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In accordance with the Chief Financial Officers Act of 1990, as amended, we are required to annually audit the consolidated financial statements of the U.S. Department of Housing and Urban Development (HUD). Our objective was to express an opinion on the fair presentation of HUD’s consolidated financial statements in accordance with U.S. generally accepted accounting principles applicable to the Federal Government. This report presents our independent auditor’s report on HUD’s fiscal year 2020 consolidated financial statements and reports on internal control over financial reporting and compliance with laws, regulations, contracts, and grant agreements. HUD reports our opinion on its financial statements in its Fiscal Year 2020 Agency Financial Report.

As part of auditing HUD’s consolidated financial statements, we are also responsible for auditing the financial statements of HUD’s two component entities, the Federal Housing Administration (FHA) and the Government National Mortgage Association (Ginnie Mae). Audit results on these entities are presented in Audit Reports 2021-FO-0001 and 2021-FO-0002, respectively.

In our opinion, HUD’s fiscal year 2020 financial statements were presented fairly, in all material respects, in accordance with the U.S. generally accepted accounting principles for the Federal Government. However, we identified deficiencies that constituted one material weakness and one instance of noncompliance with applicable laws, regulations, contracts, and grant agreements. Specifically, HUD had weaknesses in its controls over financial reporting and did not always comply with Federal generally accepted accounting principles. HUD also did not comply with the Federal Financial Management Improvement Act, regarding certain requirements to establish and maintain financial management systems.

This report contains a number of current recommendations for corrective actions addressed to the Offices of the Chief Financial Officer, Community Planning and Development, Housing – Federal Housing Administration, and Public and Indian Housing. The Followup on Prior Audits section contains outstanding prior-year recommendations. Most significant are those recommendations related to properly accounting for certain funding provided to HUD under the Coronavirus Aid, Relief, and Economic Security Act and improving and better documenting HUD’s estimation and validation methodologies for accrued grant liabilities. Additionalrecommendations specific to FHA and Ginnie Mae are in separate reports identified above.

Recommendations

Chief Financial Officer

  •   2021-FO-0003-001-A

    Closed on August 30, 2021

    Prepare a white paper regarding the accounting treatment for each type of funding disbursed under the HCVP, to include a comparison of the qualities the funding embodies against the qualities that are necessary for it to be considered a prepayment versus an expense according to generally accepted accounting principles. The Chief Financial Officer should work with PIH to gather the information necessary to complete this analysis and have PIH review it to ensure the accuracy of the program information used.

  •   2021-FO-0003-001-B

    Closed on September 30, 2021

    Develop and implement a policy that requires OCFO to review all new program notices, new regulations, and new types of funding and evaluate each against the accounting standards and current accounting treatment (as documented in white papers or other forms) to determine whether OCFO’s treatment complies with generally accepted accounting principles and if not, propose changes. The policy should include formal designation of roles and responsibilities as well as internal controls to ensure proper review and approval of conclusions.

  •   2021-FO-0003-001-C

    Closed on December 21, 2021

    Once additional data are available, and at least quarterly, reduce the CARES Act PIH prepayment by the amount actually spent by PHAs or an estimated amount with a low level of estimation uncertainty.

  •   2021-FO-0003-001-D

    Closed on August 27, 2021

    As part of the validation process for CPD’s accrued grant liabilities, review CPD’s accrued grant liabilities estimation methodology to ensure that it is based on verifiable grantee supporting documentation and all assumptions and variables used for the grant accrual estimate were properly established, supported, and documented.

  •   2021-FO-0003-001-E

    Closed on September 23, 2022

    Research the survey responses that resulted in a positive cash on hand balance to determine whether a cash advance exists. If so, the Chief Financial Officer should coordinate with CPD to (1) determine whether the grantees have proper documentation and approvals allowing for cash advances and (2) develop and implement procedures to estimate and account for cash advances for financial reporting purposes.

  •   2021-FO-0003-001-F

    Closed on June 24, 2021

    Investigate other methods for validating CPD’s accrued grant liabilities estimate, including the use of other sampling units, which could provide additional relevant information that can be used to produce more reasonable results and reduce estimation uncertainty to a low level.

  •   2021-FO-0003-001-G

    Closed on August 27, 2021

    Work with the Director of the Office of Multifamily Asset Management and Portfolio Oversight to ensure that all debt owed to HUD is identified, accurately reported in HUD’s financial records, and properly monitored to ensure compliance with applicable laws and regulations.

Community Planning and Development

  •   2021-FO-0003-001-H

    Closed on January 31, 2022

    Reevaluate and adequately document justification for the establishment of the percentages and other key assumptions used to determine the accrual amount for each program in CPD’s accrued grant liabilities estimate.

Housing

  •   2021-FO-0003-001-I

    Closed on March 29, 2022

    Implement the requirements of HUD’s current Debt Collection Handbook, to include (1) assigning a program office manager, (2) developing and implementing debt collection standard operating procedures, (3) designating program action officials, and (4) ensuring that program action officials are trained and perform debt collection duties in a timely manner in accordance with the Debt Collection Handbook; HUD Handbook 2000.06, REV-4, Audits Management System; and other pertinent guidance and policies to ensure the accurate reporting of receivables in the general ledger.

  •   2021-FO-0003-001-J

    Closed on June 16, 2023

    Review all executed repayment agreements in HUD’s Tenant Rental Assistance Certification System (TRACS) to determine which repayment agreements have not been fully repaid and represent an amount owed to HUD and work with OCFO to record these receivables.

  •   2021-FO-0003-001-K

    Closed on June 02, 2023

    Include a field in TRACS to identify which repayment agreements represent an amount owed to HUD and implement controls to ensure the accuracy of the listing in TRACS.

  •   2021-FO-0003-001-L

    Closed on May 25, 2022

    Develop and implement controls to track and enforce repayments owed to HUD to ensure that owners are not delinquent on their repayment agreements.

Public and Indian Housing

  •   2021-FO-0003-001-M

    Closed on June 07, 2021

    Ensure that OCFO has the data it needs to record a reasonable PIH prepayment estimate related to supplemental pandemic funding in fiscal year 2021 and beyond if additional funding is provided.