We audited the Federal Housing Administration’s (FHA) management
of its information technology resources and compliance with U.S.
Department of Housing and Urban Development (HUD) and other federal
information security requirements. Our overall objective was to
determine whether FHA effectively managed security controls relating
to its information technology resources. This audit supported our
financial statement audits of FHA and HUD as well as our annual
Federal Information Security Management Act review. The OIG has
determined that the contents of this report would not be available
for public disclosure; therefore, we have limited its distribution
to selected HUD officials.
.Issue
Date: March 4, 2008
Audit Report No.: 2008-DP-0003
File Size: 1.07MB
Title: OIG Response to Questions from the Office of Management
and Budget under Federal Information System Management Act of 2002
(Report Not Available to Public)
The Federal Information Security Management Act of 2002 (FISMA)
directs the Office of the Inspector General (OIG) to perform an
annual independent evaluation of the U.S. Department of Housing
and Urban Development's (HUD) information security program and practices.
This memorandum presents the results of the OIG's evaluation of
HUD’s compliance with FISMA. The OIG has determined that the contents
of this memorandum would not be appropriate for public disclosure
and has therefore limited its distribution to selected officials.
Issue Date: September 21, 2006
Audit Report No.: 2006-DP-0802
Title: Assessment of HUD's Compliance with Office of Management
and Budget Memorandum M-06-16, "Protection of Sensitive Agency Information"
(Report Not Available to Public)
We have completed a limited scope assessment of the U.S. Department
of Housing and Urban Development’s compliance to the Office of Management
and Budget Memorandum M-06-16, “Protection of Sensitive Agency Information.”
The memorandum stresses that federal agencies take all necessary
and reasonable measures to eliminate significant vulnerabilities
to the sensitive information entrusted to them. Agencies are required
to (1) implement National Institute of Standards and Technology-recommended
security controls and take specific actions by August 7, 2006, and
(2) answer questions related to personally identifiable information
and the extent to which specific controls and actions required by
the memorandum were designed and implemented. Additionally, the
inspectors general community is required to assess compliance with
the memorandum. The Office of Inspector General has determined that
the contents of this memorandum would not be appropriate for public
disclosure. Therefore, we have limited its distribution to selected
HUD officials.
Issue Date: August 31, 2006
Audit
Report No.: 2006-DP-0005
File Size: 208KB
Title: Review of HUD’s Information Technology Contingency Planning
and Preparedness
We audited the U.S. Department of Housing and Urban Development’s
(HUD) information technology contingency planning and preparedness
compliance with federal requirements and its ability to recover
in the event of interruption or disaster in a timely manner. We
found that HUD has made significant progress in implementing information
technology contingency planning and preparedness. However there
are several areas of concern that require management attention:
(1) The current information technology contingency planning process
does not fully use the planning process as recommended by the National
Institute of Standards and Technology; (2) There is no assurance
that the alternate data recovery facilities have the capability
to restore HUD’s mission-critical and major applications within
the required timeframes; and (3) HUD’s information technology contingency
and disaster recovery plans are not documented and maintained to
reflect current conditions.
We recommend that the Office of the Chief Information Officer (1)
Request the program officials to complete the business impact analyses
(BIA) and the risk assessments and ensure that they are incorporated
into HUD’s contingency and disaster recovery plans and that the
documents reflect current conditions and incorporate corrective
actions identified through testing; (2) Ensure that key Lockheed
Martin personnel at the Network Operating Center develop a memorandum
of understanding with its alternate recovery facility that will
include provisions for the inclusion of disaster recovery documents
at the alternate recovery sites and technical support for Lotus
Notes; (3) Evaluate the Electronic Data Systems (EDS) and SunGard
“no priority of service” provisions to determine whether conflicting
priorities impact the recovery time objectives.
Issue Date: August 29, 2006
Audit
Report No.: 2006-AT-0001
File Size: 474.53KB
Title: The Procurement Office Did Not Maintain Complete Contract
Files
HUD OIG audited the Office of the Chief Procurement Officer's (Procurement
Office) emergency response contract award process as part of the
Office of Inspector General's (OIG) annual audit plan, along with
our efforts to monitor Hurricanes Katrina and Rita disaster relief
efforts. The objective was to evaluate the economy, efficiency,
and effectiveness in the award of the contract funds for hurricane
relief and recovery efforts.
The Procurement Office did not maintain complete files for contract
actions that were awarded in response to disaster-related relief
efforts. In 11 of the 13 contract files reviewed, we found that
information was either missing or not prepared in accordance with
applicable regulations, policies, and procedures. These deficiencies
occurred because the Procurement Office did not have adequate controls
to ensure that contract files were complete when contracts needed
to be awarded promptly. As a result, HUD cannot be assured that
contract files related to emergency contract actions were complete
and in compliance with applicable regulations, policies, and procedures.
OIG recommended that the chief procurement officer develop and
implement internal controls to ensure that the contract files are
complete and in accordance with applicable regulations, policies,
and procedures for contracts awarded in response to disaster-related
events.
Issue Date: August 16, 2006
Audit
Report No.: 2006-SE-0002
File Size: 87.80KB
Title: The Office of Single Family Housing Expanded Late Endorsement
Eligibility without Studying Associated Risk
On May 17, 2005, HUD's Office of Single Family Housing issued Mortgagee
Letter 2005-23, removing the six-month payment history requirement
for loans submitted late for endorsement. Although the Office of
Single Family Housing asserted the change did not materially increase
the Federal Housing Administration's mortgage insurance risk, it
did not perform a risk analysis to support this determination. Contrary
to this assertion, our review of the performance of loans from seven
prior Office of Inspector General (OIG) late endorsement audits
found a three and one-half times higher risk of claims when loans
had unacceptable payment histories within the prior six months.
Further, since the issuance of the mortgagee letter, the default
rate for loans submitted late has increased and is significantly
higher than the default rate for loans submitted in a timely manner.
We recommend that HUD's Assistant Secretary for Housing-Federal
Housing Commissioner (1) rescind Mortgagee Letter 2005-23 until
appropriate rule changes can be designed that are supported by an
adequate risk assessment considering newly endorsable loans and
(2) establish sufficient documentation practices to document assertions
and identify supporting data referenced in published documents such
as policies and directives. Documentation should be sufficient to
permit a competent and independent management review and create
an audit trail.
Issue Date: July 21, 2006
Audit
Report No.: 2006-CH-0003
File Size: 763.69KB
Title: The Congressional Grants Division’s Oversight of Economic
Development Initiative – Special Purpose Grants Needs to Be Improved
The U.S. Department of Housing and Urban Development’s (HUD) Office
of Inspector General audited HUD's Congressional Grants Division’s
(Division) oversight of Economic Development Initiative – Special
Purpose Grants (Grants) appropriated for fiscal years 2002 through
2005. The audit was part of our fiscal year 2005 annual audit plan,
and our strategic plan to contribute to improving HUD’s execution
of and accountability for fiscal responsibilities. Our objectives
were to determine the adequacy of HUD’s application and award processing,
and monitoring of the Grants.
The Division did not require grantees to place liens on assisted
properties’ titles. It also did not ensure that grantees placed
covenants on assisted properties’ titles assuring nondiscrimination
and that Grant funds were appropriately used according to HUD’s
Grant agreements with grantees.
We statistically selected 105 fiscal years 2002 through 2005 Grants
for review to determine the adequacy of the Division’s application
and award processing, and the monitoring of the Grants. Of the 105
Grants, the Division did not ensure that 71 grantees submitted required
forms and documentation for appropriate monitoring, and 9 grantees
properly completed (7) or even submitted (2) required application
and award forms and documentation. The Division also could not support
that 4 grantees submitted required semi-annual progress reports,
3 grantees submitted certifications regarding lobbying, and that
it approved 2 grantees’ environmental release of funds before disbursing
Grant funds.
We recommend that HUD’s general deputy assistant secretary require
the Division to improve its existing procedures and controls to
ensure that 1) grantees receiving Grant funds above a HUD-established
minimum threshold record liens showing HUD’s interest in assisted
properties, 2) grantees place covenants on properties’ titles assuring
nondiscrimination, 3) grantees properly complete required application
forms and documentation for Grant awards, 4) Grant funds are appropriately
used, and 5) Grant funds are properly disbursed. We also recommend
that HUD’s associate general counsel of assisted housing and community
development strengthen existing procedures and controls over the
Grant agreement template review to ensure that citations to requirements
are accurate.
Issue Date: July 13, 2006
Audit
Report No.: 2006-CH-0002
File Size: 344.77KB
Title: The Office of Public and Indian Housing Is Taking Action
to Oversee the Section 202 Mandatory Conversion Program
Since March 2003, housing authorities were generally successful
in complying with the mandatory conversion of low-income housing
units to the Section 8 Housing Choice Voucher program. We reviewed
all 28 public housing developments in HUD’s Region V that were subject
to the mandatory conversion requirements to determine whether they
were following Section 202 and 24 CFR [Code of Federal Regulations]
Part 971. Except for the Detroit Housing Commission’s (Commission)
Fredrick Douglass development, all developments had either completed
or were in the process of meeting the mandatory conversion requirements.
HUD approved the partial demolition of the Fredrick Douglass development
in July 2001 based in part on its high vacancy rate. As of March
22, 2006, partial demolition had occurred; however, the development
was still not meeting the mandatory conversion requirements and
it had a vacancy rate of 43 percent.
The Office of Public and Indian Housing agreed to strengthen its
procedures and controls to ensure that all public housing authorities
comply with the mandatory conversion requirements. It also agreed
to ensure that the Commission complies with the mandatory conversion
requirements regarding the Frederick Douglass development.
We recommend that the deputy assistant secretary for public housing
investments implement additional procedures and controls to ensure
that all public housing authorities comply with Section 202 and
HUD’s regulations regarding the mandatory conversion of low-income
housing units. We also recommend that the acting deputy assistant
secretary initiate appropriate action to ensure that the Frederick
Douglass development complies with Section 202’s requirements and
HUD’s regulations regarding mandatory conversion.
Issue Date: July 11, 2006
Audit
Report No.: 2006-SE-0001
File Size: 4.04MB
Title: Significant Weaknesses in HUD’s Oversight of Single Family
Mortgage Insurance Claims are Costly
We reviewed the U.S. Department of Housing and Urban Development's
(HUD) controls over the payment of Federal Housing Administration
Mutual Mortgage Insurance Fund single family claims. We wanted to
know whether HUD had controls in place to ensure paid claims were
reviewed to determine if the mortgage loans met program requirements.
We found HUD did not independently determine mortgage loans insured
under the Mutual Mortgage Insurance Fund met program requirements
after paying billions in single family insurance claims. Our tests
of FHA loan files determined that 44 of 175 randomly selected claims
were paid for mortgages that, based on HUD's loan file, did not
meet program requirements. We estimate final HUD costs for claims
that did not meet program requirements during the period reviewed
totaled $356 million on those claims for which all revenues and
expenses were finalized.
We recommend HUD: (1) establish procedures to review paid claims
associated with early defaulted loans and unsupported final costs,
and independently verify that loans met HUD-FHA program requirements
and were therefore eligible for insurance; (2) seek recovery or
adequate support for final HUD costs for the 44 unsupported claims
identified in our sample; and (3) based on the results of (2), assess
costs and benefits associated with reviewing claims on early defaulted
loans received since the beginning of our audit period, October
1, 2003, and if feasible, independently determine that loans comply
with program requirements and seek recovery or adequate support
for final HUD costs associated with those claims
.Issue Date: July 11, 2006
Audit
Report No.: 2006-BO-0001
File Size: 723.25KB
Title: HUD Incorrectly Approved $42 Million in Operating Subsidies
for Phase-Down for Demolition Add-On Funding
We audited the U.S. Department of Housing and Urban Development
(HUD), Office of Public and Indian Housing, phase-down for demolition
add-on funding (phase-down funding) calculations for the Public
Housing Operating Fund program. We initiated the audit based on
results of a prior audit that indicated the Office of Public and
Indian Housing did not always obtain adequate supporting documentation
from public housing agencies before approving requests for phase-down
funding. Our objective was to determine whether the Office of Public
and Indian Housing obtained and adequately reviewed the supporting
documentation for the $74.3 million in approved phase-down funding
for fiscal years 2004 and 2005.
The Office of Public and Indian Housing did not always obtain and
adequately review supporting documentation before approving $42
million in phase-down funding. This occurred because each local
Office of Public and Indian Housing field office implemented its
own procedures for the review of phase-down funding requests in
the absence of formal guidance from the Office of Public and Indian
Housing’s national office. Without this guidance, the field offices
(HUD staff) interpreted and applied phase-down for demolition regulations
inconsistently. As a result, the Office of Public and Indian Housing
funded more than $15.1 million in unsupported and $20.6 million
in ineligible phase-down funding requests for fiscal years 2004
and 2005. By implementing needed controls, the Office of Public
and Indian Housing can avoid funding an additional $6.3 million
in ineligible requests for fiscal year 2006.
We recommend that the Office of Public and Indian Housing develop
formal guidance and review procedures for approving requests for
the phase-down for demolition funding. In addition, we recommend
that it direct HUD staff to obtain and review support for the $15.1
million in unsupported phase-down funding requests for fiscal years
2004 and 2005, determine the correct amount of phase-down funding,
and require the public housing agencies to reimburse HUD for any
ineligible phase-down funding received. We also recommend that the
Office of Public and Indian Housing recover the $20.6 million in
ineligible phase-down funding paid to public housing agencies in
fiscal years 2004 and 2005. We further recommend that the Office
of Public and Indian Housing direct HUD staff to obtain and review
complete support for phase-down funding requests for fiscal year
2006 to avoid funding the $6.3 million in incorrectly approved phase-down
funding requests.
Issue Date: June 19, 2006
Audit
Report No.: 2006-KC-0003
File Size:
Title: HUD Did Not Ensure That the Omaha Housing Authority Repaid
Its Public Housing Programs $2.7 Million
HUD-OIG audited HUD's efforts to collect a $2.7 million debt from
the Omaha Housing Authority of Omaha, Nebraska. We performed this
audit in response to a citizen's complaint that the Authority's
board of commissioners had not taken steps to repay or resolve the
liability.
Our objectives were to determine why the liability existed, to
whom it was owed, and what efforts HUD made to collect it. We found
that HUD did not ensure that the Authority repaid its public housing
programs $2.7 million, nor did it establish a repayment agreement.
As a result, the Authority's programs did not have these funds available
for their intended purposes. We recommended that HUD establish a
repayment agreement with the Authority to resolve the liability.
Issue Date: June 14, 2006
Audit
Report No.: 2006-KC-0002
File Size: 316.51KB
Title: HUD’s Systems Usually Prevent Credit Watch-Terminated Lenders
from Originating HUD-Insured Loans, But Brief Searches Could Find
Additional Loans That Weren’t Prevented
HUD-OIG audited the Department of Housing and Urban Development's
(HUD) Office of Housing to determine whether its controls adequately
stop Credit Watch-terminated lenders from originating new loans
in the area where they were terminated. This audit was part of our
review of HUD's approval of loan correspondents, which was included
in our annual plan.
HUD's controls almost always stop lenders from originating new
loans in areas where their approval has been terminated. In a recent
three-year period, lenders originated 58 insured loans contrary
to their sanctions. During the same period, HUD insured over 3.3
million loans.
We recommend that the Office of Housing periodically search for
loans that have been originated by terminated lenders and take appropriate
action against the lenders that improperly originated the 58 loans
we identified during our search.
Issue Date: June 8, 2006
Audit
Report No. 2006-NY-0001
File Size: 1.16MB
Title: HUD's Controls over the Reporting, Oversight, and Monitoring
of the Housing Counseling Assistance Program Were Not Adequate
We audited the U.S. Department of Housing and Urban Development’s
(HUD) Housing Counseling Assistance Program (Program) as administered
by the Philadelphia Homeownership Center. The objectives of our
audit were to determine whether HUD 1) ensures the accuracy and
reliability of the data reported on fiscal year activity reports
(HUD form-9902), and has a system in place to measure the impact
that the grants have on the performance measurements of the Program,
and 2) has implemented a monitoring system that adequately accounts
for and safeguards funds that HUD provides grantees.
We found that HUD’s controls do not allow adequate reporting on
Program performance or relate to Program objectives. Specifically,
a) the data reported on the HUD-9902 activity reports were inaccurate
and not current, b) performance goals did not measure the effects
of grant funds on the Program objectives, and c) some departmental
Program objectives were not being measured. In addition, HUD’s oversight
and monitoring of local housing counseling agencies was not adequate
to ensure that the agencies were conducting activities in accordance
with HUD requirements and grant agreements.
We recommend that the director of HUD's Office of Single Family
Program Development establish controls that will ensure accurate
and reliable fiscal year activity reports. Further, we recommend
that the office implement procedures for reporting that provide
for more timely information and the reporting of actual results
in later reports when estimates are used. In addition, we recommend
that the office implement a system that measures all Program objectives
and goals. We also recommend that the office establish and implement
written procedures to ensure that HUD provides adequate oversight
and monitoring of the Program.
Title: The U.S. Department of Housing and Urban Development Improperly
Admitted The Housing Authority of Baltimore City, Baltimore, MD,
Into The Moving To Work Demonstration
HUD did not follow applicable statutory requirements when it admitted
the Housing Authority of Baltimore City (Authority) to its Moving
to Work program. In violation of the statute, HUD executed a Moving
to Work agreement with the Authority without requiring it to provide
for citizen participation through a public hearing or other means.
It also violated the statute by not requiring the Authority to develop
a plan that considered comments from the public hearing or any other
public comments on its proposed program such as comments from current
and prospective residents who would be affected. In addition to
violating the statute, HUD also did not follow its normal award
making process because it allowed the Authority to submit its expression
of interest 31 months past the HUD-established deadline, and it
did not require the Authority to demonstrate its ability to properly
administer HUD funds.
HUD is prohibited from ignoring or waiving statutory requirements
unless Congress expressly empowers it to do so, and Congress had
not granted a waiver authorizing the Authority’s participation in
the program. Rather, HUD’s former assistant secretary for Public
and Indian Housing disregarded statutory requirements and HUD’s
normal award making process by signing an agreement admitting the
Authority into the Moving to Work program. The former assistant
secretary improperly relied on a legal opinion from the Authority’s
outside legal counsel and did not consult HUD’s legal counsel on
the propriety of the agreement.
We recommend that HUD obtain an opinion from its Office of General
Counsel to determine whether it has sufficient legal grounds to
nullify the Authority’s Moving to Work agreement, and if so, we
recommend that it nullify the agreement. If the agreement is nullified,
we recommend that HUD reinstate recommendations from our prior audits
of the Authority’s Section 8 and certificate and voucher programs,
Audit Reports 2005-PH-1004 and 2001-PH-1003. HUD should immediately
recapture $25.1 million from the Authority’s Section 8 reserve account
that the Authority carried over to the Moving to Work program. We
also recommend that HUD establish policies and procedures requiring
it to obtain a legal opinion from its Office of General Counsel
when it does not follow the normal award making process in approving
housing agencies’ participation in future program initiatives.
Issue Date: April 13, 2006
Audit
Memorandum No.: 2006-KC-0801
File Size: 43.92KB
Title: Audit Closeout: HUD’s Oversight of Public Housing Authorities’
Processes for Prohibiting Criminal Activity
HUD-OIG has completed a review of the U.S. Department of Housing
and Urban Development's (HUD) oversight of how public housing authorities
(authorities) implement the screening and eviction requirements
for drug abuse and other criminal activity. Our review of HUD's
requirements and of operations at three authorities did not identify
any pervasive issues with HUD's controls over the screening and
eviction requirements for drug abuse and other criminal activity
in public housing and Housing Choice Voucher programs. Since we
did not identify any high-risk areas that warrant investing further
audit resources, we did not expand our testing or perform any detailed
testing of HUD's controls. Therefore, we closed the review and did
not proceed with more detailed audit work.
Issue Date: April 10, 2006
Audit
Memorandum No.: 2006-FW-0801
File Size: 49.75
Title: Review of Partial Claim Option to Foreclosure under HUD's
Loss Mitigation Program
We reviewed the partial claim option to avoid foreclosure under
the U.S. Department of Housing and Urban Development's (HUD) loss
mitigation program. The partial claim option is one of three home
retention tools used to resolve defaults. The objective was to determine
whether federal housing administration approved lenders' use of
partial claims has prevented home foreclosures and as a result,
reduced claims against HUD's insurance fund. Our review did not
disclose any findings related to use of the partial claim tool to
aid borrowers in default. Consequently, we have made no recommendations
Issue Date: February 14, 2006
Audit
Report No.: 2006-DP-0004
File Size: 162.40KB
Title: Review of HUD's Information Security Program
We audited the U.S. Department of Housing and Urban Development’s
(HUD) information security program compliance with federal requirements.
We evaluated (1) the adequacy of the categorization of HUD major
systems, (2) whether HUD’s Office of the Chief Information Officer
has developed security policies and implemented and monitored enterprisewide
controls, and (3) whether HUD program officials and system owners
have properly implemented information security responsibilities
assigned to them. We found that HUD has made considerable progress
in implementing a comprehensive, entitywide information system security
program. However, our review noted several matters that require
management attention: (1) HUD’s program offices and system owners
have not properly categorized HUD’s application systems and utilities,
which could result in unnecessary expenditure of funds; (2) HUD’s
Office of the Chief Information Officer has not fully implemented
an effective entitywide information security program; and (3) HUD’s
program offices and system owners have not complied with security
responsibilities in accordance with the Federal Information Security
Management Act and HUD information security program requirements.
Issue Date: February 9, 2006
Audit
Report No.: 2006-KC-0001
File Size: 73KB
Title: HUD's Oversight of Evergreen Terrace
In response to a congressional request, HUD-OIG completed an audit
of the Department of Housing and Urban Development's Mark-to-Market
Program debt restructuring of Evergreen Terrace I. The audit objective
was to determine whether HUD appropriately approved Evergreen's
eligibility and exception rents under the Program, and assessed
the physical condition of the property.
We concluded that HUD appropriately approved the project, approved
exception rents for the project, and assessed the physical condition
of the project.
Since we found no violations of the Program, we made no recommendations
to the Deputy Assistant Secretary for Multifamily Housing.
Issue Date: February 2, 2006
Audit Report No. 2006-DP-0003
Title: Vulnerability Assessment of HUD's Computer Network (Report
Not Available to Public)
We have completed a Network Vulnerability Assessment of HUD. The
objective of our audit was to evaluate whether the department’s
network security systems, including security controls and practices,
adequately protect the integrity, confidentiality, and availability
of data and information from unauthorized access to HUD’s systems
through the performance of penetration testing. For criteria, we
used recommendations from the following Special Publications issued
by the National Institute of Standards and Technology: National
Institute of Standards and Technology Special Publication (NIST
SP) 800-42, “Guideline on Network Security Testing,” SP 800-14 “Generally
Accepted Principles and Practices for Securing Information Technology
Systems;” National Institute of Standards and Technology Special
Publication (NIST SP) 800-68, “Guidance for Securing Microsoft Windows
XP Systems for IT Professionals,” National Institute of Standards
, Technology Special Publication (NIST SP) 800-40, “Procedures for
Handling Security Patches,” and requirements for The Federal Information
Security Management Act of 2002. We concluded from our assessment
that, Although HUD has implemented controls to protect its network
from external intruders; internal penetration testing identified
security configuration and technical controls deficiencies. The
OIG has determined that the contents of this report would not be
appropriate for public disclosure; therefore, we have limited its
distribution to selected HUD officials.
Calendar Year 2005
Issue Date: December 7, 2005
Audit
Report No.: 2006-PH-0001
File Size: 1.72MB
Title: The U.S. Department of Housing and Urban Development Did
Not Properly Award Fiscal Year 2004 Healthy Homes and Lead Hazard
Control Grants
In response to a number of congressional inquiries and complaints,
we audited the process the U.S. Department of Housing and Urban
Development (HUD) used to award its fiscal year 2004 Healthy Homes
and Lead Hazard Control grants. Our audit objective was to determine
whether HUD’s Office of Healthy Homes and Lead Hazard Control (Office
of Healthy Homes) properly awarded its fiscal year 2004 Healthy
Homes and Lead Hazard Control grants. We provided interim results
of this audit in Audit Memorandum 2005-PH-0002, dated May 16, 2005.
We found HUD’s Office of Healthy Homes did not properly award the
majority of its fiscal year 2004 Healthy Homes and Lead Hazard Control
grants. Our audit of the 72 successful applications showed that
HUD did not properly evaluate, or could not demonstrate that it
properly evaluated 34 of the 72 applications, representing $92.7
million of the $168 million (55 percent) awarded during the fiscal
year 2004 grant cycle. Our detailed review of these 34 applications
showed HUD improperly awarded eight grants for $20.5 million. We
could not determine the propriety of the remaining 26 grant applications
receiving $72.3 million because the documents needed to support
HUD’s award decisions could not be provided. In addition, HUD files
pertaining to 54 of 55 applications (98 percent) reviewed for applicants
that did not receive funding did not support the decision to reject
the grant applications. Of these 54 applicants, we found that HUD
denied one applicant $365,736 in grant funds that it was eligible
to receive. These problems occurred during the 2004 grant award
process because the Office of Healthy Homes did not have adequate
internal controls in place to ensure the grant award process was
fair and equitable.
We recommend that HUD’s Office of Healthy Homes implement controls
to ensure it properly evaluates the grant applications and supports
all awards. In addition, we recommend that the office continue efforts
to recover or obtain a legal opinion to determine if the department
can pursue recovery of the $20.5 million in improperly awarded grants
it provided to eight applicants. Depending on the legal opinion,
we further recommend that the office obtain the necessary documentation
to support the award decisions relating to 26 other applicants receiving
$72.3 million in grant funds and recover the amounts it determines
were improperly awarded. Lastly, we recommend that the office review
the remaining 135 applications that did not receive awards to ensure
these applicants were not denied awards they should have received.
Issue Date: November 30, 2005
Audit
Report No.: 2006-CH-0001
File Size: 379.26KB
Title: The Real Estate Assessment Center ’s Physical Condition
Assessment Was Compromised
The U. S. Department of Housing and Urban Development’s (HUD) Office
of Inspector General reviewed HUD's Real Estate Assessment Center’s
(Center) housing inspections, and oversight and controls over its
housing inspection process. We initiated the review based on our
2005 annual audit plan and our strategic plan to help HUD improve
the execution of its fiscal responsibilities. Our objective was
to determine whether the Center had adequate controls to safeguard
the integrity of its housing inspection data.
Unauthorized persons accessed HUD’s confidential information. Controls
and procedures for securing the Center’s housing information after
a download and before the upload of inspection data were not in
place to assure that only authorized users accessed confidential
information and that authorized users did not provide their identifications
and passwords to unauthorized persons. We informed the Center’s
deputy assistant secretary of minor deficiencies through a memorandum,
dated November 22, 2005.
We recommend that the Center’s deputy assistant secretary implement
procedures and controls over the physical assessment subsystem to
correct the deficiencies addressed in this report.
Issue Date: November 15, 2005
Audit
Report No.: 2006-FO-0003
File Size: 1.5MB
Title: Additional Details to Supplement Our Report on the U.S.
Department of Housing and Urban Development Financial Statements
for Fiscal Years 2005 and 2004
In this report, we provide additional details to supplement our
Report on the U.S. Department of Housing and Urban Development's
(HUD) Fiscal Years 2005 and 2004 Financial Statements, which is
included in HUD's Fiscal Year 2005 Performance and Accountability
Report.
In OIG's opinion, based on our audit and the reports of other
auditors, the financial statements present fairly, in all material
respects, the financial position of HUD as of September 30, 2005
and 2004 and its net costs, changes in net position, budgetary resources,
and reconciliation of net costs to budgetary obligations for the
fiscal years then ended, in conformity with accounting principles
generally accepted in the United States of America.
The report identifies (a) two material weakness and six reportable
conditions on internal controls and (b) one instance of non-compliance
with applicable laws and regulations. The report discusses each
of these conditions in detail, provides an assessment of actions
taken by HUD to mitigate them, and makes recommendations for corrective
actions. During the course of the audit, OIG also identified several
matters that are not material to the financial statements and are
being separately communicated to HUD management.
Issue Date: November 7, 2005
Audit
Report No.: 2006-FO-0002
File Size: 1.75MB
Title: Audit of the Federal Housing Administration's Financial
Statements for Fiscal Year 2005 and 2004
This report presents the results of Urbach, Kahn, and Werlin LLP's
audit of the Federal Housing Administration's (FHA) financial statements
for the year ended September 30, 2005.
In Urbach, Kahn, and Werlin's opinion, the financial statements
present fairly, in all material respects, FHA's financial position
as of September 30, 2005, and its net costs, changes in net position,
budgetary resources, and reconciliation of net costs to budgetary
obligations, for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
The report identifies two material weaknesses and one reportable
condition on internal control, discusses each of these conditions
in detail, provides an assessment of actions taken by FHA to mitigate
them, and makes recommendations for corrective actions. During the
course of the audit, Urbach, Kahn, and Werlin also noted other matters
that are not material to the financial statements and are being
separately communicated to FHA management.
Issue Date: November 7, 2005
Audit
Report No. 2006-FO-0001
File Size: 1.75MB
Title: Audit of the Government National Mortgage Association's
Financial Statements for Fiscal Years 2005 and 2004
This report presents the results of the Office of Inspector General's
(OIG) audit of the Government National Mortgage Association's (Ginnie
Mae) financial statements for the years ended September 30, 2005
and 2004. In our opinion, the financial statements present fairly,
in all material respects, the financial position of Ginnie Mae as
of September 30, 2005 and September 30, 2004 and the results of
its operations and its cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States
of America.
In addition to the OIG's unqualified opinion on Ginnie Mae's financial
statements, the audit results indicate that there were no material
weaknesses or reportable conditions in Ginnie Mae's internal controls
and no reportable instances of noncompliance with laws, regulations,
and provisions of contracts. The OIG noted other matters involving
internal control and its operation that are not material to the
financial statements and are being reported separately to Ginnie
Mae's management.
Issue Date: October 31, 2005
Audit Report No. 2006-DP-0002
Title: Review of Security Configuration of the FHA Unix Operation
System (Report Not Available to Public)
We have completed a security configuration assessment of HUD's
servers on which FHA financial applications reside. The objective
of our audit was to review user access, security controls to files
and directories, and configuration of network services of HUD’s
Unix operating system. For criteria, we used recommendations from
HUD Security Handbook 2400.25; Office of Management and Budget Circular
A-130, appendix III; Government Accountability Office’s “Federal
Information System Controls Audit Manual;” Department of Defense
Unix Security Technical Implementation Guide, and National Institute
of Standards and Technology's Special Publication SP 800-14 “Generally
Accepted Principles and Practices for Securing Information Technology
Systems.” We concluded from our assessment that HUD has generally
implemented the Unix operating system configuration settings properly.
However, weaknesses in the configuration of network services still
exist, and user access, security controls to files and directories
are not sufficiently tightened. Our report presents detailed results
of our assessment and appropriate recommendations for corrective
action that will improve HUD's overall security posture through
recommended configurations. The OIG has determined that the contents
of this report would not be appropriate for public disclosure; therefore,
we have limited its distribution to selected HUD officials.
Issue Date: October 7, 2005
Audit
Report No.: 2006-DP-0001
File Size: 505KB
Title: HUD Compliance With Joint Financial Management Improvement
Program Core Financial System Requirements for Cost Management
We audited certain components of the U.S. Department of Housing
and Urban Development’s (HUD) financial system to determine whether
the financial system is capable of performing the cost management
function as defined in Joint Financial Management Improvement Program
(JFMIP) publication number JFMIP-SR-02-01, “Core Financial System
Requirements,” dated November 2001. We found that HUD’s core financial
systems do not have the ability to perform all of the mandatory
cost management functions specified in JFMIP SR-02-01, dated November
2001.
HUD’s core financial systems lack the ability to accumulate non-financial
data that would be needed to internally calculate cost management
information. Without this capability, HUD’s core financial system
does not provide all of the non-financial data elements needed to
support the integration of budget, cost, and performance measures.
This information is obtained from sources that include both automated
and manual processes, procedures, controls, data, software, and
support personnel that are not integrated through a common database
or electronically interfaced with the core financial system. We
recommended that the Office of the Chief Financial Officer develop
compliant cost management functional requirements that support the
integration of budget, cost, and performance measures as part of
the HUD Integrated Financial Management Improvement Project. While
HUD disagreed with our recommendation, we obtained documentation
from the Project that includes a mandatory functional requirement
for the accumulation of non-financial data.
Issue Date: October 4, 2005
Audit
Memorandum No.: 2006-DP-0801
File Size: 585KB
Title: OIG Reponse to Questions From the Office of Management
and Budget Under the Federal Information System Management Act 2002
The Federal Information Security Management Act of 2002 (FISMA)
directs the Office of the Inspector General (OIG) to perform an
annual independent evaluation of HUD's information security program
and practices. This memorandum presents the results of our evaluation
of HUD’s compliance with FISMA.
HUD has made significant efforts to improve its system security
program, but continued progress is needed to fully comply with federal
requirements. HUD has appointed a chief information security officer,
revised its information security policy, and completed certification
and accreditation for more than 90 percent of its applications.
However, the quality of the underlying documents and the actual
certification and accreditation process varied by application. While
a number of vulnerabilities were closed, additional vulnerabilities,
identified through oversight activities, were not corrected before
accreditation.
We found HUD program officials and system owners have not fully
met their responsibilities as specified in FISMA section 3544(a).
Also, HUD has not fully implemented an agencywide information system
security program as specified in FISMA section 3544(b). Improvements
are needed in maintaining an adequate system inventory, categorizing
security impact level properly for information systems, providing
sufficient training to program officials and contractor staff with
specialized information security responsibilities, and developing
and testing contingency plans.
Issue Date: September 30, 2005
Audit
Report No.: 2005-BO-0002
File Size: 764.64.KB
Title: HUD Did Not Conduct a Front-End Risk Assessment and, Therefore,
Fully Implement Controls for the Public Housing Mortgages and Security
Interest Program
We audited the Public Housing Mortgages and Security Interest program’s
process for granting security interest in $2.4 billion in as yet
unappropriated Capital Fund grants. Our 2003 audit report, 2004
BO 1004, dated December 5, 2003, on the Capital Fund program administered
by the Danbury Housing Authority, Danbury, Connecticut disclosed
potential weaknesses in HUD Office of Public and Indian Housing’s
internal controls over its Public Housing Mortgages and Security
Interest program. Under the Public Housing Mortgages and Security
Interest program, public housing authorities were approved to use
security interests in future program grants as collateral for long-term
debt instruments. Our objective was to determine whether HUD established
adequate internal controls to safeguard funding before allowing
public housing authorities to use security interests in future program
grants.
HUD’s Office of Public and Indian Housing failed to perform a front-end
risk assessment before allowing public housing authorities to use
security interests in more than $2.4 billion in future Capital Fund
program grants under HUD’s Public Housing Mortgages and Security
Interest program. This occurred because the Office of Indian and
Public Housing did not believe it was necessary to perform a front-end
risk assessment of the Public Housing Mortgages and Security Interest
program before establishing internal controls. Without conducting
a front-end risk assessment the level of internal controls may be
inadequate or ineffective. The lack of adequate internal controls
created problems such as preventing HUD from establishing adequate
policies and procedures for the program and from determining the
proper level of HUD field office involvement required in the review,
approval, and monitoring process. Furthermore, lack of internal
controls lead to difficulties in monitoring changes made to modernization
work subsequent to HUD’s approval of the work. HUD has approximately
$94 million in financing proposals under review that should not
be approved until a program risk assessment is completed, approved,
and adequate internal controls are in place.
We recommend that HUD’s general deputy assistant secretary for
public and Indian housing assure that HUD:
-
Complete a front-end risk assessment of the Public Housing
Mortgages and Security Interest program. This will result in
funds to be put to better use in the amount of $4.9 million.
-
Establish internal controls, including rules and regulations,
for the Public Housing Mortgages and Security Interest program
based on results of the front-end risk assessment.
-
Suspend approvals of financing proposals valued at $94 million
if the front-end risk assessment is not submitted to and approved
by HUD’s Chief Financial Officer by October 30, 2005.
Issue Date: September 13, 2005
Audit
Report No.: 2005-LA-0001
File Size: 98.35KB
Title: HUD's Controls over the Single Family Preforeclosure Sale
Program and Preforeclosure Sale Claims Need Improvement
We audited the U.S. Department of Housing and Urban Development's
(HUD) preforeclosure sale program. The objectives of the audit were
to (1) determine what abuses occurred within the preforeclosure
sale program and how they impacted losses to the Federal Housing
Administration insurance fund and (2) evaluate HUD's controls over
preforeclosure sales and preforeclosure sale claim processing.
We found investors abused the HUD preforeclosure sale program and
obtained properties through preforeclosure sales below fair market
value contrary to HUD requirements. Based upon limited testing,
we identified 102 properties that were sold through preforeclosure
for at least $2.4 million less than their fair market value, resulting
in excessive insurance claims to HUD. Additionally, HUD's claims
processing system allowed for payment of at least 52 preforeclosure
sale claims that were excessive by amounts totaling approximately
$5.1 million. We attributed these conditions to inadequate controls
over the preforeclosure sale program, especially in relation to
controls over the appraisal and marketing process for the properties
involved in the program, and inadequate controls within the claim
payment system. We recommended that HUD implement controls to minimize
abuse of the preforeclosure sale program and to ensure excessive
preforeclosure sale claims are not paid.
Issue Date: August 22, 2005
Audit
Report No.: 2005-DP-0007
File Size: 437KB
Title: Review of HUD’s Information Systems Certification and Accreditation
Process
We completed an audit of the quality of the process for certifications
and accreditations of the U.S. Department of Housing and Urban Development’s
(HUD) information systems that were completed through the end of
calendar year 2004. The objective of our audit was to assess the
quality of the U.S. Department of Housing and Urban Development’s
(HUD) process for certification and accreditation of its information
systems. For criteria, we used recommendations from Special Publications
issued by the National Institute of Standards and Technology (NIST),
and requirements from the Office of Management and Budget (OMB)
and Federal Information Processing Standards (FIPS): NIST Special
Publication (SP) 800-37, "Guideline for the Security Certification
and Accreditation of Federal Information Systems" and SP 800-53,
"Recommended Security Controls for Federal Information Systems;"
OMB Circular No.A-130, Appendix III, "Security of Federal Automated
Information Resources;" and FIPS Publication 199, "Standards for
Security Categorization of Federal Information and Information Systems."
We concluded that the quality of the process for certification and
accreditation of HUD’s information systems in calendar year 2004
was poor and that this resulted in presentation of inadequate certification
and accreditation packages to the authorizing official. Because
the packages were incomplete and did not contain the information
necessary for the authorizing official to accredit HUD’s systems,
no accreditations were made in calendar year 2004. Our report presents
detailed results of our review. We recommended that the Chief Information
Officer request that the Deputy Secretary appoint senior officials
within the program and administrative offices as authorizing officials
and direct them to complete certifications and accreditations for
their systems in accordance with Office of Management and Budget
(OMB) requirements and guidance for Federal agencies published by
the National Institute of Standards and Technology (NIST). We also
recommended that the Chief Information Officer ensure that policies
and procedures for the certification and accreditation process are
developed, approved, and implemented and that they address roles
and responsibilities assigned during the process.
Issue Date: July 12, 2005
Audit
Report No.: 2005 -DP-0006
File Size: 394.77KB
Title: Fully Implement the Active Partners Performance System
We audited the Active Partners Performance System to determine
whether it has been fully implemented and is being used as intended.
The audit was initiated because our auditors and investigators were
unable to obtain needed information on multifamily program participants
from the system. We found the Active Partners Performance System
has been operational since 1999, but its use by principal participants
has not been required. Consequently, the previous participation
certification (Form HUD-2530, Previous Participation Certification)
process has not been fully automated, and the U.S. Department of
Housing and Urban Development (HUD) does not have a complete computer
database of required participant information. We recommend that
the Office of Multifamily Asset Management fully implement the Active
Partners Performance System and ensure its use by all HUD multifamily
housing program participants. The Director of the Office of Multifamily
Asset Management concurs with our recommendation and has indicated
that the Active Partners Performance System is to be fully implemented
through mandatory use of the system by participants by October 2005.
Issue Date: May 18, 2005
Memorandum
No.: 2005-NY-0001
File Size: 249KB
Title: Title I Loan Debt Collection Asset Recovery Division Financial
Operations Center, Albany, NY
We completed an audit of Title 1 loan claims collection activity
administered by the U.S. Department of Housing and Urban Development's
(HUD) Financial Operations Center (Center), Asset Recovery Division,
in Albany, New York. The objectives of the audit were to determine
whether the Center was administering its Title 1 debt collection
activities in: (1) compliance with applicable laws and regulations,
and (2) an effective manner to provide optimal benefit to HUD. Our
work covered Title 1 claim collection activity during fiscal years
2003 and 2004.
The audit disclosed that, while the Center was generally complying
with applicable laws and regulations, there were weaknesses in controls
over Title 1 debt collections. Specifically, (1) significant amounts
of payments were received directly at the Center instead of at the
established lock box or via electronic funds transfer; (2) adequate
controls had not been established over the receipt, recording, and
processing of collections at the Center, and (3) procedures for
processing debt payments had not been updated. These deficiencies
occurred because the Center's management reporting system did not
capture the total volume of debt payments received and processed
at the Center.
We recommended that the director of the Center establish and implement
controls and procedures to ensure that (1) debtor payments are submitted
directly to the lock box or are made via electronic funds transfer;
(2) all incoming mail containing debt payments is opened at a single
location within the Center and in the presence of two individuals,
and (3) all payments received at the Center are properly recorded
and reconciled to the lock box receipts. HUD agreed with our recommendations,
and has planned, or already taken, corrective actions.
Issue Date: May 16, 2005
Memorandum
No.: 2005-PH-0002
File Size: 1.16MB
Title: Interim Memorandum Report on the Office of Healthy Homes
and Lead Hazard Control ’s Issuance of Its Fiscal Year 2004 Grants,
Washington, DC
In response to a number of congressional inquiries and complaints
received by our office, we are auditing the Office of Healthy Homes
and Lead Hazard Control’s (Office of Healthy Homes) process for
awarding fiscal year 2004 grants. The complainants alleged the Office
of Healthy Homes inappropriately awarded its fiscal year 2004 Lead
Hazard Control and Healthy Homes grants. Our objective was to determine
whether the allegation in the complaints had merit. We also wanted
to determine whether the Office of Healthy Homes followed appropriate
procedures in awarding the fiscal year 2004 lead grants.
We found the complainants’ allegation had merit. We identified
errors in the award process for all seven grant applications we
reviewed. These errors caused four applicants (totaling $6,323,636)
to either receive an award they were not entitled to or to lose
an award they should have received. In large part, these problems
occurred because the department established a deadline of September
30, 2004, to process and award the grants without having an effective
process in place. To meet this deadline, the Office of Healthy Homes
and its contractor did not always follow established procedures
in evaluating and scoring the grant applications.
Additionally, we noted the Office of Healthy Homes’ decision to
restrict its search for a contractor under HUD’s accelerated contracting
process to small business and 8(a) firms severely limited the pool
of qualified contractors. We found the contractor, whom the Office
of Healthy Homes selected to evaluate and rate the grant applications,
made a number of significant errors in processing the applications
which compromised the integrity of the award process.
Based on our survey results, we question whether the remaining
fiscal year 2004 grants were properly awarded only to eligible applicants.
We believe the department needs to take immediate action to ensure
the 2005 grant award process is completed according to the notice
of funding availability requirements and HUD’s established grant
processing procedures. We made a number of recommendations, that
if implemented, will significantly improve the grant award process
for 2005.
