

attended. 

nnn

ASAC Michael Catinella provided a presentation, entitled “Bankruptcy Fraud – An Agents Perspective,” at a 

bankruptcy fraud meeting held at the U.S. Attorney’s Office in Detroit, MI. Approximately 60 representatives 

from the U.S. Trustee office, the U.S. Attorney’s office, and Federal law enforcement agencies attended. 

nnn

ASACs Brad Geary and Manny Colin provided a presentation, entitled “The Latest Trends in Mortgage 

Fraud,” and described the FHA program and mortgage fraud schemes and trends at a meeting in Chicago, 

IL, sponsored by the Chicago Police Department. Approximately 25 State and local law enforcement 

personnel and financial institution investigators attended. 

nnn

SA Julien Kubesh provided an overview of the HUD HECM program and described fraudulent patterns 

and schemes at an International Association of Financial Crimes Investigators meeting in Minneapolis, 

MN. Approximately 75 financial institution investigators and law enforcement personnel attended. 

nnn

SAs Audra Carrington and Ira Long provided an overview of the FHA, HECM, and HUD real estate-owned 

programs and described the FHA-insured mortgage loan process at a Mortgage Fraud Investigations seminar 

in San Diego, CA. Approximately 35 Federal and State law enforcement personnel and real estate and 

mortgage professionals attended. 

Other Outreach

Michael Beard, Director, Technical Oversight and Planning Division, presented the HUD OIG view of 

suspensions and debarments at the Council of Inspectors General Suspension and Debarments Seminar 

in Washington, DC. More than 350 participants from various Inspector General and program enforcement 

offices were present at the seminar. Director Beard spoke on OIG’s Operation Watchdog results and new 

Civil Fraud Division and the debarments resulting from Region 9’s First Source financial audit.

nnn

RIGA John Buck, Auditor James Carrington, and Administrative Officer Deborah Laforet participated in 

the Pennsylvania Attorney General’s Consumer Fair in Philadelphia, PA, along with officials from HUD’s 

Philadelphia office. The Consumer Fair is part of National Consumer Protection Week, designated by the 

Federal Trade Commission. The Consumer Fair provided an opportunity for citizens to obtain valuable 

information regarding HUD’s and OIG’s services and promoted awareness and prevention of fraudulent 

schemes.

nnn

Chapter 8 - Outreach Efforts 121
Field Technical Support Division Director Cliff Cole participated as a guest speaker at the joint Association 

of Government Accountants Peninsula Chapter and American Society of Military Comptrollers Spring 2011 

Professional Development Conference in Chesapeake, VA. The conference was attended by more than 

180 financial managers and auditing and accounting professionals from a number of Federal and local 

government entities and military organizations in and around the eastern Virginia area. Director Cole 

provided an overview of HUD OIG’s organizational structure and described how OIG’s progressive use 

of computer-assisted analytics played a critical role in the history of OIG’s data-mining and organizationchanging journey that ultimately brought it to the forefront of the inspector general community as one of 

the leading Federal agencies in innovative audit and investigative data analyses.

nnn

ASAC Robert Jones provided an overview of HUD OIG’s mission, goals, and priorities; discussed the 

Office of Audit robo-signing project; and described investigative initiatives relating to HUD programs, HUD 

funding in ARRA, and the Disaster Housing Assistance and NSP programs at a meeting held with the Better 

Business Bureau Consumer Protection Group in Houston, TX. Approximately 15 individuals attended. 

nnn

ASAC Wyatt Achord and SAs Jonathan Harrison, Kevin Leonhardt, and Jerry Rogers served as group 

leaders at a “Badges for Baseball” camp in New Orleans, LA. Approximately 200 students and volunteers 

attended. 

nnn

The Seattle, WA, Office of Audit gave a presentation to a group of recently hired HUD Region X staff. 

The presentation was made in conjunction with the Region X HUD’s World training program in which new 

HUD employees are taken to each of the Region’s HUD program offices for an overview of the programs’ 

organization and functions. ARIGA Ed Schmidt and Auditor James Byers gave a presentation on the 

mission and organization of HUD OIG, along with a description of the work performed by the Office of 

Audit. Attending the presentation were 13 new Region X employees.

nnn

ARIGA Tracey Vargas participated in a teleconference with the Idaho State Auditor’s Office. The parties 

discussed HUD funding and the types of audits each agency performed. They agreed that if anything 

came to either party’s attention with respect to the State of Idaho’s HUD funds, they would coordinate 

with each other.

nnn

Senior Auditor Christy Thomas gave a presentation to a business class at the University of Kansas in 

Lawrence, KS. She discussed her career path with HUD OIG and described a day in the life of a government 

auditor to about 150 college freshman.

nnn

122 Chapter 8 - Outreach Efforts
Chapter 9 - Legislation, Regulation, 

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

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

6-month reporting period, OIG has committed approximately 485 hours to reviewing 139 issuances. The 

draft directives consisted of 11 notices of funding availability, 71 mortgagee letters or notices, and 62 other 

directives. OIG provided comments on 45 percent of these draft directives. This chapter highlights some 

of OIG’s comments for this reporting period.

Enacted Legislation

Due to the collapse of the subprime mortgage market and resulting increase in foreclosures, Congress 

and the President approved the Housing and Economic Recovery Act of 2008 (HERA) and the American 

Recovery and Reinvestment Act of 2009 (ARRA). These legislations contained significant new funding 

and programs for the U.S. Department of Housing and Urban Development (HUD). Specifically, the 

Neighborhood Stabilization Program (NSP) was created under HERA and provided an initial $3.92 billion in 

funding to State and local governments for the redevelopment of abandoned and foreclosed-upon homes 

and residential properties. ARRA provided an additional $13.61 billion to existing programs, including an 

additional $2 billion for NSP. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 

provided the third NSP funding totaling $1 billion. 

On May 20, 2009, the President signed the Helping Families Save Their Homes Act of 2009. This new 

law (1) provided the Federal Housing Administration (FHA) with additional loss mitigation authority to 

assist FHA borrowers under the Making Home Affordable program (MHA) and (2) expanded the authority 

to use FHA loss mitigation to assist defaulted home buyers in avoiding foreclosure to include those facing 

imminent default. The President also signed the Dodd-Frank Wall Street Reform and Consumer Protection 

Act, which established an office of housing counseling within HUD to boost home ownership and rental 

housing counseling and provided for foreclosure legal assistance. Specifically, the Act authorized a HUDadministered program for making grants to provide foreclosure legal assistance to low- and moderateincome homeowners and tenants related to home ownership preservation, home foreclosure prevention, 

and tenancy associated with home foreclosure. In addition, the Act provided $1 billion to HUD to implement 

the Emergency Homeowners’ Loan Program, which is currently under development and will be managed 

by HUD’s Office of Housing Counseling. 

On September 21, 2010, FHA introduced a new modified version of its home equity conversion mortgage 

(HECM) product through Mortgagee Letter 2010-34. Specifically, FHA designed HECM Saver as a second 

reverse mortgage option for the purpose of lowering upfront loan closing costs for homeowners who want 

to borrow a smaller amount than would be available with a HECM standard loan. This option is available 

for all HECM case numbers assigned on or after October 4, 2010. 

OIG is performing audits of recipients of HERA and ARRA funding. Based on risks identified in HUD’s 

front-end risk assessments, OIG has targeted program areas and will propose regulatory changes, as 

necessary, to control risks in these new program areas. In addition, OIG is conducting foreclosure reviews 

of FHA-insured properties.

OIG has also participated in a number of meetings with HUD officials regarding these additional funds 

and the programmatic risks of the activities. OIG continues to express concerns about the capacity of 

many of the grantees and has expressed its concerns in review comments to clearance items and directly 

to HUD officials.

The Federal Housing Commissioner continued to propose a number of risk management initiatives 

related to HUD’s single-family programs and has started the process of updating its multifamily program 

requirements. As part of the issuances reviewed, OIG provided comments on the preliminary rules. Many of 

124 Chapter 9 - Legislation, Regulation, and Other Directives
Chapter 9 - Legislation, Regulation, and Other Directives 125

the proposed changes required rule making. On April 20, 2010, HUD issued the final rule on Federal Housing 

Administration: Continuation of FHA Reform; Strengthening Risk Management Through Responsible FHAApproved Lenders [Docket No. FR 5356–F–02]. This final rule increases the net worth requirements for 

FHA-approved lenders, provides for the elimination of FHA approval of loan correspondents, and updates 

FHA regulations to incorporate criteria specified in the Helping Families Save Their Homes Act of 2009 

designed to ensure that only entities of integrity are involved in the origination of FHA-insured loans. 

Notices and Policy Issuances

On December 22, 2010, HUD issued a notice of information collection for its multifamily rental project 

closing documents. This is the final step before issuing the closing documents in final. This has been a 

process that began with industry talks in 1996. It brings added protection to all parties as well as consistency 

with modern real estate practice and mortgage lending laws and procedures. 

nnn

Chapter 10 - Audit Resolution
In the audit resolution process, Office of Inspector General (OIG) and U.S. Department of Housing and 

Urban Development (HUD) management agree upon the needed actions and timeframes for resolving 

audit recommendations. Through this process, OIG hopes to achieve measurable improvements in 

HUD programs and operations. The overall responsibility for ensuring that the agreed-upon changes are 

implemented rests with HUD managers. This chapter describes significant management decisions with 

which OIG disagrees. It also contains a status report on HUD’s implementation of the Federal Financial 

Management Improvement Act of 1996 (FFMIA). In addition to this chapter on audit resolution, see appendix 

3, table B, “Significant Audit Reports Described in Previous Semiannual Reports in Which Final Action Had 

Not Been Completed as of March 31, 2011.”

Audit Reports Issued Before Start of Period With No Management 

Decision as of March 31, 2011 

HUD Lacked Adequate Controls To Ensure The Timely Commitment and Expenditure of 

HOME Funds, Issue Date: September 28, 2009. 

HUD OIG audited HUD’s HOME Investment Partnerships Program (HOME). OIG recommended that the 

HUD Office of Community Planning and Development (CPD) establish and implement controls to ensure 

that field offices require participating jurisdictions to close out future HOME activities within a timeframe 

that will permit reallocation and use of the funds for eligible activities in time to avoid losing them to 

recapture by the United States Treasury under provisions of Public Law 101-510. OIG also recommended 

that CPD obtain a formal legal opinion from HUD’s Office of General Counsel regarding whether

• HUD’s cumulative technique for assessing compliance with commitment deadlines is consistent 

with and an allowable alternative to the 24-month commitment required by 42 U.S.C. (United States 

Code) § 12748 and

• HUD’s first-in, first-out (FIFO) method for assessing compliance with HOME expenditure requirements 

is consistent with and an allowable alternative to the 8-year recapture deadline pursuant to Public 

Law 101-510, codified at 31 U.S.C. § 1552.

During the reporting period, OIG rejected two management decisions proposed by CPD to address 

the recommendation. The proposed management decisions did not provide for the establishment and 

implementation of all of the controls that are needed to address the recommendation.

CPD obtained a legal opinion from the Assistant General Counsel for Community Development on 

March 5, 2010. The legal opinion supports the Department’s use of the cumulative approach and FIFO 

accounting method. Based on this legal opinion, CPD does not plan to implement OIG’s recommendation 

to discontinue use of the FIFO method to account for the commitment and expenditure of HOME funds 

or the cumulative technique for assessing deadline compliance.

