We recommend that the Deputy Secretary Develop and execute a detailed plan and timeline for both testing and reporting estimates of improper payments in the PIH-TBRA and PBRA programs in compliance with Federal law and OMB guidance.

Status

In response to the Management Alert, the Deputy Secretary stated that she would provide a plan in 30 days. On April 10, 2024, the Chief Financial Officer, Assistant Secretary for Housing, and Principal Deputy Assistant Secretary for Public and Indian Housing (PIH) stated their respective executives have been working together to develop a plan to accelerate HUD’s ability to produce statistically valid estimates. With respect to project-based rental assistance (PBRA), HUD plans to use ongoing data collection for fiscal year (FY) 2023 tier 1 and tier 2 payments to develop a statistical estimate in FY 2024. With respect to PIH-TBRA, in lieu of pursuing an estimate for the FY 2024 reporting cycle, PIH will focus on “its existing efforts to enhance PIH [IT] systems”, which HUD considers to be a more strategic use of resources. It is not clear from HUD’s response what PIH will do differently than it already had planned prior to the management alert as HUD did not provide a detailed plan or timeline for OIG review. As of November 20, 2024, a detailed plan or timeline has not been provided.

Analysis

As of November 20, 2024, HUD has not provided a detailed plan or timeline for OIG review. It remains unclear what testing was completed for PBRA in 2024, how HUD will produce a complete estimate in the PBRA programs in future years, and when it will be able to produce an estimate for PIH-TBRA.

For HUD to close this recommendation, it must finish testing the full life cycle of payments in these programs and publicly report estimates of the improper payments in them. Merely producing a plan with future action target dates is not sufficient to meet the spirit of this recommendation.

PBRA and PIH-TBRA are the two largest program expenditures in HUD's portfolio, totaling $45.3 billion in FY 23, or 67.5 percent of HUD's total expenditures. HUD has been challenged with developing a compliant sampling methodology that can test the full payment cycle and that can be executed within the required timeframes. To fully address this recommendation, the sampling methodology should test the full payment cycle, and the associated sample testing and statistical estimation must be completed in time to be included in the Annual Financial Report.

Implementation of this recommendation will result in HUD better safeguarding taxpayer dollars and decrease improper payments.

HUD (a) identify all contracts related to its programs that pre-date July 1, 2013 and that have not yet been modified to include Section 4712 whistleblower protections; and (b) review all contracts entered into on or after July 1, 2013, to ensure they include a clause that requires contractors to comply with Section 4712.

Status

As of November 2024, we have not yet reached agreement on a management decision with HUD over the corrective action they propose to take to address the recommendation.

Analysis

To fully address this recommendation, HUD must (a) identify all contracts related to its programs that pre-date July 1, 2013 and that have not yet been modified to include Section 4712 whistleblower protections; and (b) review all contracts entered on or after July 1, 2013, to ensure they include a clause that requires contractors to comply with Section 4712.

Implementation of this recommendation will ensure that Section 4712 whistleblower protections will apply to all individuals working for HUD contractors.

Seek voluntary cooperation from program participants to proactively modify pre-2013 contracts for the purpose of including a clause requiring compliance with Section 4712.

Status

As of November 2024, we have not yet reached agreement on a management decision with HUD over the corrective action they propose to take to address the recommendation.

Analysis

To fully address this recommendation, HUD must provide evidence that it has sought voluntary cooperation from program participants to proactively modify pre-2013 contracts for the purpose of including a clause requiring compliance with Section 4712.

Implementation of this recommendation will ensure that Section 4712 whistleblower protections will apply to all individuals working for HUD contractors.

Use its best efforts to include a clause requiring compliance with Section 4712 at the time of major modifications to contracts with program participants with whom HUD is unable to gain voluntary cooperation.

Status

As of November 2024, we have not yet reached agreement on a management decision with HUD over the corrective action they propose to take to address the recommendation.

Analysis

To fully address this recommendation, HUD must provide evidence that it has taken steps to ensure that it is including a clause requiring compliance with Section 4712 at the time of major modifications to contracts with program participants with whom HUD is unable to gain voluntary cooperation.

Implementation of this recommendation will ensure that Section 4712 whistleblower protections will apply to all individuals working for HUD contractors.

Develop and implement a nationwide inspection review protocol, which includes but is not limited to (1) whether field office staff should mark verification of PHA corrections of life-threatening deficiencies in PASS or any future tracking systems, (2) acceptable documentation for offsite verifications, and (3) whether field office staff should discuss or verify corrections of non-life-threatening deficiencies.

Corrective Action Taken

HUD's Office of Field Operations (OFO) created a protocol describing how it would perform quality control reviews of field office oversight of PHAs’ corrections of life-threatening deficiencies. The implementation of this recommendation resulted in HUD creating a protocol that established consistency in the way HUD field office staff monitored public housing agencies’ corrections of life-threatening deficiencies.

