OIG Internal Audit Reports Issued since 1995

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Issue Date: November 20, 2008
Audit Report No.: 2009-DP-0001
File Size: 497.50KB

Title: Review of Single-Family Partial Claims Collection Process

We audited the single-family partial claims collection process and its effectiveness in protecting the Federal Housing Administration’s (FHA) insurance fund. Our overall objective was to determine whether the single-family partial claims program operated effectively and efficiently to minimize costs to the insurance fund and collect amounts due in a timely manner. The National Service Center (NSC) and its contractors did not properly implement a cohesive partial claims collection process to ensure that partial claims were serviced in a timely manner. The NSC did not (1) fully develop and implement written policies and procedures, (2) define follow-up procedures for the forbearance plan option, (3) promptly transfer partial claims to the Albany Financial Operations Center, and (4) actively track and monitor lender billing. We recommend that the Assistant Secretary for Housing ensure that the NSC formulates and implements procedures to comply with federal regulations and enhance training provided to its contractors so that debts can be transferred to the Financial Operations Center in a timely manner. We further recommend that the Director of the Servicing and Loss Mitigation Division develop procedures to pursue lenders for administrative offsets in a timely manner and to improve the forbearance plans. We also recommend that the Single Family Mortgage Asset Recovery Technology system be fully implemented as the one system of record for partial claims.

Issue Date: November 14, 2008
Audit Report No.: 2009-FO-0003
File Size: 670.34KB

Title: Additional Details to Supplement Our Report on HUD’s Fiscal Years 2008 and 2007 Financial Statements

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 2008 and 2007 Financial Statements, which is included in HUD's Fiscal Year 2008 Performance and Accountability Report.

In OIG's opinion, based on our audit and the reports of other auditors, the financial statements were presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America.

The report identifies (a) seven significant weaknesses, and (b) four instances of noncompliance with applicable laws and regulations. The report discusses each of these conditions in detail, provides an assessment of actions taken by HUD to mitigate the deficiencies noted, 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 reported separately to HUD management.

Issue Date: November 7, 2008
Audit Report No.: 2009-FO-0002
File Size: 840KB

Title: Audit of the Federal Housing Administration’s Financial Statements for Fiscal Years 2008 and 2007

This report presents the results of Urbach, Kahn, and Werlin LLP's (UKW) audit of the Federal Housing Administration's (FHA) financial statements for the fiscal years ended September 30, 2008 and 2007.

In UKW's opinion, the financial statements present fairly, in all material respects, FHA's financial position as of September 30, 2008 and 2007, and its net costs, changes in net position, and combined budgetary resources for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The report identifies one significant deficiency on internal control and two reportable instances of non-compliance with laws, regulations and government-wide policies. Additionally, it discusses the issues/conditions in detail, provides an assessment of management’s responses to the report, and makes recommendations for corrective actions. UKW also noted other matters involving internal control and its operations that are not material to the financial statements and are being communicated separately to FHA’s management.

Issue Date: November 7, 2008
Audit Report No.: 2009-FO-0001
File Size: 405KB

Title: Audit of Government National Mortgage Association’s (Ginnie Mae) Financial Statements for Fiscal Years 2008 and 2007

This report presents the results of Carmichael, Brasher, Tuvell and Company's (CBTC) audit of the Government National Mortgage Association's (Ginnie Mae) financial statements for the fiscal years ended September 30, 2008 and 2007. In CBTC's opinion, the financial statements present fairly, in all material respects, Ginnie Mae’s financial position as of September 30, 2008 and September 30, 2007 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.

The report identifies one significant deficiency on internal control and one reportable instance of non-compliance with laws, regulations and government-wide policies. Additionally, it discusses the issues/conditions in detail, provides an assessment of management’s responses to the report, and makes recommendations for corrective actions. CBTC also noted other matters involving internal control and its operation that are not material to the financial statements and are being communicated separately to Ginnie Mae's management.

Issue Date: October 16, 2008
Audit Report No.: 2009-NY-0001
File Size: 1.43MB

Title: HUD Did Not Adquately Monitor Its Performance-Based Contract Adminstrator, New York State Housing Trust Fund Corporation

We completed an audit of the U.S. Department of Housing and Urban Development's (HUD) monitoring of its annual contributions contract with its performance-based contract administrator, the New York State Housing Trust Fund Corporation (contractor). The audit was initiated in accordance with the Office of Inspector General's (OIG) audit plan that includes performing internal audits to evaluate HUD's execution of its fiscal responsibilities. Our audit objective was to determine whether HUD appropriately monitored the contractor with respect to contract performance.

The audit disclosed that HUD did not effectively assess the performance and contractual compliance of the contractor and its subcontractor. Specifically, HUD did not fulfill its monitoring responsibilities regarding appeals of fee determinations, monthly invoice reviews, and the annual compliance review. In addition, HUD headquarters and hub management failed to keep open lines of communication to provide clear and concise guidance. We attribute these conditions to a lack of written policies and procedures for (1) addressing the complexities of contractor oversight by two hubs, (2) ensuring that consistent performance criteria were used by the hubs, and (3) handling disagreements regarding interpretations of program directives. As a result, more than $2.08 million in reduced administrative fees that were reversed were unsupported, and the contractor's substandard performance was not adequately addressed.

We recommend that the Deputy Assistant Secretary for Multifamily Housing require the Director of Housing Assistance Contract Administration Oversight to (1) establish policies and procedures defining the roles and responsibilities of hub staff, (2) provide training to hub staff in monitoring the contractor's performance, and (3) examine the appeals and ensure that the appropriate supporting documentation exists for the more than $2.08 million in fees reimbursed to the contractor. In addition, we recommend that the Deputy Assistant Secretary for Multifamily Housing require the HUD New York and Buffalo multifamily hubs to develop policies and procedures for monitoring the Section 8 contract administration initiative and reviewing challenges to HUD's fee determination, the monthly invoice review, and the annual compliance review.

Issue Date: September 30, 2008
Audit Report No.: 2008-DP-0802

Title: OIG Response to Questions from the Office of Management and Budget under the Federal Information Security 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 30, 2008
Audit Report No.: 2008-AT-0803
File Size: 331.57KB

Title: Corrective Action Verification, The Housing Authority of the City of Cuthbert, Georgia, Public Housing Programs

HUD OIG performed corrective action verification for an audit recommendation cited in the audit report, Cuthbert Housing Authority, Public Housing Programs (2004-AT-1001) issued January 15, 2004. The purpose of the corrective action verification was to determine whether the selected audit recommendation was implemented and expended its funds in accordance with HUD regulations.

