Semiannual Report to Congress U.S
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Semiannual Report to Congress U.S. Department of Housing and Urban Development Office of Inspector General Semiannual Report to Congress October 1, 2004 through March 31, 2005 Office of Inspector General Profile of Performance Profile of Performance For the Period, October 1, 2004, through March 31, 2005 Audit and Investigation Results Audit Investigation Hotline Combined Recommendations That Funds Be Put to Better Use $940,871,236 $1,824,881 $942,696,117 Management Decisions on Audits with Recommendations $1,207,899,773 $1,207,899,773 That Funds Be Put to Better Use Questioned Costs $89,988,861 $89,988,861 Management Decisions on Audits with Questioned Costs $119,366,523 $119,366,523 Indictments/Informations 888 888 Convictions/Pleas/Pretrial Diversions 455 455 Civil Actions 32 32 Recoveries/Receivables $498,294,949 $498,294,949 Funds Put to Better Use $40,844,193 $117,226 $40,961,419 Collections from Audits $7,761,521 $7,761,521 Administrative Sanctions 8 1,142 1,150 Personnel Actions 34 34 Arrests 1,786 1,786 Search Warrants 35 35 Weapons Seized 5 5 Subpoenas Issued 27 379 406 Inspector General’s Message On behalf of the U.S. Department of Housing and Urban Development’s Office of the Inspector General, I hereby proudly present the Semiannual Report on our activities for the half fiscal year beginning on October 1, 2004. Before highlighting HUD OIG’s recent activities, I note first that it is my continuing honor to serve with the many talented auditors, investigators and support personnel who strive unceasingly to further HUD OIG’s mission. Their efforts have helped ensure that HUD programs are administered properly, that HUD personnel continue to fulfill their legislatively-directed objectives, and that sums of wasted or stolen program funds are recovered for the benefit of HUD’s Inspector General’s Message target constituents. During the last six months, HUD OIG’s audits and investigations have achieved a return on investment of 28 to 1, a remarkable achievement and a proper service to the American taxpayer. HUD OIG shall set the bar ever higher in the months ahead. HUD OIG has also established vital relationships with professional organizations working on housing issues, a practice essential both to industry oversight specifically and more generally to our mission to deter fraud, waste, and abuse involving HUD programs. These organizations include the Public Housing Authorities Directors Association, the National Association of Housing and Redevelopment Officials, and the Mortgage Bankers Association. We continue to work closely with these organizations on areas of mutual interest. I note lastly and with great satisfaction that HUD OIG’s peers within the federal Inspector General community have recognized our accomplishments, and look to us for leadership. To this end, I was appointed recently to serve as Chairman of the Investigations Committee for the President’s Council on Integrity and Efficiency (PCIE). This committee establishes policies and procedures for the federal Inspector General community. Since I assumed the Chairmanship, the committee has undertaken several significant steps, including codification and implementation of a “best practices” program, an increased focus on excellence in training, and better outreach to state authorities, fellow Inspectors General and international organizations. I look forward to the many challenges ahead, and to the myriad opportunities my leadership may present to serve HUD OIG’s mission. Here are several of the key areas discussed herein. We are continuing our efforts on problems plaguing single-family housing. During the six-month reporting period, audit reports related to the single Family Housing Program area questioned millions of dollars in costs and made recommendations as to how millions of dollars in funds could be put to better use. Inspector General’s Message iii Similarly, we have had outstanding results investigating single-family mortgage fraud, tailoring our forensic audit and investigative activities to complement this need, support HUD management, and provide deterrence to potential criminal activity. The rental housing program has been enhanced by the collaboration of the Department with OIG and State and local law enforcement to locate and stop Section 8 rental subsidy fraud. Our investigative and audit focus is concentrating on fraudulent practices and the lack of compliance with Section 8 program requirements. We are conducting 20 external audits of the Section 8 Housing Choice Voucher program during this fiscal year. OIG auditors continue to monitor the Disaster Recovery Assistance funds provided to the City of New York in the wake of the 9-11 attacks. Specifically, we audited the Lower Manhattan