Notice of Recoupment, ERA 1 Program — State of North Carolina (Treasury OIG, OIG-CA-25-054)
Summary
A Department of the Treasury Office of Inspector General report, OIG-CA-25-054, dated August 13, 2025, transmitting a Notice of Recoupment to the State of North Carolina under the Emergency Rental Assistance (ERA 1) statute, 15 USC § 9058a. The OIG reports that it reviewed five fraud, waste and abuse cases from a database kept by the North Carolina Office of Recovery and Resiliency, covering 143 individual applications totaling $958,945. It determined that ERA 1 payments of $803,160 on 120 applications were ineligible, and states that Treasury's Bureau of the Fiscal Service invoiced that amount on August 12, 2025. The notice discusses each case, including FWA-2022-006 ($334,600) and FWA-2022-015 ($315,910), where it finds no established obligation to pay rent. Appendix 2 contains the state's written response asking OIG to reconsider the recoupment demand.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
DEPARTMENT OF THE TREASURY
WASH INGTON, O.C. 20220
OFFICE OF
I NSPECTOR GENERAL
OIG-CA-25-054
August 13, 2025
Emergency Rental Assistance (ERA 1) Program
Notice of Recoupment - State of North Carolina
Summary
The ERA 1 statute, cod ified at 15 USC § 9058a, directs the Department of the
Treasury (Treasury) to make allocations and payments to el igible grantees such as
States and local governments, who in-turn, make funding avai lable in the form of
rental assistance to eligible households. The statute also directs the Treasury
Office of Inspector General (OIG) to conduct monitoring and oversight of t he
receipt, disbursement, and use of funds made avai lable to grantees. As part of t his
oversight authority, if OIG determines that a grantee failed to comply w ith t he use
of funds requ irements in the statute, the amount equal to the amount of funds
used in violation shall be booked as a debt of such entity owed to the Federal
Government.
The State of North Carol ina is a recipient of funds under t he ERA 1 statute. In April
2023, we made an inquiry to the State of North Carol ina about a complaint
reported to t he OIG Hotline. We learned t hat the North Carolina Office of Recove ry
and Resil iency (NCORR), t he administrator for the State of North Carolina's
Housi ng Opportunities and Prevention of Eviction ERA program, maintained a
database of substantiated ERA fraud, waste, and abuse (FWA) cases. We
requested and reviewed documentation for five of those FWA cases. Based on t he
information provided, we determined that the State of North Carolina's ERA 1
program paid out ERA 1 funds totaling $803,160 that d id not comply w ith the ERA 1
statute because the funds were disbursed to ineligible households. On August 12,
2025, Treasury's Bureau of the Fiscal Service issued an invoice for $803,160 to
State of North Carolina establish ing a debt to the Federal Government.
The following document is OIG's Notice of Recoupment (Notice) that establ ished
this debt. The State of North Carolina was given an opportunity to provide a
written response to a draft of the Notice and its written response and our
evaluation of that response is also included in the Notice.
We conducted our review of th is ERA case from May 2024 to August 2025. We
inqui red of the grantee and other re levant parties, reviewed related
documentation, and performed other appropriate procedures. We believe the
evidence obtained is sufficient and appropriate to provide a reasonable basis for
our determination in this Notice.
In conducting our review, we followed the OIG’s system of quality management
for ensuring that the information in this report is accurate. We also followed the
Council of the Inspectors General on Integrity and Efficiency (CIGIE) Quality
Standards for Federal Offices of Inspector General which require that our work
adheres to its general standards for integrity to include objectivity, independence,
professional judgment, and confidentiality as well as its general standard for
receiving and reviewing allegations.
Distribution
Department of the Treasury
Jeff Stout, Acting Chief Program Officer, Office of Capital Access
Danielle Christensen, Deputy Chief Program Officer for State & Local
Programs, Office of Capital Access
Michelle Dickerman, Deputy Assistant General Counsel, Office of the
General Counsel
Carolyn Appel, Attorney-Advisor, Office of the General Counsel
Blossom Butcher-Sumner, Attorney-Advisor, Office of the General Counsel
State of North Carolina
ii
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
OFFICE OF
INSPECTOR GENERAL
Notice of Recoupment
Emergency Rental Assistance
Division N, Title V, Subtitle A,§ 501 of the Consolidated Appropriations Act, 2021
(Pub. L. No. 116-260), Dec. 27, 2020, and codified at 15 USC§ 9058a (ERA1)
August 11, 2025
Grantee: State of North Carolina
Poi nt of Contact: Tommy Clark
Director of the NC Pandemic Recovery Office
tommy.clark @osbm.nc.gov
(984) 202-4267
Mail ing Address: 430 North Salisbury Street, Raleigh, NC 27603
Federal Award Identification Numbers: ERA0019
Recoupment Amount: $803,160.00
Background/Legal Authority
Under t he ERA 1 statute at 15 U.S.C. § 9058a(c), Use of Funds, an eligible grantee
shall only use ERA 1 award funds to provide financial assistance and housing
stability services to eligible households. The financial assistance includes: the
payment of rent; rent arrears; utilities and home energy costs; utilities and home
energy costs arrears; and other expenses related to housing incurred due, d irectly
or indirectly, to the COVID-19 outbreak, as defined by the Secretary of the
Department of the Treasury (Treasury). Such assistance shall be provided for a
period not to exceed 12 months except that grantees may provide assistance for
an additional 3 months to ensure housing stabil ity (subject to availabil ity of
funds). The ERA 1 statute at 15 U.S.C. § 9058a(c)(2)(B)(i) allows for up to 3 months
(with exceptions) for prospective rent payments within the 12 or 15 months total
assistance limitation.
