[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                    OVERSIGHT OF HUD'S HOME PROGRAM

=======================================================================


                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 3, 2011

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 112-36



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                   SPENCER BACHUS, Alabama, Chairman

JEB HENSARLING, Texas, Vice          BARNEY FRANK, Massachusetts, 
    Chairman                             Ranking Member
PETER T. KING, New York              MAXINE WATERS, California
EDWARD R. ROYCE, California          CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma             LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas                      NYDIA M. VELAZQUEZ, New York
DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
JUDY BIGGERT, Illinois               BRAD SHERMAN, California
GARY G. MILLER, California           GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
JOHN CAMPBELL, California            JOE BACA, California
MICHELE BACHMANN, Minnesota          STEPHEN F. LYNCH, Massachusetts
THADDEUS G. McCOTTER, Michigan       BRAD MILLER, North Carolina
KEVIN McCARTHY, California           DAVID SCOTT, Georgia
STEVAN PEARCE, New Mexico            AL GREEN, Texas
BILL POSEY, Florida                  EMANUEL CLEAVER, Missouri
MICHAEL G. FITZPATRICK,              GWEN MOORE, Wisconsin
    Pennsylvania                     KEITH ELLISON, Minnesota
LYNN A. WESTMORELAND, Georgia        ED PERLMUTTER, Colorado
BLAINE LUETKEMEYER, Missouri         JOE DONNELLY, Indiana
BILL HUIZENGA, Michigan              ANDRE CARSON, Indiana
SEAN P. DUFFY, Wisconsin             JAMES A. HIMES, Connecticut
NAN A. S. HAYWORTH, New York         GARY C. PETERS, Michigan
JAMES B. RENACCI, Ohio               JOHN C. CARNEY, Jr., Delaware
ROBERT HURT, Virginia
ROBERT J. DOLD, Illinois
DAVID SCHWEIKERT, Arizona
MICHAEL G. GRIMM, New York
FRANCISCO ``QUICO'' CANSECO, Texas
STEVE STIVERS, Ohio
STEPHEN LEE FINCHER, Tennessee

                   Larry C. Lavender, Chief of Staff


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 3, 2011.................................................     1
Appendix:
    June 3, 2011.................................................    57

                               WITNESSES
                          Friday, June 3, 2011

Heist, James A., Assistant Inspector General for Audit, Office of 
  Inspector General, U.S. Department of Housing and Urban 
  Development....................................................    11
Marquez, Hon. Mercedes M., Assistant Secretary, Community 
  Planning and Development, U.S. Department of Housing and Urban 
  Development....................................................    10

                                APPENDIX

Prepared statements:
    Heist, James A...............................................    58
    Marquez, Hon. Mercedes M.....................................    68

              Additional Material Submitted for the Record

Baca, Hon. Joe:
    Written responses to questions submitted to James A. Heist...   102
    Written responses to questions submitted to Hon. Mercedes M. 
      Marquez....................................................   104
Frank, Hon. Barney:
    Letter from various undersigned housing organizations........   106
Velazquez, Hon. Nydia M.:
    Letter to Hon. Barney Frank from Thomas M. Menino, Mayor of 
      Boston, Massachusetts......................................   109
    Letter to Hon. Spencer Bachus and Hon. Barney Frank from the 
      Local Initiatives Support Corporation (LISC) et al.........   111
    Letter to Hon. Spencer Bachus and Hon. Barney Frank from the 
      National Association of Home Builders (NAHB)...............   115
    Letter to Hon. Spencer Bachus and Hon. Barney Frank from NID 
      Housing Counseling Agency..................................   117
    Letters to various Members of Congress from Michael A. 
      Nutter, Mayor of Philadelphia, Pennsylvania................   119
    Letter to Hon. Spencer Bachus and Hon. Barney Frank from 
      Stewards of Affordable Housing for the Future (SAHF).......   131
    Letter to Hon. William Lacy Clay from Francis G. Slay, Mayor 
      of St. Louis, Missouri.....................................   134


                    OVERSIGHT OF HUD'S HOME PROGRAM

                              ----------                              


                          Friday, June 3, 2011

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 9:30 a.m., in 
room 2128, Rayburn House Office Building, Hon. Spencer Bachus 
[chairman of the committee] presiding.
    Members present: Representatives Bachus, Hensarling, Royce, 
Biggert, Capito, Garrett, Neugebauer, Pearce, Posey, 
Fitzpatrick, Luetkemeyer, Huizenga, Duffy, Hayworth, Renacci, 
Hurt, Dold, Schweikert, Grimm, Canseco, Stivers, Fincher; 
Frank, Waters, Maloney, Gutierrez, Velazquez, Capuano, 
Hinojosa, Baca, Scott, Green, Cleaver, Carson, and Carney.
    Chairman Bachus. This hearing of the Financial Services 
Committee will come to order.
    Without objection, all members' opening statements will be 
made a part of the record.
    And the Chair recognizes himself for an opening statement.
    The HOME Investment Partnership Program is the Federal 
Government's largest housing construction program for the poor. 
Administered by the Department of Housing and Urban 
Development, it is intended to make decent, affordable housing 
available to low-income Americans. The Washington Post reports 
the program is ``dysfunctional, and hundreds of millions of 
taxpayer dollars have been squandered due to mismanagement, 
waste, and fraud.''
    The purpose of today's hearing is to provide HUD with an 
opportunity to respond to these allegations and to explain how 
taxpayers' money is being protected.
    I will point out that the allegations are of programs and 
failures that go back at least two or three Administrations. So 
it is not a matter from this Administration or even the prior 
Administration; most of it has been in years past. Assistant 
Secretary Marquez, who will testify before us today, started in 
2009; is that correct?
    According to the Washington Post report, HOME delivers 
billions of dollars to local housing agencies with what they 
say are few rules or safeguards in place and no reliable way to 
track how money is spent on various projects. We want to hear 
what HUD is doing to ensure program participants are being held 
accountable, and whether new legislative authority is needed to 
strengthen HUD's ability to manage the HOME Program.
    The HUD Office of Inspector General has likewise reported 
serious problems with HOME. Over the past 5 years, the IG's 
audits uncovered failures with HUD's administration of HOME 
formula block grants and identified numerous other deficiencies 
in HUD's management of the program. The committee will want to 
hear from HUD what changes have resulted from the IG audit, 
particularly what, if anything, is being done to recover funds 
if the project is not completed or does not meet the program 
requirements. And I can tell you that just from conversations 
with Members, they obviously want every path pursued to recover 
money that can be recovered legally.
    Unfortunately, the HOME Program has been exploited by 
schemers and crooks. Between 2004 and 2011, dozens have been 
convicted or indicted for criminal misuse of HOME funds, 
including elected officials, directors of housing authorities 
and nonprofit organizations, developers, landlords, and 
tenants. Our witnesses at today's hearing will be asked to 
explain what is being done to prevent this kind of malfeasance 
as the program continues.
    These problems, as I said, span multiple Administrations, 
and I have been encouraged in all my conversations with 
Secretary Donovan and others at HUD--including our witnesses 
today--that there is a determination at the agency to correct 
these problems.
    Let me mention three steps that must be taken, and I think 
we will hear testimony from Assistant Secretary Marquez that 
this will be pursued: first, that the contracts require 
repayment for failed projects or misspent funds; second, that 
those who defraud the government are pursued vigorously; and 
third, that eligibility requirements for developers are 
substantially tightened.
    HUD must ensure that every dollar dedicated to affordable 
housing is used responsibly, and any misused and 
misappropriated funds are promptly repaid. I look forward to 
hearing from the Assistant Secretary and Assistant Inspector 
General about the steps the Department is taking to ensure 
taxpayers are adequately protected from waste, fraud, and 
abuse.
    In my last 24 seconds, let me say, I know there has been an 
emphasis that the Federal Government has recovered their funds 
from the participating jurisdictions, and I know Prince 
George's County was described in the paper, but that, I think, 
does not excuse the agency or the Congress from--because that 
is taxpayer money that taxpayers in Prince George's County or 
others lost. So I think it is our ultimate responsibility in 
any Federal program not to just have the money reimbursed, but 
to see that it is not misappropriated.
    So, with that, I recognize Mrs. Maloney for 2 minutes.
    Mrs. Maloney. I thank the chairman for recognizing me and 
for holding this important hearing, and I welcome the panelists 
today.
    And I would say that HUD's HOME Program is incredibly 
important to the City of New York, which I am honored to 
represent. As you stated, Mr. Chairman, it is a block grant 
program to local communities, and local communities have used 
that money to leverage it with the private sector to build 
affordable housing. In New York City, over 16,000 units have 
been renovated under the program since it began in 1992, and I 
have examples of how it has helped in neighborhoods across the 
city that I represent. It is an important program to the 
families who are benefiting from these 16,000 units, and it 
also creates jobs to rehab, to build, to design, and these are 
real jobs for real people. It benefits localities, both 
directly and indirectly, and it represents an example of 
public-private partnership, leveraging dollars to build 
affordable housing.
    I share the chairman's concern that any mismanagement 
should be taken care of, or any malfeasance, but it is a good 
program that should continue. And I agree with the words from 
the New York City HPD Commissioner, who wrote back to the 
Washington Post, and he said, ``Many more successes are 
directly attributable to the HOME affordable housing program 
than there are failed projects.''
    So I believe our challenge is to make sure this program 
continues and continues while rehabbing affordable housing, 
leveraging dollars into our communities, and helping with our 
economic development. I certainly hope that this does not turn 
into an attempt by my good friends on the other side of the 
aisle to terminate a very worthy program, like they did the FHA 
program and the HAMP program, because this is successful. It is 
working.
    My time is up. Thank you.
    Chairman Bachus. I thank the gentlelady.
    Mrs. Biggert is recognized for a minute-and-a-half.
    Mrs. Biggert. Thank you, Chairman Bachus, and thank you for 
scheduling this hearing.
    Today, we are investigating HUD's administration of the 
HOME Program, the government's largest affordable housing and 
construction program. Recent press articles point to 
mismanagement of HOME, citing waste, fraud, and abuse of 
possibly billions of taxpayer dollars. I think it is incredible 
to think that billions in taxpayer dollars have been handed out 
with little or no accountability and may have failed to help 
hundreds of thousands of families seeking shelter.
    Meanwhile, our over $14 trillion national debt continues to 
grow. And who has HOME money, how much, for what purpose was it 
used? I think the taxpayer dollars have to be accounted for. If 
funds have been misused, or there are unspent dollars, there 
must be recovery, and HUD needs clear benchmarks and real-time 
data to track the progress of HOME funds and projects.
    What scares me is, is this the only HUD program that fails 
to account for taxpayer dollars, and how much CDBG money is 
accounted for? And is HOME just the tip of the iceberg?
    With that, I look forward to hearing from today's witnesses 
and holding future hearings on other questionable components of 
the HUD budget.
    I yield back.
    Chairman Bachus. Thank you.
    Mr. Gutierrez, for 3 minutes.
    Mr. Gutierrez. Thank you very much, Mr. Chairman.
    I instruct my staff to carefully read the Washington Post 
each and every day and to make sure they take out all of the 
articles and see the new standard here is the Washington Post. 
I am happy. I like the Washington Post. It just seems that my 
friends on the other side of the aisle are always saying, ``the 
Washington Post, that liberal bastion of Washington, D.C.'' But 
I guess when it is convenient, the Washington Post is okay, as 
it is today.
    I also find it curious, since my friends on the other side 
have always talked about local government; Washington, D.C., 
has this one-size-fits-all, and that we should let local 
governments, where people truly know how to serve the people 
out in the counties and the cities and the villages of 
America--we shouldn't let what? That is what this program is, 
and in each and every instance, as reported in this newspaper 
article, in each and every instance that HOME dollars are used, 
they are used to leverage what municipalities and villages and 
counties and those that my friends on the other side of the 
aisle are always expressing should be the expression of 
democracy out in the country. Well, they are.
    Look, $400 million is $400 million, but let us put it in 
the context of $30 billion and what has been spent on this 
program, and the hundreds of thousands of American families who 
have benefited from this program before--so that we have some 
balance, I think. I think what is important, Mr. Chairman, is 
to put balance, not simply to pick up a Washington Post article 
and say, boy, that really fits my political point of view; let 
me go use that and rail against, without understanding the 
impact that the program and the criticisms can have, without 
putting in balance the article.
    Because this program was started in 1990, under the George 
Bush Administration when our economy was not in such a good 
place as it is today, and in 20 years, the HOME Program has 
completed over 1 million units throughout this country, and I 
think we should take that into consideration.
    And let me just paint a picture for everybody so that we 
know as we look at this program, which we certainly should 
reform, retrofit, improve, make sure that there is more 
vigilance of the dollars certainly, but I hope that people 
aren't saying that we need to eliminate a wonderful program 
like this.
    The majority of people who are receiving assistance, who 
get a unit, whether it is a rehab unit or a senior citizen unit 
that is fixed up so they can stay there, or a brand new single-
family home, the majority of them are families of four, 50 
percent area median. So I want you to know much that is. That 
is $37,550. Now, of course, Members of Congress make $175,000 
or thereabouts, so it is significantly less than we make as 
Members of Congress, and I think we should be cognizant of 
that.
    And lastly, maybe we should take a few pictures of all of 
the houses in which people get great tax credits under our tax 
credit system for their homes when they file their income tax 
returns. I think people would shudder. Let us make sure that 
people who need homes, like janitors and bus drivers and nurses 
and other people who are out there have a place to live.
    Thank you very much, Mr. Chairman.
    Chairman Bachus. Thank you.
    Let me say this: I think we all recognized in the past 2 or 
3 years that homeownership is not for everyone, that there are 
numbers of people who simply cannot afford homeownership, and 
that low-income housing is a great need, and I wouldn't want 
anything about this hearing to be construed to say that it has 
not delivered a benefit. This is simply about some of the 
failures, and I think we have $33 billion worth of projects, 
and what is in question is $400 million or $500 million. So we 
are certainly not talking about all the projects or most of the 
projects or a substantial percentage. But we can always do 
better, and that is why I think we are all here, both parties, 
to do, not to--and I promise the Minority that we won't 
demagogue if you won't demagogue.
    Mr. Royce?
    Mr. Royce. Thank you, Mr. Chairman.
    Listen, we have seen one government boondoggle after 
another, and whether it is at the Federal level or the local 
level, somebody has to say at some point that these government 
interventions in the economy are really heading us down the 
wrong path. And the revelations surrounding the HOME Program, I 
think, should trouble every one of us: This program fails at 
basic accounting, basic recordkeeping. There is no 
accountability once the government funds are out the door. That 
is the problem here, and if we don't recognize that failures 
which appear commonplace throughout the HOME Program would be 
inconceivable in the private sector, then we don't understand 
some of what is wrong with these government programs.
    I believe we must avoid replicating this flawed model. Many 
aspects of the Housing Trust Fund created several years back 
were based precisely on the HOME Program, and according to 
HUD's proposed rule on the Trust Fund, most of the eligible 
activities under the Housing Trust Fund and HOME Programs are 
the same, and many of the requirements are similar, if not 
identical. The best way to prevent similar fraud and abuse 
throughout the Housing Trust Fund is simply to eliminate it 
completely and quit with the schemes on bigger and bigger 
government boondoggles.
    Chairman Bachus. I thank the gentleman.
    Mr. Green will be recognized shortly. As Mr. Green says, 
``God is good.''
    Mr. Green. All the time, Mr. Chairman, and all the time God 
is good, and I am honored to have one more day, Mr. Chairman, 
to try to get it right, and I thank the witnesses for being 
here. I thank you for your clarity, Mr. Chairman.
    I would like to start with some intelligence that I have 
received indicating that the program has a 100 percent 
repayment rate where improper expenditures are identified. I 
will be asking the witnesses about this, but obviously if this 
is true, then the question becomes not whether we can collect 
and do collect, but how quickly can we collect, how 
efficaciously can we collect, and what can we do to make sure 
that there are no losses.
    I have not read where the Washington Post has indicated 
that the program should be terminated. I don't think that there 
is a GAO report calling for termination of the program. I can 
honestly see how there is a need to make some changes and to 
make sure that we protect the taxpayer dollars. I think that 
the Chair has made this point, and that I support.
    But I also want to emphasize that the program has been of 
great benefit. It has helped millions of people across the 
length and breadth of the country, directly or indirectly. 
About 96 percent of those who receive funds for rental 
assistance are persons who are, as was indicated, making about 
$37,550, which is about 50 percent of the AMI. This is 
significant for persons who are working, trying to make a 
living, but who are making a low income. It is significant that 
this program exists for them.
    So I am going to close the way I started this, and that is 
with the comment that I have received intelligence indicating 
that there is a 100 percent repayment rate where improper 
expenditures have been identified. Now, if that is true, or if 
we are near that, then I think that we can do something to 
improve it, but I don't think we have to end it, and that is 
where I stand.
    Thank you, Mr. Chairman, and I yield back the balance of my 
time.
    Chairman Bachus. Thank you.
    Mrs. Capito, for a minute or a minute-and-a-half?
    Mrs. Capito. A minute-and-a-half.
    Chairman Bachus. A minute-and-a-half.
    Mrs. Capito. Thank you.
    I would like to thank the chairman for today's hearing, and 
since the start of this Congress, most of our committee's time 
and really the entire Congress' time has been used to ensure 
that valuable taxpayer dollars are being spent in the most 
effective and efficient manner, and so the efforts today are 
what this hearing is about.
    But the news that was in the Washington Post--and, quite 
frankly, I am willing to look at anything that shows that we 
can be more efficient and more effective with our tax dollars--
shows a lack of oversight or enforcement in HUD's HOME Program.
    To respond to my friend from Texas who says 100 percent 
repayment rate, I hope today that we get the chance to ask the 
question, if that is true, and if, in fact, it is true, is the 
repayment coming from State and local dollars, or is the 
repayment coming from CDBG money, which is Federal money from 
HUD? I think that is a good question for us to ask.
    So I think what we need to look at is, is HUD engaging in 
best practices? How can HUD improve the oversight over these 
funds and expenditure of the funds? Is there waste, fraud, and 
abuse? We always talk about that as a catchword, but I think 
this is used as a perfect example to find those areas and to 
find a way to end those practices and make sure that the 
allocated funds that are allocated to the local governments and 
local agencies, that we track that money, not that it has just 
been drawn down, but it has been spent on a worthy project, and 
that people are actually living in these facilities, because 
that is the entire goal of the program.
    So I would like to thank both of our witnesses for coming 
today, and I also would like to thank the chairman for holding 
this hearing, and I yield back the balance of my time.
    Chairman Bachus. Thank you.
    Mr. Neugebauer, for a minute-and-a-half.
    Mr. Neugebauer. Thank you, Mr. Chairman.
    I was kind of taken aback by the comment my good friend 
Illinois made about how Republicans believe in local control 
and local government, and just somehow this is a divergence 
from that. Absolutely not. But when the Federal Government 
extorts money from the American people, there is a certain 
accountability at the Federal level, and basically that is kind 
of what this hearing is about today.
    It is not about whether the HOME Program is an effective 
program or not; although I don't know how you can address 
whether this program is all that effective if, in fact, we 
don't know the status of many of these projects. Here is a list 
of 5,700 projects that have been open for over 120 days, yet 
they have been fully funded.
    Here is another list of projects that--over 1,000 projects. 
That list had 5,700 projects on it. Here is a list with over 
1,000 projects that have been open for over 5 years.
    And so, I think what is a pattern here that the Oversight 
and Investigations Subcommittee has been bringing out is that 
we passed the Dodd-Frank Act, which was supposed to fill in the 
gaps. What really happened is we are learning that we didn't 
necessarily need more regulations. We needed regulators doing 
their job. And at this particular point in time, where we are 
borrowing 42 cents for every dollar we spend in this country, 
it is time that we make sure that there is accountability for 
the dollars we are spending, because these are dollars that we 
actually don't have and are borrowing from other countries.
    And so, I look forward to this hearing, and, Mr. Chairman, 
thank you for calling this hearing today.
    Chairman Bachus. Thank you.
    Mr. Gutierrez?
    Mr. Gutierrez. Certainly, as I said, we should look at 
bettering the program, but I just heard my friend Mr. Royce 
said we should eliminate the program. I never heard him say we 
should eliminate the program while his district was getting 
$111 million in order to provide affordable housing.
    Mr. Royce. Will the gentleman yield? I said the Housing 
Trust Fund.
    Mr. Gutierrez. I am sure that you have time on your side. I 
never heard the gentleman raise the issues while his district 
was getting $111 million in HOME dollars in order to create 
homes in his district. As a matter of fact, I never heard the 
gentleman say anything about it when the State of California 
was getting $966 million, almost $1 billion over the last--
bring a complaint and say, this is a terrible program, don't 
send it to the State of California.
    So you can look at statistics, and you can look at numbers, 
and I just kind of feel that if you want to criticize a 
program, you don't wait for the Washington Post. You should be 
monitoring the dollars, the Federal dollars, in your own 
congressional district, and you don't need the Washington Post 
to tell you what to do, because the 19th District of Texas 
received $32 billion in HOME dollars over the last 20 years, 
and the State of Texas received $726 million of HOME dollars in 
order to prepare.
    I am just trying to put this in some context, and that is 
that people do derive great benefit from this program, so this 
isn't a Democrat or a Republican thing. This is about people. 
And I want in the last 2 seconds, this is about a firefighter 
being able to have a home. This is about a paramedic having a 
home, a police officer having a home, a nurse having a home. 
Now, look, admittedly those people make under $60,000 a year, 
and when you are a Member of Congress making $174,000 with 
great health care coverage, maybe they don't seem that 
important to you.
    I yield back the balance of my time.
    Chairman Bachus. I believe this is a very valuable 
discussion, and, Mr. Royce, would you like 15 seconds to 
respond?
    Mr. Royce. Yes. I think I made it very clear. We are 
talking about the Housing Trust Fund, and we have a very clear 
record on these boondoggles, and I will just close by saying if 
we recall, Mr. Chairman, we are borrowing 42 cents on every 
dollar we spend here. We are borrowing it from China and the 
rest of the world in order to continue these boondoggles, and, 
frankly, I think the Washington Post did us a favor by showing 
us how some of this actually works.
    Thank you.
    Chairman Bachus. Thank you.
    I thank both you gentlemen.
    Mr. Dold?
    Mr. Dold. Thank you, Mr. Chairman.
    I certainly want to thank you for holding this important 
hearing, and my good friend and colleague from Illinois. This 
is about trying to make sure that those people and individuals 
have housing and the millions of dollars--actually the billions 
of dollars that are being spent, we want to make sure that they 
are being spent wisely. Certainly if they are being spent 
wisely and efficiently, that is going to mean better benefits 
and more homes for those who need them, and I think that really 
needs to be the goal that we are talking about.
    As a small business owner, I know that one thing that is 
important in any organization--and certainly larger 
organizations--is that we have systems and controls, checks and 
balances to make sure that the resources that are being spent 
are being spent wisely. In this case we have some substantial 
evidence that we have dollars that are not being followed and, 
therefore, are not being used properly, and that, to me, I 
think, is one of the great things that we need to do in terms 
of oversight.
    So this hearing, in my opinion, is not about whether any 
particular Federal housing program should exist or not, or what 
funding levels any particular program should receive. Instead, 
I think today's hearing is an opportunity to evaluate HUD's 
systems, controls, checks and balances; how is HUD planning, 
how are they implementing, how are they managing, how are they 
monitoring to complete these projects.
    If HUD isn't getting this right--and I would argue that 
they are not getting this right at this point in time--then the 
beneficiaries suffer by not receiving the intended benefits 
that are being made by generous American taxpayers, and I think 
that really needs to be the focus of our efforts, because if we 
spend millions and millions of dollars, and what we have is an 
empty lot at the end of the day, then we are not providing 
affordable housing for those firefighters, for those nurses, 
for those people that my good friend from Illinois has 
highlighted. And I would argue that, indeed, we want those 
dollars to go further as opposed to we have sent them down to 
local control, and all of the sudden we have lost sight of 
them.
    I welcome the opportunity to dig in further, and I look 
forward to hearing from the witnesses. I thank the chairman 
again, and I yield back.
    Chairman Bachus. Thank you.
    Mr. Canseco?
    Mr. Canseco. Thank you, Mr. Chairman.
    We can't lose sight of what it is that we are doing today, 
as my colleague Mr. Dold just stated, and more importantly, we 
have to look at the big picture. Yesterday, Moody's issued a 
warning about the credit rating of the United States after 
Standard & Poor's had done so earlier this year. Our country is 
truly in uncharted territory when it comes to our fiscal 
outlook. Therefore, at a time like this, it is maddening to see 
taxpayer money squandered so carelessly by HUD's HOME Program.
    The Washington Post investigative article and the Inspector 
General's report have shown that a significant portion of the 
money allocated towards the HOME Program has not been accounted 
for, and nobody at HUD seems to care where it is. In the HOME 
Program, where it was an initiative of the private sector, 
those involved would be fired. If it were a private-sector 
project, they would be fired or blacklisted or in jail.
    The defenders of the program have allowed them to carry on 
while taxpayers continue to foot the bill. Why? Because these 
programs have noble-sounding names and stated purposes. So we 
turn a blind eye to their glaring defects for fear of demagogic 
ridicule. This is simply unacceptable, and I hope today's 
hearing will shine a light on some of the waste, fraud, and 
abuse perpetuated through the HOME Program at the expense of 
the American taxpayers.
    Thank you very much.
    Chairman Bachus. Thank you.
    Is there anyone else who wishes to make an opening 
statement?
    All right. Thank you.
    At this time, it is my pleasure to introduce our witnesses. 
Our first witness is Mercedes Marquez, who is the Assistant 
Secretary for Community Planning and Development for the 
Department of Housing and Urban Development. Prior to assuming 
this position not quite 2 years ago, she headed up the second 
largest public housing authority. Is that what you would you 
call it, the Los Angeles--
    Ms. Marquez. The Los Angeles Housing Department.
    Chairman Bachus. Thank you.
    Other than New York, I guess the second largest. So she is 
obviously well qualified from a management standpoint. And she 
has 800 employees, 43 field offices, and she worked in the 
Clinton Administration and has held positions of authority in 
the private sector. She is a graduate of Georgetown, with JD 
and LL.M. degrees, and we look forward to her testimony.
    We also have the Assistant Inspector General for Audits at 
HUD, and he has served in increasingly important, responsible 
positions at Agriculture, Interior, and Education prior to 
being at HUD. He is a certified public accountant and Mr.--is 
it ``Heist?''
    Mr. Heist. ``Heist.''
    Chairman Bachus. ``Heist.'' I apologize. Being Southern, I 
struggle with names. He is a certified public accountant and 
certified government financial manager.
    With that, Secretary Marquez, you are recognized.

