HUD May Require ACORN Spinoff to Reimburse Some Taxpayer Money

By Fred Lucas | September 29, 2010 | 9:49 AM EDT

The U.S. Department of Housing and Urban Development's Office of Inspector General, headed by Kenneth M. Donohue, is established by law to provide independent and objective reporting to the HUD Secretary, the Congress, and the American people through its audit and investigative activities. (Photo from HUD Web site)

( – The U.S. Department of Housing and Urban Development may require an ACORN spinoff group to pay back more than $200,000 in taxpayer funds. It also may put the group on “inactive status,” making it ineligible for future federal grants.

An investigation by the HUD inspector-general found that salary expenses charged to HUD counseling grants “were not fully supported”; that “ineligible salary expenses” totaling $65,548 for at least six terminated employees were charged to a FY 2009 HUD grant; and that “federal procurement standards were not met” to ensure tax dollars were being used effectively.

Affordable Housing Centers of America (AHCOA), formerly known as ACORN Housing Corporation, was previously affiliated with the ACORN, the Association of Community Organizers for Reform Now. AHCOA contends that the IG report found only procedural accounting problems, all of which are being corrected.

"We have made a number of changes they (the IG’s office) asked about, before they asked us,” AHCOA spokeswoman Alyson Chadwick told “Some of the changes started before any of this (investigation) started. We were in the middle of a reorganization last year when all this happened.” Chadwick said the IG’s review started in the fall of 2009, but changes began taking effect in 2008.

Congress will investigate ACORN, if Republicans win back control of Congress, said Rep. Patrick McHenry (R-N.C.), a member of the House Oversight and Government Reform Committee. “This is a damning report, and it shows that though ACORN has changed its name, it hasn’t changed its stripes,” McHenry told “It’s still a criminal enterprise, intent on money-laundering and thwarting the law.”

The IG investigation looked at fiscal years 2008 and 2009, a time when HUD gave $3.2 million in housing counseling grants to ACORN Housing Corporation/Affordable Housing Centers of America. Of that total, $2.5 million was charged to HUD grants as salary expenses. A full 83 percent of the HUD grant was used for salaries in 2008, while 73 percent of the organization’s HUD grants went for salaries in 2009.

“The caseload allocation method used by AHC for HUD chargeable salary expenses was problematic and unsupported,” the IG report says. “Consequently, HUD had no assurance that the counselors’ salary expenses totaling $2.544 million charged to the HUD grants reflected grant-eligible services.”

Moreover, the IG report noted that “costs or price analysis and documentation to support the basis and justification for the services were not readily available,” and therefore, “AHC could not ensure that it had obtained services for the lowest, most reasonable cost.”

The IG report examined only fiscal years 2008 and 2009, but it says the organization had received more than $19 million in HUD grants since 1995.

Chadwick said the organization is still working with HUD regarding the IG’s recommendations. “Our focus is on helping people save their homes from foreclosure right now,” she said. “We believe that it is very important for an organization that takes money from the federal government to live up to the highest standards possible. We want to make sure we meet those.”

The IG report commended AHCOA’s “efforts to bring its operations into compliance with federal requirements and its willingness to resolve the issues identified in the report.”

The report made five suggestions. It said HUD should require AHCOA to either provide full accounting for salary and fringe-benefit costs charged to HUD grants in 2008 and 2009, or else reimburse HUD for amounts not adequately supported. “At a minimum, the amounts of reimbursement should include $159,683 for the two test pay periods,” the IG recommendation says.

It also says AHCOA should reimburse $65,548.37 for ineligible salary expenses. It says HUD should require AHCOA to comply with federal budgetary regulations for salary timekeeping and procurement policies.

And lastly, the IG recommended that HUD “consider placing AHCOA on ‘inactive’ status while it initiates corrective action to address exceptions and recommendations in this report” and “provide AHCOA with technical assistance and guidance as needed.”

HUD agrees with most of the inspector-general’s recommendations, said Vicki B. Bott, HUD’s deputy assistant secretary for single family housing, in a Sept. 7 memo included in the appendix of the report.

HUD spokesman Brian Sullivan told on Tuesday that the department has no more to say on the matter than what was provided in the Sept. 7 memo.

AHCOA dropped ACORN from its name on Jan. 8, 2010. But the decision to make the name change came in early 2009, before videos were posted on the Web site, showing some ACORN officials giving advice to two undercover people about starting a brothel for underage girls.

The name change “was going to happen” anyway, said Chadwick, a spokeswoman for the group. “It was a matter of what the name was going to be. As you can imagine, if an organization has been around for a long time, that’s a decision that’s not taken lightly and a lot of people have opinions about it.”

She said the name-change did not have anything to do with allegations of ACORN’s voter registration fraud in 2008. “ACORN and ACORN Housing were separate organizations. We’ve never done voter registration,” Chadwick said.

But ACORN traditionally has set up a group of affiliates, almost all of which have changed their name in the past year. Rep. McHenry of the House oversight panel believes those affliliates are still tied to each other.

“ACORN has shown the surprising ability to launder money through various institutions and calling it different names,” McHenry said. “They set up a series of affiliates and move the money between them. As we know, money is fungible.”

McHenry also stressed that the IG report does not come from a political appointee.

“Time and again, we’re seeing ACORN and its affiliates try to thwart the law. We’ve had report after report on this. Finally, we have very definitive work that outlines some of their actions. The IG really just wants to get to the bottom of these programs and make sure that government funds are used appropriately.”

The investigation was initiated when Sen. Susan Collins (R-Maine), the ranking member of the Senate Homeland Security and Government Affairs Committee, and Rep. Darrell Issa (R-Calif.), the ranking member of the House Oversight and Government Reform Committee, wrote a Sept. 17, 2009 letter to HUD Inspector-General Kenneth Donohue.

AHCOA Executive Director Mike Shea said his organization has fully cooperated with the IG and that the organization will work with HUD on the issues raised by the IG’s report.

“This exhaustive, nine-month review found principled disagreement about one accounting procedure and a few procedural errors, but no illegal or intentional wrongdoing,” Shea said in a statement. “Throughout the audit we made all staff, records and clients available to the OIG team to allow their review to be as comprehensive and accurate as possible.”