HUD seek legislative authority to expeditiously include Section 4712 protections within contracts for which HUD believes it must otherwise wait until there is a major modification.

HUD develop and implement controls to ensure that the provisions of Section 4712 are included in all contracts.

We recommend that the Director of HUD’s Cleveland Office of Public Housing require the Authority to support the $48,310 in excess costs paid for landscaping services or reimburse its program from non-Federal funds.

For the contract activities during the period of January 1, 2020, through April 2022, the Director should require the Authority to support the reasonableness of $57,902 paid to three vendors for pest control services without a valid contract or repay its Public Housing Operating Fund or Capital Fund program from non-Federal funds for any amount determined not to be reasonable.

For the contract activities during the period of January 1, 2020, through April 2022, the Director should require the Authority to support the reasonableness of the change orders that increased the price of the contract (0216) by more than $1.1 million or repay its Public Housing Operating Fund or Capital Fund program from non-Federal funds for any amount determined not to be reasonable.

For the contract activities during the period of January 1, 2020, through April 2022, the Director should require the Authority to support the contract modifications and the reasonableness of the increased costs for four contracts (0824, 0505, 1023 and 0731) or repay its Public Housing Operating Fund or Capital Fund program from non-Federal funds for any amount determined not to be reasonable.

For the contract activities during the period of January 1, 2020, through April 2022, the Director should require the Authority to implement adequate procedures and controls, including but not limited to ensuring that (1) proper documentation is maintained, (2) contracts are procured in accordance with Federal and the Authority’s procurement requirements, (3) procurement staff complies with Federal procurement requirements, and (4) payments are appropriately reconciled.

Prioritize the inspection of public housing properties that were (1) not included in the NSPIRE demonstration but were identified as high priority under the Center’s Big Inspection Plan and (2) approved to participate under the NSPIRE demonstration that the Center was unable to inspect by March 31, 2023.

Implement adequate policies, procedures, and controls to ensure that public housing properties will be inspected within required timeframes.

Status

While the NSPIRE regulations on inspection timing are completed, the Real Estate Assessment Center is not able to make the required modifications in the NSPIRE system to enforce the regulatory guidelines as this time.  HUD is uncertain whether the vendor can make the needed modifications or if additional funding is needed. As of June 2024, PIH was not able to provide an expected time of when HUD will be able to make that determination.

Analysis

To fully address this recommendation, HUD must provide evidence demonstrating that it has implemented control activities to ensure that public housing properties are inspected within required timeframes. Implementation of this recommendation will result in HUD accurately tracking the dates in which public housing properties should be inspected and that they are timely completed. Due to the uncertainty of when software changes to NSPIRE can take place to enforce the timing of inspections, REAC cannot enforce the requirements of inspection timing.

Establish an improper payment council within HUD that consists of senior accountable officials from across the Department with a role in the effort that would work to identify risks and challenges to compliance and identify solutions as a collaborative group.

Status

The Office of the Chief Financial Officer (OCFO) noted that this recommendation cannot be completed by OCFO because OCFO is dependent on other HUD offices. The OCFO believes that this should be closed in light of the recommendation we made in the subsequent January 24, 2024, Management Alert: "Action Is Needed From HUD Leadership To Resolve Systemic Challenges With Improper Payments" which recommended that the Deputy Secretary Develop and execute a detailed plan and timeline for both testing and reporting estimates of improper payments in the Office of Public and Indian Housing’s Tenant-Based Rental Assistance (PIH-TBRA) and Office of Multifamily Housing Programs’ Project-Based Rental Assistance (PBRA) programs in compliance with Federal law and Office of Management and Budget guidance.

Analysis

The January 24, 2024, Management Alert: "Action Is Needed From HUD Leadership To Resolve Systemic Challenges With Improper Payments" found the lack of proper planning and coordination from leadership in HUD’s program and support offices prevents HUD from addressing the root causes behind the failure to comply with improper payment laws.

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.

To improve coordination, HUD should establish an improper payment council within HUD that consists of senior accountable officials from across the Department. The council would work to identify risks and challenges to compliance and identify solutions as a collaborative group.

We recommend that the Director for HUD’s Office of Disaster Recovery require grantees to support or repay to its program $2,551,375, from nonfederal funds, for the 9 vouchers that did not have adequate supporting documentation for expenditures.

We recommend that the Director for HUD’s Office of Disaster Recovery work with its grantee to resolve or correct program income balances for the three grants that had program income balances outstanding.

We recommend that the Director for HUD’s Office of Disaster Recovery develop and implement controls to ensure that program income balance discrepancies are identified and corrected.

We recommend that the Director for HUD’s Office of Disaster Recovery develop and implement controls to ensure that untimely FFRs are identified and corrected.

We recommend that the Director for HUD’s Office of Disaster Recovery establish a mechanism to train grantees and HUD staff on existing guidance regarding supporting documentation for expenditures, FFRs, and program income balances on a recurring basis. Additionally, provide guidance and establish recurring training for HUD staff to monitor grantees for program income and submission of the FFRs..

We recommend that the Director for HUD’s Office of Disaster Recovery implement quality control procedures to ensure that HUD staff completes the action plan and QPR checklists.

We recommend that the Director for HUD’s Office of Disaster Recovery provide training to grantees regarding the reporting, tracking, and expenditure of program income.

Require lenders to execute indemnification agreements covering a period of at least 5 years for each of the 20 loans for which the lenders did not comply with the temporary endorsement policy and related instructions, including loans for which the lenders did not execute an agreement when required or that were otherwise ineligible for insurance, and properly store the agreements and record the agreement data to put up to $1,811,238 to better use by avoiding potential losses.

Obtain guidance from the Office of General Counsel regarding the implications of allowing lenders to retroactively apply forbearance in cases in which the borrower requests forbearance after the lender submits the loan for endorsement to ensure that it consistently handles such cases.

Request and analyze data from lenders for the 3,024 loans at risk of noncompliance to identify loans that should have been subject to the temporary endorsement policy or were otherwise ineligible for insurance. The data requested should include but not be limited to the dates when the borrower requested forbearance, the loan became subject to forbearance, and the loan was submitted for endorsement.