   STATEMENT OF THE HONORABLE MERCEDES M. MARQUEZ, ASSISTANT 
SECRETARY, COMMUNITY PLANNING AND DEVELOPMENT, U.S. DEPARTMENT 
                OF HOUSING AND URBAN DEVELOPMENT

    Ms. Marquez. Good morning.
    Chairman Bachus, members of the committee, thank you for 
the opportunity to testify today regarding HUD's oversight of 
the HOME Investment Partnerships Program and the Program's 
success over the last 20 years. I would also like to present 
the actual facts about HOME that the Washington Post omitted in 
its May 15th article.
    As the Assistant Secretary for CPD, I oversee the HOME 
Program, an anchor of our Nation's affordable housing finance 
system. HOME is the largest Federal block grant designed 
exclusively to produce affordable housing for low-income 
families. Signed into law by the first President Bush, HOME 
builds and rehabilitates affordable housing, provides 
downpayment aid to help families become homeowners, and 
provides rental housing for poor families and for those on the 
verge of becoming homeless.
    HOME has done a good job at that, recently producing its 
one millionth affordable home and providing tenant-based rental 
assistance to nearly a quarter million families, while meeting 
our responsibility as a steward of taxpayer funds. Indeed, the 
Post picture of the HOME Program is a far cry from the one I 
have managed since joining the Obama Administration 2 years 
ago, and during my 5 years running the L.A. Housing Department. 
In part, that is because it misstated several key facts.
    Of the over 28,000 HOME projects under way across the 
country, the Post reported that over 700 out of a sample of 
5,000 were delayed, but HUD's own review found that well more 
than half of those properties are completed or are progressing 
towards completion. Of the properties with delays, most were 
stalled because of the recession. And with data showing that 34 
percent of all new housing starts from 2007 to 2010 were 
delayed at least 3 years, while only 4 percent of the projects 
in the Post's sample are actually delayed, HOME's success rate 
during the recession actually outpaced the private market.
    Formula block grants are based on the premise that local 
communities understand their needs better than the Federal 
Government and provide them with flexibility to design programs 
based on their needs. In exchange for this flexibility, HOME 
participating jurisdictions, or PJs, have the responsibility to 
manage their specific HOME projects, monitor construction by 
their developers, and take appropriate action when project 
problems arise.
    However, no program, public or private, is without 
problems. Projects will go awry, and capacity gaps do exist. 
HUD's charge in managing HOME is to balance this right of home 
PJs to make funding decisions with our fiduciary responsibility 
as stewards of taxpayer funds.
    A key feature of HOME is its early focus on performance 
data and accountability, and the transparency created by 
publicly available performance reports on HUD's Web site, 
report cards for every home PJ in the United States, some of 
which have been provided to you.
    Our actions have accelerated since 2009. We are better 
targeting our monitoring efforts through a more rigorous risk-
assessment system that identifies the highest-risk grantees for 
on-site monitoring. In January, we implemented automatic 
cancellation of projects that have been in our data system for 
a year with no draws. We have canceled 1,778 projects and freed 
up $290 million of HOME funds for more viable projects.
    We work in partnership with HUD's Office of Inspector 
General, referring HOME PJs we consider particularly high risk 
for in-depth program audits. We strictly enforce the HOME 
commitment and expenditure deadlines, deobligating nearly $66 
million to date. We aggressively seek repayment when HOME funds 
are misspent and have collected over $190 million in repaid or 
forfeited funds. We withhold HOME grants from PJs that have 
used HOME funds for ineligible projects or costs.
    HUD's role is not limited to oversight and enforcement. 
HUD's Transformation Initiative has provided critical funding 
for additional financial controls and system changes to improve 
performance. We provide technical assistance in the form of 
training and direct capacity-building assistance to PJs.
    In 2009, we began an internal review of HOME Program 
regulations. The proposed regulation, which will be placed into 
internal HUD clearance this month, will strengthen the standard 
to ensure PJs select developers with appropriate capacity and 
make other oversight and monitoring improvements.
    HUD will continue to improve our program oversight through 
monitoring, reporting, system improvements, enforcement, 
capacity building, and other actions. And what that oversight 
has shown is that the vast majority of PJs are doing a good 
job, meeting spending deadlines and building critically needed 
housing. And with the IG's continued help, the system is 
working to find and take action on those few PJs that fail to 
fulfill their responsibility, including some of those mentioned 
in the Washington Post article.
    Thank you for the opportunity to share with you the true 
story of HOME.
    [The prepared statement of Assistant Secretary Marquez can 
be found on page 68 of the appendix.]
    Chairman Bachus. Inspector General Heist, you are now 
recognized.

 STATEMENT OF JAMES A. HEIST, ASSISTANT INSPECTOR GENERAL FOR 
AUDIT, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF HOUSING 
                     AND URBAN DEVELOPMENT