Issue Date: May 13, 2005
Audit
Report No.: 2005-BO-0001
File Size: 2.10MB
Title: Office of Public and Indian Housing, Region 1 Boston, MA,
Approved Incorrect Operating Subsidies for Several Public Housing
Activities
We audited the U.S. Department of Housing and Urban Development
(HUD) Office of Public Housing, Boston Hub’s review process for
operating subsidy calculations for public housing agencies administering
low-income public housing programs within Region 1. Our audit was
initiated to review the operating subsidy calculations for public
housing agencies within Region 1 for Federal fiscal years 2004 and
2005.
We found that the HUD Office of Public Housing, Boston Hub incorrectly
approved $1,313,673 in operating subsidies for public housing agencies
in Federal fiscal years 2004 and 2005. The Office of Public Housing,
Boston Hub had not implemented a quality control process to ensure
the accuracy of the operating subsidy determinations approved. As
a result, the Office of Public Housing, Boston Hub provided some
public housing agencies less than their eligible subsidy, while
providing other public housing agencies more than their eligible
subsidy. When OIG brought this issue to the attention of the Office
of Public Housing, Boston Hub it immediately began corrective action.
As of April 28, 2005, the Office of Public Housing, Boston Hub had
submitted $932,939 in revisions to the Real Estate Assessment Center’s
Financial Management Division, and $27,305 of these revisions had
been processed.
We recommend that the Director of Public Housing, Boston Hub implement
a quality control process to ensure the accuracy of the operating
subsidy determinations approved, recover $446,148 in excess subsidies
approved in Federal fiscal year 2004, and ensure that Real Estate
Assessment Center’s Financial Management Division implements the
$932,939 in revisions that HUD’s Office of Public Housing, Boston
Hub submitted.
Issue Date: May 13, 2005
Audit
Report No. 2005-DE-0001
File Size: 618KB
Title: HUD's Control Over Single Family Insurance Claims Allow
Ineligible Payments and Delays in Resolving Post-claims Findings
We audited the process the U.S. Department of Housing and Urban
Development (HUD) uses to pay Federal Housing Administration Single-Family
insurance claims. The audit was part of our fiscal year 2004 Annual
Audit Plan. We scheduled the audit because the annual dollar disbursements
of Federal Housing Administration insurance claims represent a significant
disbursement activity of the Department. HUD paid out almost $6.5
billion in fiscal year 2003 to settle claims for principal and interest
on about 73,750 foreclosed properties
We wanted to determine whether HUD management and system controls
over claims disbursements were functioning as designed and adequate
to prevent payments for ineligible or unsupported costs.
For most Federal Housing Administration Single-Family insurance
claims, HUD management and system controls are adequate and effective
in ensuring that only eligible and adequately supported costs are
accepted and paid. However, the controls do allow some ineligible
interest payments and unnecessary delays in resolving post-claim
findings. Our report contains two findings with recommendations
requiring action by the Office of Housing to address these areas.
Issue Date: April 21, 2005
Audit Report No.: 2005-DP-0005
Title: Security of Windows 2000 server (Report Not Available to
Public)
We have completed a security assessment of HUD's implementation
of "Security of Windows 2000 Server." The objective of our audit
was to assess HUD’s configuration of the Windows 2000 operating
system for security and to assess backup and recovery practices.
For criteria, we used recommendations from the following Special
Publications issued by the National Institute of Standards and Technology:
SP 800-43 "Systems Administration Guidance for Windows 2000 Professional;"
SP 800-14 “Generally Accepted Principles and Practices for Securing
Information Technology Systems;” and SP 800-34 “Contingency Planning
Guide for Information Technology Systems.” We concluded from our
assessment that HUD has generally implemented the Microsoft Windows
2000 operating system configuration settings properly. However,
deficiencies in configuration security and backup and recovery practices
were identified. Our report presents detailed results of our assessment
and appropriate recommendations for corrective action that will
improve HUD's overall security posture through recommended configurations.
The OIG has determined that the contents of this report would not
be appropriate for public disclosure; therefore, we have limited
its distribution to selected HUD officials.
Issue Date: April 12, 2005
Audit
Report No.: 2005-SE-0001
File Size: 669.85KB
Title: Design and Implementation of the Public Housing/Section
8 Moving to Work Demonstration Program
We reviewed the U.S. Department of Housing and Urban Development's
(HUD) design and implementation of the Public Housing/Section 8
Moving to Work Demonstration program. We wanted to know whether
(1) the program tested ways to provide and administer housing assistance
that reduced costs, promoted self-sufficiency, and increased housing
choices, and (2) HUD had the authority to approve housing authority
requests to make tenants enter new contracts with time-limited housing
assistance.
HUD struggled to balance flexibility and accountability in the
design and implementation of the Public Housing/Section 8 Moving
to Work Demonstration program and relied on an existing system to
collect tenant information. The existing system could not accept
tenant information and was not adapted in time to support the interim
evaluation, and as a result, HUD was not able to collect tenant
information needed to measure interim program impacts on costs,
family self-sufficiency, and housing choices as planned. In addition,
HUD relied on existing assisted housing rules modified by Public
Housing/ Section 8 Moving to Work Demonstration requirements. However,
the modified rules did not ensure HUD (1) consistently monitored
Moving to Work Demonstration housing authority activities and performance,
and (2) obtained required Office of Management and Budget approval
when collecting program information.
HUD obtained a legal opinion affirming its authority to approve
housing authority requests to make tenants enter new contracts with
time-limited housing assistance.
We recommend the Office of Public Housing Investments (1) develop
a means for evaluating Public Housing/Section 8 Moving to Work Demonstration
program performance, (2) require field offices to monitor program
activities, and (3) obtain Office of Management and Budget approval
for annual plans and reports.
Issue Date: March 29, 2005
Audit
Report No.: 2005-PH-0001
File Size: 229.92KB
Title: Criteria Governing Local Government Participation in HUD’s
Single Family Property Disposition Discount Sales Program
This report addresses internal control concerns with the U.S. Department
of Housing and Urban Development’s (HUD) Single Family Property
Disposition Discount Sales Program (Sales Program). Our audit (Report
Number 2005-PH-1003) of the Town of Clifton (Town), a participant
in the Sales Program, disclosed that requirements for local government
entities may not fully protect HUD’s interests. Our objective in
this review was to assess HUD’s criteria governing a local government
entity’s participation in the Sales Program and to determine whether
current Sales Program criteria adequately protect HUD’s interests.
We found HUD needs to strengthen its Sales Program criteria. HUD’s
requirements for local governments to participate in the Sales Program
are less stringent than those for a nonprofit entity. As a consequence,
local governments can use the Sales Program for purposes other than
HUD intended.
HUD intended that the Sales Program be used to benefit low- to
moderate-income individuals. However, in our previous audit of the
Town of Clifton, we found the local government participated in the
Sales Program primarily as a means to raise revenue for the Town.
The Town did this by using its government status to purchase the
homes and then contracted a for-profit entity to manage its program.
Although the Town of Clifton did not violate HUD requirements by
participating in this manner, HUD never intended the Sales Program
to be used for this purpose. If HUD had required local governments
to follow the same requirements as a nonprofit entity, the Town
of Clifton would not have been allowed to use the Sales Program
primarily as a source of revenue.
We recommend HUD strengthen the established criteria governing
local government entities’ participation under the Sales Program,
by implementing criteria similar to which its nonprofits now operate
under.
Issue Date: March 16, 2005
Audit
Report No.: 2005-KC-0001
File Size: 130.57KB
Title: The Office of Federal Housing Enterprise Oversight Is Comparable
to Other Federal Financial Regulators in its Allocation of Resources
and Staffing
We completed an audit of the Office of Federal Housing Enterprise
Oversight (Office). The Chairman of the House Appropriations Subcommittee
on the Department of Veterans Affairs, U.S. Department of Housing
and Urban Development, and Independent Agencies asked that we determine
whether the Office of Federal Housing Enterprise Oversight's allocation
of resources over the last 3 years has been comparable to that of
other financial regulators, including the Office of Thrift Supervision
and the Federal Deposit Insurance Corporation. We were also asked
to compare the Office's staffing to the staffing of these regulators,
including the staff's responsibilities, education, expertise, salaries,
and other compensation. To meet the request, we compared the Office's
allocation of resources and staffing to those of four regulatory
agencies: the Office of Thrift Supervision, the Office of the Comptroller
of the Currency, the Federal Deposit Insurance Corporation, and
the Federal Housing Finance Board. We concluded that the Office
has been comparable to other financial regulators in its allocation
of resources and staffing for the past 3 years. The Office has allocated
staff to its major functions at levels similar to those of the other
regulators, and its staff's education and expertise have also been
consistent with those of the others. In addition, while differences
exist, the Office's salaries, other compensation (bonuses and awards),
and benefits have been generally comparable to those of the other
agencies.
Issue Date: March 4, 2005
Audit
Report No.: 2005-DP-0004
File Size: 211KB
Title: HUD's Compliance with JFMIP Core Financial System Management
and General Ledger Management Requirements
We audited certain components of the Department of Housing and
Urban Development's financial system to determine whether it is
capable of performing the mandatory Core Financial System and General
Ledger Management functional requirements provided in the Joint
Financial Management Improvement Program, "Core Financial System
Requirements" JFMIP-SR-02-01, dated November 2001. This audit was
conducted in support of OIG's assessment of HUD's compliance with
the Federal Financial Management Improvement Act of 1996, as to
whether HUD had implemented a Department-wide integrated financial
management system. Determining compliance with "Core Financial System
Requirements" JFMIP-SR-02-01 is an important portion of that assessment,
but the final assessment depends on many other factors outside the
scope of this review.
We found that the financial system used by HUD's Office of the
Chief Financial Officer is capable of performing the mandatory Core
Financial System and General Ledger Management functional requirements
published in Joint Financial Management Improvement Program publication,
"Core Financial System Requirements" JFMIP-SR-02-01, dated November
2001.
The results of this audit do not change the OIG's previous conclusion
with respect to the existence of a material weakness with HUD's
financial management system as reported in Audit Report Number FO-05-0003,
"Additional Details to Supplement Our Report on the U.S. Department
of Housing and Urban Development's (HUD) Fiscal Year 2004 Financial
Statements."
Issue Date: February 2, 2005
Audit
Report No.: 2005-DP-0003
File Size: 389.14KB
Title: Controls Over HUD's Purchase Card Program Need Improvement
To Ensure Documentation and Monitoring Requirements Are Met
We audited the U.S. Department of Housing and Urban Development's
(HUD) purchase card program to determine whether actions taken on
the recommendations made in a 2003 audit report issued by the U.S.
Government Accountability Office on HUD's purchase card program
resulted in better program management and were effective in preventing
or detecting inappropriate purchase card use.
We found that the actions taken to resolve the issues reported
in the 2003 Government Accountability Office audit report have resulted
in significant improvement in the overall management of the purchase
card program. HUD has developed and put into operation several policies
designed to improve purchase card transaction approval, review,
monitoring, and training procedures. While these actions have reduced
the frequency of improper and questionable purchase card transactions
reported in the 2003 report, we found instances of questionable
activity that are detailed in appendix B of this report. We also
found administrative weaknesses associated with documentation maintenance,
statement reconciliations, delegations of authority, and the payment
of sales tax.
We recommend that HUD improve controls over purchase card program
administrative functions by making sure monitoring procedures include
detailed reviews of documentation maintenance, statement reconciliations,
delegations of authority, and sales tax payments.
Calendar Year 2004
Issue Date: December 1, 2004
Audit
Report No.: 2005-DP-0002
File Size: 722.2KB
Title: Controls Over HUD’s Travel Card Program Need Improvement
We audited the U.S. Department of Housing and Urban Development’s
(HUD) travel card program to determine whether management controls
were effective in preventing and detecting improper transactions.
We found that approximately 6 percent of employee purchases and
cash advances with travel cards were improper in that they were
for personal use--purchases or cash advances not associated with
official Government travel. We recommended that HUD improve its
travel card training and monitoring programs.
Issue Date: November 15, 2004
Audit
Report No.: 2005-FO-0003
File Size: 1.89MB
Title: Additional Details to Supplement Our Report on the U.S.
Department of Housing and Urban Development's (HUD) Fiscal Year
2004 Financial Statements
Our report on HUD's fiscal year 2004 financial statements is included
in HUD's Fiscal Year 2004 Performance and Accountability Report.
For fiscal year 2004, OMB directed agencies to complete their Performance
and Accountability Reports and submit them to the President, OMB
and the Congress by November 15, 2004, thereby requiring that we
complete our work by that date.
We were unable to express an opinion on HUD's fiscal year 2004
principal financial statements and the reasons are detailed in our
report that is included in HUD's Fiscal Year 2004 Performance and
Accountability Report. In this report, we provide additional details
to supplement our Report on the U.S. Department of Housing and Urban
Development's (HUD) Fiscal Year 2004 Financial Statements.
Issue Date: November 15, 2004
Audit
Report No.: 2005-FO-0002
File Size: 1.38MB
Title: Audit of the Federal Housing Administration's Financial
Statements for Fiscal Years 2004 and 2003
This report presents the results of KPMG LLP's audit of the Federal
Housing Administration's (FHA) financial statements for the years
ended September 30, 2004 and 2003.
In KPMG's opinion, the financial statements present fairly, in
all material respects, FHA's financial position as of September
30, 2004 and 2003, and its net costs, changes in net position, budgetary
resources, and reconciliation of net costs to budgetary obligations,
for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
The report identifies two material weakness and two reportable
conditions on internal control, discusses each of these conditions
in detail, provides an assessment of actions taken by FHA to mitigate
them, and makes recommendations for corrective actions. The report
also identifies one reportable instance of potential noncompliance
with laws, regulations, contracts and grant agreements that KPMG
tested. During the course of the audit, KPMG also noted other internal
control matters that are not material to the financial statements
and are being separately communicated to FHA management.
Issue Date: November 12, 2004
Audit
Report No.: 2005-FO-0001
File Size: 437.4KB
Title: Audit of the Government National Mortgage Association's
Financial Statements for Fiscal Year 2004
This report presents the results of the Office of Inspector General's
(OIG) audit of the Government National Mortgage Association's (Ginnie
Mae) financial statements for the year ended September 30, 2004.
In our opinion, the financial statements present fairly, in all
material respects, the financial position of Ginnie Mae as of September
30, 2004 and the results of its operations and its cash flows for
the year then ended, in conformity with accounting principles generally
accepted in the United States of America.
In addition to the OIG's unqualified opinion on Ginnie Mae's financial
statements, the audit results indicate that there were no material
weaknesses or reportable conditions in Ginnie Mae's internal controls
and no reportable instances of noncompliance with laws, regulations,
and provisions of contracts. The OIG noted other matters involving
internal control and its operation that are not material to the
financial statements and are being reported separately to Ginnie
Mae's management.
Issue Date: October 19, 2004
Audit
Report No.: 2005-DP-0001
File Size: 826. 9KB
Title: Fiscal Year 2004 Review of Information Systems Control
in Support of the Financial Statements Audit
We reviewed general and application controls for selected information
systems as part of the Office of Inspector General's (OIG) audit
of the U.S. Department of Housing and Urban Development's (HUD)
financial statements for fiscal year 2004. Our review was based
on the Government Accountability Office (GAO) "Federal Information
Systems Controls Audit Manual" and information technology guidelines
established by the Office of Management and Budget (OMB), and the
National Institute of Standards and Technology (NIST).
We found weaknesses and deficiencies in controls that could adversely
affect the integrity, confidentiality, and availability of data.
The weaknessess and deficiencies in controls stem from HUD's noncompliance
with (i) requirements for internal controls established by the Office
of Management and Budget (OMB), (ii) guidance for securing information
systems issued by the National Institute of Standards and Technology
(NIST), and (iii) HUD's own policies and procedures. We recommend
that HUD take steps to ensure compliance with OMB requirements,
NIST guidelines, and HUD's own internal policies and procedures.
Issue Date: October 8, 2004
Audit
Report No.: 2005-FW-0001
File Size: 238.1KB
Title: Housing Authority Employee Pension Plan Forfeitures
Public and Indian Housing
The objective of the audit was to determine the amount of funds
that could be put to better use if HUD changes its policy and requires
public housing authorities with private defined contribution pension
plans to return pension plan forfeitures to the benefit of contributing
federal programs. HUD's current policy, contained in Handbook 7401.7G,
Section 2-8e, allows housing authorities with defined contribution
pension plans to reallocate forfeitures of separating employees
to other plan participants or to reduce employer contributions or
administrative costs. The policy that permits authorities to allocate
forfeitures to other plan participants is inconsistent with the
Office of Management and Budget's Cost Principles for State, Local,
and Indian Tribal Governments, OMB Circular A-87. The cost principles
require the federal government to receive an equitable share of
any previously allowed pension costs that reverts or inures to the
governmental unit. We believe that HUD could put about $5,300,000
a year to better use if HUD requires housing authorities to refund
or credit pension plan forfeitures to the federal housing programs
that incurred the original pension costs.
We are recommending the Office of Public and Indian Housing process
the policy revision and promptly distribute the policy change to
the housing authorities. Office of Public and Indian Housing Officials
agreed with our recommendation and stated the final corrective action
will be completed by April 30, 2005.
Issue Date: October 1, 2004
Audit
Memorandum No. 2005-DP-0801
File Size: 2.9MB
Title: Annual Evaluation of HUD's Information Security Program
Our testing found weaknesses in network security that we reported
to the Acting Director for IT Operations in a memorandum dated August
6, 2004. Other weaknesses in information system security are reported
in our Audit Report titled "Fiscal Year 2004 Review of Information
Systems Controls in Support of the Financial Statement Audit." Generally,
we reported that improvements are needed in network security, contingency
planning for information systems, and the agency-wide information
system security program.
In our assessment, HUD has not timely documented and implemented
an agency-wide information security program as specified in section
3544(b) of FISMA and has not fully established the minimum set of
controls provided in Appendix III to OMB Circular A-130, Security
of Federal Automated Information Resources.
However, HUD has taken steps to improve information system security
and has made commendable efforts to improve its organization for
an effective information system security program.
Issue Date: September 30, 2004
Audit
Report No.: 2004-KC-0001
File Size: 351.1KB
Title: The Office of Federal Housing Enterprise Oversight Exceeded
Its 60 Percent Statutory Requirement, But Has Weaknesses in Its
Controls Over Allocating Costs for that Requirement
We completed an audit of the Office of Federal Housing Enterprise
Oversight (OFHEO). The Chairman of the Subcommittee on the Veterans
Administration, U.S. Department of Housing and Urban Development,
and Independent Agencies asked that we determine whether OFHEO was
complying with a statutory requirement included in the Veterans
Administration / U.S. Department of Housing and Urban Development
Fiscal Year 2004 Appropriations Act. The Act requires OFHEO to use
at least 60 percent of its total funds appropriated for fiscal year
2004 for the examination, supervision, and capital oversight of
Fannie Mae and Freddie Mac, the Government Sponsored Enterprises.
We were also asked to determine whether OFHEO is using its funds
to meet the 60 percent requirement in a manner consistent with other
financial regulators of financial institutions, such as the Office
of Thrift Supervision and the Federal Deposit Insurance Corporation.
Further, the request asked us to determine whether the other regulators
are using substantially more than 60 percent of their funding for
the examination, supervision, and capital oversight of financial
institutions.
We concluded that OFHEO is exceeding the statutory requirement
to use no less than 60 percent of its fiscal year 2004 appropriated
funds for examination, supervision, and capital oversight of Fannie
Mae and Freddie Mac. However, neither OFHEO nor HUD can be certain
whether OFHEO has significantly exceeded the 60 percent requirement,
as it has reported, because OFHEO cannot adequately support its
method for allocating employee expenses, or the resulting use of
funds reported in its annual reports and budget requests.
We further determined that OFHEO is allocating its funds using
a method that is consistent with other financial regulators, including
the Office of Thrift Supervision, the Federal Deposit Insurance
Corporation, and the Office of the Comptroller of the Currency.
In addition, we concluded that OFHEO uses approximately the same
percentage of its funds as these regulators for the purposes of
examination, supervision, and capital oversight.
We recommend that the Director, Office of Federal Housing Enterprise
Oversight, ensure that his staff establishes and implements controls
to ensure that OFHEO accurately allocates and reports its use of
funding. These controls should include a reliable method of maintaining
actual employee time spent on each strategic objective and a method
of ensuring that actual expenses are reflected in its reporting
of funds used.
Issue Date: September 20, 2004
Audit
Report No.: 2004-PH-0004
File Size: 106.2KB
Title: Contracts for Endorsement and Post-Endorsement Services
We reviewed the contracts that the Office of Single Family Housing
used for endorsement and post-endorsement services over FHA-insured
mortgage loans. Our audit objectives were to determine whether the
terms of the contracts provide adequate controls to ensure efficient
and cost effective delivery of the services, and if the pricing
of the services at the four Homeownership Centers (HOCs) was reasonable.
We did not identify any significant deficiencies. Accordingly, this
report does not contain any reportable conditions or recommendations
for corrective action.
Issue Date: August 25, 2004
Audit
Memorandum No.: 2004-DP-0801
File Size: 268KB
Title: Funds Management Function Compliance with Joint Financial
Management Improvement Program, "Core Financial System Requirements"
(JFMIP-SR-02-01, November 2001)
We have completed an audit of the Department of Housing and Urban
Development (HUD) and Federal Housing Administration core financial
systems to determine whether they are capable of performing the
mandatory Funds Management Function requirements provided in Joint
Financial Management Improvement Program (JFMIP) Publication SR-02001,
“Core Financial System Requirements,” dated November 2001. We did
not make an assessment of the implementation of these functionalities.
We also did not determine whether the optional, “value-added” requirements
were met.
Our audit disclosed no instances in which the core financial systems
used by HUD and the Federal Housing Administration were incapable
of performing the mandatory Funds Management Function requirements
provided in Joint Financial Management Improvement Program (JFMIP)
Publication SR-02001, “Core Financial System Requirements,” dated
November 2001.
Issue Date: July 12, 2004
Audit
Report No: 2004-AT-0002
File Size: 2.31MB
Title: Effectiveness of the Departmental Enforcement Center
We conducted an audit to assess the effectiveness of the DEC's
enforcement actions. The DEC had positive impacts in (1) improving
the physical condition of HUD's multifamily portfolio, (2) imposing
civil money penalties against multifamily project owners who fail
to timely submit annual financial statements, and (3) implementing
debarments against program violators. However, the audit identified
the following conditions that warrant corrective action by the DEC.
-
The DEC is not functioning pursuant to its planned mission
as the Department's one enforcement authority and has not implemented
consistent enforcement standards for all HUD programs. The DEC
had assigned its operating division staff almost exclusively
to multifamily housing cases. The DEC also allowed the Office
of Housing to control certain criteria for referrals to the
DEC and certain enforcement decisions.
-
The DEC needs to improve its development and pursuit of administrative
and civil sanctions, and referral of potentially criminal violations
to the Office of Inspector General (OIG). The DEC did not pursue
equity skimming violations that may have warranted enforcement
sanctions. Audit tests identified 24 cases with violations under
the equity skimming and double damage statutes, but the DEC
did not document whether sanctions were considered and did not
pursue enforcement actions beyond partial or full repayment
of the misused funds. The DEC did not refer these equity skimming
cases to OIG as required by HUD policy.
-
The DEC needs to eliminate certain unwarranted referrals from
the Office of Housing and a premature case closure policy. These
conditions inflated the DEC's workload and reported accomplishments,
and wasted staff resources that could have been used on other
referrals.
-
Since the merger of OGC and DEC, OGC had not filled five key
vacant DEC positions because the OGC had exceeded its overall
staff ceiling. DEC also could not document some reductions in
its staff ceiling that resulted from the merger. The vacant
OGC/DEC positions and reduced DEC staffing may have increased
the burden on existing staff and hindered OGC/DEC's ability
to manage and reduce its backlog of referred cases.
We recommended that OGC/DEC (1) revise its operations to conform
with its published plans as HUD's one enforcement authority, or
obtain written HUD authorization to revise its mission, (2) establish
uniform enforcement standards for all HUD offices, (3) revise DEC
procedures to ensure appropriate consideration of sanctions and
referrals to OIG when required by HUD policy, (4) eliminate unwarranted
referrals and a premature case closure policy, (5) fill key vacant
positions, and (6) document the DEC staff ceiling.
Issue Date: June 29, 2004
Audit
Report No.: 2004-SE-0001
File Size : 1.61MB
Title: Welfare to Work Section 8 Voucher Program
We completed an audit of the HUD's Welfare to Work (WtW) Section
8 Voucher Program. Our objectives were to determine if the Department's
design, implementation, and monitoring was adequate to ensure that
program requirements were met, and the Congressional goal to help
eligible families make the transition from welfare to work was achieved.
Issue Date: June 18, 2004
Audit
Report No.: 2004-FW-0001
File Size: 1.34MB
Title: Management Controls over Grantee and Subgrantee Capacity
Community Planning and Development
We have completed an audit of Community Planning and Development's
(CPD's) management controls over the capacity of entities participating
in CPD's programs. Specifically, we looked at CPD's management controls
over selection and oversight of grantees and subgrantees. We conducted
the audit based on a Congressional inquiry related specifically
to the management controls over nonprofits.
CPD's management controls are not sufficient to provide reasonable
assurance that only grantees and subgrantees with capacity participate
in its programs. CPD has controls to minimize the risk that grantees
and subgrantees lacking capacity receive CPD program funding. However,
unverified assumptions, incomplete and outdated guidance, and limited
on-site monitoring undermine these controls.
For competitive grants, CPD incorporates capacity into the Notice
of Fund Availability as both a threshold factor and a rating factor.
However, if the applicant is new or CPD has not monitored the applicant
on-site, CPD accepts without verification that the application accurately
reflects the applicant's capacity. Further, for some competitive
grants, CPD set the threshold factor too low to be effective and
excluded field office staff, who should be the most familiar with
the grantees, from the selection process. As a result, CPD cannot
be reasonably assured that it only funds grantees and subgrantees
capable of effectively carrying out its programs in accordance with
applicable laws and regulations.
CPD bases its monitoring goals and grantee risk analyses on unverified
assumptions. CPD has never evaluated the aggregate risk associated
with its programs or made a decision as to what level of risk is
acceptable. Further, CPD has not tested its grantee risk analysis
process to ensure it accurately identifies the highest risk grantees.
As a result, CPD lacks assurance that it has the resources to perform
the appropriate level of monitoring. Additionally, CPD cannot demonstrate
that it is focusing limited resources on the highest risk programs
and grantees.
We recommend that CPD provide guidance for grantees to evaluate
capacity, involve field office personnel in decisions where appropriate,
and increase minimum threshold requirements for capacity for competitive
grant programs. Further, we recommend that CPD document the basis
for establishing monitoring goals, evaluate risks, test its risk
assessment process, schedule monitoring based on risks, increase
training for field staff responsible for monitoring, and provide
field offices with appropriate financial analyst capability.
Issue Date: May 7, 2004
Audit
Report No.: 2004-DP-0003
File: Size: 4611KB
Title: Audit Report on Application Controls over Data Integrity
within the Public and Indian Housing Information Center (PIC)
We have completed an audit of controls over the validity, accuracy,
and completeness of data within the Public and Indian Housing Information
Center (PIC). The objectives of our audit were to determine whether
adequate controls were in place and, if so, whether they were operating
effectively. We found that adequate controls are not in place over
the identification of tenants. Specifically, tenant names and social
security numbers are kept on a web server outside of HUD's secure
network, making them highly vulnerable to hackers for identify theft,
and that HUD does not sufficiently identify tenants who are not
citizens or tenants who are citizens but do not provide a valid
social security number. This condition, facilitated by HUD's creation
of an Alternate ID Generator, increases opportunities for fraudulently
obtaining housing benefits. We found that certain controls over
the accuracy of data within PIC have been inadequate. PIC was initially
populated with data that was not entirely complete and accurate,
the annual reexamination process that would update and correct inaccurate
and incomplete data within the PIC system (through submission of
updated Form 50058 records) is not enforced, controls over the calculation
of total tenant payment are not functioning and that PIC's Building
and Unit module (inventory of public housing units) contains inaccurate
data. We found that current efforts to address this problem are
insufficient. As a result, PIC data alone would not be a reliable
source of information for HUD's assessment of public housing agency
performance and the calculation of funding for the Capital Fund.
HUD has used other supporting or corroborating data when calculating
funding for the Capital Fund. The effect of these issues has been
accumulation of unreliable data, hindering achievement of PIC's
original objectives, which were to provide a building and unit inventory
for public and Indian housing, develop a Section 8 management assessment
program and PIC risk assessment program, calculate the amount of
subsidy authorized and disbursed to Public Housing Agencies (PHAs),
and to monitor PHA performance and use of HUD funds.
Issue Date: April 23, 2004
Audit
Report No.: 2004-DE-0002
File: Size: 287.4KB
Title: Use of Independent Contract Loan Officers to Originate
FHA-Insured Loans, HUD'S Single Family Mortgage Insurance Programs
We have conducted reviews of eight HUD/FHA approved non-supervised
loan correspondents (mortgagees) located in the Salt Lake City,
Utah, and Denver, Colorado metropolitan areas. These mortgagees
were selected for review primarily based on information that they
were using independent contract loan officers to originate FHA-insured
loans. The objective of our review was to determine whether the
mortgagees use independent contract loan officers to originate FHA-insured
loans.
Our review of these eight mortgagees located in Utah and Colorado
disclosed that seven of the mortgagees were using independent contract
loan officers to originate FHA-insured loans contrary to HUD requirements.
Furthermore, five of the seven mortgagees established agreements
with their independent contract loan officers, which were not in
compliance with HUD requirements.
By using independent contract loan officers or non-employees to
originate FHA-insured loans, these mortgagees could not, and in
fact did not exercise direct control and supervision over their
loan origination officers as required by HUD. The lack of direct
control and supervision, coupled with quality control deficiencies,
contributed to increased default and claim rates and therefore unnecessarily
higher risk to the FHA insurance fund.
We are recommending that HUD/FHA issue appropriate guidance and
specific instructions to HUD's Homeownership Centers and to FHA
approved mortgagees requiring the use of mortgagee employed loan
officers versus contractor or non-employees to originate FHA-insured
loans. We also recommend that HUD require mortgagees to report their
originating loan officer's income on IRS form W-2, which would include
withholding of federal income tax, Social Security tax and Medicare
tax.
Issue Date:March 17, 20004
Audit
Memorandum No.: 2004-PH-0003
File Size: 280.4KB
Title: HUD's Oversight of the Philadelphia Housing Authority's
Moving to Work Program Philadelphia, Pennsylvania
The objective of the audit was to determine if HUD adequately evaluated
the Authority’s Moving to Work application and the adequacy of its
controls for monitoring the Authority’s performance under the Program,
focusing on the Program’s Section 8 component.
Our audit showed HUD accepted the Philadelphia Housing Authority
into a new flexible housing demonstration program known as Moving
to Work without restriction, before carefully evaluating the reasons
for the Authority’s past poor performance in utilizing its Section
8 funding and the merits of its Moving to Work application. Although
HUD was within its authority to accept the Authority into the demonstration
program, by doing so it incurred a higher risk. As such, HUD should
have established more stringent controls under its agreement with
the Authority to ensure its interests were adequately protected
and HUD funds would be used in the most efficient and effective
manner that served the residents of the community.
Further, after HUD accepted the Authority into the Moving to Work
Program, it did not provide adequate oversight of the development
and implementation of the Authority’s Moving to Work Plans. In a
prior audit (Audit Report 2003-PH-1803, dated September 24, 2003)
we determined the Authority was not able to fully utilize its Section
8 Program due to limitations in the way it administered its Program.
HUD’s local field office had similar concerns and the Authority’s
Section 8 Management Assessment Program scores reflected its performance
problems. HUD personnel said the Department was reluctant to interfere
with the Authority’s Moving to Work Plans because it viewed this
action as contrary to the philosophy of the demonstration program.
Also, they said a lack of resources hindered HUD’s ability to adequately
monitor the Authority’s performance under the Program.
In effect, HUD rewarded the Authority for its past poor performance
by allowing it to participate in the new program in which it has
the flexibility to use substantial Section 8 funds in non-traditional
ways that may not provide the greatest benefit to thousands of families
who continue to wait for housing assistance. Accordingly, we believe
the Authority could put to better use an estimated $50.2 million
of the Section 8 funding it will receive over the remaining four
years of its Agreement by leasing-up the remaining rental housing
vouchers in its inventory.
Issue Date: March 4, 2004
Audit
Memorandum No.: 2004-KC-0803
File Size: 178.1KB
Title: Owner's Salary, Timberlake Care Center, Section 232 Nursing
Home Review Kansas City, Missouri
During our audit of Timberlake Care Center, a nursing home located
in Kansas City, Missouri, we identified an internal deficiency regarding
HUD's approval of the project owner's salary. Our audit objective
was to determine whether the Owner/Management Agent used project
funds in accordance with applicable requirements. During the audit,
we found that the owner was receiving a substantial salary from
the property. We did not take exception to this in our audit report
since HUD had previously approved the salary. However, the salary
may not be reasonable and necessary because the project's administrator
performs many of the normal management functions. During our review,
we found no indication that the owner was performing any significant
management functions that were reasonable and necessary to the operations
of the project. HUD approved the salary during the loan origination
process. Paying the owner a salary out of operating funds has further
contributed to this project's negative surplus cash position. We
recommended that HUD identify the management duties performed by
the project owner and determine the appropriate amount of salary
the owner should receive from operating funds for performing those
duties, and restrict the amount paid for the owner's salary to the
determined amount. HUD has provided a specific list of corrective
actions to be completed by September 30, 2004 to ensure that an
appropriate decision on whether or not to pursue changes in regard
to the owner's salary is made. HUD has provided sufficient information
for a management decision, therefore, we have input September 30,
2004 as the planned completion date for both recommendations in
the Department's Audit Resolution and Corrective Action Tracking
System.
Issue Date: March 2, 2004
Audit
Memorandum No.: 2004-KC-0802
File Size: 204KB
Title: St. Louis Office of Multifamily Housing’s Monitoring of
its Construction Analyst Contracts
We have completed a survey of the St. Louis HUD Multifamily office's
outsourcing of its Construction Analyst duties. Our objective was
to determine whether the St. Louis HUD Multifamily office properly
and efficiently monitored its construction analyst contracts. We
determined that overall the St. Louis HUD Multifamily office appears
to have properly and efficiently monitored its construction analyst
contracts, but did not always retain evidence of the receipt and
review of the contract inspectors' trip reports. Also, field-monitoring
reviews are not always documented. We recommended that HUD develop
and implement procedures to ensure that required documentation is
prepared during all field reviews and documentation is properly
retained in the project files. HUD has provided a specific list
of corrective actions to be completed by July 31, 2004 to ensure
that all field reviews are documented in accordance with the MAP
Guide and HUD Handbook 4460.1, and all trip reports are documented
and retained in the project files. HUD's implementation of its planned
actions should ensure that construction monitoring is better documented
in the future. HUD has provided sufficient information for a management
decision, therefore, we have input July 31, 2004 as the planned
completion date for both recommendations in the Department's Audit
Resolution and Corrective Action Tracking System.
Issue Date: February 25, 2004
Audit
Report No.: 2004-DP-0002
File Size: 2449KB
Title: Application Control Review of the Tenant Rental Assistance
Certification System (TRACS)
We have completed an audit of management, operational, and technical
controls over the security of the Tenant Rental Assistance Certification
System (TRACS). TRACS is a HUD mission critical financial and program
information system that interfaces with other HUD systems. It receives
HUD's highest ratings for sensitivity and criticality. Its goal
is to collect tenant data for all Housing programs and to automatically
provide payment for subsidy programs, where HUD is the contract
administrator, based upon the contract and tenant data resident
in the system.
We found deficiencies and weaknesses in controls over TRACS security:
· Access controls over the TRACS data and resources are inadequate.
· Controls over software configuration management are inadequate.
· Adequate security training has not been provided.
· Audit logs are not being utilized to detect security violations,
performance problems, or to monitor and log user activities.
· Personnel security practices pose a risk of unauthorized access
to TRACS.
· There is a lack of segregation of duties performed by key personnel.
The effect of the deficiencies and weaknesses in controls is exposure
of TRACS data to unnecessary risk of loss of confidentiality, integrity,
and availability.
The Office of Multifamily Housing has taken action to correct
some of the weaknesses identified during our review. However, additional
corrective action is needed. Our report contains recommendations
for the Assistant Secretary for Housing and the Assistant Secretary
for Administration/Chief Information Officer to improve controls
over the security of TRACS.
Issue Date: February 20, 2004
Audit
Memorandum No.: 2004-PH-0002
File Size: 278.9KB
Title: Philadelphia Homeownership Center Quality Controls Over
Single Family Loan Insurance Process, Philadelphia, Pennsylvania
As part of our national review of the Homeownership Centers (HOCs),
we reviewed the Philadelphia HOC’s system of quality controls over
its FHA Single Family Loan Insurance Process. The objective of the
audit was to examine the integrity of the HOC’s and its contractors’
system of quality controls over mortgage loans submitted for Federal
Housing Administration (FHA) insurance endorsement. The scope of
the review examined the services of the HOC’s endorsement and post-endorsement
contracts as well as the HOC’s monitoring of those services.
We identified two significant weaknesses in the HOC’s monitoring
of the endorsement and post-endorsement processes. Specifically,
we found the HOC was not aware its contractors were not performing
the required number of quality control reviews specified in their
contracts. Further, the HOC staff did not accurately measure the
post-endorsement contractor’s performance level in determining what
payments the contractor was entitled to receive. As a result of
inadequate monitoring, the HOC: overpaid the endorsement contractor
$75,387 ; overpaid the post-endorsement contractor $326,572; and
increased the risk that HUD will insure unacceptable loans. Management
action to correct these deficiencies will put $144,944 to better
use over a 12-month period.
We recommended the HOC improve controls related to monitoring reviews
of the endorsement and post-endorsement contractors. Also, we recommended
the recovery of $401,959 for reviews not performed or not performed
at the acceptable performance level.
Issue Date: February 10, 2004
Audit
Report No.: 2004-BO-0001
File Size: 936.9 KB
Title: Review of the Home Equity Conversion Mortgage Program New
England Region
We have completed a review of the Home Equity Conversion Mortgage
(HECM) Program. The specific objectives were to: (a) assess the
adequacy of internal controls; (b) identify areas susceptible to
material deficiencies, problems or weaknesses; and (c) determine
whether a comprehensive audit was warranted, including any follow-on
audit work at other locations. Our review was limited to loans endorsed
for insurance in the New England Region (Connecticut, Maine, Massachusetts,
New Hampshire, Rhode Island, and Vermont) between October 1, 1999,
and September 30, 2002. The New England Region is considered a high
priced housing market, which represents a potentially higher risk
for HUD, because the maximum dollar amount that HUD will pay on
a claim for insurance benefits is based on a property's value.
Issue Date: February 6, 2004
Audit
Report No.: 2004-AO-0001
File Size: 1.09MB
Title: Award and Administration of Lead-Based Paint Hazard Reduction
Grants
In response to a hotline complaint, we completed an audit of the
Office of Healthy Homes and Lead Hazard Control (OHHLHC) grant award
and administration process. Our audit objectives were to determine
whether: (1) grants awarded based on unsolicited proposals were
properly evaluated; (2) grants were extended and increased based
on sufficient evaluation and proper justification; and (3) OHHLHC
efficiently and effectively expended grant funds appropriated by
Congress.
Our review disclosed that OHHLHC had (1) awarded grants without
evaluating the unsolicited proposals and did not maintaining a complete
log of all such proposals submitted for consideration, (2) approved
requests for grant amendments for award increases and extensions
without adequately evaluating the grantees' requests and documenting
the evaluation, and (3) not ensured that grantees timely expended
funds.
We recommended that the Director of OHHLHC implement stronger controls
over the award and administration of unsolicited proposals, grant
amendments and unexpended balances. The Director of OHHLHC concurred
with all 10 recommendations and provided management decisions outlining
the actions planned and taken to implement our recommendations.
Issue Date: January 15, 2004
Audit
Report No.: 2004-BO-0006
Files Size: 1.07MB
Title:Review of the Administration of the Portability Features
of the Section 8 Housing Choice Voucher Program
We completed an audit of the portability features of the Section
8 Housing Choice Voucher Program. Our overall objective was to determine
whether housing authorities within the six New England states were
administering the portability features of Section 8 Housing Choice
Voucher Program effectively and efficiently. An additional objective
was to identify data problems within the Multifamily Tenant Characteristic
System module of the PIH Information Center (PIC) System. Our report
contains two findings that discuss: (1) Ineffective Administration
of the Section 8 Housing Choice Voucher Program. and (2) Inaccurate
or Incomplete Data in the PIH Information Center System.
Issue Date: January 13, 2004
Audit
Report No.: 2004-AT-0001
File Size: 1.06MB
Title: Public Housing Agency Development Activities
We conducted a review to determine whether HUD had adequate management
controls to assess PHA development activities. We found that HUD
often was unaware of the extent to which activities with related
nonprofit organizations impacted PHA operations and of the numerous
Annual Contributions Contract (ACC) violations associated with them.
HUD did not have mechanisms to readily identify or monitor such
activities, nor has staff adequately trained to detect improper
transactions. Further, even when field offices did become aware
of improper activity, they did not aggressively pursue corrective
actions to stop the activities or recover funds. PHAs did not fully
disclose activities with related nonprofit organizations in their
financial statements and Independent Public Accountants did not
include findings when those activities violated ACCs or other requirements.
PHAs also claimed to misunderstand HUD's rules. The impact of known
and potential violations is high. Our analysis of key account balances
from PHAs' audited financial statements identified 777 PHAs with
indicators of possible unauthorized development activities. Eleven
PHAs recently audited by OIG and four PHAs we reviewed for this
audit, all of which had unauthorized development activities, were
included in the 777 PHAs. The OIG audits questioned over $16 million.
For the 777 PHAs, the potential risk to the low-income public housing
program alone could be $600 million or more. The potential negative
impact of the inequitable agreements is unknown, but also could
be substantial. We believe HUD needs to take immediate steps to
identify PHAs involved in nonprofit development activities, halt
deals that violate the ACCs, and begin training its own staff and
the public housing community on the legal avenues for developing
low income housing through nonprofit affiliates.
Calendar Year 2003
Issue Date: December 22, 2003
Audit
Memorandum No.: 2004-KC-0801
File Size: 1.03MB
Title: Corrective Action Housing Subsidy Payments, Office of Housing
Audit Report No.00-KC-103-0002
We have completed a Corrective Action Verification on Recommendations
1A and 2A in Audit Report number 00-KC-103-0002, Housing Subsidy
Payments. Our objective was to determine whether the Department
is making or has made adequate progress towards achieving the goals
it identified in the Management Decisions and Corrective Action
Plan from the Housing Subsidy Payments Audit. We found that, while
the Department is making progress towards achieving its goals for
Recommendation 1A, it needs to develop revised management decisions
to accurately reflect its adjusted plans and realistic dates for
completing those plans. Additionally, management erroneously reported
as complete actions to close Recommendation 2A. As a result, we
are re-opening Recommendation 2A. Management provided us a revised
management decision with their formal comments; therefore, the final
report does not contain a recommendation.
Issue Date: December 19, 2003
Audit
Report No.: 2004-FO-0003
File Size: 4.44MB
Title: Audit of U.S. Department of Housing and Urban Development
Financial Statements for Fiscal Years 2003 and 2002
This report presents the results of OIG's audit of the Department
of Housing and Urban Development's (HUD) financial statements for
the fiscal years ended September 30, 2003 and 2002.
In OIG'S opinion, based on our audit and the reports of other auditors,
the financial statements present fairly, in all material respects,
the financial position of HUD as of September 30, 2003 and 2002
and its net costs, changes in net position, budgetary resources,
and reconciliation of net costs to budgetary obligations for the
fiscal years then ended, in conformity with accounting principles
generally accepted in the United States of America.