The ERA 1 statute at 15 U.S.C. § 9058a(k)(3)(A) defines eligible household as a
household of 1 or more individuals who are obligated to pay rent on a res idential
dwelling and with respect to which the eligible grantee involved determines:
(1) that one or more individuals within the household has (a) qualified for
unemployment benefits or (b) experienced a reduction in household income,
1
incurred significant costs, or experienced other financial hardship due, directly or
indirectly, to the COVID-19 outbreak, which the applicant shall attest in writing;
(2) that one or more individuals within the household can demonstrate a risk of
experiencing homelessness or housing instability, which may include (a) a past
due utility or rent notice or eviction notice; (b) unsafe or unhealthy living
conditions; or (c) any other evidence of such risk, as determined by the eligible
grantee involved; and (3) the household has a household income that is not more
than 80 percent of the area median income for the household. In accordance with
the ERA1 statute at 15 U.S.C. § 9058a(k)(3)(B), the grantee must also ensure that,
to the extent feasible, any rental assistance provided to an eligible household is
not duplicative of any other federally funded rental assistance provided to such
household.
Pursuant to the ERA1 statute at 15 U.S.C. § 9058a(e)(2), the last day of the period
of performance for grantees that received ERA1 reallocated funds is December 29,
2022.
The ERA1 statute at 15 U.S.C. § 9058a(i), Inspector General Oversight;
Recoupment, directs that the Treasury’s Office of Inspector General (OIG) conduct
monitoring and oversight of the receipt, disbursement, and use of funds made
available under the ERA1 program. As part of this authority, if OIG determines
that a grantee failed to comply with the use of funds requirements in the ERA1
statute (15 U.S.C. § 9058a(c)), the amount equal to the amount of funds used in
violation of 15 U.S.C. § 9058a(c) shall be booked as a debt of such grantee owed
to the Federal Government. Amounts recovered shall be deposited into the
general fund of the Treasury.
Facts and Analysis
In April 2023, we made an inquiry to the State of North Carolina (North Carolina)
about a complaint reported to the OIG Hotline. We learned that the North Carolina
Office of Recovery and Resiliency (NCORR), the administrator for the State of
North Carolina’s Housing Opportunities and Prevention of Eviction (HOPE) ERA
program, was already working with the OIG Office of Investigations on several
cases of ERA fraud and had given OIG access to an NCORR database of
substantiated ERA fraud, waste, and abuse (FWA) cases. We also learned that as
part of its administration of the ERA program, NCORR hired a third-party
investigator (investigator) to review complaints and allegations that NCORR
determined to warrant further examination. As of December 23, 2024, the NCORR
database consisted of 407 FWA cases, totaling $17,188,544.
In this Notice of Recoupment, we are reporting on our review of five FWA cases
selected from the NCORR FWA database. The five reviewed FWA cases were
made up of 143 individual applications, totaling $958,945 of financial assistance
2
paid. Of these cases, we determined that for 120 applications, the ERA1 financial
assistance payments totaling $803,160 were ineligible.
For the five FWA cases, we reviewed the investigator’s reports, related
documentation such as recoupment letters issued by NCORR for payments it
determined were ineligible, and performed other procedures, as appropriate.
Below is a discussion of the five FWA cases and our determination with respect to
each case. The specific payees, application numbers, and payment amounts are
provided in Appendix 1.
FWA-2022-006 (Total Ineligible ERA1 Payments – $334,600)
This FWA case involved 12 landlords who received ERA1 financial assistance for
46 applications totaling $334,600 that NCORR identified in its database of
substantiated FWA cases. NCORR issued “Notification to Remit Federal Funds”
letters to the respective landlords to recover the amounts paid. 1 According to
NCORR, no payments were received in response to these letters.
NCORR identified the following fraud indicators with respect to these applications:
• The 12 landlords were associated with the same mailing address located in
a mobile home court in Clarmont, North Carolina.
• The 12 landlords used multiple tax identification numbers on discrete
applications, with some of the landlords using the same tax identification
number on multiple cases. For example, one landlord used three different
tax identification numbers for five applications. As another example, the
same tax identification number was used by 10 of the 12 landlords for 31
applications.
We also reviewed county land and tax records for all rental addresses associated
with the 46 applications and found that the landlords did not own any of the
properties at the time of the financial assistance payments were made. 2
Based on our review, we determined that NCORR paid $334,600 in ERA1 financial
assistance on the 46 applications that failed to comply with the requirements of
the ERA1 statute at 15 U.S.C. § 9058a(c), Use of Funds, as there was no
established obligation to pay rent for these applicants. Accordingly, we
determined that these payments are ineligible.
1
The Notification to Remit Federal Funds” letters stated, in part: “NCORR has determined, through
third party verification, the documentation submitted to support eligibility for HOPE Program
assistance was faulty. Therefore, NCORR has found the application to be ineligible and requires
the awarded funds be returned or repaid.”
2
We note that NCORR determined that another ERA1 payment of $3,600 to 1 of the 12 landlords
was ineligible and demanded repayment. We did not include this payment in the Notice of
Recoupment as we found the landlord did own the property for which assistance was paid and we
noted no other discrepancies with the application to suggest the payment was ineligible.
