We audited the U.S. Department of Housing and Urban Development (HUD), Federal Housing Administration’s (FHA) process for making changes to its programs, policies, and operations based on an Office of Inspector General (OIG) preaudit analysis that noted potential violations of departmental clearance requirements for three documents.  Our audit objective was to determine whether HUD followed the proper requirements and procedures when implementing changes to FHA single-family programs, policies, and operations. 

HUD failed to follow required departmental clearance procedures when implementing changes to FHA programs.  Specifically, HUD’s Office of Single Family Housing did not always pursue required departmental clearance and posted draft documents or directives in final form before departmental clearance.  When departmental clearance was pursued, HUD did not always ensure that key officials reviewed the documents before issuance.  This condition occurred because HUD did not have adequate controls over the directives process.  Specifically, HUD did not implement clearly understood and updated guidance for directives and did not adequately monitor its clearance tracking system.  As a result, significant policy information was distributed without proper review and clearance, which undermined the intent and integrity of the process.  This action effectively bypassed the required review by other HUD offices, including OIG, which had questioned or opposed document policies in some cases.  Additionally, the risk of issuing incorrect or inconsistent information was increased, potentially resulting in significant financial losses or other unintended consequences. 

We recommend that HUD (1) pursue departmental clearance for the 13 documents and policies identified that did not go through required departmental clearance and recall any documents that cannot be appropriately cleared, (2) update its clearance tracking system to include missing concurrence forms, (3) ensure that appropriate concurrence forms were obtained and documented for directives issued by other HUD program offices, (4) implement controls, update policies, and provide training to ensure that directives are reviewed and documented as required.