The U.S. Department of Housing and Urban Development (HUD) has suspended the Virgin Islands Housing Finance Authority (VIHFA) from receiving additional federal funding and barred the agency from future federal procurement while an investigation proceeds, citing years of adverse audit findings, weak financial controls, slow disaster recovery efforts and the criminal conviction of its former chief operating officer.
HUD Deputy Secretary Andrew Hughes notified VIHFA Executive Director Dayna Clendinen of the action in a 13-page suspension notice outlining what the department described as substantial evidence of financial mismanagement, inadequate fraud controls, conflicts of interest and repeated failures to comply with federal grant requirements.
The suspension took effect immediately, according to HUD Secretary Scott Turner. VIHFA has 30 days to request a hearing. If it does not appeal, the suspension will become final.
The action affects an agency that has managed nearly $2 billion in federal disaster recovery funding following Hurricanes Irma and Maria in 2017. HUD estimated that amount equates to roughly $20,000 for every Virgin Islands resident.
In its suspension notice, HUD said the territory’s recovery efforts have proceeded at a “glacial” pace nearly nine years after the storms.
According to the department, only 2 percent of planned single-family rental housing projects, 16 percent of homeowner rehabilitation projects and 19 percent of multifamily rental developments have been completed. HUD also reported that none of 329 planned housing mitigation projects had been finished.
The department further criticized VIHFA for spending approximately $52.6 million on administrative costs while relatively little funding had reached residents through completed housing projects.
HUD also alleged that VIHFA’s divisions operate independently of one another, limiting internal communication and weakening the agency’s ability to detect and prevent fraud.
The suspension notice references numerous audits conducted over the past decade that questioned millions of dollars in expenditures and identified deficiencies in financial oversight, project management, reporting and fraud prevention.
Among the findings cited was an April 2026 audit concluding that VIHFA’s fraud management capacity ranked “at or below the lowest desired goal state” because anti-fraud activities were disorganized, reactive and, in some cases, absent altogether despite the agency overseeing approximately $1.9 billion in disaster recovery funding.
HUD further alleged that VIHFA repeatedly certified to the federal government that it maintained effective financial controls, conflict-of-interest safeguards and compliance systems despite evidence to the contrary.
The department also cited findings by HUD’s Office of Inspector General indicating that some VIHFA employees were aware of suspected fraudulent activity but failed to elevate concerns to senior leadership or initiate further investigations.
HUD’s decision also relied heavily on the criminal conviction of former VIHFA Chief Operating Officer Darin Richardson.
Richardson was sentenced earlier this year to 36 months in federal prison after being convicted of bank fraud, money laundering, making false statements and criminal conflict of interest stemming from a HUD-funded disaster recovery contract.
Federal prosecutors said Richardson accepted approximately $107,000 in kickbacks from a contractor while overseeing a lumber management contract that later increased from $3 million to $4.5 million. HUD alleged much of the lumber ultimately deteriorated after being left exposed to the elements.
The department stated that Richardson’s conduct alone raises serious concerns regarding VIHFA’s responsibility to continue administering federal funds.
HUD Secretary Scott Turner said the suspension reflects the Trump administration’s broader effort to strengthen oversight of organizations receiving federal grants.
Turner added that agencies administering disaster recovery funds must be held accountable to ensure assistance reaches affected communities.
Gov. Albert Bryan Jr. acknowledged receipt of HUD’s suspension notice during a Government House press briefing Monday, describing the allegations as serious while arguing the federal action was unwarranted.
Bryan said many of the issues cited originated from inspector general reports completed several years ago and maintained that the identified weaknesses have since been addressed.
The governor also questioned the tone of HUD’s letter, calling it “very unprofessional” and suggesting it appeared “sensationalized.”
Bryan said the Virgin Islands intends to appeal the suspension within HUD’s 30-day deadline and seek clarification regarding the scope of the funding freeze, including whether it applies only to future awards or also affects funds already obligated to the territory.
The governor also questioned whether the suspension could be politically motivated, noting it comes amid broader national debates involving U.S. territories, including recently introduced congressional legislation concerning birthright citizenship in the territories.
The HUD action follows additional scrutiny of VIHFA in recent years.
Former Chief Operating Officer Stephanie Berry filed a wrongful termination lawsuit in 2024 alleging the agency faced the potential loss of millions of dollars in federal funding because of noncompliance with policies and procedures. Berry also alleged disaster recovery projects had stalled under VIHFA leadership. The lawsuit remains pending, with a hearing scheduled for July 30 in Superior Court on St. Croix.
For now, VIHFA remains suspended from receiving additional HUD funding while the department’s investigation continues. The agency’s next step will be determining whether to challenge the suspension through the administrative hearing process before the 30-day deadline expires.