A report by HUD’s Office of Inspector General (OIG) concluded that HUD did not enforce the annual reporting requirements of Section 3 for public housing authorities (PHAs) receiving Recovery Act Public Housing Capital Funds. Under the American Recovery and Reinvestment Act of 2009 (ARRA), $4 billion in economic stimulus money was provided to PHAs for capital improvements.
The purpose of Section 3 of the Housing and Urban Development Act of 1968 is to ensure that when HUD assists housing and community development projects, preference for some of the new jobs, training, and contracting opportunities that are created go to low income people and to the businesses that hire them, “to the greatest extent feasible.”
The OIG found that HUD failed:
- To collect Section 3 annual summary reports (known as form HUD-60002) from 1,650 PHAs (out of a total of 3,102 PHAs) by the required deadline.
- To notify delinquent PHAs that their submissions were past due.
- Verify the accuracy of the reports received.
- To apply penalties to PHAs that did not report. For example, a PHA’s overall assessment was not affected by failure to comply.
Although HUD’s Office of Fair Housing and Equal Opportunity (FHEO), which oversees Section 3, has drafted proposed regulations that would establish greater penalties for noncompliance, the OIG reported that objections from HUD’s Office of Community Planning and Development (CPD), which oversees the CDBG and HOME programs, have prevented release of proposed regulations.
The OIG noted that FHEO lacks a data collection system capable of identifying missing and inaccurate reports; does not have procedures to follow up on missing or inaccurate reports; and does not have procedures for referring noncompliance to HUD’s Office of Public and Indian Housing (PIH), which oversees public housing.
In reply, FHEO notes that shortly after the OIG investigation, a pending memo was released to PIH and CPD requesting them to contact their grantees regarding delinquent reporting. As a result, compliance with Section 3 reporting for FY11 increased dramatically; 72% (up from 53%) of PHAs with Recovery Act Capital Funds complied. FHEO also said it had been working on a new reporting system that is waiting release from HUD’s Office of the Chief Information Officer.
FHEO also replied that it is often at a disadvantage regarding enforcement of Section 3 because FHEO does not provide funds to grantees and does not have the direct authority to impose penalties.
The OIG suggested that PIH establish policies and procedures that implement a system of escalating administrative measures against PHAs that do not submit form HUD-60002. PIH replied that it was not clear what penalties PIH could impose and that it wanted to instead provide technical assistance and encourage compliance. The OIG disagrees.
The OIG report 2013-KC-0002, “Section 3 for Public Housing Authorities,” is at: http://1.usa.gov/12BUIcZ