OIG requested reconsideration of the opinion. On June 10, 2010, HUD’s General Counsel and Chief 

Financial Officer provided additional information regarding HUD’s recapture requirements of the HOME 

program statute and CPD’s use of cumulative accounting and the FIFO method for financial management.

HUD explained that CPD’s use of cumulative accounting in its financial management represents a 

reasonable interpretation of the statutory duties imposed on the HUD Secretary and addresses the complex 

administrative challenges inherent in managing the HOME Investment Trust. HUD also explained that 

obligations and expenditures under the HOME program are accounted for on a FIFO basis by fund type 

instead of by fiscal year and that CPD, in enforcing the obligation and expenditure requirements, looks to 

total cumulative obligations and expenditures instead of accounting for them by fiscal year. Based on the 

128 Chapter 10 - Audit Resolution
Chief Financial Officer’s financial analysis, given the origin of these requirements and the fundamental 

nature of this block grant program, HUD believed that the FIFO accounting method for obligations and 

expenditures by fund type was consistent with Federal accounting requirements and had no objection 

to the total cumulative obligations and expenditures methods used for assessing compliance with the 

24-month commitment and 5-year expenditure requirements.

OIG continues to disagree that CPD’s use of the FIFO method for recognizing commitments and 

expenditures that participating jurisdictions make against their HOME appropriations or CPD’s cumulative 

accounting is consistent with the legislation under 42 U.S.C. § 12748, requiring recapture of funds not 

committed by statutory deadline dates. These methods of accounting also potentially violate the closure 

of accounts under 31 U.S.C. § 1552. 

Another issue raised by CPD’s accounting methods is whether HUD’s FIFO accounting method 

complies with Federal accounting requirements for maintaining the U.S. Standard General Ledger and 

general appropriations law. The accounting issues require review for compliance with Federal accounting 

standards and appropriation law. Since OIG’s last semiannual report date, in conjunction with its annual 

audit of HUD’s financial statements, OIG has discussed the FIFO accounting method with the Government 

Accountability Office (GAO). OIG will make a formal request for GAO to determine whether the FIFO 

accounting method violates Federal standards for appropriation accounting. (Audit Report: 2009-AT-0001)

The Federal Housing Administration Delayed Sending Violation Notices to Lenders That 

Did Not Meet Recertification Requirements, Issue Date: August 6, 2010. 

OIG audited the Federal Housing Administration (FHA) Title II single-family lender renewal process. 

The objective of the audit was to determine whether FHA ensured that lenders submitted recertification 

requirements in a timely manner. OIG found that FHA did not ensure that lenders submitted recertification 

forms, annual fees, and/or audited financial statements in a timely manner. The Lender Approval and 

Recertification Division (Division) did not promptly issue notices of violation to lenders that did not submit 

required annual recertification documentation and/or fees when due. The notices of violation give the 

lenders 30 days to cure the violation before referring them to the Mortgagee Review Board (MRB) for 

sanctions. Instead, the Division sent notices of deficiency to the noncompliant lenders and did not send 

out notices of violation until 7 months after the March 31, 2009, recertification due date. The Division’s 

delay in issuing notices of violation on behalf of the MRB allowed the noncompliant lenders to originate 

FHA loans for an additional 7 months. During this period, these noncompliant lenders originated 7,107 

FHA-insured loans worth nearly $1.4 billion and had an average default rate that was almost twice as high 

as the national rate.

OIG recommended that the Office of Lender Activities and Program Compliance require the Division to 

revise the recertification process to discontinue issuing notices of deficiency and issue notices of violation 

promptly for all lenders that do not submit or attempt to submit one or more of the required items by the 

due date (recommendation 1A).

The Office of Single Family Housing (Housing) agreed that the delay in issuing the notices of violation 

was unacceptable but disagreed with OIG’s recommendation. Housing explained that delays in the issuance 

of notices of violation were the result of exponential growth in the number of FHA-approved lenders and 

significant staffing shortages, combined with insufficient recertification processing procedures. Housing 

stated that it viewed the delays as a separate matter to the use of notices of deficiency and that a number 

of operational and policy changes had been made to avert backlogs in the future.

OIG disagrees. Although FHA has taken measures to streamline the process, these measures have 

not significantly affected the time to issue the notices of violation. As of the August 6, 2010, audit report 

Chapter 10 - Audit Resolution 129
date, the Division had not sent out notices of violation for December 2009 lenders that did not submit 

timely recertification items. Instead, the Division sent out notices of deficiency for these lenders in June 

of 2010 even though these notices are not legally required for due process. Timely enforcement of the 

recertification requirements is absolutely necessary to protect the interests of the insurance fund. Mortgagee 

Letter 2009-01 stresses this point. It states, “The Department considers the timely annual renewal of FHA 

approval requirements to be critical to its ability to adequately monitor and assess the condition of the 

mortgagee and determine if the mortgagee poses a risk to the Department, its programs or the public.” 

Notices of deficiency serve only to delay completion of this process and, therefore, should be discontinued 

for mortgagees that do not comply with the timeliness requirement.

On March 9, 2011, OIG referred this matter to the Assistant Secretary for Housing – Federal Housing 

Commissioner. (Audit Report: 2010-KC-0002)

Significantly Revised Management Decisions

Section 5(a)(11) of the Inspector General Act, as amended, requires that OIG report information 

concerning the reasons for any significant revised management decisions made during the reporting 

period. During the current reporting period, there were significant revised management decisions on 

two audits.

Somerset Investors Corporation – Melville, NY, Issue Date: March 26, 2010

As part of the OIG goal to improve the integrity of the single-family insurance programs, HUD OIG audited 

the underwriting by Somerset Investors Corporation of FHA-insured refinanced loans. The objective was 

to determine whether Somerset originated FHA-insured refinanced loans in accordance with HUD/FHA 

requirements and conducted quality control reviews that complied with HUD/FHA requirements. 

Somerset did not always originate refinanced loans in accordance with HUD/FHA requirements. 

Specifically, 8 of 11 loans reviewed exhibited underwriting deficiencies significant enough to warrant 

indemnification, such as inadequate evaluation of previous mortgage payment history, excessive qualifying 

ratios without significant compensating factors to justify loan approval, and improper calculation of 

income. The remaining three loans disclosed other underwriting deficiencies that were not significant 

enough to request indemnification. In addition, six loans subject to Somerset’s quality control review 

evidenced underwriting deficiencies that warrant indemnification. Consequently, 14 mortgage loans 

with an outstanding principal balance of more than $4.6 million were approved, which presented an 

unnecessary risk to the FHA insurance fund. In addition, while Somerset’s written quality control plan 

complied with HUD/FHA requirements, the quality control reviews conducted did not comply with 

HUD’s and its own quality control requirements regarding sample size and reporting. Specifically, the 

completed quality control reviews did not include home equity conversion mortgages; did not always 

identify corrective actions, a timetable for completion, or planned follow-up activities; and did not report 

serious violations to HUD. Consequently, assurance was lessened that Somerset’s quality control process 

would identify and address underwriting problems in a timely manner and thus protect Somerset and 

FHA from unacceptable risk.

OIG recommended that HUD require Somerset to (1) indemnify HUD for potential estimated losses of 

nearly $2.8 million for 14 loans with significant underwriting deficiencies, (2) strengthen controls over its 

underwriting procedures to provide assurance that HUD/FHA requirements are met, and (3) implement 

procedures to ensure that quality control reviews comply with HUD/FHA requirements.

HUD agreed with the recommendations on June 24, 2010, and subsequently sought Somerset’s 

cooperation in implementing OIG’s recommendations. However, Somerset failed to respond to the 

130 Chapter 10 - Audit Resolution
requested planned actions and closed its home office. As a result, the MRB on October 28, 2010, issued a 

notice of permanent withdrawal of Somerset’s HUD/FHA lender approval status. Since Somerset did not 

appeal the decision, the action became final after a 30-day period. Consequently, HUD has exhausted all 

options to satisfy the recommendations. Therefore, HUD revised its management decision on January 

16, 2011, to reflect that the recommendations were not implemented and to not realize funds to be put to 

better use, and the audit was closed on January 16, 2011. (Audit Report: 2010-NY-1009)

The Owner of Ebony Lake Healthcare Center, Brownsville, Texas, Violated Its Regulatory 

Agreement with HUD - Brownsville, TX, Issue Date: November 25, 2008

OIG issued an audit report entitled “The Owner of Ebony Lake Healthcare Center, Brownsville, Texas, 

Violated Its Regulatory Agreement with HUD.” Among the issues reported was that although the regulatory 

agreements require project receipts to be deposited into an account in the project’s name, the former 

owner failed to do so. Instead, the former owner took funds that belonged to the project, resulting in 

unauthorized distributions. When the deposits were made, the project’s manager was also a principal of 

the former owner. Although the project became HUD insured in November 2000, in March and October 

of 2001, Medicaid and Medicare receipts of more than $140,000 were deposited into the former owner’s 

bank account rather than the project’s account. The current owner learned about the unauthorized 

distributions on or before September 20, 2004, but had not taken appropriate actions to recover the funds. 

OIG’s recommendation 2A of the report was that HUD require the owner to reimburse from non-Federal 

funds more than $140,000 to the project’s residual receipts account for the ineligible distribution. HUD 

agreed to endeavor to incorporate into a management improvement and operating plan, developed with 

the owner, a requirement that the owner deposit more than $140,000 from non-Federal funds into the 

project’s residual receipts account for the ineligible distribution.

At the time of the original management decision, the Office of Housing, Office of Insured Health Care 

Facilities, stated that the project was a single-asset entity with no revenues other than those generated by 

the facility and that the owner is a nonprofit organization, which asserted that it had no funds available to 

make the required deposit. In addition, according to the owner, the former owner of the property—the 

entity which received this distribution—filed for bankruptcy February 11, 2004. After report issuance, 

several other events occurred, including the death of two of the owners. Also, the remaining owners 

entered into a $500,000 civil money penalty settlement agreement with HUD for various regulatory 

violations, including items cited in this audit report and one of a sister project.

HUD submitted a revised management decision, stating that it would submit a memorandum to OIG 

for write-off concurrence and closure of the recommendation. OIG worked closely with HUD’s Office of 

General Council, Departmental Enforcement Center, and the HUD program office to resolve a number 

of recommendations in this report. HUD aggressively pursued resolution of the recommendations and 

concluded that further pursuit would not be beneficial. Thus, on February 18, 2011, OIG concurred 

with the revised management decision for recommendation 2A to write off more than $140,000. OIG is 

awaiting HUD’s memorandum. (Audit report 2009-FW-1002) 

Significant Management Decision With Which OIG Disagrees

HUD’s Community Development Block Grant Set-Aside for Colonias Was Not Used for Its 

Intended Purposes – Washington, DC, Issue Date: July 29, 2008

HUD OIG issued an audit entitled “HUD’s Community Development Block Grant Set-Aside Was 

Not Used for Its Intended Purposes.” Among the issues reported was that due to the lack of guidance, 

colonia set-aside funding was spent for parks, swimming pools, recreation centers, and public facility 

improvements. OIG recommended that CPD issue guidance or criteria that (1) better define a colonia, 

Chapter 10 - Audit Resolution 131
(2) require the States to support their colonia designations with objective criteria, and (3) require States 

to prioritize funding to colonias with the greatest need, thereby better assuring compliance with the 

Cranston-Gonzales National Affordable Housing Act. CPD agreed to issue guidance. 

