We contracted with the independent public accounting firm of Sikich CPA LLC to audit the financial statements of HUD as of and for the fiscal year ending September 30, 2025, 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 Sikich 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, Sikich reported
- A Disclaimer of Opinion on HUD’s financial statements as of and for the fiscal year ending September 30, 2025. Management indicated in its written representations that it cannot assert to the fair presentation of the FY 2025 HUD financial statements. Since management could not make this assertion, Sikich was unable to express an opinion on the fair presentation of HUD’s financial statements.
- Two significant deficiencies for fiscal year 2025 in internal control over financial reporting, based on the limited procedures performed. The significant deficiencies were related to internal control deficiencies identified by the HUD AIR Program and internal control deficiencies over FHA’s loans receivables.
- No reportable noncompliance issues for fiscal year 2025 with provisions of applicable laws, regulations, contracts, and grant agreements or other matters.
- Due to the matter discussed in the Basis for Disclaimer of Opinion paragraph, Sikich was unable to obtain sufficient evidence to conclude whether HUD substantially complied with FFMIA.
In connection with the contract, we reviewed Sikich’s reports and related documentation and questioned its representatives. Our review, as differentiated from an audit of the financial statements in accordance with U.S. generally accepted government auditing standards, was not intended to enable us to express and we do not express opinions on HUD’s financial statements or conclusions about (1) the effectiveness of HUD’s internal control over financial reporting; (2) HUD’s compliance with laws, regulations, contracts, and grant agreements or other matters; or (3) whether HUD’s financial management systems complied substantially with the three FFMIA requirements. Sikich is responsible for the attached Independent Auditors’ Report, dated December 18, 2025, and the conclusions expressed therein. Our review disclosed no instances in which Sikich did not comply, in all material respects, with U.S. generally accepted government auditing standards.
HUD’s financial statements are included in HUD’s Agency Financial Report, which can be found at - https://www.hud.gov/sites/dfiles/CFO/documents/afr2025.pdf.
Recommendations
Chief Financial Officer
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Status2026-FO-0002-001-AOpenClosed
Systematically evaluate whether control deficiencies identified by the AIR program have affected the accuracy or completeness of HUD’s financial statements. This assessment should include:
a) Review relevant financial statement line items, disclosure, and account balances for misstatements attributable to ineffective controls;
b) Document the evaluation results, including the rationale for conclusions regarding the presence or absence of misstatements;
c) Make correcting entries to September 30, 2025 balances, as appropriate;
d) Retain supporting analysis for both internal and external review; and
e) Leverage test of balances results to inform remediation efforts. -
Status2026-FO-0002-001-BOpenClosed
Work with program offices through remediation activities to determine the underlying causes of the control deficiencies identified by the AIR program.
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Status2026-FO-0002-001-COpenClosed
Based on the causes identified, coordinate with the program offices through remediation activities to develop corrective action plans with defined milestones, responsible parties, and timelines. Progress should be tracked, documented, and periodically reported to senior management.
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Status2026-FO-0002-001-DOpenClosed
Require targeted, role-specific training for program office staff and managers in areas where deficiencies were identified, including approvals, segregation of duties, recordkeeping, and delegated authority. This training should reinforce the importance of compliance with internal control requirements and include HUD escalation and enforcement mechanisms.
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Status2026-FO-0002-001-EOpenClosed
Assess and address barriers to timely and adequate responses from program offices during AIR program internal control testing. This assessment should:
a) Identify recurring causes for delayed or incomplete responses from program offices and implement escalation protocols or incentives to ensure timely fulfillment of AIR program requests;
b) Identify and implement efficiencies in the testing process to optimize the time program offices spend on the AIR program, such as streamlining communication, clarifying expectations, finding alternatives to time consuming tasks, and optimizing scheduling;
c) Provide additional guidance, training, or resources to program offices as needed to improve the quality and timeliness of submissions; and
d) Monitor response rates and timeliness, reporting persistent issues to senior leadership for corrective action. -
Status2026-FO-0002-001-FOpenClosed
Re-examine and enhance HUD’s process for evaluating the potential financial impact of control deficiencies identified by the AIR program or other sources to ensure that:
a) Assessments of financial impact are initiated promptly upon identification of control deficiencies;
b) The evaluation process is structured to deliver clear, actionable conclusions in sufficient time to inform any necessary adjustments to financial statements prior to the financial report date; and
c) Documentation of the assessment process and results is maintained to support audit requirements and management’s assertions.
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Status2026-FO-0002-001-GOpenClosed
Coordinate with the Principal Deputy Assistance Secretary for each Program Office to:
a) Define governance protocols to include reassessing HUD’s escalation protocols and enforcement mechanisms for repeated or willful noncompliance with documented controls, such as additional oversight, retraining, or disciplinary action as appropriate. Based on the assessment, update those protocols and mechanisms, as warranted.
b) Establish and resource a HUD-wide centralized digital repository for artifacts and key supporting documentation to provide consistent documentation retention and accessibility. Based on this initiative, define governance protocols for repository use, including security, version control, timely review/update requirements, and periodic audits to validate compliance.