The report identifies (a) two material weakness and seven reportable
conditions on internal controls and (b) one instance of non-compliance
with applicable laws and regulations. The report discusses each
of these conditions in detail, provides an assessment of actions
taken by HUD to mitigate them, and makes recommendations for corrective
actions. During the course of the audit, OIG also identified several
matters that are not material to the financial statements and are
being separately communicated to HUD management.
Issue Date: December 19, 2003
Audit
Report No.: 2004-FO-0002
File Size: 642.1KB
Title: Audit of the Government National Mortgage Association's
Financial Statements for Fiscal Years 2003 and 2002
This report presents the results of the KPMG LLP audit of the Government
National Mortgage Association's (Ginnie Mae) financial statements
for the years ended September 30, 2003 and 2002. In KPMG's opinion,
the financial statements present fairly, in all material respects,
the financial position of Ginnie Mae as of September 30, 2003 and
2002 and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally
accepted in the United States of America.
In addition to KPMG's unqualified opinion on Ginnie Mae's financial
statements, the audit results indicate that there were no material
weaknesses in Ginnie Mae's internal controls and no reportable instances
of noncompliance with laws and regulations. KPMG noted other matters
involving internal control and its operation that are not material
to the financial statements and are being reported separately to
Ginnie Mae management.
Issue Date: December 15, 2003
Audit
Report No.: 2004-DE-0001
File Size: 977.4KB
Title: Indemnification for Claims on Single Family Insured Loans
Department of Housing and Urban Development's Single Family Insurance
Program
We have completed an audit of the indemnification for claims on
Single Family insured loans. We selected the audit because of concerns
we had with the collection of losses from claims where indemnification
agreements are in place. The assignment was on our annual audit
plan. Our overall audit objective was to evaluate the controls in
place to ensure indemnification agreements are adhered to, and the
lender reimburses HUD for losses incurred by HUD when a claim is
paid.
Our report contains three findings with recommendations requiring
action by your office. The three findings address the billing and
collection process, and the data entry of indemnification information
into HUD systems.
Issue Date: December 1, 2003
Audit
Report No.: 2004-DP-0001
File Size: 811.3KB
Title: Final Audit Report on Fiscal Year 2003 Review of Information
Systems Controls in Support of the Financial Statements Audit
We have completed our review of selected information systems general
and application controls in support of the fiscal year 2003 financial
statements audit. Our review was based on the General Accounting
Office "Federal Information Systems Controls Audit Manual," and
information technology guidelines established by the Office of Management
and Budget (OMB), and the National Institute of Standards and Technology
(NIST).
Our review found information systems controls weaknesses that could
negatively affect the integrity, confidentiality, and availability
of computerized data. This is due to HUD's noncompliance with Federal
requirements and standards, as well as HUD's own internal policies
and procedures. We recommend that HUD take steps to ensure that
OMB requirements, NIST guidelines, HUD's own internal policies and
procedures are implemented.
Issue Date: November 26, 2003
Audit
Report No.: 2004-PH-0001
File Size: 156KB
Title: Final Memorandum Report on Procedures for Filing Uniform
Commercial Code Continuation Statements
We audited HUD’s procedures for filing of Uniform Commercial Code
Continuation Statements. Our audit objective was to determine whether
HUD’s existing procedures for filing of Uniform Commercial Code
Continuation Statements were effective.
During our limited review of Shawnee Hills, Incorporated (Audit
Memorandum Report 2003-PH-1802), a not-for-profit company that managed
several HUD assisted Section 202/811 properties, we found HUD’s
West Virginia Field Office did not file Continuation Statements
as required under the Uniform Commercial Code to protect all of
HUD’s financial interests. In part, this oversight resulted because
the applicable HUD Handbooks and related memorandum, which provide
HUD staff with the policies and procedures to follow for filing
Continuation Statements, are outdated and need to be appropriately
revised and re-issued to staff. Under the Uniform Commercial Code,
HUD must file a report periodically (every 5 years or as state law
requires) to assure that a lien on chattels remains in effect until
the mortgaged property is paid in full or foreclosed. A chattel
is any article of tangible property other than land, and buildings
such as office furnishings, furniture, or capital equipment.
Under an internal HUD Agency reorganization in 1998, HUD’s Regional
Accounting Divisions were eliminated, and its function of maintaining
a tickler system to advise the Loan Management Branch of the date
when Continuation Statements need to be filed was not assumed by
or transferred to another HUD division. Further, HUD never revised
its procedures nor updated its handbooks and related directives
to provide staff with appropriate guidance under its new organizational
structure. As a result, HUD’s financial interests in chattels are
not fully protected and this problem is not limited to the West
Virginia Field Office.
We recommended HUD’s Assistant Secretary for Housing and Deputy
Chief Financial Officer coordinate efforts to ensure existing policies
and procedures for preparing and filing Uniform Commercial Code
Continuation Statements are appropriately updated, and distributed
to responsible field office staff for immediate implementation.
Issue Date: November 25, 2003
Audit
Report No.: 2004-FO-0001
File Size: 821KB
Title: Audit of the Federal Housing Administration's Financial
Statements for Fiscal Years 2003 and 2002
This report presents the results of KPMG LLP's audit of the Federal
Housing Administration's (FHA) financial statements for the years
ended September 30, 2003 and 2002. In KPMG's opinion, the financial
statements present fairly, in all material respects, FHA's financial
position as of September 30, 2003 and 2002, and its net costs, changes
in net position, budgetary resources, and reconciliation of net
costs to budgetary obligations, for the years then ended in conformity
with accounting principles generally accepted in the United States
of America. The report identifies one material weakness and two
reportable conditions on internal control, discusses each of these
conditions in detail, provides an assessment of actions taken by
FHA to mitigate them, and makes recommendations for corrective actions.
During the course of the audit, KPMG also noted other matters that
are not material to the financial statements and are being separately
communicated to FHA management.
Issue Date: October 7, 2003
Audit
Memorandum No.: 2004-AT-0801
File Size: 343.6KB
Title: Officer Next Door and Teacher Next Door Programs
Our recent work with the United States Attorney's Office, assisting
with preparation of possible civil or criminal cases involving violations
of the Officer Next Door and Teacher Next Door (OND/TND) Program
requirements, identified management control weaknesses in homebuyer
certification statements. Attorneys with the U.S. Attorney's Office
noted weaknesses in the certification language that undermined the
enforceability of program requirements. We worked with the attorneys
to develop certification language that is enforceable and strengthens
the integrity of the programs. HUD agreed to take immediate steps
to incorporate the recommended changes.
Issue Date: September 30, 2003
Audit
Memorandum No.: 2003-NY-0801
File Size: 25.8KB
Title: Corrective Action Verification, Asset Control Area Program,
Audit Report Number 2002-NY-0001
We performed a Corrective Action Verification review of the actions
taken on the recommendations in our nationwide audit report on the
U.S. Department of Housing and Urban Development's (HUD) Asset Control
Area (ACA) Program, which was issued February 25, 2002 under Audit
Case Number 2002-NY-0001. The review stemmed from a Senate Committee
Report that requested an audit of HUD's compliance with Section
1303 of Public Law 107-206. Therefore, the objectives of the review
were to determine whether HUD is in compliance with Section 1303
of Public Law 107-206, and to evaluate the status of HUD's management
decisions on the findings in our audit report on the Asset Control
Area Program.
Our review disclosed that HUD has generally complied with Section
1303 of Public law 107-206 by initiating actions on September 15,
2002 to enter into new agreements and contracts with program participants.
Our review also disclosed that HUD has taken required actions on
the recommendations in our audit report on the ACA, with the exception
of those relating to implementing regulations and providing training
on the ACA Program.
We recommend that HUD reevaluate and adjust the Final Action target
date for implementing the regulations for the ACA Program and ensure
that all appropriate training is provided to HUD employees and program
participants during Fiscal Year 2004. We also recommend that HUD
continue to pursue approval of its proposed legislative changes
to the ACA Program.
Issue Date: September 22, 2003
Audit
Memorandum No.: 2003-DP-0803
Files Size: 372KB
Title: Annual Evaluation of HUD's Information Security Program
The Federal Information Security Management Act of 2002 (FISMA)
requires the Office of the Inspector General (OIG) to perform an
annual independent evaluation of HUD's information security program
and practices. This memorandum presents the results of our evaluation
in accordance with reporting instructions issued by the Office of
Management and Budget (OMB).
We found HUD in general compliance with the requirements of FISMA
except for Section 3544(b)(7)(C)(i). This section requires notification
of the Office of Inspector General on security incidents. HUD has
no procedure for notifying us of security incidents. Furthermore,
HUD lacks adequate policies and procedures for documenting incident
response activities. In the previous fiscal year (FY 2002), HUD
reported 51 Denial of Service Attacks, 24 Probes, and 330 Internet
Service Provider Attacks. In FY 2003, only one incident has been
reported. Given the number of incidents reported in FY 2002, HUD's
network vulnerabilities recently identified by a HUD subcontractor,
and the numerous public warnings about worms affecting systems using
Microsoft products, there may have been incidents during this fiscal
year that have gone unreported.
Issue Date: September 10, 2003
Audit
Report No.: 2003-DP-0001
File Size: 1.25MB
Title: Audit Report on the Public and Indian Housing Information
Center (PIC)
We completed an audit of management, operational, and technical
controls over the security of HUD's Public and Indian Housing Information
Center (PIC). PIC is a technologically advanced web-based information
system designed to facilitate a more timely and accurate exchange
of data between Public Housing Agencies (PHAs) and local HUD offices
by allowing PHAs to electronically submit information to HUD.
We found deficiencies and weaknesses in controls:
· There are inadequate queries and reports for monitoring and
controlling user access to PIC. · A comprehensive process for monitoring
and controlling PIC user access is not in place.
· Access controls over the PIC Security Administration Sub-Module
are inadequate.
· There is no segregation of duties over the Security System Administration
function.
· Controls for safeguarding confidential and sensitive PIC data
are inadequate.
· Access controls for identifying and authenticating PIC users are
weak.
· System and application audit logs are not being utilized for security
and system maintenance purposes.
We recommend that PIH conduct a comprehensive vulnerability and
risk assessment, develop a comprehensive security plan for PIC,
and correct deficiencies and weaknesses in operational and technical
controls as indicated in specific recommendations at the end of
this report.
Issue Date: August 14, 2003
Audit
Memorandum No. : 2003-AO-0004
File Size: 1.89MB
Title: Review of the Department of Housing and Urban Development's
Staffing
9/30 Initiative
Between July and September 2002, HUD undertook Staffing 9/30, a
large-scale recruiting and hiring effort. The goal of Staffing 9/30
was to maximize the staffing levels of the Department before the
end of FY 2002, by filling mission critical positions. Because Staffing
9/30 was inadequately planned and directed, and information used
to track hiring levels was unreliable, HUD ended up hiring too many
people. In particular, HUD exceeded its staffing level set forth
in the FY 2003 budget by about 300. As a result, a significant number
of the positions filled were not mission critical positions as intended
and HUD had to reprogram over $20 million to cover additional personnel
costs. In other words, the results of Staffing 9/30 were inconsistent
with program requirements and staffing needs. Moreover, the hiring
actions were not based on the Resource Estimation and Allocation
Process (REAP), which was to be the means to estimate, justify and
allocate staffing resources. We recommended that HUD implement the
corrective action plan submitted to Congress to ensure compliance
with FTE ceilings in the future.
Issue Date: August 12, 2003
Audit
Memorandum No.: 2003-AO-0003
File Size: 454.4KB
Title: Title I Loan Remittances Processed by HUD's Cash Management
Branch
Washington, DC
In response to an anonymous hotline complaint, we completed an
audit of the cash management practices used by the Cash Management
Branch (CMB) to process Title I loan remittances. We evaluated CMB's
handling of Title I remittances paid by check during the period
October 1998 through January 2003. CMB has made significant progress
in improving its cash management practices as a result of our review.
However, during the audit period, CMB did not ensure that Title
I remittances were properly handled, processed, and applied. Specifically,
remittances totaling $602,608 were not applied to debtors’ accounts;
at least $87,979 in payments were not deposited timely; and CMB
did not adequately account for negotiable instruments or monitor
the process used by Bank of America to process Title I payments.
We recommended that the Deputy Comptroller of the Federal Housing
Administration improve its cash management and monitoring practices
to ensure that Title I remittances are adequately handled, processed,
and applied. The Federal Housing Administration agreed with our
recommendations and has initiated action to correct the noted deficiencies.
Issue Date: July 31, 2003
Audit
Memorandum No.: 2003-KC-0802
File Size: 244.8KB
Title: Inappropriate Home Ownership Center Instructions
During our audit of Management Solutions of America, Inc., a Philadelphia
Home Ownership Center contractor, we identified an internal deficiency
regarding Home Ownership Center instructions that differed from
the HUD Handbook. As a result we issued this memorandum to report
the details of the internal deficiency.
The Home Ownership Center gave the endorsement contractor guidance
that deviated from HUD Handbook 4165.1 for loans submitted for insurance
more than 60 days after closing. We recommended that the Director,
Philadelphia Home Ownership Center require its contractor(s) to
follow the requirements set forth in HUD Handbook 4165.1, Chapters
2 and 3 when approving late loan submissions for endorsement of
request a formal waiver from Headquarters.
Issue Date: July 29, 2003
Audit
Report No.: 2003-KC-0002
File Size: 810.3KB
Title: Office of Federal Housing Enterprise Oversight
We have completed an audit of certain administrative operations
of the Office of Federal Housing Enterprise Oversight, the safety
and soundness regulator for the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation. Our audit objectives
were to review the appropriateness of travel expenditures at the
Office during the last four years, to determine whether the Office's
compensation levels are comparable to other Federal financial regulators,
and to evaluate whether space utilization is reasonable. The Office
of Federal Housing Enterprise Oversight did not ensure that it used
its funds at optimum efficiency, as the Office paid for lodging
costs above the maximum per diem rate and also leased office space
in excess of the government recommendations and averages.
The Office sometimes did not detect its employees' travel card
misuse or travel voucher errors. We concluded that the Office's
compensation levels are comparable to other regulatory organizations.
We recommended that the Director of the Office of Federal Housing
Enterprise Oversight improve its policies and procedures in order
to ensure that its funds are used efficiently and ensure procedural
changes that have been initiated for the review of travel related
expenditures are fully implemented and effective.
Issue Date: July 15, 2003
Audit
Memorandum No.: 2003-AO-0002
File Size: 338.3KB
Title: HUD Training Academy, Washington, DC
In response to an anonymous hotline complaint, we audited HUD's
Training Academy (HTA) acquisition practices. Our audit objective
was to determine whether HTA complied with applicable acquisition
regulations when obtaining services from outside sources. We found
that HTA did not comply with applicable acquisition regulations
when obtaining services from outside sources. Specifically, with
assistance from HTA, Watson Wyatt Worldwide (WWW), a subcontractor
of Marasco Newton Group (Marasco), prepared a Statement of Work
(SOW) and an unsolicited proposal to perform the work outlined in
the SOW. Based on the unsolicited proposal, OPM awarded a $500,000
contract to Marasco non-competitively. In addition, HTA inappropriately
used Standard Form 182, "Request, Authorization, and Certification
of Training" (SF-182), and awarded nearly $150,000 to WWW without
competing the services.
Issue Date: July 8, 2003
Audit
Memorandum No.: 2003-SE-0802
File Size: 463KB
Title: Review of complaints regarding the Alaska ONAP's funding
of Indian Housing Block Grants and awarding of Indian Community
Development Block Grant funds
As part of an assessment of an anonymous complaint, we reviewed
the Alaska Office of Native American Program's (AkONAP) processing
of the Fiscal Year 2001 Indian Housing Block Grant (IHBG) funding
for Amendment 1 to the Association of Village Council Presidents
Regional Housing Authority's (AVCP) Indian Housing Plan. Our review
objectives were to determine (1) whether Departmental Officials
complied with financial requirements when reserving and obligating
IHBG funds, and (2) if the Alaska Office of Native American Programs
complied with programmatic departmental requirements when reserving
and obligating IHBG funding. In addition, we reviewed AkONAP's rating,
ranking, and awarding of Indian Community Development Block Grant
(ICDBG) funds for Fiscal Year 2002 to determine if grants were fairly
and properly awarded.
The Office of Native American Programs did not enforce program
deadlines for the Indian Housing Block Grant submissions of the
Village of Stony River and Native Village of Paimiut. In addition,
AkONAP provided funding for these two Indian Housing Plans even
though there was not an executed funding approval agreement as required.
As a result, AkONAP improperly provided $126,242 to the Association
of Village Council Presidents Regional Housing Authority (AVCP).
AVCP is the Tribally Designated Housing Entity (TDHE) for the Village
of Stony River and Native Village of Paimiut. AkONAP officials said
the Office of Native American Programs did not consider this deadline
requirement to be clear, and interpreted the requirements in the
tribes' favor. Also, AkONAP relied on a funding log rather than
official documents when it made funds available to the TDHE. In
response to our draft report, AkONAP requested guidance from the
Office of Native American Programs regarding deadlines, stated it
will reevaluate AkONAP's decisions to accept the late submittals,
and strengthened controls over funding approval.
Alaska ONAP did not maintain documentation regarding the initial
rating and ranking process for awarding Indian Community Development
Block Grant (ICDBG) funds for Fiscal Year 2002. As such, we could
not determine the validity of the concerns alleging that AkONAP
made improper changes to the ICDBG ratings and rankings. In response
to our draft report AkONAP requested the Office of Native American
Programs obtain a legal opinion as to whether documenting of the
review process complied with the HUD Reform Act.
Issue Date: June 24, 2003
Audit
Memorandum No.: 2003-KC-0001
File Size: 254KB
Title: Survey of HUD's Administration of Section 3 of the HUD
Act of 19
We have completed a survey of HUD's administration of Section 3
of the Housing and Urban Development Act of 1968. The objective
was to determine if HUD is administering Section 3 in accordance
with the HUD Act of 1968. We determined that HUD does not have adequate
controls in place to ensure it is meeting the intended purpose of
Section 3 of the Act. However, at the time of our review we found
that HUD is in the process of taking action to address the control
weaknesses. We found that the Office of Fair Housing and Equal Opportunity
needs to develop and implement necessary controls to ensure the
Section 3 program is functioning as intended by the HUD Act of 1968
as well as a timeframe to ensure controls are implemented expeditiously.
At a minimum, these controls should include:
o Developing a system to track recipients
o A method to evaluate the recipient reporting system
o Developing a system to monitor recipients that ensures contracts
contain the Section 3 clause, recipient reporting system is effective
and Section 3 residents are informed of and given available job
and training opportunities.
The Office of Fair Housing and Equal Opportunity agreed with the
two recommendations we made and developed various controls and timeframes
to have the controls implemented to correct the program control
weaknesses.
Issue Date: May 15, 2003
Audit
Report No.: 2003-SE-0001
File Size: 490KB
Title: FHA Case File Review - Underwriting Practices and Loan
Characteristics Contributing to FHA Loan Performance
We reviewed a statistical sample of 1,180 FHA case files to assess
underwriting practices and loan characteristics contributing to
FHA loan performance. Industry use of standardized credit scoring
for mortgage loans, such as those provided by Fair, Isaac and Co.,
(FICO) is widespread. However, FHA underwriting does not rely on
these scores. Current restrictions on bad credit are very flexible,
but are often subjective. The subjective nature of the criteria
can provide deserving families the opportunity for home ownership,
but it can also be overly permissive and tolerant toward borrowers
with bad credit histories. Credit scores provide evaluations of
risk based on an objective formula. Our observations demonstrate
that lower credit scores, or loans without scores, have much poorer
loan performance than other loans. Subprime lending contributes
to higher mortgage insurance premiums to the detriment of homebuyers
who have maintained good credit. We are recommending that HUD (1)
collect and track the credit scores in HUD systems to permit future
studies and targeting of quality assurance activities, (2) consider
streamlining the origination and endorsement process, and (3) consider
strengthening endorsement procedures for loans with extended delays
in submission, especially loans that have no credit scores.
Issue Date: May 7, 2003
Audit
Report No.: 2003-CH-0001
File Size : 463KB
Title: HUD's Oversight of Empowerment Zone Program Office of Community
Planning and Development Multi-Location Review
HUD's Office of Inspector General completed a multi-location audit
of the Office of Community Planning and Development’s oversight
of the Empowerment Zone Program. The objective of our audit was
to determine whether HUD had an effective system for oversight and
control of the Program. The audit was part of our Fiscal Year 2002
Annual Audit Plan. The audit was conducted based upon our review
of six Empowerment Zones and two requests from Congress.
The United States House of Representatives’ Conference Report
107-272 directed HUD’s Office of Inspector General to review the
use of Zone funds and to report our findings to the Senate Appropriations
Committee. The United States Senate’s Report 107-43 also requested
us to review the use of Zone funds and report our audit results
to Congress.
Our audit was conducted at HUD Headquarters, six Zones, and HUD’s
Field Offices of Community Planning and Development having jurisdiction
for the six Zones we reviewed. The six Zones were Cincinnati, Ohio;
Cleveland, Ohio; Huntington, West Virginia/Ironton, Ohio; Minneapolis,
Minnesota; Norfolk/Portsmouth, Virginia; and St. Louis, Missouri/East
St. Louis, Illinois.
We concluded that HUD’s Office of Community Planning and Development
lacked an adequate system of oversight and control over its Program.
Specifically, the Office of Community Planning and Development needs
to improve its oversight of the Cities use of HUD funds (Empowerment
Zone, Section 108 Loan Guarantee, and Economic Development Initiative
Grant) for the Program. Additionally, HUD’s Office of Community
Planning and Development did not: effectively assess the status
and progress of the Cities’ Programs; and adequately verify the
accuracy of the June 2001 and/or 2002 Annual Reports submitted by
the Cities for their Programs. Consequently, the following items
resulted from HUD’s inadequacies in oversight and controls: (1)
HUD lacks assurance that the Cities were efficiently and effectively
using their HUD funds; (2) HUD lacked accurate information to assess
the Zones’ progress on meeting the goals of their Strategic Plans;
and (3) the impression exists that the benefits of the Program were
greater than actually achieved.
We recommend that HUD’s Assistant Secretary for Community Planning
and Development assure that the Office of Community Planning and
Development implements controls to correct the weaknesses cited
in this report. HUD’s Office of Community Planning and Development
did not provide written comments on our draft audit report.
Issue Date April 22, 2003
Audit
Memorandum No.: 2003-FW-0803
File Size : 1.33MB
Title: Equity skimming from HUD supported "Projects:"
Haverstock I (Project No. 114-11002), Haverstock II (Project No.
114-35217), Haverstock III (Project No. 114-35240), and
Coolwood Oaks (Project No. 114-35275)
Houston, Texas
At the request of the Director of the Houston Multifamily Housing
Program Center and to fulfill an escrow and payment agreement requirement,
we attempted to conduct an audit of Haverstock I, Haverstock II,
Haverstock III, and Coolwood Oaks. Our objective was to determine
if the owner, Mr. Zieben, complied with HUD regulations, the Regulatory
Agreements and the Compliance Agreement when he made: (1) transfers
of funds between the projects and (2) payments from the projects
to identity-of-interest companies. We did not conduct a full audit
because the projects and identity-of-interest companies did not
provide complete financial books and records.
We concluded that Mr. Zieben improperly transferred $230,000 out
of Haverstock I, $190,000 out of Haverstock II and $25,000 out of
Coolwood. In addition, we found that Mr. Zieben improperly withdrew
funds from the projects by having his identity-of-interest companies
bill the projects inflated amounts for materials and labor. Due
to the lack of records, we could not determine the exact amount
he overcharged the projects. However, the projects overpaid at least
$304,087 for materials and up to $983,265 for labor. Mr. Zieben
used the unauthorized distributions and improper billings to inappropriately
enrich himself and his other business ventures.
Issue Date: March 31, 2003
Audit
Report No.: 2003-DE-0001
Files Size: 2.12MB
Title: HUD Office of Multifamily Housing Assistance Restructuring's
(OMHAR) Oversight of the Section 514 Program Activities, Washington,
District of Columbia
We completed an audit of OMHAR's management and oversight of the
Section 514 Program activities. We wanted to know what management
controls OMHAR implemented to manage and oversee the Section 514
Program. We concluded that OMHAR's management did not establish
appropriate management controls to oversee and manage the Section
514 Program, as required by the Office of Management and Budget's
Circular A-123 and HUD's policy.
We also completed external audits of forty Section 514 Program
participants (hereinafter referred to as Grantees) that received
funding over the last 4 years under Section 514 of MAHRA. Section
1303 of the 2002 Defense Appropriation Act (Public Law 107-117)
required the HUD Office of Inspector General to audit all Section
514 funded activities over the last four years. Consistent with
the Congressional directive, we audited all grantees and reviewed
their use of Section 514 funds for eligibility (per the legislation
and the grantee's agreement with HUD) and/or the allowability (per
Office of Management and Budget's Circular A-122) of costs with
particular emphasis on identifying ineligible lobbying activities.
As a result of our audits, we identified that thirty-two of the
forty grantees did not comply with the requirements of their grant
agreements and/or the allowability of grant cost requirements of
the Office of Management and Budget's Circular A-122. In our grantee
audit reports, we identified $573,818 of ineligible costs and $1,634,541
in questioned costs for a total of $2.2 million. In addition, we
identified that nine grantees used a portion of their Section 514
funds for lobbying activities directed at Congress, contrary to
the explicit prohibition in Section 514. We also identified four
grantees that used a portion of their Section 514 funds for lobbying
activities at the state and local level. Section 514 did not include
a prohibition on lobbying at the state or local level, but these
costs are unallowable under OMB Circular A-122 guidance. We concluded
that these conditions occurred because OMHAR's management emphasized
the creation of the Mark-to-Market program and strong relations
with the effected tenants not the management and oversight of the
Section 514 Program. In addition, OMHAR staff generally lacked the
knowledge and skills needed to manage and oversee a grant program.
The Assistant Secretary for Housing did not dispute the information
and conclusions in this report. In addition, the Assistant Secretary
provided management decisions for the recommendations contained
in this report and for the 221 recommendations in the forty external
Section 514 audits.
OIG agreed with the management decisions proposed by the Assistant
Secretary, with an effective date of the issuance of this report.
Issue Date: March 18, 2003
Audit
Memorandum No.: 2003-KC-0801
File Size: 927KB
Title: Inappropriate Home Ownership Center Instructions
This memorandum reports the details of an internal deficiency found
during our audit of Choice Enterprises (Report number 2003-KC-1005).
We discovered that the Denver Home Ownership Center provided instructions
to the contractor that were not in accordance with HUD Handbook
4165.1 Rev 1, Chapter 3. The Government Technical Representative
made several changes to extend the period that determines when a
loan is submitted late and is, therefore, subject to additional
documentation requirements. As a result, the contractor endorsed
19 loans valued at $1,807,534 with deficiencies that should have
been detected if HUD Handbook 4165.1 Chapter 3 rules had been used.
We recommended that the Director of the Denver Home Ownership Center
seeks indemnification of the 19 improperly endorsed loans, and instructs
contractors to follow HUD Handbook 4165.1 unless a waiver is obtained
from Headquarters.
Issue Date: March 5, 2003
Audit
Report No.: 2003-AT-0001
Files Size: 295KB
Title: Government National Mortgage Association, Review of Internal
Controls
Washington, DC
Our nationwide audit of Ginnie Mae's internal controls identified
several control weaknesses in its operations. These included: (1)
not requiring issuers to accurately report FHA case numbers and
use those numbers as its primary management control, (2) inadequate
controls to ensure reliability of automated data, (3) inadequate
procedures for matching data in Ginnie Mae's systems to FHA's systems,
and (4) unreasonable time allowed for issuers to provide the Mortgage
Insurance Certificate (MIC) to the document custodian. Because Ginnie
Mae officials did not recognize the need to implement the controls,
its database contained incomplete and inaccurate loan information
and its risk of fraud was increased. These weaknesses allowed one
issuer to submit over $21 million of uninsured and fraudulent loans
into Ginnie Mae pools.
In response to our audit inquiries and through its own assessments
of controls, Ginnie Mae implemented several new procedures designed
to strengthen and improve operations. It began electronically confirming
that all case numbers are in proper format and the case number string
and check digit match. It improved the loan level edits to identify
syntax and format errors so that GinnieNet will not allow pooling
of loans that are not in the proper format. It began follow-up with
issuers to improve the reliability of information on existing portfolios,
and continued to improve its tracking of timely MIC recognition.
Ginnie Mae agreed with our recommendation to match all FHA loans
in its database (MBSIS) with FHA's database (SFIS) to ensure data
is accurately reported and loans are insured, and expects to complete
its first reconciliation by December 2003.
Issue Date: February 12, 2003
Audit
Memorandum No.: 2003-BO-0802
File Size: 188KB
Title: New England Region's Officer Next Door and Teacher Next
Door Property Disposition Program
The Office of Inspector General (OIG), Region 1, Office of Audit
completed a review of a sample of New England homebuyers who participated
in the Officer Next Door (OND) and Teacher Next Door (TND) program
during the period January 1999 to January 2002. Our objective was
to determine whether program participants complied with requirements
of the program and to refer any violations to the OIG Office of
Investigations for further action.
Our review of 89 OND/TND homebuyers disclosed 23 OND/TND homebuyers
or 26 percent who did not comply with one or more of the program
requirements. On May 28, 2002, we referred these 23 homebuyers to
the OIG Office of Investigations for whatever action they felt necessary.
As of January 31, 2003, Office of Investigations has administratively
closed ten of these OND/TND cases and is working on the remaining
thirteen OND/TND case files. While this memorandum closes the Office
of Audit's interest in these cases, the Office of Investigation
does have continuing interest in those cases that remain open.
Issue Date: February 5, 2003
Audit
Memorandum No.: 2003-FW-0802
File Size: 183KB
Title: Time and Attendance Complaint HUD's Houston Office of Administration
Houston, Texas
At the request of HUD's San Antonio Office Support Services Supervisor,
we reviewed three Houston Office of Administration employees' time
and attendance records from the first pay period in 1996 through
the second pay period in 2002. The review disclosed that supervisors
allowed two employees to have negative leave balances, allowed one
employee to begin a 10-hour day at 9:30 a.m., advanced sick leave
in small increments, and approved credit hours for work performed
after 6:30 p.m. We recommend HUD adjust the leave balances for the
three employees to the review results; provide time and attendance
training to the supervisors, reiterate the importance of reviewing
time and attendance documentation; and perform a leave audit for
all Houston Office employees for whom the timekeeper kept time.
Issue Date: January 31, 2003
Audit
Memorandum No.: 2003-FW-0801
File Size: 620KB
Title: HUD Houston Multifamily's Oversight of Wood Hollow Place
Apartments, Project Number 114-11183, Texas City, Texas
We completed a limited review of HUD's oversight of Wood Hollow
Place Apartments. The objective of the review was to determine whether
Multifamily staff adequately monitored the project to ensure that
the management agent complied with the Regulatory Agreement and
HUD requirements. The Houston Multifamily staff did not adequately
monitor the project nor properly maintain project files. As a result,
HUD did not discover or question payments that violated the Regulatory
Agreement and HUD requirements. We made three recommendations including
that HUD staff receive direction, including training if necessary,
on how to properly perform their monitoring tasks. The Director
of the Houston Multifamily Office agreed with the recommendations
and immediately implemented them.
Issue Date: January 31, 2003
Audit
Report No.: 2003-FO-0004
File Size: 2498KB
Title: Audit of U.S. Department of Housing and Urban Development
(HUD) Financial Statements for Fiscal Years 2002 and 2001
This report presents the results of OIG's audit of the Department
of Housing and Urban Development's (HUD) financial statements for
the fiscal years ended September 30, 2002 and 2001. In OIG'S opinion,
based on our audit and the reports of other auditors, the financial
statements present fairly, in all material respects, the financial
position of HUD as of September 30, 2002 and 2001 and its net costs,
changes in net position, budgetary resources, and reconciliation
of net costs to budgetary obligations for the fiscal years then
ended, in conformity with accounting principles generally accepted
in the United States of America. The report identifies (a) 4 material
weakness and 10 reportable conditions on internal controls and (b)
1 instance of non-compliance with applicable laws and regulations.
The report discusses each of these conditions in detail, provides
an assessment of actions taken by HUD to mitigate them, and makes
recommendations for corrective actions. During the course of the
audit, OIG also identified several matters that are not material
to the financial statements and are being separately communicated
to HUD management.
Issue Date: January 31, 2003
Audit
Report No.: 2003-FO-0003
File Size: 384KB
Title: Audit of the Government National Mortgage Association's
Financial Statements for Fiscal Years 2002 and 2001
This report presents the results of the KPMG LLP (KPMG) audit of
the Government National Mortgage Association's (Ginnie Mae) financial
statements for the years ended September 30, 2002 and 2001. In KPMG's
opinion, the financial statements present fairly, in all material
respects, the financial position of Ginnie Mae as of September 30,
2002 and 2001 and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles
generally accepted in the United States of America. In addition
to KPMG's unqualified opinion on Ginnie Mae's financial statements,
the audit results indicate that there were no material weaknesses
in Ginnie Mae's internal controls and no reportable instances of
noncompliance with laws and regulations. KPMG noted other matters
involving internal control and its operation that are not material
to the financial statements and are being reported separately to
Ginnie Mae management.
Issue Date: January 21, 2003
Audit
Report No.: 2003-FO-0002
File Size: 2.91MB
Title: Audit of the Federal Housing Administration's Financial
Statements for Fiscal Years 2002 and 2001
This report presents the results of KPMG LLP's (KPMG) audit of
the Federal Housing Administration's (FHA) financial statements
for the years ended September 30, 2002 and 2001.
In KPMG's opinion, the financial statements present fairly, in
all material respects, FHA's financial position as of September
30, 2002 and 2001, and its net costs, changes in net position, budgetary
resources, and reconciliation of net costs to budgetary obligations,
for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
The report identifies two material weakness and four reportable
conditions on internal control, discusses each of these conditions
in detail, provides an assessment of actions taken by FHA to mitigate
them, and makes recommendations for corrective actions. During the
course of the audit, KPMG also identified several matters that are
not material to the financial statements and are being separately
communicated to FHA management.
Calendar Year 2002
Issue Date: December 20, 2002
Audit
Memorandum No.: 2003-AO-0802
File Size: 639KB
Title: Limited Review of HUD’s Implementation of the Federal Activities
Inventory Reform Act
We completed a limited review of HUD's implementation of the Federal
Activities Inventory Reform (FAIR) Act of 1998. Our objective was
to determine whether HUD implemented adequate procedures to compile,
review, and submit the Commercial Activities Inventory (Inventory)
to the Office of Management and Budget.
Our survey disclosed that for the three program offices we reviewed,
HUD substantially complied with the requirements of the FAIR Act;
therefore, we did not expand our review beyond the survey. However,
we noted that HUD did not submit the Inventories to OMB timely.
The FY 2000 Inventory, submitted on July 14, 2000, was late because
the program and support offices submitted their Inventories to the
CFO after the established due date. The FY 2001 Inventory was 1
month late because the CFO incorporated changes based on the review
by HUD's new administration. Subsequent to our review, we determined
that HUD's FY 2002 Inventory was submitted to OMB prior to June
30, 2002.
Issue Date: December 20, 2002
Audit
Memorandum No.: 2003-BO-0801
File Size: 331KB
Title: Review of the Office of Housing's Use of the Financial
Assessment Subsystem
We have completed a survey of the Office of Housing's use of financial
statement assessments generated by HUD's Real Estate Assessment
Center (REAC) on multifamily properties located in New England.
The purpose of our review was to evaluate the usage of audited financial
statements by multifamily housing staff in selected New England
areas. Our work revealed that the Office of Housing needs more time
to fully implement the use of REAC'S Financial Assessment Subsystem
(FASS) in order to assess whether FASS is useful to Housing's objective
of improving multifamily portfolios.
Issue Date: December 13, 2002
Audit
Memorandum No: 2003-AO-0801
File Size: 174KB
Title: Controls Over Third Party Access to, and Disclosure and Use
of Social Security Numbers
The Chairman of the House Ways and Means Subcommittee on Social
Security asked the President's Council on Integrity and Efficiency
to evaluate Federal agencies' control over third party access to,
and disclosure and use of social security numbers (SSNs). To accomplish
this, the U.S. Department of Housing and Urban Development (HUD),
Office of Inspector General (OIG) and other participating OIGs were
requested to select one program area and determine whether their
agency:
* Made legal and informed disclosures of SSNs;
* Had appropriate controls over contractors' access to and use of
SSNs;
* Had appropriate controls over other nongovernmental and noncontractor
entities' access to and use of SSNs; and
* Had adequate controls over access to individuals' SSNs maintained
in databases.
Issue Date: December 9, 2002
Audit
Memorandum Report No.: 2003-FO-0001
File Size: 193KB
Title: Audit Memorandum - HUD's Energy Management and Conservation
Program
We completed an audit of HUD's Energy Management and Conservation
(EM&C) program as part of our responsibilities (42 USC, 8262) under
the National Energy Conservation Policy Act (NECPA) of 1978 as amended
by the Energy Policy Act of 1992 (the Act). The objectives were
to determine: (1) HUD's compliance with the Act and other laws relating
to energy conservation, and (2) whether HUD has management controls
in place to ensure accuracy and reliability of energy consumption
and cost data.
HUD generally complied with prescribed energy conservation laws,
policies, and practices, and established adequate management controls
to ensure the accuracy and reliability of energy consumption and
cost data. However, HUD did not meet the 10 or the 20 percent energy
consumption reduction goals for 1995 and 2000 respectively, as mandated
by the Act. HUD identified a number of energy conservation measures
and projects, but failed to consistently fund or determine whether
the energy reduction measures would achieve the energy reduction
goals mandated by the Act or Executive Order.
Issue Date: December 3, 2002
Audit
Memorandum No.: 2003-DP-0802
File Size: 283KB
Title: Review of General Information Technology Controls at ACS
This memorandum provides the results of our limited review of the
general controls over the information systems operated and maintained
for Ginnie Mae by Affiliated Computer Services – Governmental Services,
Inc. (ACS). Our review was made in response to a request from Ginnie
Mae. This memorandum provides the results of our limited survey
work of the general controls at ACS.
Our review found that security over certain server and application
access controls can be improved. We also found that required semiannual
testing of the disaster recovery process for one (the webserver)
of the three major ACS contracted services was not being performed.
We have made five recommendations to Ginnie Mae to improve internal
controls in these areas
Issue Date: December 3, 2002
Audit
Memorandum No.: 2003-PH-0801
File Size: 209KB
Title: Assessment of HUD's Progress in Implementing the Resource
Estimation and Allocation Process (REAP) and Total Estimation and
Allocation Process (REAP) and Total Estimation and Allocation Mechanism
(TEAM) Components of its Human Resource Management System
We completed a review of the Department's progress in implementing
the Resource Estimation and Allocation Process (REAP) and the Total
Estimation and Allocation Mechanism (TEAM) components of its human
resource management system. The Chief Financial Officer's (CFO)
Office of Budget is responsible for the coordination and implementation
of the system. Our primary objective was to assess the Department's
progress in implementing REAP and TEAM, subsequent to the Office
of Inspector General (OIG) September 2000 REAP review.
Generally, we found the Department has made significant progress
in developing and implementing the key components of its human resource
management system since September 2000. The Department completed
the REAP studies in January 2002, began implementing the time reporting
component of TEAM in the third quarter of fiscal year 2002, and
anticipates the allocation module of TEAM will be implemented in
the first quarter of fiscal year 2003. The Department now needs
to develop a comprehensive strategic workforce plan that includes
elements as to how the data from the REAP studies and TEAM system
will be used to plan and allocate its human resources among its
various operating components.
Issue Date: October 30, 2002
Audit
Memorandum No.: 2003-DP-0801
File Size: 303KB
Title: AUDIT MEMORANDUM - Annual Evaluation of HUD's Information
Security Program
We completed an audit of the Department of Housing and Urban Development's
(HUD's) information security program and practices as required by
the FY 2001 Defense Authorization Act (P.L. 106-398) Title X, subtitle
G, "Government Information Security Reform (GISRA)." The Act requires
that the Office of Inspector General (OIG) perform an annual independent
evaluation of the Department's information system (IS) security
program leading to a conclusion regarding its overall effectiveness.
The purpose of the Act is to provide a comprehensive framework for
establishing and ensuring the effectiveness of information system
security programs, including the management, oversight, and controls
over information resources that support Federal operations and assets.
Issue Date: October 28, 2002
Audit
Memorandum No.: 2003-DE-1003
File Size 5.29 MB
Title: Congressionally Requested Audit of the June 1998, Memorandum
of Understanding between HUD’s Office of Multifamily Housing and
the Corporation for National Service
We completed an audit of the $2.4 million provided by HUD to the
Corporation for National Service (Corporation), under a June 1998
Memorandum of Understanding. We performed the review at the direction
of Congress. We wanted to know if VISTA members' activities, funded
under the Memorandum of Understanding, were eligible under the Multifamily
Assisted Housing Reform and Affordability Act of 1997 (MAHRA). We
reviewed 21 of the 53 VISTA projects supported by HUD funding. We
identified that the Corporation approved VISTA projects with goals/objectives
that did not comply with MAHRA or the HUD Memorandum of Understanding.
In addition, we identified that four of the 21 projects provided
ineligible assistance under MAHRA. We determined that the Corporation
expended at least $57,916 to fund these ineligible activities. In
addition, we could not determine the eligibility of the assisted
HUD multifamily projects because the VISTA sponsors' quarterly reports
lacked sufficient detail to make a determination. As a result, VISTA
members were utilized to further the goals and objectives of the
National Alliance of HUD Tenants. In addition, HUD cannot be sure
that the projects assisted were eligible under MAHRA. The Corporation
did not establish adequate management control to ensure only items
eligible under MAHRA and the Memorandum of Understanding received
assistance. In addition, the Corporation did not prepare or submit
the required quarterly reports per the Memorandum of Understanding.
We did not identify lobbying activities by the VISTA members.
Our report contains two recommendations to address the issues
identified in the report and strengthen management controls over
future agreements between HUD and the Corporation.
In conducting the audit, we reviewed the Corporation's accounting
records, and other documents supporting the expenditures of Section
514 funds. According to the Corporations records, HUD provided funding
to 53 sponsoring organizations. The funding provided 262 VISTA members
for 100 VISTA projects. We reviewed 21 of the 53 project sponsors'
records (the sample represented 97 of the 262 VISTA members activities).
Specifically, we reviewed the VISTA project sponsors' 1) applications,
2) Memorandum of Agreements, and 3) quarterly reports. We interviewed
Corporation staff members and HUD staff responsible for the Section
514 funded VISTA member activities. Our audit scope did not include
the process or method used by HUD to award the February 1995 Interagency
Agreement or the June 1998 Memorandum of Understanding to the Corporation.
We also reviewed the requirements in MAHRA, HUD's Memorandum of
Understanding, the VISTA member Handbook, the Federal regulations
applicable to the Corporation on lobbying, and HUD and the Office
of Management and Budget's guidance on the establishment of management
controls over program activities.
The audit covered the period June 12, 1998 through June 2002.
We reviewed the $2.4 million provided by HUD, of the originally
intended $3.0 million. Due to the funding shortfall, the Corporation
used its own funds to continue funding VISTA members' activities
after December 31, 2001. Therefore, our review includes activities
funded in part with Corporation funds. We performed the fieldwork
at the Corporation's Office located at 1201 New York Avenue, NW,
Washington, District of Columbia during July 2002.
