Office of Inspector General, USDA
Washington, D.C.Statement of Ongoing Activity
Joint Initiative Works To
Uncover Fraud and Hazardous
Conditions In Rural Rental Housing
We recently began a joint effort with RHS to uncover program fraud and
hazardous living conditions in the RRH Program. Spearheading this ongoing
initiative are 24 teams—each consisting of an OIG auditor, an OIG
investigator, and a State Rural Development representative—in 12 States.
The RRH Program provides moderately priced multiunit housing to low-income
and elderly persons in rural areas. RHS has more than 18,000 RRH projects
nationwide and provides interest credit and rental assistance subsidies,
totaling about $1.3 billion, to keep the housing affordable. Over the past
few years, OIG and RHS have identified numerous owners/managers and
management companies who fraudulently charge expenses to their projects
while, in many instances, allowing their projects to physically deteriorate.
Because of this, the Office of Management and Budget (OMB) has consistently
identified the RRH Program as having among the highest level of
vulnerability
to fraud and abuse in the Federal Government.
As previously reported, we had recommended that RHS put forth to Congress
legislative proposals to combat misuse of project funds, commonly known as
“equity skimming.” RHS did so, and recent passage of amendments to the
Housing Act of 1949 enabled the Inspector General and the Under Secretary
for
Rural Development to take aggressive action to identify and refer for
prosecution those who engage in this illegal activity.
Regulations permit owners of RRH projects to use independent management
companies or to form management companies (identity-of-interest companies)
to
manage and provide services to their own projects. We are focusing our
continuing reviews on projects where an identity-of-interest exists between
a
project’s owner and manager or between the management company and its wholly
owned maintenance company.
NOTE: My preliminary understanding is that the Agency is intent upon
Borrowers/Management Agents being dealt with in “enforcement proceedings.”
This can range from OIG Audits, to OIG Investigations, to prosecution, and
debarment.