The Authority did not comply with its HUD-approved agreement to obtain repayment of $327,326 advanced to one of its affiliates, the Development Corporation, and did not stop advancing funds until November 2004, although it agreed it would stop by June 2004. The Authority collected sporadic payments from the Development Corporation after the agreement was executed, leaving a current balance of $224,494. In addition to the $224,494, we verified two other receivables of $148,305 and $126,609 advanced by the Authority to the Development Corporation. Also, the Authority paid a law firm $9,000 to lobby the Georgia state legislature to eliminate barriers to developing affordable housing in rural Georgia.

OIG recommended that the Director of HUD's Atlanta Office of Public Housing continue to work with the Authority to collect $224,449 from the Development Corporation and reimburse its operating fund, require the Authority to collect $274,914 from the Development Corporation and reimburse its operating fund, apply appropriate sanctions if the Authority does not comply with its payback agreement, and require the Authority to reimburse its operating fund $9,000 from nonfederal sources.

Issue Date: September 30, 2008
Audit Report No.: 2008-CH-0003
File Size: 2.04MB

Title: The U.S. Department of Housing and Urban Development Needs to Improve Its Existing Procedures and Controls Regarding Its Management of Human Capital

The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General reviewed HUD's management of human resources. We initiated the review based on our annual audit plan and our strategic plan to help HUD resolve its major management challenges. The review also addressed a complaint to our Hotline regarding the adequacy of HUD’s Total Estimation and Allocation Mechanism (TEAM) system. Our objectives were to determine the adequacy of HUD’s staffing resources in meeting its program objectives and whether HUD’s offices used HUD’s Resource Estimation and Allocation Process (REAP) studies when they had the ability to hire. This is the second of three audit reports planned on HUD’s management of its human resources.

HUD lacked a valid basis for assessing its human resource needs and allocating staff within its program offices. Three of the five offices statistically selected for review could not provide adequate documentation to support their assessment of human resource needs and allocation of staff among their headquarters and field office locations. As a result, HUD lacked assurance that its allocation of staff was based on supportable need and it accurately determined the human resources required to meet its performance goals under the Government Performance Results Act (GPRA).

HUD’s program offices used the REAP studies when they had the ability to hire; however, they lacked adequate documentation to support their hiring practices. In particular, five of the seven HUD program offices selected for review were unable to provide adequate documentation to support their hiring of staff. As a result, HUD lacked assurance that its program offices’ hiring was appropriate.

Lastly, the complainant’s allegation regarding the adequacy of HUD’s TEAM system lacked a supportable basis as he did not have a complete understanding of the system.

We recommend that HUD’s Chief Financial Officer implement a plan detailing how HUD’s program offices will use REAP and the TEAM systems to determine which program offices need to be reassessed, continue providing training, and obtain feedback from the Office of Fair Housing and Equal Opportunity regarding the pilot of the TEAM system’s allocation module. If the pilot is determined to be successful, HUD’s Chief Financial Officer should take the necessary steps to implement the allocation module in HUD’s other program offices.

Issue Date: September 30, 2008
Audit Report No.: 2008-KC-0007
File Size: 150.95KB

Title: HUD Inappropriately Authorized the Use of Residual Receipts in Lieu of Reserve for Replacement or Operating Funds

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited HUD's use of residual receipts in lieu of reserve for replacement funds. The objective of the audit was to determine whether HUD appropriately authorized residual receipt withdrawals in lieu of reserve for replacement funds for new regulation multifamily projects.

HUD inappropriately authorized the use of more than $3.2 million in residual receipt funds for new regulation multifamily projects for ineligible costs. Regional and field office staff nationwide were either not familiar with or overlooked the residual receipt use requirements for new regulation multifamily projects. As a result, HUD lost $3.2 million that it could have used more effectively for additional housing subsidies and other authorized taxpayer purposes.

We recommend that HUD, on a project-by-project basis for the 14 projects reviewed, ensure that the project reimburses the residual receipts account with reserve for replacement or operating funds, unless this action negatively affects the project. In addition, HUD needs to ensure that regional and field office staff fully understands and complies with the requirements regarding the use of residual receipts for new regulation multifamily projects.

Issue Dated: September 29, 2008
Audit Report No.: 2008-CH-0002
File Size: 87.06KB

Title: HUD Did Not Always Ensure That FHA Lenders Complied with Federal Requirements When Submitting Loans for New Construction Properties Located in FEMA’s Designated Special Flood Hazard Areas

The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General audited HUD's oversight of the underwriting of Federal Housing Administration (FHA)-insured loans for new construction properties located in the Federal Emergency Management Agency’s (FEMA) designated special flood hazard areas. We initiated the audit as part of the activities in our 2007 annual audit plan. Our objective was to determine whether HUD had adequate oversight of the underwriting of FHA loans for new construction properties located in FEMA’s designated special flood hazard areas.

HUD did not always ensure that FHA-approved lenders complied with federal requirements when they submitted 399 loans, totaling more than $55 million in original mortgage amounts, to HUD for insurance endorsement. The loans were to finance the purchase of newly constructed properties located in FEMA’s designated special flood hazard areas. However, the lenders failed to provide evidence of a letter of map revision/amendment or flood elevation certificate when the loans were submitted to HUD for insurance endorsement. Therefore, these loans were not eligible for FHA insurance. Further, for 195 loans, totaling nearly $27 million in original mortgage amounts, the lenders did not ensure that borrowers’ escrow accounts included payments for flood insurance at the time the loans closed.

HUD also did not ensure that lenders servicing FHA-insured loans for 163 properties, totaling nearly $22 million in original mortgage amounts and located in FEMA’s designated special flood hazard areas, kept apprised of whether borrowers maintained required flood insurance. Further, 30 FHA lenders incorrectly certified to the integrity of the data supporting the underwriting deficiencies and that the loans were eligible for HUD mortgage insurance for 242 loans.

As a result, HUD inappropriately approved loans for FHA mortgage insurance; therefore, the risk to the FHA insurance fund is increased if HUD pays insurance claims and incurs losses on the resale of the properties associated with these ineligible FHA-insured loans. Further, the lenders’ failure to ensure that borrowers maintained flood insurance throughout the life of the loans would pose a significant risk if another natural flood disaster was to occur such as Hurricanes Rita or Katrina or the flooding that has recently devastated parts of the Midwest.