Issue Date: October 11, 2002
Audit
Memorandum No.: 2003-AO-0001
File Size 410KB
Title: Review of the Financial Activities of the Commission on
Affordable Housing and Health Facility Needs for Seniors in the
21st Century
At the request of the Senate Committee on Banking, Housing, and
Urban Affairs and House Committee on Financial Services, we completed
an audit of the financial activities of the Commission on Affordable
Housing and Health Facility Needs for Seniors in the 21st Century
(Commission). The objective of our audit was to determine if the
Commission expended funds in compliance with Federal laws. To accomplish
this objective, we examined financial records, contracts, invoices,
travel, and personnel records; interviewed Commissioners and Commission
staff; and reviewed laws applicable to the Commission. We are addressing
this report to the CFO's office as a means of conveying our audit
results and recommendations to the Administrator of General Services
under the Federal Advisory Committee Act. This report contains no
recommendations to HUD nor is HUD required to follow up on corrective
actions taken.
Issue Date: September 30, 2002
Audit
Memorandum No.: 2002-SE-0803
File Size 954KB
Title: Review of HUD's approval of an insured mortgage for a Section
232 Project J.A.M. Davis Incorporated, doing business as Loganhurst
Health Care, Spokane, Washington
We reviewed the Seattle Office of Housing's approval of an insured
mortgage for the Loganhurst Health Care residential facility to
determine if the Office of Housing followed HUD's mortgage credit
requirements and prudent underwriting practices when reviewing and
approving the application for insurance. The review found that the
Seattle Office of Housing approved insurance for a $3,995,000 loan
for a residential care facility that was financially unstable. This
occurred because HUD staff did not fully follow the applicable HUD
handbook requirements when it processed and approved the loan. The
owner subsequently diverted over $177,000 in project operating funds
to pay back loans and other non-project costs that were incurred
in order to obtain approval for the loan, and the property soon
went into default and foreclosure. The Seattle Multifamily Hub appears
to have implemented adequate controls that should prevent a reoccurrence
of this situation.
Issue Date: September 27, 2002
Audit
Report No.: 2002-DP-0002
File Size 578KB
Title: Audit Memorandum Report - Review of Departmental IT Security
Plans
We have completed a review of security plans prepared for HUD's
mission critical systems. This review was made in conjunction with
the OIG's FY 2001 Financial Statement Audit and as part of the OIG's
annual independent evaluation of the overall effectiveness of HUD's
security program as required by the Government Information and Security
Reform Act (GISRA). The objective was to determine whether security
plans prepared for HUD's critical information systems were compliant
with OMB Circular A-130 and consistent with National Institute of
Standards Technology Publication (NIST) 800-18.
Our review found that the security plans for mission critical
systems did not meet the requirements or guidelines of either OMB
Circular A-130 or NIST Publication 800-18. Also, HUD has not updated
the Department's information security policies and procedures for
preparing security plans to conform to current OMB Circular A-130
and NIST Publication 800-18 guidelines. Additionally, the Office
of the Chief Information Officer (OCIO) was not coordinating and
sharing with the responsible Program Area Officials the results
of a contractor's review of the Department's security plans for
appropriate corrective action. Without adequate security plans and
proper coordination between the OCIO and the Program Areas, the
Department is at risk that critical information systems will not
be adequately protected against waste, loss, and unauthorized use.
Issue Date: September 25, 2002
Audit
Report No.: 2002-SE-0001
File Size 486KB
Title: Follow up of Down Payment Assistance Programs Operated
by Private Nonprofit Entities
Based on a request from the General Deputy Assistant Secretary
for Housing, we reviewed a statistical sample of 1,125 FHA case
files to determine the percentage of borrowers receiving down payment
assistance from nonprofit corporations, and to find out if the DAP-assisted
loans are more likely to default than loans without DAP assistance.
For these types of loans, the seller or builder reimburses the nonprofit
organization for the assistance. The audit found that the use of
DAP-assisted loans has increased and is now widespread. In addition,
DAP-assisted loans have a greater tendency to default than unassisted
FHA loans. The review also found that information in HUD's Single
Family Data Warehouse is inaccurate, and that stronger controls
are needed to ensure that lenders enter correct information so that
HUD can accurately evaluate the performance of DAP-assisted loans
and the associated risk to the FHA fund. We recommended that HUD
consider implementing a rule prohibiting seller-derived down payment
assistance loans, and strengthen controls to improve the accuracy
of the Single Family Data Warehouse.
Issue Date: July 31, 2002
Audit
Memorandum No.: 2002-SF-0801
File Size 1,417KB
Title: HOME Investment Partnerships Program
We completed an internal audit survey of the HOME Investment Partnerships
Program (HOME). The overall objective of the review was to evaluate
the susceptibility of HOME to unnecessary risk of waste, fraud or
abuse, but the survey work primarily concentrated on overall program
monitoring and the Community Housing Development Organization (CHDO)
approval process. Some of the rationale for the review evolved from
our prior audit of Nonprofit Participation in HUD Single Family
Programs. We were concerned that nonprofit organizations precluded
from participation in Single Family programs nevertheless might
be participating in HOME. Whereas HUD has established procedures
intended to limit participation in Single Family programs only to
qualified, capable, experienced nonprofit organizations and HUD
actually approves (or disapproves) the Single Family nonprofits,
CHDO nonprofits initially need not have comparable experience or
qualifications and CHDOs are approved by Participating Jurisdictions
(PJs), not by HUD. We were also concerned that problems we found
with nonprofits participating in the Single Family programs could
extend to CHDO nonprofits participating in HOME. Specifically, we
were concerned that (1) CHDO nonprofits could be controlled by profit
motivated groups or individuals, (2) property resale profit margins
could be excessive, and (3) construction or rehabilitation work
might not meet minimum standards.
Our audit survey did identify some areas of apparent risk and
several deviations from program requirements including: (1) monitoring
weaknesses at both the HUD field office level and at the PJ level,
(2) administrative weaknesses at both the PJ and sub-grantee or
CHDO level, and (3) actual or apparent conflicts of interest. For
the most part, our concerns that HOME might be experiencing problems
with CHDOs analogous to those we found for Single Family nonprofits
were alleviated as a result of the survey, and we do not believe
additional internal audit coverage is warranted at this time.
Issue Date: July 31, 2002
Audit
Report No.: 2002-KC-0002
File Size 274KB
Title: Nationwide Survey HUD's Office of Housing Section 232
Nursing Home Program
We have completed a survey of the Office of Housing's administration
of HUD's Section 232 Nursing Home Program. We initiated the survey
based on previous OIG audits of insured nursing homes that indentified
numerous violations HUD's regulatory agreements. Our objective was
to determine if HUD had adquate controls in place to identify and
correct significant regulatory agreement violations. Although HUD's
internal programs data did contain evidence of regulatory agreement
violations, we found HUD does not have adquate controls in place
to ensure all violations are identified. In addition, the nursing
home annual audited financial statements submitted to the Real Estate
Assessment Center's (REAC) Financial Assessment Subsystem (FASS)
contain numerous examples of regulatory agreement violations; however,
the system does not include audited financial statements for leased
nursing homes. We believe that these significant control weaknesses
have contributed to a high number of defaults and assignments of
Section 232 projects.
Issue Date: July 12, 2002
Audit
Report No.: 2002-AO-0001
File Size 978KB
Title: the Grants Management Center’s Operations
The Office of Public and Indian Housing created the Grants Management
Center (GMC) to streamline and increase the efficiency of the administrative
functions pertaining to it's categorical and formula grant programs.
In FY 2000 and 2001, GMC processed grant awards for categorical
programs totaling approximately $1.2 billion and formula programs
for $12.3 billion. These grants included the categorical grants
of the Housing Choice Voucher program and the Resident Opportunities
and Self Sufficiency Program (ROSS), as well as the formula grants
for the Capital and Operating Funds.
Our audit of GMC’s FY 2000 and 2001 operations showed that staff
did not comply with established procedures when rating and ranking
ROSS Resident Services Delivery Models applications. This led to
scores that were arithmetically incorrect and unsubstantiated by
reviewers’ written comments. As a result, GMC provided the decision-makers
a list of eligible applicants based on unsubstantiated scores.
While consolidation has streamlined grant-processing activities,
GMC’s management did not establish baseline/benchmark information
and quantifiable indicators that directly relate to its operations
and regularly compare these indicators against performance goals.
Consequently, GMC management could not demonstrate that grant administrative
functions are carried out more efficiently.
Issue Date: July 11, 2002
Audit Report No.: 2002-DP-0001
Title: HUD Network Security Assessment (Report Not Available
to Public)
We have completed a security assessment of HUD's networked systems.
A network security assessment is an independent examination of the
network architecture and environment using specialized tools to
confirm compliance with established controls, policies, and operational
procedures. The objective of our assessment was to determine whether
security controls and practices provide adequate protection against
unauthorized access to HUD's critical and sensitive systems. We
concluded from our assessment that the Office of Information Technology
has implemented controls to strengthen HUD's network security. However,
there are a number of vulnerabilities in the configuration and control
of network resources. Our report presents detailed results of our
assessment and appropriate recommendations for corrective action
that will improve HUD's overall security posture when applied consistently
throughout its networked environment. The OIG has determined that
the contents of this report would not be appropriate for public
disclosure; therefore, we have limited its distribution to selected
HUD officials.
Issue Date: June 10, 2002
Audit
Memorandum No.: 2002-PH-0002
File Size: 290KB
Title: Single Family Sales to Owner-Occupant Purchasers
Under the Single Family Real Estate Owned (REO) owner-occupant
sale initiative, HUD established an initial 10-day bidding period
only open to individuals who certify that they will occupy a property
for 12 months and have not purchased a HUD property within 2 years.
However, we found that 29 percent of the purchasers did not comply
with these requirements. Specifically, we statistically estimate
purchasers bought 41,547 single properties, valued at $2.9 billion,
that did not comply with residency requirements. Further, 1,550
purchasers bought 1,851 properties, valued at $107.3 million, in
violation of purchase frequency limitations. The abuses occurred
because HUD management was not aware of the magnitude of the problem,
the HOCs did not specifically monitor owner-occupant sales due to
other priorities and limited resources, and HUD’s SAMS did not provide
sufficient information to enable the HOCs and Management and Marketing
(M&M) contractors to easily prescreen prospective buyers. These
abuses likely prevented a number of prospective owner-occupants
from acquiring homes, which undermined the initiative’s intent to
increase home ownership.
Issue Date: May 31, 2002
Audit
Memorandum No.: 2002-FW-0801
File Size: 130KB
Title: Referral of Annual Audited Financial Statements Completed
by George Baugh III & Company
We performed a limited review concerning unreported noncompliance
issues in annual audited financial statements completed by George
Baugh III & Co. Our limited review showed only one of the allegations
was valid: the firm did not disclose Sunlight Manor's late residual
receipts deposit in the project's 2000 audited financial statements.
Since our review of the allegations did not disclose significant
instances of noncompliance by George Baugh III & Co., we will not
perform a quality control review of the firm at this time. However,
HUD should require the firm to correct the financial statements
of the Sunlight Manor.
Issue Date: May 29, 2002
Audit
Memorandum No.: 2002-KC-0801
File Size: 171KB
Title: Region 7 Officer/Teacher Next Door Occupancy Violations
We completed occupancy evaluations of participants in the Officer/Teacher
Next Door program in Region 7. Our objective was to determine whether
program participants violated the 3-year occupancy requirements
and to refer those violations for possible prosecution by Assistant
United States Attorneys or administrative action by HUD. We found
that all program participants were occupying the residence they
had acquired under the Officer/Teacher Next Door program.
Issue Date: May 23, 2002
Audit
Report No.: 2002-PH-0001
File Size: 932KB
Title: Multi-location Review of HUD's Utilization of the Public
Housing Assessment System
We completed a multi-location review to evaluate HUD’s Utilization
of the Public Housing Assessment System (PHAS). Altogether, we reviewed
related operations at 10 Public and Indian Housing Hubs, Program
and Community Service Centers, and completed housing unit inspections
at 32 Public Housing Authorities.
Generally, we found HUD staff has been using the PHAS scoring
results in monitoring its Authority portfolio and in assisting Authorities
to improve failing or low scoring components of the PHAS score.
However, the Conference Report 106-988, which restricted HUD from
taking any adverse action against an Authority that receives a failing
PHAS score, hindered HUD’s ability to fully implement the PHAS and
thus limited its effectiveness in improving Authority performance,
especially for the Authorities with the greatest need. Specifically,
the Conference Report did not permit HUD to forward its worst performers
(troubled) to one of two Troubled Agency Recovery Centers, where
appropriate intervention strategies are to be developed and implemented
to help troubled agencies perform at an acceptable level. Because
of this restriction, Local HUD Offices have been using their limited
resources to provide targeted technical assistance to these Authorities
in addressing problem areas identified by the relevant PHAS indicators,
using a less comprehensive approach than was provided for under
the PHAS regulations. Meanwhile, the Troubled Agency Recovery Center’s
role and functions in assisting troubled agencies has continued
to erode with the centers now serving only 18 troubled and 29 non-troubled
Authorities.
Further, not related to the restrictions imposed by the Conference
Report, we found that HUD did not always designate Authorities with
failing Management Operations scores as troubled and/or forward
them to the Troubled Agency Recovery Centers in a timely manner
as was required under HUD requirements and existing protocol; and
was not providing assistance to Authorities that fail the Resident
Service and Satisfaction indicator of PHAS.
Lastly, we found Authorities were either not correcting or not
correcting in a timely manner Life Threatening Exigent Health and
Safety (EH&S) violations that were identified from REAC’s physical
inspections. Generally, the monitoring methods used by the Local
HUD Offices to ensure Authorities corrected identified EH&S violations
within 24 hours were inconsistent and not effective.
We made a number of recommendations to improve HUD’s use of PHAS
in monitoring Public Housing Authorities with failing PHAS indicators.
Issue Date: May 16, 2002
Audit
Memorandum No.: 2002-SE-0802
File Size: 114KB
Title: Survey Results on the Foreclosure Sale of the Rose Pointe
Retirement Community by the Fort Worth Property Disposition Center,
Fort Worth, Texas
We completed a survey of the foreclosure sale of the Rose Pointe
Retirement Community by the Fort Worth Property Disposition Center
in which we addressed allegations that the foreclosure sales price
was too low. Our objective was to determine if the Fort Worth Property
Disposition Center (Center) foreclosure sale of Rose Pointe Retirement
Community was effective, efficient, and economical. The Center generally
carried out the foreclosure sale of Rose Pointe Retirement Community
effectively, efficiently, and economically. The Center considered
the methods of disposal available, and determined the foreclosure
sales amount in accordance with HUD requirements. Although the Center
did not meet the goal of completing the foreclosure in 200 days,
HUD has no statutory or regulatory requirements for the time to
complete a foreclosure.
Issue Date: May 1, 2002
Audit
Memorandum No.: 2002-DP-0801
File Size: 872KB
Title: Audit Memorandum on the Review of HUD's Multi-Year Information
Technology (IT) Plan
This memorandum is in response to a congressional request that
the HUD Office of Inspector General determine whether the HUD's
Multi-Year IT Plan (FY01-FY03) addresses previously reported computer
system weaknesses and whether the most critical weaknesses have
been assigned sufficient funding priority. We found that management
was well aware of the weaknesses that required corrective action.
However, the Department sometimes initiated system projects before
the prerequisite Enterprise Architecture Plan, business processes,
and system functionality were fully identified. In addition, we
found the Plan did not fully address OIG and GAO open report recommendations
to correct long-standing material weaknesses in the computer systems
supporting major HUD activities. The weaknesses inadequately addressed
included the Department's financial systems, Section 8 rental subsidies,
FHA business processes, and FHA funds control. Our comments on those
recommended system projects that were excluded from the Plan are
provided under the "Results of Review" section. Also, we have included
comments on two large projects listed in the Plan that we believe
can be deferred until later. Although HUD's submission is called
a Multi-Year IT Plan, we believe that strategic resource planning
should entail budget planning for the succeeding five-year period.
Issue Date: April 23, 2002
Audit
Memorandum No.: 2002-SE-0801
File Size: 238KB
Title: Audit Memorandum on the Staffing Resources of the Real
Estate Assessment Center's Tenant Assessment Subsystem, Seattle
Technical Assistance Center, Seattle, Washington
We performed an audit of the Real Estate Assessment Center's Seattle
Technical Assistance Center (Center) to assess the validity of a
complaint alleging the Center staff does not have enough work to
do, and the work performed by Analysts in the Center is not commensurate
with their grade level. Our audit results found that the allegations
were generally valid. The Real Estate Assessment Center (REAC) has
not been able to provide an adequate number of suitable tasks and
activities for the Center staff to carry out, the staff does not
have enough work, and the work the Center Analysts perform is not
commensurate with their grade level. Consequently, staff resources
were underutilized, and opportunities for employee misconduct existed.
Also, there are indications that similar problems exist at the Chicago
Center. We are recommending that the Department develop and implement
a plan to fully utilize the Center employees with meaningful work
commensurate with their grade level, and determine if similar conditions
exist at the Chicago Technical Assistance Center and take appropriate
corrective action.
Issue Date: April 5, 2002
Audit
Memorandum No.: 2002-AO-0801
File Size: 603KB
Title: Administration of Bridges over Troubled Waters Cooperative
International Faith Community Information and Services Clearinghouse
and Training Center, Howard University School of Divinity, Washington,
DC
As a part of our plan to review the Office of Public and Indian
Housing's award and administration of cooperative agreements, we
reviewed Bridges Over Troubled Waters (BOTW), a 2-year ($500,000)
cooperative agreement awarded to the International Faith Community
Information and Services Clearinghouse and Training Center, Howard
University School of Divinity (ISC). The main objective of our audit
was to determine whether the Community Safety and Conservation Division
(CSCD) complied with Departmental policies and procedures in administering
BOTW. In order to achieve this objective, we also performed procedures
to determine whether ISC conformed to the terms of the agreement
and whether the BOTW program achieved its intended results. We found
that: (1) the GTR did not adequately monitor ISC's compliance with
the requirements of the agreement. As a result, performance reports
showing vital information such as actual accomplishments were missing
and were not used to approve drawdowns for ISC; (2) ISC did not
adequately document its use of the funds or maintain appropriate
supporting documentation; and (3) ISC's claim that BOTW achieved
its goal was not supported by objective evidence that could be used
to measure BOTW's success.
Issue Date: March 22, 2002
Audit
Memorandum No.: 2002-DE-0801
File Size: 6956KB
Title: Alleged Violations of the Antideficiency Act and the HUD
Reform Act by the Office of Multifamily Housing Assistance Restructuring
(OMHAR)
We concluded that HUD did not violate the Antideficiency Act in
awarding the Section 514 Technical Assistance Grants for fiscal
years 1998 through 2001. However, HUD did not fully comply with
the HUD Reform Act. While HUD officials competitively awarded the
grants, as required by the HUD Reform Act, they did not publish
the required notification in the Federal Register identifying the
grantees and award amounts.
Weaknesses in HUD’s management controls resulted in errors (The
General Accounting Office defines an error as an unintentional misstatement
of financial information) in the award of the Section 514 Technical
Assistance Grants. These errors, as well as management decisions
that unnecessarily limited the period of funds availability, led
to the appearance of potential violations of the Antideficiency
Act. In fact, HUD did not obligate or expend more Section 514 Technical
Assistance funds than were authorized by Statute and made available
for fiscal years 1998 through 2001. However, as a result of misunderstandings
between various HUD offices regarding the availability of funds
over time, HUD did not comply with the Bona-fide Needs Statute,
which provides that the balance of an appropriation or fund is available
only for payment of expenses properly incurred during the period
of availability.
The Multifamily Assisted Housing Reform and Affordability Act of
1997 (MAHRA) included language authorizing the Secretary to provide
up to $10 million annually for technical assistance grants to tenant
organizations. The MAHRA Statute does not include language specifically
restricting the availability of the funds provided for technical
assistance funds to one year. HUD’s Office of the Chief Financial
Officer, through the apportionment and allotment process, designated
Housing Certificate no year funds as the source of funds for the
Section 514 Technical Assistance Grants, but limited the availability
of these funds to one year. In effect, HUD funds that were available
for use without time restrictions were, after HUD’s action, available
for only one year. This situation created confusion among the various
HUD Offices regarding the availability of funds by fiscal year for
carryover and future use and contributed to the violation of the
Bona-fide Needs Statute.
Factors that contributed to the appearance of violations of the
Antideficiency Act included the following. In fiscal year 1998 HUD
did not record or account for the commitment of Section 514 Technical
Assistance Grant awards at the point of commitment or obligation
in accordance with its accounting policy and the General Accounting
Office’s Principles of Federal Appropriations Law. As a result,
fiscal year 1998 funds allocated for Section 514 Technical Assistance
were reapportioned through OMB at fiscal year end. Therefore, for
budgetary purposes these fiscal year 1998 funds were no longer available
for future expenditure even though HUD made a definite commitment
for the future use of these funds. In fiscal year 2001 Section 514
Technical Assistance Grant agreements were modified prior to grantee
acceptance to clarify that the initial funding obligated for the
multiyear grant is less than the total grant amount for the three
year period and is based on availability of funds at the time of
award. Nevertheless, the Chief Financial Officer’s (CFO) Office
of Budget took the position that the total award amount as shown
on the grant agreement should have been obligated. This created
confusion regarding the actual grant award obligation amounts for
fiscal year 2001 and resulted in the CFO’s Director of Budget withdrawing
OMHAR as a legally qualified allowance holder for any funds appropriated
to HUD by Congress.
These processes clearly caused the misstatement of actual or valid
obligations in fiscal years 1998 and 1999, and caused confusion
regarding the amount of fiscal year 2001 obligations, but there
was no violation of the Antideficiency Act. At the point of obligation
when HUD made definite commitments to make future expenditures,
Section 514 Technical Assistance funds were available to cover the
obligations incurred.
Issue Date: March 13, 2002
Audit
Memorandum No.: 2002-FO-0004
File Size: 348KB
Title: Independent Accountant's Report on the Department of Housing
and Urban Development's Fiscal Year 2001 Detail Accounting Submission
Report
In accordance with The Office of National Drug Control Policy
(ONDCP)Reauthorization Act of 1998 and Office of National Drug Control
Policy Circular: Annual Accounting of Drug Control Funds, dated
December 17,1999, the accompanying report presents the results of
our attestation review of the Department of Housing and Urban Development's
Submission of Detailed Accounting of FY 2001 Drug Control Funds,
dated January 17, 2002,and revised February 14, 2002. Our review
focused on assessing the Detailed Accounting prepared by the Offices
of Housing and Public and Indian Housing, prior year actual obligations,
the accompanying disclosures, the financial systems and data supporting
the drug methodologies, the estimation methods used, the completeness
of the data, the application of the methodologies, and the assertions
made regarding the obligation data presented in the Resource Summaries
using the criteria indicated above. We were precluded by independence
standards from reviewing the Detailed Accounting prepared by the
Office Inspector General, and the Office of Inspector General has
been given the authority to submit its Detailed Accounting report
separately from HUD. Based on the review, nothing came to our attention
that caused us to believe that the HUD's submission is not presented
in all material respects with ONDCP's policy and circular.
Issue Date: March 12, 2002
Audit
Memorandum No.: 2002-DE-0802
File Size: 164KB
Title: Rocky Mountain District Review of the Officer/Teacher
Next Door Program
We completed our review of participants in the Officer/Teacher
Next Door program. Our objective was to determine whether program
participants violated the 3-year occupancy requirements and to refer
those violations for possible prosecution by Assistant United States
Attorneys or administrative action by HUD. We reviewed the occupancy
status of homebuyers who participated in the program during the
period of October 1998 to October 2001.
Issue Date: February 28, 2002
Audit
Report No.: 2002-DE-0001
File Size: 1326KB
Title: Follow-up Nationwide Review of HUD's Loss Mitigation Program
We performed a nationwide follow-up audit of HUD's Single Family
Loss Mitigation Program to evaluate whether the program is effectively
and efficiently achieving HUD's goals for increased home retention
and minimized costs to the insurance fund. We first audited this
program in 1999. The follow-up audit was planned in the Office of
Inspector General's fiscal year 2001 annual audit plan. Our audit
work included reviews at six large and two midsize servicing mortgagees.
We also reviewed the private contractor servicing partial claim
notes and the Office of Housing, Single Family Division, which includes
the National Servicing Center. The Department has exceeded its goals
to increase the usage of loss mitigation strategies, thereby reducing
losses to the FHA insurance fund with foreclosure avoidance. Although
HUD has expanded the usage of the loss mitigation on FHA-insured
loans, additional work is needed to improve the administration of
the program. We identified four issues that are keeping the loss
mitigation program from reaching its full potential and achieving
HUD's goals to help borrowers retain homeownership while mitigating
the economic impact to the FHA insurance fund.
Issue Date: February 27, 2002
Audit
Report No.: 2002-FO-0003
File Size: 3814KB
Title: Audit of U.S. Department of Housing and Urban Development
(HUD) Financial Statements for Fiscal Years 2001 and 2000
This report presents the results of OIG’s audit of the Department
of Housing and Urban Development’s (HUD) financial statements for
the fiscal years ended September 30, 2001 and 2000. In OIG’s opinion,
the financial statements present fairly, in all material respects,
HUD’s financial position as of September 30, 2001 and 2000, and
its net costs, changes in net position, budgetary resources, and
reconciliation of net costs to budgetary obligations, for the years
then ended. The report identifies (a) 5 material weakness and 10
reportable conditions on internal controls and (b) 2 instances of
non-compliance with applicable laws and regulations. The report
discusses each of these conditions in detail, provides an assessment
of actions taken by HUD to mitigate them, and makes recommendations
for corrective actions. During the course of the audit, OIG alsoidentified
several matters that are not material to the financial statements
and are being separately communicated to HUD management.
Issue Date: February 25, 2002
Audit
Report No.: 2002-NY-0001
File Size: 467KB
Nationwide Audit - Asset Control Area Program Single Family Housing
We performed a nationwide audit of the Asset Control Area Program
to assess the effectiveness of the Program in meeting its objective
of expanded homeownership opportunities in revitalization areas.
Specifically, our audit objectives were to determine whether: (1)
eligible single-family properties are being made available to local
governments and nonprofit entities, (2) homeownership opportunities
are being expanded, (3) neighborhoods are being revitalized as a
result of improvements to the housing stock, (4) HUD has established
adequate management controls over the Asset Control Area Program,
and (5) the Asset Control Area Program is an efficient use of HUD
resources.
Issue Date: February 22, 2002
Audit
Report No.: 2002-FO-0002
File Size: 3159KB
Title: Audit of the Federal Housing Administration’s Financial
Statements for Fiscal Years 2001 and 2000
This report presents the results of KPMG LLP’s (KPMG) audit of
the Federal Housing Administration’s (FHA) financial statements
for the years ended September 30, 2001 and 2000. In KPMG’s opinion,
the financial statements present fairly, in all material respects,
FHA’s financial position as of September 30, 2001 and 2000, and
its net costs, changes in net position, budgetary resources, and
reconciliation of net costs to budgetary obligations, for the years
then ended. The report identifies two material weakness and four
reportable conditions on internal control, discusses each of these
conditions in detail, provides an assessment of actions taken by
FHA to mitigate them, and makes recommendations for corrective actions.
During the course of the audit, KPMG also identified several matters
that are not material to the financial statements and are being
separately communicated to FHA management.
Issue Date: February 20, 2002
Audit
Report No.: 2002-FO-0001
File Size: 525KB
Title: Government National Mortgage Association Audit of Financial
Statements Fiscal Years 2001 and 2000
This report presents the results of KPMG LLP's (KPMG) audit of
the Government National Mortgage Association's (Ginnie Mae) financial
statements for the years ended September 30, 2001 and 2000. In KPMG's
opinion, the financial statements present fairly, in all material
respects, Ginnie Mae's financial position as of September 30, 2001
and 2000 and results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting
principles. In addition to KPMG's unqualified opinion on Ginnie
Mae's financial statements, the audit results indicate that there
were no material weaknesses or reportable conditions with Ginnie
Mae's internal controls, or material instances of non-compliance
with laws and regulations. KPMG noted other matters involving internal
control and its operation that are not material to the financial
statements and are being reported separately to Ginnie Mae management.
Calendar Year 2001
Issue Date: November 13, 2001
Audit
Report No.: 2002-KC-0001
File Size: 682KB
Title: Oversight of the Audit Resolution Process Office of the
Chief Financial Officer
We have completed an audit of the Chief Financial Officer's (CFO's)
controls over the audit resolution process. Our overall audit objective
was to evaluate whether HUD's audit resolution practices and procedures
ensure that closure actions for completed Office of Inspector General
(OIG) audit recommendations are supported, effectively implemented,
and properly documented. Additionally, we determined whether HUD
staff adhered to policies and procedures. We determined the oversight
of the audit resolution process by the CFO's office has improved
markedly since the previous OIG audit in 1996. We found no examples
of abuse of the recommendation closure process, as in the audit
issued in September 1996, nor did we find significant errors by
the current Audit Liaison Officers in our current review of the
audit resolution process. However, we found some areas where procedures/controls
can be improved to ensure that agreed-upon recommendations are supported
and properly documented when closed. These areas are summarized
below and detailed in the findings section of the report.
Issue Date: November 5, 2001
Audit
Report No.: 2002-SF-0001
File Size: 3,236KB
Title: Nonprofit Participation in HUD Single Family Programs
We have completed an audit of nonprofit organizations' participation
in FHA insured single family programs. The primary objectives of
our review were to determine whether (1) current approval and monitoring
policies, procedures, and guidelines are adequate to ensure that
nonprofit organizations participating in the discount sales program
are legitimate, independent organizations; (2) financial benefits
resulting from discounted sales prices are passed on to low and
moderate income homebuyers; (3) revitalization areas meet current
requirements; and (4) properties sold at 30 percent discounts were
actually located in revitalization areas. The primary emphasis of
our review was on HUD's discount sales program for nonprofit organizations
and governmental agencies. However, problems noted in the approval
and monitoring process related to the discount sales program are
also applicable to nonprofit organizations' participation in other
FHA single family programs. The audit disclosed serious problems
with HUD's discount sales program which brings into question the
viability of the program.
Issue Date: September 28, 2001
Audit
Report No.: 2001-DP-0004
File Size: 6,708KB
Title: Real Estate Assessment Center (REAC) Systems Development
and Security
We have completed an audit of HUD’s system development efforts
for the Real Estate Assessment Center (REAC). The objectives of
our audit were to review the efficiency and effectiveness of system
development and security operations including: (1) procurement of
development contractor services, (2) project management and monitoring,
and (3) physical and software security controls of existing systems.
Our audit found that both efficiency and effectiveness of the system
development process have to be improved. The procedures for procuring
contractual services for system development do not ensure that the
best value is being obtained. A potential of $1.16 million in maximum
savings was possible if the best qualified and lower cost contractor
was fully utilized. REAC's project management of the system development
efforts also needed improvement. As a result, some systems did not
meet users needs and additional requests for project funding were
necessary. Controls over security, including physical access to
the REAC offices, personnel and contractor background investigations,
and software access and integrity controls need to be increased.
Issue Date: September 28, 2001
Audit
Report No.: 2001-DP-0003
File Size: 535KB
Title: Audit Report of the Real Estate Management System (REMS)
The Real Estate Management System (REMS) was designed to address
weaknesses in disparate and decentralized systems used to manage
and value HUD’s vast multifamily housing portfolio. In the past,
Multifamily Housing (MFH) servicing sites and HUBs relied on a collection
of local databases and the Field Office Multifamily National System
to track their individual property portfolios. However, these systems
were not integrated and the data available was unreliable. Information
in REMS is a critical asset and necessary for supporting MFH’s overall
program mission. Developed and implemented in FY 1998, REMS reportedly
enabled the Department to successfully value and manage its vast
multifamily housing portfolio using one system for the first time.
We reviewed the REMS to determine whether: (1) the system has adequate
controls to ensure management can rely on REMS data, and (2) information
is adequately protected against loss and/or error. During our audit,
we determined that although REMS is a significant improvement over
past MFH system development efforts, application controls need strengthening.
Specifically, we found: (1) incomplete or erroneous data in REMS;
(2) users do not utilize the system consistently or to its fullest
potential; and (3) data is at risk of being lost or inaccessible
due to inadequate change control procedures. To correct these deficiencies
and to prevent reoccurrence, MFH should: (1) implement automated
input controls and perform more frequent data quality reviews; (2)
document operational procedures and provide end users with adequate
training; and (3) formalize REMS change control test procedures.
Our report includes specific recommendations to the Deputy Assistant
Secretary for Multifamily. However, we expect MFH to take the lead
to ensure that all program areas using the REMS work together to
strengthen management controls.
Issue Date: September 28, 2001
Audit
Memorandum No.: 2001-DE-0801
File Size: 192KB
Title: Denver Homeownership Center, Review, Approval and Monitoring
of Nonprofit Organizations’ Participation in FHA Single Family Insurance
Programs
We reviewed the Denver Homeownership Center’s procedures and controls
over the review, approval, and monitoring processes of nonprofit
organizations participation in FHA Single Family Insurance Programs.
The Denver Homeownership Center has established various procedures
and controls to carryout its’ management and oversight of nonprofits
and their Affordable Housing Programs. We found that the Denver
Homeownership Center needs to modify these procedures and controls
in order to improve its oversight activities of the nonprofits.
Issue Date: September 27, 2001
Audit
Memorandum No.: 2001-HQ-0801
File Size: 114KB
Title: Review of HUD's Procedures for Notifying Internal Revenue
Service of Forclosures
We completed a review of the Department of Housing and Urban Development's
(HUD) procedures for notifying the Internal Revenue Service (IRS)
of multifamily mortgage foreclosures. HUD did not properly report
debt forgiven at foreclosure to the IRS. This reportable event may
result in a taxable event to the property owners. HUD needs to improve
the guidance and oversight of the contractor performing this function.
Issue Date: September 21, 2001
Audit
Memorandum No.: 2001-AO-0803
File Size: 355KB
Title: Complaint – Administration of the Vacancy Reduction Program
In response to a citizen’s complaint, we performed a limited review
of the administration of the Vacancy Reduction Program (VRP). The
VRP focused on the rehabilitation of vacant units, and identification
and correction of site and management deficiencies to achieve and
sustain occupancy at Public Housing Authorities (PHAs). The Assistant
Secretary for Public and Indian Housing (PIH) is responsible for
administering VRP. The complainant alleged that the Director of
the Community Safety and Conservation Division (CSCD) inappropriately
used: A contractor to provide the same services that HUD staff performed,
and Drug Elimination Program funds to pay Aspen Systems Corporation
(Aspen) for VRP activities. We did not substantiate that the Director
of CSCD used a contractor to perform services that HUD staff performed.
However, we did find that the Director inappropriately used Drug
Elimination Program funds to pay for VRP modernization requirements.
We also determined that PIH did not provide adequate program oversight
to VRP.
Issue Date: September 6, 2001
Audit
Memorandum No.: 2001-DP-0802
File Size: 34KB
Title: Annual Evaluation of HUD’s Security Program and Practices
In accordance with the requirements of the Government Information
Security Reform Act (GISRA), this audit memorandum presents the
results of our annual evaluation of HUD’s security program and practices.
The objective of our evaluation was to determine whether the Department’s
security program is effective. During our evaluation, we performed
procedures designed to ascertain whether the Office of the Chief
Information Officer (OCIO) has: (1) developed and implemented effective
security policies and procedures; (2) monitored the effectiveness
of those procedures; and (3) coordinated the timely and effective
implementation of actions to correct reported security weaknesses.
We also performed procedures to determine whether the Department
has met the requirements of the Act by: (1) incorporating information
security throughout the system lifecycle; (2) establishing an incident
response capability to detect, report, and respond to security incidents;
and (3) evaluating the effectiveness of its information security
program. In conclusion, we found that the security-monitoring program
still needs strengthening, the information security program lacks
executive level leadership and direction, and previously reported
weaknesses in management, operational, and technical controls remain
uncorrected. As a result, the absence of an effective entity-wide
security program, proactive leadership from the Office of the CIO,
and adequate management, operational, and technical controls, may
lead to insufficient protection of sensitive or critical resources
and compromise the integrity, confidentiality, reliability, and
availability of information maintained in HUD’s systems.
Issue Date: August 29, 2001
Audit
Report No.: 2001-AO-0003
File Size: 697KB
Title: Drug Elimination Funds Used for Creative Wellness Program
As a part of our audit plan to review Public and Indian Housing
cooperative agreements, we reviewed the Creative Wellness Program
developed by the National Institute for Medical Options (NIMO).
Our audit objectives were to determine: whether funds were expended
appropriately; if adequate monitoring and oversight over the creative
wellness program agreements was provided; and if public housing
drug elimination funds was an appropriate source of funding for
a creative wellness program. We determined that PIH spent over $1.1
million of public housing drug elimination funds on a wellness program
that did not adequately address issues pertaining to substance abuse,
domestic violence, or violent crime as required by the interagency
and cooperative agreements with the National Institute for Medical
Options (NIMO). We believe the Deputy Assistant Secretary for Public
and Assisted Housing Delivery misused her position to secure funding
for the interagency agreement with the Department of Health and
Human Services and the cooperative agreement for the creative wellness
program developed by NIMO. Inadequate monitoring by the Grant Officer
and the GTRs allowed NIMO to misspend $98,110 on ineligible and
unsupported items.
Issue Date: August 29, 2001
Audit
Memorandum No.: 2001-SE-103-0802
File Size: 417KB
Title: Nationwide Audit of Rent Reasonableness for Section 8
Tenant-Based Units
As part of our annual audit plan, we conducted an audit of HUD’s
controls regarding the determination of rent reasonableness for
housing units assisted by the tenant-based Section 8 program. We
found that Section 8 rents were generally reasonable. However, HUD
should simplify its requirements to ensure conformance with federal
statutes, increase effectiveness, and lesson public housing authority
Section 8 administrative expense.
Issue Date: August 17, 2001
Audit
Report No.: 2001-AT-0002
File Size: 985KB
Title: Troubled Agency Recovery Center, Memphis, Tennessee
This report presents the results of our audit of the Memphis, Tennessee,
TARC. Our objective was to determine whether the TARC accomplished
its mission in an efficient and effective manner. This included
assessing the effectiveness of its management controls. We found
the TARC’s operations were generally inefficient and ineffective.
For example, it did not consistently provide effective oversight
to Public Housing Authorities (PHAs), and it did not fully utilize
its staff. A 1999 OIG survey of the Memphis and Cleveland, Ohio,
TARCs found similar deficiencies. While a recent management change
at the TARC has improved operations, several areas need further
improvement.
Issue Date: August 2, 2001
Audit
Report No.: 2001-SE-107-0002
File Size: 1,209KB
Title: Implementation of the Native American Housing Assistance
and Self-Determination Act of 1996
We performed a nationwide audit of the Native American Housing
Assistance and Self-Determination Act of 1996 (NAHASDA) program
implementation. The purpose of the audit was to determine if NAHASDA
recipient performance is consistent with the Indian Housing Plan
and if the Housing Entities efficiently, effectively, and economically
provide affordable housing. Specifically, the audit objective was
to determine if the Housing Entities: Have implemented and/or accomplished
planned activities outlined in their Indian Housing Plan (IHP).
Have a history of satisfactory performance. Are financially stable.
Have acceptable management systems. Obtained required Single Audit
Act reports. Developed and implemented operating policies. We performed
on-site visits at 17 Housing Entities within four of the six Office
of Native American Programs (ONAP) regions. Our objective was not
to audit the tribes but to assess NAHASDA program performance as
a whole.
Issue Date: June 29, 2001
Audit
Report No.: 2001-AT-0001
File Size: 464KB
Title: Nationwide Audit of the Officer and Teacher Next Door
Programs
This nationwide audit of the Department of Housing and Urban Development’s
(HUD) Officer Next Door and Teacher Next Door (OND/TND) property
disposition programs disclosed that the programs are at high risk
of abuse by homebuyers and HUD had not established adequate management
controls over the programs. The audit identified the following adverse
conditions: (1) 23 of 108 homebuyers in our sample abused the OND
program by not fulfilling occupancy requirements and thus received
unearned discounts of $734,800, (2) achievement of OND and TND program
goals and objectives was not assessed, (3) homes were sold outside
of revitalization areas and therefore were improperly discounted
about $1.2 million, (4) a tracking and referral process for suspected
program violators is needed, and (5) key records related to program
activity were not preserved and properly archived.
Issue Date: June 14, 2001
Audit
Memorandum No.: 2001-PH-0803
File Size: 163KB
Title: Philadelphia Homeownership Center, Single Family Disposition
Activities, Philadelphia, Pennsylvania
We have completed a review of the Philadelphia Homeownership Center’s
(HOC) Single Family (SF) Disposition Activities. The review was
performed in response to three external Management and Marketing
(M&M) Contractor audit reports issued to the Philadelphia HOC. Specifically,
we reviewed the HOC’s monitoring controls over the M&M contractors
within its jurisdiction and examined the plausibility of using Single
Family Acquired Asset Management System (SAMS) data to better monitor
SF disposition voucher processing controls, appraisal procedures,
and sales to owner-occupant purchasers. Based on the review, the
Philadelphia HOC needs to improve its M&M contractor oversight.
Also, HOCs should develop better techniques to utilize SAMS data
more effectively in their contractor monitoring and SF housing disposition
activities. Because our review included an analyses of nationwide
SAMS data, some of the SF disposition trends we identified appear
to have universal applicability throughout the country. Accordingly,
the recommendations contained in this memorandum, although addressed
only to the Philadelphia HOC, may improve SF disposition activities
at the Santa Ana, Denver, and Atlanta HOCs. As such, Headquarters
(HQ) should consider implementing the recommendations at all HOCs.
Details can be found under the "Results of Our Review" section of
this memorandum.
Issue Date: June 4, 2001
Audit
Report No.: 2001-AO-0002
File Size: 786KB
Title: Use of Contractors by the Deputy Chief Financial Officer
In response to an anonymous complaint, we performed a limited
review of the Deputy Chief Financial Officer’s (CFO) use of contractors.
The complaint alleged that the Deputy CFO misused contract staff
to perform inherently governmental functions and personal services,
the contract staff duplicated work performed by HUD employees, and
contract staff displaced HUD employees from their workspace. We
concluded that PricewaterhouseCoopers (PwC), at the request of the
Deputy CFO, prepared statements of work (SOWs), submitted proposals,
and won two Federal Housing Administration contracts worth $12.9
million. Neither the Deputy CFO nor PwC disclosed PwC’s participation
in preparing the SOWs or the resulting organizational conflict of
interest. In addition, PwC was directed to perform inherently governmental
functions and personal services. We did not find duplication of
work being performed by the contractors. However, we did find that
HUD employees were moved from their workspace. Such movement did
not violate any laws or regulations.
Issue Date: May 31, 2001
Audit
Report No.: 2001-FW-0002
File Size: 17,164KB
Title: HUD’s Compliance with the Government Performance and Results
Act
We performed a nationwide audit to evaluate HUD’s compliance with
the Government Performance and Results Act of 1993 (GPRA). Specifically,
we reviewed HUD’s Strategic Plan and Annual Performance Plan to
ensure that HUD had established a mission, goals, and objectives
that conformed with HUD’s authorizing legislation. In addition,
we reviewed HUD’s consultation process and the involvement of contractors
in the preparation of HUD’s plans. Further, we analyzed HUD’s strategic
planning process to determine if HUD used GPRA to manage its program
growth and staffing resources. Although HUD’s current Strategic
Plan and Fiscal Year 2001 Annual Performance Plan are vast improvements
over HUD’s previous attempts, HUD was still not fully complying
with the requirements of GPRA. As a result, the President, Congress
and the taxpayer will be unable to fully use HUD’s GPRA plans and
reports to measure the results and scope of HUD’s operations.