3
FWA-2022-015 (Total Ineligible ERA1 Payments – $315,910)
NCORR identified what it considered a coordinated fraud ring involving (1) a
married couple and a limited liability corporation (LLC A) owned by the wife of the
married couple 3 and (2) another individual who owned a limited liability
corporation (LLC B) with an affiliation to LLC A. 4 NCORR provided its investigator
multiple allegations associated with these applicants. In a memorandum to
NCORR, the investigator stated: “Based on our review of the documentation
provided by NCORR, this allegation appears to be substantiated.” NCORR
subsequently issued “Notification to Remit Federal Funds” letters to the
respective parties involved with these applications to recover the amounts paid.
According to NCORR, no payments were received in response to these letters.
According to NCORR documentation and our review:
• NCORR paid LLC A ERA1 financial assistance for 23 applications totaling
$160,260. For all 23 of these applications, LLC A applied as the landlord. For
22 of the 23 applications, with ERA1 payments totaling $155,430, neither the
husband, the wife, nor LLC A owned the property. For the other application,
the property, on which $4,830 of ERA1 financial assistance was paid, did not
exist. Accordingly, we determined that that NCORR paid $160,260 in ERA1
financial assistance to LLC A that failed to comply with the requirements of
the ERA1 statute at 15 U.S.C. § 9058a(c), Use of Funds, as there was no
established obligation to pay rent associated with these applications. We
therefore determined that these payments were ineligible.
• For another application, the wife of the married couple applied as the tenant
of a property owned by LLC A using a third party as the landlord. NCORR
paid the third party ERA1 financial assistance in the amount of $4,140 for
the application. As the wife/tenant was the owner of LLC A, and LLC A was
the property owner, we determined that the ERA1 financial assistance paid
failed to comply with the requirements of the ERA1 statute at
15 U.S.C. § 9058a(c), Use of Funds. We therefore determined that the
payment was ineligible.
• NCORR paid LLC B ERA1 financial assistance for 25 applications totaling
$125,840. For 21 of the 25 applications, for which ERA1 financial assistance
totaling $111,960 was paid:
o neither LLC B nor its owner owned the property (18 applications for
which ERA1 financial assistance totaling $89,850 was paid);
o the tenant on the application owned the property (1 application for
which ERA1 financial assistance of $9,000 was paid);
3
The wife of the married couple reported in public filings that she was either the owner or the
chief executive officer of LLC A.
4
According to a public filing, LLC A was the registered agent for LLC B.
4
o the property did not exist (1 application for which ERA1 financial
assistance of $8,280 was paid); and
o the application, which showed LLC B as the property manager, was
dated before LLC B was formed (1 application for which ERA1
financial assistance of $4,830 was paid).
Accordingly, we determined that NCORR paid $111,960 in ERA1 financial
assistance to LLC B on the 21 applications that failed to comply with the
requirements of the ERA1 statute at 15 U.S.C. § 9058a(c), Use of Funds, as
there was no established obligation to pay rent associated with the
applications. We therefore determined that these payments were ineligible. 5
• NCORR paid another third-party landlord ERA1 financial assistance for 13
applications totaling $39,550, for which NCORR determined there was an
association between the third-party landlord and LLC A. 6 For all 13
applications, we determined that the third-party landlord was not the
property owner at the time of rental assistance. Accordingly, we determined
that that NCORR paid $39,550 in ERA1 financial assistance to the third-party
landlord on the 13 applications that failed to comply with the requirements
of the ERA1 statute at 15 U.S.C. § 9058a(c), Use of Funds, as there was no
established obligation to pay rent associated with the applications. We
therefore determined that these payments were ineligible.
In summary, we determined that NCORR paid $315,910 in ERA1 financial
assistance that failed to comply with the requirements of the ERA1 statute at 15
U.S.C. § 9058a(c), Use of Funds, for 58 applications associated with this FWA case.
Accordingly, we determined that these payments are ineligible.
FWA-2022-156 (Total Ineligible ERA1 Payments – $128,950)
NCORR received an allegation that an individual received rental assistance using a
fraudulent utility bill. NCORR’s investigator reviewed the allegation and
substantiated that the utility bill was fraudulent. During its review, the investigator
also determined that the individual (hereafter referred to as Landlord A) and three
other individuals (hereafter referred to as Landlords B, C, and D, respectively)
posed as landlords on multiple applications, all using the same mailing address.
5
For the other 4 applications with ERA1 assistance payments to LLC B, totaling $13,880, we are not
challenging the payments. Our review of these applications found that the owner of the limited
liability corporation was the owner of record for the properties for which the ERA1 assistance was
paid. We noted that the tenants for each application had the same last name as the owner; while
we did not determine whether these tenants had a familial relationship with the owner, the ERA1
statute at 15 U.S.C. § 9058a(k)(3) does not specifically exclude familial relationships in the
definition of an eligible household. We found no other discrepancies in the applications that
suggest they did not meet ERA1 eligibility requirements.
6
We inquired of NCORR how they made this determination. According NCORR, documentation
submitted for another application, not included in this FWA case, showed both the third party and
LLC A to be landlords.