We recommend that the Assistant Secretary for Housing-Federal Housing Commissioner (1) seek appropriate administrative action for the active loans if the lenders cannot provide documentation, such as a letter of map amendment/revision, to show that the properties are not located in FEMA’s designated special flood hazard areas or the required elevation certification showing that the properties meet elevation requirements and are covered by flood insurance; (2) require the applicable lenders to reimburse HUD for any future losses from claims paid if they cannot provide the elevation certifications or letters of map revision/amendment; (3) require the lenders for the loans lacking flood insurance to provide evidence showing that the properties have flood insurance or are no longer located in FEMA’s designated special flood hazard areas or seek appropriate administrative action; (4) and improve the Office of Single Family Housing’s existing procedures and controls to ensure that lenders follow HUD’s underwriting requirements for new construction properties located in FEMA’s designated special flood hazard areas. These improved procedures and controls should result in a potential savings to the FHA insurance fund of nearly $261,000 over the next year.

We also recommend that HUD’s Acting Associate General Counsel for Program Enforcement determine legal sufficiency and if legally sufficient, pursue remedies under the Program Fraud Civil Remedies Act against the lenders with incorrect certifications cited in this audit report.

Issue Date: September 29, 2008
Audit Report No.: 2008-CH-0001
File Size: 87.06KB

Title: HUD Did Not Always Ensure That FHA Lenders Complied with Federal Requirements Regarding Home Equity Conversion Mortgages

The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General audited HUD's oversight of the Federal Housing Administration (FHA)-insured home equity conversion mortgages (HECM) program. We initiated the audit as part of the activities in our 2008 annual audit plan. Our audit objective was to assess elements of HUD’s oversight of the HECM program. This is the first of two audit reports regarding the HECM program and focuses on lender notification of borrower deaths and payment of debenture interest.

HUD did not ensure that FHA lenders reported borrowers’ death in accordance with federal requirements. For the 31 loans reviewed, HUD’s contractor failed to provide documentation to support that FHA lenders notified HUD of borrowers’ deaths in writing. Further, the lenders failed to notify the contractor of borrowers’ deaths for 11 of the 31 loans and for 13 loans, did not report in a timely manner the dates of borrowers’ death.

HUD failed to pay debenture interest on HECM loans. For 13 of the 30 loans in which HUD paid claims during the period March 1, 2006, through February 29, 2008, it did not pay debenture interest to the lenders in accordance with federal requirements.

As a result, HUD could not be assured that FHA lenders appropriately met HUD’s time requirements for initiating the foreclosure process or for recording the deeds-in-lieu to take possession of the property, which impacts the amount of the lenders’ insurance claims. Additionally, as a result of HUD’s failure to pay lenders debenture interest on HECM loans from the loans’ due date to the claim payment date, it owes lenders debenture interest on HECM loans.

We recommend that the Assistant Secretary for Housing-Federal Housing Commissioner require that HUD’s Office of Single Family Housing improve its existing procedures and controls to ensure that lenders follow HUD’s requirements for servicing HECM loans and implement adequate procedures and controls to ensure that the Office of Single Family Housing complies with federal requirements in the administration of the HECM program, including the proper payment of claims, and curtail interest payments to the appropriate lenders for the loans identified in this audit report that HUD determines failed to meet all of its time requirements.

Issue Date: September 11, 2008
Audit Report No.: 2008-DP-0007

Title: Evaluation of HUD ’s Security Controls over Databases (Report Not Available to Public)

We have completed an Evaluation of HUD’s Security Controls over Databases. Our overall objective was to determine if the security implemented on HUD’s network provides adequate controls to prevent abuse or unauthorized access to the Department’s information resources. We reviewed HUD’s database environment by evaluating security measures in place that guard these assets, scanning identified databases, and identifying vulnerabilities and suspect configurations that place information at risk. For criteria, we used recommendations from the following Special Publications issued by the National Institute of Standards and Technology: NIST SP 800-53, “Recommended Security Controls for Federal Information Systems Standards,” and NIST SP 800-40, “Procedures for Handling Security Patches.” We also used requirements from the Federal Information Security Management Act of 2002. The OIG has determined that the contents of this report would not be appropriate for public disclosure and have limited its distribution to selected HUD officials.

Issue Date: September 8, 2008
Audit Report No.: 2008-KC-0006
File Size: 386.46KB

Title: HUD’s Office of Single Family Housing Had Not Fully Implemented an Internal Control Structure in Accordance with Requirements

The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, audited HUD's Office of Single Family Housing (Single Family) due to concerns over the expected increase in Federal Housing Administration (FHA)-insured loans generated by newly implemented and proposed FHA programs. The objective of our audit was to determine whether Single Family had implemented an internal control structure in accordance with Government Accountability Office (GAO) internal control standards and HUD requirements.

We concluded that Single Family had not fully implemented an internal control structure in accordance with GAO internal control standards and HUD requirements. Specifically, it did not (1) perform a formal, systematic annual risk assessment of its programs and administrative functions, (2) plan and conduct ongoing management control reviews or alternative management control reviews of its programs, (3) establish an overall strategy regarding its risk-based monitoring of program activities and participants, or (4) identify corrective actions required to improve its management controls in a timely manner.

We recommended that HUD ensure that Single Family managers and staff fully implement an acceptable internal control structure by preparing and implementing effective written policies and procedures that comply with the GAO internal control standards and HUD Handbook 1840.1 requirements.

Issue Date: September 4, 2008
Audit Report No.: 2008-LA-0003
File Size: 332.95KB

Title: Implementation Weaknesses Existed in All Major Phases of the FHA Appraiser Review Process

We audited HUD's appraiser review process as part of our annual plan. The audit was proposed in response to a single-family loan origination audit that raised concerns regarding HUD's oversight of FHA appraisers. This is the second of two audits covering HUD's controls over the appraiser review process. The first audit report, 2008-LA-0002, focused on HUD's oversight of the FHA appraiser roster; whereas this audit report focuses on the appraiser review procedures conducted by the homeownership centers and HUD's oversight of the appraiser review process.

We found that HUD's appraiser review process was not adequate to reliably and consistently identify and remedy deficiencies associated with an appraiser. Additionally, HUD did not maintain information necessary to assess the effectiveness of its review process. For each major phase of the appraiser review process we noted problems such as inadequate or incomplete HUD guidance, weak quality controls over implementation of review procedures, and inconsistent application of rating standards and sanctioning timeframes.

We recommend that HUD develop and implement adequate oversight and controls over the appraiser review process to address the weaknesses identified in this report and to ensure that headquarters continuously evaluates the efficiency and effectiveness of the process.