Issue Date: May 23, 2001
Audit
Memorandum No.: 2001-BO-0801
File Size: 69KB
Title: Unprocessed Year-End Settlements for Contract Administered
Section 8 Projects in Massachusetts
During a review of HUD Section 8 payments, we determined that
there was a significant backlog of unprocessed settlements for contract
administrators on the 270 Massachusetts projects managed by the
Financial Management Center. Accordingly, we reviewed the unprocessed
settlements as of December 31, 2000. Our objectives were to assess
the significance of the backlog and the effectiveness of procedures
to address it. Our review disclosed that unprocessed settlements
are not being reviewed in a timely manner consistent with HUD’s
policy. As of December 31, 2000, there is a backlog of 289 unprocessed
settlements for 122 projects covering years 1998-2000 (for the most
part, some are older). Consequently, HUD has not collected approximately
$3 million that was due HUD for net over-advances. The cost of money
or interest incurred by HUD on the receivable is approximately $239
thousand.
Issue Date: May 11, 2001
Audit
Report No.: 2001-FW-0001
File Size: 816KB
Title: Housing Authority of New Orleans, New Orleans, LA
We performed an audit of the Housing Authority of New Orleans
(HANO) to ascertain the current status of the HANO’s management
structure. For the past 5 years, HANO has operated under a 2-year
Cooperative Endeavor Agreement to correct long-standing problems,
particularly with respect to the poor condition of its housing stock.
During this time, Congress enacted the Quality Housing and Work
Responsibility Act of 1998 (also known as the Public Housing Reform
Act) that required HUD to create an Advisory Council which would
help determine HANO’s future. Our audit objectives were to: (1)
ascertain the status of the Cooperative Endeavor Agreement; (2)
review HANO’s progress in modernizing its housing stock; and (3)
determine if HUD complied with the Quality Housing and Work Responsibility
Act requirement to create the Advisory Council. HUD has continued
the Cooperative Endeavor Agreement (CEA) beyond its planned and
contractual life.
HUD has continued the CEA because HANO continues to have major
problems in carrying out its primary mission. Because of the poor
condition of its housing stock, the most recent Cooperative Recovery
Plan said HANO was "potentially troubled." HANO continues to have
problems completing a modernization program at its 10 large conventional
developments. HANO does not have the capacity to: (1) stabilize
and renovate its viable developments; (2) demolish and dispose of
units not meeting Section 202 requirements; (3) relocate residents
during modernizations; and (4) construct suitable permanent housing.
HANO’s long-term success depends upon having an effective Section
8 Department, which HUD staff stated had been substandard for the
past 3 years.
Six years ago we urged the Secretary to take over HANO and contract
out the management of its properties to as many as 12 companies.
We have amended our primary recommendation made 6 years ago, and
we are now urging the Secretary to take over HANO and divide the
housing authority into smaller housing authorities. This would allow
the smaller housing authorities to focus on the problems affecting
specific sites.
Issue Date: March 30, 2001
Audit
Report No.: 2001-NY-0001
File Size: 1222KB
Title: Canal Corridor Initiative HUD Administered Small Cities
Community Development Block Grant Program Section 108 Loan Guarantee
Program New York State
We performed an audit of the U.S. Department of Housing and Urban
Development’s (HUD) Canal Corridor Initiative to assess HUD’s efforts
in achieving the program’s objectives outlined in the Notice of
Funding Availability (NOFA) published in the Federal Register of
December 3, 1996 (Volume 61, Number 233). The Initiative sought
to revitalize the economic base of communities in upstate New York
through development projects and job creation along the canal system
and connecting waterways involving grants from the Small Cities
CDBG Program and loans from the Section 108 Loan Guarantee Program.
As such, our audit objectives were to: (1) evaluate HUD’s award
process to the Grantees; (2) assess the Initiative’s progress; (3)
determine whether the Initiative’s goals are being met, especially
the goal of job creation; and (4) determine whether HUD is adequately
monitoring the Grantees’ progress and expenditures.
The Canal Corridor Initiative began with a NOFA dated December
3, 1996. Funding was provided to successful applicants in the form
of Small Cities CDBG development grants and loans from the Section
108 Loan Guarantee Program, first in Fiscal Year 1997, and again,
but to a much lesser extent, in Fiscal Year 1999. Our review did
not disclose any improprieties regarding the award process. Essentially,
all the Grantees located along the New York State waterways that
requested funding were awarded funds.
While the Initiative has produced some limited successes by means
of public improvement projects, most activities have been slow moving;
thus, compromising the Initiative’s ultimate success. HUD authorized
over $100 million for the Initiative consisting of Section 108 Loans,
Section 108 Grants and Small Cities CDBG Grants. However, four years
after HUD introduced the Canal Corridor Initiative only $24.4 million
has been expended and program objectives, such as, job creation
are not being fully realized.
Not expending the funds jeopardizes a major objective of the Initiative
that is to create jobs. Our site visits to 12 of the 53 funded Grantees
disclosed that the 12 Grantees were to create 1338 jobs; however,
at the time of our visits, only 153 jobs, which is less than 12
percent, were documented as created.
The audit showed that progress has been curbed because Grantees
had little success brokering Section 108 Loans to third parties,
and because HUD has not actively monitored Grantees; thus, allowing
poor program performance to go undetected and unresolved.
Additionally, our site visits showed that Grantees often did not
comply with the financial management systems requirements contained
in Title 24 Code of Federal Regulations (CFR) Part 85. Numerous
financial management deficiencies were noted during the site visits.
In fact, we determined that 10 of the 12 Grantees we visited were
not in compliance with Title 24, CFR Part 85 financial management
requirements. Again, the absence of adequate monitoring allowed
deficiencies to go undetected and unresolved.
Falling short of full compliance with the financial management
systems requirements raises concerns as to the capacity of Grantees
to carry out the Canal Corridor Initiative.
Unless HUD is willing to implement corrective actions, such as,
the recommended actions in this report, slow program progress may
continue unabated, and the potential for realizing program goals
and objectives will be in jeopardy.
On March 27, 2001, we held an exit conference with HUD officials
of the Community Planning and Development Division in Headquarters
and the Buffalo Office to discuss the draft findings and recommendations.
A written response to our draft findings was provided to us on March
29, 2001.
The written responses are shown in Appendix A of this report.
Issue Date: March 30, 2001
Audit
Memorandum No.: 2001-PH-0802
File Size: 64KB
Title: Citizen Complaint, Forest Green Commons Townhouse Development/Joshua
Meeks’ House – HOPE VI Project
Based on a citizen complaint, we performed a limited review of
the HUD Pittsburgh Public Housing Office’s (PIH’s) environmental
assessment determination of the Joshua Meeks House (Property) located
on Forest Green Drive in connection with a HUD funded HOPE VI Project
(Forest Green Commons Townhouse Development). Specifically, the
complainant alleged HUD and the developer did not properly apply
the requirements of Section 106 of the National Historic Preservation
Act in its review process. As discussed in the results of the review,
we determined HUD followed all Federal requirements of the Act.
Issue Date: March 30, 2001
Audit
Report No.: 2001-SE-107-0001
File Size: 240KB
Title: HUD Approval of a Student Housing Project for Cook Inlet
Housing Authority
In response to complaints received by our office, we performed
an audit to determine if HUD properly approved a student housing
project for the Cook Inlet Housing Authority. We found that HUD
officials improperly approved an ineligible student housing project
that was not needed and did not meet the intent of the Native American
Housing Assistance and Self-Determination Act (NAHASDA). In addition,
HUD improperly waived requirements that limit costs on affordable
housing.
Issue Date: March 28, 2001
Audit
Report No.: 2001-FO-0004
File Size: 81KB
Title: Review of HUD’s Internal Controls over Fiscal Year 1999
Annual Performance Data
We have completed a review of the internal controls over the Department
of Housing and Urban Development’s (HUD) fiscal year 1999 annual
performance data. The objective of our review was to determine what
internal controls HUD has established to ensure the accuracy and
reliability of data presented in its fiscal year 1999 Annual Performance
Report (APR).
HUD presented 85 performance indicators from ten headquarters offices
in its fiscal year 1999 APR. In order to accomplish our objective,
we selected a sample of performance indicators that were presented
in HUD’s fiscal year 1999 Annual Performance Report and remained
in HUD’s fiscal year 2001 Annual Performance Plan. We reviewed data
for 22 performance indicators from eight offices. The data for six
performance indicators from three offices were considered accurate
and reliable, however, we identified problems with data for 16 indicators
from five other offices. The results of our review are summarized
below.
Many of the performance indicators we reviewed contained data
that were estimated by HUD offices. Offices estimated the data because
they did not have current data or did not have confidence in their
data to give an accurate description of accomplishments. Although
the estimates may have given a better picture than the data offices
had, these offices cannot attest to the accuracy and reliability
of these performance data presented in the fiscal year 1999 APR.
Data presented in the fiscal year 1999 APR for some performance
measures were inaccurate. The inaccuracies occurred for different
reasons. Some occurred because offices did not review a draft of
the APR which was provided to them for final approval and therefore
did not detect erroneous data that appeared in the report. Others
occurred because systems that accumulate performance data were updated
after data were extracted for the APR. Because of these inaccuracies,
a clear picture of accomplishments is not being reported in the
fiscal year 1999 APR.
HUD has not set Department wide standards for criteria that determine
data quality and direct data cleanup efforts. As part of a data
cleanup effort, a guidebook was published which established a process
for determining data cleanliness based on six criteria; valid, unique,
complete, consistent, timely, and accurate. The guidebook sets definitions
for these criteria, however, it falls short of setting a standard
for each criteria that program offices can follow to determine cleanliness
of data. Without this, HUD offices do not have standards for criteria
that determine data quality and serve as a basis to direct data
cleanup efforts as well as to formulate data quality plans.
In general, the Deputy Chief Financial Officer and cited offices
agreed with our findings and recommendations and stated that actions
have been taken or are planned to strengthen internal controls over
data quality. Detailed comments from the sited offices in our draft
report were considered when finalizing this report. Changes to the
report were made where appropriate.
Issue Date: March 22, 2001
Audit
Memorandum No.: 2001-PH-0801
File Size: 60KB
Title: Project H.O.M.E., Supportive Housing Grants, PA26B80-0011,
and PA26B97-0104 (Renewal), Philadelphia, Pennsylvania
As part of a nationwide review of HUD’s Continuum of Care Program,
we audited the Supportive Housing Grants awarded to Project H.O.M.E.
(Housing, Opportunities, Medical Care, Education) for 1997 and 1998.
Our objectives were to determine whether Project H.O.M.E.:
1.Implemented the grants in accordance with its applications;
2.Expended funds for eligible activities under Federal regulations
and applicable cost principles;
3.Maintained evidence of measurable results;
4.Ensured a sustainable program; and
5.Expended funds timely.
As a result of our audit, we determined that Project H.O.M.E.’s:
activities were consistent with its applications and achieved measurable
results; funds were expended properly and timely; and projects were
sustainable.
We believe that Project H.O.M.E.’s operations are both generally
efficient and effective. However, we noted a lack of adequate income
documentation and rent calculations in tenant files. While initial
documentation was included in most tenant files, subsequent income
documentation and rent calculations were not available. We recommend
that Project H.O.M.E. maintain all applicable income documentation
and rent calculations in the participant files.
Issue Date: March 1, 2001
Audit
Report No.: 2001-FO-0003 File Size: 327KB (Includes Appendices
A, B, and C)
Appendix
D - 193KB - Agency Comments
Appendix
E - 42KB - OIG Evaluation of Agency Comments
Appendix
F - 7KB - Report Distribution
Principal
Financial Statements - 88KB
Title: Audit of the U.S. Department of Housing and Urban Development
(HUD) Fiscal Year 2000 Financial Statements
This report presents the results of our audit of the U.S. Department
of Housing and Urban Development (HUD) financial statements for
the year ended September 30, 2000. Our audit was conducted in accordance
with the Chief Financial Officers Act of 1990, as amended. Guidance
issued by the Office of Management and Budget requires us to report
on HUD's financial statements, internal control, and compliance
with material laws and regulations.
In our opinion, the financial statements present fairly, in all
material respects, HUD’s financial position as of September 30,
2000, and its net costs of operations, changes in net position,
status of budgetary resources, and reconciliation of net costs to
budgetary obligations for the year then ended.
Our report identifies four material weaknesses and ten reportable
conditions on internal controls, discusses each of these weaknesses
and conditions in detail, provides an assessment of actions taken
by HUD to mitigate them, and makes recommendations for corrective
actions. Most of these control weaknesses were reported in prior
efforts to audit HUD's financial statements and represent long-standing
problems.
Our review of HUD's compliance with laws and regulations disclosed
that: a) HUD did not substantially comply with the Federal Financial
Management Improvement Act, b) HUD did not comply with the United
States Housing Act of 1937, as amended by the Quality Housing and
Work Responsibility Act of 1998, and c) an allocation methodology
used by FHA for certain contracts may require refinement and such
re-allocation of contract costs between funds could result in a
matter of noncompliance with the Anti-Deficiency Act.
During the course of the audit, we also identified other matters
that are not material to the financial statements and are being
separately communicated HUD's management for appropriate corrective
action.
Issue Date: March 1, 2001
Audit
Report No.: 2001-FO-0002
File Size: 716KB
Title: Audit of the Federal Housing Administration’s Fiscal Year
2000 Financial Statements
This report presents the results of KPMG LLP’s (KPMG) audit of
the Federal Housing Administration’s (FHA) financial statements
for the year ended September 30, 2000.
In KPMG’s opinion, the financial statements present fairly, in
all material respects, FHA’s financial position as of September
30, 2000, and its net costs, changes in net position, budgetary
resources, and reconciliation of net costs to budgetary obligations,
for the year then ended. However, KPMG also reported a potential
non-compliance with the Anti-Deficiency Act, 31 U.S.C. 1341 (a),
that requires additional analysis, as well as a policy or legal
determination by HUD’s Office of General Counsel, OMB and/or the
Comptroller General. The report identifies a material weakness and
three reportable conditions on internal controls in Appendices A
and B, discusses each of these conditions in detail, provides an
assessment of actions taken by FHA to mitigate them, and makes recommendations
for corrective actions. Appendix C briefly describes the resolution
of a prior year material weakness and reportable conditions. During
the course of the audit, KPMG also identified several matters which,
although not material to the financial statements, are being separately
communicated to us and FHA management.
Issue Date: February 27, 2001
Audit
Memorandum No.: 2001-DP-0002
File Size: 1109 KB
Title: Audit of HUD's Central Accounting and Program System (HUDCAPS)
We completed an audit of HUD's Central Accounting and Program System
(HUDCAPS). This audit was initiated based on the results of the
OIG's Fiscal Year 1999 Financial Statements audit work, which resulted
in a disclaimer of opinion. The disclaimer was given, in part, because
of HUDCAPS system control weaknesses and Program Accounting System
to HUDCAPS conversion problems.
The objectives of our audit were to determine the adequacy of
the controls for maintaining data integrity and ensuring that data
was protected against loss, errors, or unauthorized use. We evaluated
the controls over (1) system maintenance, (2) data reliability,
and (3) reconciliation of transactions.
We found significant internal control weaknesses in HUDCAPS as
follows: (1) maintenance practices remain weak, (2) controls over
data integrity and security access were inadequate, and (3) the
Office of the Chief Financial Officer was not effectively utilizing
the system for cash reconciliation. We also concluded that HUDCAPS
can be a reliable financial management system if the Department
is willing to invest the time and resources to correct the deficiencies
we have identified. During the audit, the Office of the Chief Financial
Officer has taken action to address the reported weaknesses. However,
additional efforts are needed to fully correct the control deficiencies
described in the report.
Issue Date: February 21, 2001
Audit
Memorandum No.: 2001-DP-0801
File Size: 16KB
Title: Review of the Department's Internet Privacy Status, Pursuant
to Requirements of the Treasury and General Government Appropriations
Act, 2001
Our office has completed a review to determine whether the Department
or any third parties, including other governmental agencies, are
obtaining personally identifiable information relating to any individual's
access or viewing habits for governmental or non-governmental Internet
sites. The review (see Attached) was performed in accordance with
December 21, 2000, Congressional legislation under Section 646 of
the Treasury and General Government Appropriation Act, 2001 (Public
Law 106-554). OIG determined that the Department has not been collecting
personally identifiable information on HUD Internet users. However,
two areas need improvement. Management oversight to ensure adequate
privacy on HUD's Internet web pages should be strengthened. Additionally,
the standard privacy statement needs strengthening and all HUD contracted
sites should have hyperlinks to the statement.
Issue Date: February 20, 2001
Audit
Report No.: 01-FO-177-0001
File Size: 87KB
Title: Audit of the Government National Mortgage Association’s
Fiscal Year 2000 Financial Statements
This report presents the results of KPMG LLP’s (KPMG) audit of
the Government National Mortgage Association's (Ginnie Mae) financial
statements for the year ended September 30, 2000. In KPMG’s opinion,
the financial statements present fairly, in all material respects,
Ginnie Mae’s financial position as of September 30, 2000 and results
of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles. In addition
to KPMG’s unqualified opinion on Ginnie Mae’s financial statements,
the audit results indicate that there were no material weaknesses
or reportable conditions with Ginnie Mae’s internal controls, or
material instances of non-compliance with laws and regulations.
Furthermore, KPMG’s assessment of Ginnie Mae’s efforts to address
recommendations from prior years indicated that, while some efforts
are incomplete, the outstanding issues are not material to the financial
statements, requiring reporting in the audit report. Instead, these
outstanding issues are being reported separately to Ginnie Mae management.
Issue Date: February 14, 2001
Audit
Memorandum No.: 2001-AT-0801
File Size: 68KB
Title: Interim Results - Officer/Teacher Next Door Program
OND/TND’s purpose is to strengthen America’s communities and build
a safer nation by offering homeownership opportunities to law enforcement
officers and teachers in revitalization areas. Officers and teachers
may purchase one HUD-owned single-family home in a revitalization
area or in a HUD-approved exception area at a 50 percent discount
off the list price. The officer or teacher must then live in the
home as their sole residence for 3 years from the date of closing.
HUD sold approximately 3,824 homes under OND/TND from August 11,
1997, through July 31, 2000. HUD discounted about $152 million off
the list price of these homes.
HUD initiated OND on August 11, 1997 (HUD Notice 97-51). Several
significant changes to OND became effective August 2, 1999, with
the issuance of Federal Register Notice 4277-I-02. The interim rule
required (1) a second mortgage for the amount of the discount, (2)
initial and annual certification of occupancy, (3) that officers
not own any other residential real estate, and (4) that only single-family
homes are eligible. On November 17, 1999, HUD expanded OND to include
teachers (HUD Directive 99-30).
Closing agents did not execute second mortgages on 56 percent of
the property sales in our sample that closed after the effective
date of the second mortgage requirement. Our sample of all 29 OND
home sales clustered in the Dade County area included 9 home sales
subject to the second mortgage requirement. Second mortgages were
not filed on 5 of these 9 homes sales. These five sales closed on
various dates from December 22, 1999, to June 9, 2000. Additional
evidence provided by the M&M contractor showed that second mortgages
were not filed on 16 of 17 closings from March 24, 2000 to September
13, 2000.
Our interim results indicate that a high proportion of homebuyers
abused and defrauded the OND/ TND program. Seven of the 29 homebuyers
we reviewed, or about 26 percent, violated one or more program requirements
by renting, selling or not living in the property. We also found
strong indications that many other homebuyers may have violated
the program requirements. OIG Investigations currently had 81 OND/
TND homebuyers under investigation for suspected violations, including
5 who were convicted and another 4 who pled guilty. HUD OND/ TND
program staff in headquarters estimated that 25 percent of all OND/
TND homebuyers violated occupancy requirements after closing. Also,
the Atlanta HOC began, but did not complete, a proactive monitoring
effort that identified 12 homebuyers who were suspected of violating
OND/ TND occupancy requirements.
Issue Date: February 13, 2001
Audit
Memorandum No.: 2001-AO-0802
File Size: 236KB
Title: Fair Housing Initiatives Program Grant Administration Process
Weaknesses Washington, DC
On February 13, 2001, we issued our final report on Fair Housing
Initiatives Program (FHIP) Grant Administration Process Weaknesses
(Audit Memorandum No. 2001-AO-0802). We performed this review as
a result of allegations disclosed during our review of the Use of
Fair Housing Initiatives Program Funds (Audit Memorandum No. 00-AO-174-0801).
These conditions occurred because the Grant Officer (GO) did not
amend the agreement as directed in the policy governing cooperative
agreements. Also, the GO did not coordinate with the GTR during
the negotiation process and FHEO had not developed and implemented
timeframes for completing negotiations.
Issue Date: February 13, 2001
Audit
Memorandum No.: 2001-AO-0801
File Size: 303KB
Title: FY1998 Fair Housing Initiatives Program, National Focus
Education and Outreach Competition, Washington, DC
On February 13, 2001, we issued our final report on the FY 1998
Fair Housing Initiatives Program National Focus Education and Outreach
Competition (Audit Memorandum No. 2001-AO-0801. We performed this
review as a result of allegations disclosed during our review of
the Use of Fair Housing Initiatives Program Funds (Audit Memorandum
No. 00-AO-174-0801). We determined that the focus and scope of the
$2 million FHIP project was significantly changed after Consumer
Action had been selected to receive the award. This condition occurred
because the Secretary's office used undue influence over the FHEO
grant officials.
Issue Date: February 1, 2001
Audit
Memorandum No.: 01-FO-177-0801
File Size: 648KB
Title: Independent Accountant’s Report on the Department of Housing
and Urban Development’s Fiscal Year 2000 Detail Accounting Submission
Report
In accordance with The Office of National Drug Control Policy
(ONDCP) Reauthorization Act of 1998 and Office of National Drug
Control Policy Circular: Annual Accounting of Drug Control Funds,
dated December 17, 1999, the accompanying report presents the results
of our attestation review of the Department of Housing and Urban
Development’s Submission of Detailed Accounting of FY 2000 Drug
Control Funds, dated February1, 2001. Our review focused on assessing
the Detailed Accounting prepared by the Office of Housing and the
Office of Public and Indian Housing, prior year actual obligations,
the accompanying disclosures, the financial systems and data supporting
the drug methodologies, the estimation methods used, the completeness
of the data, the application of the methodologies, and the assertions
made regarding the obligation data presented in the Resource Summaries
using the criteria indicated above. We were precluded by independence
standards from reviewing the Detailed Accounting prepared by the
Office Inspector General, and the Office of Inspector General has
been given the authority to submit its Detailed Accounting report
separately from HUD. Based on the review, nothing came to our attention
that caused us to believe that the HUD’s submission is not presented
in all material respects with ONDCP’s policy and circular.
Issue Date: January 31, 2001
Audit
Report No.: 2001-AO-0001
File Size: 357KB
Title: Drug Elimination Technical Assistance Program
We completed an audit of the Public and Indian Housing Drug Elimination
Technical Assistance Program (DETAP) in response to a citizen complaint.
The overall audit objective was to determine whether the allegations
regarding the administration of DETAP grants were valid. Our specific
objectives were to determine: the adequacy of the methods used by
Aspen to enter and use consultant profile information in the consultant
database; the fairness of the process used for searching the consultant
database for referrals; and the effectiveness of the HUD Government
Technical Monitor in monitoring Aspen’s administration of DETAP.
Calendar Year 2000
Issue Date: November 24, 2000
Audit
Memorandum No.: 01-FW-111-0801
File Size: 28KB
Title: Request for Investigation of the Rainbow Village Project
in Houston, Texas for a Possible Program Fraud Civil Remedies Act
Filing
At the request of HUD’s Counsel, we performed a limited review
of the Rainbow Village Section 202 project to determine whether
a Program Fraud Civil Remedies Act (PFCRA) filing was merited. To
perform the review, we reviewed information provided by you and
the project files. We also interviewed appropriate HUD staff. Based
on our work and HUD’s inaction, we do not believe that a PFCRA filing
is appropriate. We do not believe that debarment is an appropriate
action either. Instead, HUD should take administrative action to
prevent any future payments to entities with prohibited conflicts
of interest. In addition, HUD Counsel must determine whether HUD’s
inaction on information in its possession negatively affects its
ability to recover previous payments to entities with conflicts
of interest. Further, HUD should provide notice to the three individuals
and their related conflict-of-interest entities that they will not
be able to participate in any future phases of the project because
of their conflicts. Finally, HUD must adjust the remaining amount
of the developer’s fee to ensure that the amount paid at final closing
does not exceed the 8 percent regulatory cap.
Issue Date: October 31, 2000
Audit
Report No.: 01-DP-166-0001
File Size: 231KB
Title: HUD's Entity-Wide Security Program
We completed an audit of HUD's entity-wide security program for
computer based systems. Specifically, we evaluated whether HUD's
security planning and management practices include: (1) assessing
and managing risk; (2) developing and implementing effective security
policies and procedures; and (3) monitoring the effectiveness of
those procedures. We also reviewed the adequacy of the Department's
efforts to implement Presidential Decision Directive No. 63. This
Directive requires Federal entities to protect their critical infrastructures
from intentional acts. Our audit concluded that HUD's security program
needs significant improvement. We found that computer security weaknesses
continue to pose risks to sensitive data and critical computer resources.
Numerous deficiencies noted during our review are long-standing,
having been identified in previous audits and reviews. HUD has not
placed the appropriate emphasis on information systems security.
Our report contains a number of recommendations to strengthen information
security at HUD.
Issue Date: September 29, 2000
Audit
Report No.: 00-AT-123-0002
File Size: 1,010KB
Title: Demolition of HUD Real Estate Owned Properties, Chicago,
Illinois
This report presents the results of our internal audit of the
demolition of U.S. Department of Housing and Urban Development’s
(HUD) Single Family properties by the City of Chicago, Illinois.
HUD did not effectively prevent the costly and unwarranted demolition
of HUD-owned properties by the City of Chicago. As a result, the
stock of affordable housing in Chicago has been significantly reduced.
Further, the FHA mortgage insurance fund suffered significant losses.
We estimated losses on a sample of 30 HUD-owned properties demolished
by the City and sold as vacant lots between June 1998 and February
2000 between $446,223 to $729,142. HUD will continue to lose an
estimated $883,017 to $1,493,507 per year if it does not stop the
City from demolishing HUD-owned properties. We also found that the
City improperly used $94,920 of Community Development Block Grant
funds in 1998 and 1999 to demolish 15 HUD-owned properties.
Issue Date: September 29, 2000
Audit
Report No.: 00-DP-166-0804
File Size: 468KB
Title: Department's September 2000 Purchase of COTS Financial
Management System
We are providing this audit memorandum to alert you to our concerns
over the September 1, 2000, purchase of a Commercial Off-the-Shelf
(COTS) software package for the Department's and FHA's core financial
management system. The Department may be repeating a past mistake
of a hasty decision without adequate studies and analyses. In an
OIG memo dated January 28, 1998, we outlined several risks associated
with the Department’s decision to implement the existing COTS integrated
financial system. These risks include an incomplete evaluation of
viable solutions, user requirements, costs, and data conversion.
Since that decision, the Department encountered delays and cost
overruns, resulting in an inability for the OIG to render an opinion
on the FY 1999 Financial Statements. In order to minimize the risk
of another failure, we are recommending that before any development
work starts for this new initiative, adequate feasibility and cost/benefit
analyses are completed, user requirements are defined, and the Department's
Enterprise Architecture Plan is completed.
Issue Date: September 29, 2000
Audit
Report No.: 00-PH-119-0001
File Size: 421KB
Title: Up-Front Grant Program
We completed an audit of the Department’s administration of the
Up-Front Grant Program. The purpose of our audit was to determine
whether HUD awarded Up-Front Grants according to its program guidelines,
and if HUD monitored grantees to ensure they were complying with
the terms and conditions of Grant Agreements. We found HUD is not
following many of its key program guidelines for awarding Up-Front
Grants and is not adequately monitoring grantees that have received
Up-Front Grants.
Issue Date: September 29, 2000
Audit
Related Memorandum No.: 00-PH-169-0802
File Size: 413KB
Title: Progress Assessment - Implementing the Resource Estimation
and Allocation Process (REAP)
We have completed an assessment of the Department’s progress in
developing and implementing a Resource Estimation and Allocation
Process (REAP) using the preceding methodology. We found that HUD
conveyed to Congress the realization that it needed a resource management
system and that it planned to implement such a system within 18
months. We found that HUD with the National Academy of Public Administration
(NAPA) developed a methodology for resource estimation and allocation.
Further, NAPA briefed each Assistant Secretary on the REAP methodology
and the impact it would have on their programs. Also, HUD selected
a contractor to implement the methodology and do the measurement
studies at various program offices throughout the Department to
determine resource estimate requirements.
Issue Date: September 29, 2000
Audit
Related Memorandum: 00-FO-2214-0802
File Size: 104KB
Title: Survey of HUD's Contract Award Process
We have completed a survey of HUD’s contract award process with
the focus on the two management and marketing contracts awarded
in June 2000. The survey was a follow-up on issues relating to HUD’s
decision to award contracts to the In Town Management Group to perform
services as a "management and marketing contractor." The survey
reviewed the policies and procedures used by HUD to ensure awards
are made to responsible contractors. The objective was to determine
whether HUD should change the contracting process as a result of
lessons learned from the In Town management and marketing contracts.
From our review of the preaward files for the management and marketing
contracts awarded in June 2000, we concluded that HUD’s Contracting
Office had followed the procedures prescribed in the Federal Acquisition
Regulations (FAR) as they relate to ensuring awards are made to
responsible contractors. However, greater emphasis is needed on
verifying past performance and improvements should be made in supporting
the evaluations of the bid proposals. Also, procedures are needed
to ensure the required provisions are added to all contracts where
contractors have access to HUD’s sensitive automated systems. The
Chief Procurement Officer’s generally accepted and agreed to implement
our recommendations. We completed our field work in August 2000.
Issue Date: September 29, 2000
Audit
Report No.: 2000-SE-107-0002
File Size: 1572KB
Title: Office of Native American Programs Staff Training Conference,
Reno, NV
We received three complaints regarding a staff training conference
conducted by the Office of Native American Programs (ONAP) from
December 6-9, 1999. One of the complaints alleging insensitive or
offensive material was provided to us through a senatorial inquiry.
The senator requested this office to provide a report along with
any findings of concern. In response to the allegations in the three
complaints, we conducted a review to determine if:
* insensitive or offensive material was presented during skits performed
at the conference.
* an unauthorized individual attended the conference at government
expense.
* employee misconduct occurred during the conference.
* the conference was not an effective or efficient use of government
resources.
We concluded the skit was offensive and derogatory Alaska Office
of Native American Programs management personnel were involved in
the development and presentation of a skit that contained material
that was at a minimum insensitive to Native Alaskans and derogatory
toward their culture.
In our opinion, the presentation of the skit was the result of
current Alaska ONAP management personnel's lack of professional
judgment, as well as a lack of skills in the areas of cultural sensitivity,
human relations, communications, and diversity.
The Assistant Secretary for Public and Indian Housing needs to
ensure that Alaska ONAP management personnel understand the seriousness
of their actions and in the future follow HUD policies, regulations,
and requirements with regard to insensitive and offensive material.
To help achieve this, we are recommending that the Assistant Secretary
(i) have the Alaska ONAP Administrator issue a public apology, (ii)
require training courses for Alaska ONAP management and staff, and
(iii) consider if disciplinary action against responsible parties
is appropriate.
Persons responsible were not held accountable.
Headquarters Office of Native American Programs officials did
not hold those responsible for presenting offensive or insensitive
material at the training conference accountable for their actions
and have not been proactive in oversight and management of Alaska
ONAP.
There was no accountability because Headquarters ONAP officials
failed to recognize material that was insensitive or offensive that
was presented at the training conference. Furthermore, Headquarters
ONAP has not been proactive in addressing Equal Employment Opportunity
(EEO) and work environment issues through their management practices.
We are recommending that the Assistant Secretary for Public and
Indian Housing ensure that there will be no tolerance for insensitive
or offensive actions or behavior in the workplace and work environment
issues are made part of ONAP office reviews by:
* ensuring amendment of area ONAP office review guides to specifically
include:
1. compliance with EEO and Affirmative Employment regulations, policies,
guidelines, and goals.
2. measurement of office environment and morale.
* issuance of a memorandum stating there is zero tolerance for
jokes, comments, or other material that is offensive or insensitive
to any ethnicity, race, sex, disability, religion, color, or other
class of people, and issue disciplinary guidelines for such actions.
Controls over attendance need improvement
An unauthorized individual attended the training conference at
government expense because ONAP management officials failed to consider
all relevant criteria before allowing the person to attend. Also,
we found no evidence to support allegations of employee misconduct
at the ONAP Staff Training Conference in part because ONAP did not
have good controls over attendance. Overall, the training conference
was an efficient and effective use of government resources.
We are recommending that the Assistant Secretary for Public and
Indian Housing ensure adequate controls are in place over attendance
at future organizational training events.
HUD agreed with the audit results
Draft findings were provided to the Assistant Secretary for Public
and Indian Housing for written comments on August 25, 2000. We received
the Assistant Secretary's response on September 26, 2000, and incorporated
his comments into the report as appropriate. The Assistant Secretary
stated in his comments that the Office of Native American Programs
is ready to implement the recommendations made. The Assistant Secretary
declined an exit conference.
We appreciate the cooperation of employees in the Anchorage (Alaska)
HUD Office as well as officials in the Offices of Public and Indian
Housing and Native American Programs in promptly complying with
our requests for information.
Issue Date: September 29, 2000
Audit
Report No.: 2000-SE-119-0003
File Size: 1344KB
Title: Nationwide Audit of Use and Disposition of Residual Receipts
Office of Multifamily Housing Programs
This final report contains the results of our recent audit of
the use and disposition of residual receipts. We initiated the audit
based on information obtained during the financial audit for Fiscal
Year 2000. The purpose of the audit was to determine if HUD: (1)
considers using residual receipts as a source of funds when housing
assistance payments (HAP) contracts expire and are renewed, (2)
has adequate controls in place to ensure that funds in residual
receipts accounts are properly returned to HUD when property owners
opt out of the Section 8 program, and (3) was aware of the amount
of residual receipts being generated by uninsured assisted properties.
The report contains four findings that indicate HUD should utilize
and improve controls over residual receipts. Currently, HUD does
not consider or use residual receipts as a source of funds when
renewing expiring Section 8 HAP contracts for insured multifamily
properties. In addition, the review disclosed one case where, due
to inadequate HUD controls, a former property owner prepaid an insured
property’s mortgage and withdrew $64,369 in residual receipts. Also,
unlike other major Section 8 contracts for multifamily properties,
current regulations for properties in the Loan Management Set-Aside
(LMSA) program do not allow HUD to recover residual receipts at
contract termination. Finally, HUD does not receive financial information
about uninsured Section 8 assisted properties managed by State Housing
Agencies that generate significant residual receipts.
Issue Date: September 29, 2000
Audit
Related Memorandum No.: 00-BO-111-0802
File Size: 540KB
Title: Section 8 Contract Renewal Process
The purpose of our review was to evaluate the appropriateness,
economy and efficiency of Section 8 contract renewals and Departmental
efforts to encourage owners not to opt out of affordable housing
programs. In Spring 1999, HUD created Mark Up to Market (MUTM) to
offer owners a financial alternative to opting out of their Section
8 contracts. Owners are continuing to opt out because they find
opting out more attractive than continuing in the Section 8 Program.
Streamlining the MUTM process could result in fewer opt outs.
Issue Date: September 29, 2000
Audit
Report No.: 00-KC-103-0002
File Size: 209KB
Title: Housing Subsidy Payments Office of Housing
We have completed an audit of the Office of Housing’s controls
over housing subsidy payments. Specific audit objectives were to
identify and evaluate controls in place to ensure the accuracy of:
project owner/agent entered tenant data in the Tenant Rental Assistance
Certification System (TRACS) database; and Section 8 special claims.
During our review, we identified areas where controls needed improvement
to assure that housing subsidy payments are accurate and appropriate.
These areas are summarized below and detailed in the findings section
of the report. In addition, previous Office of Inspector General
audits reported that the management controls relevant to verification
of applicant and tenant income do not adequately prevent or detect
cases of unreported income. HUD has reported this control as a material
weakness in its annual Federal Manager’s Financial Integrity Act
report since fiscal year 1996. HUD needs to continue reporting this
control as a material weakness.
Issue Date: September 28, 2000
Audit
Report No.: 00-AT-123-0001
File Size: 852KB
Title: Single-Family Property Disposition Program
This report presents the results of our nationwide internal audit
of FHA's single family property disposition program. It is a compilation
of external audit reports on seven M&M contractors as well as audit
work performed at FHA's four homeownership centers (HOCs) and at
the Department of Housing and Urban Development (HUD) Headquarters.
Our audit determined that outsourcing of program operations resulted
in reduced returns to the mortgage insurance fund of about $188
million. We attribute the losses to poor M&M contractor sales performance
and substantially increased program costs. We believe FHA's failure
to perform a cost benefit analysis in accordance with A-76 contributed
to the poor program performance and loss of funds.
Our audit also confirmed what FHA has repeatedly found in its monthly
performance assessment reports. As discussed in Finding 2, none
of the contractors we audited managed properties according to contract
requirements. Contractors did not perform timely initial inspections,
perform adequate inspections, correct hazardous conditions, make
repairs, or perform routine maintenance to preserve and protect
properties. The poor property conditions decreased marketability,
increased FHA's holding costs, negatively affected surrounding communities,
reflected poorly on the Department, and in some cases, threatened
the health and safety of the public. Although FHA repeatedly reported
the deficiencies in its monthly performance assessment reports,
it has not been successful in improving property conditions under
private management.
Issue Date: September 28, 2000
Audit
Related Memorandum No.: 00-CH-119-0801
File Size: 310KB
Title: HUD’s Settlement Agreement, Associated Estates Realty Corporation,
Office of Multifamily Housing
We completed a review of HUD’s Settlement Agreement with Associated
Estates Realty Corporation. The objectives of our review were to
determine: (1) why HUD entered into the Settlement Agreement; (2)
whether the Agreement was appropriate according to Federal laws
and HUD’s requirements; and (3) if HUD enforced the terms of the
Settlement Agreement. The Settlement Agreement was entered into
because of HUD’s desire to settle a rent increase lawsuit filed
by Associated Estates. HUD also wanted to remove Associated Estates
from the four Projects to protect the tenants from unhealthy and
unsafe living conditions. The Settlement Agreement required: HUD
to pay Associated Estates $1.78 million for requested rent increases;
Associated Estates to find new owners for Rainbow Terrace and Park
Village Apartments, or transfer the Projects to HUD; and HUD agreed
not to take administrative actions against Associated Estates and
released Associated from any and all claims except tax or criminal
fraud.
Issue Date: August 10, 2000
Audit
Related Memorandum No.: 00-AO-185-0802
File Size: 64KB
Title: Citizen Complaint - Tenant-Based Section 8 Program Horning
Brothers
In response to a complaint from a former Horning Brothers employee,
we completed a limited review of Horning Brothers’ Section 8 transactions.
The complainant alleged that Horning Brothers was improperly retaining
Federal funds received under the Section 8 program. Specifically,
the complainant stated that Horning Brothers had retained HUD overpayments
of Section 8 certificates and vouchers and had failed to notify
HUD to make the appropriate adjustments.
Based on our limited review, we concluded that Horning Brothers
improperly retained $72,162 of District of Columbia Housing Authority’s
funds (including accrued interest) and disbursed or transferred
$10,618 without any supporting documentation. Horning Brothers accomplished
this by establishing a Tenant Assistance Payment (TAP) escrow account
to temporarily retain funds that could not be identified to a specific
tenant or property. Some deposits made as early as 1995 were still
in the TAP escrow account when we completed our field work in April
2000.
Issue Date: July 6, 2000
Audit
Related Memorandum No.: 00-AO-174-0801
File Size: 647KB
Title: Anonymous Complaint Use of Fair Housing Initiatives Program
Funds, Washington, DC
In response to an anonymous complaint, we performed a limited review
of the Fair Housing Initiatives Program (FHIP) grant award process.
FHIP funds grants, contracts, or cooperative agreements with State
and local government agencies, public or private nonprofit organizations,
or other entities that conduct programs to prevent or eliminate
discriminatory housing practices. The Assistant Secretary for Fair
Housing and Equal Opportunity (FHEO) is responsible for administering
FHIP.
We found that two of the three allegations were credible. Specifically,
HUD violated the FHIP authorizing statute by granting the Boston
Housing Authority a $297,060 conditional award for clearly prohibited
purposes. In addition, HUD allocated $200,000 to another grantee
for national fair housing activities which were never conducted
in 1999. We found that the allegation concerning misuse of National
Education Component funds lacked merit. In reviewing the specific
allegations, we identified other deficiencies relating to funding
diversity and audit trails for scoring applications. Until these
weaknesses are addressed satisfactorily, FHEO cannot assure Congress
and taxpayers that FHIP funds are awarded as intended and that the
program is operating efficiently and effectively.
Issue Date: July 5, 2000
Audit
Related Memorandum No.: 00-CH-211-1809
File Size: 33KB
Title: Harbor View Estates Multifamily Equity Skimming Duluth,
Minnesota
We completed an audit of the books and records of Harbor View
Estates. We performed the audit to determine whether Project funds
were used in compliance with the Regulatory Agreement and other
agreements, and applicable HUD policies and procedures. The review
was part of our Operation Safe Home initiative.
We found that Duluth Harbour Investments, Incorporated, the former
owner of Harbor View Estates, inappropriately disbursed $356,638
of Project operating funds while the Project was in a non-surplus
cash position and/or while its mortgage was in default. The expenditures
included: $113,924 for repayments of owner advances and/or loans;
$62,062 for loan payments of identity-of-interest companies; $45,926
for unsupported payments to related parties; $44,967 for transfers
to related parties' bank accounts; $42,860 for non-Project utility
costs; $23,844 for garnished operating funds; $16,300 for security
deposit funds disbursed for unidentifiable expenses; and $6,755
for unsupported miscellaneous expenses. We also found that Melhus
Management Company, a former management agent of the Project, improperly
received $5,899 of Project funds for excess management fees and
unauthorized lease-up fees. As a result, the Project's expenses
were overstated and there were fewer cash resources available for
debt service or to pay reasonable and necessary operating expenses
timely.
Issue Date: June 30, 2000
Audit
Related Memorandum No.: 00-DP-166-0804
File Size: 14KB
Title: Audit Related Memorandum on Program Income
We performed a limited application controls review of HUD's Integrated
Disbursement and Information System (IDIS) as part of our work in
support of the audit of HUD's Fiscal Year 1999 financial statements.
Attached is the results and recommendation from our review. During
FY 1999, 649 grantees and six states reported approximately $647.5
million in program income. We found CPD had removed an automated
control in IDIS to ensure that non-revolving program income is first
used by the grantees before drawing on other entitlement funds.
This fund control is required by federal regulations. Without this
control in place, HUD could end up overpaying millions of dollars
to the grantees.
Issue Date: May 15, 2000
Audit
Related Memorandum No.: 00-FO-177-0801
File Size: 1,056KB
Title: Independent Accountant’s Report on the Department of Housing
and Urban Development’s Fiscal Year 1999 Detail Accounting Submission
Report
In accordance with The Office of National Drug Control Policy (ONDCP)Reauthorization
Act of 1998 and Office of National Drug Control Policy Circular:
Annual Accounting of Drug Control Funds, dated December 17, 1999,
the accompanying report presents the results of our attestation
review of the Department of Housing and Urban Development’s Submission
of Detailed Accounting of FY 1999 Drug Control Funds, dated March
31, 2000 and revised May 9, and May 10, 2000.
