Audit finds $1.2M in ‘unnecessary expenses’ at RI Housing

A sign outside Rhode Island Housing's headquarters in downtown Providence. (photo: WPRI/John Villella)

PROVIDENCE, R.I. (WPRI) – Rhode Island Housing is one of 19 agencies throughout the country accused of misusing $3 million in federal funds earmarked for homeowner relief, according to an audit released last month by the office of the special inspector general for the Troubled Asset Relief Program (SIGTARP).

The 93-page audit identified $1.2 million in unnecessary expenditures by Rhode Island Housing, including funds spent on a new customer center, severance payments for former employees and marketing costs.

“Every dollar spent on unnecessary expenses is a dollar that is no longer available for homeowner assistance,” the audit states.

Congress created the $400-billion Troubled Asset Relief Program (TARP) in 2008 as a way stimulate economic growth and prevent home foreclosures during the Great Recession. The audit focused on TARP’s Hardest Hit Fund (HHF), a program created in 2010 that was designed to assist communities deeply affected by the subprime mortgage crisis.

Rhode Island Housing had received $69 million from the Hardest Hit Fund to support 3,300 borrowers as of April, according to its most recent quarterly report. Nearly $11 million was spent on administrative support, outreach and counseling. Funding for the Hardest Hit Fund was halted in 2013, but an additional round of aid was approved in 2016.

The audit claims the agency charged TARP $1 million for rent backdated for years when the Hardest Hit program was closed to new applicants as well as the build-out of a customer service center, operating expenses and online system expenses. The special inspector general’s office said the agency “should, at a minimum, reimburse TARP for any portion of these expenses not related to HHF.”

Emily Martineau, a spokesperson for Rhode Island Housing, said the agency “strenuously disagrees with the characterization of the expenses outlined” in the audit. She said Rhode Island Housing “has consistently been a diligent and conscientious steward of Hardest Hit Fund funding.”

Martineau said all expenses questioned in the audit were approved by the U.S. Treasury Department, which has the final say over how funds can be spent. She also disputed the audit’s claim that the agency has reimbursed the federal government for nearly $40,000, arguing that the reimbursements were unrelated to the report.

In a memo dated Sept. 1, Rhode Island Housing said the auditor’s “overly strict, bureaucratic approach to determine whether a particular expense is eligible for reimbursement under HHF is unjustified and unworkable.”

The memo also outlined Rhode Island Housing’s response to all of the questioned expenses, suggesting it was appropriate to charge for the build-out for the customer service center because the new round of federal funding created a need for the space. The agency also said expenses associated with the customer center “were needed to help inform new and existing program participants as well as partners about the second phase of funding and the new customer center location.”

Martineau said it is unclear how the appeal process will work, but the U.S. Treasury will likely “ask us to support each expenditure separately, which we have already largely completed.”

“Given our outstanding performance on this project, Treasury’s historic approach in these matters and the minor dollar amounts involved here in Rhode Island, we expect that most, if not all, of the expenditures will be deemed appropriate,” she said.

The audit comes months after Providence City Councilwoman Jo-Ann Ryan filed suit against Rhode Island Housing, alleging that the agency fired her after she raised questions about the Hardest Hit Fund. The agency has said Ryan was terminated because she was conducting city business during work hours.

The two sides are expected to appear in court later this month.

“Many of these expenses were the same wasteful expenditures that I brought to the attention of RIH management, shortly before I was fired without notice,” Ryan said in a statement. “As I alleged in my whistleblower lawsuit against RIH, I was retaliated against for reporting this egregious waste.  Potentially thousands of Rhode Islanders who needed HHF assistance have gone unaided due to this malfeasance.”

Martineau declined to comment on Ryan’s statement, citing the ongoing lawsuit.

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Dan McGowan ( dmcgowan@wpri.com ) covers politics, education and the city of Providence for WPRI.com. Follow him on Facebook and Twitter: @danmcgowan

Walt Buteau (wbuteau@wpri.com) is a Target 12 investigative reporter for WPRI 12 and Fox Providence. Follow him on Twitter and on Facebook.