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Veterans First Did Not Administer or Spend Its Supportive Housing Program Grants in Accordance With HUD Requirements

Due to concerns identified by the U.S. Department of Housing and Urban Development’s (HUD) Office of Community Planning and Development (CPD), we completed a limited scope, spinoff audit of Veterans First and reviewed additional grants not covered in our original audit (2015-LA-1002, issued April16, 2015).  CPD was concerned that HUD funds for two additional grants not reviewed in the first audit were used to cover shortfalls in Veterans First’s U.S. Department of Veterans Affairs (VA)-funded program activities.  The purpose of the spinoff audit was to determine whether Veterans First administered and spent its Supportive Housing Program (SHP) grants in accordance with HUD requirements.   

We found that contrary to HUD requirements Veterans First drew down HUD grant funds in advance and inappropriately diverted those funds, as well as rental revenue specific to each HUD house, to pay off its current VA- and corporate-related expenses.  Our review of two LOCCS draws showed that Veterans First did not incur enough expenses to warrant drawing down so much of its HUD funds, nor did it have enough supporting documentation to show that it incurred costs related to those HUD houses.  As a result, CPD could not be assured that Veterans First used its HUD grants appropriately.  Further, because it did not have sufficient funds for its HUD property obligations.

As a result, we recommend that the Director of HUD Los Angeles Office of Community Planning and Development require Veterans First to (1) Support or repay $49,307 in unsupported costs to the program from non-Federal funds, (2) repay $8,083 in ineligible costs to the program from non-Federal funds, (3) support or repay the program for grant funds of $340,581 that were drawn without being reviewed by HUD, (4) support or repay the June 2015 drawdown of $11,198, and (5) require Veterans First to implement additional procedures and controls for its accounting system.  We also recommend that HUD’s Office of Program Enforcement pursue civil remedies or administrative sanctions against Veterans First and responsible parties for the misuse of HUD funds.