5
The investigator reviewed these applications and stated in a report to NCORR that
the allegations of fraud with respect to the applications appeared to be
substantiated. Subsequently, NCORR sent recoupment notices to the payees in
attempts to recapture the ineligible rental payments. According to NCORR, no
payments were received in response to these letters. The common theme found
by NCORR’s investigator was these purported landlords did not own the
properties for which NCORR paid ERA1 financial assistance. Based on our review
of NCORR documentation and public land records, we determined that NCORR
paid $128,950 in ERA1 financial assistance on 13 applications that failed to comply
with the requirements of the ERA1 statute at 15 U.S.C. § 9058a(c), Use of Funds,
as there was no established obligation to pay rent for these applicants.
Accordingly, we determined these payments are ineligible. Additional details are
below.
• Landlord A – NCORR paid $31,500 in ERA1 financial assistance to this
individual as the landlord for three applications. In our review, we verified
through public land records that the individual did not own the properties
for which the assistance was paid.
• Landlord B – NCORR paid $47,055 in ERA1 financial assistance to this
individual as the landlord for five applications. In our review, we verified
through public land records that the individual did not own the properties
for which the assistance was paid.
• Landlord C – NCORR paid $40,195 in ERA1 financial assistance to this
individual as the landlord for four applications. In our review, we verified
through public land records that the individual did not own any of the
properties for which the assistance was paid.
• Landlord D – NCORR paid $10,200 in ERA1 financial assistance to this
individual as the landlord on one application. We verified through public
land records that the individual did not own the property for which
assistance was paid.
FWA-2023-101 (Total Ineligible ERA1 Payments – $12,300)
NCORR received an allegation of fraud alleging an applicant was posing as a
landlord on two rental assistance applications. NCORR’s investigator reviewed the
allegation and determined that he did not own, nor did he appear to be associated
with the owners of any of the properties. The investigator stated in a report to
NCORR that the allegation appeared to be substantiated and, as a result, NCORR
sent two recoupment notices to the payee in attempts to recapture the ineligible
rental payments. In our review, we verified through property records that the
applicant did not own the rental properties listed on the two applications. Based
on our review NCORR documentation and public land records, we determined
that NCORR paid $12,300 in ERA1 assistance on the two applications that failed to
comply with the requirements of the ERA1 statute at 15 U.S.C. § 9058a(c), Use of
6
Funds, as there was no established obligation to pay rent. Accord ing ly, we
determ ined t hese payments are ineligible.
FWA-2022-20 (Total Ineligible ERA 1 Payment - $11 .400)
NCO RR received an allegation of fraud from a landlord, who alleged his tenant
was posing as a landlord on a rental assistance application. NCORR's investigator
reviewed the allegation and verified that the applicant did not own the property he
claimed to own. In a report to NCORR, the investigator stated that the allegation
appeared to be substantiated and, as a resu lt, NCORR sent a recoupment notice to
the payee in attempts to recapture the ineligible rental payment. According to
NCORR, no payments were received in response to these letters. In our review, we
verified through property records that the applicant did not own the rental
property listed on the application. Based on our rev iew, we agree w ith the
investigator's conclusion and determined that NCO RR paid $11,400 in ERA 1
assistance on this application that failed to comply with the requirements of the
ERA 1 statute at 15 U.S.C. § 9058a(c), Use of Funds, as there was no obligation to
pay rent. According ly, we determined that this payment is ineligible.
These five FWA cases are summarized as follows:
Ineligible ERA 1
Financial Assistance
Case FWA Case No. Payments
1 FWA-2022-006 $334,600.00
2 FW A-2022-015 315,910.00
3 FWA-2022-156 128,950.00
4 FWA-2023-101 12,300.00
5 FWA-2022-020 11,400.00
Total $803,160.00
Based on the information provided, we determined that North Carolina's ERA1
program paid out ERA 1 award funds tota ling $803,160 which failed to comply with
the Use of Funds requirements in t he ERA 1 statute (15 U.S.C. § 9058a(c)) because
the funds were disbursed to ineligible househo lds. Accordingly, t hese funds are
required to be returned to the government.
Grantee Response
On May 13, 2025, we provided North Carolina an opportunity to respond to a draft
of t his notice requesting t heir written reply by May 28, 2025. Upon request, we
granted an extension for the ir written response to June 18, 2025. On June 18,
2025, North Carolina requested another extension to May 1, 2026. We considered
that request to be unreasonable and denied t he request informing them that this
notice wou ld be issued in fina l on July 15, 2025, if no written response is rece ived
7
by that date. On July 14, 2025, North Carolina provided its written response which
is included as Appendix 2 to this Notice. 7
In its response, North Carolina stated that it used ERA funds to support housing
stability for eligible renters throughout the COVID-19 pandemic. According to
North Carolina, it sought to distribute these funds expeditiously, cognizant of the
need to help people remain safely in their homes amid a public-health crisis.
Despite the inherent urgency, North Carolina stated it strove to comply with all the
requirements and controls recommended by the Federal Government to protect
against fraud, waste, and abuse. It believed it was successful in achieving full
compliance.
