We recommend that the Office of Single Family Housing coordinate its efforts with the Office of Public and Indian Housing and the Office of Multifamily Housing Programs to further ensure that appropriate controls are in place to prevent HECM borrowers from violating principal residency requirements.

Request an opinion from HUD’s Office of the Chief Financial Officer’s Appropriation Law Division on whether the abnormal balance in account 4901 constitutes a violation of the Antideficiency Act.

Enhance standard operating procedures around system and account reconciliations to ensure that they cover all possible scenarios and are easy to follow.

Appropriately train and monitor new personnel to ensure that they understand and execute the procedures and controls.

Update procedures to clearly define error thresholds that require follow-up and the communication process for elevating errors to supervisors, managers, and senior leadership.

Establish clear lines of communication within and between divisions to ensure that all personnel become aware of issues that may impact their duties and responsibilities.

Strengthen controls over the preparation of HECM-related reconciliations, reviews, and oversight by ensuring that (1) program personnel preparing such reconciliations understand how such reconciliations impact financial accounting and reporting and (2) financial personnel sufficiently understand programs and systems to determine their general ledger impact.

Enhance the quarterly variance analysis to identify the business reasons for changes in account balances and pay specific attention to abnormal balances and activity.

Strengthen the financial statement review controls by completing a compliance matrix to ensure all balances that are presented and disclosed reflect the most up-to-date financial accounting and reporting guidance.

Perform a comprehensive analysis for all cohort years and assess the impact that the use of the scheduled UPB instead of the current UPB has on the LGL. If significant based on a quantitative threshold, update the SF cash flow model to incorporate the current UPB data.

Develop and implement a new process to require the annual validation of the fourth quarter endorsement volume estimation method for the SF Forward model. The process should include a management review and approval control component. The process should be documented and should demonstrate that management’s estimate is based on the analysis of past experiences, current policy, and market considerations, and, if necessary, incorporate improvement recommendations.

Perform a comprehensive review of the SF and HECM model documentation and update the specific sections with the current practices and procedures required to execute the model activities.

Establish a process that requires the timely review and update of model documentation. The process should include tracking the dates and nature of the revisions.

Provide training and periodic reminders to field staff and management to ensure that the data fields in DAP and on the final Form HUD-290 are accurate and consistent.

Develop and implement written procedures that provide guidance or best practices that should be followed to address data anomalies. At a minimum, these written procedures should include the following: (1) a process for identifying key data attributes that significantly impact the results, (2) the determination of preset thresholds for analyst and management attention, (3) the treatment of data anomalies, such as null values or values that exceed preset thresholds, (4) a process for providing feedback to the upstream data provider(s) for corrective and preventive actions when data integrity issues are detected and management concludes the issue is significant, and (5) a process for preparing documentation to support management decisions.

As part of the validation process for CPD’s accrued liabilities, improve its validation process to ensure that it is based on verifiable grantees responses and supporting documentation.

We are recommending OCFO reopen the following recommendation reported in audit report 2021-FO-0003-0001-D: 1B. As part of the validation process for CPD’s accrued grant liabilities, review CPD’s accrued grant liabilities estimation methodology to ensure that it is based on verifiable grantee supporting documentation and all assumptions and variables used for the grant accrual estimate were properly established, supported, and documented.

Implement a policy to ensure the federal regulation responsibilities for outgoing HUD employees are reassigned to appropriate HUD personnel to enable HUD to continue to address those federal regulation requirements.

Establish controls to determine if single audits for HUD grantees are being completed and reported in a timely manner in accordance with 2 CFR §200.512.

Provide a means for which HUD grantees and their auditors can request technical advice and counsel.