Politics & Government

Money meant for struggling NC homeowners spent on barbecue and gym memberships, audit finds

A foreclosure sign tops a sale sign outside an existing home on the market in Denver in this Aug. 29, 2007 file photo.
A foreclosure sign tops a sale sign outside an existing home on the market in Denver in this Aug. 29, 2007 file photo. AP

A North Carolina housing agency used money that should have gone to struggling homeowners to pay for employee gym memberships, catered barbecue lunches, gift cards, flowers and balloons, according to a scathing federal report.

North Carolina’s Housing Finance Agency charged $107,578 in wasteful and unnecessary expenses to the U.S. Treasury Department since 2010 while administering nearly $700 million from a fund within the federal program created as part of the bank bailout of 2008, according to the report released last week by the special inspector general for the Troubled Asset Relief Program.

The agency is repaying some of the money.

“TARP is not a source to fund (a) state agency’s general operations, boost state employees’ morale or throw catered barbeques when Treasury employees visit. TARP is not a windfall,” Christy Goldsmith Romero, the TARP inspector general, said in a statement.

The report, which examined 18 states and the District of Columbia, found $3 million in unnecessary expenses charged to the Hardest Hit Fund, a $9.6 billion fund within TARP created to help struggling homeowners keep their homes after the financial crisis. While North Carolina accounted for just a fraction of the questioned spending, investigators singled out the state with a 14-page section of their report, detailing expenses down to a $4.26 charge for balloons and $1.81 for a bottle of water from CVS.

“It’s because through conducting the audit, our auditors found not just unnecessary expenses, but it was a culture where the state agency basically decided to spend whatever they could on whatever they wanted,” said Robert Sholars, director of communications for the TARP inspector general.

The Hardest Hit Fund has helped more than 25,000 struggling North Carolina homeowners remain in their homes over more than six years, said Scott Farmer, the executive director of the Housing Finance Agency. The program helps homeowners who have lost their jobs or had their hours cut – a huge need in the years after the 2008 financial crisis. It offers temporary help making mortgage payments.

“For us, the primary piece that’s missing (from the audit report) is the success of the program,” said Farmer, who has spent the last 17 years with the agency and became its executive director in January. “We’re very pleased with the outcomes. We’re continuing to operate the program and want to continue to help. I would compare our numbers in terms of production against any other state. We’ve done an excellent job of operating this program.”


The Housing Finance Agency, created in 1973, “finances affordable housing opportunities for North Carolinians whose needs are not met by the market,” according to the agency’s website.

An earlier audit found more than $8.2 million in waste and abuse in Nevada. As a result, Sen. Chuck Grassley, an Iowa Republican, requested an audit of other states administering the Hardest Hit Fund. Congress most recently allocated money for the Hardest Hit Fund in 2016 with an additional $2 billion.

Though the North Carolina agency doesn’t dispute the charges listed in the audit, it does take issue with the characterization of many of them. Auditors highlighted more than $2,500 in charges for Clyde Cooper’s Barbeque and even printed a menu in its report. Farmer said the charges were for catered working lunches.

“It’s not a barbecue. It was catered lunches where staff was working on an audit with Treasury staff. It looked a little different when you call it a barbecue,” Farmer said.

The audit revealed that the agency spent more than $1,100 on shirts with the agency’s logo, another expense that the agency said was misleading.

“The shirts were ordered as a work uniform for staff that was working” at large foreclosure events,” said Connie Helmlinger, the agency’s manager of public relations and marketing. “We want staff to be easily identified. That was something that stuck out to me. It’s a work uniform. They weren’t a gift.”

Auditors found $8,880 charged to TARP for gym memberships and more than $18,000 in employee cash bonuses. The agency said the gym charges were in keeping with staff policy for full-time employees, who were given wellness incentives, and the bonuses were actually temporary compensation for employees who took on more responsibility when the program expanded.

Auditors found more than $14,000 in employee meals unrelated to travel, including for annual review lunches, and another $11,000 for employee parties, celebrations and outings.

And on and on – from a $734 dinner at Winston’s Grille to $53 for cupcakes and ice cream.

The report scolded the agency for calling its new grants “the game changer.”

The Housing Finance Agency operated a $12.4-million program from 2005 to 2010 that did not include TARP funding. The massive influx of federal dollars – $483 million in 2010 – led to a staffing escalation. The agency leased more office space, created a website for homeowners and participated in training with hundreds of partners across the state.

“The comment was around the context of the amount of money received,” Farmer said, disputing any nefarious connotations. “It was a ‘game changer’ in that we had to restructure our organization.”

Though the worst effects of the financial crisis are over for most Americans, Farmer said the agency still completes 100 new loans each month.

“It’s unfortunate that we have a need for it, but we’re grateful we do have this program,” he said.

Of the $9.6 billion allocated to the program, about $8.5 billion is expected to be distributed with $1.1 billion spent in administrative expenses.

“You think about why this fund was created. Congress decided there was this really significant need. They didn’t want people to lose their homes,” Sholars said. “The money should have gone to homeowners that needed the money and needed the assistance. In this case, that did not happen.”

The report outlined 30 recommendations for the Treasury Department to curb wasteful spending, including recovering all $107,578 from North Carolina. The agency said Treasury has not asked for repayment, but it is processing more than $53,000 in repayment. The repayment is coming from the agency’s general funds. The Housing Finance Agency is a “self-supporting agency,” Farmer said: It receives state funding for its programs but pays for the administrative costs of running those programs with funds it earns from its other programs.

“There’s some things we felt, rather than argue about, it’s easier and more appropriate to repay those amounts and move forward,” Farmer said.

Brian Murphy: 202.383.6089; @MurphinDC