Further, GAO issued its December 2009 report, “Rural Water Infrastructure – Improved Coordination 

and Funding Processes Could Enhance Federal Efforts to Meet Needs in the U. S.-Mexico Border Region” 

(GAO-10-126), which found that HUD has “not always ensured compliance with statutory requirements 

and regulations concerning the eligibility of applicants or projects or the prioritization of funds from 

programs targets at the border region.” GAO also “found that HUD has not developed guidance for 

determining what constitutes a colonia, has not made such determinations, and has not reviewed 

states’ determinations. Lacking guidance and direction from HUD, states have applied the requirements 

differently.”

OIG reported in its April 1, 2010, through September 30, 2010, Semiannual Report to Congress that 

it disagreed with CPD’s proposed guidance due to OIG’s disagreement with CPD’s interpretation of the 

statute implementing the colonia set-aside and CPD’s definition of a colonia. OIG also previously reported 

that it had referred the issue to the Deputy Secretary. In December 2010, the Deputy Secretary met with 

Acting Inspector General Stephens to discuss the issue. After this meeting, HUD’s Office of General 

Counsel issued a legal opinion in response to the referral and disagreement, dated December 16, 2010. 

In it, HUD’s General Counsel determined that CPD’s position was legally correct. 

On February 8, 2011, CPD issued Notice CPD-11-001 to provide guidelines for administering the State 

Community Development Block Grant colonia set-aside. The notice provided guidance, and regarding 

the criteria for a community to be considered a colonia, CPD stated, “In addition to being in existence 

before November 28, 1990, Section 916(e)(1)(C) requires a colonia to be ‘determined to be a colonia on 

the basis of objective criteria, including lack of potable water supply, lack of adequate sewage systems, 

and lack of decent, safe, and sanitary housing.’ This means that all three expressly named criteria be 

included in such list and that at least one of three be included in each instance.” 

As OIG disagrees that the statute allows CPD to define a colonia as lacking in just one of the criteria, 

such as only potable water; adequate sewage systems; or decent, safe, and sanitary housing, OIG noted 

its disagreement with the management decision but has closed the recommendations based on the 

Deputy Secretary’s agreement with the legal opinion and CPD. (Audit Report 2008-FW-0001) 

Federal Financial Management Improvement Act of 1996

In fiscal year (FY) 2010, HUD did not substantially comply with FFMIA. In this regard, HUD’s 

financial management systems did not substantially comply with Federal financial management system 

requirements.

During FY 2010, HUD made limited progress in bringing the financial management systems into 

compliance with FFMIA. HUD’s financial management systems continued to not meet current 

requirements. HUD’s systems were not operated in an integrated fashion and linked electronically 

to efficiently and effectively provide agencywide financial system support necessary to carry out the 

agency’s mission and support the agency’s financial management needs.

HUD’s financial systems, many of which were developed and implemented before the issue date of 

current standards, were not designed to provide the range of financial and performance data currently 

required. HUD is in the process of modernizing its financial management systems by developing an 

integrated financial management system. The modernization development, HUD’s Integrated Financial 

Improvement Project (HIFMIP), was launched in FY 2003 but has been plagued by delays. Originally 

132 Chapter 10 - Audit Resolution
planned for implementation in 2006, the contract for HIFMIP was awarded on September 23, 2010. The 

Office of Management and Budget (OMB) approved the 18-month base period of performance for the 

contract, which is expected to run through April 2012. Future option periods will require OMB approval.

FFMIA requires OIG to report in its Semiannual Reports to Congress instances and reasons when an 

agency has not met the intermediate target dates established in its mediation plan required by FFMIA. At 

the end of 2010, 4 of the 42 financial management systems were not in substantial compliance with FFMIA. 

These four systems are the HUD Procurement System (HPS), Small Purchase System (SPS), Integrated 

Disbursement and Information System (IDIS), and Facilities Integrated Resources Management System 

(FIRMS). The Department acquired a new application, HUD Integrated Acquisition Management System, 

to replace the HPS and SPS on September 30, 2010. As of November 15, 2010, HUD had not provided 

remediation plans for FIRMS. OIG determined that IDIS is not in substantial compliance with FFMIA. 

Although 38 individual systems had been certified as compliant with Federal financial management 

systems requirements, HUD had not performed independent reviews of all of its financial management 

systems in accordance with OMB Circular A-127. Collectively and in the aggregate, deficiencies continued 

to exist. 

In addition, OIG audit reports have disclosed that security of financial information was not provided in 

accordance with OMB Circular A-130, Management of Federal Information Resources, appendix III, and 

the Federal Information Security Management Act. 

nnn

Chapter 10 - Audit Resolution 133

Appendix 1 - Peer Review Reporting

135
Background

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law No. 111-203), Section 

989C, requires Inspectors General to report the latest peer review results in their semiannual reports to 

Congress. The purpose in doing so is to enhance transparency within the government. Both the Office of 

Audit and Office of Investigation are required to undergo a peer review of their individual organizations 

every 3 years. The purpose of the reviews is to ensure that the work completed by the respective 

organizations meets the applicable requirements and standards. The following is a summary and status 

of the latest round of peer reviews for both organizations. 

Office of Audit

Peer Review Conducted on HUD OIG

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

received a grade of pass (the highest rating) on the peer review report issued by the U.S. Treasury Inspector 

General for Tax Administration on September 22, 2009. There were no recommendations included in the 

System Review Report. The report stated: 

In our opinion, the system of quality control in effect for the year ended March 31, 2009, for the 

audit organization of the HUD OIG has been suitably designed and complied with to provide the 

HUD OIG with reasonable assurance of performing and reporting in conformity with applicable 

professional standards in all material respects. Federal audit organizations can receive a rating 

of pass, pass with deficiencies, or fail. The HUD OIG has received a peer review rating of pass. 

Peer Review Conducted by HUD OIG on USDA

The U.S. Department of Agriculture (USDA) OIG received a rating of pass on the peer review report issued 

by HUD OIG on September 30, 2009. The System Review Report contained no findings or recommendations. 

Office of Investigation

Peer Review Conducted on HUD OIG

The most recent peer review of the Office of Investigation was conducted in 2008 by the United States 

Postal Service’s Office of Inspector General. The results of the peer review found HUD OIG compliant 

(the highest rating) with the quality of standards established by the inspector general community and the 

attorney general guidelines.

nnn

136 Appendix 1 - Peer Review Reporting
Appendix 2 - Audit Reports Issued
Internal Reports

15 Audit Reports

Chief Financial Officer (4 Reports)

2011-DP-0003 HUD Did Not Fully Comply With the Requirements of OMB Circular A-127, 12/03/2010.

2011-DP-0004 Fiscal Year 2010 Review of Information Systems Controls in Support of the 

Financial Statements Audit, 01/14/2011.

2011-FO-0003 Additional Details to Supplement Our Report on HUD’s Fiscal Years 2010 and 2009 

Financial Statements, 11/15/2010. Better use: $753,500,000.

2011-FO-0004 Annual Evaluation of HUD’s Compliance With Presidential Executive Order 13520, 

Reducing Improper Payments, 12/07/2010.

Chief Information Officer (4 Reports)

2011-DP-0001 HUD Did Not Properly Manage HITS Contracts and Contractors To Fully Comply 

With Contract Requirements and Acquisition Regulations, 10/06/2010.

2011-DP-0002 Better Planning for the Unisys Rehost Project Was Needed, 11/19/2010.

2011-DP-0005 Although HUD Continued to Make Improvements to Its Entitywide Security 

Program, Challenges Remained in Its Efforts To Comply with Federal Information 

Security Requirements, 02/10/2011.

2011-DP-0006 HUD’s Controls Over Selected Configuration Management Activities Need 

Improvement, 03/24/2011.

Government National Mortgage Association (1 Report)

2011-FO-0001 Audit of Ginnie Mae’s Financial Statements for Fiscal Years 2010 and 2009, 

11/05/2010.

Housing (3 Reports)

2011-FO-0002 Audit of the FHA’s Financial Statements for Fiscal Years 2010 and 2009, 11/05/2010.

2011-HA-0001 HUD Did Not Adequately Plan the Procurement of the Management and Marketing 

Contracts, 11/09/2010.

2011-LA-0001 HUD Did Not Provide Adequate Oversight and Guidance During the Technical 

Review of the Retreat at Santa Rita Springs, 01/21/2011.

Office of Chief Human Capital Officer (1 Report)

2011-PH-0001 HUD Hired Employees in Accordance With Office of Personnel Management 

Guidelines for Streamlining the Federal Hiring Process, 01/25/2011.

Public and Indian Housing (2 Reports)

2011-CH-0001 HUD Can Improve Its Oversight of Public Housing Agencies’ Section 8 ProjectBased Voucher Programs, 11/16/2010.

2011-NY-0001 HUD’s Oversight of Public Housing Authorities’ Energy Performance Contracting in 

New York and New Jersey Had Not been Sufficient, but HUD Had Taken 

Appropriate Steps To Improve Controls, 02/01/2011.

nnn

138 Appendix 2 - Audit Reports Issued
External Reports

63 Audit Reports

Community Planning and Development (26 Reports)

2011-AO-1001 The State of Louisiana Generally Ensured That Disbursements to Small Rental 

Property Program Participants Were Eligible and Supported, Baton Rouge, 

LA, 10/28/2010.

2011-AO-1002 The State of Louisiana Did Not Always Ensure That Disbursements Under Its First 

Time Homebuyer Program Complied With Federal Regulations and Program 

Requirements, Baton Rouge, LA, 10/29/2010. Questioned: $2,817,530; 

Unsupported: $2,549,115.

2011-AT-1004 Mecklenburg County Mismanaged Its Shelter Plus Care Program, Charlotte, NC, 

01/21/2011. Questioned: $466,175; Unsupported: $441,100.

2011-BO-1007 The Community Builders Is Expected To Expend Funding Within the Deadline and 

Meet Its Goals for the NSP 2, Boston, MA, 03/21/2011.

2011-CH-1001 The City of Flint Lacked Adequate Controls Over Its HOME Program Regarding 

Community Housing Development Organizations’ Home-Buyer Projects, 

Subrecipients’ Activities, and Reporting Accomplishments in HUD’s System, Flint, 

MI, 10/13/2010. Questioned: $2,236,722; Unsupported: $64,761; Better use: $646,298.

2011-CH-1003 The City of Cleveland Lacked Adequate Controls Over Its HOME Investment 

Partnerships Program and American Dream Downpayment Initiative-Funded 

Afford-A-Home Program, Cleveland, OH, 12/27/2010. Questioned: $810,000; 

Unsupported: $760,000; Better use: $90,000.

2011-CH-1004 The State of Indiana’s Administrator Lacked Adequate Controls Over the State’s 

HOME Investment Partnerships Program and American Dream Downpayment 

Initiative-Funded First Home/PLUS Program, Indianapolis, IN, 01/31/2011. 

Questioned: $942,071; Unsupported: $803,445; Better use: $123,768.

2011-FW-1006 The Texas Department of Housing and Community Affairs Generally Ensured 

That Its Program Management Firm Complied With Requirements, Austin, 

TX, 01/26/2011. Questioned: $71,691.