Issue Date: August 27, 2008
Audit Report No.: 2008-NY-0002
File Size: 1.00MB

Title: Weaknesses in the Office of Fair Housing and Equal Opportunity's 2007 Award Process for the Fair Housing Initiative Program, National-Based Media Campaign

We performed a limited scope audit of the Office of Fair Housing and Equal Opportunity to determine whether the Office complied with the requirements of 42 U.S.C. (United States Code) Chapter 45, Subpart I, Section, 3616a(d), entitled Fair Housing Intiatives Program, Education and Outreach, when it published the 2007 Fair Housing Initiatives Program notice of funding availability. The audit disclosed that the Office generally complied with the applicable requirements; however, it issued the 2007 Fair Housing Initiatives Program notice of funding availability with an error related to applicant eligibility and it did not fully document criteria to determine eligibility of the applicant awarded the 2007 Education and Outreach Initiative national program media campaign. This condition occurred because the Office broadly defined who was eligible to apply and did not obtain legal guidance regarding applicants qualifying as nonprofit organizations representing groups protected under the Fair Housing Act. Additionally, the Office of Fair Housing and Equal Opportunity lacked a policy regarding whether a portion of each fiscal year's Education and Outreach Initiative funds were to be used for a national program for Fair Housing Month activities.

We recommend that the Assistant Secretary, Office of Fair Housing and Equal Opportunity, (1) strengthen its internal control procedures regarding the development of future super notices of funding availability to ensure that notice language complies with statutory requirements, (2) obtain guidance on the meaning of a nonprofit organization representing groups of persons protected under the Fair Housing Act, and (3) develop policy on whether funds from each fiscal year's Fair Housing Initiatives Program appropriation is intended to be used for a national program specifically for annual Fair Housing Month activities.

Title: HUD's Community Development Block Grant Set-Aside for Colonias Was Not Used for Its Intended Purposes

The U. S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited HUD's administration of the Community Development Block Grant (CDBG) set-aside for colonias (colonia set-aside). We performed the review because of concerns that surfaced during an audit survey of the state of Texas's colonia set-aside funds. That review showed that HUD had not issued regulations or handbooks that required compliance with Section 916 of the Cranston-Gonzalez National Affordable Housing Act of 1990 (Act). In addition, HUD could not determine whether Texas used its colonia set-aside funds in the most efficient and effective manner or whether it accomplished the intended purposes of providing water and sewage systems to the most needy colonia residents. Our audit objective was to determine whether HUD ensured that the states of New Mexico, Arizona, Texas, and California (states) expended colonia set-aside funds in compliance with the Act.

We found that HUD did not issue regulations or handbooks specific to the administration of the set-aside funds or develop performance measures to track accomplishments. Thus, it did not ensure that the states expended the funds in compliance with the Act and could not track accomplishments. Rather, HUD allowed the states to define colonias and determine how to distribute the funds. The states had different definitions of colonias and did not always prioritize funding to the colonias with the greatest needs as required. As a result, between 2004 and 2007, New Mexico and Arizona allocated or expended more than $8.4 million in colonia set-aside funds for projects that did not meet the requirements of the Act and did not meet the intended beneficiaries' basic health and safety needs. In addition, HUD could not report on the progress or effect of the set-aside funds in meeting the colonia residents' needs regarding water, sewage, and housing.

We recommend that HUD require the states of New Mexico and Arizona to support or repay more than $8.4 million. Further, HUD should implement effective internal controls to ensure that the states comply with the Act and implement performance measures specific to the colonia set-aside to help ensure that funds are used effectively to meet water, sewage, and housing needs of the colonia residents. By implementing effective controls, HUD can put more than $2.8 million to better use over the next 12 months.

Issue Date: July 23, 2008
Audit Report No.: 2008-DP-0006

Title: Review of HUD’s Information Technology Security Program
(Report Not Available to the Public)

We have completed a review of HUD’s information technology security program. The overall objective of our audit was to evaluate HUD’s entity-wide information security program’s compliance with FISMA requirements. Specifically, we evaluated the overall quality of HUD’s certification and accreditation process for its systems; HUD program officials and system owners’ implementation of their assigned information security responsibilities; and whether HUD’s Office of the Chief Information Officer developed security policies and implemented and monitored enterprise-wide controls. 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: July 21, 2008
Audit Report No.: 2008-DP-0005

Title: Review of Controls Over the Removal of Local and Remote User Access
(Report Not Available to the Public)

We audited the U.S. Department of Housing and Urban Developments’ (HUD) processes and controls to remove the computer system access rights of retired employees. This audit was initiated based upon work performed during our fiscal year 2007 review of information system controls in support of the annual financial statement audit. The OIG has determined the contents of this report would not be appropriate for public disclosure; therefore, we have limited its distribution to select HUD officials.

Issue Date: July 15, 2008
Audit Report No.: 2008-KC-0005
File Size: 51.02KB

Title: HUD’s Office of Multifamily Housing Generally Met Requirements While Administering the Opt-Out Process for Section 8 Projects

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General reviewed HUD's oversight of projects that opted out of the Section 8 program between January 1, 2004, and December 31, 2007. We reviewed the opt-out process because it involved large amounts of funds potentially not accounted for or remitted to HUD.

With a few minor exceptions, HUD complied with applicable requirements while administering the opt-out process for the nine Section 8 projects in our sample. In addition, for all nine projects, the responsible depository properly remitted residual receipts to HUD or released the residual receipts to the project owners, or the balance in the residual receipts account was zero so no action was required.

We communicated the minor exceptions to HUD in a separate management letter. Since we did not identify any significant deficiencies, the report contains no recommendations.

Issue Date: June 24, 2008
Audit Report No.: 2008-KC-0004
File Size: 295.58KB

Title: HUD’s Office of Single Family Housing Could Improve the Reliability of Its Process for Reporting Performance Measure Results

We concluded that Single Family could improve the reliability of its process for reporting performance measure results. Single Family has a performance measurement process in place; however, it could make the process more reliable if it routinely evaluated data used for performance measure results and formally documented its structure and process for developing, monitoring, and reporting on performance measures.

We recommended that HUD establish and implement effective written policies and procedures for routinely evaluating the data used to report performance measure results to ensure that the data are the most accurate and appropriate data available. We also recommended that HUD establish and implement effective written policies and procedures for developing, monitoring, and reporting on performance measures.

Issue Date: June 12, 2008
Audit Report No.: 2008-DP-0004
File Size: 802.33KB

Title: Review of Selected FHA Major Applications’ Information Security Controls (Report Not Available to the Public)

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: May 21, 2008
Audit Report No.: 2008-BO-0002
File Size: 337.20KB

Title: Maintenance of Effort Requirements Are Needed to Ensure Intended Use of CDBG Program Funds

As part of the Office of Inspector General (OIG) annual goals for internal audits, we reviewed U.S. Department of Housing and Urban Development (HUD) policies prohibiting the use of funds from the Community Development Block Grant (CDBG) program to supplant general government funds. Congress stated in a 2006 House congressional report that CDBG funds were never meant “to be used to replace local general government funds on projects communities should underwrite, regardless of whether grant dollars are available” and that “[t]he congressional prohibition against supplanting notwithstanding, HUD lacks the ability to determine whether funds are supplanted for general revenue funds because it does not collect the necessary data.”

