We contracted with the independent public accounting firm of CliftonLarsonAllen LLP (CLA) to audit the financial statements of HUD as of and for the fiscal years ended September 30, 2021 and 2020,1 and to provide reports on HUD’s 1) internal control over financial reporting; and 2) compliance with laws, regulations, contracts, and grant agreements and other matters, including whether financial management systems complied substantially with the requirements of the Federal Financial Management Improvement Act of 1996 (FFMIA). Our contract with CLA required that the audit be performed in accordance with U.S. generally accepted government auditing standards, Office of Management and Budget audit requirements, and the Financial Audit Manual of the U.S. Government Accountability Office and the Council of the Inspectors General on Integrity and Efficiency.
In its audit of HUD, CLA reported:
- The consolidated financial statements as of and for the fiscal year ended September 30,2021, are presented fairly, in all material respects, in accordance with U.S. generally accepted accounting principles.
- One material weakness2 and one significant deficiency3 in internal control over financial reporting, based on the limited procedures that it performed.
- A material weakness existed related to HUD and Federal Housing Administration(FHA) controls over financial accounting and reporting.
- A significant deficiency existed related to FHA econometric modeling activities used to estimate the agency’s loan guarantee liability.
- Two reportable matters of noncompliance with provisions of applicable laws, regulations, contracts, and grant agreements or other matters.
- Noncompliance with federal financial management system requirements, federal accounting standards, and the U.S. Standard General Ledger at the transaction level.
- Noncompliance with the Single Audit Act.
This report, along with the audited financial statements, is included in HUD’s Agency Financial Report, which is available at https://www.hud.gov/sites/dfiles/CFO/documents/afr2021.pdf
Recommendations
Chief Financial Officer
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Status2022-FO-0004-001-AOpenClosedClosed on August 24, 2022
As part of the validation process for CPD’s accrued liabilities, improve its validation process to ensure that it is based on verifiable grantees responses and supporting documentation.
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Status2022-FO-0004-001-BOpenClosedClosed on September 22, 2022
We are recommending OCFO reopen the following recommendation reported in audit report 2021-FO-0003-0001-D: 1B. 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.
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Status2022-FO-0004-004-AOpenClosedClosed on March 31, 2022
Implement a policy to ensure the federal regulation responsibilities for outgoing HUD employees are reassigned to appropriate HUD personnel to enable HUD to continue to address those federal regulation requirements.
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Status2022-FO-0004-004-BOpenClosedClosed on August 31, 2023
Establish controls to determine if single audits for HUD grantees are being completed and reported in a timely manner in accordance with 2 CFR §200.512.
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Status2022-FO-0004-004-COpenClosedClosed on March 31, 2022
Provide a means for which HUD grantees and their auditors can request technical advice and counsel.
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Status2022-FO-0004-004-DOpenClosed
Establish controls to determine if follow-up is being conducted to determine if the grant recipients have taken appropriate and timely corrective action. That follow-up must include the following: a. Issuing a management decision letter as prescribed in 2 CFR §200.521; b. Monitoring recipients to ensure they are taking appropriate and timely corrective action; c.Using cooperative audit resolution mechanisms (see 2 CFR §200.25) to improve federal program outcomes through better audit resolution, follow-up, and corrective action; and d. Developing a baseline, metrics, and targets to track, over time, the effectiveness of HUD’s process to follow-up on audit findings and on the effectiveness of single audits in improving recipient accountability and their use by HUD in making award decisions.
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Status2022-FO-0004-004-EOpenClosedClosed on March 31, 2022
Establish controls to ensure that HUD provides Office of Management Budget (OMB) annual updates to the compliance supplement6 and works with OMB to ensure that the supplement focuses the auditor to test compliance requirements most likely to cause improper payments, fraud, waste, abuse or generate audit findings for which HUD will take sanctions.
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Status2022-FO-0004-004-FOpenClosed
Establish a control to hold HUD’s Single Audit Accountable Official responsible for improving the effectiveness of the single audit process based on single audit metrics that HUD will establish in response to recommendation 4D above.