2011-KC-1001 The City of East St. Louis Did Not Properly Manage Housing Rehabilitation 

Contracts Funded by the CDBG Program, East St. Louis, IL, 02/09/2011. 

Questioned: $127,780; Better use: $400,000.

2011-LA-1001 The City of Los Angeles Housing Department Did Not Always Effectively 

Administer Its Homelessness Prevention and Rapid Re-Housing Program, 

Los Angeles, CA, 10/25/2010.

2011-LA-1004 The Community Development Programs Center of Nevada Did Not Fully Comply 

With NSP Requirements, Las Vegas, NV, 12/21/2010. Questioned: $10,831; 

Unsupported: $10,831.

2011-LA-1005 The City and County of San Francisco Did Not Always Ensure That Homelessness 

Prevention and Rapid Re-Housing Funds Were Used as Required, San Francisco, 

CA, 12/21/2010. Questioned: $63,008; Unsupported: $54,188.

2011-LA-1006 The City of Mesa Needs To Improve Its Procedures for Administering Its NSP 

Grant, Mesa, AZ, 02/08/2011. Questioned: $22,344; Better use: $328,207.

Appendix 2 - Audit Reports Issued 139
2011-LA-1007 Allegations of Lutheran Social Services of Northern California’s Misuse of 

Homelessness Prevention and Rapid Re-Housing Program Funds Were 

Unsubstantiated, Sacramento, CA, 02/08/2011.

2011-NY-1002 The City of Bayonne Did Not Adequately Administer Its Economic Development 

Program, Bayonne, NJ, 11/12/2010. Questioned: $645,601; Better use: $196,292.

2011-NY-1004 The City of Binghamton Did Not Always Administer Its Section 108 Loan Program 

in Accordance With HUD Requirements, Binghamton, NY, 12/21/2010. 

Questioned: $3,926,961; Unsupported: $2,403,393; Better use: $81,561.

2011-NY-1005 The Lower Manhattan Development Corporation CDBG Disaster Recovery 

Assistance Funds, New York, NY, 02/07/2011.

2011-PH-1001 The Virginia Housing Development Authority Generally Administered Its Tax Credit 

Assistance Program Funded Under the Recovery Act in Accordance With 

Applicable Requirements, Richmond, VA, 10/25/2010.

2011-PH-1002 The City of Scranton Did Not Administer Its CDBG Program in Accordance With 

HUD Requirements, Scranton, PA, 11/08/2010. Questioned: $11,735,924; 

Unsupported: $11,735,924.

2011-PH-1003 The Pennsylvania Housing Finance Agency Generally Administered Its Tax Credit 

Assistance Program Funded Under the Recovery Act in Accordance With 

Applicable Requirements, Harrisburg, PA, 11/08/2010. Questioned: $287,526; 

Unsupported: $151,936.

2011-PH-1005 The District of Columbia Did Not Administer Its HOME Program in Accordance 

With Federal Requirements, Washington, DC, 12/23/2010. Questioned: $8,174,880; 

Unsupported: $6,479,685; Better use: $1,884,526.

2011-PH-1006 The City of Pittsburgh Can Improve Its Administration of Its CDBG Recovery 

Act Funds, Pittsburgh, PA, 01/31/2011. Questioned: $400,000; Unsupported: $400,000.

2011-PH-1008 The West Virginia Housing Development Fund Generally Administered Its Tax 

Credit Assistance Program Funded Under the Recovery Act in Accordance 

With Applicable Requirements, Charleston, WV, 03/21/2011.

2011-SE-1002 Washington State Housing Finance Commission Did not Always Disburse Its 

Tax Credit Assistance Program Funds in Accordance With Program Requirements, 

Seattle, WA, 01/19/2011. Questioned: $187,104; Unsupported: $17,068.

2011-SE-1003 Oregon Housing and Community Services Allowed a Developer To use NSP 

Funds for Ineligible Purposes, Salem, OR, 03/01/2011. Questioned: $5,000.

2011-SE-1004 Oregon Housing and Community Services Generally Complied With NSP 

2 Requirements, Salem, OR, 03/28/2011.

General Counsel (1 Report)

2011-PH-1009 Deutsche Bank Berkshire Mortgage, Inc., Acquired a $45.6 Million Loan That Was 

Not Properly Underwritten in Accordance With HUD’s Multifamily Accelerated 

Processing Program, Bethesda, MD, 03/22/2011. Questioned: $29,774,713.

Housing (10 Reports)

2011-AT-1001 Nationwide Home Loans Did Not Follow HUD Requirements in Approving FHA 

Loans and Implementing Its Quality Control Program, Miami, FL, 10/25/2010. 

Better use: $5,186,994.

140 Appendix 2 - Audit Reports Issued
2011-BO-1004 The Neighborhood Assistance Corporation of America Generally Administered 

Its HUD Grants Used for Housing Counseling Activities in Accordance With HUD 

Requirements, Jamaica Plain, MA, 02/16/2011.

2011-BO-1005 Semper Home Loans, Inc., Needs To Improve Its Quality Control Process for 

Loan Origination and Updating of Mortgage Records, Providence, RI, 03/02/2011. 

Questioned: $169,000; Better use: $179,400.

2011-DE-1001 Citizen Complaint Against BIONIC Real Estate Services, LLC, Regarding 

Its Management of a HUD Section 236-Insured Multifamily Property Cannot 

Be Supported, St. Joseph, MO, 11/08/2010.

2011-FW-1002 Gold Financial Services, Inc., Did Not Follow HUD/FHA Requirements in 

Underwriting Two Loans and Originated a Third in Violation of Its Own Internal 

Controls, San Antonio, TX, 10/25/2010. Questioned: $71,259; Better use: $86,885.

2011-FW-1003 WR Starkey Mortgage, LLP, Did Not Follow HUD Underwriting Requirements for 

13 of 14 Loans Reviewed, Plano, TX, 12/17/2010. Questioned: $360,032; Better 

use: $543,482.

2011-LA-1003 Naomi Gardens Did Not Comply With HUD Procurement and Waiting List 

Requirements, Arcadia, CA, 11/24/2010.

2011-NY-1006 Financial Management and Procurement Controls at Westbeth Artists Houses 

Did Not Always Comply With Regulations, New York, NY, 03/10/2011. Questioned: 

$377,516; Unsupported: $332,836.

2011-PH-1004 NFM, Inc., Did Not Fully Implement Its Quality Control Plan in Accordance With 

HUD Requirements, Linthicum, MD, 11/10/2010.

2011-SE-1001 Alaska Housing Finance Corporation’s Management and Occupancy Reviews 

Were Not Always as Comprehensive as Required for a Section 8 PerformanceBased Contract Administrator, Anchorage, AK, 12/17/2010.

Lead Hazard Control (1 Report)

2011-CH-1002 ACORN Associates, Inc., Materially Failed To use Its Lead Elimination 

Action Program Grant Funds Appropriately, New Orleans, LA, 11/08/2010. 

Questioned: $3,247,078; Unsupported: $2,047,163; Better use: $752,842.

Public and Indian Housing (20 Reports)

2011-AO-1003 The Housing Authority of East Baton Rouge Parish Generally Ensured That It Met 

HUD and the Recovery Act Requirements but Incurred an Ineligible Expenditure, 

Baton Rouge, LA, 01/04/2011.

2011-AT-1002 The East Point Housing Authority Made Excessive Housing Assistance Payments 

for a Zero-Income Tenant and Its Units Did Not Meet Housing Quality Standards, 

East Point, GA, 11/22/2010. Questioned: $38,447.

2011-AT-1003 The Housing Authority, City of Wilson, Mismanaged Its Section 8 Program, Wilson, 

NC, 01/14/2011. Questioned: $124,346; Unsupported: $14,568.

2011-BO-1001 The Cambridge Housing Authority Generally Administered Its Public Housing 

Capital Fund Stimulus (Formula) Recovery Act Funded Grant in Accordance With 

Applicable Requirements, Cambridge, MA, 11/02/2010.

2011-BO-1002 Brockton Housing Authority Needs To Improve Controls over its Interprogram 

Fund Transactions and Housing Choice Voucher Program Procurements, 

Brockton, MA, 12/13/2010. Questioned: $1,146,168; Unsupported: $1,146,168.

Appendix 2 - Audit Reports Issued 141
2011-BO-1003 The Housing Authority of the City of New Haven Did Not Support Cost 

Reasonableness for More Than $1.4 Million or Properly Obligate $60,000 

of Its Capital Fund Stimulus Recovery Act Grant, New Haven, CT, 

12/17/2010. Questioned: $1,498,948; Unsupported: $1,438,948.

2011-BO-1006 The New Bedford Housing Authority Generally Administered Its Public Housing 

Capital Fund Stimulus Formula and Competitive Grants (Recovery Act Funded) in 

Accordance With Applicable Requirements, New Bedford, MA, 03/03/2011.

2011-CH-1005 The Housing Authority of the County of Cook Needs To Improve Its Controls 

Over Its Administration of Section 8 Housing Assistance Payments to Its Nonprofit 

Units, Chicago, IL, 02/07/2011. Questioned: $35,193; Better use: $10,688.

2011-CH-1006 The DuPage Housing Authority Inappropriately Administered Its Section 8 Housing 

Choice Voucher Program, Wheaton, IL, 03/23/2011. Questioned: $5,532,347; 

Unsupported: $400,250.

2011-FW-1001 The Housing Authority of the City of Shreveport Mismanaged Its Recovery 

Act Funds by Entering into Imprudent Contracts to Meet the Obligation Deadline, 

Shreveport, LA, 10/14/2010. Questioned: $1,147,670.

2011-FW-1004 The West Memphis Housing Authority Generally Administered Its Recovery Act 

Funding in Compliance with Requirements, West Memphis, AR, 01/05/2011. 

Questioned: $23,412.

2011-FW-1005 The Housing Authority of the City of Port Arthur Mismanaged Its Recovery Act 

Funding, Port Arthur, TX, 01/25/2011. Questioned: $725,546.

2011-KC-1002 The East St. Louis Housing Authority Drew Capital Funds for Unsupported and 

Ineligible Expenses, East St. Louis, IL, 03/01/2011. Questioned: $171,687; 

Unsupported: $90,534.

2011-LA-1002 The Housing Authority of the City of Los Angeles Generally Had Capacity; 

However, It Needs To Improve Controls Over Its Administration of Its Capital Fund 

Grant Awarded Under The Recovery Act Program, Los Angeles, CA, 11/04/2010. 

Questioned: $369,259; Unsupported: $369,259.

2011-LA-1008 The Hawthorne Housing Authority Failed To Maintain an Adequate Financial 

Management System, Hawthorne, CA, 03/28/2011. Questioned: $1,488,455; Better 

use: $450,000.

2011-NY-1001 The Jersey City Housing Authority Had Administration Weaknesses in Its Capital 

Fund Programs, Jersey City, NJ, 10/19/2010. Questioned: $5,636,567; Unsupported: 

$5,583,115; Better use: $1,479,147.

2011-NY-1003 The Irvington Housing Authority Did Not Administer Its Capital Fund Programs in 

Accordance With HUD Regulations, Irvington, NJ, 11/24/2010. Questioned: 

$2,631,523; Unsupported: $2,422,132; Better use: $60,621.