Our objective was to determine whether the HUD Office of Community Planning and Development (CPD) had management controls that were sufficient to ensure that CDBG grantees had effective procedures to preclude them from supplanting general government funds with CDBG program funds. We also examined whether there were practical ways to measure whether grantees used CDBG program funds to supplant general state or local government funds and indicators that grantees might be using federal program funds to supplant general government funds.

HUD could not identify whether federal funds were used to supplant general government funds because it had not implemented management controls to provide assurances that CDBG grantees did not supplant their local budgets with CDBG program funds. Specifically, HUD could not identify whether a grantee supplanted its local budget because it had not identified the requirements for maintenance of effort included in the Housing and Community Development Act of 1974 (HCDA), either in policy or CDBG program regulations.

According to CPD program officials and as discussed in a 1980 U.S. Government Accountability Office (GAO) report, when the program was implemented, there was a consensus that the requirement for maintenance of effort was difficult, if not impossible, to enforce because it called for an external judgment on what grantees would have done if federal funds were not available. However, GAO has reported more recently on the maintenance of effort requirements, and also other federal agencies have established maintenance of effort requirements, ways to measure compliance, and indicators of noncompliance. HUD indicated that it was taking initial steps by discussing the requirement with its grantees but that this activity was not a high priority. However, without maintenance of effort management controls, CDBG program funds may be at risk for substitution by grantees.

HUD should initiate efforts to address and establish maintenance of effort requirements and continue its dialogue with its grantees to consider stakeholder input for establishing maintenance of effort compliance requirements and determine whether to or how to implement maintenance of effort requirements for the program after consideration of stakeholders’ input.

Issue Date: May 14, 2008
Audit Report No.: 2008-AT-0003
File Size: 162.37

Title: HUD Lacked Adequate Controls over the Physical Condition of Section 8 Voucher Program Housing Stock

As part of the U.S. Department of Housing and Urban Development (HUD), Office of the Inspector General’s (OIG) strategic plan, we audited HUD’s controls over the physical condition of Section 8 housing stock for the Housing Choice Voucher program. Our objective was to determine whether HUD had adequate controls to ensure that its Section 8 housing stock was in material compliance with housing quality standards.

We found that HUD did not have adequate controls to ensure that its Section 8 housing stock was in material compliance with housing quality standards. This condition occurred because HUD had not fully implemented its Section 8 Management Assessment Program. As a result, it could not ensure that the primary mission of the Section 8 program, paying rental subsidies so that eligible families can afford decent, safe, and sanitary housing, was met. In addition, HUD’s lack of knowledge regarding the condition of its Section 8 housing stock resulted in inflated performance ratings for public housing agencies administering the program. Consequently, HUD routinely rated some agencies as being high performers when a significant percentage of the units they administered were in material noncompliance with housing quality standards. HUD was revising its Section 8 regulations. These revisions included developing a physical inspection system to help ensure that HUD’s Section 8 housing stock is in material compliance with housing quality standards.

Our recommendations included completion of the departmental clearance process of the proposed revised Section 8 regulations by the end of fiscal year 2008, allowing the proposed revisions to Section 8 Management Assessment Program and housing quality standards to go through the proper process and carefully consider all questions and comments made by the affected parties (HUD Office of Public and Indian Housing staff, tenants, landlords, Real Estate Assessment Center, HUD OIG, etc.) before publishing the final rule, and fully developing and implementing a physical inspection system for the tenant-based Housing Choice Voucher program within three years of the issue date of this report.

Issue Date: May 12, 2008
Audit Report No.: 2008-AT-0802
File Size: 141.31KB

Title: Corrective Action Verification Opelika Housing Authority Public Housing Programs

HUD OIG performed a corrective action verification of audit recommendations cited in the audit report, Opelika Housing Authority, Public Housing Programs (2004-AT-1011) issued July 23, 2004. The purpose of the corrective action verification was to determine whether the selected audit recommendations were implemented and the deficiencies cited in the report were corrected. The Authority implemented the necessary corrective action for the recommendations. As a result, the recommendations are resolved and no further action is required.

The Authority's Section 8 general ledger contained a receivable in the amount of $57,900, due from Opelika Housing Development Corporation a not-for-profit corporation affiliated with the Authority,. The receivable represents ineligible Section 8 payments made to the Opelika Housing Development Corporation by the Section 8 program. HUD recovered the ineligible payments during 2005 through offset of Section 8 administration fees from the Authority's Section 8 program. However, the Opelika Housing Development Corporation did not reimburse the Authority for the ineligible payments.

OIG recommended that the Director of HUD's Birmingham Office of Public Housing require the Authority to collect $57,900 from the Opelika Housing Development Corporation.

Title: The Miami Dade Housing Agency, Miami, Florida, Did Not Maintain Adequate Controls over Its Capital Fund Program

HUD-OIG audited the Miami Dade Housing Agency (Agency) capital fund program. The objective of the audit was to determine whether the Agency had adequate controls to ensure that contracts were awarded in accordance with regulations and U.S. Department of Housing and Urban Development (HUD) requirements.

The Agency did not have adequate controls to ensure that contracts were awarded in accordance with regulations and HUD requirements. It did not maintain documentation supporting that contracts were awarded with full and open competition. This condition occurred because the Agency did not have effective internal controls for documenting the procurement process and disregarded federal procurement requirements. As a result, it could not ensure that more than $12.1 million for contract payments was awarded through full and open competition and that the costs were reasonable. In addition, the Agency did not properly support multiple drawdowns of capital funds. It drew down capital funds from HUD to reimburse itself for expenses associated with 2003 and 2004 capital fund program grants. It then transferred these expenses to close out a 2002 capital fund program grant and drew down additional capital funds from HUD using these same expenses as justification. It could not provide documentation to support that HUD was reimbursed for the excess funds used to close out the grant. This condition occurred because the Agency did not have effective controls in place to track excess funds that needed to be returned to HUD. As a result, we have no assurance that excess funds of more than $1.8 million were repaid to HUD.

