The OIG has determined that the contents of this recommendation would not be appropriate for public disclosure and has therefore limited its distribution to selected officials.

Ensure that future policies and guidance developed to return HUD’s offices to normal operations include the specific criteria, metrics, and defined geographic area to be used by all offices as applicable.

Develop and implement sufficient policies and controls to ensure that (1) applicable criteria in any future guidance are met and all safety measures are sufficiently completed before returning HUD’s offices to normal operations and (2) sufficient documentation is maintained to support that the applicable criteria were met.

Develop and implement controls for use of the bulk grant closeout process going forward to ensure that grants are closed in accordance with all applicable requirements, including that administrative actions and required work under the grant award have been completed by the grantee before the grant is closed out. These controls should include but not be limited to increased collaboration and communication between headquarters and field offices.

Develop and implement controls to ensure that future grant data reporting to stakeholders is consistent and accurate, including defining how records should be counted and data should be presented and ensuring that accurate POP dates are maintained in HUD’s systems.

Require lenders to provide evidence of sufficient flood insurance or execute indemnification agreements for the 21 loans in our statistical sample that did not have sufficient flood insurance at the time of our audit to put nearly $1.1 million to better use. (See appendix A.)

Develop a control to detect loans that did not maintain the required flood insurance to put $1.5 billion to better use by avoiding potential future costs to the FHA insurance fund from inadequately insured properties. Corrective Action Taken In November 2022, FHA published the Acceptance of Private Flood Insurance for FHA-Insured Mortgages final rule (Docket No. FR-6084-F-02) in the Federal Register and issued Mortgagee Letter…

Consult with the Office of General Counsel to review the language in the statutes, regulations, and handbooks and if warranted, make adjustments to the forward mortgage handbook to ensure consistency with the statute.

Consult with the Office of General Counsel to review the language in the statutes, regulations, and handbooks and if warranted, make adjustments to the HECM handbook to ensure consistency with the statute and regulation.

Provide support for the reimbursement to its housing program of $107,036 from non-Federal funds if justification cannot be provided to support that the overhead and profit amounts paid to the contractors were reasonable.

Perform a review of the remaining 453 contracts and any additional contracts issued under the old invitations to bid to ensure that overhead and profit amounts charged by contractors were reasonable. The State should either provide justification or support for the reimbursements to its housing program from non-Federal funds for the unsupported amounts.

Update policies and procedures to ensure that a cost reasonableness assessment is performed on all cost elements, including the overhead and profit percentages charged by contractors for future contracts.

Develop and implement procedures to ensure the execution of newly developed policies that require contractors that work on multiple programs to provide adequate support to distinguish the proper amount of time and cost spent on each program. The State should also be required to provide procedures that implement the policy changes.

Train staff to ensure that expenditures, including payments made to contractors, are classified to the proper project activity in the DRGR system and provide support for training conducted.

Terminate the current lease and pay for any fees needed to terminate the lease from non-Federal funds.

Execute and record the release of the current lease with the third party and ensure that the declaration of trust is returned to the first priority position.

Correct the reporting and use of proceeds received from the current lease, thereby putting $1,278,260 to better use. This requirement includes properly recording the proceeds as restricted nonrental program income on its financial data schedule, placing any unspent funds into an account subject to a general depository agreement until spent, providing a detailed accounting of the use of the proceeds, reporting the use of any proceeds used for…

Repay from non-Federal funds any proceeds used for unallowable expenses identified in recommendation 1C.

Submit a Section 18 application to obtain HUD approval of any proposed new lease agreement prior to its execution, in compliance with the United States Housing Act of 1937 and 24 CFR Part 970.

Improve controls over the proper execution and recording of all declaration of trust documents.