    Mr. Heist. Good morning. I would like to thank the 
chairman, ranking member, and distinguished members of the 
committee for the opportunity to testify today regarding 
oversight of HUD's HOME Program. I am Jim Heist, Assistant 
Inspector General for Audits at HUD'S Office of Inspector 
General (OIG), and I am pleased to discuss our audit work 
regarding HUD's HOME Program.
    OIG's mission is to provide independent and objective 
reporting to the Secretary and to the Congress regarding HUD's 
programs. The HOME Program is the largest Federal block grant 
to State and local governments, designed to create affordable 
housing for low-income households. Because HOME is a formula-
based grant, funds are awarded to the participating 
jurisdiction noncompetitively on an annual basis. The formula 
is based in part on factors including the age of units, 
substandard occupied units, number of families below the 
poverty rate, and population in accordance with census data.
    HOME addresses the need for affordable housing in our 
country, a need that is increasing in the wake of the economic 
downturn and rising unemployment. However, the Office of 
Inspector General has expressed concerns about the controls, 
monitoring, and information systems related to the HOME 
Program. Over the past 5 years, we have conducted 64 audits of 
the HOME Program at the grantee level. We initiated at least 12 
of these at the request of the Department based on concerns 
they had expressed to us. Many others were selected based on 
grantee risk assessments that HUD has done and included 
informal input from HUD staff.
    The most common finding in our audits is a lack of internal 
controls. This includes subgrantee activities, resale and 
recapture provisions to enforce HUD's affordability 
requirements, incorrectly reporting program accomplishments, 
and incurring ineligible expenses. There is also a repetitive 
thread of not always meeting the objectives of the program to 
provide affordable housing or not always meeting local building 
code requirements.
    In our external audits of HOME funds over the past 5 years, 
we cited a total of $179 million in questioned costs and $58 
million associated with recommendations that funds be put to 
better use. HUD agreed with most of these costs, and to date 
has recovered or realized savings of $93 million, and resolved 
another $66 million by subsequently obtaining documentation 
from the grantee to support the costs.
    HUD focuses its monitoring activities at the grantee level 
through its field offices. Grantees, in turn, are responsible 
for monitoring their subgrantees. Our audits have found that, 
in some instances, little or no monitoring is occurring, 
particularly at the subgrantee level.
    Another concern we have is with the Integrated Disbursement 
and Information System (IDIS). The system is used by HUD to 
accumulate and provide data to monitor compliance with home 
requirements for committing and expending funds. HUD also uses 
the system to generate reports used within and outside HUD, 
including the public, participating jurisdictions, and the 
Congress.
    We believe the system cannot produce complete and 
reconcilable audit trails throughout the entire grant life 
cycle. Moreover, we have found that the system is not in 
compliance with Federal financial management system 
requirements. OIG has expressed its concerns about the data 
integrity in this system and the impact that it has on HUD's 
overall financial statements. We believe that with a robust, 
more up-to-date information system, HUD would be able to better 
monitor the HOME Program.
    OIG believes that HOME is an important program, given the 
current economic and housing crisis in our country. The need 
for affordable housing has never been greater than now. There 
are successful examples of how HOME funds have been used for 
their intended purposes. Since most of our work, on the other 
hand, focuses on high risks in the program, we have highlighted 
areas where improvements need to be made, particularly in the 
controls and monitoring of the program by the Department, as 
well as in the areas of data integrity and systems 
enhancements.
    We look forward to working with the Department and the 
Congress in assessing ways to improve the effectiveness of the 
HOME Program. I thank you for the opportunity to speak with you 
today, and I am happy to answer any questions that the 
committee may have.
    Chairman Bachus. Thank you very much.
    [The prepared statement of Inspector General Heist can be 
found on page 58 of the appendix.]
    Chairman Bachus. My first question, let me go back to my 
opening statement, and I mentioned conversations with the 
agency. One concern is that contracts require repayment for 
failed projects or misspent funds. And I know that there was 
some reference in the Washington Post article, and since those 
articles, that some of the contracts didn't have that legal 
requirement.
    I would like to ask both our witnesses, are we moving to 
remedy that? I know that participating jurisdictions have a 
role in that, but how is that--what are you doing to ensure 
that doesn't happen again?
    Ms. Marquez. There are two ways to discuss that. One is, of 
course, that the regulations in the statute require that if 
there are ineligible costs, those must be repaid with non-
Federal funds. So CDBG funds or any other Federal dollars may 
not be used. Inevitably, anytime that something must be 
repaid--in other words, the $250 million we are talking about--
it is repaid with a tax--really tax receipts from the local and 
State governments. Of course, that pains a local and State 
government more than anything else, because when you have to 
use your own dollar to repay a Federal dollar, that is a police 
officer who is not being hired. It is a library hour that is 
cut short. It is a firefighter who does not get overtime. And 
as a result of that, that probably serves as the greatest 
effort possible to keep them in line.
    In this story in the Washington Post, we are really talking 
about 2.5 percent, 97.5 percent, but this is a great program, 
but at a local level what you raise, sir, is correct. What we 
are doing to help the jurisdiction--and I am a firm believer 
that these decisions about where this money is spent and how it 
is spent must be made at the local level, and our job is to 
support them and provide adequate oversight, without question.
    Anything can be better, but as a former director of housing 
myself, I would tell you that there is no way that HUD, anyone 
in the Federal Government, could tell me where that money 
should be spent better than in my local community, and so I run 
the program from that point of view. From a local point of 
view, how do you ensure that things like that were reported in 
the Washington Post, like that case in Washington, D.C., is 
true?
    As we move forward with regulations--and you and I--you 
gave me the pleasure of speaking with me about this--what we 
are going to do is help them with model language. What they 
lack is a model agreement, a legal agreement that allows them 
to put in that agreement how it is that they would go back and 
enforce those requirements by law so that they wouldn't be 
paying back a Federal dollar, but instead the developer or 
someone else would be paying from their own private funds for 
anything that didn't happen.
    In Los Angeles, I did that, so the second largest 
jurisdiction, I changed all of the model legal agreements so 
that all that was in there, because that was never going to 
happen when I was involved. That is what we are going to be 
doing to help them. That is the level now of help and capacity 
building that we must provide to local agencies to allow them 
to do their work.
    Chairman Bachus. Thank you.
    Assistant Secretary, let me tell you, I understand you 
could make an argument that no HUD money was used or no Federal 
money or it was reimbursed. Of course, Mrs. Capito mentioned an 
interesting thing; did it come out of another program? But I 
think the important thing is that it was taxpayer money. 
Whether it is Prince George's County, and whether it is 2 
percent of the total, and we also acknowledge that a lot of 
private projects fail. You have given those concerns, but we 
are simply talking about no matter how many or how few there 
were, I think the Washington Post article is good, and it sort 
of gives us an urgency to include that language. There were 
projects where there was no legal requirement, and I think one 
thing we agree on is that needs to be in there, because we 
don't want to replace that with local taxpayer money. We want 
the people who received the money to pay for it.
    The second thing I want to mention is tightening up on the 
standards for nonprofits and participating jurisdictions. There 
obviously ought to be--and I think you have mentioned that 
since the Washington Post. Could you tell me about maybe 
eligibility standards for developers, whether you are going to 
propose that be tightened?
    Ms. Marquez. The HUD rule has not been revisited since 
1996. The development business has changed substantially since 
then, and, in fact, in that period of time, HOME has become a 
foundation stone of the affordable housing finance system. As a 
result of that, what has also happened is that we have gone 
from a small number of nonprofits in 1990 who did this business 
to actually a very large business. In Los Angeles, 50 percent 
of those developers that received HOME money were actually 
private developers, so it was a very successful program, lots 
of leverage.
    But what is needed--and we agree with you, sir--is 
tightening of underwriting criteria for developers in general, 
whether they are for-profit or nonprofit, and as we have gone 
through the rule, as I said in my testimony, since 2009, I came 
in with that agenda because it was my job in Los Angeles to do 
that there. So we have done it before. The Secretary did that 
in New York. We are very clear on how to do it, and those are 
the types of issues in this new regulation that we have been 
working on that has nothing to do with the Washington Post 
article. It has to do with coming in, that the rule hadn't been 
redone since 1996. We are working on that now.
    Chairman Bachus. Thank you. This hearing is not abolishing 
the program, although there may be some who want to do that. 
This is not about determining if it--this is just about 
correcting some of the report.
    Mr. Frank, would you like to make an opening statement?
    Mr. Frank. No thanks, Mr. Chairman.
    Chairman Bachus. I recognize you for 5 minutes, or Mrs. 
Maloney or whomever.
    Mr. Frank. I will do my questions.
    Chairman Bachus. Okay.
    Mr. Frank. I appreciate the courtesy, Mr. Chairman.
    I think it is an important hearing, and I want to begin 
with my agreement with the chairman on the reason you are in 
front of us; this is not a hearing aimed at abolishing this 
program. And I note with appreciation the Inspector General's 
closing comments in which he says that the program ought to 
continue and be improved, and obviously, we have an obligation 
to do this.
    There is clearly a pattern that exists over maybe, what, 
three Presidential Administrations, and the problem is in part 
this, I think, and we do run into this tension. We have decided 
that it is better to have the Federal Government work 
cooperatively with State and local governments, particularly 
local and county entities, rather than do it directly, but 
there is a tension there. There is a tension where local 
governments may resist. I will say also there are probably 
cases, if they went into it, where there was a problem in a 
local area, and HUD moved to correct it, and a Member of the 
House or Senate might have said, leave them alone, stop doing 
that.
    Ms. Marquez. On occasion.
    Mr. Frank. Thank you.
    I would not be surprised to have that happen, and I don't 
say that to be critical, in particular because that is partly 
our job from time to time, because HUD isn't always right 
either, and the Washington Post isn't always right.
    But I am saying there is an inherent tension when we decide 
not to have the Federal Government do it, but to have State and 
local governments do it, and that is there. That doesn't excuse 
things, and we may want to abuse it, but that is clearly 
problematic.
    I do want to say, having noted that, that the local 
entities overwhelmingly support this program. In fact, I ask, 
Mr. Chairman, to be able to put into the record a letter 
addressed to you and to me which is actually critical of the 
Washington Post, says that it distorts HOME's record by 
focusing on a very small percentage of HOME developments, and 
it says that they think that it gives an inaccurate picture 
beyond the inaccuracies discussed, but the Post failed to 
report the bigger picture: 381,000 rental units; 428,000 home 
buyers; 197,000 rehabilitations; and they say HOME funding is a 
vital piece in financing numerous affordable housing 
developments. The isolated issues that were the focus of the 
Post are not representative either of the Administration or the 
outcome of HOME funds. Again, this goes from the Clinton 
Administration, through the Bush Administration, and into the 
Obama Administration.
    But I want to note that among the signatories here are the 
National Association of Counties, the National Association of 
Housing and Redevelopment Officials, the National Association 
of Local Housing Finance Agencies, the National Association of 
State Mental Health Program Directors, the National Council of 
State Housing Agencies, and the U.S. Conference of Mayors.
    So I am glad that we have put out the consensus that this 
is a very important program, the great majority of funds have 
been spent well, but it can be improved.
    And I did then want to ask the Inspector General--and I 
appreciate the very constructive tone of this--when he--I would 
note, again, that conclusion: OIG believes that HOME is an 
important program which provides affordable housing to low-
income Americans. The need for affordable housing has never 
been greater. There are many examples of how HOME funds have 
been used for their intended purpose. The OIG correctly 
acknowledges it is their job to find wrongdoing, and I 
appreciate his noting that is not--
    Mr. Heist. That is really just so everybody understands 
that our findings need to be placed in the proper context.
    Mr. Frank. Thank you. I appreciate you doing that. Not 
everybody in your line of work does that.
    There was one thing that I was particularly pleased to see 
where you talked about when you found there were problems, and 
HUD appears over time to have been cooperative with you.
    On page 4 you say: Over the past 5 years--again, going back 
5 years is about 50-50 with the 2 Administrations, little more 
in the Bush Administration, but close to even--we cited a total 
of $179 million in questioned costs and $58 million associated 
with recommendations of funds to be put to better use. That is 
about, what, $237 million. HUD agreed with $221 million of 
these combined costs. I am encouraged by that, that over the 
years, rather than be resistant, over the two Administrations, 
the Bush and Obama Administrations, you made recommendations 
about $237 million, and they agreed with you with well over 90 
percent of it. Is that a correct number? Have you been able to 
work with them?
    Mr. Heist. That is a fair characterization. It is actually 
about 95 percent, and HOME is one program where we--compared to 
some other programs, quite frankly--actually work better with 
HUD than--we do have areas where we agree and where we 
disagree, but I think we each understand our positions, and 
ultimately, we are hoping to accomplish the same thing.
    Mr. Frank. I am glad you acknowledge we all want to make it 
work better, but I will say again a decision to do this, led by 
that man--this program is the brainchild of Henry B. Gonzalez 
right up here, and he put it through this committee and this 
House. He made the conscious decision to support it on both 
sides; not to have this be a Federal top-down program, but to 
be a cooperative program that introduces an element of 
friction. That is not a reason for complacency, but it is 
something we should be aware of in how we deal with it.
    Thank you, Mr. Chairman.
    Chairman Bachus. I am told that we will recess now for some 
votes on the Floor, and the trial of the Washington Post will 
reconvene at the end of votes.
    [recess]
    Mr. Neugebauer. [presiding]. The hearing will come back to 
order. Mr. Heist, I understand that you are completing--is it 
33 years of service?
    Mr. Heist. Thirty-five.
    Mr. Neugebauer. Thirty-five, and that you are retiring at 
the end of this month?
    Mr. Heist. I am.
    Mr. Neugebauer. Thanks for your service.
    Mr. Heist. Thank you. I appreciate that. It would explain 
the smile on my face.
    Mr. Neugebauer. I hear you. I noticed you were pretty 
chipper today so--
    I now recognize the gentlewoman from Illinois, Mrs. 
Biggert, chairman of the Housing Subcommittee.
    Mrs. Biggert. Thank you, Mr. Chairman.
    Ms. Marquez, on page 4 of your written testimony, you 
mention specific percentages of HOME projects that are 
considered open. Do you have a dollar figure for open projects?
    Ms. Marquez. We are going to check that for you.
    Mrs. Biggert. Okay. Thank you. And then could you define 
the meaning of open projects and how does an open project 
differ from a project that is progressing toward completion, as 
you describe on page 5 of your testimony?
    Ms. Marquez. An open project is the body of projects that 
the 642 PJs are working on at any given time across the 
country. Those projects can change. They can cancel them if 
they think they are not moving toward completion, they can be 
completed.
    So that is actually the body of work that is open at any 
given time, but I would also say to you that we were concerned 
when we arrived that there were too much laxity in what that 
was and have moved with strong management to make sure that we 
get a smaller universe so that we can see what that actually 
is, so that since December of 2009, that list of open projects 
has shrunk, the closed projects, by 48 percent.
    Mrs. Biggert. Is there a difference then from progressing 
towards completion?
    Ms. Marquez. Progressing--as I said, open is the universe, 
so progressing towards completion is a subset of where that 
universe of project is.
    Mrs. Biggert. Okay. Let's say that a project started in the 
mid- to late 1990s. Could such a project still be open today?
    Ms. Marquez. It could be, and I have some concerns about 
that.
    Mrs. Biggert. Isn't everything supposed to be completed in 
5 years?
    Ms. Marquez. Thank you for asking that question. This is 
where we get to when you want a program that has a relationship 
with the private sector and you want a program, as we do, as 
you do I know, that leverages dollars. The HOME Program as a 
whole leverages nearly $4 for every HOME dollar that is 
invested. So that means that in a project, if it is following 
the national average, the HOME dollars don't make up more than 
20 percent of it.
    What that means is that when you have a project and 80 
percent of the project is financed through a private bank, 
through bonds, through tax credits, through other things, the 
HOME dollars can actually be spent but the project is not 
completed because it is only a portion, usually acquisition. 
And that is what happens when you are doing business in the 
private sector. It is not a situation like a public housing 
dollar where the public housing is paying the full percentage 
of that unit. Here, this is a public-private partnership.
    Mrs. Biggert. So does that completed project--does that 
simply mean that all the funds for that project have been 
spent? So does that mean the private dollars and/or just the--
    Ms. Marquez. Yes, it does.
    Mrs. Biggert. And the Federal. Okay. So does it mean that 
people are actually occupying units?
    Ms. Marquez. When something is complete in the system, it 
means that the construction is done, all the money has been 
drawn down, and it is occupied.
    Mrs. Biggert. Okay. I looked at some of the recent 
appropriations for the HOME Program, and I have to say we all 
know--we all think that this program has been very beneficial. 
What we want to make sure is that it is efficient and that we 
have the correct data.
    And I think with Fiscal Year 2008, we had $1.7 billion; in 
2009, $1.825 billion, and another $2.2 billion of funding in 
2009 from the stimulus bill; $1.825 billion in 2010; and then 
another $1.61 billion in this year's CR. So that is about $10 
billion for 4 years, and has HUD had to recoup any of these 
funds or has each dollar been accounted for?
    Ms. Marquez. That is a broad question, so I will try to 
take it in turn. It is possible that of all of those dollars, 
particularly the older dollars, that money has been recaptured 
if there was an ineligible activity or anything like that 
found.
    Mrs. Biggert. Okay. If the dollars have been recouped, are 
they returned to the Treasury, the General Fund or are they 
recycled and handed out to other PJs?
    Ms. Marquez. It depends on how it is recaptured. The 
statute actually calls for the money, when it is something, for 
instance, that is not about fraud, so we are not talking about 
criminality, but when it is a project that was canceled, that 
money must be repaid, when it is ineligible, the money must be 
repaid with non-Federal funds, but the dollar amounts go back 
to that local jurisdiction in their HOME Program per the 
statute.
    When there is--and it is rare but when it has occurred that 
there would be something that you would call fraud, then we 
have another set of options, but usually what we would do there 
is terminate the participation of the jurisdiction. HUD itself, 
the PCPD itself, does not have the authority to send something 
for criminal prosecution. However, we do have the authority to 
send it to our enforcement center and we do, and we also have 
the authority and we do work with our Office of General Counsel 
to debar someone. So from us, it is not HUD that prosecutes 
you. We could send it to the U.S. Attorney and we have done 
that, but we could debar you and put you out of business, and 
we have also done that on occasion.
    Mrs. Biggert. Thank you. I think my time has expired.
    Mr. Neugebauer. Thank you. And now the gentleman from 
Illinois.
    Mr. Gutierrez. Thank you so much. I want to just say for 
the record that Congressman Barney Frank is meeting with the EU 
International Coordinator, Michelle Barnett, and that is why he 
is not continuing here with us.
    I would like to just follow up with Mr. Heist. In the 
Washington Post article, in the second paragraph, it says, 