The response made these specific points:
Internal Controls to Detect Potential Fraud
In distributing funds, NCORR was mindful of the need to ensure that anyone
who received assistance was in fact eligible. 8 To that end, NCORR
implemented a comprehensive fraud detection and prevention system,
including: a dedicated fraud and compliance team; case level audits and
documentation, quality control, and use of an Enterprise Resource Planning
system; a whistleblower tipline and response process; use of check holds to
prevent disbursement of fraudulent payments; cooperation with state and
federal law enforcement; and a structured process to recover funds identified
as potentially fraudulent. North Carolina noted that the courts had ordered
restitution of $1.2 million to be paid directly to Treasury. 9
According to North Carolina, NCORR was praised by Treasury during oversight
reviews as having a robust fraud detection and response system. Treasury had
also recommended that other states adopt NCORR’s Landlord-Tenant
7
The attachments supporting North Carolina’s written response are not included as part of this
Notice due to the volume of information provided. These attachments were considered as part of
our evaluation of North Carolina’s response.
8
OIG Note: North Carolina explained in the response that (1) the direct grantee with Treasury was
the State’s Office of State Management and Budget (OSBM) and the North Carolina Pandemic
Recovery Office (NCPRO) and (2) NCORR administered the ERA program as a subrecipient. North
Carolina provided as attachments copies of various agreements between OSBM and NCPRO with
NCORR for this purpose.
9
OIG Note: As an attachment to its response, North Carolina provided a list of 12 individuals that
were prosecuted and ordered as part of their sentence to pay restitution totaling $1,203,045. The
reported amount of fraud associated with these individuals totaled $754,220. None of the
individuals were the subject of this Notice of Recoupment.
8
Agreement as a model of best practice. 10 Although NCORR encountered some
instances of external fraud (e.g., landlord-tenant collusion or fraudulent
identity submissions), when those instances arose, NCORR addressed them in
accordance with established protocols and coordinated with law-enforcement
authorities when necessary.
Payment Eligibility
According to North Carolina, the five cases that OIG identified in the Draft
Notice of Recoupment were determined eligible based on all available
guidance and documentation at the time of issuance. Before distributing the
funds involved in these cases, NCORR implemented the following Treasury-
approved methods: (1) use of the fact-based proxy method to verify income
eligibility during the pandemic; 11 (2) use of Landlord Tenant Agreements that
included a self-attestation under penalty of perjury; 12 (3) W9 verification with
10
OIG Note: As an attachment to its response, North Carolina provided a copy of a Treasury ERA
guidance webpage that did cite North Carolina’s Landlord-Tenant Agreement as one example of
“simplified eligibility forms . . . being used effectively by emergency rental assistance programs
around the country.”
11
OIG Note: As attachments to show its use of the fact-based proxy method, North Carolina
provided (1) a copy of a Treasury ERA guidance webpage identifying “promising practices” that
included, among other things, guidance that: “A grantee may rely on a written attestation from the
applicant as to household income if the grantee also uses any reasonable fact-specific proxy for
household income, such as reliance on data regarding average incomes in the household’s
geographical area;” (2) an internal email dated September 24, 2024, with the subject “Treasury
ERA Rankings – NC is #6 in the nation for expenditures and #2 for households served;” and (3) an
Excel file listing of the 245 applications (including those receiving ERA assistance and those that
did not receive ERA assistance) that comprised the five FWA cases that were the subject of this
Notice of Recoupment and which showed, among other things, the tenant’s income compared to
80 percent of the area median income for the tenant’s county. OIG notes that income eligibility was
not an issue with the FWA cases that are the subject of this Notice of Recoupment.
12
OIG Note: As attachments, North Carolina provided copies of Landlord Tenant Agreements for
117 applications, including applications that were not the subject of this Notice of Recoupment.
OIG agrees that the standard form includes self-attestations described by North Carolina.
9
the Internal Revenue Service (IRS) and identity documentation; 13 and (4)
collection of leases and utility documentation, when available or applicable. 14
These practices align with Treasury’s guidance that was disseminated during
the pandemic emergency. That guidance recognized the administrative
challenges inherent in responding to the pandemic and urged states to
approach the distribution of funds with flexibility, so as to allow for swift
disaster relief to landlord and tenants. As one strategy for the efficient
distribution of funds, Treasury encouraged “reasonable reliance on applicant
attestations” in the ERA FAQs.
If NCORR distributed $803,160 in ineligible payments, it was not because
NCORR did not have the required controls in place to prevent fraud, waste, and
abuse. Rather, NCORR employed the controls that were explicitly
recommended and encouraged by Treasury at the time.
Third Party Investigative Reviews
In its response, North Carolina states that the OIG relied in part on the findings
of third-party fraud investigators. According to North Carolina, a preliminary
review of the five cases cited in the Draft Notice of Recoupment revealed that
the third-party fraud investigators failed to determine whether checks issued
by NCORR were cashed or cancelled. As a result, the third-party fraud
investigators—and by extension, the Draft Notice of Recoupment—overstated
the total alleged fraudulent amount by including cancelled checks.
North Carolina states that NCORR identified, based on a preliminary review,
five cancelled checks, totaling more than $55,000, related to the five cases:
13
OIG Note: As attachments, North Carolina provided 221 files consisting of IRS Forms W-9,
Request for Taxpayer Identification Number and Certification, and copies of driver licenses. Some
of the W-9s and driver licenses were associated with applications that were not the subject of this
Notice of Recoupment and some driver license files consisted of a note stating: “This item is
missing.” We note that the W-9 form is submitted to North Carolina by a landlord or other parties
to provide their social security number or employer identification number for the purpose of
information reporting by North Carolina to IRS about payments (e.g., Form 1099-MISC,
Miscellaneous Payments). Form W-9 does not represent IRS verification that the landlord-reported
social security number or employer identification number is correct.