2011-NY-1007 The Jersey City Housing Authority Had Financial Control Weaknesses in Its 

Recovery Act Funded Public Housing Capital Fund Program, Jersey City, 

NJ, 03/11/2011. Questioned: $18,574.

2011-NY-1008 The Jersey City Housing Authority Did Not Always Obligate or Disburse 

Replacement Housing Factor Capital Fund Grants in a Timely Manner, Jersey City, 

NJ, 03/18/2011. Questioned: $3,118,327.

142 Appendix 2 - Audit Reports Issued
2011-PH-1007 The Philadelphia Housing Authority Did Not Comply With Several Significant HUD 

Requirements and Failed To Support Payments for Outside Legal Services, 

Philadelphia, PA, 03/10/2011. Questioned: $4,496,120; Unsupported: $4,496,120.

Audit-Related Memorandums1

Community Planning and Development (2 Reports)

2011-AT-1801 The City of Columbus Demonstrated the Capacity to Obligate Its NSP-1 Funds, 

Columbus, GA, 11/24/2010.

2011-AT-1802 The Municipality of Arecibo Charged the HOME Program With Expenditures 

That Did Not Meet Program Objectives, Arecibo, PR, 01/27/2011. Questioned: 

$483,500; Unsupported: $431,489; Better use: $108,635.

Housing (3 Reports)

2011-CF-1801 An Underwriting Review of 15 FHA Lenders Demonstrated That HUD Missed 

Critical Opportunities To Recover Losses to the FHA Insurance Fund, Washington, 

DC, 03/02/2011.

2011-FW-1801 Review of Allied Home Mortgage Capital Corporation’s Fiscal Year 2009 Financial 

Statements, Houston, TX, 11/01/2010.

2011-LA-1801 Review of Compliance With the Real Estate Settlement Procedures Act by DHI 

Mortgage, LTD, and Its Closing Agents, Tucson & Scottsdale, AZ, 02/09/2011.

nnn

1

 The memorandum format is used to communicate the results of reviews not performed in accordance 

with generally accepted government auditing standards, to close out assignments with no findings and 

recommendations, to respond to requests for information, to report on the results of a survey, or to report the 

results of civil actions or settlements.

Appendix 2 - Audit Reports Issued 143

Appendix 3 - Tables
Table A

Audit reports issued before the start of the period

with no management decision at March 31, 2011

*Significant audit reports described in previous semiannual reports

Report number

and title

Reason for lack of

management decision

Issue date

* 2009-AT-0001 HUD Lacked Adequate 

Controls to Ensure the Timely 

Commitment and Expenditure of HOME 

funds

2010-KC-0002 FHA Delayed Sending 

Violation Notices to Lenders That Did 

Not Meet Recertification Requirements

See chapter 10, page 128.

See chapter 10, page 129.

09/28/2009

08/06/2010

146 Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

Table B

Significant audit reports on which final action had not been completed 

within 12 months after the date of the 

Inspector General’s report

2002-AT-1002

2002-KC-0002

2004-DP-0002

2005-AT-1004

2005-CH-1002

2005-NY-1005

2005-AT-1013

2006-CH-0001

2006-NY-1003

2006-SE-0002

2006-KC-1013

Housing Authority of the City of Tupelo, 

Housing Programs Operations, Tupelo, MS

Nationwide Survey of HUD’s Office of 

Housing Section 232 Nursing Home 

Program

Application Control Review of the Tenant 

Rental Assistance Certification System

Housing Authority of the City of Durham, 

NC

Washington Mutual Bank, Underwriting of 

FHA-Insured Loans, Downers Grove, IL

The Housing Authority of the City of 

Newark Bond Financing Activities and 

Section 8 Housing Choice Voucher 

Administrative Fee Reserves, Newark, NJ

Corporacion Para el Fomento Economico 

de la Ciudad Capital Did Not Administer 

Its Independent Capital Fund in 

Accordance with HUD Requirements, San 

Juan, PR

Real Estate Assessment Center’s Physical 

Condition Assessment Was Compromised

The Housing Authority of the City of 

Newark’s Controls Over Bond Financing 

Activities, Obtaining Supporting 

Documentation, and Legal Settlements 

Require Improvement, Newark, NJ

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

07/03/2002 

07/31/2002 

02/25/2004 

11/19/2004

11/29/2004

05/26/2005

09/15/2005

11/30/2005

02/14/2006

08/16/2006

08/30/2006

10/31/2002

11/22/2002

07/14/2004

03/15/2005

01/28/2005

09/23/2005

01/11/2006

01/10/2006

08/17/2006

03/30/2007

10/17/2006

07/01/2015

08/30/2011

12/31/2011

03/15/2015

07/31/2011

10/11/2011

Note 1

12/31/2011

09/13/2012

Note 1

11/30/2012

Appendix 3 - Tables 147
Report 

number

Report title Issue

date

Decision

date

Final

action

2006-DP-0802

2007-LA-0001

2007-DP-0003

2007-KC-0002

2007-KC-0003

2007-BO-0002

2007-SE-0001

2007-FW-1011

2007-AT-1010

2007-DP-0006

2007-AT-0001

2007-KC-0801

2007-CH-1017

Assessment of HUD’s Compliance with 

OMB Memorandum M-06-16, “Protection 

of Sensitive Agency Information”