Our review focused on assessing the Detailed Accounting prepared
by the Office of Housing and the Office of Public and Indian Housing,
prior year actual obligations, the accompanying disclosures, the
financial systems and data supporting the drug methodologies, the
estimation methods used, the completeness of the data, the application
of the methodologies, and the assertions made regarding the obligation
data presented in the Resource Summaries using the criteria indicated
above. We were precluded by independence standards from reviewing
the Detailed Accounting prepared by the Office Inspector General.
In addition, the Office of Inspector General has been given the
authority to submit its Detailed Accounting report separately from
HUD.
Issue Date: May 11, 2000
Audit
Report No.: 00-DP-166-0003
File Size: 680KB
Title: Integrated Disbursement and Information System (IDIS)
We completed an audit of HUD's ongoing development efforts for
improving the Department's Integrated Disbursement and Information
System (IDIS). The objectives of our audit were to review: (1) the
current status of the IDIS development efforts (including the process
for making changes to program code); (2) Community Planning and
Development's (CPD) operation of the system and interface with the
grantee system users; and (3) the control over data input security
and integrity.
We found that several changes are being made to improve the system
but without adequate program code testing. As a result, additional
programming errors are being introduced which are preventing CPD
from reaching its goal of restoring user faith in the system. Much
of the testing inadequacies can be corrected by enforcing adequate
testing of all changes and using an automated testing tool. We also
found that security over data input is inadequate and have made
several recommendations for improvement.
Issue Date: May 3, 2000
Audit
Related Memorandum No.: 00-PH-119-0801
File Size: 214KB
Title: Presbyterian Association on Aging, Plumwood Apartments,
Parker Heights, and Sprucewood Commons - Section 811 and 202 PRAC
Projects, Oakmont, Pennsylvania
Our Mid-Atlantic office has completed a review of the granting
of income and age waivers for the Plumwood Apartments, Parker Heights
and Sprucewood Commons projects. Our review was performed as a result
of a confidential complaint concerning the Pittsburgh Multifamily
Housing Division’s granting of age and income waivers for projects
owned by the Presbyterian Association on Aging (Owner). Specifically,
the complainant alleged multifamily staff improperly granted income
and age waivers for Plumwood Apartments, a Section 811 project;
and Parker Heights and Sprucewood Commons which are two Section
202/PRAC facilities.
Based on the review, we believe the Pittsburgh Multifamily Housing
Division improperly granted income and age waivers for the above
projects and therefore, jeopardized the integrity of HUD programs
designed for very low-income families.
Issue Date: April 6, 2000
Audit
Related Memorandum No.: 00-SF-121-0802
File Size: 129KB
Title: Internal Audit - Single Family Housing, Los Angeles Area
Office and Santa Ana Homeownership Center, Santa Ana, California
We completed a limited review of the Los Angeles Area Office and
Santa Ana Homeownership Center's single family housing loan production
operations. The purpose of our review was to determine whether the
Office and Center implemented management controls needed to adequately
oversee mortgagees' loan origination practices and compliance with
HUD regulations and requirements. Specifically, we determined whether
the existing controls would have been sufficient to have detected
and/or corrected apparent irregularities in loans originated by
a mortgagee, Allstate Mortgage Company.
Issue Date: March 31, 2000
Audit
Report No.: 00-DE-156-0001
File Size: 618KB
Title: Non-Competitive 1998 Rural Housing and Economic Development
Grant Awards
This report contains one finding which identifies that HUD's Office
of Native American Programs non-competitively awarded three Rural
Housing and Economic Development grants totaling $6 million, or
43 percent, of the grant dollars awarded in 1998. In making these
awards, HUD acted contrary to the 1998 HUD Appropriations Act, the
Community Development Act of 1974, as amended, and the HUD Reform
Act of 1989. We are recommending that you notify appropriate Congressional
Committees of the $6 million awarded contrary to Congressional requirements
and seek Legislative relief for these awards. We are also recommending
you review current HUD procedures and take appropriate actions to
strengthen procedures to ensure that future grant awards comply
with Legislative requirements. These actions, at a minimum, should
include creating administrative remedies for awarding grants without
required competition.
Issue Date: March 31, 2000
Audit
Report No.: 00-BO-111-0002
File Size: 225KB
Title: Use of the Real Estate Assessment Center’s Physical Inspection
Assessments
We conducted an audit of the Office of Housing’s use of physical
inspection assessments generated by HUD’s Real Estate Assessment
Center (REAC) on multifamily properties insured by the Federal Housing
Administration and/or receiving project-based subsidy under the
Section 8 program. The purpose of our review was to evaluate actions
taken to address and track corrections to the physical deficiencies
disclosed through the REAC property inspections.
Although the Office of Housing utilizes the REAC property inspections
within their servicing responsibilities, the report addresses the
need for the Office of Housing to reinforce its assurances and improve
its processes to strengthen the Department’s oversight of its portfolio
of insured and subsidized multifamily properties. Specifically,
we determined that the Office of Housing does not have the proper
assurances that corrective action is completed by the owner to the
extent of all the physical deficiencies reported by the property’s
REAC inspection. This includes assurances that exigent health and
safety violations are corrected within the required time frame and
that complete property surveys identifying the magnitude of the
physical deficiencies are performed. Further, we determined that
the Office of Housing can improve the current notification process
to field office staff of completed property inspection reports and
exigent health and safety violations released by REAC.
Issue Date: March 31, 2000
Audit
Related Memorandum No.: 00-AT-123-0803
File Size: 38KB
Title: Interim Report, Atlanta Homeownership Center, Real Estate
Owned, Single Family Property Disposition Program, Area-3
We have completed a survey of the Atlanta Homeownership Center’s
(HOC) Single Family Property Disposition Program for the HOC jurisdiction
known as Area-3. The survey was performed as part of an ongoing
national assessment of the performance and success of the Management
and Marketing (M&M) contracting initiative. The survey primarily
focused on operations of Southeast Alliance of Foreclosure Specialists,
LLP (SAFS), a M&M contractor. However, we also performed survey
work at the HOC to assess its controls over the contractor. Our
survey identified significant weaknesses in SAFS’s operations which
warrant additional audit work and immediate corrective action. As
such, we have initiated audit work at SAFS. Although we are not
currently issuing controlled recommendations regarding the weaknesses
cited in this memorandum, we do suggest immediate action be taken.
Issue Date: March 31, 2000
Audit
Report No.: 00-AO-177-0001
File Size: 1629KB
Title: Nationwide Audit of Storefront Operations
We performed a nationwide audit of Storefront Operations to evaluate
the effectiveness and efficiency of the operation. The new HUD Storefront
Office, one of many changes the Department is making as part of
the 1997 HUD 2020 Management Reform Plan, is intended to serve as
a national model of more responsive government. We wanted to determine
the amount and source of funding for storefront operations and kiosks;
and the adequacy of HUD’s policies and procedures relating to staffing,
training, site selections, and monitoring and evaluating the storefronts’
overall performance in meeting the stated goals and long-term vision.
The audit included reviews in Headquarters; Albuquerque, New Mexico;
Baltimore, Maryland; Buffalo, New York; Reno, Nevada; Sacramento,
California; and Washington, DC. The audit found that HUD storefront
operations and kiosks were costly, poorly planned, and lacked measurable
benefits. We also determined that HUD’s storefront implementation
was so aggressive that HUD did not adequately: establish management
controls over storefront operations; plan or support storefront
staffing levels; or establish national HUD goals for Community Builders.
Issue Date: March 31, 2000
Audit
Report No.: 00-KC-105-0001
File Size: 317KB
Title: Assessment of Resident Association Grants
We have completed a review of Resident Associations. The objective
of our review was to assess the results of all audits conducted
of the Tenant Opportunity Program to determine if systemic problems
existed, and if they have been adequately addressed in the new Resident
Opportunities and Self Sufficiency program. The review was conducted
in accordance with OIG’s general audit plan.
The Office of Inspector General has issued eight audit reports
evaluating the use of $1,306,861 in Tenant Opportunity Program grant
funds. The eight reports consistently identified similar deficiencies
which existed because of weaknesses in the Tenant Opportunity Program.
Grantees spent $395,707, or 30 percent of the funds reviewed, on
ineligible or unsupported items.
We concluded the Resident Opportunities and Self Sufficiency program
improves upon many of the controls of the Tenant Opportunity Program.
However, it does not adequately address all weaknesses that were
reported with the Tenant Opportunity Program. The new program does
not incorporate procedures that ensure grantees have adequate administrative
capabilities and partnerships with housing authorities and receive
sufficient on-site, real time monitoring. As a result, HUD needs
to further improve its controls over the new program to ensure that
it will meet its intended objectives and goals.
Issue Date: March 31, 2000
Audit
Report No.: 2000-SE-121-0001
File Size: 2,064KB
Title: Final report of nationwide audit, Down payment assistance
programs, Office of Insured Single Family Housing
This is the final report of our audit of down payment assistance
provided by private nonprofit organizations. We initiated the audit
in response to citizen concerns about HUD-approved innovative down
payment assistance programs. The purpose of the audit was to determine
if: (1) the structure of the loan transactions involving down payment
assistance from a nonprofit complied with HUD requirements; (2)
HUD has the controls in place to approve, monitor, and evaluate
the performance of private nonprofit organizations’ down payment
assistance programs; and (3) loans in which nonprofit organizations
provided down payment assistance to buyers increase the risk to
the Federal Housing Administration’s (FHA’s) insurance fund.
Audit results show that HUD allowed nonprofit organizations to
operate down payment assistance programs that circumvent FHA requirements.
The down payment loan transactions do not meet the intent of FHA
requirements in that the down payment assistance is not a true gift
from the nonprofit, and the nonprofit is being reimbursed for the
assistance by the seller. Audit results indicate that default rates
for buyers receiving down payment assistance from nonprofit organizations
are significantly higher than for other FHA loans. Also, some sellers
have raised the sales prices of properties to cover the cost of
the down payment assistance programs causing buyers to finance higher
loan amounts. The circumvention of FHA requirements occurred because
HUD did not have an established process or specific criteria to
evaluate these programs.
Issue Date: March 30, 2000
Audit
Report No.: 00-SF-121-0001
File Size: 520KB
Title: Single Family Production, Home Ownership Centers, Atlanta,
GA, Denver, CO, and Santa Ana, CA
We have completed an audit of the single family loan production
activities of HUD’s home ownership centers. The audit was undertaken
because of significant changes in the past few years affecting single
family loan origination activities. The changes included: (1) loan
underwriting requirements, (2) the establishment of Home Ownership
Centers, and (3) the transfer of virtually all aspects of single
family production and program monitoring from HUD staff to lenders
and contractors under the oversight of the Home Ownership Centers.
This report contains five findings with recommendations for improving
single family operations.
Issue Date: March 28, 2000
Audit
Report No.: 00-BO-101-0001
File Size: 357KB
Title: Use of the Real Estate Assessment Center’s Physical Inspection
Assessments
We conducted an audit of the Office of Public and Indian Housing’s
use of physical inspection assessments generated by HUD’s Real Estate
Assessment Center (REAC) on public housing properties. The purpose
of our review was to evaluate actions taken to address and track
corrections to deficiencies disclosed through the REAC physical
inspections. The report’s finding indicates that: (1) the Office
of Public and Indian Housing has not fully engaged the use of REAC
physical inspection since the process was implemented in October
1998 and (2) the need to establish a system for tracking corrective
action resulting from the REAC physical inspections.
Issue Date: March 28, 2000
Audit
Report No.: 00-NY-177-0001
File Size: 397KB
Title: Nationwide Audit, Enforcement Center
We performed a nationwide audit of the Enforcement Center to assess
the Center’s efforts towards achieving the Secretary’s strategic
objective of restoring the public trust. The audit included reviews
at the Enforcement Center’s Headquarters and at its Satellite Offices
in New York, Chicago, and Fort Worth. The audit determined that
unless the U. S. Department of Housing and Urban Development (HUD)
is willing to provide the Center with the necessary authority and
resources to make prompt decisions when pursuing Enforcement actions,
the Center will not achieve its full potential of aggressively pursuing
enforcement actions against non-complying entities.
Issue Date: March 17, 2000
Audit
Report No.: 00-AT-123-0802
File Size: 35KB
Title: Atlanta Homeownership Center, Real Estate Owned, Single
Family Property Disposition Program, Area-2
We have completed a survey of the Atlanta Homeownership Center’s
(HOC) Single Family Property Disposition Program for the HOC jurisdiction
known as Area-2. Our survey was performed as part of an ongoing
national assessment of the performance and success of the Management
and Marketing (M&M) contracting initiative. Area-2 has been managed
by HOC employees since the failure of Intown Management, cancellation
of its contract, and bankruptcy of the firm in September 1999. Our
survey did not focus on Intown’s failure, but rather on HUD’s contingency
planning, ability to recover from failure of its contractor, and
most importantly, ability to sustain the program’s mission.
Based on the survey, we believe the HOC has generally been effective
in correcting many of the problems created by Intown. Operations
have improved under the supervision and guidance of the HOC management
and staff, and we commend your efforts in resolving many of the
significant challenges you faced following Intown’s failure. Not
surprisingly, however, is that HUD still has not met its program
mission. Our survey found increasing inventory, decreasing revenues,
properties not maintained according to requirements, untimely disposition
programs, and incomplete inventory files. While our assessment of
Area 2 operations gave ample evidence of the superior management
capabilities of HOC employees over the private contractor, it did
not give credence to the benefits of outsourcing single family property
disposition operations.
HUD anticipates implementing a new M&M contract for Area-2 in July
2000. In view of this upcoming event, we do not plan additional
audit work of Area-2 at this time nor do we offer any formal recommendations.
Issue Date: March 1, 2000
Audit
Report No.: 00-FO-177-0003
File Size: 276KB (Includes Appendices A, B, and C)
(Due to their file sizes, separate links are provided below for
Appendices D, E, F, and G)
Appendix
D - 544KB - Agency Comments
Appendix
E - 546KB - OIG Evaluation of Agency Comments
Appendix
F - 1,231KB - HUD OGC Legal Opinions and OIG Legal Analysis
Regarding Modernization Funds
Appendix
G - 7KB - Report Distribution
Title: US Department of Housing and Urban Development Attempt
to Audit the FY 1999 Financial Statements
In accordance with the Chief Financial Officers (CFO) Act of 1990,
we have reported the results of our attempt to audit HUD’s principal
financial statements for the fiscal year ended September 30, 1999.
We issued our report to meet our obligation under the CFO Act to
report by March 1, 2000. Our report explains why we were unable
to perform sufficient procedures to opine on HUD’s financial statements
in time to meet this statutory due date or be reasonably close to
meeting this date. We issued our report without HUD’s principal
financial statements. HUD is responsible for completing its Fiscal
Year 1999 Accountability Report, which is to include the financial
statements along with this report or an update. Our report includes
our findings on HUD’s internal controls and compliance with laws
and regulations resulting from our attempt to audit HUD’s principal
financial statements. Had we completed our audit, we might have
found additional matters we would have reported. Our report discusses
the significance of HUD’s financial management and control problems
and HUD’s actions to correct them. Our report also contains recommendations
to assist the Department in its continuing efforts to correct these
longstanding problems.
Issue Date: February 29, 2000
Audit
Report No.: 00-FO-131-0002
File Size: 415KB
Title: Audit of the Federal Housing Administration’s Fiscal Year
1999 Financial Statements
This report presents the results of KPMG LLP’s (KPMG) audit of
the Federal Housing Administration’s (FHA) financial statements
for the year ended September 30, 1999. We concur with KPMG’s opinion,
that the financial statements present fairly, in all material respects,
FHA’s financial position as of September 30, 1999, and its net costs,
changes in net position, budgetary resources, and reconciliation
of net costs to budgetary obligations, for the year then ended.
Issue Date: February 24, 2000
Audit
Report No.: 00-FO-177-0001
File Size: 75KB
Title: Audit of the Government National Mortgage Association’s
Fiscal Year 1999 Financial Statements
This report presents the results of KPMG LLP’s (KPMG) audit of
the Government National Mortgage Association's (Ginnie Mae) financial
statements for the year ended September 30, 1999. We concur with
KPMG’s opinion, that the financial statements present fairly, in
all material respects, Ginnie Mae’s financial position as of September
30, 1999 and results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting
principles.
In addition to KPMG’s unqualified opinion on Ginnie Mae’s financial
statements, the audit results indicate that there were no material
weaknesses or reportable conditions with Ginnie Mae’s internal controls,
or material instances of non-compliance with laws and regulations.
Furthermore, KPMG’s assessment of Ginnie Mae’s efforts to address
recommendations from prior years indicated that, while some efforts
are incomplete, the outstanding issues are not material to the financial
statements, requiring reporting in the audit report. Instead, these
outstanding issues are being reported separately to Ginnie Mae management.
We reviewed Ginnie Mae’s process for developing and supporting
performance measures included in the Overview and D&A sections of
its annual report. Working with KPMG, we determined that the financial
data presented with the performance measures were not inconsistent
with the financial statements. Our review disclosed that for the
financial performance measures assessed, Ginnie Mae complied with
OMB requirements to document and support financial and statistical
information presented in the D&A.
Issue Date: February 10, 2000
Audit
Related Memorandum No.: 00-SF-123-0801
File Size: 49KB
Title: Limited Review - REO Division Operations
We conducted a limited review to evaluate the internal control
procedures in place for disposing of HUD-acquired single family
properties at: (1) the former HUD Los Angeles (LAAO) Real Estate
Owned (REO) Division during the time that a scheme involving the
sale of REO properties at well below the appraised value was perpetrated
by a HUD housing specialist; (2) the Santa Ana Homeownership Center
(HOC) REO Division and, (3) the Management & Marketing (M & M) contractor,
Golden Feather. The purpose of the review was to determine the adequacy
of the internal control procedures at LAAO that allowed the scheme
to occur and whether adequate internal control procedures are in
place at the Santa Ana HOC and Golden Feather to minimize the likelihood
that the scheme could reoccur.
Issue Date: February 3, 2000
Audit
Report No.: 00-BO-101-0801
File Size: 49KB
Title: Settlement Agreement With Creative Choice Homes, Inc. HA,
City of Bridgeport, Bridgeport, CT
We are currently auditing the Housing Authority of the City of
Bridgeport (Authority) and became aware of the subject agreement
during our review of the Father Panik Village replacement status.
In addition, certain payments made by the Authority to Creative
Choice Homes, Inc. (CCH) are not in accordance with contract terms
and conditions. We are issuing this memorandum in advance of our
audit report to provide our recommendations to you so that corrective
actions can be initiated. We are recommending that the Authority’s
request for $1.8 million in funds for a termination settlement of
its contract with CCH not be approved. We also recommend that you
require CCH to resubmit invoices supporting $881,680 of planning
cost to comply with contract terms and conditions.
Issue Date: February 1, 2000
Audit
Report No.: 00-AT-106-0801(Revised)
File Size: 1,332KB
Title: HUD’s Approval of Noncompetitive Procurement, Public Housing
Division, San Juan, Puerto Rico
Our recent review of the Puerto Rico Public Housing Administration
(PRPHA) procurement procedures disclosed that HUD’s approval of
noncompetitive procurement for two multi-million dollar contracts
was improper. On December 23, 1997, HUD’s Public Housing Division
authorized the PRPHA to execute a contract with Cardona, Irizarry
& Co. for $9.6 million due to an emergency, and a contract with
CVR Puerto Rico, Inc. for $4.4 million as sole source. Our review
disclosed that the PRPHA’s request to procure these contracts using
noncompetitive method was not justified and did not include a cost
analysis, which is mandatory, especially in these cases. Therefore,
neither the PRPHA nor HUD had a basis to determine the reasonability
of the contract costs. We questioned the reasonability of the charges
under both contracts in the audit report on the review of the PRPHA
procurement procedures.
We are issuing this revised memorandum to include HUD’s comments.
Excerpts from HUD’s comments are included in the finding. Appendix
A contains the complete text of the comments. The original memorandum
was issued on November 15, 1999, under the same number.
Calendar Year 1999
Issue Date: November 30, 1999
Audit-Related
Memorandum No.: 00-DP-166-0803
File Size: 16KB
Title: Review of the Department's Year 2000 Clean Management Procedures
and Preparedness For the Millennium Rollover
We have completed a review of HUD's Year 2000 (Y2K) clean management
effort and the Day One strategy for the millennium date change.
We found that HUD's clean management policies are sufficient to
provide controls to ensure that further changes would not threaten
existing Y2K compliance. Clean management includes controls and
procedures implemented by HUD to protect Y2K compliant program code
and data from non-certified changes, thereby placing its Y2K compliance
status in jeopardy. In addition, procedures are in place to recertify
applications with major releases or changes that were made after
initial Y2K certification.
Issue Date: November 8, 1999
Audit-Related
Memorandum No.: 00-DP-166-0802
File Size: 14KB
Title: Year 2000 IV&V Review of HUDCAPS and A43C Claims Modules
Our office has completed a limited Independent Verification and
Validation (IV&V) review of selected HUDCAPS and A43C Claims modules.
We selected these two mission critical systems because HUDCAPS is
the focal point for integrating all HUD financial systems and A43C
provides on-line update and inquiry capability to Single Family
Insurance and Claims data bases. We reviewed 56 programs containing
300,000 lines of code focusing on date intensive modules. The objective
of our review was to determine if the modules would be able to process
dates correctly in the year 2000 (Y2K). The programs were selected
based on discussions with TEAM 2000/Certification group and Information
Technology (IT) staff.
We found that the HUDCAPS selected modules were Y2K compliant.
However, our review of A43 found that module A43TAA1, which contained
statements with two digit year fields used in date calculations,
would fail during the millennium transition. This program also contained
a leap year routine that would fail after the year 2000. The IT
staff researched this issue and corrected the two digit year problem.
But the leap year problem remains. Even though the code would work
in year 2000, it would fail for leap years 2004 and beyond. Since
minimum resources are required to correct this problem, we recommend
that you work with Housing to correct the module A43TAA1 so that
the program would work for the leap years beyond year 2000.
Issue Date: November 4, 1999
Audit
Report No.: 00-DP-166-0002
File Size: 677KB
Title: Audit Report of the Initial Development Efforts of the
Departmental Grants Management System
We conclude that the initial DGMS development efforts are not
cost effective. In particular, the "combined" development solution,
selected from four technical alternatives in the DGMS feasibility
study, was later abandoned in favor of the most costly and risky
"custom" solution. The "combined" solution was to expand upon the
software programs, developed to date from IDIS and from a system
from another federal agency, called GATES. The switch to the "custom"
solution has led to simultaneous development of two competing Departmental
systems -- the existing IDIS and the replacement DGMS. This dual
effort approach to grants management leads to higher development
costs and greater risks of failure.
Issue Date: October 29, 1999
Audit
Report No.: 00-DP-166-0001
File Size: 1,112KB
Title: HUD Information Technology Investment Practices
We found that HUD IT investment projects are below industry average
in productivity and quality, management decisions are based on incomplete
cost and schedule data, and project plans. In addition, contractor
controls need improvement and monitoring of project progress is
inadequate. The conditions found are due to the absence of a consistent
approach to managing and controlling IT investment projects and
failure to use industry accepted project management practices. HUD
has not established 'Project Management', as a core competency to
manage system development efforts.
Issue Date:October 14, 1999
Audit
Memorandum No.: 00-FW-177-0801
File Size: 35KB
Title: Community Builder’s Role in Phoenix Point Transitional
Housing Alexandria HA, New Orleans, LA
Our review concluded that HUD’s Senior Community Builder for New
Orleans had inappropriately interfered with a Public Trust Officer’s
attempt to bring the Authority within compliance of its ACC. The
Senior Community Builder’s interference created an atmosphere of
confusion to Authority and local government officials. As a result,
the Authority did not know whose directions within HUD to follow.
Without the Senior Community Builder’s interference, the Authority
may have resolved Phoenix Point within 1 month of the notification
letter. To date, Phoenix Point remains unresolved. During our review,
HUD’s Director of Community, Planning and Development (CPD) attempted
to impede our audit by denying that his office had any files pertaining
to Phoenix Point. Another CPD employee had to provide the file on
Phoenix Point.
Issue Date: October 6, 1999
Audit-Related
Memorandum No.: 00-DP-166-0801
File Size: 19KB
Title: Housing Authorities' Year 2000 Readiness Activities
Our office has completed a limited review of the Year 2000 (Y2K)
readiness activities at nine Public Housing Authorities (PHAs):
Baltimore, Chicago, Dallas, Detroit, District of Columbia, Fort
Worth, Omaha, New Orleans, and New York City. The objectives of
our review were to determine whether: 1. The PHAs have established
basic project management structures and procedures to ensure that
potential Y2K problems will be prevented; and 2. Adequate steps
have been taken to protect the health and safety of HUD program
recipients from potential Y2K problems. The nine PHAs were selected
because they are some of the largest PHAs nationwide and, therefore,
pose the greatest risk to the health and safety of their tenants
should Y2K failures occur. We interviewed PHA management and key
Y2K project personnel. We also reviewed samples of documentation
for Y2K project management, awareness, assessment, remediation,
testing, and contingency planning. When appropriate, we provided
the PHA management with Y2K educational material in the form of
presentations and printed material to assist them in organizing
and completing necessary corrective actions.
Issue Date: September 30, 1999
Audit
Memorandum No.: 99-BO-199-0802
File Size: 310KB
Title: Implementation of the Real Estate Assessment Center’s Physical
Inspection Assessments
The purpose of our review was to assess the implementation of the
Real Estate Assessment Center’s (REAC) operations pertaining to
physical inspection assessments. REAC provides assessments to help
HUD monitor the properties in its public housing, subsidized housing
and insured housing portfolios. We have identified two unresolved
concerns and made three recommendations to strengthen REAC’s implementation
process.
Issue Date: September 30, 1999
Audit
Report No.: 99-PH-163-0002
File Size: 133KB
Title: Internal Audit Follow-up Review of HUD Contracting
We performed an audit of the Department’s contracting initiatives.
Our objectives were to assess the affect of recent reform initiatives
on the procurement process and to determine if the reform initiatives
were providing adequate controls and safeguards against fraud, waste
and abuse. The audit was undertaken to follow up on the corrective
actions being taken in connection with the recommendations in our
prior audit of HUD’s contracting (97-PH-163-0001), dated September
1997.
Our review of the recently deployed HUD Procurement System (HPS)
showed that substantial strides have been made in automating the
Department’s procurement data and establishing the necessary financial
linkages to fully integrate HPS with HUD’s core accounting system.
Our analysis of HPS showed that the system was capable of providing
detailed information for both headquarters and field office procurement
actions and could track contract status from the advanced procurement
planning stage through the request for contract services, solicitation,
award, and post-award contract administration. Queries made through
the system’s standard reports module and its ad-hoc report generation
tool showed that information was readily available and easily obtainable
to assist day-to-day users and senior officials in managing procurement
activity.
While the CPO’s commitment to making the Department a model procurement
agency is encouraging, we are not yet convinced that the Department’s
overall contracting attitudes and practices have changed significantly.
Issue Date: September 30, 1999
Audit
Memorandum No.: 99-FO-101-0802
File Size: 403KB
Title: Survey of the Troubled Agency Recovery Centers (TARC) and
Related Field Office Activities
As part of OIG’s on-going reviews of the Department’s progress
in implementing HUD’s 2020 Management Reform Plan, we completed
a survey of the TARCs and activities at selected "Hub" and program
center (PC) field offices. Our primary objective was to review the
TARCs’ procedures for processing troubled Public Housing Authorities
(PHA) to determine whether the TARCs are effective in improving
troubled PHAs’ performance levels. As a secondary objective, we
reviewed the Hub/PCs’ overall PHMAP process to determine if all
troubled PHAs were properly identified and forwarded to the TARCs
for processing.
The TARCs continue to operate well below the operating capacity
for which they were established in Fiscal Year 1998 under HUD’s
2020 Management Reform Plan. The Public Housing Management Assessment
Program (PHMAP), currently being used by the Department to identify
troubled PHAs, does not generate a sufficient number of PHAs to
fully employ or justify existing TARC staffing levels, nor do Hub/PC
offices always effectively identify PHAs that may/should be designated
as troubled and forwarded to the TARCs for processing. As of August
1999, the TARCs had 52 troubled PHAs with 22,112 units in their
inventory, and had assumed the servicing responsibilities for 4
non-troubled PHAs with 15,475 units. This represents only 2 percent
of the estimated 3,300 PHAs managing 1.3 million units nationwide.
Furthermore, we are concerned the Department has not been able to
quantify the number of PHAs the new Public Housing Assessment System
(PHAS) will classify as troubled in Fiscal Year 2000, and whether
all these PHAs will be assigned to the TARCs for processing. TARC
staffing levels were set based on the assumption that implementation
of PHAS would result in identification of 575 troubled PHAs.
Generally, we found the TARCs were developing strategies that
improved the PHAs’ ability to increase their PHMAP scores to the
extent that their designation will be changed from a troubled to
either a standard or high performer. However, the TARCs’ strategies
and processing procedures do not always identify and address all
pertinent management and operational deficiencies troubled PHAs
need to correct to improve performance on a sustainable basis. Furthermore,
we found the TARCs current procedures for processing troubled PHAs
do not always comply with the Housing Act and PHMAP regulations.
Specifically, the TARCs do not always (1) timely obtain independent
assessments for troubled PHAs transferred from the Hubs; (2) complete
independent assessments before on-site evaluations and Memoranda
of Agreement (MOA)/Recovery Plans are completed; and (3) prepare
comprehensive MOA/Recovery Plans that address all operational and
management issues.
Issue Date: September 30, 1999
Audit
Report No.: 99-DP-166-0004
File Size: 597KB
Title: Audit Report of HUD's Efforts to Correct Year 2000 Problems
(Phase III)
Our review found that while the Department has reported completion
of Y2K renovation and certification of all mission critical systems,
a number of weaknesses remain. First, the supporting Y2K contingency
plans have not been fully developed and tested. Second, HUD's Data
Center has not performed sufficient testing of system software for
Y2K compliance. Third, critical HUD Headquarters building systems
have not been Y2K certified. Fourth, HUD has not taken steps to
ensure data exchanges between mainframe and personal computers will
yield correct results in the Year 2000. Finally, one of four mission
critical systems reviewed, Loan Accounting System (LAS), lacked
sufficient basis to verify Y2K certification.
In the Department’s September 1, 1999 response to the draft report
issued on July 7, 1999, HUD did not agree with a number of recommendations.
Had HUD initiated action to implement these recommendations prior
to September 1, the risks of Y2K failures would have been greatly
reduced. However, with less than 100 days left until the Year 2000,
there is now insufficient time to implement these recommendations.
Since the Department is accepting a higher degree of risk than necessary,
it is more prudent for HUD to spend the remaining time preparing
for Y2K failures. This effort should also ensure that the associated
risks for not implementing the recommendations are addressed and
mitigated in the Y2K contingency plans.
Since formal recommendations are not included in this report, we
do not expect a response from the Department. However, we are issuing
this report to alert HUD management of continued Y2K risks.
Issue Date: September 30, 1999
Audit
Report No.: 99-FW-177-0002
File Size: 439KB
Title: Nationwide Audit Community Builders
We performed a nationwide audit of the Community Builders to evaluate
their hiring, functions, responsibilities, and their impact on other
organizations within HUD. The audit included reviews in Headquarters;
Boston, Massachusetts; Denver, Colorado; Detroit, Michigan; Fort
Worth, Texas; Houston, Texas; Knoxville, Tennessee; Los Angeles,
California; New Orleans, Louisiana; New York, New York; Richmond,
Virginia; and Seattle, Washington. The audit found problems with
the Community Builder concept, its implementation, and its impact
on HUD.
This audit is part of the Inspector General’s continuing reviews
of HUD’s 2020 Management Reform Plan, but it also responds to requests
from members of Congress and numerous citizen complaints. The audit
found problems with the Community Builders’ concept, its implementation,
and its impact on HUD.
The audit disclosed that HUD did not properly plan or implement
the Community Builder function. The Department may have inappropriately
used Schedule A hiring authority to hire the Community Builder Fellows
and violated requirements of the selection process. To establish
the Community Builder position, HUD had to allocate salary, training,
and travel dollars, as well as personnel, from its monitoring and
enforcement role – at a time the Department was already significantly
decreasing its workforce. This allocation contradicts one of the
primary goals of the Community Builder function, which was to allow
HUD personnel assigned to the monitoring and enforcement roles to
better perform their jobs. In order to maintain Community Builders,
HUD will have to continue spending at high levels to pay and train
each successive Fellows class. HUD cannot recover the personnel
positions lost to Community Builders without an increase in funding.
The impact of Community Builders is difficult to measure, when measurable.
The one clear effect of the Community Builders is the dramatic increase
in the number of people at HUD not part of a specific program, engaged
in customer relations, and owing their jobs to the Department’s
political management.
Issue Date: September 30, 1999
Audit
Memorandum No.: 99-FW-177-0803
File Size: 49KB
Title: Community Builders’ Role In Multifamily Property Disposition
Multifamily Housing Property Disposition Center Fort Worth, Texas
During our nationwide review of Community Builders, the Fort Worth
Property Disposition staff expressed concerns regarding the involvement
of Community Builders in disposing of HUD property. The staff named
seven properties. We decided to review those concerns and determine
whether Community Builders had inappropriately intervened with the
property disposition process. To accomplish the objective, we reviewed
documents regarding the disposition of five properties and interviewed
applicable HUD staff and local officials. The review covered the
respective periods HUD held each property in its inventory. The
properties were: Crest A in Dallas, Texas; Pebble Creek in Arlington,
Texas; two Jeff-Vander-Lou properties in St. Louis, Missouri; and
Kenilworth in Portland, Oregon.
Our review of five properties disclosed that in three cases Community
Builders did inappropriately interfere in HUD’s disposition of the
property. In the three cases, a Community Builder intervened and
placed inappropriate pressure on multifamily housing officials.
As a result of the Community Builder interference, HUD spent more
than $4.7 million in holding costs or lost sales proceeds. In one
instance, HUD sold a property that it had invested $17 million to
a nonprofit for $10.
Issue Date: September 30, 1999
Audit
Report No.: 99-DE-121-0001
File Size: 375KB
Title: Department of Housing and Urban Development’s Loss Mitigation
Program
We performed a nationwide audit of HUD’s Single Family Loss Mitigation
Program to determine the program’s effectiveness at keeping families
in their homes and reducing foreclosures, as well as to evaluate
the risks associated with the program. Our audit work included comprehensive
reviews at four large servicing mortgagees, the Single Family Claims
Branch, and the National Servicing and Loss Mitigation Division.
Our audit work also included limited reviews at four small servicing
mortgagees, HUD’s Quality Assurance Division located in Headquarters
and within the four Home Ownership Centers.
According to our analysis of HUD data, FHA has insurance in force
for 6,235,000 single family dwellings, totaling over $475 billion.
The four large mortgagees reviewed during our audit serviced 1,736,875
insured loans or 27 percent of FHA’s insured loan portfolio. From
October 1996 through May 1999, HUD paid 18,609 loss mitigation claims
for the three home retention tools. The four mortgagees we reviewed
were paid for 11,349 of these claims, or 61 percent, of the total
claims paid.
We could not determine at the time of our audit whether FHA’s
Loss Mitigation Program will ultimately reduce foreclosures and
keep families in their homes, because the majority of the loss mitigation
activities have occurred within the last year and are currently
in process. However, we did identify significant weaknesses within
the program that could seriously impact the program’s effectiveness.
The audit identified weaknesses in the following areas: incentive
claim payments; monitoring and oversight of servicing mortgagees;
and default status reporting. HUD needs to initiate corrective action
in these areas to ensure the program is carried out more effectively
and that the mortgage insurance fund is protected against unnecessary
losses.
Issue Date: September 17, 1999
Audit
Report No.: 99-AT-123-0001
File Size: 2516KB
Title: Single-Family Property Disposition Program
In March 1998, the General Accounting Office (GAO) reported on
FHA’s Property Disposition Program. GAO concluded that FHA did not
have adequate controls in place to oversee its Real Estate Asset
Management (REAM) contractors and that property conditions were
deteriorating.
Our audit disclosed no improvement in program operations since
GAO’s report. Subsequent to field consolidation, inventory increased,
sales to homeowners declined, age and condition of FHA properties
deteriorated, revenue was lost, and holding costs increased. FHA
continued to have poor control over its REAM contractors. Because
of staff shortages caused by the reorganization, FHA management
issued emergency contracts, and placed temporary, inexperienced,
and/or untrained HUD staff in property disposition jobs. The effort
did not overcome the problems. FHA received numerous reports of
non-performance by REAMs, but took little enforcement action because
it had no system to record, track, or quickly respond to these reports.
Issue Date: August 27, 1999
Audit-Related
Memorandum No.: 99-DP-166-0003
File Size: 28KB
Title: Review of the Department's Overall Year 2000 Business Process
Continuity Contingency Plan and Supporting Year 2000 Contingency
Plans
Our office has completed our review of the Department's overall
"Year 2000 Business Process Continuity Contingency Plan and Supporting
Year 2000 Contingency Plans." The overall plan includes 30 supporting
plans for core business functions. We found that the Department
did not follow the General Accounting Office's (GAO) and industry
accepted standards in developing the plans. We also found that many
of the plans lack clarity and detail and show no evidence of coordination
with the other program areas or operations staff. Additionally,
a review of HUD's contingency plan testing efforts disclosed that
over a third of the supporting plans will not be tested. Several
contingency plans either did not meet their scheduled test completion
dates or do not have a test completion date. Also, approximately
a third of the plans have not been updated since April 26, 1999
although updates are required quarterly. Lastly, we noted that the
current testing schedule for those plans to be tested showed completion
dates may not provide enough time for HUD to correct and revalidate
their contingency plans before the Year 2000 (Y2K).
Issue Date: August 25, 1999
Audit
Report No.: 99-FW-111-0802
File Size: 29KB
Title: Enforcement of Compliance Agreement with Herbert J. Zieben
and H.J.Z., Inc.
HUD Multifamily staff are not taking action to enforce the Compliance
Agreement. Multifamily staff tasked with enforcing the agreement
did not take action for several reasons: 1.) they were not reviewing
the reports submitted by Mr. Zieben; 2) they were not aware of the
Compliance Agreement; and 3) they assumed it was OIG’s responsibility
to enforce the agreement. As a result, Mr. Zieben made payments
totaling over $3.1 million to his identity-of-interest companies.
In addition, transfers of funds totaling $350,000 have occurred
out of one property that had minimal surplus cash available.
Issue Date: July 9, 1999
Audit
Report No.: 99-KC-113-0001
File Size: 116KB
Title: Security Costs of MultiFamily Property Disposition Properties
(Multi-Location)
Neither HUD nor its Property Management contractors established
a means of determining the level and type of security needed at
the Multifamily Property Disposition properties. HUD and the Property
Management contractors assumed all properties needed high levels
of security when HUD first took control of them. As a result, HUD
spent more than $38 million on security services without assurance
that the levels and types of security were appropriate.
Issue Date: June 18, 1999
Audit-Related
Memorandum No.: 99-SE-121-0802
File Size: 72KB
Title: Confidential Complaint - Appraiser Selection for FHA-Insured
Single Family Properties Anchorage, Alaska
We found that the complainant's allegation was credible in that
lenders were selecting appraisers recommended by real estate agents.
While HUD regulations require lenders to select and be responsible
for the work of single family property appraisers, the regulations
do not prohibit lenders from selecting appraisers recommended by
real estate agents. However, the results of our limited review of
loan files were inconclusive and did not disclose definite patterns
or relationships between real estate agents, appraisers, underwriters,
or loan processors. Also, we could not determine whether or not
lenders were losing business if they chose an appraiser other than
the one a real estate agent recommended.
Issue Date: June 1, 1999
Audit-Related
Memorandum No. 99-PH-202-0801
File Size: 39KB
Title: Receivership Chester Housing Authority Chester, Pennsylvania
We have completed a review of selected operations of the Chester
Housing Authority (CHA). The CHA has been operating under court
appointed receivership since 1994, and the Receiver and the current
CHA staff have made substantial progress in improving the CHA’s
operations. This memorandum addresses the CHA receivership and discusses
the issues of: 1) the need for continuing the receivership, 2) the
degree of Receiver services still required by the CHA, and 3) whether
a receivership fee adjustment is warranted due to reduced services
by the Receiver. Considering our review, we are recommending that
HUD, in concert with the Receiver and CHA, identify the areas of
CHA operation that still need the Receiver’s attention and effect
a plan , with time frames, to raise CHA performance to acceptable
levels in these areas. Upon successful completion of the plan, HUD
would petition the court to terminate the receivership.
Issue Date: March 31, 1999
Audit-Related
Memorandum No.99-SE-148-0801
File Size: 1,168Kb
Title: Section 108 Loan Guarantee Program
We completed reviews of complaints on two Section 108 projects
in Washington State. In the process of reviewing the allegations
in the complaints and the relevant HUD requirements, we identified
opportunities for improvement in the Section 108 program which we
want to bring to your attention. Addressing these opportunities
may help to further the Department’s missions under the HUD 2020
Management Reform Plan of empowering people and communities, and
restoring the public trust. The opportunities we identified relate
to the following categories of HUD requirements or topics:
- citizen participation,
- displacement of businesses and jobs,
- presumption alternative for meeting a national objective,
- timeliness of HUD approval of Section 108 loan guarantee,
- assistance to grantees on environmental requirements,
- excess profits to for-profit businesses,
- disclosure of information by applicants,
- citizen concerns and misconceptions about the Section 108 program,
and guidance on how an activity can qualify under the spot blight
national objective.
Issue Date: March 30, 1999
Audit
Report No. 99-CH-156-0001
File Size: 221Kb
Title: HUD's Oversight of the Empowerment Zone Program, Office
of Community Planning and Development, Multi-Location Review
We completed a multi-location audit of the Office of Community
Planning and Development's oversight of the Empowerment Zone Program.
The objective of our audit was to determine whether HUD has an effective
system for oversight and control of the Program. We performed the
audit based upon our Fiscal Year 1998 annual audit plan. The audit
was conducted at HUD Headquarters, four Empowerment Zones, and HUD's
State Offices of Community Planning and Development having jurisdiction
for the four Zones we reviewed. The four Zones were Atlanta, Chicago,
Detroit, and Philadelphia.
We concluded that HUD did not have an adequate system of oversight
and control for the Empowerment Zone Program. HUD did not effectively
assess the progress and status of the Empowerment Zones. The Headquarters'
EZ/EC Team did not confirm the appropriateness of the use of Empowerment
Zone funds, nor did it confirm that the use of funds complied with
the Cities' Strategic Plans. The Team also did not ensure that Performance
Reviews submitted by the Cities were verified for accuracy. As a
result, HUD did not detect that Empowerment Zone resources were
not always efficiently and effectively used, and the impression
exists that the benefits of the Empowerment Zone Program were greater
than actually achieved.
Issue Date: March 29, 1999
Audit
Memorandum No: 99-FW-155-0801
File Size: 21KB
Title: City of Houston, Texas, Homebuyers Assistance Program
(funded by the HOME Program)
During our audit of the City of Houston’s HOME Program, we found
two weaknesses in the HOME Program regulations. First, Houston provided
assistance to homebuyers who did not need help to purchase a home.
Second, in the case of non-competitively procured subrecipients,
non-financial conflicts of interest can occur that are detrimental
to HUD.
Issue Date: March 26, 1999
Audit
Report No: 99-SF-11-0801
File Size: 69KB
Title: Corrective Action Verification Multi-Region Audit of Section
236 Program Excess Rental Income Collections - Audit Report No.
95-SF-111-0001
We found that HUD did not satisfactorily implement 11 of the 17
audit recommendations. Therefore, we are reopening recommendations
contained in Finding 2 (2A, 2B, 2D, 2E, 2F, 2G) and Finding 3 (3A,
3B, 3C, 3D, and 3E). The reported deficiencies that prompted those
audit recommendations have not been corrected. In fact, the uncollected
reported excess income increased from almost $15 million reported
in the report to over $18 million at the time of this CAV. Further,
the numbers of missing excess income reports increased from about
10,000 to nearly 14,000, so it is likely that unreported excess
income has also increased. The agreed upon recommendations, if implemented,
would have decreased both amounts in our original report. Officials
at all four field offices and Headquarters, where we performed the
CAV, attributed the lack of action to staffing changes associated
with HUD's reorganization.
