We audited the U.S. Department of Housing and Urban Development’s (HUD) fiscal year 2014 compliance with the Improper Payments Elimination and Recovery Act of 2010 (IPERA) in accordance with the requirements of IPERA.  Our audit objectives were to (1) determine HUD’s compliance with IPERA reporting and improper payments reduction requirements; (2) determine whether HUD’s reporting of improper payments data, including the agency’s performance in reducing and recapturing improper payments, was complete and accurate; and (3) determine whether HUD’s assessment of the level of risk associated with high-priority programs and the quality of the improper payments estimates and methodology were reasonable.

HUD did not comply with IPERA for fiscal year 2014.  HUD did not adequately report on its supplemental measures because it lacked documented procedures and its improper payments risk assessment was deficient because all relevant OIG audit reports were not considered.  Additionally, HUD’s estimate of improper payments for the billing error component was based on out-of-date information, and the methodology for developing the estimate did not include an evaluation of all types of errors that could lead to significant improper payments.  Finally, we noted 18 unimplemented recommendations from our prior year report.  As a result, (1) HUD officials and other users, including Congress and OMB, did not have a complete and accurate picture for making decisions regarding HUD’s internal controls over improper payments and efforts to recover improper payments, (2) HUD’s risk assessments may have underestimated the risk of significant improper payments, and (3) its estimate of improper payments may have been misstated.

We recommend that HUD (1) implement procedures to ensure that all required improper payments reporting elements are included in its annual financial report and all relevant OIG and GAO audit reports are considered in its risk assessments, (2) consider the dollar amounts related to OIG and GAO audit reports and HUD’s program monitoring findings in its risk assessment, and (3) reevaluate the types of errors previously identified to determine whether there are new causes of significant improper payments that would require reporting.