Tax Credit Project Owners Are Allowed 

To Charge Higher Rents for Tenant-Based 

Section 8 Voucher Households than NonVoucher Households

Review of HUD’s Procurement Systems

HUD Can Improve Its Use of Residual 

Receipts To Reduce Housing Assistance 

Payments

HUD Did Not Recapture Excess Funds 

from Assigned Bond-Financed Projects

HUD Did Not Process Multifamily 

Accelerated Processing Applications 

within Established Processing Goals and 

the Multifamily Accelerated Processing 

Guide Is Outdated

HUD’s Oversight of the Section 8 ProjectBased Contract

Capmark Finance, Inc., Misrepresented 

Asbury Square Apartments’ Financial and 

Physical Condition When Underwriting 

the $9.098 Million Loan, Tulsa, OK

The Cathedral Foundation of Jacksonville 

Used More Than $2.65 Million in Project 

Funds for Questioned Costs, Jacksonville, 

FL

Review of HUD’s Personal Identity 

Verification and Privacy Program

HUD Needs To Improve Controls Over Its 

Contract Administration Processes

Lenders Submitted Title II Manufactured 

Housing Loans for Endorsement without 

the Required Foundation Certifications

The City of Cincinnati Lacked Adequate 

Controls over Its HOME Investment 

Partnerships Program, Cincinnati, OH

09/21/2006

11/08/2006

01/25/2007

01/29/2007 

04/30/2007

05/21/2007

06/07/2007

07/02/2007

08/14/2007

08/28/2007

09/19/2007

09/24/2007

09/30/2007

11/24/2006

07/05/2007

05/25/2007

01/29/2007

08/27/2007

09/07/2007

10/05/2007

10/23/2007

12/03/2007

12/20/2007

09/19/2007

03/11/2008

01/28/2008

09/30/2014

Note 2

10/15/2011

Note 2

Note 1

Note 2

Note 1

Note 2

Note 2

Note 1

Note 1

Note 2

09/30/2011

148 Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2008-LA-0001

2008-LA-1003

2008-AT-1004

2008-AT-1005

2008-NY-1003

2008-AO-1002

2008-KC-0002

2008-AO-0801

2008-AT-0003

2008-BO-0002

2008-CH-1010

The Los Angeles Multifamily Hub Did Not 

Properly Monitor Its Performance-Based 

Contract Administrator, Los Angeles 

LOMOD

Home for Life Foundation Did Not 

Properly Administer Its Supportive 

Housing Program Grants, Los Angeles, CA

The City of West Palm Beach Did Not 

Properly Administer Its CDBG Program, 

West Palm Beach, FL

The City of Fort Lauderdale Did Not 

Properly Administer Its CDBG Program, 

Fort Lauderdale, FL

The City of New York’s Department of 

Housing Preservation and Development 

Had Administrative Weaknesses in Its 

HOME Program, New York, NY

State of Louisiana, Road Home Program, 

Funded 418 Grants Coded Ineligible or 

Lacking an Eligibility Determination, 

Baton Rouge, LA

HUD Did Not Ensure That Housing 

Authorities Properly Administered the 

Community Service and Self-Sufficiency 

Requirement

Review of Duplication of Participants 

Benefits under HUD’s Katrina Disaster 

Housing Assistance Program and Disaster 

Voucher Program

HUD Lacked Adequate Controls over the 

Physical Condition of Section 8 Voucher 

Program Housing Stock

Maintenance of Effort Requirements Are 

Needed to Ensure Intended Use of CDBG 

Program Funds

The City of Cincinnati Lacked Adequate 

Controls over Its System Reporting and 

Rental Rehabilitation Projects for Its 

HOME Investment Partnerships Program, 

Cincinnati, OH

11/05/2007

12/18/2007

01/09/2008 

01/11/2008 

01/23/2008

01/30/2008

03/24/2008

03/28/2008

05/14/2008

05/21/2008

06/11/2008

03/03/2008

02/26/2008

05/05/2008

05/05/2008

05/21/2008

05/12/2008

07/22/2008

08/01/2008

09/10/2008

10/02/2008

10/09/2008

Note 1

04/01/2013

05/01/2012

05/01/2012

Note 1

Note 1

10/01/2011

Note 1

09/30/2012

Note 1

07/13/2011

Appendix 3 - Tables 149
Report 

number

Report title Issue

date

Decision

date

Final

action

2008-DP-0004

2008-LA-1012

2008-AO-1005

2008-CH-1014

2009-CH-1001

2009-FO-0002

2009-FO-0003

2009-FW-1002

2009-DP-0003

2009-AO-0002

2009-NY-1008

Review of Selected FHA Major 

Applications’ Information Security 

Controls

The Housing Authority of the City of 

Calexico Did Not Comply with Public 

Housing Program Rules and Regulations, 

Calexico, CA

State of Louisiana, Road Home Program, 

Did Not Ensure That All Additional 

Compensation Grant Applicants Were 

Eligible, Baton Rouge, LA

The City of Cincinnati Did Not Adequately 

Manage Its HOME Investment Partnerships 

Program, Cincinnati, OH

New Phoenix Assistance Center 

Substantially Failed to Manage Its 

Supportive Housing Program Grant, 

Chicago, IL

Audit of the FHA’s Financial Statements 

for Fiscal Years 2008 and 2007

Additional Details to Supplement Our 

Report on HUD’s Fiscal Years 2008 and 

2007 Financial Statements

The Owner of Ebony Lake Healthcare 

Center Violated Its Regulatory Agreement 

with HUD, Brownsville, TX

Review of the Centralized HUD Account 

Management Process

HUD’s Receivership Did Not Ensure That 

the Housing Authority of New Orleans 

Properly Accounted for Its Fungibility 

Funding, Monitored and Paid Two of 

Its Contractors, and Paid Its Accounts 

Payable Disbursements

The City of Newburgh Did Not Always 

Administer Its CDBG Program in 

Accordance with HUD Requirements, 

Newburgh, NY

06/12/2008

07/01/2008

08/07/2008

09/26/2008

10/24/2008

11/07/2008

11/14/2008

11/25/2008

01/09/2009

01/29/2009

02/24/2009

10/08/2008

10/14/2008

01/13/2009

01/22/2009

02/20/2009

03/13/2009

03/19/2009

03/25/2009

04/30/2009

08/21/2009

06/11/2009

Note 1

12/31/2013

Note 1

07/31/2011

Note 1

04/15/2011

12/31/2011

10/01/2011

Note 2

Note 2

Note 2

150 Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2009-AO-1001

2009-AO-1002

2009-CH-1008

2009-NY-1012

2009-FW-0801

2009-DP-0005

2009-AT-1008

2009-PH-0801

2009-FW-0001

2009-LA-1011

State of Louisiana, Road Home Program, 

Did Not Ensure That Road Home 

Employees Were Eligible to Receive 

Additional Compensation Grants, Baton 

Rouge, LA

State of Louisiana, Road Home 

Program, Did Not Ensure That Multiple 

Disbursements to a Single Damaged 

Residence Address Were Eligible, Baton 

Rouge, LA

The City of East Cleveland Did Not 

Adequately Manage Its HOME Investment 

Partnerships and CDBG Programs, East 

Cleveland, OH

The City of Rome Did Not Administer 

Its Economic Development Activity in 

Accordance with HUD Requirements, 

Rome, NY

Tenant Confirmation for Disaster Housing 

Assistance Program for March and April 

2009

Review of Implementation of Security 

Controls over HUD’s Business Partners

Miami-Dade County Did Not Properly 

Administer Its CDBG Program, Miami, FL

Corrective Action Verification Review, 

Upfront Grant for Ridgecrest Heights 

Apartments, CEMI-Ridgecrest, Inc., 

Washington, DC, Audit Memorandum 

98-AO-219-1804

HUD’s Disaster Recovery Grant Reporting 

System Can Collect the Basic Information 

Needed to Monitor the Neighborhood 

Stabilization Program

City of Los Angeles Housing Department 

Did Not Ensure That the Buckingham 

Place Project Met HOME Program 

Requirements, Los Angeles, CA

05/05/2009

05/05/2009

05/11/2009

05/20/2009

05/28/2009

06/11/2009

06/19/2009

06/19/2009

06/25/2009

07/01/2009

09/16/2009

09/16/2009

09/08/2009

09/23/2009

09/25/2009

11/17/2009

09/25/2009

07/09/2009

10/23/2009

10/21/2009

Note 2

Note 2

09/08/2011

Note 2

10/01/2011

12/31/2014

Note 2

Note 2

Note 2

09/01/2011

Appendix 3 - Tables 151
Report 

number

Report title Issue

date

Decision

date

Final

action

2009-AT-1009

2009-KC-1008

2009-CH-1011

2009-KC-0001

2009-AT-1011

2009-CH-0002

2009-LA-1018

2009-LA-1019

2009-DE-1005

2009-AO-1003

2009-DE-1801

The Housing Authority of the City of 

Newnan Inappropriately Encumbered 

Assets and Advanced Funds to Support Its 

Nonprofit Organization, Newnan, GA

Grace Hill Used Neighborhood Initiative 

Grant Funds to Pay Unsupported Payroll 

Expenses and Duplicated Computer 

Support Costs, St. Louis, MO

The Housing Authority of the City of 

Terre Haute Failed to Follow Federal 

Requirements and Its Employment 

Contract Regarding Nonprofit 

Development Activities, Terre Haute, IN

HUD Subsidized an Estimated 2,094 to 

3,046 Households That Included Lifetime 

Registered Sex Offenders

The City of Miami Did Not Properly 

Administer Its CDBG Program, Miami, FL

The Office of Affordable Housing 

Programs’ Oversight of HOME Investment 

Partnerships Program Income Was 

Inadequate

DHI Mortgage Company, LTD’s Scottsdale 

and Tucson, AZ, Branches Did Not Always 

Follow FHA-Insured Loan Underwriting 

and Quality Control Reaquirements

The Owner of Park Lee Apartments 

Violated Its Regulatory Agreement with 

HUD, Phoenix, AZ

Adams County Did Not Have Adequate 

Controls over Its Block Grant Funds, 

Westminster, CO

Louisiana Land Trust, As the State of 

Louisiana’s Subrecipient, Did Not Always 

Ensure That Properties Were Properly 

Maintained, Baton Rouge, LA

Adams County Had Weaknesses That 

Could Significantly Affect Its Capacity 

to Administer Its Recovery Act Funding, 

Commerce City, CO

07/20/2009

07/24/2009

07/31/2009

08/14/2009

08/18/2009

08/28/2009

09/10/2009

09/15/2009

09/17/2009

09/23/2009

09/24/2009

11/16/2009

10/13/2009

11/24/2009

03/31/2011

12/15/2009

12/26/2009

01/08/2010

01/13/2010

01/15/2010

01/26/2010

01/14/2010

06/30/2011

Note 2

01/01/2030

12/31/2013

04/04/2011

Note 2

06/30/2011

07/13/2011

Note 2

Note 2

Note 2

152 Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2009-LA-1020

2009-AT-1012

2009-AT-0001

2009-AT-1013

2009-CH-1017

2009-DP-0006

2009-AT-1015

2009-CH-1019

2009-CH-1020

2009-DP-0007

The Housing Authority of the City of 

Richmond Did Not Follow Procurement 

Requirements and Had Internal Control 

Weaknesses, Richmond, CA

The Municipality of Río Grande Needs 

to Improve Administration of Its CDBG 

Program and Its Recovery Act Funds, Rio 

Grande, PR

HUD Lacked Adequate Controls to Ensure 

the Timely Commitment and Expenditure 

of HOME Funds

The City of Atlanta Entered Incorrect 

Commitments into HUD’s Integrated 

Disbursement and Information System for 

its HOME Program, Atlanta, GA

The Housing Authority of the City of 

Terre Haute Failed to Follow Federal 

Requirements Regarding Its Turnkey III 

Homeownership Program Units’ Sales 

Proceeds, Terre Haute, IN

Review of HUD’s Web Application 

Systems

The Puerto Rico Public Housing 

Administration Mismanaged Its 

Capital Fund Financing Program and 

Inappropriately Obligated $32 Million in 

Recovery Act Funds, San Juan, PR

The Michigan State Housing Development 

Authority Failed to Operate Its Section 

8 Project-Based Voucher Program 

According to HUD’s and Its Requirements, 

Lansing, MI

The City of Flint Lacked Adequate 

Controls over Its Commitment and 

Disbursement of HOME Investment 

Partnerships Program Funds, Flint, MI

Review of Selected Controls within the 

Disaster Recovery Grant Reporting System

09/24/2009

09/25/2009

09/28/2009

09/28/2009

09/29/2009

09/29/2009

09/30/2009

09/30/2009

09/30/2009

09/30/2009

12/29/2009

01/22/2010

03/18/2011

11/05/2009

01/22/2010

12/17/2009

01/27/2010

01/27/2010

01/27/2010

03/26/2010

04/30/2011

Note 2

Note 3

Note 2

06/30/2011

09/30/2011

05/05/2011

02/01/2012

Note 2

Note 2

Appendix 3 - Tables 153
Report 

number

Report title Issue

date

Decision

date

Final

action

2010-NY-1002

2010-FW-0001

2010-LA-0001

2010-FO-0002

2010-FO-0003

2010-BO-1002

2010-CH-1003

2010-AO-0801

2010-NY-1005

2010-AO-1002

2010-NY-1802

Jersey Mortgage Company Did Not Always 

Comply with HUD/FHA Loan Underwriting 

Requirements, Cranford, NJ

HUD Did Not Maintain Documentation 

to Determine if Public Housing Agencies 

Took Corrective Action on its January 7, 

2008 Memorandum and Public Housing 

Agencies Paid an Estimated $7 Million for 

Deceased Tenants

HUD’s Performance-Based Contract 

Administration Contract Was Not Cost 

Effective

Audit of the FHA’s Financial Statements 

for Fiscal Years 2009 and 2008

Additional Details to Supplement Our 

Report on HUD’s Fiscal Years 2009 and 

2008 Financial Statements

The City of Holyoke, Office of Community 

Development, Needs to Improve Its 

Administration of HOME- and CDBGFunded Housing Programs, Holyoke, MA

The Grand Rapids Housing Commission 

Needs to Improve Its Administration of Its 

Section 8 Project-Based Voucher Program, 

Grand Rapids, MI

HUD Needs to Ensure That the Housing 

Authority of New Orleans Strengthens 

Its Capacity to Adequately Administer 

Recovery Funding

The City of Paterson Did Not Always 

Administer Its CDBG Program in 

Accordance with HUD Requirements, 

Paterson, NJ

State of Louisiana Did Not Always 

Ensure Compliance Under Its Recovery 

Workforce Training Program, Baton 

Rouge, LA

Control Weaknesses at the Syracuse 

Housing Authority May Affect Its Capacity 

to Administer American Recovery and 

Reinvestment Act Funds, Syracuse, NY

10/09/2009

11/10/2009 

11/12/2009

11/13/2009

11/16/2009

11/23/2009

11/24/2009

12/15/2009

12/18/2009

01/04/2010

01/14/2010

03/19/2010

01/08/2010

03/12/2010

03/05/2010

04/02/2010

09/30/2010

03/22/2010

04/19/2010

03/19/2010

05/14/2010

03/04/2010

Note 2

Note 2

Note 2

Note 2

04/01/2011

04/15/2011

10/01/2011

04/30/2012

06/30/2011

Note 2

08/31/2011

154 Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2010-FW-1002

2010-NY-1007

2010-BO-0001

2010-PH-0001

2010-DE-1002

2010-KC-1001

2010-NY-1803

2010-LA-1009

2010-KC-1003

2010-CH-0001

The Housing Authority of the Sac and Fox 

Nation of Oklahoma Improperly Spent 

More Than $800,000 in Contracts and Did 

Not Always Operate in Accordance with 

HUD Rules and Regulations or Its Own 

Policies, Shawnee, OK

The City of Jersey City Needs To 

Strengthen Its Controls To Ensure That 

It Will Be Able To Effectively Administer 

CDBG-R Funds, Jersey City, NJ

HUD Was Not Effective in Recovering the 

New London Housing Authority From 

Troubled Status and Did Not Take the 

Required Regulatory or Statutory Action

HUD’s Philadelphia, PA, Homeownership 

Center Did Not Always Ensure That 

Required Background Investigations Were 

Completed for Its Contracted Employees

Fort Belknap Indian Community Did Not 

Properly Administer Its Indian Housing 

Block Grant Funds, Harlem, MT

The State of Iowa Misspent CDBG Disaster 

Assistance Funds and Failed To Check for 

Duplicate Benefits, Des Moines, IA

The New York City Housing Authority Had 

the Capacity to Administer Capital Funds 

Provided Under the American Recovery 

and Reinvestment Act, New York, NY

DHI Mortgage Company, LTD’s Scottsdale, 

AZ, Branches Did Not Follow FHA-Insured 

Loan Underwriting Requirements

The City of East St. Louis Did Not Properly 

Allocate Salary and Building Expenses or 

Properly Document Its Process to Secure 

a Consulting Services Contract, East St. 