Issue Date: March 25, 1999
Audit
Report No: 99-DP-166-0002
File Size: 373KB
Title: Review of HUD's Efforts to Correct Year 2000 Problems
(Phase II)
This report is the second review we performed as part of the OIG's
continuing oversight of HUD's Y2k initiative. We evaluated project
management oversight of six highly critical applications to determine
if the detailed project work and test plans, and the testing and
certification processes followed Departmental guidelines and industry
accepted best practices to minimize the impact of Y2k date problems.
In our first audit report (98-DP-166-0003 dated June 1, 1998), we
emphasized the need for a senior official to be involved with the
management and coordination of Y2k activities. We also stressed
the need to adopt an automated configuration management program
to control software changes made to correct the Y2k date problems.
The results of our current work have shown an even greater need
to address these two areas.
The Department has agreed that software configuration management
is a high priority item but has recognized and accepted the risks
for not fully implementing an automated configuration management
tool for all of HUD's platforms. The Department intends to implement
the automated tool when resources become available, possibly after
the Y2k renovation work is completed. HUD is committed to performing
Y2k renovation, certification, and testing for all applications
and the process has been in place for some time. However, there
are weaknesses in all three areas. In particular we are concerned
with weak controls over testing. Experience has shown that Y2k testing
is consuming between 50 to 70 percent of a project's time and resources.
The weaknesses exist because the Y2k Project Office is not functioning
at a high enough level with sufficient authority to ensure best
practices and standards are followed.
Although the recent involvement of the CIO in coordinating the
Y2k effort is a positive step, more needs to be done to provide
accountability for the Y2k project and operations. There is a continued
need for a senior level manager, such as the CIO, to provide the
necessary leadership and accountability over the Office of Information
Technology (IT) operations. Currently, the CIO has no direct authority
over HUD's IT and contractor personnel performing Y2k work. A senior
official with sufficient authority would ensure that everything
possible is done to minimize the risk of Y2k failures. In our first
report (98-DP-166-0003), we recommended that the Department place
the Office of IT within the Office of the CIO. However, the Department
decided not to implement this recommendation.
Issue Date: March 29, 1999
Audit
Report No: 99-FO-177-0003
File Size: 701 KB
Title: Audit of the U.S. Department of Housing and Urban Development
Fiscal Year 1998 Financial Statements
In accordance with the Chief Financial Officers (CFO) Act of 1990,
this report presents the results of our audit of HUD's principal
financial statements for the year ended September 30, 1998. Also
provided are assessments of HUD's internal controls and compliance
with laws and regulations. HUD continues to face major challenges
in its efforts to correct longstanding material internal control
weaknesses that are hindering its ability to carry out its mission
and improve program management. In particular, HUD needs to overcome
issues with its internal control environment, including the need
to upgrade financial systems and address resource issues. Our report
discusses the significance of HUD's financial management and control
problems and HUD's actions to correct them. Our report also contains
recommendations to assist the Department in its continuing efforts
to correct these longstanding problems.
We also identified several matters which, although not material
to the financial statements, will be communicated in a separate
management letter to the Department. That letter will also provide
additional details on some of the internal control weaknesses described
in this report. We appreciate the courtesies and cooperation extended
to the OIG staff and our contractor.
Issue Date: March 12, 1999
Audit
Report No: 99-FO-131-0002
File Size: 6,750 KB
Title: Audit of the Federal Housing Administration Audit of Fiscal
Year 1998 Federal Basis Financial Statements
We have audited the accompanying consolidated balance sheet of
the Federal Housing Administration (FHA) as of September 30, 1998,
and the related consolidated statements of net cost and changes
in net position, the combining statement of budgetary resources,
and the combined statement of financing (hereinafter collectively
referred to as "financial statements") for the year then ended.
The objective of our audit was to express an opinion on the fair
presentation of FHA’s 1998 financial statements. In connection with
our audit, we also considered FHA’s internal control over financial
reporting and tested FHA’s compliance with certain provisions of
applicable laws and regulations that could have a direct and material
effect on its financial statements.
In our opinion, FHA’s financial statements as of and for the year
ended September 30, 1998, are presented fairly, in all material
respects, in conformity with the hierarchy of accounting principles
and standards recommended by the principals of the Federal Accounting
Standards Advisory Board. This hierarchy is a comprehensive basis
of accounting other than generally accepted accounting principles.
As a result of our consideration of internal control over financial
reporting, we noted reportable conditions in the following seven
areas, the first four of which we also considered material weaknesses:
-
Addressing staff and administrative resource issues,
-
Placing more emphasis on early warning and loss prevention
regarding the insured portfolio,
-
Improving federal basis and budgetary accounting,
-
Improving technology systems in order to support business
processes more effectively,
-
Resolving Secretary-held mortgage notes and minimizing additional
mortgage note assignments and note servicing responsibilities,
-
Monitoring and accounting for single family property inventory,
and
-
Enhancing the design and operation of information systems general
and application controls.
Regarding our tests of compliance with certain provisions of laws
and regulations, we noted noncompliance with data and accounting
requirements of the Credit Reform Act of 1990.
Date Issued: March 5, 1999
Audit
Report No. 99-FO-171-0001
File Size: 126KB
Title: Audit of the Government National Mortgage Association’s
Fiscal Year 1998 Financial Statements
This report presents the results of the KPMG LLP’s (KPMG) audit
of the Government National Mortgage Association's (Ginnie Mae) financial
statements for the year ended September 30, 1998. We concur with
KPMG’s opinion, that the financial statements present fairly, in
all material respects, Ginnie Mae’s financial position as of September
30, 1998 and results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting
principles.
Audit Scope and OMB Audit Requirements
This audit was performed pursuant to the requirements of the Chief
Financial Officers Act and Office of Management and Budget (OMB)
Bulletin 98-08, Audit Requirements for Federal Financial Statements.
To complete this audit, we contracted with the independent certified
public accounting firm of KPMG. We approved the scope of the audit
work, monitored its progress at key points, reviewed their working
papers, and performed other procedures we deemed necessary. OMB’s
audit requirements in Bulletin 98-08, as amended, exceed Government
Auditing Standards, primarily in three areas.
These relate to:
· expanding the review of Ginnie Mae’s internal controls,
· reviewing performance measures contained in Ginnie Mae’s annual
report, and
· reporting under the Federal Financial Managers Improvement Act
(FFMIA) of 1996.
To address the first additional OMB requirement, we engaged KPMG
to expand their review of Ginnie Mae’s internal controls. The section
discussing internal controls presents the results of this work.
To address the second additional requirement, the Office of Inspector
General (OIG) performed the procedures required by OMB Bulletin
98-08. With respect to FFMIA, the reporting requirements do not
apply to the Ginnie Mae audit, but will be reported at the HUD consolidated
level.
Results of KPMG's Audit
In addition to KPMG’s unqualified opinion on Ginnie Mae’s financial
statements, the audit results indicate that there were no material
weaknesses or reportable conditions with Ginnie Mae’s internal controls,
or material instances of non-compliance with laws and regulations.
Furthermore, KPMG’s assessment of Ginnie Mae’s efforts to address
recommendations from prior years indicated that, while some efforts
are incomplete, the outstanding issues are not material to the financial
statements, requiring reporting in the audit report. Instead, these
outstanding issues are being reported separately to Ginnie Mae management.
OIG Review of Ginnie Mae’s Performance Measures
Ginnie Mae’s performance measures are incorporated in both the
"Overview" and "Management’s Discussion and Analysis of Financial
Position and Results of Operations" (D&A) sections of Ginnie Mae’s
Fiscal Year 1998 annual report prepared under the requirements of
the CFO Act. In accordance with OMB Bulletin 98-08, we obtained
an understanding of certain aspects of Ginnie Mae’s internal controls
and assessed control risk relative to the policies and procedures
adopted by management to provide reasonable assurance that data
supporting reported performance measures are properly recorded and
accounted for to permit preparation of reliable and complete performance
information.
For purposes of this report, we classified the significant D&A
internal control policies and procedures relative to the production
of performance measures into the following categories:
- Operations
- Risk Management
- Liquidity and Capital Adequacy
We reviewed Ginnie Mae’s process for developing and supporting
performance measures included in the Overview and D&A sections of
its annual report. We noted that for some performance measures,
the data used were as of periods prior to the end of the fiscal
year because this was considered by Ginnie Mae to be the best available
information. In addition, working with KPMG, we determined that
the financial data presented were not inconsistent with the financial
statements. Our review disclosed that for the financial performance
measures assessed, Ginnie Mae complied with OMB requirements to
document and support financial and statistical information presented
in the D&A.
In prior years, we have reported that Ginnie Mae needs to build
on efforts already completed to improve performance measures. Currently,
Ginnie Mae’s senior management has developed performance measures
in support of the Secretary of Housing and Urban Development’s Strategic
Plan for fiscal years 1998-2003 to comply with current guidance
under the Government Performance and Results Act. Ginnie Mae also
developed four measures or indicators for HUD’s fiscal year 1999
Annual Performance Plan to achieve the HUD goal to "Maintain liquidity
in the market for mortgage credit."
Comments of Ginnie Mae Officials
On February 26, 1999 we provided a draft of KPMG’s report to Ginnie
Mae officials for their review and comment. The draft was subsequently
discussed with Ginnie Mae officials. Ginnie Mae largely agreed with
the results of the audit. Ginnie Mae’s comments were considered
in developing the final version of this report.
Issue Date: February 1, 1999
Audit
Report No.: 99-DP-166-0001
File Size: 69KB
Title: Commercial Credit Card Program
We completed an audit of the agency's commercial credit card program
used for the procurement of goods and services. The objective of
our audit was to determine if the agency's credit card program was
effective and efficient and had adequate internal controls to ensure
that credit card purchases were authorized and made for official
purposes. Our audit concluded that the credit card program is effective
in reducing administrative time and costs associated with more formal
procurement methods. Program efficiency, however, needs to be improved
and the agency's internal controls over the credit card transactions
are weak. Approximately 43 percent of our sampled cardholder billing
statements, which support credit card invoice payments, lacked assurance
that credit card purchases were properly authorized and made for
official purposes. As a result the credit card program is subject
to fraud, waste, and abuse.
Issue Date: January 8, 1999
Audit
Report No. 99-B0-101-0001
File Size: 163KB
Title: Multi-District Audit - Public Housing Drug Elimination
Program
We conducted a multi-district audit of the Public Housing Drug
Elimination Program (PHDEP) encompassing fiscal years 1994 through
1997 which included the review of selected grantees’ PHDEP Programs
for fiscal years 1994 through 1996. The purpose of our review was
to determine if grantees are effectively administering their Programs,
and if the Department is accurately measuring Program accomplishments
to assure its primary goal is achieved. The report’s two findings
address the need for grantees to ensure better administration and
accountability of grant funds, and the need for HUD to have reliable
data to measure program effectiveness.
Calendar Year 1998
Issue Date: December 17, 1998
Audit
Report No. 99-FW-101-0001
File Size: 474KB
Title: Nationwide Audit HOPE VI Urban Revitalization Program
We performed a nationwide audit of the HOPE VI Urban Revitalization
Program to determine whether the program effectively, efficiently,
and economically addresses the needs of severely distressed public
housing. The audit work included comprehensive reviews at ten housing
authorities and HUD Headquarters. Although some of the authorities
had only made minimal progress, for sites where the physical revitalization
was completed, the transformation was impressive. The audit found
problems with HUD's monitoring and administration of the program.
While HUD has already begun to take corrective action in some areas,
HUD needs to complete planned actions and initiate other actions
in problem areas not yet addressed.
Date Issued: November 10, 1998
Audit
Report No. 99-PH-156-0001
File Size: 109KB
Title: Internal Audit, Youthbuild Program, Multiple Location Review
We performed an audit of the Department's administration of the
Youthbuild Program (Program). Our objectives of the audit were to
determine if HUD: (1) awarded Youthbuild implementation grants in
accordance with regulations, and (2) adequately monitored grant
recipients for compliance with program regulations.
We reviewed seven recipients, including the six largest recipients
in the nation, who received a total of $17 million in implementation
grants in the first three years funds were awarded. We found evidence
of very successful and efficient programs and others that were not
very effective. For example, during the 1993 grant year, Philadelphia
Youthbuild had 47 of 48 students earn their high school diplomas
at an average cost of $21,109, while Durham and Baltimore only had
14 students and 6 students earn their GED's at average costs of
$71,280 and $165,921, respectively.
The auditee generally agreed with program recommendations and
has taken steps to incorporate these recommendations in their 1998
grant awards. However, it should be noted the auditee strongly disagreed
with OIG's presentation of Youthbuild results.
Specifically, the auditee indicated that every Youthbuild program
is unique and there are many intangible outcomes that cannot be
adequately measured, and therefore it is unfair to compare results
among recipients. The auditee further felt the above chart presentation
was inappropriate because attainment of a high school diploma or
GED is not a program requirement.
While we agree there could be many intangible benefits to a Youthbuild
program, we do not agree that it is unfair to quantify and compare
a recipients performance with regard to the number of students earning
their high school diplomas or GED's and the number of homes rehabilitated.
We believe students earning their high school diploma and GED's,
while not a program requirement, are important measures of a recipient's
ability to foster permanent change in a participants future, and
goes to the very core of the programs objectives.
Basically, because of HUD's lack of monitoring or assessment, the
Department has gathered very little accurate or verified data of
results for over $130 million of grant funds awarded. Additionally,
our review determined grant recipients are not adequately maintaining
follow up participant tracking information and are not able to support
much of the participant information reported to HUD (APPENDIX A).
Considering the fundamental program objective of Youthbuild is to
provide young adults with educational and employment opportunities,
accurate follow up participant tracking is a critical measure of
the program's success.
Our review disclosed HUD needs to improve its overall administration
of the Youthbuild program. Specifically, HUD did not adequately:
review and rank Youthbuild applications; or perform necessary monitoring
of Youthbuild recipients. Deficiencies we noted included:
* rating elements were not scored consistently for four of 12 applications;
* an applicants demonstrated past performance was not adequately
considered in the rating process; and
* grantee recipients did not maintain adequate documentation to
support financial accountability, compliance with program regulations,
and program performance.
The Acting Director, Office of Economic Development stated that
oversights made in the rating and ranking of applications caused
the scoring errors, and that the selection process did not consider
an applicant's past performance unless it was included as part of
their next application. Additionally, the Acting Director, Office
of Economic Development stated HUD relied heavily on recipient certifications
and independent accountant reports, as there was not sufficient
staff resources to implement a monitoring program. As a result,
HUD has obligated Program funds without establishing adequate performance
standards relative to the program objectives and amount of funding
provided.
We recommend that HUD: incorporate prior performance evaluation
reports and progress reports into the application review process
resulting in a more accurate representation of a recipient's demonstrated
qualifications and experience; perform an independent quality review
of applications to ensure applicant rating sheets are mathematically
correct and objective rating elements have been scored consistently
among applicants; create an automated database to monitor a recipients
accomplishments relative to program objectives; and implement a
proactive on-site monitoring program that focuses on a recipients
financial accountability and program performance.
While this report contains only one finding, substantial improvement
is needed in HUD's administration of the Youthbuild program to ensure
future resources are used more efficiently. It should be noted that
the report details deficiencies in virtually all areas of the Youthbuild
program, to include selection of applicants for participation, accounting
for costs, and fulfillment of the Program objectives. We believe
HUD's plan to transfer some monitoring responsibility to local HUD
offices is a positive step towards strengthening recipient financial
and performance accountability.
Issue Date: September 30, 1998
Audit
Report No. 98-DP-166-0004
File Size: 267KB
Title: Controls Over Single Family Acquired Asset Management
System
We conducted a review of application and general controls related
to the Federal Housing Administration (FHA) Single Family Acquired
Asset Management System (SAMS). This audit was conducted at the
request of the FHA Comptroller's office to determine whether SAMS
is a reliable system for property disposition. KPMG Peat Marwick,
LLP, provided audit support for this review. The reliability of
SAMS is an essential element in supporting the annual FHA financial
statement audit required by the Chief Financial Officers Act. SAMS
processes and controls the disposition of single family properties
worth millions of dollars.
The review disclosed a number of deficiencies in SAMS that render
the system ineffective for managing and controlling the inventory
of properties undergoing disposition. The most serious weakness
is that SAMS does not have adequate controls in recording and tracking
property disposition obligations and expenditures. As a result,
the FHA is exposed to fraudulent and/or duplicate payments for purchases.
We also found SAMS cannot be relied upon for making management decisions
because of the poor data quality and exposure to unauthorized access.
Issue Date: April 16, 1998
Audit-Related
Memorandum 98-SE-107-0807
File Size: 162KB
Title: Northwest Office of Native American Programs, Oversight
of Southern Puget Sound Inter-Tribal Housing Authority, Seattle,
Washington
On November 29,1996, OIG received a request from the Secretary
of HUD to thoroughly review allegations of various improprieties
in the use of HUD funds by Tribal governments and/or Indian housing
authorities (IHAs) and inadequate monitoring by HUD's Office of
Native American Programs (ONAP). Program abuse at IHAs across the
country was alleged in The Seattle Times' December 1996 series of
articles entitled "From deregulation to disgrace" which identified
29 instances. The series included allegations that a $1.2 million
housing grant to the Southern Puget Sound Inter-Tribal Housing Authority
bought a polluted, unusable piece of property and built a large
home for the tribal chairman.
Audit Objective, Scope and Methodology
As part of our review to address the Secretary's request, we wanted
to know if the Northwest Office of Native American Programs (NWONAP)
provided effective oversight of the Southern Puget Sound Inter-Tribal
Housing Authority (IHA).
To accomplish this, we:
* reviewed The Seattle Times series.
* contacted the NWONAP Administrator to obtain:
* a perspective and position on the issues reported in The Seattle
Times series for the IHA, * a description of the program requirements
applicable to the IHA, and
* a description of actions taken by NWONAP in relation to the issues
reported in the series for this IHA.
* obtained and reviewed applicable program requirements including
statutes, regulations, handbooks, guidebooks, memoranda, and other
directives.
* interviewed appropriate staff, and reviewed available documentation
related to oversight. The review included testing of the management
information and control systems to obtain an understanding of how
those systems functioned.
* compared the oversight and actions taken by the NWONAP to the
applicable requirements.
We performed our field work from February through April 1997, and
extended our work as necessary to accomplish our objective. This
work was a part of the work done to address the Secretarial request
discussed above. This memorandum includes specific recommendations
that were not within the scope of the audit report responding to
the Secretarial request (Report 98-SE-107-0002).
Audit Results
Our review disclosed that NWONAP oversight of the IHA did not ensure
development requirements were met. A required environmental review
was not obtained prior to releasing funds for purchase of a commitment
to provide a leasehold and Low-rent funds were permitted to be used
as Mutual Help funds. As a result:
* The IHA spent $205,000 for a commitment to enter into a leasehold
on a polluted site that cannot be used to develop the planned ten
units of Low-rent housing until another $468,000 is spent to remove
the contaminates. Also, the IHA spent an additional $31,235 to identify
and remove a portion of the hazardous pollutants from this land
even though a leasehold had not been obtained.
* The IHA sold houses developed with Low-rent development funds
to Tribal members for $531,7291 less than the $749,295 it cost to
develop them. Accordingly, the ten intended Low-rent units were
not developed. Also, the Tribal Chairman, who was not low income
and not eligible for the Low-rent program, benefited from the IHA's
action, receiving a 2,100 square foot, $176,405 custom two story
home that he lived in without making any payments for the first
11 months.
Required Environmental Review Not Obtained
Federal regulations at 24 CFR 50, and HUD Handbook 7450.1 state
that HUD is responsible for completing an environmental assessment
prior to expending other than planning funds on a project. These
requirements are reiterated in HUD Development Handbook 7450.1,
REV-1.
NWONAP did not complete an environmental review before permitting
the IHA to advance the Tribe $205,000.
On December 22, 1993, the IHA requested $205,000 of its $1.2 million
Low-rent development grant to purchase a leasehold on a proposed
housing site for 10 of the 30 units included in the grant. The approved
development plan allocated these ten units to the Shoalwater Bay
Indian Tribe. On December 27, 1993, NWONAP approved the $205,000
disbursement to the IHA subject to five conditions, one being that
HUD would complete its environmental review. The IHA did not meet
these five conditions before paying the $205,000 to the Shoalwater
Bay Indian Tribe for the leasehold. Also, the NWONAP did not question
the IHA's use of the funds even though HUD had not completed the
required environmental review.
The polluted site cannot be used to develop the needed ten units
of Low-rent housing until contaminates are removed.
In 1997, the Environmental Protection Agency determined that the
site cannot be used for housing until contaminates are removed at
a cost of about $468,000. Prior to the Environmental Protection
Agency review the IHA had obtained a level two environmental review
at a cost of $25,373 which identified chemical and petroleum hazards,
and paid $5,862 to a contractor for removal of some of the contaminates.
Also, the property cannot be placed in trust because of the pollution.
Accordingly, the Tribe could not provide the IHA a leasehold and
had not provided a written commitment to provide a leasehold. (We
noted that the IHA advanced the funds to the Tribe in exchange for
a commitment to provide a leasehold. As of July 1997, the IHA has
not yet received a leasehold on the land.)
NWONAP's Director of Development, who was aware of the requirements,
placed a higher priority on starting the Low-rent development project
than on ensuring the site was environmentally safe.
The Director of Development (at the time) stated that he approved
the disbursement although he knew that an environmental review should
have been done. He stated he approved the disbursement without doing
the required review for several reasons. First, the IHA had been
trying for three years to obtain an approved site and had unsuccessfully
attempted to purchase three sites. Second, NWONAP assumed the land
could be (and needed to be) quickly purchased and placed into trust
and that all parties were unaware of any items which would impede
the process.
Low-rent funds were permitted to be used as Mutual Help funds.
The regulations at 24 CFR 950.455 state that an IHA may apply
to the HUD Area ONAP for approval to convert any or all of the units
in an existing rental project to the Mutual Help program. The application
process requires the IHA to submit a request for conversion to the
HUD Area ONAP. The HUD Area ONAP must review the application for
legal sufficiency; tribal acceptance; demonstration of family interest;
evidence that units are habitable, safe, and sanitary; family qualifications;
and financial feasibility. HUD also has provisions for converting
a rental project to the Mutual Help program prior to development
of the project. This is referred to as reformulation and requires
HUD approval. The preamble to the Federal Register publication of
the final rule part 950 addressed reformulation as follows:
* Consistent with other grant programs, if an IHA wishes to redirect
project funds, a program modification must be proposed and approved
before such reformulation can proceed.
NWONAP allowed the IHA to use Low-rent development funds as if
they were Mutual Help homeownership development funds.
The NWONAP denied an IHA request to reformulate the Low-rent development
to a Mutual Help development. Instead of officially reformulating
the development NWONAP simply allowed the IHA to sell houses developed
with Low-rent development funds to participants as if they were
Mutual Help development funds. These houses were developed with
funds allocated by the development plan to the Shoalwater Bay Indian
Tribe. The IHA had planned to convert the houses from Low-rent to
Mutual Help and the NWONAP Administrator understood that if an IHA
is planning to convert a rental project to Mutual Help, it should
treat it as Mutual Help from the start. The IHA's Executive Director's
notes from a January 1996 meeting with HUD show the NWONAP Administrator
suggested the IHA execute Mutual Help leases for the units it was
acquiring.
As a result, the IHA sold seven Tribal members houses for $531,7292
less than the $749,295 it cost to develop them and the ten intended
Low-rent units were not developed.
Seven Tribal members purchased houses developed with Low-rent funds
for at least $531,7293 less than the $749,295 it cost to develop
them. Since these seven homes were built with Low-rent development
funds and were not converted to the Mutual Help program, the disposition
should have followed the rules in 24 CFR 950 Subpart M for disposal
of Low-rent dwelling units. Those rules and the Annual Contribution
Contract require HUD approval of the disposition and sale at fair
market value.
The Tribal Chairman, who was not low income, received the greatest
benefit.
The IHA's records show the Tribal Chairman had an income of at
least $13,000 over the low income limits when he applied for Low-rent
housing in 1994. The Chairman received the largest house under the
program, at 2,100 square feet and at a cost to the IHA of $176,405.
The IHA sold the home to the Chairman for $76,184. The IHA has had
the $76,184 first mortgage for sale since the Chairman moved in
during April 1996. Additionally, the IHA did not require the Chairman
to make any mortgage or rental payments for the first 11 months
he lived in the home.
This occurred because NWONAP's Administrator placed a higher priority
on the flexibility in the regulations than on following the rules
of the program.
The NWONAP Administrator allowed the IHA's program to go forward
in the spirit of increased flexibility. He stated that he depended
on the IHA's prior Executive Director's assurances that the program
complied with regulations. Also, the NWONAP Administrator relied
on the verbal assurances of a staff member and instructions he thought
were from Headquarters that Low-rent projects could be treated as
Mutual Help projects right from the start if an IHA intended to
convert. However, the Low-rent requirements state that the reformulation
(during development) must go through a re-rating and re-ranking
process before being approved by ONAP. ONAP Headquarters staff confirmed
that unless the IHA applies and the Field Office approves a change,
a Low-rent project may not be treated as Mutual Help. The Deputy
Assistant Secretary for Native American Programs stated that to
be fair, they do not want IHAs to be able to change the type of
development at will, therefore they need to go through reformulation.
The NWONAP's actions allowed ineligible expenditures totaling $236,235
for a polluted site and the sale of houses built with Low-rent funds
for $531,7294 less than the $749,295 they cost. These actions have
reduced the number of housing units provided to eligible participants.
We believe that these conditions should be corrected consistent
with the requirements of the US Housing Act of 1937. However, we
recognize that the Native American Housing and Self Determination
Act of 1996 now governs HUD's Native American Housing programs and
will govern the use of any funds repaid to the program.
Date Issued: October 26, 1998
Audit
Related Memorandum No: 99-BO-119-0801
File Size: 78KB
Title: Advisory Report on Section 8 Contract Administration
This report presents our review of six Contract Administrators
in New England. We wanted to evaluate the performance of Contract
Administrators and identify any issues that could have an effect
on the Department's plan to contract out the administration of Section
8 Housing Assistance Payments. Contracting out project-based Section
8 administration is critical to the framework of the HUD 2020 Management
Reform Plan. Proper implementation of this activity could have a
positive affect on HUD's future.
At the September 10, 1998 meeting, you stated that you were planning
to issue a performance-based contract. Under a performance-based
contract, the Department would define objectives to be completed
under the contract. You informed us that the Department does not
have experience with performance-based contracting. We are presenting
information about the operations of six Contract Administrators
to assist the Department in its preparation of these objectives
for its Request for Proposals. This will be HUD's first Request
for Proposal for a performance-based contract. We have also identified
a number of issues that the Department should consider while preparing
this Request for Proposals. Recognizing and addressing these issues
will assist the Department in successfully transferring the administration
of Section 8 Housing Assistance Payment Contracts.
Since your office is developing the Request for Proposals, we believe
that timely presentation of data from current Contract Administrators
will be beneficial. Therefore, we are not presenting a draft report
seeking comments. Also, we have not included any recommendations.
Date Issued: September 30, 1998
Audit
Report No. 98-SE-148-0003
File Size: 0KB
Title: Citizen Complaint, City of Spokane, Section 108 Loan Guarantee
Application Redevelopment of River Park Square, Spokane, Washington
We reviewed complaints from citizens and organizations concerning
the City of Spokane’s Section 108 loan guarantee application for
the redevelopment of River Park Square. The complaints were submitted
to the Office of Inspector General, to the Office of Block Grant
Assistance in HUD Headquarters, and to other entities. We focused
our review on the allegations in the complaints that raised questions
about eligibility of the project and compliance with HUD regulations.
We categorized the allegations into seven HUD-requirement issue
areas. These were national objectives, public benefit, private financing
of the project, displacement of jobs and businesses, citizen participation,
financial feasibility, and aspects of the environmental review process.
We determined that the allegations identified a violation or possible
violation of HUD regulations for two of the seven issue areas. We
also identified one deficiency that was related to the issue areas
we reviewed but was not specifically included in the complaints.
Date Issued: September 15, 1998
Audit
Report No. 98-SF-174-0002
File Size: 222KB
Title: Internal Audit - Office of Fair Housing and Equal Opportunity
This report includes four findings with recommendations for corrective
action. Issues presented in the first two findings have previously
been brought to FHEO's attention; however, serious problems still
exist. In September 1994, the United States Commission on Civil
Rights (USCCR) assessed the fair housing activities of HUD and reported
that it had not made cause determinations within the 100-day benchmark
set by Congress. Also in 1996, USCCR assessed Title VI enforcement
efforts and reported that HUD had not ensured that recipients and
sub-recipients complied with Title VI requirements. As shown in
Findings 1 and 2 of this report, the same conditions existed at
the time of this review.
We note that FHEO requested a funding increase from $30 million
to $52 million for FHAP agencies and FHIP grantees for FY 1999.
We question the underlying basis or appropriateness for the funding
increase especially since this audit points out serious management
deficiencies in FHEO's ability to adequately manage its programs.
We believe that FHEO should assure itself that, in light of current
staffing reductions, it can sufficiently absorb any workload increase
resulting from this funding increase. Another concern is the ability
of FHAP agencies to properly manage their programs. As noted in
Finding 1, FHAP agencies were not managing their workload effectively
and funding methods for these agencies were not economical and potentially
wasteful. We have also noted in Finding 3 that FHEO has not satisfactorily
accomplished its responsibilities for administering the FHIP.
Issue Date: August 31, 1998
Audit
Report No. Report: 98-SF-112-0001
File Size: 131KB
Title: Earthquake Loan Program (HELP)
We performed an audit of the HUD Earthquake Loan Program (HELP).
The purpose of our audit was to determine if the program was designed
and implemented in accordance with the Act and administered in a
manner that minimized fraud, waste, or abuse of HUD funds. We concluded
that HUD needs to develop a detailed response plan for future disasters
and take corrective action to identify and recover all HELP funds
that were a duplication of other funds.
HUD Responded Rapidly To Aid Multifamily Project Owners The Emergency
Supplemental Appropriations Act of 1994 provided relief to victims
of the January 1994 Southern California earthquake. HUD responded
rapidly by creating the HELP to aid owners of damaged HUD assisted
multifamily projects. Generally, actions taken by the HUD Los Angeles
Area Office (LAAO) staff provided prompt and effective relief; however,
we found areas where there needs to be more extensive up-front disaster
relief planning. We believe that the lessons learned during the
response to this disaster can be used to more effectively and efficiently
respond to future disasters. This report provides the basis for
the planning needed.
HELP Controls Did Not Safeguard HUD Funds HUD did not design the
HELP with controls that adequately safeguarded HUD funds from fraud,
waste, or abuse. The weaknesses were most evident in four areas:
* Waivers or modification of statutes, regulations, and handbook
requirements created opportunity for abuse;
* HUD did not restrict funding to earthquake repairs and costs;
* Program and loan administration guidance was unclear; and,
* Legal and reporting requirements were not addressed.
Absence Of A Plan And Insufficient Staffing Allowed For Ineligible
Expenditures HUD is required to establish controls to safeguard
assets and prevent duplication of benefits through its financial
assistance programs. We believe the HELP weaknesses we identified
occurred because HUD had no response plan to effectively implement,
monitor, and oversee disaster assistance. In addition, insufficient
personnel were available to accomplish necessary oversight. As a
result, some owners/agents assisted under the HELP (1) received
funds even though they had obtained funds from other sources; (2)
made ineligible and questionable expenditures; (3) diverted funds
for personal use; and, (4) received possible preferential treatment
for funding. Specifically, HUD obligated or disbursed questionable
HELP funds of $7.1 million to owners/agents of the 27 projects that
we reviewed.
HUD-Wide Disaster Response Plan And LAAO Recovery Of Duplicate
Funds Are Recommended We recommended that all Assistant Secretaries
whose programs/staffs are expected to provide assistance to disaster
victims in the future develop plans that address known requirements.
We also recommended that the Director of the Los Angeles Multifamily
Hub be required to identify and recover all HELP funds that were
a duplication of other funds. Due to the inconsistencies and inadequacies
of the HELP guidance, we did not recommend that HUD take any further
action to resolve the other questioned costs cited in our report.
HUD Agreed With The Finding And Recommendations The Acting General
Deputy Assistant Secretary for Housing generally agreed with the
finding and our recommendations and said that his office was taking
or planned to take the necessary steps to implement them. He stated
that HUD's disaster response was rapid, comprehensive, and resulted
in positive accomplishments. However, he acknowledged that HUD-wide
guidance must be complemented with more detailed program office
guidance in order to assure that problems such as those cited in
this report are avoided in the future. His written response is included
as Appendix A to this report.
Issue Date: June 5, 1998
Audit
Report No. 98-DP-166-0002
File Size: 347KB
Title: Personal Computing (PC) Workstation Procurement
We performed this review to determine if personal computing (PC)
equipment and accessories procurement practices were cost effective.
We also followed up on a prior OIG audit related to inventory controls
over personal computers. During our preliminary review, we found
the Department had purchased computers and peripheral items at higher
than fair market prices. We concluded that buying PC equipment and
accessories exclusively through the Indefinite Delivery Indefinite
Quantity (IDIQ) arrangement with HUD's primary contractor for information
technology was not cost effective. For example, the Department paid
as much as 20% more than market prices for similar or identical
workstations and the IDIQ price for 93% of the peripheral equipment
tested exceeded the General Service Administration (GSA) price list.
Subsequent to our preliminary review, the Office of Information
Technology (IT) initiated a change in the procurement practice by
buying equipment from sources providing equipment at prices set
by the GSA. These prices usually were lower than those of the IDIQ
arrangement. The changed approach in buying computers has saved
HUD about $3.8 million. However, the revised procurement practice
remains an informal process that would still allow items be purchased
at higher prices, whether by either the GSA price list or the IDIQ
arrangement.
The Department should adopt a policy where it is standard practice
to always comparison shop and purchase equipment at the lowest possible
cost to the Government. Regarding the follow-up review on weak inventory
controls for PC equipment, we found the previously reported weaknesses
still exist. The Department still lacks an effective inventory system
to timely and accurately track new PC equipment ordered and received.
As a result of these weak controls, the Department is open to theft
of computers and related equipment. The Office of Administrative
Management Service (OAMS) and IT must work together to develop a
system to accurately and timely account for PC equipment.
Issue Date: June 1, 1998
Audit
Report No. 98-DP-166-0003
File Size: 602KB
Title: Review of HUD's Efforts to Correct Year 2000 Problems
On January 1, 2000, it is a real possibility that many of the
Department of Housing and Urban Development's (HUD's) computer systems
will malfunction or produce incorrect information simply because
the century date has changed. The Year 2000 problem is rooted in
the way dates are recorded and computed in automated information
systems. For the past several years, programmers have typically
used two digits to represent the year, such as "97" to represent
1997. However, starting in the Year 2000, the continued use of two
digits will render the date indistinguishable from the year 1900,
or 2001 from 1901. As a result of the ambiguity, HUD's system or
application programs that use dates to perform calculations, comparisons,
or sorting may generate incorrect results. Unless corrected, the
impact of these failures will be widespread and costly to the Department.
HUD recognized the Year 2000 date problem two years ago and established
a Year 2000 project in the Office of Information Technology (IT).
Some progress has been made in HUD's effort to correct the Year
2000 date problem. Both the awareness and assessment phases of the
project have been completed. In particular, the project office has
identified all mission critical systems, prepared a Year 2000 readiness
guide, and conducted a risk assessment. However, HUD has failed
to take several "industry recognized" best practices to minimize
the risk and impact of system failures caused by the Year 2000 date
problems.
First and foremost, HUD needs to establish an agency-level program
office to manage and coordinate Year 2000 activities rather than
leaving the project management at two levels below the Office of
Information Technology. The recently issued Executive Order on February
4, 1998, states that agency heads are now responsible for the Year
2000 problem. With the short time left, an executive level office
is needed to ensure accurate and timely reporting of Year 2000 status
and to make the hard decisions regarding business priorities and
resource allocation. This office must assess the impact of using
the same limited number of qualified personnel (HUD and Contractor
employees) for both new system initiatives and the Year 2000 project.
Second, HUD must also immediately implement configuration management
(CM) for its mission critical systems. CM is an industry accepted
practice of controlling changes made to a system's software and
associated documentation throughout the development and operational
life of the system. Although IT had agreed over the past three years
to implement CM, currently only two of the 75 mission critical applications
are partially under the control of CM. Since there are millions
of lines of code in HUD's systems, CM is crucial to manage the changes
made to those systems. Without CM, HUD cannot readily track and
test all of the fixes made to the date fields needing correction
for Year 2000.
A third important step is developing contingency plans to ensure
operational continuity in the event of equipment failures and software
failures in the Year 2000. Until recently, the Year 2000 Project
has not focused on contingency planning for core mission business
areas. Without adequate contingency planning, Year 2000 failures
will render HUD unable to write new and/or maintain existing billions
of dollars worth of Single and Multifamily insurance and long-term
housing subsidy commitments. Further, a disruption to the subsidy
processing system would become an additional hardship for more than
three million families, whose Section 8 rent-subsidy checks would
be delayed for an indeterminate period of time.
Issue Date: May 20, 1998
Audit
Report No. 98-HQ-169-0001
File Size: 62KB
Title: Review of Non-Career Senior Executive Service (SES) Qualifications
We found that HUD's personnel procedures did not include establishing
required qualification standards and evaluating whether non-career
executives met the standards prior to their appointment to the SES.
As a result, HUD's procedures did not comply with the Civil Service
Reform Act of 1978 (Public Law 95-454) and applicable regulatory
requirements. We are recommending actions to ensure HUD is selecting
non-career executives that meet mandatory qualifications.
Issue Date: May 1, 1998
Audit
Report No. 98-AT-121-0002
File Size: 754KB
Title: Audit of Section 203(k) Rehabilitation Mortgage Insurance
Program
Although the program was successful in many respects, our review
disclosed that: (1) substantial improvements were needed in lender
performance, and (2) borrower information was recorded incorrectly
in HUD's database.
Issue Date: March 31, 1998
Audit
Report No. 98-BO-111-0002
File Size: 171KB
Title: Sect. 8 Rent Increases under the Budget-based Method
We are recommending that you promulgate guidance to prevent rent
structure conversions without proper approval, and prevent rent
increases from significantly exceeding 120 percent of Fair Market
Rents. Further, the Department's policy on funding capital improvements
should be clarified.
Issue Date: March 20, 1998
Audit
Report No. 98-FO-177-0004
File Size: 943KB
Title: HUD FY97 Financial Statements
In accordance with the Chief Financial Officers (CFO) Act of 1990,
this report presents the results of our audit of HUD's principal
financial statements for the year ended September 30, 1997. Also
provided are assessments of HUD's internal controls and compliance
with laws and regulations. HUD continues to face major challenges
in its efforts to correct longstanding material internal control
weaknesses. As we discuss in the report, HUD needs to overcome issues
with its internal control environment, such as the need to upgrade
financial systems and improve resource management, that are hindering
its ability to carry out its mission and improve the management
of its programs. Our report discusses the significance of HUD's
financial management and control problems and HUD's actions to correct
them. Our report also contains recommendations to assist the Department
in its continuing efforts to correct these longstanding problems.
Issue Date: March 12, 1998
Audit
Memorandum 98-SE-107-0808
File Size: 62KB
Title: Congressional Request, Development Costs of Alaska Native
Housing, Anchorage, Alaska
We performed a review of development costs of Alaska Native housing
in response to a request received from United States Senator Frank
H. Murkowski. Senator Murkowski requested our assistance in examining
the appropriateness of the costs associated with developing housing
for Alaska Natives. Given the nature of the request and previous
work that has been done by the Department of Housing and Urban Development
(HUD) as well as the Office of Inspector General, we spoke with
the Senator's staff to decide on mutually agreeable objectives for
that review. Based upon the discussions, it was decided that we
would determine:
* the per unit and per project costs to construct the HUD housing
at Eagle, Healy Lake, Tetlin, and Tok, including off-site sewer
and water;
* how the costs of developing housing at these four remote locations
compared to the costs of developing other housing for Alaska Natives;
and,
* whether these costs differed significantly, and, if so, why.
In performing our review, we visited the four project sites and
talked to the various parties involved in the development of the
projects, including the architect, cost estimator, and representatives
from the Interior Regional Housing Authority (Authority) and HUD.
We also reviewed project records. The results of our review are
contained in Attachment I to this memorandum.
Issue Date: March 9, 1998
Audit
Report No. 98-FO-131-0003
File Size: 1,020KB
Title: Audit of the Federal Housing Administration's Fiscal Year
1997 Financial Statements
This report presents the results of KPMG Peat Marwick LLP's (KPMG)
audit of the Federal Housing Administration's (FHA) financial statements
for the year ended September 30, 1997. We concur with KPMG's opinion,
that the financial statements present fairly, in all material respects,
FHA's financial position and results of its operations, and cash
flows for the year then ended, in conformity with generally accepted
accounting principles.
Issue Date: March 9, 1998
Audit
Report No. 98-FO-171-0002
File Size: 209KB
Title: Audit of the Government National Mortgage Association's
Fiscal Year 1997 Financial Statements
This report presents the results of KPMG Peat Marwick LLP's (KPMG)
audit of the Government National Mortgage Association's (Ginnie
Mae) financial statements for the year ended September 30, 1997.
We concur with KPMG's opinion, that the financial statements present
fairly, in all material respects, Ginnie Mae's financial position
as of September 30, 1997 and results of its operations and its cash
flows for the year then ended, in conformity with generally accepted
accounting principles.
Issue Date: March 3, 1998
Audit
Related Memorandum No. 98-AO-203-1802
File Size: 59KB
Title: Corrective Action Verification Audit Report No 96-AO-203-1002
District of Columbia's Section 8 Certification and Voucher Payment
System
We found that DCHA demonstrated poor efforts to collect excess
HAP. Overpayments occurred when landlords continued to receive HAP
checks in the months after a Section 8 tenant moved and failed to
notify DCHA. Our 1996 audit reported uncollected excess HAP of approximately
$440,000 from fiscal years 1993 to 1995. We found that DCHA recovered
only 15 percent or $64,000 of the $440,000. Furthermore, our current
review noted an additional $227,373 in excess HAP made during fiscal
years 1996 and 1997.
Issue Date: February 23, 1998
Audit
Related Memorandum No. 98-SE-107-0805
File Size: 110KB
Title: Secretarial Request, Office of Native American Programs,
Oversight of Indian Housing Authorities, Northwest Office of Native
American Programs, Seattle, Washington
On November 29,1996, OIG received a request from the Secretary
of HUD to thoroughly review allegations of various improprieties
in the use of HUD funds by tribal governments and/or Indian housing
authorities (IHAs) and inadequate monitoring by HUD’s Office of
Native American Programs (ONAP). Program abuse at IHAs across the
country was alleged in The Seattle Times’ December 1996 series of
articles entitled "From deregulation to disgrace" which identified
29 instances.
Issue Date: February 23, 1998
Audit
Related Memorandum No. 98-SE-107-0804
File Size: 37KB
Title: Secretarial Request, Office of Native American Programs,
Oversight of Indian Housing Authorities, Southern Plains Office
of Native American Programs, Oklahoma City, Oklahoma
On November 29,1996, OIG received a request from the Secretary
of HUD to thoroughly review allegations of various improprieties
in the use of HUD funds by tribal governments and/or Indian housing
authorities (IHAs) and inadequate monitoring by HUD’s Office of
Native American Programs (ONAP). Program abuse at IHAs across the
country was alleged in The Seattle Times’ December 1996 series of
articles entitled "From deregulation to disgrace" which identified
29 instances.
