Las Vegas Sun

March 29, 2024

Audit: Group wasted $8.2M in bailout funds meant for Nevadans

Updated Friday, Sept. 9, 2016 | 8:13 p.m.

A nonprofit that was supposed to distribute most of the $202 million that Nevada got in a recession-era government bailout has "a pervasive culture of waste and abuse" and has been spending as much money on itself as on homeowners trying to avoid foreclosure, according to federal auditors.

Officials with the U.S. Treasury's Troubled Asset Relief Program said Nevada should immediately stop using the nonprofit to administer Hardest Hit Funds and return $8.2 million in wasted money back to the account. Most of that figure represents overhead costs, billed to the bailout fund, that held steady even though the nonprofit's client list dropped 94 percent from its peak year.

The nonprofit "used the program as a cash cow for every expense imaginable while all but stopping admitting new homeowners," according to the report issued by Special Inspector General Christy Goldsmith Romero, which said the agency demonstrated "a sense of entitlement and no appreciation for the fact that it was taking funds for itself from the homeowners the program intended to help."

The Nevada Housing Division, which oversees the nonprofit, said they're requesting an attorney general investigation into the situation.

Nevada suffered the highest unemployment rate in the country during the recession and was one of the first states to receive money from the Hardest Hit Fund, which aimed to stabilize communities during the housing crisis. While about 20 percent of Nevada homeowners remain underwater, owing more than their homes are worth, the nonprofit is behind pace on disbursing all the bailout funds by the end of 2017.

The report issued Friday says the contractor, the Nevada Affordable Housing Assistance Corporation, spent thousands of dollars on employee parties and upscale restaurants and paid $500 a month toward its CEO's Mercedes Benz. At the same time, its performance was falling.

Nevada estimated the Hardest Hit Fund could help nearly 24,000 homeowners in the years following the recession, but later scaled back those expectations. It helped only 117 homeowners in all of 2015, even though 688 applications came in.

The contractor also moved into a larger office in the more expensive North Las Vegas City Hall shortly after reducing its staff. The nonprofit broke its $11,200-per-month lease a year later after deciding that it didn't need so much room — a move that cost about $40,000 in lawyer fees, moving expenses and office furniture costs.

Auditors faulted the Nevada Housing Division for letting the activities go unchecked, although the division provided a memo from October 2015 indicating it was previously shut out of many of the nonprofit's decisions and had been raising red flags about the organization for two years.

Democratic Rep. Dina Titus echoed auditors' concerns and vowed to follow up on their findings. She said she'd long been skeptical of the state's "bloated" system for disbursing the funds.

"I am angered by the Nevada Housing Division's lack of oversight and greatly disturbed that money meant to aid struggling Nevadans was squandered on parties, gift cards, and luxury items," said Titus. "The state's indiscretion highlighted in the report may jeopardize its future ability to garner federal assistance that can help Nevada families."

Officials with the Nevada Department of Business and Industry, which includes the Nevada Housing Division, said they think some of the expenses criticized in the audit are allowable under federal law, meaning far less than $8.2 million may be owed back to the Hardest Hit Fund.

"Whatever the final number, those responsible should be held accountable," the department said in a statement.

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