``Nationwide, nearly 700 projects awarded $400 million have 
been idling for years under the HOME Program.''
    You testified that there were $178 million that you felt 
were questionably used and $58 million that could have a better 
use, of which $93 million you subsequently found that they 
responded affirmatively for a better use of--I am sorry--to 
resolve the misuse and that $66 million of the $58 million.
    Is that true? Could you explain that to us?
    Mr. Heist. The statistics you cite refer to our body of 
audit work for the last 5 years and has no relationship with 
the numbers that the Post cited.
    Mr. Gutierrez. But I guess I just want to figure out who 
is--because you said in the last 5 years, you have found about 
95 percent of everything you have challenged HUD with; is that 
correct?
    Mr. Heist. No, what I said was we issue audit findings and 
we are just making recommendations. It was up to the HUD 
program manager to resolve those. I am saying they agree with 
us 95 percent of the time.
    Mr. Gutierrez. They agree with you 95 percent of the time, 
and when you said $179 million, $93 million you found that they 
corrected?
    Mr. Heist. Correct.
    Mr. Gutierrez. Okay. And $58 million, under better use, you 
found that a large percentage of that they put better use to 
that money?
    Mr. Heist. Part of it we will look at a grantee and they 
just don't have the records to support the expenditure.
    Mr. Gutierrez. Okay. But do you have a good relationship 
with HUD?
    Mr. Heist. With respect to the HOME Program, I would 
characterize it as very good.
    Mr. Gutierrez. Okay. So you have a very good relationship 
and you have found that they have been very responsive when you 
challenge them from the Inspector General point of view.
    So would you agree with the statement then 700 projects 
have been stalled, $400 million.
    Mr. Heist. I don't have a body of work that would 
substantiate that claim.
    Mr. Gutierrez. But your body of work then is the one you 
initially testified to was $179 million, $93 million they fixed 
and $58 million better use, and they fixed most of that, that 
is your body of work?
    Mr. Heist. That is correct.
    Mr. Gutierrez. And you have been doing this for how long?
    Mr. Heist. I have been in my current position for 10 years.
    Mr. Gutierrez. You have been in your current position for 
10 years, and you have been in the Inspector General's office 
for how long?
    Mr. Heist. I have been in the Inspector General community 
for 35 years.
    Mr. Gutierrez. For 35 years. So I think we could establish 
you as a professional witness, right? I am not a lawyer, but I 
have been watching too many lawyer movies--Perry Mason; he is 
an expert on the matter.
    I would like to go now to Secretary Marquez, thank you. 
Number one, you too, for your many years of service to people, 
whether it is here at the Federal or at the City level back in 
L.A. I just want to understand this.
    The program is a block grant program. Would it be correct 
that if we appropriate $1.6 billion, there is then a 
mathematical equation used to distribute that money throughout 
the country?
    Ms. Marquez. Yes.
    Mr. Gutierrez. And you don't have anything to do with that. 
It was there, you use it, and that is what you go by?
    Ms. Marquez. Yes.
    Mr. Gutierrez. So the Congress of the United States states 
this $1.6 billion, and then you as an institution, HUD, 
distributes that money to localities and then they choose the 
programs?
    Ms. Marquez. Correct.
    Mr. Gutierrez. Now, there have been $32 billion so far 
allocated to the program over the last 20 years; is that 
correct?
    Ms. Marquez. Yes.
    Mr. Gutierrez. Since there is a ratio of four to one, would 
it be fair then to say that there is approximately $120 billion 
that doesn't come from the Federal Government that was used in 
coordination with these $32 billion?
    Ms. Marquez. The ratio of almost $4 to $1 is based on 
dollars actually spent, right, so it is about $80 billion right 
now.
    Mr. Gutierrez. So when the Washington Post reports or 
someone reads in the Washington Post, they might be misguided 
by thinking that a project that you, under HOME dollars, put 
$150 million in--I am sorry $150,000 in, that was the complete 
amount of the project?
    Ms. Marquez. That would almost certainly be incorrect.
    Mr. Gutierrez. Because you appropriate approximately--you 
contribute approximately 20 percent of the dollars?
    Ms. Marquez. Correct.
    Mr. Gutierrez. So if a project truly has failed, a bank or 
a private institution, somebody with private money, lost the 
other 80 percent of the money?
    Ms. Marquez. That is one of the reasons why there are so 
few losses in the program. When you have various levels and 
layers of funding, you also have various layers of review. In 
the last 5 years, about 50 percent of the units that have been 
built, rental units that have been built with the HOME 
contribution are also associated with tax credits. Tax credits 
usually make up 40 to 50 percent of the capital in an 
affordable housing deal. There is a rigorous underwriting 
review that goes on with tax credits. So not only are they 
underwritten for HOME, they are underwritten for tax credits, 
they are underwritten for bonds, they are underwritten for 
private financing. So that is why these projects overwhelmingly 
are sound.
    Mr. Gutierrez. The equation is basically four to one. If I 
have a $100 million project, you guys are going to put about 20 
percent of that money, the other 80 percent comes from other, 
but you allow local municipalities, villages, commissions, 
counties to select the programs in which they are going to use 
the HOME dollars in; you send it to them?
    Ms. Marquez. I don't have the authority to allow them. The 
statute gives them the authority.
    Mr. Gutierrez. Let me--because I am going over my time--I 
just want to, could you tell me because we want to make sure 
that even though we are actually gaining hundreds of millions 
of dollars, indeed, over $100 billion that we--from the private 
sector that we have been able to leverage, could you tell me 
two things you are doing to make sure we get the money back 
because the Washington Post says you can't get the money back?
    Ms. Marquez. I would say we have been--actually there are 
several things we have done. One of the most important things I 
think is auto cancelation now on a monthly basis.
    Mr. Neugebauer. Be quick here.
    Ms. Marquez. On a monthly basis, we cancel anything that 
has not been drawn in over a year. So we have canceled now 
1,778 projects for $290 million just since January.
    Mr. Gutierrez. Thank you very much.
    Mr. Neugebauer. I now recognize myself for 5 minutes.
    Ms. Marquez, are you familiar with the Kairos project that 
was featured in the Washington Post article?
    Ms. Marquez. I am to the degree that I am the Assistant 
Secretary and it has been brought to my attention.
    Mr. Neugebauer. Over the last few years, we have looked 
over hundreds of documents, and we found something interesting. 
We found that in March 2010, the Kairos project was on HUD's 
books, but when we went back and we looked at the November 2010 
report, that project had vanished, it was not on the report.
    Can you explain why that happened?
    Ms. Marquez. I cannot specifically tell you why that is. 
The report--I can tell you that the Kairos project has gone 
through monitoring by HUD, but it is not unknown to HUD and 
that we have requested repayment. I can tell you that.
    Mr. Neugebauer. Have you received the payment?
    Ms. Marquez. Not yet, but I can also tell you that we have 
sanctioned the county on their CHDO operations. It is no longer 
permitted to use the funds. I can tell you that.
    Mr. Neugebauer. So when did you make a request for them to 
return the money?
    Ms. Marquez. We made the request at the end of May. This 
was learned of--this deal was learned of, I believe, from the 
Washington Post and we acted on it immediately.
    Mr. Neugebauer. So after it was brought to your attention 
by the Washington Post, then you went back to review this 
project, I guess put it back on the books now and are 
monitoring it; is that correct?
    Ms. Marquez. The monitoring--what we found--they had 
already been through in-depth auditing in 2005 and 2008. There 
are several--
    Mr. Neugebauer. Just for me, could you furnish me records 
showing that you are monitoring that project and letters and 
correspondence of what was going on?
    Ms. Marquez. Absolutely.
    Mr. Neugebauer. About a week or two after the Post notified 
you, you took action to return this money. I think the point 
that has been made here today, and I think--I don't want to say 
some people are missing the point. The point is that both of 
you have testified that once you discover that the money has 
not been used appropriately or properly that you go and get the 
money back.
    Here is the problem. You are not discovering that the 
projects--how many projects do we know that are out there that 
aren't performing? And the Inspector General says that you have 
very poor internal controls and that we have 5,700 open 
projects here that are open for more than 120 days and then we 
have projects, as you said, we have 5 years, 1,000 projects. 
There is a project in Baltimore, Maryland, that was opened--the 
last disbursement was July 2, 1997, for $4 million. Do you know 
the status of that project?
    Ms. Marquez. I will get that to you on Baltimore, but if I 
could respond to your first question, we are talking at any 
given time 20,000 open activities for a multi-billion dollar 
project. We are also discussing, as our friend the IG has told 
you, that initially we were looking at 108 delayed projects, 
108 out of a million units. We have closed all of those.
    Now, in time, we continue to work, right, projects 
continue. At the moment there are 277--just 277 out of 
thousands and thousands and thousands.
    Mr. Neugebauer. My time is limited. So basically, when we 
look at this picture, we have a project that was closed in 
November. We find out that now maybe it shouldn't have been 
closed, it is back open and so forth, for $750,000 the 
taxpayers got back, and that is unacceptable. Now, I think one 
of the things that--when I read the testimony and look at all 
of the research that we have done is that basically you say, 
these are local projects, I get that. But again, you have a 
fiduciary responsibility to make sure that these billions of 
dollars are spent as they were designed by Congress to do, and 
I do not believe that within the organization that you have 
demonstrated that you have the ability.
    Do you know how the Washington Post discovered that some of 
these projects were vacant? Google. And so, the fact that you 
don't know the status of a lot of these projects is alarming. 
You say, we are relying on the local governments. Obviously not 
all--and I am not trying to categorize all local governments--
but some local governments aren't using those moneys properly 
or they are not administering it appropriately.
    And you mentioned the private sector. I want to be clear. I 
came from the private sector, and trust me, when I was doing 
projects, building houses and projects, when I asked for money, 
somebody came out and made sure that what I was asking money 
for, that was actually there. I couldn't just call the bank and 
say, send me some money.
    I just want to go back to one thing because my time is 
about over, maybe it is over. We are talking about the IDIS 
system. Here is a quote from the Inspector General's report. 
Grantees and subgrantees are able to update, change, cancel, 
reopen, increase or decrease project funding without any review 
by HUD. Grantees and subgrantees also self-report the number of 
family house by the projects without comprehensive review by 
HUD.
    Now, does that sound like that you are doing the job that 
you are supposed to be doing?
    Ms. Marquez. I would actually say that I disagree with that 
a bit.
    Mr. Neugebauer. I would, too, if it was said about me, but 
the Inspector General believes it is true.
    Ms. Marquez. I would respectfully disagree with that. The 
IDIS system is a system that all grantees must use to do 
business. We have to--everyone has to know what they are doing. 
It has to be able to change. Now, every drawdown can be and is 
tracked by grants. We monitor. In fact, in the last 2 fiscal 
years, HUD has monitored 34.5 percent of the jurisdictions; 
that is 222. We have made over 600 findings. That is HUD. That 
is not the Inspector General. So, we are actually quite active 
with them.
    I would say to you, sir, that I completely agree with you 
that HUD has a fiduciary responsibility, but I would also say 
that the Washington Post report is incorrect in many measures, 
including the reliance on Google. Google tells us that those 
photographs are often 3 years old. They drew on them without 
knowing. We know that well over half of those projects that 
were cited by the Washington Post are either occupied or well 
on their way to being occupied. So they are just flat wrong.
    Mr. Neugebauer. I think the question here is not whether 
Google is--pictures were old or new, but some of these projects 
are open--have been open for over 15 years, and so I would 
think those photos are relevant. I think what is relevant here 
is that HUD does not have the appropriate internal control and 
the systems to appropriately monitor this program or we 
wouldn't have discovered these particular issues.
    I see my time has expired, and so I now recognize Ms. 
Velazquez, the gentlewoman from New York.
    Ms. Velazquez. Thank you, Mr. Chairman. Mr. Heist, as 
originally conceived, the HOME Program was intended to provide 
affordable housing for low-income Americans, an issue that you 
yourself in your testimony describe as vital given the housing 
crisis in this country. My question to you is, should the 
problem or problems identified by your recent audit overshadow 
the success of the program at achieving its original goals?
    Mr. Heist. I can only--I would address that by just 
suggesting that anyone needs to take our findings into context. 
The systems issues that we have reported, we believe, are 
significant but their impact is constrained somewhat. In no way 
is it endemic of the entire program, and some of the issues 
with respect to what the system does and enables jurisdictions 
to do is a function of the program structure itself.
    Ms. Velazquez. Okay. Fair enough. Assistant Secretary 
Marquez, even before the Post investigation appeared, problems 
in the HOME Program had been identified by internal reviews at 
HUD and remedial actions were taken.
    Do you believe your agency has the ability to identify and 
remedy problems in the program on its own?
    Ms. Marquez. Absolutely. I think that the evidence in the 
program, 1 million units provided, 250 million tenants 
assisted, with some absolutely stunning buildings, shows that. 
I also think that this issue is not just--it is not about what 
the Washington Post found or didn't find. It is our job to 
monitor every day and we do.
    Ms. Velazquez. But someone might want to craft legislation 
to terminate the program based on the finding of the Washington 
Post.
    But I have a question for Mr. Heist. In your audit, you 
made a number of recommendations for HUD to improve data 
collection and make information enhancement. Presumably, some 
of those changes will entail the acquisition of new IT, new 
training for employees, and a transition of existing data to 
the new system.
    What is a reasonable amount of time for HUD management to 
turn around these recommendations and have adequate systems in 
place?
    Mr. Heist. A lot of that is dependent upon getting the 
necessary funding. I do know that for a number of years, HUD 
has been trying to get funding for this system in particular, 
and only in Fiscal Year 2010 I think there is an expectation 
that certainly within the next year, we would start seeing some 
improvements because now they do have that funding and are able 
to address some of the issues, apart from what we have reported 
on other issues as well, but some of them are specifically 
directed towards our recommendations that we have made over the 
past couple of years. Accounting for program income is a good 
example.
    Ms. Velazquez. Madam Secretary, would you care to comment?
    Ms. Marquez. HUD has been requesting funding to improve the 
IDIS system since 1999 and was denied. In 2010, because of the 
transformational issue, it has been approved, it is designed. 
We are, in fact, taking into account, as the OIG said, many of 
their recommendations. We agree with them. In fact, we agree 
there is a housing crisis in the United States. We can't waste 
a single dollar, and one of our tools is oversight and 
enforcement and we take it very seriously.
    Ms. Velazquez. Thank you. Ms. Marquez, both the Post and 
your IG have been critical of your agency's record of 
enforcement actions and civil penalties for bad actors in the 
HOME Program.
    Does your agency have adequate resources and expertise to 
address this need to pursue these measures? And when I ask the 
question, how long it will take for you to implement the 
recommendations made by the IG, what will be the price tag to 
that and would you please give us a timeline?
    Ms. Marquez. That could be answered in many ways. I will 
try to be right to the point on this.
    There are, as Mr. Bachus had raised, at the local level the 
ability of the local players to pursue in court civilly. 
Repayment of funds has to be done through capacity building and 
model documents. The rule that we are working on now that will 
be released internally within 1 month addresses those issues, 
and so within 1 year, we will help them with model 
documentation so that they can take folks to courts themselves.
    Ms. Velazquez. The HOME Program has always operated as a 
block grant with funds being disbursed through intermediaries 
at the local level.
    Would the program be better served if HOME funds were 
administered directly by HUD instead of by participating 
jurisdictions?
    Ms. Marquez. I couldn't imagine such a thing. Everybody has 
a separate market, separate conditions. In most communities, 
there are submarkets. You can never make that decision for a 
local government or for other players. You just can't.
    Mr. Neugebauer. I thank the gentlewoman.
    Ms. Velazquez. Thank you.
    Mr. Neugebauer. The gentleman from Texas, Mr. Canseco.
    Mr. Canseco. Thank you very much, Mr. Chairman.
    Ms. Velazquez. Mr. Chairman, would you yield for a second?
    I just would like to ask unanimous consent to enter into 
the record some letters of support from different 
organizations.
    Mr. Neugebauer. Without objection, it is so ordered.
    Mr. Canseco. Thank you, Mr. Chairman. Ms. Marquez, the 
Administration proposed an increase in HUD's budget for Fiscal 
Year 2012 of $747 million more than HUD's 2010 budget. Did you 
know that? Is that correct?
    Ms. Marquez. Yes.
    Mr. Canseco. Was this money requested in order to better 
police the HOME Program?
    Ms. Marquez. No. I fully believe that the HOME Program is 
one of the best programs in the Federal Government, and we can 
always do better, but it is a fine program, and most of what we 
need to do is being done through systems changes. This is a 
time of great need in the country. This is not the time to be 
to creating more bureaucracy. It is the time to use what we 
have better.
    Mr. Canseco. So the increase in budget for 2012 was not to 
help the HOME Program?
    Ms. Marquez. It is not that some of it isn't to help the 
HOME Program, but it is capital dollars to go to jurisdictions, 
not to stay at HUD.
    Mr. Canseco. Do you think from a taxpayer perspective, it 
would be appropriate for HUD to get the HOME Program under 
control before its budget is ever increased, from a taxpayer 
program?
    Ms. Marquez. With great respect, the HOME Program is a 
great program now.
    Mr. Canseco. Did the HOME Program receive any money from 
President Obama's 2009 stimulus bill?
    Ms. Marquez. I don't believe HOME dollars, specifically no. 
There was something else called TCAP through the stimulus that 
came in specially to help with tax credit projects because the 
private tax credit market lost great value, value tax credits, 
and many deals were endangered and so what is called TCAP came 
in and went directly to State housing finance agencies through 
HUD to save many deals, but it is not HOME funding at all.
    Mr. Canseco. How is that TCAP fund used?
    Ms. Marquez. The TCAP money went to State finance agencies 
with HUD, they competed, and what ended up happening in a very 
good way is that they went forward and actually saved deals 
that were on the brink of failing because the tax credit market 
fell through in value as with the rest of the real estate 
market.
    Mr. Canseco. And did any of that money go to the HOME 
Program?
    Ms. Marquez. They are not HOME dollars, no.
    Mr. Canseco. They are not HOME dollars. So HOME didn't get 
anything from the Obama 2009 stimulus nor from TCAP?
    Ms. Marquez. Yes, they are not HOME dollars.
    Mr. Canseco. Now, I understand that HUD contacted a number 
of participating jurisdictions that had been investigated by 
the Washington Post to inquire about the status of the HOME 
project. Does HUD usually contact this many jurisdictions in 
such a short period of time?
    Ms. Marquez. Absolutely. One of the things that the Post 
failed completely to mention is that the HOME employees 
throughout the country in local jurisdictions, it is their job 
to have relationships with these jurisdictions. They talk to 
them all of the time. So, yes, absolutely we are speaking to 
them daily.
    Mr. Canseco. So you contact them on a normal course of 
business?
    Ms. Marquez. Absolutely.
    Mr. Canseco. So is it fair to say that the Washington Post 
article was or was not a catalyst for HUD to actually go out 
and contact these jurisdictions and HUD would not have 
contacted them otherwise or would have normally contacted them?
    Ms. Marquez. This is what I would say. For Washington, 
D.C., which had a number of projects, we had already referred 
Washington, D.C., to the IG 2 years earlier for an audit. With 
Prince George's County, because we had monitored them twice and 
we were very concerned and as you probably know, their 
executive has been arrested for fraud, we would be--we were 
concerned as well for criminal fraud. And so would I call the--
would I call a jurisdiction when I read anything that would 
alarm me, yes, and that is absolutely what they must do. But 
this is something in the normal course of business, it would be 
called a CPD representative calls these jurisdictions, their 
assigned jurisdictions. Every CPD rep has their list of 
jurisdictions that they do business with.
