The Treasury Department is investigating the expenditures of housing agencies in 18 states and the District of Columbia that used federal funds aimed at bailing out homeowners in danger of losing their properties to foreclosure, alleging that some misspent the money and will have to repay it.
So far, the Treasury’s Office of Special Inspector General has identified $3 million in questionable expenses that include bonuses, barbecues and a vehicle allowance. But Treasury officials say that a review of the expenses is ongoing, and that the figure could increase or even decrease because some housing agencies are disputing the charges.
The allegations are contained in a 93-page audit that Treasury’s inspector general issued in August on the Troubled Asset Relief Program (TARP), which the government established in 2010 during the Great Recession.
The audit focuses on TARP’s Hardest Hit Fund, a $9.6 billion program that provides financial assistance and counseling to homeowners in D.C. and the 18 states at risk of losing their property. Each program is overseen by those states’ housing finance agencies and is required to provide reports and financial statements to Treasury.
“Every dollar that’s spent on something that’s not necessary is a dollar more that a taxpayer has to spend,” Special Inspector Christy Goldsmith Romero said in a phone interview. “Or a dollar that could go to homeowners. So we are taking the strict view because that’s the strict view that’s required by law.”
“We are committed to working with the states administering Hardest Hit Fund programs to ensure that taxpayer funds are used responsibly and to prevent waste and abuse,” a Treasury Department spokesman said in a statement. “Treasury is actively reviewing state expenditures and will seek to recover any that violated program requirements so that they can be deployed to prevent avoidable foreclosures and stabilize neighborhoods.”
The inspector general is scrutinizing use of TARP funds by Alabama, Arizona, California, D.C., Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina and Tennessee.
Treasury has demanded that Nevada and North Carolina repay some unauthorized expenses, according to the inspector general’s office. But neither the audit nor Treasury officials specify whether all or just some of the 18 states and D.C. have misspent TARP funds and are being asked to repay them. They also don’t detail how much has been repaid so far.
The report criticizes the D.C. Housing Finance Agency’s handling of a data storage system used to manage its HomeSaver program. According to the audit, D.C. hired a contractor named CounselorDirect to manage the online application for the program. D.C., according to the audit, charged $258,333 to TARP to prepay five years’ worth of data storage and access after the program had shut down. TARP regulations require programs to retain records for only three years, according to the audit.
D.C.’s housing agency disputes the claim that the program had shut down, saying in a statement to The Post: “The Agency’s HomeSaver Program did not shut down in 2013 and instead a new tax lien extinguishment program (HomeSaver Phase II) was rolled out while the unemployment and underemployment program was concluding. In fact, the Agency’s HomeSaver Program is still active and the Agency continues to close and fund HomeSaver loans.”
The inspector general also questioned the large amount of TARP dollars spent on meals. According to the audit, approximately $200 was charged to TARP for a continental breakfast with Treasury and $964 was charged for two continental breakfasts and snacks during training sessions for about two dozen housing counselors.
For its part, the D.C. housing agency said in its statement that the counselors spent several hours on site and that the training was useful.
Goldsmith Romero launched the investigation on the recommendation of Sen. Charles E. Grassley, R-Iowa, who was concerned about unauthorized spending in Nevada’s Hardest Hit Fund program. The state so far has had to repay approximately $82,000 for such expenditures as bonuses to the former chief executive and a $500-a-month vehicle allowance for the same CEO.
Moreover, the audit asserts that officials from the Nevada Affordable Housing Assistance Corp., the subcontractor hired to carry out the program, used TARP funds for some meals and legal expenses that should not have been charged to the program.
“Goldsmith [Romero]’s job is the result of some things I have learned over a couple decades in Congress,” Grassley said in a phone interview. “You’ve got to have somebody to watch out for taxpayer money.”
Michael Holliday, chief financial officer of Nevada’s Housing Division, said in an interview that the agency is cooperating with Treasury.
“We feel really confident that, yeah, they did some dumb things,” Holliday said. “I don’t think any of them were done out of bad intent. I think it was just bad decision-making. But everyone feels really good that they’ve turned over every stone.”
Of the more than $11,000 in questionable meal expenses, North Carolina officials spent $2,749.69 of TARP funds for four catered barbecues that served 50 to 60 people at three of the events and 90 people at the fourth, including Treasury officials, according to the audit. It also asserts that North Carolina spent more than $7,000 in bonuses to employees.
“We repaid some of the expenses and we’re reviewing additional expenses to determine if any others should be allowable or unallowable under the federal program,” said Scott Farmer, executive director of the North Carolina Housing Finance Agency. “We did repay a good portion of those meals.”
Farmer said his agency is reviewing whether some of the more than $7,000 in expenses for bonuses actually may have been extra hours for staff that are allowable but were categorized incorrectly.
The Inspector General’s office also plans to investigate other expenses that the 18 states and D.C. incurred relating to travel and conferences.