Louis, IL

The Office of Block Grant Assistance 

Lacked Adequate Controls Over the 

Inclusion of Special Conditions in NSP 

Grant Agreements

01/20/2010

02/02/2010 

02/18/2010 

02/26/2010

03/07/2010

03/10/2010

03/12/2010

03/19/2010

03/26/2010

03/29/2010

04/23/2010 

04/05/2010

06/18/2010

06/25/2010

06/25/2010

09/13/2010

06/03/2010

07/16/2010

07/22/2010

07/27/2010

04/23/2011 

04/01/2011

05/01/2011

Note 2

06/30/2011

10/31/2012

06/01/2011

06/02/2011

06/01/2011

06/01/2011

Appendix 3 - Tables 155
Report 

number

Report title Issue

date

Decision

date

Final

action

2010-DE-1801

2010-AT-1003

2010-AO-1003

2010-CH-1006

2010-LA-1010

2010-PH-1008

2010-FW-1003

2010-CH-1007

2010-AT-1004

The Fort Belknap Indian Community Had 

Weaknesses That Could Significantly 

Affect Its Capacity To Administer Its 

Recovery Act Funding, Harlem, MT

The Housing Authority of Whitesburg 

Mismanaged Its Operations, Whitesburg, 

KY

The State of Louisiana’s Subrecipient 

Generally Ensured Costs Were Supported 

Under Its Tourism Marketing Program, 

Baton Rouge, LA

The Other Place, Inc., Needs To Improve 

the Administration of Its Homelessness 

Prevention and Rapid Re-Housing 

Program Under the ARRA, Dayton, OH

Arizona Department of Housing’s 

Administration of Its Recovery Act Grant: 

Homelessness Prevention and Rapid ReHousing Program, Phoenix, AZ

Sasha Bruce Youthwork, Incorporated, 

Did Not Support More Than $1.9 Million in 

Expenditures, Washington, DC

The Housing Authority of the Sac 

and Fox Nation of Oklahoma Did Not 

Demonstrate the Administrative Capacity 

To Appropriately Expend Its Recovery Act 

Funding, Shawnee, OK

The Michigan State Housing Development 

Authority Needs To Improve Its Controls 

Over Section 8 Project-Based Housing 

Assistance Payments, Lansing, MI

Mobile Housing Board Used HOME 

Investment Partnerships Program Funds 

for Ineligible and Unsupported Costs for 

Its HOPE VI Redevelopment, Mobile, AL

04/23/2010

04/28/2010

04/30/2010

04/30/2010

05/07/2010

05/11/2010

05/13/2010

05/14/2010

05/17/2010

08/03/2010

08/26/2010

08/27/2010

08/10/2010

08/03/2010

11/03/2010

08/16/2010

09/08/2010

08/31/2010

07/31/2011

11/29/2035

Note 2

04/29/2011

05/31/2011

12/30/2011

07/31/2011

05/31/2012

04/30/2011

Significant audit reports issued within the past 12 months 

that were described in previous semiannual reports

on which final action had not been completed

as of March 31, 2011

156 Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2010-KC-1004

2010-FW-1004

2010-LA-1011

2010-AT-1006

2010-CH-1008

2010-AO-1004

2010-NY-1012

2010-LA-1013

2010-PH-1011

2010-FW-1005

The State of Iowa Did Not Implement 

Adequate Controls Over Its Business 

Rental Assistance Program, Des Moines, 

IA

The Georgetown Housing Authority Used 

$195,855 for Ineligible and Unsupported 

Expenditures, Georgetown, TX

Sacramento Housing and Redevelopment 

Agency Did Not Always Administer the 

NSP in Accordance With HUD Rules and 

Regulations, Sacramento, CA

The Puerto Rico Department of Housing 

Failed To Properly Manage Its HOME 

Investment Partnerships Program, San 

Juan, PR

The DuPage Housing Authority 

Inappropriately Administered Its Section 

8 Project-Based Voucher Program, 

Wheaton, IL

The Mississippi Development Authority 

Generally Ensured That Contracts 

Were Procured in Accordance With Its 

Disaster Recovery Program Policies and 

Procedures, Jackson, MS

The City of Jersey City’s CDBG Funds 

Used for a Float Loan Did Not Comply 

With Applicable Regulations, Jersey City, 

NJ

The City of Montebello Did Not Comply 

With HOME Requirements, Montebello, 

CA

The Philadelphia Housing Authority Did 

Not Ensure That Its Section 8 Housing 

Choice Voucher Program Units Met 

Housing Quality Standards, Philadelphia, 

PA

The Texas Department of Housing and 

Community Affairs Did Not Fully Follow 

Requirements or Best Practices in the 

Acquisition of Its Disaster RecoveryFunded Program Management Firm, 

Austin, TX

05/26/2010 

06/02/2010 

06/02/2010 

06/11/2010

06/15/2010

06/22/2010

07/01/2010

07/08/2010

07/08/2010

07/20/2010

10/13/2010

08/20/2010

02/22/2011

10/08/2010

10/08/2010

10/19/2010

01/25/2011

11/04/2010

09/27/2010

11/16/2010

05/31/2011

08/11/2011

04/29/2011

10/31/2011

12/31/2012

07/01/2011

01/15/2012

11/01/2011

04/30/2011

11/15/2011

Appendix 3 - Tables 157
Report 

number

Report title Issue

date

Decision

date

Final

action

2010-CH-1807

2010-CH-1808

2010-LA-1803

2010-AT-1007

2010-BO-1006

2010-CH-1010

2010-PH-1012

2010-CH-1810

2010-LA-1014

2010-AO-1005

Birmingham Bancorp Mortgage 

Corporation Did Not Properly Underwrite 

a Selection of FHA Loans, West 

Bloomfield, MI

Mac-Clair Mortgage Corporation Did Not 

Properly Underwrite a Selection of FHA 

Loans, Flint, MI

Alacrity Lending Company Did Not 

Properly Underwrite a Selection of FHA 

Loans, Southlake, TX

The Housing Authority, City of Wilson, 

Lacked the Capacity To Effectively 

Administer Recovery Act Funds, Wilson, 

NC

Waltham Housing Authority Needs to 

Improve Controls Over Its Interprogram 

Fund Transactions, Procurement, and 

Travel for Its Housing Choice Voucher and 

Low-Income Public Housing Programs, 

Waltham, MA

The Housing Authority of the City of 

Terre Haute Substantially Mismanaged 

Its Capital Fund Program and Lacked 

Capacity To Adequately Administer Its 

Recovery Act Funds, Terre Haute, IN

The Harrisburg Housing Authority Did 

Not Procure Goods and Services in 

Accordance With HUD Regulations and Its 

Procurement Policy, Harrisburg, PA

Dell Franklin Financial, LLC, Did Not 

Properly Underwrite a Selection of FHA 

Loans, Millersville, MD

The Retreat at Santa Rita Springs Did Not 

Comply With HUD Rules and Regulations 

and Other Federal Requirements, Green 

Valley, AZ

The State of Louisiana’s Subrecipient 

Did Not Always Meet Agreement 

Requirements When Administering 

Projects Under the Orleans Parish Long 

Term Community Recovery Program, 

Baton Rouge, LA

07/21/2010 

07/22/2010 

07/26/2010 

07/27/2010

07/27/2010

07/27/2010

07/27/2010

07/30/2010

08/02/2010

08/04/2010

11/12/2010

10/26/2010

12/21/2010

11/24/2010

11/24/2010

12/07/2010

09/27/2010

12/10/2010

11/29/2010

01/13/2011

11/01/2011

11/01/2011

11/01/2011

11/27/2013

10/14/2011

11/04/2011

06/30/2011

11/01/2011

11/01/2011

12/01/2011

158 Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2010-CH-1811

2010-CH-1011

2010-LA-1804

2010-LA-1805

2010-AT-1009

2010-AT-1010

2010-LA-1806

2010-AT-1011

2010-FW-0003

2010-LA-1015

2010-SE-1001

D&R Mortgage Corporation Did Not 

Properly Underwrite a Selection of FHA 

Loans, Farmington Hills, MI

The State of Illinois Needs To Improve 

Its Capacity To Effectively and Efficiently 

Administer Its NSP, Chicago, IL

Assurity Financial Services, LLC, Did Not 

Properly Underwrite a Selection of FHA 

Loans, Englewood, CO

Americare Investment Group Did Not 

Properly Underwrite a Selection of FHA 

Loans, Arlington, TX

The Puerto Rico Public Housing 

Administration Needs To Improve Its 

Procurement Procedures, San Juan, PR

The Housing Authority of DeKalb County 

Improperly Used Its Net Restricted Assets, 

Decatur, GA

American Sterling Bank Did Not Properly 

Underwrite a Selection of FHA Loans, 

Sugar Creek, MO

The Puerto Rico Department of Housing 

Did Not Ensure Compliance With HOME 

Program Objectives, San Juan, PR

HUD Was Not Tracking Almost 13,000 

Defaulted HECM Loans With Maximum 

Claim Amounts of Potentially More Than 

$2.5 Billion

The Housing Authority of the City 

and County of San Francisco Did Not 

Effectively Operate Its Housing Choice 

Voucher Housing Quality Standards 

Inspections, San Francisco, CA

Washington State Did Not Disburse Its 

Homelessness Prevention and Rapid 

Re-Housing Funds in Accordance With 

Program Requirements, Olympia, WA

08/04/2010 

08/05/2010 

08/05/2010 

08/06/2010

08/13/2010

08/23/2010

08/24/2010

08/25/2010

08/25/2010

08/31/2010

08/31/2010

12/22/2010

11/27/2010

12/03/2010

12/16/2010

10/29/2010

11/18/2010

12/22/2010

12/06/2010

12/03/2010

12/20/2010

12/07/2010

11/01/2011

05/01/2011

12/02/2011

10/20/2011

07/15/2011

08/31/2011

12/07/2011

11/30/2011

08/25/2011

11/30/2011

04/30/2011

Appendix 3 - Tables 159
Report 

number

Report title Issue

date

Decision

date

Final

action

2010-NY-1805

2010-BO-1008

2010-LA-1807

2010-KC-1007

2010-LA-0002

2010-NY-1806

2010-NY-1807

2010-AT-1014

2010-KC-0003

2010-KC-1008

2010-NY-1808

Webster Bank Did Not Properly 

Underwrite a Selection of FHA Loans, 

Cheshire, CT

The Avesta Housing Management 

Corporation Did Not Properly Follow HUD 

Rules and Regulations, Portland, ME

Alethes, LLC, Did Not Properly Underwrite 

a Selection of FHA Loans, Lakeway, TX

The Missouri Housing Development 

Commission Did Not Always Obtain 

Required Documents and Properly Report 

on the Tax Credit Assistance Program 

Funded Under the Recovery Act, Kansas 

City, MO

HUD’s Office of Single Family Housing’s 

Management Controls Over Its Automated 

Underwriting Process

Security Atlantic Mortgage Company, Inc., 

Did Not Properly Underwrite a Selection 

of FHA Loans, Edison, NJ

First Tennessee Bank, N.A., Did Not 

Properly Underwrite a Selection of FHA 

Loans, Memphis, TN

Polk County Did Not Comply With 

Procurement and Contract Requirements 

in Its NSP and HOME Program, Bartow, FL

HUD’s Written Policies and Procedures 

for Loan Indemnifications Were Generally 

Adequate, But Did Not Include Procedures 

for Pursuing Signed Indemnification 

Agreements From Lenders

The City of East St. Louis Awarded Block 

Grant Program Funds to Recipients 

Without Adequately Verifying Their 

Eligibility, East St. Louis, IL

Pine State Mortgage Corporation Did Not 

Properly Underwrite a Selection of FHA 

Loans, Atlanta, GA

09/01/2010 

09/03/2010 

09/08/2010 

09/10/2010

09/15/2010

09/22/2010

09/27/2010

09/28/2010

09/28/2010

09/28/2010

09/29/2010

02/09/2011

11/30/2010

01/04/2011

01/07/2011

01/13/2011

02/09/2011

02/17/2011

03/16/2011

02/03/2011

01/26/2011

02/11/2011

09/01/2012

05/06/2011

12/07/2011

04/29/2011

09/15/2011

01/20/2012

12/10/2011

03/01/2012

09/28/2011

05/12/2012

01/30/2012

160 Appendix 3 - Tables
Report 

number

Report title Issue

date

Decision

date

Final

action

2010-CF-1801

2010-DP-0004

2010-FW-0004

2010-HA-0003

2010-NY-1809

Final Civil Action, Anchor Mortgage 

Corporation, Loan Origination Fraud 

- Violations of the False Claims Act, 

Chicago, IL

Security Weaknesses on HUD’s Network 

Devices

HUD’s Oversight of the Hurricane Ike 

Disaster Housing Assistance Program in 

Texas Needed Improvement

HUD Needs To Improve Controls Over Its 

Administration of Completed and Expired 

Contracts

Sterling National Mortgage Company, Inc., 

Did Not Properly Underwrite a Selection 

of FHA Loans, Great Neck, NY

09/30/2010 

09/30/2010 

09/30/2010

09/30/2010

09/30/2010

02/18/2011

12/02/2010

12/30/2010

01/27/2011

02/03/2011

02/17/2012

09/30/2011

12/31/2011

Note 2

01/31/2012

Audits Excluded:

