We audited the U.S. Department of Housing and Urban Development’s (HUD) oversight of public housing agencies’ declarations of trust.  The audit was part of the activities in our fiscal year 2015 annual audit plan.  Our audit objective was to determine whether HUD had adequate oversight of public housing agencies’ compliance with its declaration of trust requirements.

HUD did not always ensure that public housing agencies maintained valid and sufficient declarations of trust for HUD-assisted properties.  Specifically of the 115 projects reviewed, (1) 2 projects did not have declarations of trust and (2) 20 projects had declarations of trust with deficiencies that impaired their validity.  Further, we were unable to determine whether the declarations of trust for 47 projects were sufficient.  As a result, HUD’s interests and investments were not always protected to prevent potential conveyances or encumbrances of public housing property without HUD approval.  In addition, we estimate that HUD will provide more than $509 million in operating subsidies over the next year for projects in which its interests are not protected.

We recommend that HUD require the public housing agencies to (1) record new declarations of trust for 22 projects to ensure that HUD’s interests are protected and (2) support that 47 projects have sufficient declarations of trust that cover all HUD-assisted properties.  We also recommend that HUD (1) amend the declaration of trust form and (2) implement adequate procedures and controls to ensure that public housing agencies maintain valid and sufficient declarations of trust that are recorded in public records to prevent HUD-assisted properties from being conveyed or encumbered.