14
OIG Note: As attachments, North Carolina provided copies of 109 lease agreements or
attestations, including applications that were not the subject of this Notice of Recoupment.
10
Check numbers (b) (6) . 15 NCORR is currently
re-examining all cases reviewed by the third-party fraud investigators team to
determine whether they missed other cancelled checks or failed to take other
investigative steps.
According to North Carolina, failure to verify check redemption status
introduces material error into any loss calculation and undermines the fairness
and factual basis of the recoupment request. For this reason, North Carolina
asserts that no repayment demand should be made based on the third-party
investigators’ estimated fraud totals until the above-referenced review by
internal auditors for NCORR is complete.
North Carolina concluded the response with its assertions that (1) ERA funds were
distributed in compliance with Treasury guidelines, (2) NCORR fulfilled its
obligations under the subrecipient agreement, and (3) payments made by NCORR
were eligible at the time of disbursement based on Federal guidance. It asked that
OIG recognize the good faith compliance described above and reconsider its
recoupment demand.
OIG Evaluation
We considered the North Carolina’s July 14, 2025, response, and the referenced
attachments, which were provided separately on July 15, 2025, in finalizing this
Notice of Recoupment. Overall, we find that North Carolina’s response and
additional documentation provided neither new evidence to demonstrate that the
financial assistance provided for the subject applications were eligible, nor
evidence to demonstrate that the payments for the applications that are the
subject of this Notice of Recoupment were cancelled. The theme common to these
applications that made them ineligible for ERA1 assistance was that the landlords
in question did not own or have any connection to the properties and therefore
there was no obligation by the tenants to pay rent to those landlords.
In its response, North Carolina stated that NCORR employed controls that were
aligned with Treasury guidance and that the applications in question were
deemed eligible based on all available guidance and documentation at the time of
issuance. In our review, we do not make a determination of a grantee’s internal
15
OIG Note: As attachments, North Carolina provided details of these five checks. According to the
details, the check numbers are associated with applications (b) (6)
, respectively. None of these applications are
included in the Notice of Recoupment. In our review of NCORR’s FWA database, we excluded any
applications that did not have an associated check number or a Notification to Remit Federal Funds
sent to the beneficiary. We also reconciled check, rental assistance, and Notice to Remit Federal
Fund amounts. Furthermore, the payments to the addresses for these applications were verified to
the ERA1 payment data North Carolina submitted to Treasury.
11
controls and eligibility process as it would not absolve a grantee from their
requirement to properly administer Federal Government funds and to repay funds
that were disbursed to ineligible households. The adequacy of grantee internal
control, including fraud prevention procedures, is not determinative of whether or
not a sum is eligible for recoupment. The standard established in the ERA1 statute
does not provide for “best efforts;” it requires that the grantee used the funds for
specified purposes for specified entities. Treasury OIG has no authority to waive
liability for improper payments made by the grantee.
12
Appendix 1
Schedule of FWA Cases - Payees, Applicat ion Nu m bers, and Ineligible Payment
Amounts
Ineligible ERA 1
FWA Number Payee Application No. Payment
Amount
FWA-2022-006
(46 applications
tota ling $334,600)
• e • I •
(10 applications tota ling
$69,390)
(b) (6) $7,590.00
7,200.00
7,200.00
6,900.00
6,900.00
6,900.00
6,900.00
6,600.00
6,600.00
6,600.00
Landlord B $9,350.00
(7 applications totaling $51,740) 7,590.00
7,200.00
7,200.00
6,900.00
6,900.00
6,600.00
Landlord C $8,700.00
(7 applications totaling $51,250) 8,400.00
8,400.00
7,150.00
6,600.00
6,600.00
5,400.00
Landlord D $7,590.00
(5 applications totaling $34,590) 6,900.00
6,900.00
6,600.00
6,600.00
Landlord E $7,800.00
(3 applications totaling $22,540) 7,590.00
7,150.00
Landlord F $7,590.00
(3 applications totaling $21,690) 7,200.00
6,900.00
Landlord G $9,600.00
(2 applications totaling $16,500) 6,900.00
Landlord H $7,590.00
(2 applications totaling $16,390) 8,800.00
Landlord I $8,400.00
13
Appendix 1
Schedule of FWA Cases - Payees, Application Numbers, and Ineligible Payment
Amounts
Ineligible ERA 1
FWA Number Payee Application No. Payment
Amount
(2 applications totaling $15,550)
Landlord K
(2 applications totaling $13,560)
(b) (6) 7,150.00
$6,900.00
6,660.00
Landlord L $6,600.00
(2 applications totaling $12,600) 6,000.00
Landlord M
$8,800.00
(1 a lication tota lin $8,800)
FWA-2022-015 LLCA $9,000.00
(58 applications (23 applications totaling 9,000.00
total ing $315,910) $160,260) 8,700.00