Develop and implement training for field offices that addresses reviewing or following up with PHAs about the correction of life-threatening and non-life-threatening deficiencies and how (1) to review physical inspection reports to effectively ensure that PHAs correct physical deficiencies, (2) PHAs should address or correct each type of deficiency observed in the REAC physical inspection report, and (3) to use PASS or any future tracking system.

Corrective Action Taken

HUD developed and provided training to the field offices on their roles and responsibilities for following up with PHAs on the correction of life-threatening and non-life-threatening deficiencies observed during REAC inspections, the NSPIRE system and standards, protocols, and timelines for deficiency correction and verification. Implementation of the recommendation will help HUD to ensure that field office staff are clear on their roles and responsibilities to communicate with PHAs on how deficiencies should be addressed and verify that PHAs’ inspection deficiencies have been corrected.

Implement a system to track field office inspection review activities and create a repository for the support documentation collected to verify the correction of life-threatening deficiencies.

Corrective Action Taken

HUD’s Office of Field Operations (OFO) had created a quality assurance tracker as well as a life-threatening deficiency tracker, which contained data specific to the inspections selected by OFO HQs, for quality assurance reviews. The documentation (photographs, work orders, etc.) of the life-threatening deficiency correction was maintained in HUD’s NSPIRE Salesforce system.

Implementation of the recommendation resulted in HUD creating a system to track HUD field offices’ verifications of PHAs’ corrections of life-threatening deficiencies.

Develop and implement a nationwide protocol for field offices, describing how PHA self-inspections should be reviewed, based on REAC's determination of the number and frequency of PHA self-inspections.

Status

The Office of Field Operations will develop and implement a nationwide protocol for field offices, describing how Public Housing Agency (PHA) self inspections should be reviewed, based on Real Estate Assessment Center’s determination of the number and frequency of PHA self-Inspections. Enforcing the requirements of inspection timing are dependent upon software changes to NSPIRE.

The final action target date is August 15, 2024.

Analysis

To fully address this recommendation, HUD must provide evidence demonstrating that it has implemented control activities to ensure that public housing properties are inspected within required timeframes. Implementation of this recommendation will result in HUD accurately tracking the dates in which public housing properties should be inspected and that they are timely completed.

Implement adequate policies, procedures, and controls to ensure that public housing properties will be inspected within required timeframes.

Status

NSPIRE regulations clarified and modified the timing for which inspections should occur. The date for inspection of each public housing property must then be programmed into HUD's system to ensure that inspections occur within the required timeframes. The Real Estate Assessment Center (REAC) continues to work with its management and system support contractors on the list of public housing properties to inspect and the date the inspections should be completed by under the new NSPIRE regulations. REAC is in the process of adjusting the list based on information relating to small, rural public housing. As of November 2024, the NSPIRE regulations on inspection timing are completed. However, REAC is not able to make the required modifications in the NSPIRE system to enforce the regulatory guidelines. REAC previously indicated that new IT funding is needed to make the system modifications but had not provided information about whether additional funding has been allocated. The final action target date was May 31, 2024.

Analysis

To fully address this recommendation, HUD must provide evidence demonstrating that it has implemented control activities to ensure that public housing properties are inspected within required timeframes.

Implementation of this recommendation will result in HUD accurately tracking the dates in which public housing properties should be inspected and that they are timely completed.

Due to the uncertainty of when software changes to NSPIRE can take place to enforce the timing of inspections, REAC cannot enforce the requirements of inspection timing.

Update its policy and procedures to define its authority for marketing troubled issuer portfolios and the conditions that must exist to extinguish issuers using rapid relocation.

Corrective Action Taken

As of February 2024, HUD addressed this recommendation in a Management Decision by providing the updated extinguishment SOP, the Rapid Relocation Process Flow, and the Rapid Relocation Extinguishment Process Steps, updated to include the conditions that must be present to execute an extinguishment using rapid relocation. We believe that these guidance enhancements will help Ginnie Mae to reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.

Update its policy and procedures to define what type of information Ginnie Mae may disclose and how it will handle protected information before extinguishment.

Corrective Action Taken

Ginnie Mae provided the updated SOP to clarify data and information handling through all phases of the termination/extinguishment process. Specifically, the updated procedures state that Ginnie Mae does not disclose Issuer or portfolio information within the Rapid Relo process. Ginnie Mae provided clarity in this enhancement that will reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.

Update its Policies and procedures to define how Ginnie Mae will determine the portfolio value and price before Sale.

Corrective Action Taken

Ginnie Mae updated its Rapid Relocation Extinguishment SOP to specify the valuation model for rapid relocations will use the same valuation models as other extinguishment options, including examples of portfolio valuation. We believe this guidance enhancement will help Ginnie Mae to reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.

