Federal watchdog blasts states for TARP failures

by Ryan Smith31 Oct 2013

A federal watchdog on Tuesday blasted several states for spending a mere fraction of federal bailout funds to help struggling homeowners.

Following the financial crisis, the federal government set up the Hardest Hit Fund, which provided cash for 19 states to give relief to troubled homeowners. In an audit released Tuesday, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) called out eight of those 19 states -- Alabama, Arizona, California, Florida, Georgia, Indiana, Michigan, and Mississippi -- for spending less than 22% of their funds on homeowner assistance.

Indiana was at the bottom of the pile, spending just 8% of its HHF funds on homeowner assistance, according to the report. Indiana also drastically reduced its estimate of the number of homeowners it would help with the funds.

“Even though Treasury obligated $221,694,139 of HHF funds to Indiana, Indiana is not getting a significant amount of these funds out the door to help homeowners with HHF. As of June 30, 2013, the state had drawn down $66.3 million (30%) of those funds,” the report stated. “As of June 30, 2013, the state had three HHF programs and had spent $18.8 million (8% of its obligated funds) to help 1,859 individual homeowners. The remaining $8.2 million (4%) was spent on administrative expenses, and $39.4 million (18%) is held as cash-on-hand. … At the start of 2011, Indiana estimated that it would provide HHF unemployment assistance to as many as 16,257 homeowners,” the report stated. “As of June 30, 2013, Indiana lowered that peak estimate to 8,000 homeowners and has helped 1,859 homeowners with HHF unemployment assistance.”

The story was much the same for other states singled out by the report. The Treasury reserved more than $162 million in HHF funds for Alabama, only 13% of which the state has used to help homeowners. Arizona has used only 11% of its more than $267 million on homeowner aid.

The states weren’t the only entities to draw the inspector general’s ire. The U.S. Treasury also took a lashing in the report for failing to follow the agency’s recommendations to “set meaningful and measurable goals” for how the money would be spent.

“Treasury has rejected SIGTARP’s important recommendations. Treasury’s failure to set meaningful goals and metrics to identify program successes and failures results in a lack of accountability on both the part of Treasury and the 19 HHF states,” the report stated. “Treasury’s failure to implement these recommendations harms oversight, reducing Treasury’s ability to identify and assess weaknesses in a timely manner and bring prompter corrective changes. It is important that Treasury fulfill its role as steward over TARP programs, make determinations of which programs are successful and which programs are not working and ensure that HHF funds are reaching homeowners.”