HUD Did Not Always Follow Applicable Requirements When Forgiving Debts and Terminating Debt Collections | Office of Inspector General, Department of Housing and Urban Development

We audited the U.S. Department of Housing and Urban Development’s (HUD) process for forgiving debts and terminating debt collections based on an Office of Inspector General (OIG) preaudit analysis that noted potential violations of debt collection requirements related to disallowed costs in a prior OIG audit recommendation. Our audit objective was to determine whether HUD complied with applicable requirements when forgiving debts and terminating debt collections.

HUD did not always follow applicable statutory, regulatory, and policy requirements when forgiving debts and terminating debt collections. Specifically, HUD terminated debt collections and forgave debts without ensuring that required collection actions were taken and that U.S. Department of Justice (DOJ) approval was obtained when required. This condition occurred because HUD’s review process was not sufficiently thorough to validate that requirements were met before program office requests for debt forgiveness or collection termination were approved. As a result, HUD officials stopped debt collections and effectively disposed of government receivables totaling at least $4.4 million without appropriate authorization.

We recommend that the Acting Chief Financial Officer (1) take appropriate steps to establish eligibility for collection termination or compromise for 10 debts totaling more than $1.2 million and reinstate debts with available means of collections; and (2) conduct a complete analysis of existing procedures to strengthen controls over debt collection, including HUD’s Treasury Reports of Receivables reporting, resulting in funds to be put to better use of $3,247,078. Controls should include additional procedures for ensuring that DOJ approval is obtained when required, that all appropriate means of collection have been pursued, and that all closed debts are tracked and were properly authorized for collection termination or forgiveness.

Recommendation	Status	Date Issued	Summary
2017-LA-0005-001-A	Open	September 21, 2017	Take appropriate steps to establish eligibility for collection termination or compromise for 10 debts totaling $1,210,278,5 including three debts that were closed without required DOJ approval. For debts that have a remaining appropriate means of collection, such as demand letters, administrative offset, or referral to Treasury, HUD should reinstate the debt and resume collections.
2017-LA-0005-001-B	Closed	September 21, 2017	Conduct a complete analysis of existing procedures to strengthen controls over debt collection, including HUD’s Treasury Reports of Receivables reporting, resulting in funds to be put to better use of $3,247,078. Controls should include additional procedures for ensuring that DOJ approval is obtained when required, that all appropriate means of collection have been pursued (including referral to Treasury when required), and that all closed debts are tracked and were properly authorized for collection termination or forgiveness. The analysis should also include a review of HUD’s Treasury Reports on Receivables, and any other available records to verify that all closed debts were properly approved for collection termination or forgiveness when required. For any identified debts that were not properly approved, the Departmental Claims Collection Officer should coordinate with applicable program offices to obtain appropriate documentation to approve collection termination or reinstate the debt and resume collections.

Recommendation

Status

Date Issued

Summary

2017-LA-0005-001-A

Open

September 21, 2017

Take appropriate steps to establish eligibility for collection termination or compromise for 10 debts totaling $1,210,278,5 including three debts that were closed without required DOJ approval. For debts that have a remaining appropriate means of collection, such as demand letters, administrative offset, or referral to Treasury, HUD should reinstate the debt and resume collections.

2017-LA-0005-001-B

Closed

September 21, 2017

Conduct a complete analysis of existing procedures to strengthen controls over debt collection, including HUD’s Treasury Reports of Receivables reporting, resulting in funds to be put to better use of $3,247,078. Controls should include additional procedures for ensuring that DOJ approval is obtained when required, that all appropriate means of collection have been pursued (including referral to Treasury when required), and that all closed debts are tracked and were properly authorized for collection termination or forgiveness. The analysis should also include a review of HUD’s Treasury Reports on Receivables, and any other available records to verify that all closed debts were properly approved for collection termination or forgiveness when required. For any identified debts that were not properly approved, the Departmental Claims Collection Officer should coordinate with applicable program offices to obtain appropriate documentation to approve collection termination or reinstate the debt and resume collections.