We conducted an audit of the U.S. Department of Housing and Urban Development’s (HUD) controls over public housing authorities’ (PHA) reporting and accounting for pension and other postemployment benefit obligations. Our concern was whether HUD needed to take action to reduce benefits or provide additional funding to ensure the continued viability of PHAs. Our objectives were to determine whether HUD verified that PHAs (1) submitted independent public accountant (IPA) reports that complied with HUD and Governmental Accounting Standards Board (GASB) requirements when reporting on accrued pension liability and other postemployment benefit obligations, (2) properly reported supporting information for their computations of the pension and other postemployment liability costs, and (3) reported that they set aside the necessary amount of monetary assets to meet their accrued pension and other postemployment benefit obligations.

HUD had procedures to generally ensure that PHAs properly reported and accounted for pension and other postemployment liabilities and reported that they reserved sufficient funds to cover these costs. Specifically, HUD (1) reasonably verified that PHAs submitted financial data schedules and IPA reports that generally complied with HUD and GASB requirements when reporting on accrued pension liabilities and other postemployment benefit obligationss, and (2) generally verified that PHAs properly reported supporting information for their computations of pension and other postemployment liability costs. However, although HUD had general procedures to determine whether PHAs reported that they set aside the necessary amount of monetary assets to meet their accrued pension and other postemployment benefit obligations, improvements could be made in the financial reporting process.

We recommended that the Assistant Secretary for Public and Indian Housing require PHAs to report more information on pension and other postemployment benefit obligations by prescribing a contra-asset line item in the restricted monetary asset section of its financial data schedule template for PHAs to report amounts (such as contributions, earmarks, forfeitures, etc.) that will be used by PHAs to pay their future pension and other postemployment benefit obligations.