    Mr. Canseco. Now, when you contact these jurisdictions and 
they give HUD an answer as to what the status is on certain 
properties, is there any follow-up or examination by HUD to 
make sure that what the jurisdiction told you is actually 
correct?
    Ms. Marquez. There absolutely is. So for instance, when we 
requested at the end of May, that in PG County, they repay $1 
million, before we did that, we went in to audit them. Everyone 
has the right to due process and we went in to look at their 
books and look at everything.
    Mr. Canseco. Thank you. My time is almost up, but let me 
ask you this follow-up question to what my colleague Mrs. 
Biggert asked.
    She asked in cases of fraud--and you answered that you have 
other options to investigate fraud for enforcement purposes, 
but you did not say what those options are. Do you mind telling 
us what those options are or what happens to the money with 
regards to that enforcement?
    Ms. Marquez. We have several options. One is to refer it to 
the State Attorney General or to the Department of Justice, and 
we have done that on occasion. Another is if we are seeking 
repayment and someone, for instance, who would not want to 
repay, we would go to our enforcement center, and we have done 
that on occasion and have always been paid. We would also go to 
the Office of General Counsel and seek debarment, which would 
essentially take someone out of being able to do business with 
HUD completely if they were found to be in violation. We do 
that as well. We would also, and often do, do a joint referral 
so we could do many of these things and immediately bring the 
Office of Inspector General in immediately to look at those 
things, and you have heard them testify. It is a good 
relationship.
    Mr. Canseco. So the HOME Program does have an enforcement 
center?
    Ms. Marquez. HUD has an enforcement center.
    Mr. Canseco. So you go to the HUD enforcement center?
    Ms. Marquez. Yes.
    Mr. Canseco. Thank you very much. My time is up.
    Mr. Neugebauer. I thank the gentleman. The ranking member 
of the Oversight and Investigations Subcommittee, the gentleman 
from Massachusetts, Mr. Capuano.
    Mr. Capuano. Thank you, Mr. Chairman. Mr. Heist, did you 
read the Washington Post story?
    Mr. Heist. Yes, I did.
    Mr. Capuano. And what was your general opinion of it?
    Mr. Heist. My observation was that they brought out some 
examples of misspending and certain projects that were 
consistent with some work that we have done at the local level. 
We reported in the past that HUD data systems have evidence--
indicators of stalled projects. Actually, CPD has apparently 
adopted our definition in trying to highlight those cases. I 
can't speak to their overall conclusions.
    Mr. Capuano. Did you find anything in the article that was 
shocking or unknown to you?
    Mr. Heist. I wouldn't say shocking, no. Certainly unknown. 
I wasn't familiar with many of the examples.
    Mr. Capuano. The specific examples, but the general 
concepts you were familiar with?
    Mr. Heist. Correct.
    Mr. Capuano. You have been the IG at HUD for 10 years, if I 
remember?
    Mr. Heist. Inspector General for Audit for 10 years.
    Mr. Capuano. In that 10 years, this is not the only program 
that you audited?
    Mr. Heist. Correct.
    Mr. Capuano. How does this program stack up against other 
programs?
    Mr. Heist. One thing I would say about the HOME Program is 
that it does have some specific rules and very specific 
criteria for types of activities that are allowed. So in 
comparison with other programs, it is more straightforward to 
audit. You can point to specific rules, and I think that is 
part of why we get a relatively high amount of support on our 
recommendations because there are clear-cut rules.
    Mr. Capuano. That is why I was able to get, at the request 
of the chairman of the subcommittee, mountains of information 
in a relatively short period of time.
    Mr. Heist. With respect to our audits?
    Mr. Capuano. Yes.
    Mr. Heist. Yes, we have done quite a number of them over 
the years.
    Mr. Capuano. In the 10 years you have been doing this, do 
you think the program is getting better or worse or pretty much 
the same?
    Mr. Heist. I can't make an overall assessment because we 
have not looked at the program in that light. Our primary focus 
is to identify areas of risk and offer recommendations as to 
what the Department can do to address those risks. And we have 
to audit against the program structure the way it is, which is 
a program that devolves much of the decision-making authority 
to the local level, and that is what we are auditing against 
and that is the constraint that we operate under.
    And in any kind of program where you rely on intermediaries 
to carry out--
    Mr. Capuano. But you don't have a general opinion that over 
the last 10 years, it has gotten worse?
    Mr. Heist. No.
    Mr. Capuano. Or what about getting better? Have they been 
more responsive to your suggestions?
    Mr. Heist. They have been very responsive in the last 
couple of years. We issued a report a couple of years ago that 
sort of talked about some of the systems issues, concerns that 
we had, and I was quite heartened to see that they have 
implemented a number of our recommendations. The notice, for 
example, that was put out to start canceling activities that 
had not received any activity for a year after the funds were 
committed, they made specific reference to our audit work in 
telling the participating jurisdictions this is why we are 
doing this.
    Mr. Capuano. In some situations, IGs and the agencies they 
oversee don't necessarily have a positive working relationship. 
Would you say that is not the case here?
    Mr. Heist. With the HOME Program, I would characterize it 
as generally positive.
    Mr. Capuano. I know that there is one significant 
disagreement--
    Mr. Heist. There are disagreements.
    Mr. Capuano. --that you point out. That is fine. The FIFA 
one, in particular. It is a pretty straightforward accounting 
difference of opinion.
    Mr. Heist. Yes.
    Mr. Capuano. Even when you disagree. Because to me--here is 
how I look at it. No program can be perfect. I don't care what 
the program is. I don't care who is running it. No program can 
be perfect. That is why we need IGs to help keep it on the 
straight and narrow.
    The question is, what do you do about things you find? What 
you just told me is that they are relatively cooperative and 
that they do have some disagreements. But your next question 
is, on the disagreements that you have, specifically the FIFA 
one, have they at least handled the disagreement in a 
professional manner?
    Mr. Heist. Certainly, absolutely.
    Mr. Capuano. So it is not that they are just ignoring you; 
they are just saying, we respectfully disagree?
    Mr. Heist. That is absolutely true.
    Mr. Capuano. So what I am hearing is, it is a program--and 
I think this hearing is fine. The article raised some serious 
questions. I read the article as well. It is reasonable and 
fair for us to ask about these things. It is reasonable and 
fair to get your answers, but from what I am hearing from you, 
other than the ordinary course of events, and again, there are 
always some bumps and some improvements, I don't walk away from 
this at the end of my time shocked. I actually feel pretty good 
that the program seems to be working as intended; that you have 
been overseeing it reasonably well; and that when you find 
differences of opinion, they tend to react in a positive 
manner, and that when you have disagreements, they are 
professional about it. So to me, it sounds like the system is 
working.
    And my time is up. So, therefore, I say thank you.
    Mr. Neugebauer. I thank the gentleman, and now the 
gentleman from Texas, the vice chairman of the full committee, 
Mr. Hensarling.
    Mr. Hensarling. Thank you, Mr. Chairman. Ms. Marquez, I was 
at another commitment, so I missed your earlier testimony. We 
may be going over some old ground here. I thought I heard you 
say that in your opinion, the HOME Program is one of the most 
important programs or one of the most effective programs of the 
Federal Government. Did I hear you say that?
    Ms. Marquez. Yes, you did, sir.
    Mr. Hensarling. Okay. HUD administers what, roughly 90 
programs; is that a good ballpark figure?
    Ms. Marquez. I don't administer them all, so I couldn't say 
that, but sure.
    Mr. Hensarling. Okay. I received information from I believe 
the Government Accountability Office. By some measurements, 
there are over 10,000 Federal programs. I believe HUD 
administers 90, more or less. So it is an important claim to 
make that this is one of the most important programs that the 
Federal Government has. As I understand the program, what you 
measure is the amount of money that goes out the door and 
measure whether it went out in 5 years. Now, is there something 
else that you are measuring here because if there is, and I did 
read the testimony, I am missing it. So my question is, if that 
is true, how do you know? How do you make the claim that this 
is one of the most important programs that the Federal 
Government has to offer if your only metric is how much money 
went out the door and did it go out in 5 years?
    Ms. Marquez. The most important metric is one million 
families served through this program and--
    Mr. Hensarling. And so what does that mean, served? Did 
they receive money?
    Ms. Marquez. What it means is that of the one million units 
I am speaking about, those have actually been built, homes 
rehabbed, homeowners in homes.
    Mr. Hensarling. Okay. How do you track that information?
    Ms. Marquez. That is tracked in all of the different 
reporting systems that we have shown. It is also tracked 
through the IG. It is tracked through any reporting measure 
that the government has. It is in there. We have several.
    Mr. Hensarling. This is reporting by the grantees; is that 
correct?
    Ms. Marquez. Yes, this is a block grant. So what the 
Congress decided under President Bush was that you would trust 
local government, local decision-makers to use their dollars 
responsibly, that they knew what their needs were, that they 
knew best how to work with private developers and for-profits.
    Mr. Hensarling. That is not the question, Ms. Marquez. I am 
not trying to assess blame here. But what I am trying to 
understand is what is the accountability system, your fault, my 
fault, no one's fault. I am trying to understand. Maybe it was 
Congress' wisdom to do this, but frankly, we are in a slightly 
different era as the Nation is going broke as we are borrowing 
40 cents on the dollar, much of it from the Chinese, sending 
the bill to our children and grandchildren. Maybe the bar that 
was set 10 years ago needs to be re-examined. So, again, maybe 
a program that made great sense 10 years ago, maybe has to face 
a little higher hurdle rate. Maybe there is a design flaw here, 
or maybe there isn't. Again, as I am looking at the tracking 
system, what I am seeing is that you have to account for money 
out the door, getting it out in 5 years, and then reports come 
back that I don't--and please correct me if I am wrong--that 
are not independently verified from these grantees of the good 
that they have done, and if there was more independent 
verification, I don't think the Washington Post would have 
written the article, and the Washington Post is not exactly 
known as a bastion of conservative thought. It wasn't Fox News. 
It was the Washington Post.
    Ms. Marquez. I guess that is interesting in this position, 
isn't it, because the HOME Program is one that empowers local 
government, and so from that point of view, perhaps the 
Washington Post would rather that we had a one-size-fits-all as 
the Federal Government for this money. HUD does not agree. We 
agree that this is locally controlled, locally driven. I would 
say to you that HUD monitors every grantee. In the last 2 
years, we have monitored 34.5 percent of the--
    Mr. Hensarling. Okay. What does it mean to monitor? How do 
you monitor?
    Ms. Marquez. It means this--we actually go to the place, we 
go to their office, we have a risk assessment. Every year, 
there is a risk assessment. The IG has actually approved the 
risk assessment tool. We take a look at a number of items 
having to do with risk, their performance. You name it, and it 
is looked at. From that point of view, we then prioritize what 
it is that should be monitored. High-risk grantees come first.
    Mr. Hensarling. How many of these sites are you actually 
going to?
    Ms. Marquez. We are going to--when I say monitoring, I mean 
our job is to monitor the grantee, the jurisdiction. So we 
actually go to the jurisdiction. Now, it is also true that 
often within a monitoring visit, you might be there a week 
looking at all of their documents, a sampling of files, making 
sure that they have everything they are supposed to have.
    Mr. Hensarling. Aren't there 25,000 open projects?
    Ms. Marquez. There are approximately right now 20,000 open 
activities, but as I have said, we are talking about billions 
of dollars and 642 jurisdictions. So 20,000 activities is the 
business of HOME captured in a system so that everyone can look 
at it. It is actually quite transparent, which is why we were 
able to afford in such a quick turnaround all of your requests 
for data because it is actually in the system. It is also why 
the IG says that the system is straightforward to audit because 
the information is in there and it is accessible.
    Mr. Hensarling. I see my time has expired. Thank you, Mr. 
Chairman.
    Mr. Neugebauer. I thank the gentleman, and now Mr. 
Hinojosa.
    Mr. Hinojosa. Thank you, Mr. Chairman. I would like to 
first stress that the title of today's hearing is, in fact, 
``Oversight of HUD's HOME Program'' and not what some have 
contended is an investigation into the Affordable Housing 
Program or the deficit or debt of the United States. It is 
obvious to me that during the last 10 years that we have been 
at war in Iraq and Afghanistan and focused most of our money to 
the wars and neglected many of the domestic programs such as 
housing. I think that there is smoke and mirrors that I am 
hearing and seeing here in this hearing.
    The title is, ``Oversight of HUD's HOME Program'' and 
unless that title is changed, the members contending that it is 
something else are sadly mistaken. HUD's Assistant Inspector 
General just told members of this committee that he supports 
the program but has had a difference of opinion with the Office 
of General Counsel. They have not called for the program to be 
eliminated.
    In my congressional district, I have seen the investment 
and the improvements that were made in spite of cutting down 
the funding for this program. Just the City of Harlingen, in 
the last period from 2009 through 2011, has received 
$1,173,000. The City of McAllen has received $2 million. The 
whole county, which is 750,000 in population, has received 
$8\1/2\ million. That is not a lot when you think of 750,000 
people in that county.
    For those of you unfamiliar with a colonia, because we have 
a very large number of those in my area, it is an 
unincorporated area outside of city limits in which American 
citizens reside. Those citizens have no running water, no 
sewage treatment, very little electricity, no paved roads, 
nothing at all that most of us take for granted. They are much 
worse than what we know to be ghettos. The HOME Program is 
helping to turn around some of these colonias, areas that would 
be decimated if the program were eliminated.
    I hear the other members of the committee asking hard 
questions, but I think that there was--that in the 
investigation and the program examined by HUD in July of 2010 
was not found in violation of the overall HOME objectives.
    Ms. Marquez, I want to ask you a question. Are you familiar 
with the colonias?
    Ms. Marquez. Yes, I am.
    Mr. Hinojosa. If that is the case, then you have been down 
there, evidently. I want to ask you, can you talk about how the 
HOME funds are being used to help the colonias and also add to 
the answer to my question, how is HOME assisting in the 
disaster recovery across the country?
    Ms. Marquez. Okay. As it relates to the colonias, in this 
year, the Secretary honored my request that oversight of 
colonias come to my office. I have been to pretty much all four 
States and have traveled there. The HOME Program is of enormous 
help to colonias because it is able to leverage other 
resources. You are right, it is at a State level that colonias 
receive money. So the State of Texas receives their HOME 
allocation, and then the colonias and local governments apply 
to the State for HOME dollars. Because it is not a lot of 
money, it is absolutely essential in colonias that they 
leverage other dollars, whether it is the CDBG set-aside for 
colonias, it is money from Rural Development or anything else. 
So without leverage, colonias cannot go forward.
    Mr. Hinojosa. If you would yield, there is a number here 
for the whole State of Texas. Our State program received $126 
million, of which I said that a small amount came to Hidalgo 
County of 8\1/2\ million. So continue.
    Ms. Marquez. As I said, you absolutely in a colonia must 
leverage. There is no other way to move forward there. And so, 
the HOME Program plays an overwhelming help there because 
virtually everyone who lives in a colonia qualifies for HOME 
dollars.
    Mr. Hinojosa. My time has expired, but I wanted to conclude 
by saying that the HOME Program is supported by many 
organizations that I know of and have met with, such as Habitat 
for Humanity, the Housing Assistance Council, the National AIDS 
Coalition, and the National Alliance to End Homelessness.
    With that, I yield back.
    Mr. Neugebauer. I thank the gentleman, and now recognize 
the gentleman from New Mexico, Mr. Pearce.
    Mr. Pearce. Thank you, Mr. Chairman. I thank both of you 
for being here.
    Secretary Marquez, I notice your document showing the 
inaccuracies of the Washington Post, and frankly, coming from 
my side of the aisle, I don't need much encouragement to 
believe that the newspapers might get it wrong occasionally. I 
would be interested if you have a document that is similar 
about Mr. Heist's presentation. In other words, the fact that 
you don't have an audit program, he says you are unable to 
produce reports that would facilitate timely identification of 
fraud, waste, and abuse in the programs. Is that inaccurate, 
totally inaccurate?
    Ms. Marquez. I guess I would say that on most things, I 
tend to agree with my colleagues at the OIG, but there are some 
times--
    Mr. Pearce. So this is inaccurate, that you do, in fact--
    Ms. Marquez. I believe that the systems we have for 
oversight and reporting adequately cover it. However, I would 
agree with them that this is a split. There are things in the 
IDIS system that need improvement, and that is why since 1999, 
CPD has been requesting funding, and in 2010, has now received 
funding.
    Mr. Pearce. You mentioned the in-depth study on the Kairos 
project. It is mentioned somewhere in here, 2005 and 2008. So 
if you did an in-depth study, why didn't it reach some level to 
where somebody finally blew the whistle? The whistle was blown. 
You obviously blew the whistle now that the report came out in 
the newspaper. But if the systems are so straightforward--I 
have heard both of you say that you have straightforward 
systems. Why didn't the whistle get blown on that?
    Ms. Marquez. We have looked at all their files and I have 
offered to make them all available in terms of our monitoring. 
They had entered information. There was information in the 
system. It was incorrect. I would note that it is not just on 
the CPD side that this wasn't caught. The IG didn't catch it 
either. So you can't catch everything in a system that is about 
a million units.
    Mr. Pearce. How many people--you said you have helped a 
million people and you have that breakdown here and I 
appreciate that. How many people nationwide, would you guess 
from your experience, need help? If you have helped a million, 
is it 10 million, 20 million, 30 million?
    Ms. Marquez. There is a worst-case housing needs study that 
was released in February by HUD that indicated how severe the 
need for affordable housing is, and it certainly shows that 
there has been an increase of 20 percent in worst-case housing 
needs for renters between 2007 and 2009, which is why no dollar 
can be wasted.
    Mr. Pearce. But my question is, how many people nationwide 
would you recommend or would you guess fall in the category of 
needing your help, your services?
    Ms. Marquez. What it says in the report is that in 2007, 
there were 5.91 million households who fit within a worst-case 
housing need, and that that has now gone up significantly.
    Mr. Pearce. Okay. So let's say it doubled from 5.9 million; 
let's just say it went to 10 million households. That makes the 
math much easier. Just to put it in perspective, in order to 
serve the 1 million people that you served, it has taken not 
only your $32 billion, but then according to your report, 
another $80 billion from outside private sources. So that is 
basically $112 billion to take care of 1 million people. So 
when we multiply $112 billion times 10, we are actually going 
to need about $1 trillion to handle those 10 million people. 
And so when I hear the discussions about how effective a 
program is, I just need to put it into context for myself that 
we need $1 trillion on this path of 112,000 average per person 
that you help. And I do note that rental units, the average per 
person is $31,000, according to your figures that you have 
distributed, and then I assume that is then amplified by the 
$80 billion.
    Mr. Heist's report also talks about District of Columbia; 
there is a significant problem here. He is talking about $6.5 
million costs charged to the program. Then he talks later about 
the mobile. He says, the City failed to detect or prevent the 
housing board use of $1.1 million. Are these all things that 
you said you have a really nice tight system, these are things 
you have applied for and you have gotten reimbursement for 
those; is that correct?
    Ms. Marquez. In this case, in Washington, D.C., it was 
actually HUD that requested the audit by the IG before there 
was a Washington Post story. So it was actually HUD that caught 
it and asked the IG to review, having nothing to do with the 
Washington Post.
    On the 1 million number, it is not people, it is units, and 
those have affordability periods anywhere from 5--in 
California, it is up to 55 years. So when you are talking about 
an investment, you are not talking about people. You are 
talking about units over many, many years. So who would 
benefit? Multiples of millions of people would benefit from 