Update its policies and procedures to define how Ginnie Mae intends to identify and evaluate prospective buyers to ensure its ability to absorb the extinguished portfolio before executing the purchase and sale agreement.

Corrective Action Taken

Ginnie Mae updated its Rapid Relocation Extinguishment SOP to require an Impact Analysis Evaluation of each prospective buyer under the Rapid Relocation Extinguishment program. The Impact Analysis Evaluation mirrors similar activities performed on select standard Pool Transfer participants and includes details (such as adjusted net worth, delinquency, loan court and total unpaid principle balance) to confirm prospective buyers are able to absorb the extinguished portfolio before executing the purchase and sale agreement. We believe this guidance enhancement will help Ginnie Mae to reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.

PIH in coordination with other HUD offices as necessary, research and address potential causes of the variance in the number of EBLL cases among States on the EBLL tracker and identify solutions that are within HUD's control.

Status

As of November 13, 2024, the PIH Office of Field Operations (OFO) had completed its outreach data collection and identified 9 public housing authorities that had not completed the required EBLL reporting actions and that OFO informed the field office directors overseeing the appropriate PHAs that they had until November 6, 2024, to upload the proper information to the trackers. OFO had not received confirmation that the data had been uploaded.

The estimated completion date is February 28, 2025.

Analysis

To fully address this recommendation, OFO must provide evidence that it coordinated with other HUD offices and identified the causes of the variances in the number of EBLL cases among states on the EBLL tracker. OFO must also demonstrate that it fully remedied the causes of the variances.

Alternatively, OFO must provide an explanation sufficient to support a claim that it could not identify the causes of the variances or develop and implement solutions for problems it identified in its research.

Implementation of this recommendation will result in improved HUD data of EBLL cases of children living in public housing across the country. Accurate reporting of EBLL cases to HUD is essential so that HUD can ensure PHAs take effective environmental interventions that help prevent additional lead exposure.

Update HUD regulations, policies, and procedures following the regulatory process required by the amended Lead Safe Housing Rule, in consideration of CDC’s lowered BLRV of 3.5 ug/dL.

Status

On November 22, 2024, the Office of Lead Hazard Control and Healthy Homes (OLHCHH) informed HUD OIG that the final Federal Register Notice was published for its request for information from Lead Safe Housing Rule stakeholders and the general public on its proposal to adopt the CDC's BLRV of 3.5 µg/dL as its EBLL under the rule. The public comment period ended on October 11, 2024, and as of October 15, 2024, all 25 comments submitted have been posted to https://www.regulations.gov/docket/HUD-2024-0069/comments. OLHCHH is reviewing the public comments in preparing to decide whether to change the rule's current level, and if so, to what level.

The estimated completion date is June 30, 2025.

Analysis

To fully address this recommendation, OLHCHH must provide evidence that it has updated its regulations, policies, and procedures so that they are consistent with CDC’s lowered BLRV of 3.5 ug/dL. Alternatively, OLHCHH must establish that its research led it to determine that environmental interventions in cases of children with EBLLs between 3.5 and 4.9 µg/dL were ineffective in reducing the children’s blood lead levels and that lowering HUD’s EBLL regulation to 3.5 µg/dL is unnecessary.

Implementation of this recommendation will help ensure children living in public housing with EBLLs receive effective environmental interventions.

Perform a complete agency-wide fraud risk assessment (which incorporates the fraud risk assessments performed at the program level) and use the results to develop and implement an agency-wide plan to move HUD’s fraud risk management program out of the ad hoc phase.

Status

HUD has made steady progress in building its Fraud Risk Management program. In FY2024, HUD received Congressional approval to establish the Office of the Chief Risk Officer (OCRO). With its Fraud Risk Management Policy in place since 2022, OCRO worked with the HUD Risk Management Council to develop the Department’s approach and establish a cross-functional approach for Fraud Risk Management program accountability. The CRO also completed a fraud risk exposure assessment method that enables the Department to provide a risk-based approach to prioritize program fraud risk assessments and a department-level Fraud Risk Management Playbook to align HUD’s cross-functional activities and accountability to the GAO Fraud Risk Framework and CFO Council practices. The CRO is also working on tools and templates that are being customized for HUD program offices to help them complete their fraud risk assessments. Priority program offices are targeted to complete fraud risk assessments in 2025.

Analysis

While HUD has made progress in the area of fraud risk management, there is still work to be done for HUD to complete an entity wide fraud risk assessment. HUD's exposure analysis will help it to determine where to focus its efforts. The Department still needs to conduct program specific fraud risk assessments. Based on the demonstration by MFH, we believe that MFH has made great progress in its fraud risk assessment, and we are encouraged that it has identified areas of weakness that it plans to target. However, PIH and CPD have not been able to demonstrate progress in this area. We believe that the tools and templates the OCRO is developing, along with the continued support, will help PIH and CPD to complete these assessments.

