Office of Investigations

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					   Summit on Housing
Neighborhood Stabilization

       Washington, DC
      October 7 & 8, 2008
• 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
   “Identifying, Prosecuting, and
Preventing Fraud in HUD Programs”
 • Auditors & Agents
       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
          OIG Strategic Plan
• Align directly and support HUD’s plan

• Contribute to resolving significant issues
  raised or confronted by HUD and our

• Assist HUD in resolving its “Major
  Management Challenges”
HUD Inspector General
  Office of Audit
              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
        Annual Audit Objective

 Focus resources on areas of greatest benefit
  and risk to our customers
      HUD Management
      HUD Stakeholders
    Neighborhood Stabilization
• 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
         Office of Audits Plan
• Due to the high risk, we plan to:
  – Perform grantee audits
  – Monitor HUD’s oversight of the program and
  – Respond to OIG Hotline Complaints
  – Review proposed program and monitoring
   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,

 Grantee’s lack of administrative capacity to carry out the
  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
           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
        Conflicts of Interest
Procurement of services

Purchase and sale of foreclosed homes

Bulk purchases and sale
      OIG Review of Program
 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
 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.
  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
• We plan to get the word out for constituents to
  contact the OIG Hotline and report:



Office of Investigation
     Inspector General Mission
Conduct independent and objective audits
 and investigations.

Prevent waste, fraud, and abuse.

Promote economy, efficiency, and

Review pending legislation, and regulation.

Keep agency head and Congress informed.
        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
       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.
• Federal law enforcement and regulatory
• Federal prosecutors.
• State and local law enforcement.
• State regulators.
• 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
       Meeting Emergent Issues

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

              • Fraud
              • Waste
              • Abuse
• Criminal, Civil and Administrative
       Potential Criminal Issues
•   Public Corruption    •   Theft
•   Bribery              •   False Statements
•   Extortion            •   Contract Steering
•   Kickbacks            •   Conspiracy
•   Embezzlement         •   Mail Fraud
•   Diversion of Funds   •   Wire Fraud
•   Money Laundering     •   Bid Rigging
   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.
     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
 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.
• 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.
          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.
         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
• Manage Risk
• Set and maintain ethical standards
                Our Goal

• Our mutual goal is to provide safe, decent
  and affordable housing in our communities.
       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
          Internet Web Sites
• Office of the Inspector General Locations:
• Semi-annual Reports to the Congress:

Questions ?