Summit on Housing Neighborhood Stabilization Program

1. Summit on HousingNeighborhood Stabilization Program Washington, DC October 7 & 8, 2008

2. Presenters • Frank A. Rokosz, Assistant Director, Office of Audit’s Technical Oversight and Planning Division • Anthony Medici, Special Agent in Charge, Office of Investigation, Criminal Investigations Division

3. “Identifying, Prosecuting, and Preventing Fraud in HUD Programs” • Auditors & Agents

4. Inspector Generals are Authorized to: • Access all records and information of the agency and program participants • Conduct audits and criminal investigations • Issue subpoenas for records and documents • Hire staff and control budget resources

5. OIG Strategic Plan • Align directly and support HUD’s plan • Contribute to resolving significant issues raised or confronted by HUD and our stakeholders • Assist HUD in resolving its “Major Management Challenges”

6. HUD Inspector GeneralOffice of Audit

7. What Audit Does • Internal and External Audits/Surveys • Financial, Information Systems, and Program Performance • Legislation/Regulation Reviews • Audit Plan • Audit Follow-up • Support for Investigations and Assistant US Attorneys

8. Annual Audit Objective • Focus resources on areas of greatest benefit and risk to our customers • Congress • HUD Management • HUD Stakeholders • Taxpayer

9. Neighborhood Stabilization Program • OIG considers this a HIGH RISK Program • Based on dollars $3.92 Billion • Limited Controls - significant flexibility to the grantees to develop their program • Limited Capacity - experience by grantees in stabilization activities • Limited Time for Implementation - pressure to take quick actions

10. Office of Audits Plan • Due to the high risk, we plan to: • Perform grantee audits • Monitor HUD’s oversight of the program and grantees • Respond to OIG Hotline Complaints • Review proposed program and monitoring requirements

11. Common CPD Audit Findings • Lack supporting documentation for disbursements • Grant funds are not used in accordance with Federal requirements, State law, City ordinances, local policies, etc. • Grantee’s lack of administrative capacity to carry out the grant

12. Common CPD Audit Findings • Lack of grantee or management oversight • Excessive salaries of employees • Used grant funds for expenses not included in approved grant, budget and/or not approved by HUD

13. Conflicts of Interest • CFRs – No person who is an employee, agent, consultant, officer, or elected or appointed official of the recipient and who exercises or has exercised any functions or responsibilities with respect to assisted activities, or who is in a position to participate in a decision making process or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from the activity, or have an interest in any contract, subcontract, or agreement with respect to the assisted activities – this includes their family

14. Conflicts of Interest AREAS OF CONCERN • Procurement of services • Purchase and sale of foreclosed homes • Bulk purchases and sale

15. OIG Review of Program Guidance • Legislation/Regulation Reviews • Joint effort by OIG Audit and Investigations to closely review NSP guidance • OIG will support and suggest significant controls for the NSP, to include certifications by grantees and participants

16. Program Fraud Civil Remedies Act Of 1986 Title 31, United States Code, section 3801, “Program Fraud Civil Remedies Act of 1986,” provides federal agencies, which are the victims of false, fictitious, and fraudulent claims and statements, with an administrative remedy to recompense such agencies for losses resulting from such claims and statements; to permit administrative proceedings to be brought against persons who make, present, or submit such claims and statements; and to deter the making, presenting, and submitting of such claims and statements in the future.

17. General Accountability Office • The Housing and Economic recovery Act of 2008 requires the General Accountability Office to perform audits and contact for audits of program activities. • OIG Audit will be working closely with GAO in auditing this program

18. HUD OIG HOTLINE • We plan to get the word out for constituents to contact the OIG Hotline and report: FRAUD WASTE MISMANAGEMENT

19. Office of Investigation

20. Inspector General Mission • Conduct independent and objective audits and investigations. • Prevent waste, fraud, and abuse. • Promote economy, efficiency, and effectiveness. • Review pending legislation, and regulation. • Keep agency head and Congress informed.

21. Office of Investigation Oct. 1 2007 to March 31, 2008 • Arrests: 754 • Indictments: 602 • Convictions: 444 • Investigative Recoveries: $20.5 million • Administrative Sanctions: 422 • Personnel Actions: 26

22. Inspectors General are Authorized to: • Access all records and information of the agency and program participants. • Conduct audits and criminal investigations. • Issue subpoenas for records and documents. • Hire staff and control budget resources.

23. Partnerships • Federal law enforcement and regulatory agencies. • Federal prosecutors. • State and local law enforcement. • State regulators. HUD

24. Community Development Grant Fraud • HUD OIG has experience and expertise in investigating fraud involving CPD Grant programs. • In FY08, OI continued a major initiative against CPD fraud. • For the six month period, October 1, 2007-March 31, 2008, OI reported 27 criminal judicial actions and 22 civil and administrative actions, $5.7 million recovered.

25. Meeting Emergent Issues Research & Analysis Training Liaison Strategic Planning Agency and Law Enforcement Partnerships • In FY09, HUD OIG is moving to meet the challenges presented by Housing and Economic Recovery Act of 2008 and the Neighborhood Stabilization Program

26. NSP Concerns • Fraud • Waste • Abuse • Criminal, Civil and Administrative Misconduct

27. Potential Criminal Issues • Public Corruption • Bribery • Extortion • Kickbacks • Embezzlement • Diversion of Funds • Money Laundering • Theft • False Statements • Contract Steering • Conspiracy • Mail Fraud • Wire Fraud • Bid Rigging

28. Some HUD OIG CPD Cases • Former Mayor and Director of Public Works in Texas • Indicted for allegedly accepting bribes from a demolition contractor in exchange for city contracts funded by HUD CDBG sources.

29. Theft & Embezzlement of Government Funds • Former Executive Director for an Urban Enterprise Association sentenced to 71 months imprisonment and more than $1.1 million restitution for theft of government funds.

30. Conspiracy, Money Laundering • The former Mayor of Fairbanks, Alaska and treasurer of a social services organization convicted of conspiracy, misapplication from an organization receiving federal funds, and money laundering.

31. Extortion • Former Mayor of Chicopee, MA sentenced 2 years imprisonment after conviction on extortion charge. • Defendant extorted campaign contributions from a developer under contract with the Chicopee Office of Economic Development, which received CDBG funds.

32. Zero Tolerance • HUD OIG is taking a zero tolerance approach to NSP fraud, waste and abuse • HUD OIG will use administrative, civil and criminal remedies to deter, detect and stop program abuses.

33. How You Can Help • HUD OIG welcomes the assistance and cooperation of state, local, community and non-profit entities who are working towards the success of NSP. • Exercise Due Diligence in all phases of NSP. • Manage Risk • Set and maintain ethical standards

34. Our Goal • Our mutual goal is to provide safe, decent and affordable housing in our communities.

35. Departmental / Management / Employee Responsibilities • Report to OIG • Suspected violations of laws, rules, or regulations. • Gross mismanagement. • Waste of funds. • Abuse of authority. • Cooperate During Audits and Investigations For further information see HUD handbook 2000.3 REV-4 Chapter 3

36. Internet Web Sites • Office of the Inspector General Locations: www.hud.gov/offices/oig/ • Semi-annual Reports to the Congress: www.hud.gov/offices/oig/reports/congress.cfm HUD-OIG HOTLINE: “www.hotline@hudoig.gov

38. Questions ?