that number.
    Mr. Pearce. Okay. Mr. Chairman, I see I am over, if I could 
make one closing comment. I notice in the IG report that it 
says,`` 43 investigations have been run by the IG, several of 
which were referred to us by HUD'' which means several were not 
referred by HUD. So as I am hearing a nice tight process and a 
straightforward audit, I still have a lot of questions. Thank 
you, Mr. Chairman, for your indulgence.
    Mr. Neugebauer. I thank the gentleman and now another great 
Texan, the gentleman from the Houston area, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman, and I thank the ranking 
member for allowing me to proceed as well. I also thank the 
witnesses for appearing.
    I would like to start with the notion that these really are 
people who are being helped. While we do have units, I think 
the units benefit people, and I have some intelligence that 
indicates that we have preschool teachers who are helped, some 
of them making $28,840, paramedics, firefighters, plumbers, 
bookkeepers, accountants, mail carriers, lab technicians, 
highway maintenance workers, elementary school teachers, mental 
health counselors, automotive technicians, electricians, and 
secondary school teachers. So we are not just helping people 
who are down and out without jobs. These HOME dollars benefit 
people who are working hard every day, trying to make ends meet 
but are also finding it difficult to acquire affordable housing 
in the areas where they live and they are making 80 percent or 
less of AMI or in some cases 50 percent, below 50 percent of 
AMI.
    The program has been a benefit to people in 642 States or 
local participating jurisdictions. Am I to interpret from this 
that nearly every State receives some of these dollars?
    Ms. Marquez. Every State.
    Mr. Green. Every State. That would mean that every Member 
has constituents who are benefiting from these dollars. It is 
not something that is partisan. I don't have just Democrats in 
the State receiving dollars and we don't have just the 
Republicans in the State receiving the dollars. Every State 
with all of our constituents receiving some of these dollars. 
And it is very difficult to paint a picture of what life would 
be like in the absence of a program, but is it safe to say that 
if we didn't have the programs that are developed where the 
low-income tax credits that are leveraged with dollars at a 
rate of about four to one that teachers, firefighters, 
plumbers, some of these persons that I have called to your 
attention, many of them might not have the housing that they 
have currently surely, but also some of them might find 
themselves homeless? We can't say to what extent, but some 
could. Is that a fair statement, ma'am?
    Ms. Marquez. It is fair to say that HOME dollars work and 
leverage not only with private dollars but with other dollars, 
Section 8 project-based certificates, to create enormous 
numbers of units for the chronically homeless and others facing 
homelessness. So it is one of HOME's purposes, leverages that, 
and as you said, it also overwhelmingly, though, provides 
housing for working people.
    Mr. Green. And do people move through these units? Do we 
have some people who will actually find that the unit is of 
benefit to them at their current salary level and then they 
move on to purchase a home? Is this transitional housing for 
some people?
    Ms. Marquez. Yes, not in the sense that we would talk about 
someone who is receiving a subsidy, but yes, because it 
stabilizes a family. If you no longer have to make a decision 
between your rent and buying a new winter coat for your child 
or food or medicine for a senior citizen, it tends to stabilize 
your family and allows you to move forward and it allows you to 
make more money and move out.
    What is important here is the affordability period, that 
HOME requires 5 to 20 years just the home statute of 
affordability. So it is not just there for one family; it is 
there for many families.
    Mr. Green. Mr.--is it ``Heist'' or ``Heist,'' which do you 
prefer?
    Mr. Heist. ``Heist.''
    Mr. Green. Mr. Heist, one quick question because my time is 
about to expire. Would you tell us the last time that you 
audited a perfect program, please?
    Mr. Heist. It is hard. Perfection is hard for anybody to 
achieve. We do have no-finding reports on occasion.
    Mr. Green. I see. Have you--do you peruse the newspaper 
with some degree of regularity, sir?
    Mr. Heist. I am sorry?
    Mr. Green. Do you read the newspaper with some degree of 
regularity?
    Mr. Heist. Certainly.
    Mr. Green. Do you find that police departments from time to 
time will have fraud within them?
    Mr. Heist. Will have what?
    Mr. Green. Let me just make a statement. Police departments 
have fraud. We prosecute criminals. There would be fraud in 
programs, and criminals ought to be prosecuted. But we ought 
not let criminals prevent us from serving people who are in 
need of the program. Just as we don't in police departments 
when we catch fraud, find it, we shouldn't end this program.
    Thank you very much. I yield back.
    Mr. Neugebauer. I thank the gentleman, and now the 
gentleman from Missouri, Mr. Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. Mr. Heist, just 
some quick questions with regard to oversight.
    In your testimony, you say that some of the audits found 
that there was no--in some instance, no monitoring occurred at 
all particularly in the subgrantee level. What have you found 
there and have there been some changes in processes or 
procedures to rectify the situation?
    Mr. Heist. I would say one common area that we see is the 
recipient being responsible for monitoring the subgrantees that 
it passes funds through, particularly local nonprofit groups--
    Mr. Luetkemeyer. Okay. So what you are saying is that there 
are not enough procedures in place, policies in place to track 
the subgrantee stuff?
    Mr. Heist. Largely, the policies are in place. It is a 
question of whether the jurisdiction is following them the way 
HUD expects them to follow.
    Mr. Luetkemeyer. Okay. You make a comment also about the 
nonprofits. I notice--I think it was in your testimony or some 
of the other things you had here where we may have some 
problems with nonprofits from the standpoint that they may not 
have the expertise that other developers have to be able to 
utilize those dollars. Did you find that in your findings, that 
it was more of a problem with the nonprofits than it was the 
other folks?
    Mr. Heist. That is something that we find in a number of 
our audits. The nonprofits lack the capacity to deal sometimes, 
not always, but in some cases.
    Mr. Luetkemeyer. What do you think would be a solution to 
that problem? Do you think we need to have more oversight, more 
rules, more regulations, more restrictions? How do we solve 
that problem, because I'm not necessarily against the program 
here, but obviously, we have--we are here today because there 
is a perceived problem with oversight, with tracking of this, 
and we need to find a way to come up with some solutions. What 
kind of solutions do you see there that would work?
    Mr. Heist. Certainly training, helping capacity building. 
The statute contains a provision that 15 percent of the funds 
be allocated to community-based nonprofits. So there is a 
recognition within the statute that they do play a role, and it 
is a question of how do those groups, what training do they 
receive. I think it is a very important function and role that 
HUD would play when providing technical assistance.
    Mr. Luetkemeyer. But we do have to have some sort of 
additional tracking or some sort of oversight here obviously if 
we have a bigger problem there, wouldn't you agree?
    Mr. Heist. The nature of the program is that it is the 
jurisdiction's responsibility to oversee those nonprofits.
    Mr. Luetkemeyer. What happens when a jurisdiction is found 
to be noncompliant or do you see a lot of HUD action taken 
against these folks? Do they restrict the number of projects 
that they allow because there is lack of oversight or lack of 
cooperation? Do they start to provide more oversight over these 
people then to continue to find ways to watch what is going on 
a little closer?
    Mr. Heist. Overall, I would characterize the audit 
resolution for this program as higher than others as far as 
agreeing and recovering the funds.
    Mr. Luetkemeyer. That certainly gives me great pause for 
the rest of the programs then if we have some problems here we 
are looking at today and not providing oversight over those.
    Mr. Heist. We don't always agree, I can tell you. We 
probably disagree more on other programs than we do on this 
particular one.
    Mr. Luetkemeyer. Obviously, some of the testimony here and 
some of the responses from the HUD officials, they agree on 
some of the findings that you had here. And so, what about the 
tracking of what goes on here? I know there are a lot of 
questions with regards to tracking of watching how these things 
occur, whether we are getting the right information, whether we 
are in contact enough to provide the oversight. What would your 
findings show?
    Mr. Heist. Our findings show that some of the systems 
issues impede the ability to monitor, to track the flow of 
funds, the proper matching of disbursements with the original 
obligation that set up the project. Those are issues that we 
believe need to be addressed on a continuum to improve the 
oversight.
    Mr. Luetkemeyer. When you see this going as a result of 
this hearing, do you see continued improvement of oversight? Do 
you have a list of suggestions? Do you have a report that you 
are going to put out? Do you have a working group that is in 
place? Where do you see and where do you think this is going to 
go as a result of this?
    Mr. Heist. This is something that we look at annually when 
we audit HUD's financial statements. And we have looked at it 
more in depth over the last couple of years because of some 
issues that we developed and I think the trend is towards the 
positive, largely. Again, there are areas where we disagree, 
but it is something that we will be looking at closely as we 
proceed with that effort.
    Mr. Luetkemeyer. Thank you very much. I see my time is up. 
Thank you very much, Mr. Chairman.
    Mr. Neugebauer. I thank the gentleman. And now the 
gentlewoman from California, Ms. Waters.
    Ms. Waters. Thank you very much. I would like to welcome 
our witnesses here today, particularly Ms. Marquez. I am so 
pleased you are at HUD. I am from Los Angeles, and you are from 
Los Angeles where you ran our Housing Department's HOME 
Program. You have a great reputation. As a matter of fact, you 
are known as being a tough enforcer of the rules and the laws, 
and I have a great appreciation for that. So I am very pleased 
that you are here and I think you are a wonderful addition to 
HUD.
    Let me see if I can put this in its proper perspective. 
What is the size of the HOME Program in terms of funding now? 
How much money are we talking about?
    Ms. Marquez. In 2011, we are talking about $1.6 billion.
    Ms. Waters. And the audit was for what period of time?
    Ms. Marquez. Well--
    Ms. Waters. The information that has been shared with us 
through the--
    Ms. Marquez. Through the Post article?
    Ms. Waters. Yes, the Post article. I am sorry.
    Ms. Marquez. That took a snapshot in time. It took a 
snapshot in time, looking at open activities at a snapshot in 
time. Here we are talking about a 20-year program that over 
time has had 760,000 open activities in 20 years.
    Ms. Waters. So what percentage of the dollars that have 
been spent on the program, I guess in the snapshot, could be 
identified as problematic?
    Ms. Marquez. They incorrectly identified what turns out to 
be about 2.5 percent, but it wasn't accurate.
    Ms. Waters. What is the accurate--
    Ms. Marquez. I would say that as we took a look at it--
actually, the Washington Post declined to give us their actual 
data. We asked for it and they declined. So we did what we 
could do to mimic it. And as we went through, we found that 
instead of having 700 stalled projects, that well over half are 
either completed and occupied or well on their way to being 
occupied and that a small percentage are stalled and mainly due 
to the recession.
    So it is just incorrect.
    Ms. Waters. I was a little bit late coming in today. I had 
a Judiciary Committee hearing that is going on. So I don't know 
if you have been able to explain this to the other members who 
may have had questions so that they can understand the small 
percentage of problems that this program may have had. Have you 
been asked these questions by either side of the aisle?
    Ms. Marquez. I think I have.
    Ms. Waters. I see. And have you attempted to correct the 
Washington Post on their misinformation?
    Ms. Marquez. I think that we have overall. When you have 
produced 1 million units with large affordability periods all 
over the country when the IG sitting next to me who we speak to 
all the time testifies that we have a very solid working 
relationship and that we regularly refer matters because we 
also don't tolerate fraud, waste, and abuse, I think we have 
debunked what the Washington Post had to say.
    Ms. Waters. Mr. Heist, if I may, what other programs do you 
have the responsibility for other than the HOME Program?
    Mr. Heist. There are many. We have responsibility over all 
HUD programs. Single family mortgages, Section 8 rental 
assistance, and the Community Development Block Grant Program 
are some of the more significant. We also have a significant 
workload in Recovery Act funds that were provided to the 
Department of Housing and Urban Development.
    Ms. Waters. It is a big operation over there, and I am sure 
that we will find that there are problems from time to time in 
various operations of HUD. How does this HOME Program compare 
with other programs you have reviewed?
    Mr. Heist. As far as the Administration, probably better 
than most, I think in large part because the criteria are a 
little bit more structured and straightforward. You have 
specific activities and criteria that these jurisdictions can 
spend funds on, which makes it more straightforward to us to 
audit and kind of easier, with fewer grey areas, I think where 
we have a lot of our disagreements is where we differ on our 
interpretations of what the statutes says they are allowed to 
do or not allowed to do. And we just don't have as much of 
that. Then, there is a program where we have a reasonably good 
working relationship at the staff level both in headquarters 
and the field.
    Ms. Waters. Again, as I said, I was a little bit late 
coming in. Have you had an opportunity to say what you just 
said to me to the other members of this committee and your 
testimony on questioning here today, letting them know that 
this is not--there are no big issues here with this program and 
that you work well together and that it is structured well? 
Have you had an opportunity say that today?
    Mr. Heist. Yes, I have.
    Ms. Waters. Mr. Chairman, I always appreciate efforts that 
are put forth in this committee to find out information, but I 
certainly wish that we could spend this time on some really 
troubled areas. About the same time the story about the HOME 
Program broke in the Washington Post, reports were surfacing 
about a HUD Inspector General audit of the 5 largest mortgage 
services. This audit reportedly concluded that the servicers 
had been defrauding the government by filing for FHA insurance 
payments to cover losses on foreclosed homes, using defective 
and faulty documents. I would hope that we can get to some 
really serious issues like this and not kind of use up our time 
on something like this where the Post article is just incorrect 
and perhaps we should dig a little deeper before we take 
everybody's time to--
    Mr. Neugebauer. I thank the gentlewoman. I do want to point 
out that the Inspector General does not have good things to say 
about your follow-up in your accounting. When you look at that 
report, that is not a glowing report and you can certainly have 
a professional relationship. But, Ms. Marquez, I think it is 
disingenuous to tell us that you don't have any problems when 
in fact the Inspector General has pointed out problems and in 
fact we have seen through the Washington Post article that 
there were problems. So I think--and I don't know that you 
actually know how many projects are open or closed or in 
compliance because if you have inadequate internal controls, 
that would lead people to believe that you don't actually have 
accurate information. And so--
    Ms. Waters. Will the gentleman yield?
    Mr. Neugebauer. Let me be clear that--
    Ms. Waters. Will the gentleman yield? I don't know whose 
time we are on. My time was up a long time ago.
    Mr. Neugebauer. I was going to recognize the gentleman from 
New York, Mr. Grimm.
    Mr. Grimm. And I yield back to you for whatever amount of 
time you need.
    Mr. Neugebauer. That is all right. I just made a little 
sideline comment there. You are recognized for 5 minutes.
    Mr. Grimm. Thank you. First of all--
    Ms. Waters. Will the gentleman yield? I am sorry.
    Mr. Grimm. Yes, ma'am. I will yield.
    Ms. Waters. Thank you very much, and I won't take much 
time. After my comments, the chairman took more time to raise 
some serious questions of Ms. Marquez and I am wondering if the 
Chair will allow her to respond prior to your taking your time.
    Mr. Neugebauer. It is the gentleman's time.
    Ms. Waters. Before his time, you took time to raise 
questions that were not responded to.
    Mr. Grimm. I will--Ms. Marquez, if you would like, please 
take 30 seconds to respond.
    Ms. Marquez. I would respectfully disagree. I think that 
our reporting systems can always be improved, but they are 
quite solid. A system that shows that $30 billion over 20 years 
where 97.5 percent showed good shape, where the IG is on the 
record here testifying just like me that this is a good program 
that is straightforward and it is easy to monitor speaks to 
that.
    I would finally say, thank you, Congresswoman. You know me 
well. ``Disingenuous'' would never be the word I would use to 
describe me.
    Mr. Grimm. If I could, Mr. Heist, I do believe that I heard 
your testimony earlier today that although you are not 
obligated to get rid of this program and I don't think this is 
what this is about today, but there were definitely some 
concerns that you had and you outlined them in your report, is 
that not true?
    Mr. Heist. That is correct.
    Mr. Grimm. Okay. Ms. Marquez, you mentioned before that the 
investigation by your agency was started prior to the actual 
Post story being printed. Is that correct?
    Ms. Marquez. What I believe I said, sir, is that there are 
several instances here and as it relates to both the Washington 
Post story to Washington, D.C., and as it relates to Prince 
George's County. In the Washington, D.C., instance, we had 
actually requested the IG to go and do an audit way before the 
Washington Post story.
    Mr. Grimm. And here is my question. Prior to being printed 
but prior to the inquiries because the reporters were looking--
    Ms. Marquez. Completely unrelated. It is our business to 
monitor. And so we were doing our business. And in the course 
of doing business, we referred to the IG.
    Mr. Grimm. Thank you. One of the things I just want to 
emphasize, and maybe it is because I am a fresh set of eyes, 
being new here as a Member of Congress, I think there is a 
couple of things that can get lost. One of the things that was 
striking to me today was, Mr. Heist, you mentioned that you 
were not shocked, it wasn't shocking what you read in the Post. 
And as someone who has served in the Federal Government for 16 
years, I completely understand why you wouldn't be shocked 
because I believe--this is just my opinion. I don't speak for 
my colleagues. One of the problems we have in the Federal 
Government and local governments throughout this country is we 
have become immune to mismanagement, to waste, to fraud, to 
abuse at--even though as a percentage of the whole it may be 
small, it should always be shocking. And the reason it should 
be shocking is because we have heard a lot of testimony and 
some very good statements on the other side of the aisle that I 
agree with, how important programs are for those that need low-
income housing and people are struggling and needing a place to 
live.
    I don't disagree. But we also have to remember all those 
who are struggling to pay their mortgages who are working two 
and three jobs to pay for these programs. These programs are 
paid for by other hardworking Americans and to think that some 
of their tax dollars, any amount of their tax dollars will be 
wasted or will be abused has to be shocking for all of us 
because if they stop paying those taxes and they stop providing 
these safety nets, then the indigent, the poor, the needy, 
where do they get it from? They don't get it from us here in 
Congress. We appropriate, we allocate, we write laws, but we 
are not paying that money. It is every hardworking American, 
every hardworking citizen who is paying their taxes.
    So I want to emphasize again that I think it is just 
systemic, and I am guilty as anyone else to not realize that we 
should always be shocked by any amount of waste and fraud or 
abuse or anything and we have to remember that when it is not 
our money, it is easy to say, it is a small percentage, it is 
not so bad.
    So I just want to keep that in context and remind everyone 
that there are a lot of hardworking people struggling out there 
and those are the people who really provide these safety nets 
and I think we always need to be respectful of that.
    Mrs. Biggert. [presiding]. The time of the gentleman has 
expired. The gentleman from Missouri, Mr. Cleaver, is 
recognized for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman. I agree with the 
gentleman's comments. The Congress is funding airplanes that 
the Air Force doesn't want and we are also giving tax cuts to 
corporations whose quarterly profits are above $14 billion. So 
I agree, we all ought to be upset when dollars are wasted. 
Thank you for being here, Madam Secretary. And I can speak 
experientially, I think, in support of what Ms. Waters just 
said. I have sat in the room when you have spoken very straight 
to my city with housing problems, created since I left the 
mayor's office, I may add. But one of the things I think that 
is important here that we can't overlook, these are block 
grants and it is one of the things that I think Republicans and 
Democrats both agree on, that block grants are good. If you 
talk to any man, Republican or Democrat or Governor, we like 
that and the main reason is it is self-determination, the 