OIG recommended that HUD require the Agency to (1) provide supporting documentation to justify the eligibility and reasonableness of more than $12.1 million disbursed for five contracts and to Miami Dade County (County) for seven transactions or reimburse the capital fund program more than $2.2 million and the HOPE VI program almost $9.9 million from nonfederal funds, (2) ensure that federal procurement requirements for maintaining supporting documentation are implemented and enforced, and (3) ensure that any services obtained through the County are purchased in compliance with federal procurement requirements. In addition, HUD should require the Agency to (1) provide documentation to support that the excess drawdown of more than $1.8 million was returned to HUD or reimburse the capital fund program from nonfederal funds; (2) develop a system to track excess drawdowns and reimbursement of capital funds to HUD and maintain supporting documentation for both; (3) hire an independent accounting firm to reconcile capital fund program grants between HUD's Line of Credit Control System and the Agency financial system; and (4) incorporate the tracking system, maintenance of supporting documentation, and the reconciliation of capital fund program grants into existing procedures.

Issue Date: April 14, 2008
Audit Report No.: 2008-KC-0003
File Size: 189.17KB

Title: Enterprise Income Verification Users Did Not Always Take Advantage of HUD’s Training and Guidance

The U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General audited HUD’s Enterprise Income Verification (EIV) system. HUD implemented the EIV system nationwide for public housing authorities to use to identify and reduce tenant income and subsidy errors within the Section 8 and public housing programs. Our objective was to determine whether HUD provided adequate guidance and training to its EIV coordinators and housing authority users.

We found that HUD provided adequate guidance and training to its EIV coordinators and housing authority users. However, EIV users did not always take advantage of HUD’s EIV training and guidance. Since use of EIV is not yet mandatory, HUD did not require housing authorities to ensure that their users take EIV training prior to granting them access to the EIV system. As a result, housing authority users may not fully understand EIV’s capabilities and their responsibilities when using the system.

We recommend that the Deputy Assistant Secretary for Public Housing and Voucher Programs consider enhancing existing requirements to require housing authorities to certify that their EIV users have received EIV training prior to granting access to the EIV system. The housing authorities would keep the certifications on file and have them available for review.

Issue Date: March 28, 2008
Audit Report No.: 2008-AO-0801
File Size: 238.07KB

Title: Review of Duplication of Participants Benefits under HUD’s Katrina Disaster Housing Assistance Program and Disaster Voucher Program

We audited the U.S. Department of Housing and Urban Development’s (HUD) Katrina Disaster Housing Assistance Program (KDHAP) and Disaster Voucher Program (DVP) administered by various public housing agencies. Our audit objective was to determine whether HUD established controls to ensure that the Housing Authority of New Orleans (HANO) pre-Hurricane Katrina Housing Choice Voucher program participants did not receive duplicate assistance under KDHAP and/or DVP.

We determined that in most cases HUD ensured that KDHAP/DVP participants receiving assistance were not also receiving assistance under HANO’s Housing Choice Voucher program. However, in a few instances (4 of 51), the participants received duplicate assistance. In all four cases, this occurred because HUD allowed Housing Choice Voucher Homeownership program (Homeownership program) participants to execute and receive KDHAP/DVP payments on their behalf while continuing to receive mortgage payments under the Homeownership program. HANO has continued to pay participants Homeownership program assistance payments after Hurricane Katrina to avoid placing the participants into foreclosure. Since the Housing Choice Voucher and KDHAP/DVP program regulations prohibit families from receiving assistance while receiving another housing subsidy or receiving assistance for more than one unit or a unit in which they do not reside, $13,147 in Homeownership program funds was misspent. In addition, two of the four participants also received Community Development Block Grant (CDBG) funding totaling $161,090 to rebuild their property, and the other two applied for assistance but had not received it as of October 2007. Finally, all four participants had also received duplicate rental assistance funding from FEMA totaling $14,655 as of September 2006. In addition, there is a risk that additional duplicate participants exist that were not detected by our testing methodology, as Social Security number information in HANO's register was not always reliable.

We recommend that the HUD’s Director of Housing Choice Voucher Programs take appropriate actions to recover the ineligible funding totaling $13,147 for four duplicate participants, prevent duplicate payments by working with the lenders to rework the mortgages and suspending payment or seek a waiver for the duplicate payment prohibition for Homeownership program participants, and work with FEMA and HUD’s Office of Community Planning and Development to ensure that their assistance did not duplicate HUD’s rental assistance and recover any ineligible duplicate assistance payments, which currently totals $14,655.

Issue Date: March 26, 2008
Audit Report No.: 2008-PH-0001
File Size: 120.37KB

Title: HUD's Process for Tracking the American Dream Downpayment Initiative Had Weaknesses

As part of our strategic plan, we audited the United States Department of Housing and Urban Development's (HUD) American Dream Downpayment Initiative (Initiative). Our audit objective was to determine whether HUD had adequate controls to ensure that its grantees did not exceed allowable downpayment assistance limits and that funds were used as required.

HUD had controls in place to ensure that grantees did not exceed allowable downpayment assistance limits and that funds were used as required, but the control had weaknesses. Specifically, HUD relied heavily on its Integrated Disbursement and Information System, which did not have adequate capability to specifically track the Initiative's activities. Further, regardless of the total amount of downpayment assistance provided to the homebuyers reported via the system, the accomplishment reports prepared by HUD and used to report the total amount of the Initiative's funding disbursed always reflected the grantees' budgeted funding limits. If grantees exceeded downpayment assistance limits, HUD charged the excessive amount to the participating jurisdiction's HOME Investment Partnerships Act formula allocation.

We recommend that HUD perform periodic analyses to ensure that information reflected on the Initiative's accomplishment reports is accurate and coincides with the grantees' HUD-approved consolidated plans. If any of the reported information is found to be inaccurate, HUD needs to correct the appropriate reports and monetary figures.

Issue Date: March 24, 2008
Audit Report No.: 2008-KC-0002
File Size: 333.99KB

Title: HUD Did Not Ensure That Housing Authorities Properly Administered the Community Service and Self-Sufficiency Requirement

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited HUD's community service and self-sufficiency requirement (the requirement) as a result of news media reports that the requirement is rarely enforced. Our audit objective was to determine whether HUD ensured that housing authorities properly administered the requirement.

We found that HUD did not have adequate controls to ensure that housing authorities properly administered the requirement. Specifically, HUD did not have sufficient guidelines, adequate data collection and reporting systems, or effective enforcement mechanisms. Of 68 statistically selected households, 44 households did not comply with the requirement and were, therefore, ineligible for continued occupancy. Based on these results, we estimate that housing authorities improperly renewed or extended the leases of at least 85,000 ineligible households costing an estimated $21.5 million in monthly operating subsidies.

We recommend that HUD improve its controls to ensure that housing authorities properly administer the requirement, resulting in more than $257 million being put to better use annually. We also recommend that HUD require housing authorities to take corrective action against the 44 ineligible households identified as part of our statistical sample review.

