Raleigh, N.C. — The North Carolina Housing Finance Agency misused federal money meant to help homeowners rework their mortgages after the recession, according to a government watchdog.
The Office of the Special Inspector General for the Troubled Asset Relief Program, commonly known as TARP, found more than $3 million in wasteful spending from the program's "Hardest Hit Fund" in housing agencies nationwide, including more than $107,000 in North Carolina, officials said.
The N.C. Housing Finance Agency disputes the findings but has already begun paying the money back, executive director Scott Farmer said Wednesday.
"Congress did not authorize TARP dollars for barbeques, steak and seafood dinners, gift cards, flowers, gym memberships, employee bonuses, litigation, celebrations, cars and other unnecessary expenses of state housing agencies," Special Inspector General Christy Goldsmith Romero said in a statement. "Some state housing agencies are more willing to keep TARP dollars for themselves than distribute it to low-earning homeowners, a violation of TARP contracts and inconsistent with TARP law."
Congress funded TARP in 2008 as the U.S. housing market was collapsing during the recession to help people modify their mortgages and fend off foreclosure. The money was restricted to "necessary expenses" to help with loan modifications.
Although waste and abuse in several other states dwarfed what federal auditors found in North Carolina, they cited the N.C. Housing Finance Agency for a business culture that used TARP funds as an ATM card. The agency received $482 million from the Hardest Hit Fund, or HHF, in 2010 after years of operating a much smaller program, according to the audit.
"The culture at the North Carolina agency was that officials could use almost any justification to charge TARP for barbeques, parties, celebrations, restaurant outings, gifts, gym memberships, regular employee meals and employee cash bonuses," the audit states.
Among the 14 pages of improper spending listed are the following charges:
- About $2,750 for four lunches for dozens of staffers and U.S. Treasury Department employees catered by Clyde Cooper's Barbeque
- $734 for a steak and seafood dinner for 18 employees at Winston’s Grill and $183 for lunch for 11 staffers at the Fox and Hound to celebrate the opening of the HHF program
- $348 for a staff picnic for employees and their families on a Saturday, with TARP even paying for a piñata and candy to fill it for the children
- $1,113 for shirts from Land’s End with the agency logo for employees and contractors who attended events "so they could be easily identified"
- $666 for a 2011 holiday lunch at The Square Rabbit for about 60 people, as well as $59 in pizza for staffers who couldn't attend the party
- $8,580 for gym memberships for six staffers
- $15,841 in cash bonuses to three employees
- $2,901 for fast food for employees who worked through breakfast or lunch hour or on a weekend
- About $850 in gift cards, flowers, balloons and other "employee morale" perks.
The inspector general report said the federal government needs to claw back the misspent money from states.
Farmer said the expenses were "miscategorized," not misused. Still, he said, the N.C. Housing Finance Agency has already repaid half questioned spending and is reviewing the remainder.
"We’ve worked our best to make the program work and stand it up and be something that the state’s proud of," he said. "Our agency is proud of our outcome. It's proud of the work we’ve done. It's unfortunate this has happened. We’ve addressed it as quickly as we can. We’ve repaid a portion, and we intend to repay any other amounts the Treasury feels it's appropriate for us to repay."
Dion Boone was on the brink of losing her home several years ago when she applied for TARP funding and received a $35,000 loan to be able to stay in her home.
"It was a relief for me, this program," Boone said.
So, she was stunned by the audit's findings.
"I was angry. I was hurt. I was disappointed," she said. "Do you know how many families that could have helped? I say shame on them. I say shame on them."
No homeowners were denied funds because of the questioned expenditures, Farmer said, noting that the N.C. Housing Finance Agency's administrative budget different is separate from its aid budget.
"There's a certain amount of shock and disappointment," he acknowledged when told of Boone's reaction to the audit. "The thing we have is a better perspective. We know where our agency is. Nobody here was intending to do anything wrong."