communities make the decision on how block grants are spent. 
And I want to ask the question, what happens when HUD comes 
across fraud and waste? What is the process?
    Ms. Marquez. At HUD, our Secretary and myself--and, yes, I 
have traveled with you and you have seen some hard talk about 
real solutions--have a zero tolerance for fraud, waste, and 
abuse. So one of the reasons why in the last 2 years, the 
number of referrals to the IG have gone up, is in reflection of 
that. We don't want that to happen. And like Mr. Grimm, I am 
shocked. That is just not okay. We have huge needs in this 
country and we can't waste dollars. So we refer to the IG, we 
go to our enforcement center, we will send it to the Department 
of Justice if that is what is required, we can go to the State 
attorney general's office and we can move to debar someone, 
remove them from being able to do business if we are talking 
about fraud. Overwhelmingly, though, we are not talking about 
fraud. We are talking about more in the realm of what I think 
Mr. Pearce was talking about in terms of capacity with 
nonprofits and others. And there our responsibility--if you 
want to ensure that money is well spent, it is not just about 
enforcing on the backside--and I respect that that is the job 
of the IG and it is part of my job. I see us as two wings of 
the same hawk in that response. But it is also my job to help 
them get it right. And that is about capacity building. HUD has 
completely revamped its capacity building business in the last 
2 years. At CPD it is called the one CPD. We are now focused on 
place-based, market-based solutions. We need it to join our 
grantees where they are working in the real world with leverage 
to understand how to better do business. We are also entering 
into brand new training programs with CHDOs and nonprofits 
because we recognize weaknesses over the years and there is, as 
the IG said, a 15 percent set-aside for CHDOs. We have to help 
them use it well. And so it is not just about enforcement and 
oversight, incredibly important and we take it seriously, no 
tolerance, but it also about helping people get it right in the 
first place, making sure that the first invested dollar is well 
spent and well leveraged so that you don't take it back because 
when you take back a dollar, it is not invested as well. So you 
want to get your biggest bang for the buck the first time.
    I come from that place, right? It is my job to make sure 
they do it well, not to make the decision for them, but to be 
supportive as well as taking my role of oversight seriously, 
and I can tell you in Los Angeles it was me who put the poor 
commissioner in default. And it appeared on the front pages of 
the L.A. Times and I said to my staff and I believe I had this 
discussion with Congresswoman Waters, this is a test of the 
emergency broadcast system. Are people going to let me get it 
done? I prosecuted him because in my city, I had those 
documents in my contracts, right, the way we want to help them 
do it now, that allowed me to take them to court. I got back 
every penny, including interest. I did not forgive one cent and 
it came right back to the program out of his money, not city 
money, his personal funds, and we invested it back in 
affordable housing. So that is how I look at this.
    Mr. Cleaver. I think that is--the New York Times used--and 
I quote--the term ``bungled deal.'' And I think people 
misunderstand that and there is a difference between bungled 
deal and improper expenditure. And I think my time has run out. 
But at some point I wish that the committee understood the 
difference between bungled deals and improper expenditure.
    Mrs. Biggert. The gentleman's time has expired. The 
gentlelady from New York, Dr. Hayworth, is recognized for 5 
minutes.
    Dr. Hayworth. Thank you, Madam Chairwoman. And I thank you, 
Ms. Marquez, for your comments regarding market-based 
solutions. I think that makes sense. Whether a bungled deal is 
through the best of intentions or whether or not something has 
actually--whether precious taxpayer dollars have been wasted, 
we do have to make the case that the more dollars that are left 
in a market-based solution, the better off we are, which argues 
indeed for us to look very carefully at how best to mobilize 
the power of our marketplace to assure that opportunity for 
jobs which actually enable people to pay for their housing of 
course in the marketplace in that the incentivized and 
motivated and energetic marketplace takes place and it is--I 
was just doing a quick calculation and it is going to be 
striking for all of us. But $30 billion in funds over I think 
20 years, Ms. Marquez?
    Ms. Marquez. Yes.
    Dr. Hayworth. 2.5 percent managed not optimally for 
whatever reason unfortunately is gone. But that is actually 
$750 million of taxpayer funding. And at $100,000 apiece, that 
would be 7.5 million jobs. So it just points out to all of us 
who care about these issues that we do need to think about how 
we take from our taxpayers and allocate funds. And that is 
what--we all want the same things for the people who need it 
most. And my goal as a member of this conference is to make 
sure that we are providing the opportunities that people need. 
So 7\1/2\ million jobs is an awful lot of jobs.
    I appreciate everything we can do to work together to bring 
the marketplace ever more to bear on this problem so that we 
don't have to have an enormous taxpayer expenditure that 
probably we could eventually work our way out of.
    And I thank you. I yield back my time.
    Mrs. Biggert. The gentlelady yields back. The gentleman 
from Delaware, Mr. Carney, is recognized for 5 minutes.
    Mr. Carney. Thank you, Madam Chairwoman. And thank you to 
the two of you for coming to our hearing today to shed some 
greater light on the subject. When you get down to this end of 
the podium here, a lot has been said, and a lot of questions 
have been asked. But it is difficult for me as a new Member to 
separate fact from fiction. Although I think we have had an 
opportunity to do that, put the program in some perspective, it 
has been a very successful program in my home State of 
Delaware, certainly an essential component of our overall 
affordable housing plan. And I have heard a lot of talk on both 
sides of the aisle about how important it is to help folks. You 
talked about the need that you are meeting and you talked a 
little bit about the unmet need and there is a tremendous unmet 
need out there.
    Could you characterize this program in terms of meeting 
that need? The thing that worries me the most about incidents 
of fraud and abuse is that it gives fuel to the fire of those 
who want to eliminate these programs and we have heard that 
from the other side, at least one member who said we ought to 
eliminate this program. So that upsets me as well as the misuse 
of taxpayer dollars.
    Could you talk to me, though, about how important this 
program is in terms of meeting that unmet need and the math of 
that since we are only meeting about 10 percent I think is the 
math I heard?
    Ms. Marquez. I would think that the best way to understand 
the HOME Program within the current marketplace and the way 
that we do work is that the HOME Program is an anchor of the 
Nation's affordable housing finance system. Without the capital 
that is provided through HOME, you would have really very 
little with which to leverage tax credits. So all of these 
private dollars would have no avenue into investment--
    Mr. Carney. These projects combine tax credits with HOME 
money, with private money. There have been numbers thrown 
around. What is the amount of private money that is leveraged 
by HOME money?
    Ms. Marquez. It is a combination--I can tell you this--of 
the dollars that have been spent in the HOME Program over the 
20 years, they have leveraged nearly $4 to $1 of about $80 
billion spent.
    Mr. Carney. That is a pretty good investment by--
    Ms. Marquez. By any measure, it is great leverage. Of that, 
in any rental deal, in any new rental affordable housing that 
is being built, tax credits generally play somewhere in the 
area providing 40 to 50 percent of the capital but the HOME 
dollars are the gap.
    Mr. Carney. Right, the gap funding. So this is an essential 
part. I understand--
    Ms. Marquez. No gap, no project.
    Mr. Carney. No gap, no project, no units, unmet needs get 
greater and all the rest of it. So it kind of takes us down to 
the standard that we have, takes me down to the standard that 
we have--what I am going to call the error rate, the fraud and 
abuse rate, which could be bungled deals, as Mr. Cleaver 
mentioned, or kind of inappropriate expenditures and there is a 
big difference there. We have bungled deals in the private 
sector. Most of these are privately run projects, right?
    Ms. Marquez. They are a combination. But at this point, it 
is a more even mix between nonprofits and for-profits.
    Mr. Carney. But that partnership, the local partnership 
with the private industry, with the Fed is an important 
component of this program?
    Ms. Marquez. Absolutely.
    Mr. Carney. As our ranking member said, it does create 
tensions and potential problems with the subgrantees and the 
grantees. And I would ask Mr. Heist if he could indicate where 
those biggest risks are. You talked about risk assessment with 
the subgrantees, with the private contractors. Where do you see 
the biggest problems, the biggest waste or misuse of funds?
    Mr. Heist. I would say in the area of the capacity of 
subgrantees that have to actually oversee the projects. So the 
oversight over the time--
    Mr. Carney. So subgrantees are not local housing 
authorities, right?
    Mr. Heist. They are not housing authorities. They are city 
governments typically.
    Mr. Carney. City governments. I think it is the State 
housing authority in my State.
    Ms. Marquez. And Delaware--
    Mr. Carney. We are very small. So it is the subgrantees, 
right? So they are private businesses for nonprofit 
organizations, correct?
    Mr. Heist. Nonprofits.
    Mr. Carney. So that gets to something that I heard for the 
first time in the last answer, the 15 percent set-aside to what 
are these nonprofits. Is that a problem? Is that an issue that 
we should look at? I understand the importance of those 
entities, but if they don't have the capacity, we have to be 
really careful about wasting money there frankly.
    Ms. Marquez. We agree. It is not wasting money. What has 
happened, I believe, over the last--I don't know--15 years, 
regardless of party, is that as we decided that all decision 
making should be made at the local level. We also misunderstood 
that local decision making and authority is not the same thing 
as local expertise. And we have to help; part of what the 
Federal Government can do is oversight and help.
    Mr. Carney. My time is up. So your capacity building 
initiative is really, really important?
    Ms. Marquez. Absolutely.
    Mr. Carney. I want to thank you for the work that you do 
for a need that is tremendous out there.
    Mrs. Biggert. The gentleman's time has expired.
    The gentleman from Ohio, Mr. Stivers, is recognized for 5 
minutes.
    Mr. Stivers. Thank you, Madam Chairwoman. I appreciate the 
witnesses coming here today to talk about the HOME Program. And 
it seems that there is some overlap in our Federal housing 
programs. Ms. Marquez, can you address the ways that the HOME 
and CDBG funds address housing needs that are not addressed by 
any other Federal programs?
    Ms. Marquez. The HOME funds are very specific in their 
ability to be used. They can do rental, new construction or 
rehab, you can do homeownership assistance, helping people buy 
a new home, you can do rehab for owners in homes so they 
already own their home and then you help them rehab to stay 
there. You can also provide rental assistance to renters, and 
over the 20 years, about 250,000 renters have been helped. CDBG 
has many, many more uses, but also restrictions as it relates 
to housing so that you cannot acquire land with CDBG for 
housing. You can't do acquisition, which is, of course, the 
important thing that you need to do to do affordable housing, 
is you have to be able to acquire land. So the HOME Program 
does that. The other difference is having to do with 
affordability and restrictions. The HOME Program has very clear 
affordability housing restrictions and a different set of 
eligibility. It is stringent in the way that the IG responded, 
that is very straightforward.
    CDBG is used for a wide variety of things. Interestingly, a 
State CDBG program--for instance, overwhelmingly State 
governments use their CDBG for infrastructure.
    Mr. Stivers. Right. And I am familiar with the CDBG 
program. But I guess I will get back to my more basic point 
which I don't think you have answered. Have you inventoried the 
programs for housing to look at overlap between all of the 
housing programs that you administer to ensure that we don't 
have multiple programs doing the same thing? Frankly, it would 
be easier to administer fewer programs that--if you have two 
programs doing the same thing, why don't you combine them into 
one? Have you done any kind of inventory like that of your 
programs?
    Ms. Marquez. Actually, we have looked a little bit. In the 
2012 budget, there is an example of it, for instance. And that 
is where we have asked that the SHOP program that has some 
overlap with the HOME Program actually should be collapsed into 
HOME because you can use HOME funds for it. So in a time when 
tough decisions have to be made, that is one we made and one we 
corrected.
    Mr. Stivers. Thank you for that. And I will ask Mr.--is it 
``Heist?'' Is that how you say your name? I don't want to say 
it wrong. With regard to the HOME Program, are there internal 
controls lacking in the HOME Program? And if so, are there--
what are the consequences and is there a plan inside to modify 
those internal controls because frankly, especially if we are 
going to collapse other programs into HOME, as I was just told, 
that is really important that we have the proper internal 
controls.
    Mr. Heist. There are internal control issues with respect 
to the manner in which funds are tracked as far as the 
obligations and then following through with the commitments and 
disbursements and the ability to more timely identify projects 
which are lagging. We issued a report about 2 years ago that 
looked at this in some depth. And CPD has been taking a number 
of steps to improve the way they use the system. There are 
still limitations that need to be addressed that are going to 
require--as was stated earlier--availability of funding. One, 
for example, the controls over making sure that the grantee--if 
they have program income they are supposed to use that first 
before they draw down funds from Treasury. HUD did not have a 
good way of monitoring that and tracking that. That is a 
recommendation we made about a year or so ago, and it is 
dependent upon systems funding which they received in fiscal 
year 2010 and are working towards those system improvements. 
There are other areas where we think they can go further.
    Mr. Stivers. Great. I am going to ask one last question of 
Ms. Marquez, and I hope you will take those internal control 
issues very seriously. It sounds like you have, and I 
appreciate it, Mr. Heist.
    The final thing I wanted to ask about is after the 
Washington Post article, you guys created a document called, 
``Setting the Record Straight'' in which you talked about that 
only 2.5 percent of the funds are used inappropriately. And I 
am just curious if you think there is an acceptable level of 
loss or leakage or failure with a program like this? And 
clearly, we all understand it may not be zero.
    Ms. Marquez. I guess I would say that our goal, while it is 
unattainable, is to be perfect. So we have a zero tolerance 
policy. I am working towards eliminating any problem wherever I 
can and that is my job to do, to strive for. I know I won't 
reach it. But that is my job to do.
    Mr. Stivers. Thank you. My time has expired.
    Mrs. Biggert. The gentleman's time has expired. The 
gentlelady from New York, Mrs. Maloney, is recognized for 5 
minutes.
    Mrs. Maloney. Thank you very much. And I thank both of the 
panelists. I would like to ask Assistant Secretary Marquez, I 
understand that there was a Washington Post article and I read 
it and everybody is talking about it, and the New York City HPD 
looked at the 44 projects--and I am talking about New York 
City's HPD--that the article identified as stalled. And the New 
York City HPD determined that actually only three projects were 
truly stalled. And apparently, the Post had counted projects as 
stalled where the developer had started digging the foundation 
and then found something wrong when they went into the ground 
or they received a stop work order from the buildings 
department. All of these things are outside of the control of 
the developer.
    So my question to you, Ms. Marquez, is do you believe the 
article was accurate in the portrayal of projects that it 
deemed to be stalled? And can you describe HUD's oversight 
process for stalled projects?
    Ms. Marquez. I do not believe that the Washington Post 
article was accurate. In fact, I am certain that it was not. We 
have done many, many things as it relates to stalled projects. 
We are also concerned about it. The most important thing is you 
have to understand where you are. In development, we are 
talking about the real world, we are talking about really hard 
to place issues here. It is more difficult to do affordable 
housing development than it is to do marketplace development.
    In my written testimony, I provided a chart that went 
through all the different steps of what developers go through. 
To do affordable housing development, you have some special 
things. You have more environmental issues that have to be 
looked at, you have Section 3 issues on employment that have to 
be looked at. There are Davis-Bacon wages that have to be met. 
There is affirmative refurthering housing requirements that 
have to be met. In the end, it takes about a year longer. We 
have gone a long way to ensure and, as I have testified 
earlier, we are ready to release a rule within about a month 
that strengthens our oversight, that makes both--at different 
levels. One at a grantee level, what we would require more of 
them on their underwriting. At a project level, different 
levels of reporting so that we will know more. And also, at a 
systems level, so that we are making fixes all the way through.
    The HUD rule has not been amended since 1996, and there has 
been a cry in the industry for a very long time for it. When I 
arrived, having come from Los Angeles, I understood what these 
weaknesses were and I came in and within one month asked the 
staff to please begin the review. Now, we are toward the end of 
it. And within a month, it will be released internally.
    Mrs. Maloney. As you well know, rents in New York City are 
extremely high and the HOME Program has rehabbed over 16,000 
units in the City I am honored to represent since it started in 
1990 under George Bush number one. Can you talk a bit about the 
benefits from HOME, what it means to the families? What are the 
income limits for families living in the HOME units? What are 
the housing needs? What is the typical rent burden for HOME 
eligible families and HOME assistance versus unassisted units? 
Give us a sense of what it means to working people.
    Ms. Marquez. The statute limits eligibility at 80 percent 
of the area median income. However, a review of the 20-year 
program shows that well over half of the dollars are actually 
focused in on folks at 50 percent or below a median income. So 
this is a program that overwhelmingly targets working class 
people, not folks who are on some other form of assistance. 
These are working people. These folks have to make choices. In 
a city like New York, where rents are so high and if you are 
not lucky enough to have been in a rent-controlled unit for a 
very long time, you can find yourself living way out of the 
center. Homes that are built by HOME, whether they are rental 
or homeownership, allow folks to be close to the center for 
transit. We know if folks can live closer to their jobs, they 
pay less of their dollars on these other types of expenses, and 
as a result, end up helping their families more, and this is 
what is important about the HOME Program.
    Mrs. Maloney. And I understand from my local housing agency 
that in New York City, $1 of HOME funding leverages $3.11 and 
other private and public sources of funding. And in your 
opinion, would there be such significant private investment to 
develop affordable housing without the HOME funding that serves 
as a leverage?
    Ms. Marquez. We would be in grave danger, I believe. It 
forms the basis of our affordable housing finance system in 
this country.
    Mrs. Maloney. And very, very briefly. My time is up. How 
many jobs do you think this country would lose, or maybe you 
could put it in the record because my time is up, if this 
program is abolished?
    Ms. Marquez. There are many types of jobs that would be 
lost, along the real estate industry, in construction, in 
banks. All over. I would have--I don't want to make a guess at 
this. It is a national program. That would be inappropriate of 
me. But we would be happy to enter something into the record 
later.
    Mrs. Maloney. Thank you. My time has expired. Thank you, 
Madam Chairwoman.
    Mrs. Biggert. Thank you. I think that we will try and do a 
quick second round if people would be willing to be brief. And 
I recognize myself for 5 minutes.
    Ms. Marquez, we just put up on the screen over here, which 
is the--if you can see it, it is the HUD's homes for sale 
listing. I think there are 18,000 homes that are listed. It is 
not something you have to read. It looks like the Multiple 
Realtors Listing. Why can't CPD track the projects and process 
if you can do the HUD homes for sale?
    Ms. Marquez. I am sorry. One more time?
    Mrs. Biggert. Why can't CPD track the projects in progress 
just like you can track the multiple listings, the homes that 
HUD has for sale?
    Ms. Marquez. This gets right back to what a block grant is. 
This listing is an FHA listing. This is actually housing that 
is controlled by HUD. In a block grant program, the statute 
invests authority and decision-making at the local level. I 
again would say to you that I feel that we do track them. We 
can do better.
    Mrs. Biggert. I have this, which is your tracking and it is 
the delayed activities and you have some--just home buyer, home 
buyer, activities in the city. Sometimes it says unknown, the 
State, and then the commitment date, the total amount committed 
and amount disbursed and the percentage disbursed by the date 