.Issue Date: March 4, 2008
Audit Report No.: 2008-DP-0003
File Size: 1.07MB

Title: Fiscal Year 2007 Review of Information Systems Controls in Support of the Financial Statements Audit
(Report Not Available to the Public)

We reviewed general and application controls for selected information systems to assess management controls over the U.S. Department of Housing and Urban Development’s (HUD) computing environments as part of the Office of Inspector General’s (OIG) audit of HUD’s financial statements for fiscal year 2007 under the Chief Financial Officer’s Act of 1990. 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 stem from HUD’s noncompliance with (i) requirements for internal controls established by OMB, (ii) guidance issued by NIST for securing information systems, 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: March 4, 2008
Audit Report No.: 2008-LA-0002
File Size: 948.86KB

Title: HUD Did Not Have Adequate Internal Controls over Its FHA Appraiser Roster

We audited HUD's controls over the FHA appraiser roster in response to a single-family loan origination audit that had raised concerns about FHA appraisers and appraisals. We reviewed HUD's appraiser roster (roster) to determine whether HUD's controls over the roster were adequate to ensure that only qualified/eligible appraisers were placed on the roster and whether the oversight and maintenance of the roster were sufficient to ensure that only currently eligible appraisers remained on the roster. HUD had significant weaknesses in its internal controls used to maintain the roster. These weaknesses caused the roster to contain unreliable data which included the listing of 3,480 appraisers with expired licenses and 119 appraisers that had been state sanctioned. Additionally, 28 of the appraisers listed with expired licenses and eight of the sanctioned appraisers conducted appraisals.

Specifically, HUD

• Did not conduct roster quality control reviews in accordance with its written roster quality control plan;
• Did not perform regular monitoring of the roster to ensure data reliability;
• Instructed and/or approved its contractor to use logic statements when developing the software program that updates the roster, which were not in accordance with HUD regulations and did not always work properly; and
• Did not retain initial application packages for all active appraisers listed on its roster as required by HUD's record disposition schedule.

We recommend that HUD implement stronger internal controls to ensure that only eligible appraisers are placed on its roster and that oversight and maintenance of the roster are sufficient to ensure that only eligible appraisers remain on the roster.

Issue Date: February 14, 2008
Audit Report No.: 2008-BO-0001
File Size: 77.63KB

Title: Office of Multifamily Housing Boston Hub Staff Effectively Used Contract Fee Inspectors

We reviewed the use of contract fee inspectors by the Office of Multifamily Housing Boston Hub (Boston Hub) as part of our 2007 annual audit plan. This review was initiated because U.S. Department of Housing and Urban Development (HUD) staff rely on contract fee inspectors to oversee the work of contractors performing renovation work on HUD-insured properties. Our objective was to determine whether the Boston Hub effectively used contract fee inspectors to monitor and oversee contractors renovating HUD-insured properties located within the Boston Hub in Region 1.

Our audit did not disclose any indication that the Boston Hub did not use contract fee inspectors effectively to monitor and oversee contractors renovating HUD-insured properties located within the Boston Hub in Region 1. The audit also did not disclose any indication that the internal control structure for monitoring renovations was not effective. We did identify a minor deficiency, which was communicated separately through a memorandum, dated February 14, 2008, to the Acting Director of the Boston Hub.

Based on our audit, we did not identify any reportable conditions or deficiencies; therefore, we are not making any recommendations.

Issue Date: February 11, 2008
Audit Report No.: 2008-AT-0801
File Size: 327.85KB

Title: Corrective Action Verification Miami-Dade Housing Agency Did Not Ensure Section 8-Assisted Units Met Housing Quality Standards, Audit Report 2006-AT-1001

HUD OIG performed a corrective action verification of the audit recommendations cited in the audit report, Miami-Dade Housing Agency (Agency) Did Not Ensure Section 8-Assisted Units Met Housing Quality Standards (2006-AT-1001) issued December 21, 2005. The purpose of the corrective action verification was to determine if the selected audit recommendations were implemented and the deficiencies reported in the audit report corrected.

The Agency disregarded the management decisions and did not implement the promised corrective action. The Agency did not correct the housing quality standards violations we cited in our prior audit and failed to implement its revised Section 8 administrative plan. As a result, the deficiencies reported in our audit report were not corrected, and the Agency continued to violate HUD requirements.

OIG recommended and HUD agreed with reopening recommendations 1A and 1B from our previous audit report 2006-AT-1001 because the Agency did not implement the agreed upon corrective actions.

Title: HUD’s Quality Assurance Division Did Not Always Resolve Materially Deficient or Potentially Fraudulent Loans Consistently

HUD OIG audited the U.S. Department of Housing and Urban Development's (HUD) Quality Assurance Division because the results of some previous OIG audits indicated that the Quality Assurance Division might not have consistently followed its requirements.

Our objective was to determine whether HUD's Quality Assurance Division consistently required Federal Housing Administration (FHA)-approved lenders to indemnify loans with similar material deficiencies and whether it appropriately handled potentially fraudulent loans.

We concluded that HUD's Quality Assurance Division did not always resolve materially deficient or potentially fraudulent loans consistently. As a result, HUD increased its risk of treating lenders differently in similar situations. In addition, OIG did not have the opportunity to pursue actions against parties responsible for fraudulent loans, and the FHA insurance fund incurred unnecessary losses and remains at risk for additional losses on fraudulent loans.

We recommended that HUD develop and implement effective policies and procedures to ensure uniform resolutions to loan underwriting deficiencies and handling potentially fraudulent loans. We also recommended that HUD coordinate with OIG to reevaluate the agreement between HUD and OIG regarding referring potentially fraudulent loans to OIG. Further, we recommended that HUD require lenders to indemnify 16 insured loans that contained evidence of fraud.

Issue Date: January 10, 2008
udit Report No.: 2008-AT-0001
File Size: 240.82KB

Title: The Atalanta Office of Public and Indian Housing Did Not Ensure That the Housing Authority of DeKalb County Accurately Implemented Its Memorandum of Agreement

As part of HUD OIG's strategic plan, an audit was conducted of HUD's Atlanta Office of Public and Indian Housing oversight of the Housing Authority of DeKalb County's compliance with its memorandum of agreement. The primary objective was to determine whether Public Housing adequately monitored the Authority's implementation of operating improvements required in the agreement. Specifically, the objective was to determine whether Public Housing management controls and oversight processes used to monitor the implementation of the agreement were adequate.

Public Housing did not ensure that the Authority accurately implemented its agreement. The Authority did not implement some tasks related to financial management and procurement. As a result, the Authority was released from its agreement without fully completing and implementing it. Thus, HUD could not be assured that the Authority's public housing program was managed in a manner consistent with sound financial practices.

