The U.S. Department of Housing and Urban Development is suspending funding for the Virgin Islands Housing Finance Authority, the agency announced Monday.

HUD said it investigated the organization and found widespread financial mismanagement, inadequate fraud controls, false certifications and improper payments. The VIHFA received $1.9 billion in HUD disaster recovery funding nearly a decade ago, and although the organization has spent less than a third of it, evidence suggests officials spent these funds on administrative kickbacks and allegedly fraudulent schemes instead of on families or communities recovering.

"The Trump administration is changing the game when it comes to who we entrust with taxpayer dollars," HUD Secretary Scott Turner said in a press release. "Organizations riddled with corruption, mismanagement and crime will no longer be allowed to squander billions. Virgin Islands Housing Finance Authority officials cannot be allowed to prioritize kickbacks over helping families recover from disasters." 

The investigation discovered the VIHFA's former chief operating officer, who oversaw disaster recovery programs, is serving a federal prison sentence after being convicted of fraud, money laundering and criminal conflict of interest. 

Despite receiving nearly $2 billion, equal to more than $20,000 per Virgin Island resident, the VIHFA has completed just 2% of single-family rental rehabilitation projects and 0% of single and multifamily housing projects, according to the release.

The investigation also found the VIHFA sought $6.2 million in disaster-related costs that the Federal Emergency Management Agency had already paid, and that the organization has repeatedly made false certifications claiming an effective compliance program and may have submitted additional false certifications to obtain further funding.

HUD's Office of Inspector General deemed the VIHFA's fraud risk management processes "at or below the lowest desired goal state" as well. Auditors determined the organization's anti-fraud activities were disorganized, reactive or absent, and the VIHFA had not implemented a structured fraud risk management framework. 

The office will further investigate whether the VIHFA has committed offenses that are actionable under federal law. 

If the VIHFA decides to contest the suspension, it must submit a written hearing request within 30 days, according to HUD's letter to the organization.

The Trump administration sought to cut HUD's 2026 budget by 43.6%, or $33.5 billion, last year. While not likely in the original plan for spending cuts, the agency saves, for now, $1.3 billion with this decision.

"I promised that HUD would be a faithful steward of the American people's hard-earned money, and we are keeping that promise," Turner said. "Working with the White House Task Force to Eliminate Fraud, we are putting every grantee on notice: there are real consequences for abusing taxpayer dollars."