and then the last disbursement, which is fine. But it just 
seems like there should be--can't the locals provide you with 
this kind of thing that makes it--there is more data, there are 
more benchmarks. Wouldn't that be easier than to be able to 
track all of the properties that are involved?
    Ms. Marquez. The HOME Program is involved in active real 
estate development as opposed to a listing of a home that was 
owned by someone else and now is built and has to be sold as a 
single family home. This is actually real estate development. 
Deals are assessed, we decide--a jurisdiction decides that they 
don't want to go forward, they take them out. So we are talking 
apples and oranges here.
    Mrs. Biggert. Every project that the HOME has and every 
project that HUD--with FHA. Why can't you show something like 
that and have the real end of it? In fact, we have these 
pictures where 5 years later, there is still a hole in the 
ground where a project was said to have been in progress. And 
it just seems like we would have a much better idea of what is 
going on and there wouldn't be these projects that go on for 
years that haven't reached completion.
    Ms. Marquez. There are always projects as we spoke about. 
There is no perfection.
    Mrs. Biggert. There are always houses for sale, too.
    Ms. Marquez. Yes, but we own those. We are talking about 
local government, local decision-making. We are not talking 
about the Federal Government taking over the HOME Program and 
deciding for a local government what to invest in.
    Mrs. Biggert. How hard is it to take a picture and post it 
and--other HUD programs do it and DOJ does it.
    Ms. Marquez. These are foreclosed homes.
    Mrs. Biggert. I know what they are. I am just asking, why 
can't there be more data with your program?
    Ms. Marquez. I think there is lots of data with our 
program. If there is something in particular, ma'am, that you 
would like me to consider, I am happy to do that but there is 
lots of data.
    Mrs. Biggert. For example, can't you post online from a 
scale of 1 to 5 the progress on a program? In other words, as 
you are moving ahead and--
    Ms. Marquez. We do.
    Mrs. Biggert. I don't see it on here.
    Ms. Marquez. We actually have many reports that are online. 
There are progress reports on the HOME Web site that are 
tracked that provide reports every month. As a result of those 
reports that come out every month, we actually deobligate 
dollars every month.
    Mrs. Biggert. Is there a report something like this that 
the DOJ does?
    Ms. Marquez. Here we have on page 7 and 8 of my testimony, 
I list 8 different reports that are published either monthly or 
quarterly that make clear the progress that deals are making. 
And as I had said earlier, we also feel that we can do better. 
So that as we go forward with the new rule, we are going to 
tighten at the jurisdiction level, at the project level, and at 
the assistance level.
    Mrs. Biggert. Are you reporting building progress or funds 
spent?
    Ms. Marquez. Both, actually. In this report here, the 
snapshot, it actually not only talks about the jurisdiction, 
but it also talks about their different projects. We are 
tracking. But again, it is the power in HOME is actually 
invested at the local level.
    Mrs. Biggert. And I agree with that. But it just seems that 
your data stops when it gets there and then we don't have any 
idea how the project develops. Local control is great, but it 
would seem that they would account to you where they are in the 
scheme of things and transparency that people can see that.
    Ms. Marquez. In essence, they do. When your staff has an 
opportunity to spend a little bit more time with this, they 
will look at these sheets and they will tell you--
    Mrs. Biggert. Those aren't transparent, are they? We got 
those from you.
    Ms. Marquez. They are online. They are on our Web site. 
Everyone can look at them.
    Mrs. Biggert. Okay. I think we need something more 
transparent. I guess we will just disagree.
    The gentlelady from California?
    Ms. Waters. Thank you very much, Madam Chairwoman. In terms 
of reporting, I am looking at page 7 and I see that you have 
the HOME performance snapshot report, the dashboard report, the 
open activities report, the vacant units report, the expiring 
funds report, the PJ analysis report, the auto cancelation 
final draw report. You have a lot of reports here. You are 
reporting on everything. I don't know if--do you have this 
information of all the reports that are identified here on page 
7? I just went through them. It may be instructive to take a 
look at these reports.
    Mrs. Biggert. Will the gentlelady yield? I am looking at 
the snapshot report and it has program progress and the number 
of funds committed but it doesn't give any--it is just numbers. 
It doesn't--who does it apply to?
    Ms. Waters. Let me just take a look at what this snapshot 
report does.
    Ms. Biggert. I yield back.
    Ms. Waters. This quarterly report tracks the progress of 
individuals, participating jurisdictions and ranks them against 
others for eight performance factors. It is an important tool 
in helping to evaluate the performance of participating 
jurisdictions by ranking them and providing a context for 
accomplishments. It includes a special red flags report 
indicating particularly poor performance in any of the five 
areas related to HOME assistance rental or production. And then 
they talk about Attachment 2.
    So I think the report does what it is supposed to do. Maybe 
what you are looking for is in another one of the reports.
    Mrs. Biggert. If the gentlelady will yield, what I am 
looking for is each project. This gives us a percentage of what 
is happening, but it is not each project, like the picture of 
the building that they are building or something that ties it 
to.
    Ms. Waters. So what you are looking for is a State-by-State 
report--
    Mrs. Biggert. State-by-State, project-by-project--
    Ms. Waters. A funded project and its progress? I am sure 
that information is available. That would be quite a--
    Ms. Marquez. Actually in the open activities report, that 
is also listed on page 7, it is on our Web site. And that 
actually gives you a track of progress of individual HOME 
projects.
    Mrs. Biggert. As identifying with address or--
    Ms. Marquez. Probably, because otherwise--that is how they 
would have to enter in later all of the beneficiary data. So it 
is there. I am sorry. I misspoke. On privacy for individuals, I 
am not allowed. But it has a marker. You could call the 
jurisdiction and know--you could ask us and know. I guess what 
is important is that this is on our Web site for everyone to 
look at that tracks progress by project.
    Ms. Waters. Reclaiming my time if I may. This is an open 
activities report that you are referring to now?
    Ms. Marquez. Yes, ma'am.
    Ms. Waters. Thank you. Let me just move to another little 
area that I wanted to clear up. First of all, I am sorry that 
Mr. Grimm is not here because I wanted to engage in a little 
bit about whether or not he should be shocked when we read 
something in the Washington Post. And Mr. Heist, I don't want 
you to feel bad about not being shocked. I am shocked by what 
the Washington Post does not report on like the Kaplan schools 
that they own that are causing so much pain in communities like 
mine where people are using their Pell grants and other dollars 
that are provided by the Federal Government to be educated only 
to find out that the institution is not capable of doing that.
    Having said that, Ms. Marquez, the Washington Post article 
that motivated the committee to have this hearing noted that 
even when HUD learns of a botched deal, Federal law does not 
give the agency the authority to demand repayment. The agency 
can only ask agencies to voluntarily return money.
    Could you explain to me what they are talking about?
    Ms. Marquez. That is just another instance of being 
incorrect. I have been asked, I think, a number of times. There 
are many things that HUD can do and that HUD does do. We have a 
100 percent record of having money returned. We have the option 
of going to our enforcement center. We have the option of going 
to the Attorney General. We have the option of going to the 
Justice Department. We can debar people and we have done all of 
those things. We have also terminated--we have stopped their 
grants completely. We have just in the last--since 2003, there 
are 8 jurisdictions that we terminated their involvement 
because of their performance.
    So, we have taken many actions. Many actions are available 
to us.
    Ms. Waters. Let me just be clear. The representation in the 
Washington Post that says Federal law does not give the agency 
the authority to demand repayment, you have just described any 
number of ways--
    Ms. Marquez. That is correct.
    Ms. Waters. --that you can deal with any problems that 
occur in these agencies and you have the tools that you need to 
get money back; is that correct?
    Ms. Marquez. I believe that we do.
    Ms. Waters. Thank you. I yield back.
    Mrs. Biggert. The gentlelady yields back.
    The gentleman from Texas, Mr. Canseco, is recognized for 5 
minutes.
    Mr. Canseco. Thank you, Madam Chairwoman. Just very 
briefly, Ms. Marquez. HUD--just to clarify here, your program 
has block grants to municipalities or to cities and then they 
do their work according to certain plans set out by HUD; is 
that correct?
    Ms. Marquez. They do their work according to plans that 
they have drawn up and submitted and there are regulations and 
there is--
    Mr. Canseco. Plans that your Department has approved?
    Ms. Marquez. Correct.
    Mr. Canseco. Do you follow the progress of those plans?
    Ms. Marquez. Yes, we do. In fact, there is an annual report 
called the CAPR where they enforce. This is call the 
consolidated plan where they report what they want to do as a 
community, their HOME dollars, their CDBG dollars, their ESG 
dollars. A whole bunch of things are reported through there.
    Mr. Canseco. In other words--I don't want to put words in 
your mouth. So if you allocate $1 million for 100 families, 
homes or habitats, you follow that progress; is that correct?
    Ms. Marquez. When HOME dollars fund a program, not a 
project, right? So they receive the dollars and are--they 
decide how to use them, but they also have the right under the 
law to change their mind. So they often amend their plan and we 
follow as we monitor; we take a look at everything they have 
said they are going to do.
    Mr. Canseco. Understandably. If at the end of the day, it 
was intended for 100 families and only 25 families get fitted 
into that home or move in, do you monitor that?
    Ms. Marquez. Do you mean if they said they were going to 
find 100 homes for--private homes for a family, do we monitor? 
Essentially, you would be asking in the CONPLAN did you do it 
and they report every year on their activities and one of these 
reports actually keeps you up to date on it.
    Mr. Canseco. So the report does not come in where they 
completed their project, where they said they were going to 
house 100 families and they in effect only housed 25 families, 
the report would come in weak. And do you ask for that money 
back? Do you get that money back? Or what happens to that 
money?
    Ms. Marquez. As I said, we fund a program, not projects. So 
a project of 100 homes is a project, not a program. They have 
the right to reprogram that dollar. For instance, if they were 
facing just a massive recession like the one that we have just 
gone through and it no longer makes sense to do homeownership 
because of things like the list of foreclosures, and instead 
they decided because there are many more renters in the 
country, we need to move the money now to renting, that would 
be appropriate and okay for them to do.
    Mr. Canseco. So in other words, once those dollars go out 
the door from your office, they can do with it what they want?
    Ms. Marquez. They cannot do with it what they want. They 
have to meet the regulations and the uses of the HOME Program, 
and as the IG has said, they are very straightforward uses, and 
we monitor against them.
    Mr. Canseco. If there are any funds that were not used, how 
do you monitor the use of those funds, to ask for funds back?
    Ms. Marquez. There are two requirements. One is in the 
statute, a 2-year requirement that they obligate those funds, 
and then by regulation--actually, the statute was silent on 
this, we added it--there is a 5-year requirement on 
expenditure. We have reports in the IDIS system that actually 
track where they are cumulatively on their appropriation of 
their program on the 2-year and 5-year basis.
    Mr. Canseco. And is it a written report or is it also a 
site inspection report? Or how do you monitor this other than 
by reading the written report that you get from them?
    Ms. Marquez. The expenditure of funds is actually, if you 
haven't expended it, there is nothing to go look at. You 
haven't expended it. So that comes through a formula accounting 
program in the system, but we do monitor the grantees, and as I 
said, in the last 2 years, we have monitored 34.5 percent of 
them. We actually go to the jurisdiction's office. We have an 
assessment tool that we do yearly that is actually something 
that is approved by the IG, that they agree with. We go through 
that monitoring. They actually use the risk assessment, too. We 
go through that. We take a look at a sample of files, and it is 
very usual that in an in-place monitoring, they would actually 
do a site visit to a project.
    Mr. Canseco. Are there times when you don't do site visit 
follow-up?
    Ms. Marquez. I am sure there are. If we don't feel that one 
is necessary, I am sure they may not, but it is--what I 
understand is it is more usual than not that as part of the 
monitoring of a jurisdiction, there would be a site visit to a 
project.
    Mr. Canseco. Thank you very much. I yield back.
    Mrs. Biggert. Thank you. Mr. Stivers, do you have any 
questions?
    Mr. Stivers. Yes.
    Mrs. Biggert. The gentleman is recognized for 5 minutes.
    Mr. Stivers. Thank you, Madam Chairwoman, and I want to 
follow up on some questions that the gentleman from Texas was 
asking. How do you choose who you go and inspect with the 
onsite visits? Is it based on the snapshot report, so that they 
report and they look good on the five factors, then you don't 
go see them or is it based on some other criteria? Is it 
random?
    Ms. Marquez. It is not random.
    Mr. Stivers. Okay.
    Ms. Marquez. The risk assessment tool takes into account 
the grant size, the complexity of activities, what we think 
about the CHDO capacity in the area, the adequacy of oversight, 
is this a CHDO, a place that has a lot of failures or not, the 
staff capacity, their ability to underwrite, and project 
process. So all of these things and other factors go into a 
risk assessment.
    Mr. Stivers. Great, and what goes into the decision to do a 
physical on-site visit of a project or not?
    Ms. Marquez. There--what we are looking at there is when 
they go on and do a sample of files, when they look at them, if 
there is something in that that they don't feel is right they 
will go look, similar to what the IG does. When they go and 
poke around, if they think something is wrong, they dig in a 
little deeper. So do we.
    Mr. Stivers. So you visited about a third of your grantees 
last year, and there were two-thirds that you didn't visit on a 
rotating basis of every 3 years. Am I to assume that you will 
visit everyone or you will continue to use this snapshot and 
visit the same people year after year?
    Ms. Marquez. We make it a point to make sure that within 3 
years, we are continually monitoring--that you get a monitoring 
visit onsite, at least one every 3 years, but as I said much 
earlier, maybe even this morning, what we did--what we do there 
is that we have--most of our staff works and lives in the 
field, not in Washington, D.C. Each CPD representative is 
responsible for a number of grantees. They have a personal 
business relationship with them. They are constantly talking to 
them. So it is not just that you see them once every 3 years, 
when they go onsite to do the formal monitoring. Someone else 
has said, and I think this is true, often it is HUD employees 
who catch the problem early, before it is a problem and help 
them address it and fix it.
    Mr. Stivers. Great, and just a minute ago, you talked about 
reprogramming money. Is there some report that comes back to 
you when someone wants to reprogram money or is there some--
obviously, you said as long as it meets the guidelines, they 
really don't have to request it, they can just do it, but is 
there some way you know when someone reprograms money?
    Ms. Marquez. With this thing called the consolidated plan, 
with all of the money in it that they do this report to us, if 
they are going to substantially change an activity, so if they 
said we are going to do homeownership and they decided that 
because of the economy, that wasn't a good idea, and they 
should now do rental, they would actually have to file a plan 
amendment with HUD and we would review it. You cannot just 
decide. You have committed.
    Mr. Stivers. Mr. Heist, do you know of any issues or 
problems with the reprogramming of money?
    Mr. Heist. That is not something that we have looked at, 
no.
    Mr. Stivers. Okay. Thank you. A minute ago, you were 
talking about Davis-Bacon. So every project that is done under 
the HOME mantra is a Davis-Bacon program and pays essentially a 
higher amount than market wages that pays what is legislatively 
called prevailing wage although it is not really the prevailing 
wage in the marketplace?
    Ms. Marquez. It actually depends on how many units it is. 
So if it is 11 units or more, Davis-Bacon applies.
    Mr. Stivers. Thank you. And then lastly, earlier you said 
that you had a zero tolerance for failed projects, but there 
are a little over 4,200 projects that have taken their final 
draw but still are open that are on your--what report do you 
call that--your final draw report. So how many of those will be 
closed--they are at least 120 days beyond taking their final 
draw, but their program is not--everything is not done, and I 
understand occasionally you will take your final draw before 
you finish the project, but what is the oldest project on that 
list as we sit here today?
    Ms. Marquez. Actually, I couldn't answer that question. I 
would be happy to--
    Mr. Stivers. I would love to know. Would you have a guess? 
Would it be no older than 2 years? Would it be no older than 5 
years?
    Ms. Marquez. I would be wrong to take a guess, but I can 
tell you within the last 4 months, we have reduced that list of 
final draw projects by 25 percent.
    Mr. Stivers. And your goal is to get it to what number?
    Ms. Marquez. That I couldn't say. These are real things and 
real final draw. As I said, this is actually real estate that 
is being built, and we are facing the worst real estate crisis 
in my life, and so this is something that is real about delays. 
And as I said earlier, in the private market they were facing a 
34 percent delay in the last 3 years, where the HOME Program 
faced a 4 percent delay. So by all standards, that is not bad.
    Mr. Stivers. Thank you. My time is up.
    Mrs. Biggert. The gentleman's time has expired. Just one 
quick question. Mr. Heist, have you asked the Comptroller 
General for a legal opinion on the accounting issue of the 
numbers of yours that remain open?
    Mr. Heist. Yes, we have.
    Mrs. Biggert. When do you expect to receive that opinion?
    Mr. Heist. We just sent it to them a couple of weeks ago. 
We have met with them over the past couple of years informally, 
so they understand the issue and we helped--they have actually 
provided assistance to us to help frame the issue better so 
they could give us a good answer.
    Mrs. Biggert. Could you briefly describe exactly what you 
are asking for?
    Mr. Heist. It is an issue of the level at which HUD is 
required to track the obligation, then commitment, then 
disbursement of funds. We are essentially--and that is the 
heart of the disagreement that we have with HUD--that we 
believe it should be tracked at the fund year level, every year 
you get an allocation of HOME funds. HUD uses a cumulative 
method where they compare all the expenditures against the 
obligations since the inception of the program. That is what we 
disagree with, the application of that method, and I would--in 
fact, we are meeting with GAO probably within the next week or 
two, and then they will meet with HUD, they will meet with HUD 
General Counsel, HUD CFO's office, and I would--I hate to say 
how long. I think it will be matter of months, I am sure.
    Mrs. Biggert. Why is this important?
    Mr. Heist. Because I think--it is why we believe that the 
system is not in compliance with financial management 
standards, and it has a potential impact on the statement of 
their outstanding obligations on their financial statements, 
and depending on how you interpret the statute, it could affect 
the amount of money that comes back to Treasury as these 
projects are canceled, as the funding lapses.
    Several years ago, the funding for this program was 
switched from a no year indefinite appropriation period to a 3-
year, and with that comes the consequence of after 5 years of 
the funds being available, they are automatically canceled by 
Treasury and swept back. This would potentially impact the 
amounts that would be subject to cancelation.
    Mrs. Biggert. Thank you. And with that, let me just say I 
think this has been a really important hearing and I thank the 
witnesses. It is important because I think the role of this 
committee is to provide oversight and protect taxpayers' 
investments, and it is also important to ensure that the 
taxpayer dollars are being used for their intended purposes. 
And while we may disagree on some of the conclusions and 
findings, I think that we can all agree that this is an 
important program, that there is room for improvement with the 
Administration and the accounting. So this hearing is part of 
the process of identifying what should happen, and what 
changes.
    With that, the Chair notes that some members may have 
additional questions for this panel which they may wish to 
submit in writing, and so, without objection, the hearing 
record will remain open for 30 days for members to submit 
written questions to these witnesses and to place their 
responses in the record.
    And again, I thank the witnesses, and it has been a really, 
I think, good hearing and I thank you for the time that you 
have spent with us, and with that, this hearing is adjourned.
    [Whereupon, at 12:55 p.m., the hearing was adjourned.]


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