Issue Date: February 23, 1998
Audit
Related Memorandum No. 98-SE-107-0803
File Size: 69KB
Title: Secretarial Request, Office of Native American Programs,
Oversight of Indian Housing Authorities, Southwest Office of Native
American Programs, Phoenix, Arizona
On November 29,1996, OIG received a request from the Secretary
of HUD to thoroughly review allegations of various improprieties
in the use of HUD funds by tribal governments and/or Indian housing
authorities (IHAs) and inadequate monitoring by HUD’s Office of
Native American Programs (ONAP). Program abuse at IHAs across the
country was alleged in The Seattle Times’ December 1996 series of
articles entitled "From deregulation to disgrace" which identified
29 instances.
Issue Date: February 23, 1998
Audit
Related Memorandum No. 98-SE-107-0802
File Size: 66KB
Title: Secretarial Request, Office of Native American Programs,
Oversight of Indian Housing Authorities, Northern Plains Office
of Native American Programs, Denver, Colorado
On November 29,1996, OIG received a request from the Secretary
of HUD to thoroughly review allegations of various improprieties
in the use of HUD funds by tribal governments and/or Indian housing
authorities (IHAs) and inadequate monitoring by HUD’s Office of
Native American Programs (ONAP). Program abuse at IHAs across the
country was alleged in The Seattle Times’ December 1996 series of
articles entitled "From deregulation to disgrace" which identified
29 instances.
Issue Date: February 23, 1998
Audit
Related Memorandum No. 98-SE-107-0801
File Size: 154KB
Title: Secretarial Request, Office of Native American Programs,
Oversight of Indian Housing Authorities, Eastern Woodlands Office
of Native American Programs, Chicago, Illinois
On November 29,1996, OIG received a request from the Secretary
of HUD to thoroughly review allegations of various improprieties
in the use of HUD funds by tribal governments and/or Indian housing
authorities (IHAs) and inadequate monitoring by HUD’s Office of
Native American Programs (ONAP). Program abuse at IHAs across the
country was alleged in The Seattle Times’ December 1996 series of
articles entitled "From deregulation to disgrace" which identified
29 instances.
Issue Date: February 23, 1998
Audit
Related Memorandum No. 98-SE-107-0002
File Size: 281KB
Title: Secretarial Request, Office of Native American Programs,
Oversight of Indian Housing Authorities, Washington, DC
This report summarizes the results of our review of the Office
of Native American Program’s oversight of Indian housing authorities
as requested by the Secretary of HUD on November 29, 1996. It shows
a need for better performance by IHAs and the Office of Native American
Programs in providing reasonable assurance that HUD programs are
operated free from fraud, waste, abuse and mismanagement.
Issue Date: January 30, 1998
Audit
Report No.: 98-AO-123-0001
File Size: 345KB
Title: Audit of the Single Family Real Estate Owned Pilot Contracts
The Capital District was requested by the HUD Single Family Division
to review the Single Family Real Estate Owned (SFREO) pilot contracts
to identify areas where HUD is vulnerable to fraud, waste, and abuse
of Federal assets. We were also requested to recommend ways to improve
their proposed approach to issue a national single family property
disposition contract. During our exit conference, we were informed
that HUD is no longer actively pursuing the national contract concept
but is considering the use of similar contracts at the individual
HUD Single Family Home Ownership Centers. Based on our audit of
the three pilot contracts, we identified program improvements that
HUD should implement now as well as revised contract language that
will improve the efficiency and effectiveness of the pilot contracts.
If HUD reconsiders pursuing the national contract or similar pilot
contracts, HUD should revise the contracts to include our recommended
improvements.
Consistency and Effectiveness of Contract Requirements The pilot
contracts need improvement to maintain consistency and effectiveness
in performance. Specifically, the contracts do not require the contractor
to comply with current changes in HUD legislation, regulations,
or other HUD policy and procedural documents; contract terminology
is vague and nonspecific; and restrictions are not placed on the
use of identity-of-interest companies. In addition, the pilot contracts
do not require the contractor to maintain a written policies and
procedures manual for its property disposition operations. In a
related matter, we believe HUD could reduce its cost of repairs
reimbursed under the pilot contract by modifying the contracts to
require the use of preferred vendor lists and unit pricing matrices
instead of soliciting bids for repairs over $1,000. We recommend
that HUD address the cited contract improvements in pilot contracts
now or in the national contracts if HUD proceeds with the concept.
Management of Custodial Properties Custodial properties are a continuing
problem. Properties remain classified as custodial for years because
HUD does not aggressively follow up on title transfers. As a result,
HUD incurs increased and unnecessary holding costs to maintain them.
For example, we estimated that for the last 3 years, holding costs
of $31.8 million were paid for 1,013 custodial properties that have
been in the inventory for 3 years or more.
Issue Date: January 6, 1998
Audit
Related Memorandum No. 98-DP-166-0001
File Size: 20KB
Title: Interim Review on HUDCAPS Performance- Year 2000 Compliance
We found that HUD has not taken adequate steps to minimize the
impact of the Year 2000 problem. Specifically, HUD has not (1) developed
a Year 2000 detailed project plan for HUDCAPS, (2) assessed the
adverse impact of stored dates on HUDCAPS application processing,
(3) traced and mapped the missing source code modules with date
fields to the executable modules, and (4) developed a test strategy
and acquired the necessary test supporting tools. Additionally,
HUD has not yet completed the implementation of configuration management
software (ENDEVOR) for HUDCAPS. Without adequate configuration management,
HUD cannot ensure that the Year 2000 changes are properly made to
avoid system failures, errors and omissions.
Calendar Year 1997 Reports
Issue Date: December 18, 1997
Audit
Related Memorandum No. 98-NY-112-0802
File Size: 9KB
Title: Riverside South Apartments Project No. 012-32269
As you are aware, the Office of Inspector General (OIG) in a previous
Audit Related Memorandum1 questioned an application for mortgage
insurance pertaining to Riverside South Apartments. In that Memorandum,
we explained that because of local community and congressional interest,
the OIG evaluated a $356 million application for mortgage insurance.
The mortgage proceeds were to be used to build Riverside South Apartments,
a development located on the Upper West Side of New York City, New
York. Our conclusion was that FHA should not insure the proposed
$356 million mortgage for three reasons, which are provided in the
attached Audit Related Memorandum. Subsequent to issuing that memorandum,
the Mortgagee withdrew that application and submitted a revised
one in August 1997, which shows a drastic reduction in the project's
size and mortgage amount. Nonetheless, our evaluation of the revised
application resulted in the same concerns that we raised in our
previous Audit Related Memorandum.
According to the revised application, the Mortgagee reduced the
request for mortgage insurance from $356 million to $180 million.
The Mortgagee originally requested that FHA insure a loan to build
a project consisting of four buildings containing 1,663 residential
units, of which 333 would have been available for low income families.
In the revised application, the project will consist of two buildings
containing 853 units, of which 171 units will be available for low
income families. In the original application, 65 percent of the
site consisted of a park and pier (58 percent pertained to the park
while 7 percent pertained to the pier). In the revised application,
the pier was dropped, but the park remained and still represents
58 percent of the site. During the review of the original application,
we estimated that the value of the park and pier represented one-fourth
of the mortgage. Likewise, during our review of the revised application,
we estimate that the value of the park represents almost one-fourth
of the mortgage.
As previously described, the scope of the project was simply cut
in half. Therefore, the same three reasons that we provided in our
previous Audit Related Memorandum, as to why FHA should not insure
the $356 million mortgage, also pertain to the $180 million request.
Consequently, we do not believe that FHA should bear the risk of
insuring the revised request for mortgage insurance for three reasons.
First, for each million dollars of insuring authority only one unit
of low income housing will be built; second, almost one-fourth of
the security of the mortgage (park) will eventually be given to
the City of New York; and third, as we explained in our previous
Audit Related Memorandum, we question whether Congress intended
for FHA to insure a mortgage that includes the value of a park.
The major issue is the park. It is important to note that the Developer
plans to develop approximately 21 acres of the former Penn Central
rail yard into a park along the Upper West Side of New York City,
New York as part of a grand plan to construct buildings containing
5,700 housing units. If the FHA approves the revised application
for mortgage insurance, which includes the value of approximately
four acres of the park, the precedent will be set for the Developer
to submit other applications with other parts of the park to the
FHA in a piecemeal manner. In short, it is possible that FHA could
end up insuring the value of a substantial part of the park.
During our evaluation of the revised application, we noted that
representatives of the Mortgagee are discussing different strategies
with HUD officials in the New York City Field Office regarding the
conveyance of the park to the City of New York. The primary issue
is whether the park should be conveyed to the City immediately after
it is developed and the buildings constructed, or at some later
date. It is our position that regardless of when the park is conveyed
to the City of New York, considering the size of this mortgage,
it would be a significant drain on the FHA insurance fund, if a
mortgage default occurred that results in a mortgage assignment
to HUD. Furthermore, if the Developer is resolute in its intention
to donate the park to the City, then we question why the Developer
does not merely make the donation outside of the insured mortgage
transaction.
In our previous Audit Related Memorandum, we explained how FHA's
procedures allowed developers to obtain high amounts of insuring
authority, and we made appropriate recommendations to request that
a limit be placed on the value of site not attributable items, such
as a park, that can be included in the amount of insured mortgages.
As you are aware, the OIG and FHA are at an impasse as to the resolution
of these recommendations; therefore, we requested that the Deputy
Secretary review the matter.
In this Audit Related Memorandum, we are recommending that the
FHA seek a legal opinion to determine if Congress intended for the
FHA to insure mortgages that include the value of a park as an allowable
amenity when it passed Section 220 of the National Housing Act.
If the legal opinion provides that a park is not an allowable amenity,
the FHA should not approve the revised application.
Issue Date: November 25, 1997
Audit
Case Number 98-HQ-179-0801
File Size: 200KB
Title: Interim Review of HUD 2020 Management Reform Plan
While we agree that HUD must reform, and agree with some of the
corrective measures in the HUD Reform Plan, we generally remain
cautious about the potential effectiveness of HUD's new organizational
configuration, the Department's capacity to implement its planned
reforms, and the potential effectiveness of many of its planned
reforms. We also believe that the HUD Reform Plan could have the
unintended effect of compounding many of HUD's current problems,
and could even create new problems for the Department. HUD, therefore,
is undergoing a drastic downsizing and overhaul of its organization
and operations, in a relatively short period of time, and without
any assurance that its reforms will enable the Department to accomplish
its mission and restore the public's trust in HUD. Nevertheless,
HUD management is moving quickly to institute its reforms, and is
making continuous modifications to such reforms.
Our major concerns are the manner in which the HUD Reform Plan
was developed, and the premises upon which it is based. Briefly,
the HUD Reform Plan was largely developed without the benefit of
any formal and open consultation process involving responsible,
affected and interested parties. In addition, a cost-benefit analysis
of the Department's planned reforms was not performed prior to HUD's
announcing its reform decisions in June of this year. Further, the
HUD Reform Plan is built on an unsupported premise, namely, that
the Department can adequately function with a staff of 7,500. This
arbitrarily derived staff level was determined without first performing
an adequate analysis of HUD's diverse and complex mission, and without
assessing its financial risk exposure, functions, and future workload
demands.
In conjunction with HUD's FY 1996 appropriations hearings, the
Department stated in reference to its Reinvention Blueprint legislative
proposals that "Without enactment of most of these proposals, reduction
to 7,500 fte will cripple HUD's operations." Although the Department
is rapidly approaching its 7,500 staff target level, its reform
implementation plans have not been finalized, and its proposed legislation
to streamline and consolidate programs has not been enacted. As
a result, the Department is now in serious jeopardy of not having
the capacity to carry out its current mission and responsibilities.
Furthermore, once the 7,500 downsizing target is reached, HUD will
have no capacity to handle any additional workload that may come
about as a result of the enactment of future HUD related legislation.
Issue Date: November 17, 1997
Audit
Report No. 98-SE-148-0001
File Size: 123KB
Title: Citizen Complaint, City of Seattle, Section 108 Loan Guarantee,
Acquisition of Frederick and Nelson Building, Seattle, WA
We reviewed complaints received from the Seattle Displacement
Coalition, related to the City of Seattle's Section 108 loan guarantee
for acquisition of the Frederick and Nelson building. This review
focused on the regulatory and programmatic issues in the complaints.
We found that the allegations in the complaints, that the application
should not have been approved, were not valid. However, the complaints
identified four programmatic issues that HUD needs to address to
further its efforts to empower grantees and citizens. We also identified
two deficiencies in the City's administration of the Section 108
activity.
Issue Date: October 20, 1997
Audit
Case Number 98-FO-101-0001
File Size: 2,180KB
Title: Audit of the Fiscal Year 1996 Hope VI Grant Award Process
HUD awarded $381 million of Fiscal Year 1996 HOPE VI funds to
37 ineligible applicants (Appendix D). The applicants were ineligible
because they did not demonstrate compliance with the eligibility
requirements, as specified in the HOPE VI Notice of Funding Availability
(NOFA). HUD determined eligibility for the 37 applicants by either
revising the criteria for determining eligibility after the deadline
date for submission of theapplications, not properly considering
NOFA eligibility requirements, or enhancing applications by considering
information not provided by applicants. We concluded that HUD's
funding of applicants that did not demonstrate compliance with the
NOFA requirements, did not comply with Section 102 of the HUD Reform
Act. The Department had the opportunity to avoid the HUD Reform
Act compliance issue by publishing a revision to the NOFA and extending
the date for applicants to submit revised applications. We attribute
HUD's decision not to publish a revised NOFA to their intention
to award HOPE VI funds by September 30, 1996. The Department's decision
to award the HOPE VI funds by September 30, 1996 was not necessitated
by the need to obligate these funds by fiscal year end. The Appropriations
Act specified that the HOPE VI funds were to remain available until
expended. The Acting Assistant Secretary for Public and Indian Housing
advised us that he made the decision to award the funds by fiscal
year end because of past criticisms of HUD not awarding funds in
a timely manner. He also wanted to take into consideration the needs
of the housing authorities to timely carry out the activities provided
for in the grant agreements.
Issue Date: October 10, 1997
Audit
Related Memorandum 98-NY-112-0801
File Size: 29KB
Title: Proposed Financing Plan for Jose De Diego Beekman Houses
It has recently come to our attention that HUD is finalizing an
expansive refinancing package for eight Section 236 projects, known
as the Jose De Diego Beekman Houses (Beekman Houses), located in
the City of New York. This package provides for HUD expenditures
of nearly $181 million over the next 15 years to rehabilitate and
stabilize the developments, over 80 percent of whose units do not
meet basic housing quality standards (HQS), while holding harmless
the parties who own and manage the properties. Under the package,
substantial benefits can accrue to these owners, while only a nominal
contribution for their continued participation is required.
We must express our concern that: The plan is a poor deal for HUD
and the taxpayers; The plan rewards a landlord who may bear responsibility
for the deplorable conditions of the projects; and HUD's agreements
with the landlord may undermine HUD's enforcement ability.
Issue Date: September 30, 1997
Audit
Case Number 97-DP-166-0001
File Size: 1,066KB
Title: HUDCAPS Access Controls Need Improvement
As a result of our review, we found that the Department had not
taken adequate measures in the general control environment during
HUDCAPS' implementation to control system access. This situation
exposed the Department to the risk of unauthorized use of restricted
data and programs.
Issue Date: September 30, 1997
Audit
Case Number 97-PH-163-0001
HUD's
Response
File Size: 730KB
Title: HUD Contracting Activity
We found several contracts where HUD used an indefinite quantity/task
order process to expedite procurement, but the combination of vague
work orders, inadequate estimates and lack of oversight led to incumbent
contractors basically holding the Department hostage to the present
contract. Consequently, HUD has found itself in some financially
unsound and costly long term arrangements. The problems related
to contracting cited in this report were compounded over the past
four years by continuing departmental weakness noted in our semiannual
reports to Congress; namely, a lack of integrated financial and
management data systems, dwindling experienced staff resources,
and the proliferation of new programs and initiatives.
Issue Date: September 30, 1997
Audit
Case Number 97-PH-163-0002
File Size: 193KB
Title: Memorandum of Agreement Department of HUD and Department
of the Army, Washington, DC
We determined that the current MOA contains many deficiencies and
is not in HUD's best interest. Further, HUD Field Offices are not
receiving the inspection information as required.
Issue Date: September 4, 1997
Audit
Case Number 97-SF-123-0002
File Size: 58KB
Title: Sales of HUD-Owned Properties Single Family Real Estate
Owned Branch, Arizona State Office
Our audit focused on sales of HUD-owned properties where the sales
price of, and related FHA-insurance on, the properties appeared
excessive.This report contains one finding and recommends actions
necessary to protect the homebuyers HUD serves while protecting
the Department's FHA insurance fund.
Issue Date: July 23, 1997
Audit-Related
Memorandum 97-SF-123-0802
File Size: 30KB
Title: Monitoring of the Real Estate Asset Management Contract
Real Estate Owned Branch, Phoenix Office
We found that REO staff did not effectively monitor the REAM'S
performance. Specific problems noted during our review were: a.
REO staff did not make routine inspections of acquired properties
as required. b. Reviews of the contractor's operations were not
adequate. c. Reviews were not made to ensure that subcontractors
were properly licensed and insured. d. Contract performance requirements
were changed without the contracting officer's authorization.
Issue Date: July 3, 1997
Audit
Related Memo. No: 97-BO-151-0806
File Size: 497KB
Title: Vulnerability Assessment Transitional Housing Programs,
New England District
We found that eligible individuals were receiving the intended
benefits of the program. Documentation of eligibility in the participant's
files met the criteria of your October 30, 1995 memorandum, "Guidance
on Documentation of Participant Eligibility Under Homeless Assistance
Programs." We found that HUD funds were being adequately controlled
and that the grantees' accounting systems were sufficient to account
for the receipt and use of HUD funds. Due to the nature of most
grants reviewed, matching funds were not specifically required by
HUD. However, most of the grantees had obtained supplemental funds
in order to fully accomplish the objectives of their program. In
the case of the Foundations project, which involved the acquisition
and rehabilitation of properties, we observed commitment letters
from non-Federal sponsors that assured the required matching funds
would be provided. In our review of the four grants which had subgrantees,
we learned that two grantees had performed limited financial reviews
and none had performed on site-program reviews due to a lack of
resources. For details see Appendices A, E, F, and G.
Issue Date: June 25, 1997
Audit
Related Memorandum No: 97-BO-111-0805
File Size: 39KB
Title: Section 8 Rent Increase Melrose Apartments FHA Project
013-35056 Providence, Rhode Island
Controls have not been established to assure that (1) only reasonable
costs are incurred, (2) repairs will be completed within budget,
(3) payments are made in accordance with contracts, and (4) funds
allocated for repairs are not used for other purposes.
Issue Date: June 3, 1997
Audit
Case Number 97-FW-174-0001
File Size: 295KB
Title: Beaumont Fair Housing and Public Housing Offices Beaumont,
Texas
The audit found that the Beaumont offices are not achieving their
mission and HUD may not have sufficient funding to carry out court-ordered
improvements. Also, HUD officials need to determine if a court ruling
warrants action. The ruling may result in HUD staff and the Fair
Housing Services Center performing duplicate duties and may infringe
on HUD's statutory rights to perform compliance monitoring.
Issue Date: June 2, 1997
Audit
Related Memorandum No. 97-BO-101-0804
File Size: 30KB
Title: Interim Report Public Housing Drug Elimination Program
New Haven, Connecticut
The PHA has not: executed an acceptable contract with the police
department; established adequate management and accounting controls
over the enhanced police services expenditures; and instituted budgetary
controls to prevent overspending.
Issue Date: May 23, 1997
Audit
Case Number 97-KC-117-0001
File Size: 84KB
Title: Review of Low Income Housing Tax Credits Program
We concluded NCSHA's standards accomplish the same thing as HUD's
subsidy layering guidelines. However, states were not mandated to
adopt the standards. We are recommending the Offices of Housing,
Public and Indian Housing, and Community Planning and Development
work with NCSHA and take the steps necessary to establish mandatory
parameters for developer and contractor fees and profits that will
have the same effect as subsidy layering reviews.
Issue Date: March 25, 1997
Audit
Report No. 97-BO-129-0003
File Size: 31KB
Title: Processing of 48 Defaulted Single Family Mortgages, New
Haven, Connecticut
This report contains a finding documenting the delays in foreclosing
and identifying specific actions to be taken to limit the Department's
potential loss.
Issue Date: February 26, 1997
Audit
Related Memorandum No. 97-BO-111-0803
File Size: 48KB
Title: Review of Multifamily Enforcement Actions, West Street
Apartments, New Haven, Connecticut
We conducted a review of the Connecticut State Office's (CSO) Multifamily
enforcement actions pertaining to West Street Apartments, a 65-unit,
multifamily insured project in New Haven, Connecticut. The owner
defaulted on the mortgage in August 1995, violated numerous provisions
of the Regulatory Agreement, did not cooperate with the CSO staff,
and still remains in control of the project.With respect to this
one project, it paints a grim picture of HUD's enforcement actions
and illustrates how an owner can continue to reap financial benefits
without cooperating with HUD. While we recognize HUD has a major
Multifamily Enforcement Strategy under way, we believe that HUD
can strengthen its process by developing procedures to avoid the
pitfalls experienced by the CSO staff. This report contains one
finding detailing the CSOs enforcement efforts.
Issue Date: February 21, 1997
Audit
Case Number: 97-AT-101-0002
File Size: 144KB
Title: Tenant Opportunity Program, Grantees of Atlanta HA Developments,
Atlanta, Georgia
The resident organizations of AHA communities lack the capacity
to continue their TOP grants without substantial technical assistance.
The grantees lacked control over grant funds, had inadequate books
and records, and lacked basic knowledge of the TOP Program. We attribute
these conditions to the failure of the TAO concept in that it did
not fulfill the role of services coordinator and technical advisor.
As a result, the TOP grantees did not develop management capabilities
and did not identify social support needs for the purpose of increasing
resident management of public housing projects. The 31 grantees
have spent about $650,000 or 22 percent of the funds awarded by
HUD. In addition, the senior high-rise grantees did not exhibit
any desire to pursue resident management or related functions. HUD
and AHA have initiated efforts to provide TOP grantees with technical
assistance.
Issue Date: February 21, 1997
Audit
Related Memorandum 97-NY-112-0802
File Size: 18KB
Title: Riverside South Apartments, NY, NY
We concluded that the FHA should not bear the risk of insuring
the proposed mortgage. Our reasons are threefold. First, out of
the 1,663 residential units to be developed only 333 of the units
will represent low-and-moderate income housing. In essence, for
each one million dollars of insuring authority devoted to this development,
one unit of low-and-moderate income housing will be produced. Second,
immediately following the endorsement of the mortgage, the park
and pier, nearly one-fourth of the security for the mortgage, will
be given to the City of New York. Consequently, in the event of
default, a potential significant loss to the FHA insurance fund
is a practical certainty. Third there is a real question as to whether
Congress authorized FHA to insure the park and pier.
Issue Date: February 6, 1997
Audit
Case Number 97-AT-121-0001
File Size: 86KB
Title: Audit of Section 203(k) Rehabilitation Mortgage Insurance
Our review disclosed that: (1) the 203(k) Program is highly vulnerable
to waste, fraud, and abuse by investors and non-profit borrowers,
and (2) the escrow commitment procedure increases the amount of
certain loans beyond statutory limits.
Issue Date: February 5, 1997
Audit-Related
Memorandum 97-KC-1120-0801
File Size: 39KB
Title: Review of Excess Insurance Proceeds
We are recommending that Housing, in conjunction with OGC: (1)
publish regulations dealing with prospective accumulations of excess
insurance proceeds; and (2) take specific actions to identify excess
insurance proceeds and ensure excess proceeds either benefit the
housing developments and their tenants or offset HUD's mortgage
insurance losses. Audit work through July 15, 1996, showed HUD had
paid $17.1 million in excess insurance proceeds on 82 multifamily
housing developments. HUD has been successful in recovering $2.7
million. The remaining $14.4 million in excess insurance proceeds
was either disbursed to owners, issuers, GNMA, and third parties,
or held by trustees.
Issue Date: January 7, 1997
Audit
Case Number 97-BO-101-0002
File Size: 60KB
Title: HUD's Public Housing Development Program Acquisition Method
The audit disclosed that the PHAs were partially successful in
using Acquisition grant funds to purchase housing units for public
housing tenants, were successful in making communities aware of
the program, and did experience local community opposition in some
locations. We also found that, of approximately $344 Million in
Acquisition grant funds approved for Fiscal Years (FY) 1991 through
1995 to purchase housing units, approximately $95 Million, or 28
percent, remains unspent for approved units. It should be noted
that approximately 58 percent of these funds remain unspent from
FYs 1991 through 1994, which is two to five years ago.
Issue Date: January 6, 1997
Audit
Related Memorandum 97-AT-101-0801
File Size: 23KB
Title: Limited Review of the Technical Assistance Organization,Atlanta
(TAO), Atlanta, Georgia
The TAO received $320,700 in fees from its member grantees, used
$165,463 for operating costs and had funds on hand at August 29,
1996 of $155,237 and receivables due of $3,059. The TAO had payables
at the end of review period of $14,602.
Calendar Year 1996 Reports
Issue Date: November 25, 1996
Audit
Related Memorandum No. 97-BO-105-0802
File Size: 23KB
Title: Termination of HOPE 1 Planning Grant, McKnight Neighborhood
Council, Springfield, MA
This report contains a finding indicating the need for you to assure
the eligibility and reasonableness of the final costs under the
Grant and take appropriate action to recover any excess funds if
paid to the Grantee.
Issue Date: November 21, 1996
Audit
Case Number 97-BO-111-0001
File Size: 80KB
Title: Section 232 Nursing Home Program, Review of Underwriting
Procedures
The Department's underwriting procedures are generally sound.
However, we found inconsistencies in the way the HUD State Offices
treat income from leased operations during the construction phase.
These inconsistencies can result in overinsuring HUD mortgages which
unnecessarily increases HUD's risk.
Issue Date: November 8, 1996
Audit-Related
Memorandum 97-SF-174-0801
File Size: 40KB
Title: Office of Fair Housing and Equal Opportunity, Oversight
of Fair Housing Congress of Southern California, Inc., Los Angeles,
California
Our review disclosed that FHEO had already determined that FHCSC
had not complied fully with the lending grant agreement and had
taken corrective action; therefore, we did not continue with a complete
review of FHCSC. However, we identified deficiencies in FHEO's oversight
of FHCSC's lending grant that warrant reporting and corrective action.
Issue Date: October 25, 1996
Audit
Case Number 97-SE-111-0001
File Size: 80KB
Title: Section 8 Rent Recoveries, Alpine Ridge Litigation, Seattle
Office of Housing
Our report contains three findings. These findings disclose that
the Office of Housing has calculated overpayments of $3.8 million
to be collected and has waived interest in exchange for repayment
terms not included in the court order authorizing collection of
overpayments. Second, Housing misapplied a local Annual Adjustment
Factor to past rent increases, resulting in up to $3.7 million in
excessive Housing Assistance Payments to Section 8 project owners.
Finally, Housing has not attempted collection of overpayments in
one case where an owner sold its project during the Alpine Ridge
litigation.
Issue Date: October 24, 1996
Audit-Related Memorandum 97-BO-114-0801
File Size: 31KB
Title: Review of Priority Purchaser Status, Yorkshire Village
Apartments, Houston, Texas
Our review disclosed no evidence to suggest that the seller and
the non-profit purchaser are a related party as defined in HUD's
Preservation Letter Number 8. However, we found that the seller
and consultants orchestrated the sale of Yorkshire Village to a
non-profit group, created by them, who has had little to no involvement
with the POA process and are not supported by the residents. As
such, we have concerns that the best interests of the property,
the residents, and the community are not being met. Further, our
review disclosed concerns with the processing of the sale performed
by the HUD Houston Area Office.
Issue Date: September 30, 1996
Memorandum
No. 96-DP-166-0002
File Size: 55KB
Title: Management Study: Multifamily Information Systems
We conducted a study to review Multifamily's past and current efforts
to build information systems to support its program operations.
This study was not done on any one particular individual system.
Instead, it was a general look at the basic processes of systems
building within Multifamily. Our purpose for this study was to try
to determine, if possible, the root causes which are preventing
Multifamily from developing credible, effective information systems.
We discuss what, in our opinion, are these causes and the possible
solutions in our report. We believe the conditions described in
the report merit the attention of agency senior management because
they could prevent successful development of useful information
systems for Multifamily.
Issue Date: September 24, 1996
Audit
Case Number 96-FW-111-0002
File Size: 76KB
Title: Audit of Multifamily Asset Management Operations, Dallas
Area Office
The audit identified ineffective supervision as the primary cause
for serious problems found at the Asset Management Branch. Supervisors
did not establish adequate controls or procedures; provide adequate
guidance to staff; properly plan, prioritize, or oversee staff activities;
or efficiently use staff and other resources.
Issue Date: September 16, 1996
Audit
Case Number 96-SF-177-0003
File Size: 114KB
Title: Review of Resolution of OIG Audit Recommendations
We completed a multi-field office review of audit resolution procedures
and practices used by HUD management since April 1, 1994 to close
OIG audit recommendations. This report includes two findings with
recommendations for corrective action.
Issue Date: August 28, 1996
Audit
Related Memorandum 96-SF-119-0806
File Size: 14KB
Title: Interim Report, Review of Preservation Activities, Kukui
Towers, Honolulu, Hawaii
Although our review continues, the selection of the priority purchaser
for Kukui Towers appears to be contrary to existing requirements
and lacks the requisite resident support. Also, the $40 million
capital grant attached to the preservation efforts appears to exceed
the current value of Kukui Towers. Since the capital grant for Kukui
Towers will be recaptured by September 30, 1996 if the sale to a
priority purchaser is not accomplished by that date, your immediate
attention to Kukui Towers is essential.
Issue Date: August 23, 1996
Audit
Related Memorandum 96-FW-151-0801
File Size: 29KB
Title: Single Family Property Disposition, Homeless Initiative
The Homeless Initiative is not an effective Program for helping
the homeless become self sufficient. Weaknesses endemic to the Program
leave it vulnerable to abuses such as providers housing ineligible
tenants. Because the Homeless Initiative does not receive any direct
HUD funding, HUD does not consider the Program to be a priority.
Yet, to adequately monitor the Homeless Initiative, HUD must invest
significant staff time in the Program, which it does not have, by
diverting staff from higher priority programs that receive funding.
The Homeless Initiative would benefit by being administered by only
one Office. However, both CPD and Housing have expressed reservations
about being solely responsible for the Program. HUD has tried to
correct programmatic flaws since 1993. Nonetheless, the flawsidentified
in 1993 still exist in 1996. For these reasons, we recommend that
HUD eliminate the Homeless Initiative Program.
Issue Date: August 15, 1996
Audit
Report Number 96-DE-107-0001
File Size: 70KB
Title: Indian Housing Authority Cash Probes, Office of Native
American Programs
We found that Indian Housing Authorities' management over cash
assets can be enhanced with the joint efforts of Authority staff
and HUD Office of Native American Programs staff. With increased
knowledge and focus on cash management controls by both Authorities
and HUD, opportunities for diversion, fraud, and abuse can be decreased.
HUD can accomplish this by increasing its focus on cash management
controls when providing technical assistance and guidance to Indian
Housing Authorities.
Issue Date: August 8, 1996
Audit
Report Number 96-SF-113-0002
File Size: 41KB
Title: Acorn II Project, HUD-Owned Multifamily Project, Oakland,
California
We have audited the financial statements of the Acorn II project,
a HUD-owned multifamily project located in Oakland, California.
The financial statements cover the period of December 31, 1991 through
September 30, 1995. The audit did not disclose any issue requiring
HUD action.
Issue Date: August 8, 1996
Audit
Report Number 96-SF-113-0001
File Size:61KB
Title: Acorn I Project, HUD-Owned Multifamily Project, Oakland,
CA
We have audited the financial statements of the Acorn I project,
a HUD-owned multifamily project located in Oakland, California.
In our opinion, the financial statements are presented fairly and
in conformity with generally accepted accounting principles.
Issue Date: July 31, 1996
Audit
Report Number 96-FW-151-0001
File Size: 96KB
Title: Single Family Homeless Initiative, New Orleans Field Office
Oversight of Safety Net, New Orleans, Louisiana
In response to Congressional and Secretarial requests, we audited
the New Orleans Field Office's oversight of Safety Net, a nonprofit
organization in Baton Rouge, Louisiana. Safety Net administered
HUD's Single Family Property Disposition Homeless Initiative. The
requestors wanted to know whether Safety Net had complied with the
Homeless Initiative regulations and guidelines, and whether the
New Orleans Field Office had properly carried out its oversight
responsibilities of Safety Net. Safety Net had not complied with
the Homeless Initiative regulations and guidelines, and the New
Orleans Field Office's oversight was seriously deficient. Consequently,
the Homeless Initiative's purpose of assisting the homeless by providing
transitional housing and supportive services was not met. Instead,
the New Orleans Field Office allowed Safety Net to abuse the program
by leasing properties to relatives, employees, and individuals that
did not meet the definition of homeless.
Issue Date: July 15, 1996
Audit-Related
Memorandum 96-AT-221-1823
File Size: 113K
Title: Interim Report, Section 203(k) Rehabilitation, Home Mortgage
Program
We have not completed our review. To date, however, our results
show that extensive program abuse is occurring around the country
by lenders, investors, and non-profits. The 203(k) Program, as currently
designed, is too risky because it permits investors, non-profits,
and lenders to walk away with big profits leaving HUD liable for
the mortgages. The rehabilitation work is far from satisfactory.
High claims and defaults are occurring on loans to investors and
non-profits and seem likely to increase.
The 203(k) Program is highly vulnerable to waste, fraud, and abuse
by investors and non-profit borrowers. The program design encourages
risky property deals, land sale schemes, overstated property appraisals,
and phony or excessive fees, and does not adequately safeguard HUD's
interests. Moreover, participation by investors and non-profits
does not appear to promote HUD's objective -- to restore and preserve
existing housing in an effective, efficient, and economical manner.
The abuses have not been isolated to any one person, group, or area
of the country. As demonstrated by our examples, this program seems
to be viewed by some as merely a means to turn a quick profit.
Our results show that investors and non-profit borrowers have
carried out fraudulent or otherwise unnecessary land transactions
to generate money for either the borrower or identity-of-interest
(IOI) parties. They have not made required downpayments. They have
obtained loans on properties which did not need significant repairs
and should not have been in the program. Investors have been paid
for rehabilitation work that was not performed. Non-profit borrowers
have obtained large numbers of loans and have been unable to complete
the work. Non-profit borrowers have also made large profits, contrary
to their stated motivation. Unfortunately, mortgage lenders have
contributed to the abuse. One large lender, for example, has repeatedly
circumvented HUD loan origination requirements to assist otherwise
unqualified borrowers in obtaining loans and has charged ineligible
and unsupported fees.
The involvement of investors and non-profit organizations in the
203(k) Loan Program unnecessarily increases HUD's risk of loss to
the insurance fund from defaults. Of the loans we reviewed, too
few homes had been properly rehabilitated and timely occupied. In
addition, we computed excessive profits and ineligible fees totaling
about $3.3 million in 291 loans -- a cost ultimately passed on to
a homeowner or to HUD and the taxpayer in the case of a default.
We believe that HUD should immediately disqualify investors just
as it has done in the 203(b) Loan Program and take other precautions
to prevent the program abuse that is occurring.
Issue Date: June 12, 1996
Audit
Report Number: 96-BO-123-0001
File Size: 56KB
Title: Controls Over Real Estate Asset Manager (REAM) Contracts,
Massachusetts State Office
The Real Estate Owned (REO) Branch needs to develop controls to
evaluate Real Estate Asset Manager (REAM) contractors' performance
to assure the risk relating to HUD-Owned single family properties
is sufficiently limited.
Issue Date: May 13, 1996
Audit-Related
Memorandum 96-AO-176-0801
File Size: 173KB
Title: Review of HUD Implementation of Federal Lobbying, Restrictions
Public Law 101-121
Our limited review found HUD to be in general compliance with
the Byrd Amendment.
Issue Date: May 13, 1996
Audit-Related
Memorandum 96-AO-169-0802
File Size: 68KB
Title: Limited Review on HUD's Management of the Workers', Compensation
Program
We performed a limited review of HUD's management of the worker's
compensation program and found that improvement can be made in tracking
claims and following up with employees once claims have been approved
by the Department of Labor.
Issue Date: May 10, 1996
Audit
Related Memorandum No. 96-AT-119-0801
File Size: 42KB
Title: Review of Excess Insurance Proceeds, Southeast/Caribbean
We identified 31 Southeast/Caribbean projects with excess funds
totaling $4,703,255.
Issue Date: May 10, 1996
Audit-Related
Memorandum 96-SE-119-0802
File Size: 34KB
Title: Review of the Ernst and Young Database for the Multifamily
Portfolio Reengineering Model
For the 56 projects we found 423 differences out of the 3,864
elements included in our testing (Attachment A.) However, only 114
of the 423 differences noted were significant, i.e., more than a
5 percent difference (Attachment B.) Also, when we ran our data
through the cash flow model the difference in total costs for 54
of the 56 projects was about 3 percent. However, differences in
the costs for individual projects can be significant (over 5 percent).
Issue Date: May 7, 1996
Audit
Related Memorandum 96-BO-111-0801
File Size: 48KB
Title: Boston Safe Neighborhood Action Plan, Boston, MA
Our review disclosed that the Boston SNAP Initiative is a successful
model in bringing diverse groups together for the purpose of implementing
crime reduction strategies at HUD multifamily projects.
Issue Date: April 25, 1996
Audit
Related Memorandum 96-SF-123-0804
File Size: 56KB
Title: Review of Santa Ana Area Office's Property Disposition
Branch, Santa Ana, California
Our review disclosed that the various concerns of potential mismanagement
were unsubstantiated except that the SAAO allowed 10 of 114 properties
reviewed to receive FHA insurance even though they did not meet
minimum property standards.
Issue Date: April 3, 1996
Audit-Related
Memorandum 96-SE-182-0801
File Size: 72KB
Title: Performance Measurement
In response to GPRA, HUD is in the process of identifying and implementing
performance measures and developing information systems to accumulate
and report on the Department's progress toward meeting those measures.
Issue Date: April 2, 1996
Audit
Report Number 96-AO-121-0002
File Size: 38KB
Title: Review of Selected Aspects of the Single Family Assignment
Program
Our report contains one finding which discloses opportunities
for more effective operation of the Single Family Assignment Program.
Issue Date: March 28, 1996
Audit
Report Number 96-SE-119-0002
File Size: 84KB
Title: Review of Savings from FAF Bond Refundings
For the most part, the housing agencies we reviewed were using
or planning to use their savings in accordance with the McKinney
Act requirements, and HUD was receiving the amount due. However,
some agencies used or planned to use some of their savings for costs
not specifically related to housing, and HUD was not in all cases
properly accounting for its share of the savings. Our report includes
recommendations for improvement that should, when implemented, give
HUD greater assurance that the savings from bond refundings are
used consistent with the McKinney Act requirements, and that HUD
will receive all the savings it is due.
Issue Date: March 5, 1996
Audit
Report Number 96-DP-166-0001
File Size: 73KB
Title: Controls Over Software Maintenance Must Be Significantly
Strengthened
We found that: 1. Project Cost Accounting Must Be Used To Control
Software Costs 2. Numerous Controls Needed For Application Software
Changes 3. HUD Has Not Been Using Performance-Based Contracting
Methods for Software Development and Maintenance Contracts
Issue Date: January 11, 1996
Audit-Related
Memorandum 96-SF-119-0803
File Size: 86KB
Title: Review of Section 223(f) Refinancing Country Village Apartments,
Project No. 143-11012, Riverside, California
We concluded that LAAO did not complete all specified processing
procedures for approving the Section 223(f) loan; however, LAAO's
deviations from HUD requirements did not result in any material
adverse impact on HUD or other program participants. Although HUD
Headquarters requested that LAAO expedite the processing of Country
Village's application, LAAO received no instructions from HUD Headquarters
to skip any processing procedures. Based on the results of our review,
we believe that HUD procedures for processing Section 223(f) loan
applications are adequate to protect HUD's interest; therefore,
additional guidance to HUD field offices is not needed.
Calendar Year 1995 Reports
Issue Date: December 14, 1995
Audit
Report Number 96-AO-101-0001
File Size: 68KB
Title: Audit of Notice of Fund Availability Process, Office of
Public and Indian Housing, Washington, D.C.
Our report contains one finding which discloses that PIH did not
always follow the HUD Reform Act of 1989 in processing the NOFAs
for the 1994 funding cycle for MROP and FIC programs.
Issue Date: November 22, 1995
Audit
Related Memorandum 96-CH-111-0801
File Size: 54KB
Title: Illinois State Office's Follow-Up Actions On Multifamily
Project Financial Statements
We concluded that the Illinois State Office was adequately utilizing
the information provided by the Ervin reports.
Issue Date: November 13, 1995
Audit
Case Number 96-SE-119-0001
File Size: 31KB
Title: Section 232 Nursing Homes, The Americana and Monticello
Hall, Office of Housing
Our report shows the adverse affect to HUD when: a) the sole asset
requirement is waived; b) Uniform Commercial Code documents are
not properly filed; c) the language of the security agreements is
overly broad; and d) project bed authority is not adequately protected.
The report also raises the issue of whether HUD's risk in insuring
nursing homes is growing because of a shift in the way that long-term
care is provided.
Issue Date: October 31, 1995
Audit
Related Memorandum 96-SF-111-0801
File Size: 88KB
Title: Limited Review of LAO Monitoring of Finley Square Cooperative
Los Angeles, CA
We found that the LAO could have more closely monitored the project's
physical and financial condition, and if it had done so it might
have ensured more timely corrective actions by the management agent
and owners to improve deficiencies in both areas.
Issue Date: August 31, 1995
Audit
Report Number: 95-HQ-154-0002
File Size: 56KB
Title: Audit of Empowerment Zone, Enterprise Community and Economic
Development Initiative Grant Selection Processes
This report presents the results of our audit of the Empowerment
Zone (EZ) and Enterprise Community (EC) designation process. We
also included the Economic Development Initiative (EDI) grant award
process in our audit, because of its close ties to the EZ/EC designation
process. Our primary objective was to determine if fair and equitable
processes were developed and followed in making all EZ/EC designations
and awards of EDI funds in accordance with statutory requirements.
The audit was initiated at the request of Senator Bond, Chairman
of the Senate Appropriations Subcommittee on Veterans Affairs, HUD
and Independent Agencies, and Senator Mack, Chairman of the Senate
Banking, Housing and Urban Affairs Subcommittee on Housing Opportunity
and Community Development.
The processes used in making EZ/EC designations and EDI grant awards
did not provide reasonable assurance that the best eligible applications
were selected for benefit designations and funding awards. The original
process designed for making EZ/EC designations was not fully followed,
and the nature of alternative procedures used was not described
in writing. More importantly, assessments of the eligibility, as
well as an application's relative rating and ranking against other
applications, were inadequately documented to enable an independent
reviewer to determine the bases for decisions made.
As a result of these process weaknesses, we were unable to satisfy
ourselves as to the basis for or reasonableness of:
1. The final designation of 6 EZs from a total of 22 EZ applications
which were generally categorized as "strong" by the application
review process,
2. The final selection of 14 EC applications which were categorized
as "weak" or no longer under further consideration by the application
review process, and
3. A decision to limit EDI grants to 6 strong rated EZ applicants
who did not receive EZ designations. Revised: June 11, 2002.
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