HUD became aware of the financial problems of HACC when the staff of the Office of Public Housing, Pennsylvania State Office, met with representatives of HACC on October 2, 2000. 

HACC requested the meeting to discuss its declining Public Housing and Section 8 reserves and a shortfall in Hope VI funds. A HUD technical review was performed in October 2000 and the results were discussed with the HACC on November 20, 2000. At that time HACC was advised to immediately stop funding the private development company with Public Housing and Section 8 funds. On February 26, 2001 HACC advised HUD that it defaulted on a $500,000 line of credit/loan, which was taken out for the private development company, and the bank seized the $400,000 Certificate of Deposit (Comprehensive Grant Funds) that was used as collateral for the loan. By letter dated February 28, 2001, HUD notified HACC to take several actions that included to discontinue making payments to HACC's development projects, its consultants and to reimburse the Section 8 and Low Income Public Housing Programs.

On August 3, 2001 OIG assistance was requested and Management provided copies of HUD's Troubled Agency Recovery Center North (TARC) detail assessment report, dated June 20, 2001, on the HACC's operation, and KPMG's Consulting Draft Assessment Report, dated August 10, 2001, on the nature and depth of the private developments' problems.