Government Report Cites ACORN Offshoot for 'Ineligible' Payments, Grant Problems

An official report released this week says an ACORN offshoot group cannot properly account for how it has spent millions of federal dollars and recommends that the group repay the government and be put on standby mode until it cleans up its act.

The report from the inspector general for the Department of Housing and Urban Development reviewed how ACORN Housing Corporation -- now called Affordable Housing Centers of America -- has spent federal grant money over the past two decades. The report described the group's book-keeping as "problematic and unsupported," and claimed that more than $65,000 in "ineligible" salary expenses were charged to a federal grant last year, including costs for six employees after they were terminated.

The report said more than $19 million from HUD went to the organization since 1995, and that about 80 percent of the $3.25 million received between 2008 and 2009 went toward salaries.

"For continued approval as a HUD-approved housing counseling agency and for future awards consideration, AHC must bring its operations into full compliance with applicable laws," the IG report said, recommending that it be placed on "inactive" status by the federal housing department.

The study is the latest blow to the beleaguered low-income advocacy group ACORN and its offshoots. After Congress voted to cut funding to the main organization following the release of undercover videos that showed its workers appearing to help a couple posing as a pimp and prostitute, the organization's affiliates and chapters have been reorganizing under different names.

ACORN Housing Corporation, which was formed in 1985 by ACORN organizers, changed its name this year to Affordable Housing Centers of America.

The IG report recommended that the organization reimburse the government for the $65,000 in "ineligible" expenses -- and either provide support for other salary costs or reimburse that money as well.

A memo released Sept. 7 by the Department of Housing and Urban Development agreed that the group should either "provide documentation" to support its expenses or reimburse the government.

The department "will evaluate if inactive 'status' is warranted," the memo said.

In response, a representative for Affordable Housing Centers of America wrote in a Sept. 10 letter to the inspector general's office that "almost all" personnel records unavailable during the audit "have now been located." The response also said the group instituted an "electronic time-keeping system" to record how grant money is applied -- a reform that "satisfies" one of the recommendations in the report.

The response said the organization "does not dispute" that expenses for terminated employees, as well as expenses for prior-year costs, were "erroneously charged" to the federal government.

However, Affordable Housing Centers of America argued that it should not have to repay the money because the group "incurred substantial other allowable costs" last year that it did not charge to Washington.

"Importantly, none of the findings suggest that funds were misused or that counseling work was not performed," the response said, adding that the group will work "constructively" to improve its operation.

The inspector general study was requested by Rep. Darrell Issa, R-Calif., ranking Republican on the House Oversight and Government Reform Committee.

"It doesn't matter if it's $10 or $10,000 -- there is no acceptable amount of abuse or mismanagement that the federal government should tolerate when it comes to the taxpayers' dollars," Issa said in a written statement.