OIG recommended that the Deputy Assistant Secretary for Public and Indian Housing Field Operations perform a comprehensive review of the procurement function at the Authority to ensure the procurement function is operating in accordance with federal and state regulations, and perform either staff or independent public accountant on-site review of the financial management internal controls to ensure that the Authority has adequate financial internal controls regarding the disbursement of funds prior approval.

Issue Date: December 31, 2007
Audit Report No.: 2008-NY-0001
File Size:1.68MB

Title: HUD's Monitoring Controls and Procedures Regarding the Community Development Block Grant Program Were Not Adequate

We audited the U.S. Department of Housing and Urban Development's (HUD) administration of the Community Development Block Grant (CDBG) program. Our audit objectives were to determine whether HUD (1) had a system to measure the impact and outcome of its significant investment in grantees, which specifically determined whether (a) investments demonstrated increases in neighborhood health and (b) the primary CDBG objective of developing viable urban communities was attained, and (2) had implemented a system to measure the impact of its monitoring efforts for improving grantee performance and effectiveness.

HUD performance measurements did not demonstrate how grantees were increasing neighborhood health and attaining the primary CDBG objective of developing viable urban communities. In addition, while HUD monitoring of CDBG entitlement communities identified numerous grantee deficiencies and offered meaningful recommendations for corrective actions, grantee performance had often not improved over time.

We recommend that HUD's Office of Community Planning and Development (CPD) implement a system to measure the impact of its monitoring efforts for improving grantee performance and effectiveness. Specifically, we recommend that HUD design a performance measurement system that allows HUD to report meaningful outcomes and not just outputs. HUD needs to design a ranking and rating system for individual grantees so that HUD and its stakeholders can identify and address both good and poor performance. Further, we recommend that HUD establish controls to ensure that CPD monitoring efforts emphasize high-impact activities so that recommendations can focus on promoting improvements in program participants' performance. Also, HUD should assess the impact of its CPD monitoring on performance and increase incentives to improve grantee performance and compliance by using all of its available sanction authority.

Issue Date: December 4, 2007
Audit Report No.: 2008-AO-0001
File Size: 722.28KB

Title: HUD Had a Less Than 1 Percent Error Rate in Housing Ineligible Participants for KDHAP and DVP Disaster Housing Assistance

We audited the U.S. Department of Housing and Urban Development’s (HUD) Katrina Disaster Housing Assistance Program (KDHAP) and Disaster Voucher Program (DVP) administered by public housing agencies. We initiated the audit as part of our examination of relief efforts provided by the federal government in the aftermath of Hurricanes Katrina and Rita. Our audit objectives were to determine whether HUD (1) properly determined the eligibility of KDHAP/DVP participants and (2) implemented adequate measures to prevent KDHAP/DVP participants from receiving duplicate housing assistance from other HUD housing programs.

HUD did not always ensure that only eligible KDHAP/DVP participants received disaster housing assistance. This condition occurred because during its development of the Disaster Information System, HUD included names of participants who were not residing in HUD-assisted dwellings immediately before the Hurricane Katrina evacuation. In addition, HUD did not specify in the family eligibility requirements for KDHAP/DVP that families with regular vouchers that were searching for housing but never had a housing assistance payments contract executed on their behalf in the disaster area were ineligible for these programs. As a result, as of August 31, 2007, $760,317 in federal funds had been misspent for 84 KDHAP/DVP participants who were ineligible for disaster assistance. If ineligible costs continue to be incurred, HUD could spend an additional $153,808 on ineligible participants from September 2007 to the end of the program. However, these 84 participants count as less than 1 percent of the total number of participants according to the KDHAP Information System.

We will report the results of our review regarding the adequacy of HUD’s measures to prevent duplicate housing assistance in a separate audit report.

We recommend that HUD’s Director of Housing Voucher Programs take appropriate actions deemed necessary to recover or write off the $760,317 in federal funds that was misspent on 84 ineligible participants, immediately cease paying funding on the participants ineligible for KDHAP and/or DVP to prevent misspending $153,808 in federal funds, and take appropriate actions to remove any other ineligible participants from the Disaster Information System.

Issue Date: November 14, 2007
Audit Report No.: 2008-FO-0003
File Size: 489.25KB

Title: Additional Details to Supplement Our Report on the U.S. Department of Housing and Urban Development's Fiscal Years 2007 and 2006 Financial Statements

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 2007 and 2006 Financial Statements, which is included in HUD's Fiscal Year 2007 Performance and Accountability Report.

In OIG'S opinion, based on our audit and the reports of other auditors, the financial statements were presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America.

The report identifies (a) two material weaknesses, (b) eight significant weaknesses, and (c) one instance of noncompliance with applicable laws and regulations. The report discusses each of these conditions in detail, provides an assessment of actions taken by HUD to mitigate the deficiencies noted, 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 reported separately to HUD management.

Issue Date: November 8, 2007
Audit Report No.: 2008-FO-0002
File Size: 7.21MB

Title: Audit of the Federal Housing Administration’s Financial Statements for Fiscal Years 2007 and 2006

This report presents the results of Urbach Kahn and Werlin LLP's audit of the Federal Housing Administration's (FHA) financial statements for the years ended September 30, 2007 and 2006.

In Urbach Kahn and Werlin's opinion, FHA's principal financial statements are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America.

The report identifies three significant deficiencies. Two of those significant deficiencies, relating to FHA's Home Equity Conversion Mortgage system and subsidy cash flow model, are considered to be material weaknesses. The report did not identify any instances of non-compliance with laws and regulations. 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, 2007
Audit Report No.: 2008-FO-0001
File Size: 358.62KB

Title: Audit of the Government National Mortgage Association’s (Ginnie Mae) Financial Statements for Fiscal Years 2007 and 2006

This report presents the results of Carmichael, Brasher, Tuvell and Company's audit of the Government National Mortgage Association's (Ginnie Mae) financial statements for the years ended September 30, 2007 and 2006.

In Carmichael, Brasher, Tuvell and Company's opinion, the financial statements present fairly, in all material respects, the financial position of Ginnie Mae as of September 30, 2007 and September 30, 2006 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 Carmichael, Brasher, Tuvell and Company's unqualified opinion on Ginnie Mae's financial statements, the audit report contains one significant deficiency in Ginnie Mae's internal controls and no material weaknesses or reportable instances of noncompliance with laws, regulations, and provisions of contracts. Carmichael, Brasher, Tuvell and Company 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: November 5, 2007
Audit Report No.: 2008-LA-0001
File Size: 1.28MB

Title: The Los Angeles Multifamily Hub Did Not Properly Monitor Its Performance-Based Contract Administrator, Los Ang