8,700.00
8,700.00
8,400.00
8,400.00
8,280.00
8,280.00
8,280.00
8,280.00
8,280.00
8,280.00
6,210.00
5,520.00
5,520.00
4,830.00
4,830.00
4,830.00
4,830.00
4,830.00
4,140.00
4,140.00
Third party landlord/ property
owned by LLC A $4,140.00
(1 application tota ling $4,140)
LLC B $9,000.00
(21 applications tota ling 9,000.00
$ 111,960) 8,700.00
8,400.00
8,280.00
4,830.00
4,830.00
14
Append ix 1
Schedule of FWA Cases - Payees, App lication Numbers, and Ineligible Payment
Amounts
Ineligible ERA 1
FWA Number Payee Application No. Payment
Amount
(b) (6) 4,830.00
4,830.00
4,830.00
4,830.00
4,830.00
4,830.00
4,830.00
4,200.00
4,200.00
4,170.00
4,140.00
2,800.00
2,800.00
2,800.00
Third Party Landlord $5,200.00
Associated with LLC A 4,550.00
( 13 applications tota ling 4,550.00
$39,550)
4,550.00
4,200.00
3,900.00
1,950.00
1,950.00
1,950.00
1,800.00
1,800.00
1,575.00
1,575.00
FWA-2022-156 Landlord A $10,500.00
( 13 applications (3 applications totali ng $31,500) 10,500.00
total i ng $128,950) 10,500.00
Landlord B 12,600.00
(5 applicat ions totaling $47,055) 10,500.00
10,500.00
8,280.00
5,175.00
Landlord C 13,125.00
(4 applications tota ling $40,195) 9,790.00
9,000.00
8,280.00
Landlord D $10,200.00
15
Append ix 1
Schedule of FWA Cases - Payees, Application Numbers, and Ineligible Payment
Amounts
Ineligible ERA 1
FWA Number Payee Application No. Payment
Amount
(1 a lication tota lin $10,200)
FWA-2023-101
FWA-2022-020
Landlord
(2 applications total ing $12,300)
Landlord
(b) (6) $8,450.00
3,850.00
$11,400.00
( 1 applicatio ns total ing $1 1,400)
Total lneli ible ERA1 Pa ments for the 5 FWA cases $803, 160.00
16
Append ix 2
Grantee Response
STATE OF ORTH CAROLTNA
OFFICE OF STATEBlIDGET AND MANAGEMENT
~ SBM OFFICE OF STATE BUDGET
ANO MANAGEMENT
JOSII STEIN KRISTINW ALKER
( l<lVRR\f6R i.'TATB rnmc.nr fluir;c;r(,~
July 14, 2025
TO: Marla A. Freedman, Executive Advisor
Office of Audit
Treasury Office oflnspector General
FROM: Dolphus T. Clark rmml
Director, NC Pandemic~ Office
SUBJECT: Response Regarding Recoupment Risk for ERA Funds
Dear Marla Freedman.
This letter responds to rcc•cnt communications c-0nc~rni.ng the potential rcc-0upmcnt of Emergency Rental Assistance (ERA)
fonds. 1 ERA funds were used to support housing stability for eligible re nters throughout the COV ID- 19 pandemic. As is
often the case in the conrexl ofan emergency, 01th Carolina sought to distribute these fund s expedi tiously, cognizant of
the need to l1elp people remam safely in their homes amid a. public-health crisis. Despite the inherent urgency, North
Carolina strove to comply with all of the requirements and controls recommended by the federal government to protect
against fraud. waste, and abuse. As this letter ex.plains at greate r length below, we believe we were successful in achieving
foll compliance. For that reason, we urge the Dcpartmcot to reconsider its rccoupmcnt demand.
[nternal Conb-ols to Detect Potential Fraud
In distributing funds, the orth C.'U"olina Office of Recovery and Resiliency (NCORR) was mindful of the need to ensure
that anyone who received assistance was in fact eligible. To that end, CORR implemented a compre hensive fraud
detection and prevention system , including:
• A dedicated fraud ,UJd compliance team
Case level audits and docttmentation, quality control, and use of an Enterprise .Resource Planning system
(Salesforce)
• A whistleblower tipline and response process
• Use of check ho lds to prevent disbursement of fraudulent payments
• Cooperation with state and federal law enforcement, including the North aroli na State Bureau ofllwesrigation,
the nited States Postal Inspector, Housing and rban Development Office of inspector General. US
Department of Justice, and Local Law Enforcement Agencies
• A stntctured process to recover funds identified as potentially fraudulent 2
1 Tile Slate of North Caroliua U1rough tbe Office of Slate Manage1oeu1 a nd Budget (OSBM) and tl1e Norlb Carolina Pandemic
Reco"ef.\· Office (NCPRO) sen:ed as the direct grantee with the United Slates Depart.menl of TreaSUf.\' Cthe Department'"), and the
ortl.1 Carolina Office of Recoveiy aud Resiliency (NCORR), as a subredpient. administered the ERA program . Because NCPR
not NCORR-was I.he direct grantee. NC PRO has assumed responsibility for responding to your inqwry .
• From this process, the courts ordered restimtioo of $1.2 million to be paid directly to the U.S. Department of the Treasury. (Sec
AUachmcnt A).
1-ifallirlg :tddl'e.l-s: "-'WW. oSbUL!:1-b(e.nc,I.J;§l Offli;xi- loe11tio.■ :
20320 M.- i1 S'"n-k~ Ct"11tt-r 984-136-(J6M • • FAX, 911-1-:?J6-C6:IO 2 South Sldisbury St.re'-"t
RoMgb, NC 27699-03!0 An .IHiOJAA Em1,loye-r llnlelgh, NC Z76'JI
17
Append ix 2
Grantee Respo nse
111ese controls are aligned with 2 CFR 200.303. ('1ntemal Controls'} Based on these controls, NCORR was praised by U1e
Department during oversight reviews as h~ving a robust fraud detection and r(;-sponse sysl<::m. In fac~ the Department has
recommended that other sratr:s adopt ORR's Landlord-Tenant Agreement as a model of best practice. (See A1taclunent
B).
