Federal Reports

We audited Neighborhood Loans, Inc., to evaluate its quality control (QC) program for originating and underwriting Single Family FHA-insured loans. Our audit covered the period October 2020 through September 2022.  We selected Neighborhood Loans for review based on its increasing loan volume and delinquency rate and because its rate of self-reporting loans to HUD when it identified fraud, material misrepresentations, and other material findings that it could not mitigate was below average for 5 of the last 6 years.

We found that Neighborhood Loans’ QC program for originating and underwriting FHA-insured loans was not sufficient.  Specifically, Neighborhood Loans (1) did not select the proper number of loans for review and maintain complete data to document its loan selection process; (2) did not complete all loan reviews in a timely manner; (3) did not always complete key review steps and sometimes missed material deficiencies; and (4) did not adequately assess, mitigate, and report loan review findings, which included self-reporting loans to HUD when required.  These issues occurred because Neighborhood Loans had insufficient controls over its QC program, was not always familiar with HUD requirements, and experienced staffing constraints.  As a result, HUD did not have assurance that Neighborhood Loans’ QC program fully achieved its intended purposes, which include, among other things, protecting the FHA insurance fund and lender from unacceptable risk, guarding against fraud, and ensuring timely and appropriate corrective action.

We recommend that HUD require Neighborhood Loans to (1) update its QC plan and related procedures to align with HUD requirements; (2) provide training to staff and management on HUD requirements for lender QC programs; (3) review the loans that it had not selected and take appropriate actions when applicable; (4) review its QC files for loans in which it may not have performed complete reverifications and reverify information where appropriate (5) evaluate its QC files for reviews in which it did not yet assess the risk of findings identified; and 6) evaluate its QC files for the loans in which it identified material findings to confirm whether it self-reported to HUD all findings of fraud or material misrepresentation, along with any other material findings that it did not acceptably mitigate.
 

The Office of Inspector General is issuing this inspection report to assess the U.S. Small Business Administration’s (SBA) initial response to Hurricane Milton, including staffing, loan application volume, response time to applicant queries, and timeliness of disaster loan approvals.

We found that in SBA’s initial disaster assistance response to Hurricane Milton, the agency promptly established a field presence, adequately staffed recovery centers, and responded timely to applicant queries.

Although SBA processed loan applications in 17 days on average, the agency was unable to disburse all but one of those loans during a 68-day funding lapse. As a result, the overall processing time from application receipt to disbursement of funds was 73 days on average for applications submitted before or during the funding lapse and 19 days on average for applications submitted after supplemental appropriations were approved.

We recommended SBA review current outreach strategies, including staffing assignments, and make appropriate changes to optimize resources, thereby ensuring maximum awareness of available assistance to disaster survivors. We also recommended the agency implement processes to gather feedback from applicants that would assist in monitoring the effectiveness of its outreach methods.

SBA management partially agreed with Recommendation 1 and agreed with Recommendation 2. Management’s response and planned action satisfy the intent of both recommendations.

The OIG receives requests from VA’s National Acquisition Center to validate vendors’ data and compliance with Federal Supply Schedule (FSS) contract terms and conditions. The VA FSS program supports the acquisition needs of VA and other government agencies for medical equipment, supplies, pharmaceuticals, and services by contracting with vendors that provide the items at a discount. The OIG reports its findings to the National Acquisition Center, but the reports are not published because they contain sensitive commercial information.

This report summarizes 20 reports the OIG issued to the National Acquisition Center in fiscal years (FYs) 2023 and 2024. The report presents overall findings in three areas: vendors’ compliance with FSS terms and conditions, noncompliance that could be pursued under the False Claims Act, and net overcharges to the government. In the 20 reports, the OIG identified overbillings and noncompliance with the price adjustment clause, the price reductions clause, the industrial funding fee and sales reporting clause, and the trade agreements clause, as well as with the Veterans Health Care Act of 1992 and shipping charges. The OIG issued two False Claims Act reports in FY 2023 and determined the impact to the government was $13,833,997 in overcharges, of which VA was able to recover about $13,418,977. Finally, the OIG calculated about $20.1 million in overall net overcharges to the government.

Federal agencies purchased about $18.9 billion in products and services through VA’s FSS program during FY 2023 and $21.4 billion in FY 2024. The OIG’s findings and recommendations helped VA collect about $19.5 million in net overcharges (97 percent of the about $20.1 million).

Like other organizations, Amtrak (the company) has been migrating its existing technology systems and data and deploying new systems to the cloud, and its efforts are ongoing. During our ongoing audit of the company’s cloud computing practices, we identified two pressing cybersecurity issues. We are providing this early alert to bring these issues to the company’s immediate attention. Given the sensitive nature of the information, we are summarizing the results in this public version of the report.

SUMMARY OF RESULTS

Our work to date on the company’s cloud computing practices, which we plan to continue, identified two matters for immediate consideration. In commenting on a draft of this interim report, the company’s Executive Vice President for Digital Technology and Innovation agreed with our matters for consideration and described actions the company plans to take to address them.

U.S. Customs and Border Protection’s (CBP) inconsistent processes for
identifying special interest aliens (SIAs) created disparities in alien
screening. In July 2023, CBP’s Office of Field Operations (OFO) San Diego
Field Office and the U.S. Border Patrol (Border Patrol) Yuma and El Centro
sectors had a process to identify and provide additional screening of SIAs,
yet San Diego sector did not. This inconsistency occurred because CBP did
not have an agency-wide policy stating whether to identify aliens from
certain countries as SIAs. As a result, aliens from countries with links to
terrorism entered at least one CBP region that did not provide additional
screening.