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Cook county

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Cook county

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  1. Cook county Chicago, Illinois November 2, 2009

  2. U.S. Housing & Urban Development Office of Inspector General Barry McLaughlin, SAC Ray Espinosa, ASAC Brad Geary, ASAC

  3. Inspector General: Mission • Independent audits and investigations. • Prevent waste, fraud, and abuse. • Promote economy, efficiency, and effectiveness. • Review pending legislation, and regulation. • Keep Congress informed.

  4. Inspector General: Authorized • Records & 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. Special Agents are trained at the FLETC and have federal law enforcement authority and powers. • HUD-OIG conducts investigations on a complex array of HUD programs. • HUD-OIG strives to become the “Gold Standard” for the investigations of housing and mortgage fraud.

  6. Investigations • Follow CIGIE Investigative Standards. • Reports provided to Department of Justice, or HUD management (misconduct). • Systemic control weaknesses identified during an investigation are referred to HUD.

  7. Investigations • Reactive to allegations. • Scope may be undetermined at onset. • Confidential with no formal notification. • Investigation information “secret.” • Interviews: complainants, witnesses, subjects, or employees.

  8. 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 (See HUD handbook 2000.3 REV-4 Chapter 3)

  9. Role of Office of Inspector General • Intake. • Preliminary inquiries. • Prove/disprove allegations. • Analysis. • Investigation. • Interviews. • Records. • Reports • Prosecution. • Testify.

  10. OIG Priorities FY-2010 1. Mortgage Fraud. 2. Recovery Act Fraud. 3. Neighborhood Stabilization / CPD Fraud. 4. Multi-Family Fraud.

  11. Executive Summary • U.S. organizations lose 7% of their annual revenues to fraud. • Median loss $175,000. • Losses over $ 1 million  + 25 % • Typical fraud in study  + two years

  12. Executive Summary • Most Common Fraud: • Corruption (27%) • Billing schemes (24%) • Most Costly • Financial statement fraud (median loss of $2 million) among the 99 financial misstatements in this Report.

  13. Executive Summary • Anti-fraud controls impact an organization’s exposure to fraud. • Industries most victimized: • Banking and financial services (15% of cases) • Government (12%) • Healthcare (8%).

  14. How Fraud is Committed Breakdown of All Occupational Fraud Schemes — Frequency3 3The sum of percentages in this chart exceeds 100 percent because several cases involved multiple schemes from more than one category.

  15. Victim Organizations Fraud Schemes - Government Public Administration (106 cases)12 12The sum of percentages in this chart exceeds 100 percent because several cases involved multiple schemes from more than one category.

  16. Detection of Fraud Schemes Initial Detection Method by Organization Type8 8The sum of percentages in this chart exceeds 100 percent because in some cases respondents identified more than one detection method.

  17. Detection of Fraud Schemes Percent of Tips by Source9 9The sum of percentages in this chart exceeds 100 percent because in some cases respondents identified more than one source of the initial tip.

  18. Victim Organizations Internal Controls Modified or Implemented in Response to Fraud

  19. The Perpetrators

  20. About the ACFE The ACFE is the world’s premier provider of anti-fraud training and education. Together with nearly 50,000 members in more than 125 countries, the ACFE is reducing business fraud worldwide and providing the training and resources to fight fraud more effectively. Founded in 1988 by Joseph T. Wells, CFE, CPA, the ACFE proudly celebrates its 20th anniversary as the leader in the global fight against fraud.

  21. Housing Fraud Schemes • Zero income • Under reporting • Property owner • Landlord &Tenant • Straw Landlord • Straw Tenant Bribes Gangs Drugs Guns Money Laundering

  22. CPD Fraud Schemes • Use of HUD funds • Cars • Clothes • Vacations • Kid’s Tuition • Condos • Reporting Over/Under Embezzlement Gangs Drugs Guns Money Laundering

