The U.S. Department of Housing and Urban Development (HUD), Office of the Inspector General (OIG) audited HUD’s Public Housing Capital Fund program and American Recovery and Reinvestment Act (Recovery Act) Capital Fund program monitoring procedures because it was included in our annual audit plan and was prompted by a prior external audit (OIG audit report 2011-LA-1802, issued May 5, 2011). Our objective was to determine whether HUD’s Capital Fund program monitoring procedures and reporting system details were adequate to ensure that public housing agencies disclosed and used property insurance recoveries in accordance with program requirements.

HUD did not adequately monitor insurance recoveries to ensure that public housing agencies appropriately applied the applicable credits either as a cost reduction or cash refund as appropriate. HUD’s program guidance was outdated and the procedures for the annual in-office review of the agencies’ ongoing capital activities and for monitoring Recovery Act program grants were not sufficiently detailed to address the review of insurance recoveries. In addition, the information HUD required agencies to submit in their annual plans and in HUD’s Financial Assessment Sub-System lacked sufficient details to be effectively used in the monitoring of insurance recoveries.

We recommend HUD update its information collection requirements to ensure that public housing agencies disclose insurance recoveries, revise its policies and procedures to ensure oversight of the disclosure of insurance recoveries, and issue a notice with guidance for public housing agencies related to the procedures for the disclosure and use of insurance recoveries.