Although NCORR encountered some instances of external fraud (e.g., land lord-tenant collusion or fraudulent identi ty
submissions) when those instances arose, NCORR addressed them in accordance with established protocols and
coordinated with law-enforcement authoritic.~ when necessary.
Pavment Rligi bilitv
·n1e draft notice from the Depa1tment's ffice of Inspector General (OIG) identifies five cases selected from the NCORR
database. OIG believes that th e,~e five cases involved $803, 160 in ineligible payments.
The five cases that OIG has identified were determined eligible based on all aYailable guidance and docum entation at the
time of issuance. Before distributing th funds involv d in these ca. es, NCORR implemented the following Depaitment-
approvecl method,: •
Use of the fact-based proxy method to Yerify income eligibility during the pandemic (See At1aclumnt C)
Landlord Tenant Agreements that included a self-attestation under penoltyofpcrjw-y (Sec Attach m ent 0) 3
• W9 verification with IRS and identity document.1tion (See Attach ment E)
• Collection of least:S and utility documenl-0tion, when availa hie or applictible (See Attachmen t F)
'l11ese practices nlign with the Departm~nt guidance that was disseminated dw·ing the p.mdernic emergency. Tiiat guidance
recognized the administrative challenges inlierent in responding to the pandemic and urged states to approach the
distribution of funds with ilexibility, so as lo allow for swift disaster relief to landlord and tenants. As one strategy for the
efficient distribution ofJ:unds, the Department encouraged "reiisonable reliance on applicant attesuitions" in the ERA FAQs.
CORR took all of this guidance seriously. And, at the time of the pandemic, the Depa1tment was explicitly suppo1tive of
orth Carolina's approach. In fact, the Department cited the increase in the speed of 01th Carolina ' s distribution of ERA
funding after the implementation of selt:attestation flexibi lity the Depa1tment's decision to provide "even more explicit
pennission for grantees lo rely on applicant's self-attestations without furtlwr documentation."'
In a subsequent letter, the Department directed grantees who were 10\ performing in terms of speed of ERA distribution to
submit a program improYement plan that included a response explaining "whether they have implemented the best practices
described in ihe DepartmenJ."s guidance, incl uding the use of self-attestations." The Dep;utmem warned Lha t tht: lowest
performing grantees would be subject to i-eallocation. 5 IfNCORR distributed S803,160 in ineligible payments, it was not
because 1CORR did not have the required contrnls in place to prevent fraud, waste, and abuse. Rather, NCORR employed
the C-Ontrols that were explicitly recommencled and encouraged by the Department al the time.
T hir d Pa rtv Invcst.igutive Reviews
111e drat1 notice from OlG relies in part on lh1: findings of third-party fra ud investigators. But a preliminary review of the
five cases cited in the clrall notice revealed that the tlurd-pa1ty fralld investigators failed to deteimine whether checks issued
by NCORR were cashed or cancelled. As a result, the U1ird-party fraud investigators----aml by extension, the drall notice-
overstated the total alleged fraudulent amount by including cancclle<l chocks.
Based on a preliminary review alone. NCORR identified five cancelled checks, totaling more than $55,000, related lo the
five cases: Check numbers See Attachmen t G). NCORR is currently re-
examining all cases l'evicwed by the third-party fraud investigators team lo cletennine whether thc:y missed other cancelled
checks or failed to lake other investigative steps,
Failure to verify checkredemptionsuitus introduces material error into any loss calculation and undermines U1e fairness 3nd
factual basis of the recoupment request. For this reason, we respectfully assert that no repayment demancl should be made
3 This attachJ11ent is the CORR Landl ord Tenant Agreem en~ which includes 8n affirmation under penally of perju,y thAL the faclS set
forth a rc true an d accurate. (Section ( i)(g)).
4 "Treas ury Announces S~,·en Add1 tjonfll Rilicies to Encourage StAte nnd Local Governments lo Expedite Emergencv...fum!J!l
Assistance:· U.S. Deprutment of the Trea ury. 7/2021
' L ttc1 to Emergency Rental Assistance Program G-ranrcc~. Deputy Sccrcrnrv of Ille Trcasurv. 10/4/21
18
Appendix 2
Grantee Response
based on the third-party investigators' estimated fraud totals until the above-referenced review by internal auditors for
NCORR is complete.
Concl usion and Request
In conclusion, we respectfully assert that ERA funds were distributed in compliance with the Depa11ment's guidelines,
NCORR fulfilled its obligations under the subrecipient agreement (See Attachment I); and payments made by NCORR
were eligible at the time of dlisbursement based on federal guidance.
We therefore respectfully rnquest that OIG recognize the good faith compliance described above and reconsider it~
recoupment demand.
Cc: Bob Taylor, Executive Advisor Ofttce of Audit
OIG Note: The Attachments referenced in the response are not included in this
Appendix due to their volume and sensitive personal information contained
therein. The Attachments are summarized in footnotes to the section “Grantee
Response” starting on page 7 of the Notice of Recoupment. Where applicable, we
provide an evaluation of the Attachment.
19
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