  23. American Recovery and reinvestment act - 2009 Overview

  24. COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) • $1 Billion – By Formula - Done • Standard CDBG Eligible Activities Including: • Acquisition, Code Enforcement, Demolition, Rehabilitation, Construction, Public And Social Services, Planning And Capacity Building, Nonprofit Development, Economic Development, Relocation, Ta, Housing And Homeownership Assistance • Bid-based Contracts w/in 120 Days • HUD Must Establish Requirements To Expedite Use Of Funds

  25. NEIGHBORHOOD STABILIZATION PROGRAM (NSP) • $2 Billion - competitive • States, local governments, non-profits (consortia of non-profits who can partner with for-profits) • Purchase, rehabilitate, re-occupy foreclose homes, including financing, land banking and demolition • HUD NOFA w/in 75 days – mid-July; must obligate all funds w/in one year 2/17, 2010 • Applications due 75 days after solicitation • Recipients must spend 50% w/in 2 years; 100% w/i 3 years • No demolition of public housing • Added tenant protections for renters in acquired foreclosed property

  26. Recovery and Transparency Board OVERVIEW

  27. RAT Board The Board is responsible for coordinating and conducting oversight of Federal spending under the Recovery Act to prevent waste, fraud, and abuse. • Members: Earl Devaney, Chair and other designated IGs • Functions: Monitor the accountability objectives established by the Recovery Act • Reports: Submitted to the President, Congress and the Senate/House Appropriations Committees • Flash • Quarterly • Annual • Website

  28. Recovery Accountability & Transparency Board • OMB will coordinate Recovery Act activities until the Recovery Accountability and Transparency Board is in place. • OMB will support the Board in its oversight of Recovery Act implementation, including working with agencies to meet full performance of the accountability objectives. • The Board is responsible for coordinating and conducting oversight of Federal spending under the Recovery Act to prevent waste, fraud, and abuse. • The Board will monitor the accountability objectives established by the Recovery Act.

  29. Recovery Accountability and Transparency Board The Board will establish and maintain a user-friendly and public website containing: • Materials explaining what Act means to citizens • Accountability information , including findings from audits, Agency IGs, and GAO • Data on relevant economic, financial, grant and contract information • Detailed data on awarded contracts that expend funds including information on competitiveness and process used for contract award., and summaries for contracts over $500,000. • Printable reports on covered funds obligated by month to each state and congressional district • A method for public feedback on contract performance

  30. Recovery Accountability and Transparency Board(Website) The Board will establish and maintain a user-friendly and public website containing: • Detailed information on Federal contract/grant expending funds, including data elements required with Federal Funding Accountability and Transparency Act of 2006. Aggregate reporting for awards below $25,00 or to individuals • A link to estimate of jobs sustained/created by Act • A link to information on announcements of grant competitions and solicitations for contracts to be awarded • Links to other state and government websites with info on covered funds

  31. Recovery Accountability and Transparency Board(Website) The Board will establish and maintain a user-friendly and public website containing: • The plan from each federal agency using covered funds • Info on Federal allocation of formula grants & awards of competitive grants using covered funds. • Info on Federal allocations of mandatory & other entitlement programs by State, country of geographical unit. • Job opportunities organized by location, and links to accessing job opportunities, with local employment agencies, State job banks, Labor Dept Career One Stop website, state, local and other public agencies plus contracted private firms receiving Federal funding

  32. 1.2 Accountability Objectives • Funds awarded/distributed in prompt, fair, and reasonable manner • Uses and benefits of funds are reported clearly, accurately, timely and are transparent to the public • Fraud, waste, abuse and errors are mitigated • Funded projects avoid cost overruns and delays • Program goals are achieved with specific outcomes and improved results

  33. Risk Management For individual programs receiving Recovery Act funds, risk assessment includes: • Existing internal controls are sufficient to adequately mitigate the risk of fraud, waste, and abuse • Agencies must have defined strategies, developed with input from the Inspector General for the agency, to prevent or timely detect waste, fraud, or abuse. • Possible performance issues with (potential) funding recipients • Leading or lagging indicators (error measurements) to monitor ongoing program performance

  34. 4.17 Do Inspectors’ General need to follow special rules in reporting their own Recovery Act spending ? Yes. • Separately report obligations associated with oversight of Recovery Act programs. The Recovery Act includes provisions that provide supplemental funding to some IGs to carry out additional oversight of activities funded by the Act. • Report these funds separately in their budget execution reports and submissions to Recovery.gov. • Report other funds not provided through the Recovery Act that are used to monitor Recovery Act programs in their agency .