79 audits under repayment plans

30 audits under debt claims collection 

processing, formal judicial review, 

investigation, or legislative solution

Notes:

1 Management did not meet the target date. 

Target date is over 1 year old.

2 Management did not meet the target 

date. Target date is under 1 year old. 

3 No management decision

Appendix 3 - Tables 161
Table C

Inspector General-issued reports with questioned and

unsupported costs at March 31, 2011

(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)

76,297 

4,424 

261 

0 

44,644 

0

125,626 

Questioned

costs

116,148 

7,042 

376 

38 

95,617 

0

219,221 

47 

4 

- 

1 

42

0

94

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

92,900 

21,257

66,359

5,284 

3,305 

29,421 

<17,786>4 

139,890 

42,597

90,920

6,373 

5,419 

73,912 

<62,254>4

 

651

332

36

103

 

3

26 

<50>4

 

C

D 

E

1

 22 audit reports also contain recommendations with funds to be put to better use. 

2

 7 audit reports also contain recommendations with funds due program participants. 

3

 7 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. 

162 Appendix 3 - Tables
Table D

Inspector General-issued reports with recommendations 

that funds be put to better use at March 31, 2011

(thousands)

Audit reports Number of

audit reports

For which no management decision had been made 

by the commencement of the reporting period

For which litigation, legislation, or investigation was 

pending at the commencement of the reporting 

period

For which additional costs were added to reports in 

beginning inventory

For which costs were added to noncost reports

Which were issued during the reporting period

Which were reopened during the reporting period

Subtotals (A+B)

Questioned

costs

218,555 

2,957 

0 

1,624 

766,109 

0

989,245 

30 

1 

- 

1 

19

0

51

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

154,366 

35,173

105,927

13,266 

15,521 

819,358 

<42,157>4 

371

102

26

53

 

2

12 

<15>4

 

C

D 

E

1

 22 audit reports also contain recommendations with questioned costs. 

2

 1 audit report also contains recommendations with funds due program participants. 

3

 3 audit reports also contain recommendations with funds agreed to by management. 

4

 The figures in brackets represent data at the recommendation level as compared to the report level. 

See Explanations of Tables C and D.

Appendix 3 - Tables 163
Explanations of Tables C and D

The Inspector General Act Amendments of 1988 require Inspectors General and agency heads to report 

cost data on management decisions and final actions on audit reports. The current method of reporting at 

the “report” level rather than at the individual audit “recommendation” level results in misleading reporting 

of cost data. Under the Act, an audit “report” does not have a management decision or final action until 

all questioned cost items or other recommendations have a management decision or final action. Under 

these circumstances, the use of the “report” based rather than the “recommendation” based method of 

reporting distorts the actual agency efforts to resolve and complete action on audit recommendations. For 

example, certain cost items or recommendations could have a management decision and repayment (final 

action) in a short period of time. Other cost items or nonmonetary recommendation issues in the same 

audit report may be more complex, requiring a longer period of time for management’s decision or final 

action. Although management may have taken timely action on all but one of many recommendations 

in an audit report, the current “all or nothing” reporting format does not take recognition of their efforts.

The closing inventory for items with no management decision on tables C and D (line E) reflects figures 

at the report level as well as the recommendation level.

nnn

164 Appendix 3 - Tables
Appendix 4 - Index
State Page numbers

Alabama 15, 55, 70

Arizona 17, 22, 49, 64

Arkansas 80

California 14, 30, 42, 43, 50, 79, 83, 104, 113, 118, 120, 121

Colorado 17, 20, 21, 37, 55, 117

Connecticut 17, 78

District of Columbia 60, 121, 131

Florida 10, 14, 18, 19, 38, 39, 44, 53, 67, 85, 113, 118

Georgia 31, 39, 64, 116

Idaho 113

Illinois 15, 24, 29, 31, 34, 40, 42, 43, 45, 54, 60, 69, 95, 110, 111, 113, 114, 116, 118, 

121

Indiana 24, 113, 119

Iowa 16

Kansas 16, 122

Kentucky 67

Louisiana 38, 39, 44, 69, 78, 80, 89, 91, 92, 93, 94, 95, 101, 116, 118, 122

Maine 112

Maryland 11, 15, 21, 43, 49, 54, 111, 115, 117, 119

Massachusetts 12, 16, 30, 40, 41, 44, 84, 111, 114, 116, 117

Michigan 14, 23, 41, 45, 61, 67, 68, 72, 115, 118, 119, 120, 121

Minnesota 53, 95, 121

Mississippi 44, 91, 93, 94

Missouri 16, 18, 53, 95, 112, 116

Nevada 114, 116

New Hampshire 110

New Jersey 14, 17, 21, 33, 34, 44, 45, 55, 60, 69, 70, 71, 80

New Mexico 119, 120

New York 18, 20, 23, 38, 40, 43, 45, 49, 54, 55, 59, 69, 70, 71, 90, 112, 114, 115, 118, 120, 

130

North Carolina 20, 30, 64, 116

Ohio 18, 19, 23, 84, 110, 111, 114

166 Appendix 4 - Index


Pennsylvania 19, 24, 32, 45, 59, 69, 81, 95, 121

Puerto Rico 63, 115

Rhode Island 10, 19, 39, 119

South Carolina 117

Tennessee 20, 24, 42, 44, 53, 113, 115 

Texas 10, 11, 15, 17, 23, 38, 54, 71, 79, 95, 104, 117, 118, 119, 122, 131

Utah 22, 68, 71, 114

Vermont 111

Virginia 16, 17, 22, 82, 122

Washington 82, 112, 122

West Virginia 82

Wisconsin 113

nnn

State Page numbers

Appendix 4 - Index 167

HUD OIG Operations Telephone 

Listing
Office of Audit

Headquarters Office of Audit, Washington, DC 202-708-0364

Region 1 Boston, MA 617-994-8380

Hartford, CT 860-240-4800

Region2 New York, NY 212-264-4174

Albany, NY 518-464-4200

Buffalo, NY 716-551-5755

Newark, NJ 973-622-7900

Region 3 Philadelphia, PA 215-656-0500

Baltimore, MD 410-962-2520

Pittsburgh, PA 412-644-6372

Richmond, VA 804-771-2100

Region 4 Atlanta, GA 404-331-3369

Miami, FL 305-536-5387

Greensboro, NC 336-547-4001

Jacksonville, FL 904-232-1226

Knoxville, TN 865-545-4369

San Juan, PR 787-766-5202

Region 5 Chicago, IL 312-353-7832

Columbus, OH 614-469-5745

Detroit, MI 313-226-6190

Minneapolis, MN 612-370-3000

Region 6 Fort Worth, TX 817-978-9309

Houston, TX 713-718-3199

Oklahoma City, OK 405-609-8606

San Antonio, TX 210-475-6898

Regions 7/8/10 Kansas City, KS 913-551-5870

St. Louis, MO 314-539-6339

Denver, CO 303-672-5452 

Seattle, WA 206-220-5360

Regions 9 Los Angeles, CA 213-894-8016

Phoenix, AZ 602-379-7250

San Francisco, CA 415-489-6400

Sacramento, CA 415-489-6400

Region 11 New Orleans, LA 504-671-3715

Jackson, MS 601-965-4700

nnn

170 HUD OIG Operations Telephone Listing
Office of Investigation

Headquarters Office of Investigation, Washington, DC 202-708-0390 

Region 1 Boston, MA 617-994-8450

Hartford, CT 860-240-4800

Manchester, NH 603-666-7988

Region 2 New York, NY 212-264-8062

Buffalo, NY 716-551-5755

Region 3 Philadelphia, PA 215-656-0500

Newark, NJ 973-776-7347 

Pittsburgh, PA 412-644-6598

Region 4 Atlanta, GA 404-331-3359

Birmingham, AL 205-731-2630

Columbia, SC 803-451-4320

Knoxville, TN 865-545-4369

Louisville, KY 502-618-8127

Memphis, TN 901-229-6997

Nashville, TN 615-426-6171

Region 5 Chicago, IL 312-353-4196

Indianapolis, IN 317-226-5427

Minneapolis/St. Paul, MN 612-370-3000

Region 6 Arlington, TX 817-978-5440

Houston, TX 713-718-3196

Little Rock, AR 501-353-8115

Oklahoma City, OK 405-609-8601

San Antonio, TX 210-475-6819

Regions 7/8 Kansas City, KS 913-551-5866

Denver, CO 303-672-5350

Salt Lake City, UT 801-524-6090

St. Louis, MO 314-539-6559

Regions 9 Los Angeles, CA 213-894-0219

Las Vegas, NV 702-336-2144

Phoenix, AZ 602-379-7255

Region 10 Seattle, WA 206-220-5380

Billings, MT 406-247-4080

Sacramento, MT 916-930-5691

San Francisco, CA 415-489-6683

Region 11 New Orleans, LA 504-671-3701

Baton Rouge, LA 225-334-4913 

Hattiesburg, MS 601-299-4279

Jackson, MS 601-965-5772

Region 13 Baltimore, MD 410-962-4502

Greensboro, NC 336-547-4000

Richmond, VA 804-771-2100

HUD OIG Operations Telephone Listing 171
Region 14 Tampa, FL 813-228-2026

Jacksonville, FL 904-208-6126

Miami, FL 305-536-3087

San Juan, PR 787-766-5868

Region 15 Detroit, MI 313-226-6280

Cleveland, OH 216-522-4421

Columbus, OH 614-469-6677

nnn

172 HUD OIG Operations Telephone Listing


Report fraud, waste, and mismanagement in HUD 

programs and operations by

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.hudoig.gov/hotline/index.php

All information is confidential,

and you may remain anonymous.
Semiannual Report to Congress

October 1, 2010, through March 31, 2011

www.hudoig.gov

No. 65