We audited the U.S. Department of Housing and Urban Development’s (HUD) fiscal year 2020 compliance with the Payment Integrity Information Act of 2019 (PIIA) and other Office of Management and Budget guidance. PIIA was enacted to prevent and reduce improper payments and requires each agency’s inspector general to perform an annual review of the agency’s compliance with PIIA. Our audit objective was to determine whether HUD complied with PIIA reporting and improper payments reduction requirements according to guidance from the OMB.
HUD did not fully comply with PIIA reporting and improper payments reduction requirements for fiscal year 2020. Of the six requirements, HUD did not comply with one requirement, and one requirement was not applicable. Specifically, HUD did not use a comprehensive sampling and estimation methodology for publishing an improper payments estimate for three of four reported programs. Due to the impacts of the COVID-19 pandemic, HUD did not test the complete payment cycle, to include payments issued by State, local, or other agencies, which was not made clear in its reporting of improper payments estimates. Instead, HUD was limited to the extent that the documentation and information were readily available to it without burdening the direct recipients of funds. As a result, HUD’s programs were vulnerable to the adverse effects of improper payments, and HUD will likely continue to miss opportunities to prevent, identify, reduce, and recover improper payments unless it fully complies with PIIA reporting and reduction requirements. However, we recognize that HUD is making progress in being fully compliant with PIIA and acknowledge its plan to execute a comprehensive sampling and estimation methodology in the coming year.
We recommend that HUD use a comprehensive sampling and estimation methodology for all reported programs and disclose in its reporting any limitations imposed or encountered.
Recommendations
Chief Financial Officer
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Status2021-AT-0002-001-AOpenClosedPrioridadPriority
We believe these open recommendations, if implemented, will have the greatest impact on helping HUD achieve its mission to create strong, sustainable, inclusive communities and quality affordable homes for all.
For the MF-RAP, PIH-TRA, and CPD-HIM programs, ensure that the program's improper payments rate estimates adequately test for and include improper payments of Federal funding that are made by State, local, and other organizations administering these programs and adequately disclose any limitations imposed or encountered when reporting on improper payments, to a degree that fairly informs users of the respective reported information.
Status
This recommendation was closed by HUD. However, OIG continues to object to that closure and identifies this as a priority recommendation. After HUD closed this recommendation, it informed OIG that it would not be able to produce estimates of improper payments in these programs for FY 2023 and projected to the Office of Management and Budget that it may not be able to do so until FY 2027, dependent on funding.
For several years, we have reported that HUD was unable to test for improper payments in these programs because the Office of the Chief Financial Officer (OCFO) was unsuccessful in working with the Offices of Public and Indian Housing, Multifamily Housing Programs, and the Chief Information Officer to securely collect program files needed to test payments. This year, OCFO reported that HUD was again unable to complete improper payment testing because it was delayed in implementing a secure platform designed to collect supporting data and documentation and also because of limited staffing resources with technical knowledge of the payment cycles. The lack of proper planning and coordination from leadership in HUD’s program and support offices has prevented HUD from addressing the root causes behind the failure to comply with improper payment laws.
Due to this, HUD OIG issued a management alert to the HUD Deputy Secretary entitled "Action Is Needed From HUD Leadership To Resolve Systemic Challenges With Improper Payments", on January 23, 2024. In response to the Management Alert, the Deputy Secretary stated that she would provide a plan in 30 days. On April 10, 2024, the Chief Financial Officer, Assistant Secretary for Housing, and Principal Deputy Assistant Secretary for Public and Indian Housing (PIH) stated their respective executives have been working together to develop a plan to accelerate HUD’s ability to produce statistically valid estimates. With respect to project-based rental assistance (PBRA), HUD plans to use ongoing data collection for fiscal year (FY) 2023 tier 1 and tier 2 payments to develop a statistical estimate in FY 2024. With respect to PIH-TBRA, in lieu of pursuing an estimate for the FY 2024 reporting cycle, PIH will focus on “its existing efforts to enhance PIH [IT] systems”, which HUD considers to be a more strategic use of resources. It is not clear from HUD’s response what PIH will do differently than it already had planned prior to the management alert as HUD did not provide a detailed plan or timeline for OIG review. As of June 21, 2024, a detailed plan or timeline has not been provided.
Analysis
HUD has been challenged with developing a compliant sampling methodology that can test the full payment cycle and that can be executed within the required timeframes. HUD’s sampling methodology did not test the full payment cycle. Further, the associated sample testing and statistical estimation of improper payments could not be completed in time for the required annual reporting of improper payment estimates in the Agency Financial Report (AFR), normally issued in November. To fully address this recommendation, the sampling methodology should test the full payment cycle, and the associated sample testing and statistical estimation must be completed in time to be included in the AFR.
Implementation of this recommendation will result in HUD better safeguarding taxpayer dollars and decrease improper payments.