  35. Are Federal agencies expected to initiate additional oversight requirement for grants (Sec 5.4) and loans/loan guarantee (Sec 7.4) under the Recovery Act Performance Management and Accountability Agencies in consultation with the Inspectors General, shall establish procedures to validate the accuracy of information submitted on a statistical basis and/or risk based approach as approved by OMB. Internal Controls Assessment Consistent with normal practices, agencies must use appropriate internal control assessments to assess the risk of program waste, fraud, and/or abuse. Using the aforementioned risk assessments, agencies must have defined strategies, developed with input from the Inspector General for the agency, to prevent or timely detect waste, fraud, or abuse.

  36. 5.9 Are there terms and conditions, beyond standard practice, that must be included under the Recovery Act? • Each grantee or sub-grantee awarded funds made available under the Recovery Act shall promptly refer to an appropriate inspector general any credible evidence that a principal, employee, agent, contractor, sub-grantee, subcontractor, or other person has submitted a false claim under the False Claims Act or has committed a criminal or civil violation of laws pertaining to fraud, conflict of interest, bribery, gratuity, or similar misconduct involving those funds. • Competitive and formula grant agreements • Loans and loan guarantee agreements

  37. ACCOUNTABILITY AND TRANSPARENCY Act Section 1514 INSPECTOR GENERAL REVIEWS • Any inspector general of a Federal department or executive agency shall review, as appropriate, any concerns raised by the public about specific investments using funds made available in this Act. • Any findings of such reviews not related to an ongoing criminal proceeding shall be relayed immediately to the head of the department or agency concerned. • In addition, the findings of such reviews, along with any audits conducted by any inspector general of funds made available in this Act, shall be posted on the inspector general’s website and linked to the website established by section 1526, ( RAT Board website)

  38. ACCOUNTABILITY & TRANSPARENCY • Semi-annual Report On Extensions. The inspector general shall include in semi-annual reports to Congress a list of those investigations for which the inspector general received an extension. • Semi-annual Report. The inspector general shall include in semi-annual reports to Congress a list of those investigations the inspector general decided not to conduct or continue under this paragraph. Section 1553 Protecting State And Local Government And Contractor Whistleblowers.

  39. Red Flags of Mortgage Fraud

  40. Top Ten States for Mortgage Fraud

  41. MARI Industry wide Mortgage Fraud Results/Projections

  42. Red Flags - Application • Unsigned or Undated • Power of Attorney • Source of down payment • High income – No personal property • P.O. Box for employer • No debt • Borrower’s age – v – Employment • Patterns from broker / seller • Education – v- Profession • No primary residence

  43. Red Flags – Credit Report • No credit history / Alias / Multiple SSN • Debt reported – v – Credit report • High income but uses finance companies • Inconsistent employment info • Credit bureau alerts • Similar reports between borrowers • UTL at work address

  44. Red Flags – Title Insurance • Seller not on title • Buyer has pre-existing interest in property • Chain of title includes buyer / realtor / broker • Mailed to 3rd party other than lender • Income / property tax liens • Faxed documents – v – Original / Cert. copy

  45. Red Flags - VOD • Completed same day • Deletions • No deposit accounts listed, but in file • Deposit account with rounded numbers • Deposit account insufficient to close • Bad signature • Young / Low Income with large cash • Closing check drawn on diff bank

  46. Red Flags – VOE • Similarities in names – borrower /seller • Inappropriate source • Not on original letterhead or standard form • Completed same day ordered • Bad signature • P.O. Box only • Employer out of town • Excessive praise • Rounding of dollar amounts • Faxed documents

  47. Our Address Barry McLaughlin Special Agent in Charge U.S. HUD Office of Inspector General 77 West Jackson Blvd. Room 2646 Chicago, Illinois 60604 (312) 913-8634

  48. Questions ? Thank you.