Development Corporation and found that it has generally disbursed the Disaster Recovery Assistance funds as directed by the Congress. In closing, I have already stated how proud I am of the men and women of HUD-OIG and their excellent work. I also want to commend those OIG personnel who are activated reservists, serving our country in the armed forces in Afghanistan, Iraq, the Middle East, and elsewhere. They are our strength and our future. I am extremely grateful that America has such fine individuals dedicated to the service of our citizenry. Thank you, Kenneth M. Donohue, Sr. Inspector General Inspector General’s Message Inspector General’s Message iv Information About the HUD Office of Inspector General eginning with fiscal year (FY) 2004, the Office of Inspector General (OIG) instituted a return-on-investment (ROI) computation as one method to measureBB its contribution to the Department’s mission. This measure takes the total dollars of recommended “funds to be put to better use1” and “questioned costs,2” together with “receivables and recoveries 3” from Investigations and Hotline, and divides that total by OIG’s operating costs, including salaries, for the period. The resulting ratio represents the potential amounts that could be realized or better used per dollar of OIG expenditures either during current or future periods. Many factors affect when and how much is actually returned so OIG uses recommended amounts in our ROI calculation, rather than management decisions, to better relate results to the work that was actually done during the period. Much of this period’s ROI results from the annual financial audit finding regarding the need to deobligate $708 million in HUD funds. The majority of contributing factors to the ROI are the results from reviews of external parties who administer or benefit from U.S. Department of Housing and Urban Development (HUD)-funded programs. HUD refers many matters such as these to OIG for audit or investigation, as appropriate. Our target ROI ratio for FY 2005 is set at 8-to-1. This means that for every dollar Congress appropriated to OIG, we should uncover $8 that should be returned or put to AboutInformation Us better use. The budget for FY 2005 is $103,168,000. The ROI in dollars computed on an 8-to-1 ratio would be approximately $825 million. We are pleased to report that for the period of October 1, 2004, to March 31, 2005, our ROI is 28 to 1 – far exceeding a goal of 8-to-1. 1 “Funds to be put to better use” is an item required by Congress and is defined in the Inspector General Act as “ a recommendation by the Office that funds could be used more efficiently if management of an establishment took actions to implement and complete the recommendation, including (1) reductions in outlays; (2) deobligations of funds from programs or operations; (3) withdrawal of interest subsidy costs on loans or loan guarantees, insurance, or bonds; (4) costs not incurred by implementing recommended improvements related to the operations of the establishment, a contractor, or grantee; (5) avoidance of unnecessary expenditures noted in preaward reviews of contractor grant agreements; or (6) any other savings which are specifically identified.” 2 “Questioned costs” are “a cost that is questioned by the Office because of (1) an alleged violation or provision of law, regulation, contract, grant, or cooperative agreement, or other agreement or document governing the expenditure of funds; (2) a finding that at the time of the audit, such cost is not supported by adequate documentation; or (3) a finding that the expenditure of funds for the intended purpose is unnecessary or unreasonable.” 3 “Receivables and recoveries” are based on the total dollar value of (1) criminal cases—the amount of restitution, criminal fines, and/or special assessments based on a criminal judgment or established through a pretrial diversion agreement; (2) civil cases—the amount of damages, penalties, and/or forfeitures resulting from judgments issued by any court (Federal, State, local, military, or foreign government) in favor of the U.S. Government or the amount of funds to be repaid to the U.S. Government based on any negotiated settlements by a prosecuting authority or the amount of any assessments and/or penalties imposed, based on actions brought under the Program Fraud Civil Remedies Act, civil money penalties, or other agency-specific civil litigation authority, or settlement agreements negotiated by the agency while proceeding under any of these authorities; (3) voluntary repayments—the amount of funds repaid on a voluntary basis or funds repaid based on an agency’s administrative processes by a subject of an OIG investigation or the value of official property recovered by an OIG during an investigation before prosecutive action is taken, any of