Acting HUD watchdog’s memo targets fraud, tech and safety issues
The acting head of the U.S. Department of Housing and Urban Development (HUD) Office of the Inspector General (OIG) has issued an updated memorandum of open priority recommendations that aim to increase the department’s efficiency and address key management challenges.
The memo, issued this week by Stephen M. Begg — who is serving as the acting inspector general of the department — said that the recommendations “will have the most significant impact on increasing efficiency in HUD programs” and will assist in efforts to reduce “fraud and wasteful spending.”
The memo explains that 24 recommendations from prior years remain open, while seven new ones have been added.
Resolving these 31 recommendations in particular would impact the department’s ability to mitigate waste and fraud, could positively impact the living conditions for those residing in HUD-assisted housing, and would also improve HUD’s ongoing technology modernization efforts.
Fraud, counterparty risk
At the top of the memo’s list is mitigating fraud risk. A chief recommendation is for HUD to “perform a complete fraud risk assessment of all programs and use the results to develop and implement an agency-wide plan to mitigate those risks. … Doing so will help HUD manage fraud risk proactively and better prevent fraud rather than chase it.”
Improper payments to the department’s largest grant programs also need to be addressed, the memo said.
“The OIG has identified that, for 7 consecutive years, HUD has been unable to accurately estimate the amount of potential improper and unknown payments in its PIH Tenant-Based Rental Assistance (TBRA) program and the Multifamily Housing Project-Based Rental Assistance (PBRA) program,” the memo explained.
“These are the two largest program expenditures in HUD’s portfolio, representing approximately 62% of HUD’s total expenditures, and are the two programs most at risk of making improper payments.”
The last year that the department reported a compliant estimate for these programs was 2016, when payments to them totaled $30.7 billion. Of that amount, $1.7 billion was made improperly, HUD estimated at the time.
The OIG also recommended that whistleblower protections are bolstered, since those working as contractors, subcontractors, grantees and subgrantees “play a critical role in identifying fraud, waste, and abuse in HUD programs.”
Mitigating counterparty risks should also be a priority for the department, the OIG said, due to the importance of the Federal Housing Administration (FHA)’s mortgage insurance programs.
“[FHA] relies on mortgage lenders and servicers, or counterparties, to provide loans to eligible borrowers and to service properties in accordance with HUD’s requirements,” the memo said.
“OIG recommended in 2014, 2018, and 2019 that FHA enhance several internal controls to better prevent ineligible borrowers with delinquent federal debt from obtaining HUD-insured mortgage loans.”
This would help keep “billions of dollars in mortgage loan balances out of FHA’s insurance fund and reduce the risk that losses on the loans impact taxpayers.”
Health and safety, technology
The department also continues to face “significant challenges” in promoting health and safety practices within HUD-assisted rental housing, the OIG said.
“From 2020 to 2023, the OIG made eight health and safety priority recommendations that HUD has not yet addressed,” including those that “urge HUD to take steps to reduce tenants’ exposure to lead hazards in assisted housing,” the memo explained.
The OIG recommends that HUD require property owners to document their compliance with lead control practices; implement a lower “intervention threshold” when lead is detected in a child’s blood; implement an action plan for oversight of lead in multifamily properties; and “address potential causes of variances” in reporting of lead poisoning at public housing authorities (PHAs).
IT modernization and improved procurement practices are also listed as open recommendations of priority.
The OIG has consistently recommended that the department take action to improve its information security infrastructure “to better protect sensitive HUD systems and data, including requiring the use of multifactor authentication, blocking unauthorized software and operating systems from executing on HUD’s network, and improving HUD’s compliance with cybersecurity and supply chain risk management program requirements.”
An additional technology recommendation this year centers on protection of sensitive, private data in HUD’s IT systems. This is something that the OIG has sounded the alarm about several times in past years.