To fully address this recommendation, HUD must provide evidence that it has performed an agency-wide fraud risk assessment performed at the program level, adopted and implemented its fraud risk assessment program departmental policy and that each HUD program office has established office-specific risk programs.

Requires the REAC in coordination with OFO to determine the number of developments and associated units that contain lead-based paint and lead-based paint hazards.

Status

In May 2023, HUD published a final rule establishing a new approach to defining and assessing housing quality: The National Standards for the Physical Inspection of Real Estate. Public Housing regulations were amended, and Public Housing program participants were required to comply with this final rule and use the NSPIRE standards starting July 1, 2023. The Real Estate Assessment Center and Office of Field Operations will collaborate with the Office of Lead Hazard Control and Healthy Homes, the Office of Policy Development and Research, and a statistician to evaluate data collected under the NSPIRE inspection program to estimate the number of public housing developments and associated units that contain lead-based paint and lead-based paint hazards. As of November 2024, PIH reported that inspections have had a slow start due to procurement delays. Additionally, the NSPIRE system did not get the requested functionality to collect lead inspections. The final action target date is March 31, 2025.

Analysis

To address this recommendation, HUD will need to provide evidence that it collected and evaluated data under NSPIRE and estimated the number of public housing developments and associated units that contain lead-based paint and lead-based paint hazards.

Implementation of this recommendation will assist HUD in working with PHAs to address the public housing units that contain lead-based paint and lead-based paint hazards and help HUD’s oversight of units in need of hazard reduction.

Update applicable requirements to require assisted property owners, including PHAs, to maintain adequate documentation to support their determinations that maintenance and hazard reduction activities that disturb surfaces with lead-based paint qualify for the de minimis exemption from the lead-safe work practices under the Lead Safe Housing Rule.

Status

To address this recommendation, OLHCHH agreed to:

1. Issue a notice to assisted target housing owners and public housing agencies on the de minimis exception citing correct application of the de minimis threshold; describing appropriate documentation methods for the application of the de minimis threshold; and recommendations of best practices for documenting applications.
2. Collect additional data regarding the use of the de minimis threshold, including information on how private and public housing owners: (a) determine how much paint in target housing will be disturbed during a maintenance or rehabilitation project; (b) use the paint disturbance area information; (c) monitor the amount of paint disturbed in projects that are designed to disturb de minimis amounts of paint in target housing.
3. Design and conduct webinars, including at least one for each program office’s major categories of stakeholders on requirements and best practices pertaining to the de minimis exception under the Lead Safe Housing Rule and its implementation; record the webinars on the HUD website (e.g., on HUD Exchange) for future viewing by stakeholders; and conduct outreach promoting the webinars.

The Office of Lead Hazard Control and Healthy Homes had drafted guidance on the de minimis exception to the Lead Safe Housing Rule for PIH, Multifamily Housing, and CPD and submitted it through the clearance process on September 26, 2024. The program office is revising the draft guidance in consideration of the comments received from HUD program offices and OIG, and projects that it will issue the notice by December 31, 2024.

Analysis

To implement this recommendation, HUD needs to provide evidence that it has implemented the three actions OLHCHH agreed to complete.

Implementation of this recommendation and associated corrective actions will ensure assisted property owners are sufficiently informed regarding the requirements to support their determinations that maintenance and hazard reduction activities that disturb surfaces with lead-based paint qualify for the de minimis exemption from the lead safe work practices under the Lead Safe Housing Rule and that assisted property owners are conducting this work safely, thereby ensuring households are residing in safe and healthy HUD assisted housing.

We recommend that the Deputy Chief Financial Officer…In collaboration with all involved program offices, develop and implement a sampling methodology that allows for a sample size that reasonably allows for the testing of the complete payment cycle within the PIIA reporting timeframe.

Status

This recommendation remained closed per HUD; however, we continue to identify this as a priority open recommendation because HUD continues to be challenged to fully implement this recommendation. Due to this, HUD OIG issued a management alert to the HUD Deputy Secretary entitled "Action Is Needed From HUD Leadership To Resolve Systemic Challenges With Improper Payments", on January 23, 2024. In response to the alert, HUD is working on a plan to address the challenges encountered by the OCFO and bring the Department into compliance. Part of this plan should include information about how the Department plans to address this recommendation. The Department has not submitted a plan to us as of November 2024.

Analysis

To fully address this recommendation, the sampling methodology should test the full payment cycle, and the associated sample testing and statistical estimation must be completed in time to be included in the Annual Financial Report.

Implementation of this recommendation will result in HUD better safeguarding taxpayer dollars and decrease improper payments.

Consult with OMB on the appropriate reporting for the untested portions of the payment cycle (such as reporting as unknown) and report accordingly.