We audited the U.S. Department of Housing and Urban Development’s (HUD) fraud risk management program at the enterprise and program-office levels and assessed its overall maturity. Our objective was to determine HUD’s progress in implementing a fraud risk management framework at the enterprise and program-office levels that encompasses control activities to prevent, detect, and respond to fraud.
The Antifraud Playbook established by the Chief Financial Officers Council and the U.S. Department of the Treasury assess maturity of an agency’s fraud risk management program in four phases: (1) culture, (2) identifying and assessing fraud, (3) preventing and detecting fraud, and (4) turning insight into action. We found that in all four phases HUD’s fraud risk management program was in the early stages of development, or at an “ad hoc” maturity level. HUD’s program is still in its infancy because HUD had not previously dedicated sufficient resources to lead and implement fraud risk management activities.
Although HUD has recently taken steps to mature its program, HUD needs to commit resources to enhancing antifraud controls and promoting a culture of fraud risk management. Without improvements to its program, HUD may miss opportunities to identify and eliminate fraud vulnerabilities, leaving its funds and reputation at risk.
We recommend that the Chief Risk Officer (1) perform a complete agency-wide fraud risk assessment and develop a plan to improve the maturity of HUD’s fraud risk management program; (2) communicate to program staff the differences between HUD’s processes for enterprise risk management, Payment Integrity Information Act of 2019, and financial risk management risk assessment and how those processes relate to HUD’s fraud risk management program; (3) develop policies, procedures, and strategies for collecting and analyzing data to identify fraud within HUD’s programs, promote fraud awareness, and develop antifraud risk mitigation tools. We also recommend that the Chief Financial Officer determine and seek to fulfill an appropriate level of dedicated staff resources to administer HUD’s enterprise and fraud risk management programs effectively and increase fraud risk awareness and strengthen antifraud controls in HUD’s program offices.
Recommendations
Chief Financial Officer
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Status2023-FO-0001-001-AOpenClosedPriorityPriority
We believe these open recommendations, if implemented, will have the greatest impact on helping HUD achieve its mission to create strong, sustainable, inclusive communities and quality affordable homes for all.
Perform a complete agency-wide fraud risk assessment (which incorporates the fraud risk assessments performed at the program level) and use the results to develop and implement an agency-wide plan to move HUD’s fraud risk management program out of the ad hoc phase.
Status
HUD continues to make progress in advancing HUD’s Fraud Risk Management program. HUD issued its Fraud Risk Policy on March 31, 2022. Since then, HUD has integrated fraud risk considerations into risk assessment work completed across HUD, to include processes for Front End Risk Assessments (FERA) and the annual risk profile refresh. Leveraging the history of reports issued by HUD oversight partners, HUD has (1) compiled program level oversight reports to identify fraud risk concerns; (2) initiated a repository to stratify elements of the reports to isolate fraud risk concerns; and (3) isolated trends and themes from the source reports. This baseline work will support the Department’s Fraud Risk Exposure report, due September 2024.
The Chief Risk Officer (CRO) has indicated that it is nearing completion on an entity wide fraud risk exposure analysis. This analysis will tell HUD what programs should be prioritized and reviewed regularly, and which programs can be reviewed less frequently. The programs ranked highest will be first on the list for a full fraud risk assessment and the CRO will lay out a plan and timeline for completing the others. The CRO is also working on a plan to transition from the use of contractor support to full time staff, the plan will occur in phases until 2027, with the first hiring actions occurring soon. The Office of Multifamily Housing (MFH) met with OIG on April 7 to demonstrate the progress they have made on their program-specific fraud risk assessment for the Project Based Rental Assistance Program. MFH expects to complete the assessment by July 15th. the Offices of Public and Indian Housing and Community and Planning and Development have not completed fraud risk assessments, but are working on assigning or hiring staff for dedicated risk management roles.
Analysis
While HUD has made considerable progress in the area of fraud risk management, there is still a lot of work to be done for HUD to complete an entity wide fraud risk assessment. While HUD's exposure analysis will help it to determine where to focus its efforts, HUD still needs to conduct program specific fraud risk assessments. Based on the demonstration by MFH, we believe that MFH has made great progress in its fraud risk assessment and we are encouraged that it has identified areas of weakness that it plans to target. However, PIH and CPD have not been able to demonstrate progress in this area and we do not believe that they will be able to complete program specific fraud risk assessments by 9/30/24.
To fully address this recommendation, HUD must provide evidence that it has performed an agency-wide fraud risk assessment performed at the program level, adopted and implemented its fraud risk assessment program departmental policy and that each HUD program office has established office-specific risk programs/p>
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Status2023-FO-0001-001-BOpenClosedClosed on September 30, 2024
Develop and implement a procedure to collect and analyze reported suspected instances of fraud, along with other relevant data points, that can be leveraged to develop more robust antifraud risk mitigation tools.
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Status2023-FO-0001-001-COpenClosedClosed on September 30, 2024
Communicate to HUD program staff the differences between HUD’s enterprise risk management, PIIA, and financial risk management risk assessment processes to ensure an understanding of their roles and responsibilities within HUD’s fraud risk management program.
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Status2023-FO-0001-001-DOpenClosedClosed on September 30, 2024
Develop and implement activities to raise awareness of fraud, such as participating in organized antifraud conferences or a newsletter that includes instances of recent fraud in Federal programs.
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Status2023-FO-0001-001-EOpenClosed
Develop and implement a strategy for collecting and analyzing agency-wide data, to include subrecipient and beneficiary data, to identify trends and potential indicators of fraud across programs.
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Status2023-FO-0001-001-FOpenClosedClosed on September 30, 2024
Collaborate with the Chief Risk Officer to conduct a workforce assessment to determine the level of dedicated full-time staff resources needed by the Chief Risk Officer to effectively (1) administer HUD’s enterprise and fraud risk management programs and (2) support program risk officers by increasing employee and stakeholder awareness of potential fraud schemes that could impact each program respectively.
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Status2023-FO-0001-001-GOpenClosedClosed on September 30, 2024
If the workforce assessment determines that additional staff are needed, work with the Chief Risk Officer to staff the necessary positions.