Based on a hotline complaint and additional work by our Financial Audit Division and Office of Legal Counsel, we reviewed whether a conflict of interest existed within the U.S. Department of Housing and Urban Development (HUD) Office of Public and Indian Housing (PIH). Specifically, former PIH Assistant Secretary Sandra B. Henriquez appointed Debra Gross, a former lobbyist and the deputy director of the Council of Large Public Housing Authorities (CLPHA), a housing industry group, to be responsible for PIH’s Office of Policy, Program and Legislative Initiatives (OPPLI). Our objectives related to this portion of a multifaceted assignment were to determine whether HUD complied with requirements to obtain the services of the deputy director, whether a conflict of interest existed under this arrangement, and whether HUD took appropriate actions to mitigate the conflict of interest.

HUD inappropriately used the Intergovernmental Personnel Act (IPA) to appoint CLPHA’s deputy director as HUD’s DAS of OPPLI. In doing so, Assistant Secretary Henriquez created an inherent conflict of interest because she placed the deputy director of an industry group in charge of PIH’s policy-making division, the division responsible for developing and coordinating the regulations applicable to the entities that CLPHA represents. HUD’s lack of oversight in the IPA agreement process allowed this inherent conflict of interest to occur without prior ethical review by HUD’s Office of General Counsel (OGC). Additionally, HUD did not obtain required financial disclosure reports from the deputy director, failed to provide the deputy director with required ethics training, and allowed her to hire permanent HUD employees. In her HUD policy-making role, it appeared that the deputy director championed the public housing industry’s regulation relief agenda at HUD while retaining her job at CLPHA. Also, apparent lobbying efforts by CLPHA and other housing industry groups during this period complicated the matter. Due to the inherent conflict of interest and HUD’s failure to recognize and mitigate it, HUD cannot know whether the policy decisions enacted during the deputy director’s tenure were inappropriately influenced or in the best interest of HUD and all of its stakeholders.

We recommended that HUD establish and implement procedures to use IPA agreements responsibly and ensure conflicts of interest do not exist. Also, we recommended HUD perform an independent review of the deputy director’s actions regarding policy making to determine whether they compromised HUD’s integrity or objectivity in managing, monitoring, and evaluating PIH programs.