The Trump administration has suspended a U.S. territory's housing-finance authority from receiving further federal funding, citing years of alleged financial mismanagement and audit failures.
The Department of Housing and Urban Development halted disbursements to the Virgin Islands Housing Finance Authority after identifying dire audit findings and the conviction of a former executive in a disaster-recovery contracting scheme.
HUD Secretary Scott Turner said the suspension took effect immediately as the agency intensifies scrutiny of federal grant recipients nationwide.
The department's deputy chief sent a 13-page letter to authority officials detailing the findings and barring the agency from future federal procurement during an investigation.
HUD claimed a nearly $2 billion appropriation intended for recovery after Hurricanes Irma and Maria in 2017 had been mismanaged, leaving residents without promised housing and infrastructure nearly a decade later.
Audits found disaster recovery spending lagged badly while administrative costs consumed a disproportionate share of available funds.
The former chief operating officer was sentenced to 36 months in prison after convictions including bank fraud, money laundering, and criminal conflict of interest.
Prosecutors said the executive received $107,000 from a contractor, and a related contract was later inflated from $3 million to $4.5 million, with much of the lumber allowed to rot unused.
HUD alleged the authority made false certifications to the federal government that it maintained proficient financial controls and safeguards against conflicts of interest.
Multiple audits spanning a decade raised significant concerns, questioning millions in costs and uncovering weak oversight and inaccurate reporting.
One audit concluded the authority failed to implement a structured fraud prevention framework despite overseeing $1.9 billion in disaster recovery funding.
HUD found only 2% of planned single-family rentals, 16% of single-family homeowner projects, and 19% of multifamily rental projects had been completed since the storms.
None of 329 housing mitigation projects had been finished, while $52.6 million was spent on administrative costs alone.
The agency also determined internal divisions operated in silos, hindering communication and fraud-risk management.
An inspector general probe found employees had personal knowledge of suspected fraud but the authority failed to investigate or alert senior management.
The authority has 30 days to request a hearing, after which the funding suspension will become final.
The action marks the latest step in a broader federal anti-fraud campaign targeting misuse of public funds across multiple programs.
