HUD Inspector General Identifies the Department’s Top Six Management Challenges

The HUD Office of Inspector General (OIG) issued a report on the top management challenges facing HUD in 2019, identifying six specific issues which, according to the report, “impact HUD’s ability to meet the needs of its beneficiaries and protect taxpayer dollars.” Two of the six issues relate to ensuring the availability of safe, decent, affordable housing and administering disaster recovery assistance.

The six management challenges identified by the OIG are:

1. Ensuring the availability of affordable housing that is decent, safe, sanitary, and in good repair.

2. Protecting the Federal Housing Administration’s mortgage insurance funds.

3. Providing adequate monitoring and oversight of its operations and program participants.

4. Administering disaster recovery assistance.

5. Modernizing technology and the management and oversight of information technology.

6. Instituting sound financial management governance, internal controls, and systems.

The OIG report finds that HUD’s strategies for addressing the shortage of affordable housing have not been successful, considering that rents are increasingly unaffordable for the lowest income people and that affordability issues are increasingly affecting higher-earning households. According to the OIG, HUD has systematically failed to ensure proper reporting and mitigation of unsafe environmental conditions impacting residents in affordable housing units. The report cites cases of lead contamination involving children and the agency’s inaction in determining the extent to which residents are impacted by environmental contaminants from EPA-designated Superfund sites, an issue that has been on the agency’s radar since the EPA published a report in 2016. HUD’s lack of controls and monitoring of contracted inspectors from its Real Estate Assessment Center (REAC) are also blamed for misrepresentative inspection scores on the physical condition of HUD properties, including the Alexander County Housing Authority in Cairo, IL (Memo 10/1). 

The OIG report notes that limited funding for monitoring systems and adequate staffing levels within Public and Indian Housing (PIH) and Community Planning and Development (CPD) force staff to rely on risk-based and remote strategies for monitoring and oversight, which are often only as effective as the reliability of information received from grantees. HUD has not undergone routine or timely management control reviews (MCR) since 2015. According to the report, MCRs are an important monitoring tool that can provide “key feedback on the effectiveness and efficiency of departmental operations.” Without this mechanism in place, HUD has not been in compliance with the internal control standards set by the Government Accountability Office (GAO) for several years. According to HousingWire, HUD has been on the GAO’s high-risk list since 1994 because of management deficiencies. As a consequence of inadequate oversight, grantees and Public Housing Authorities (PHAs) have “not been able to support or have misspent millions of dollars.”

The OIG report also highlights HUD’s challenges in implementing the Community Development Block Grant-Disaster Recovery (CDBG-DR) program. Because the CDBG-DR program has not been formally established in the Code of Federal Regulations, HUD has relied on repeated Federal Register notices to operate the CDBG-DR program. Since September 2017, HUD has issued 61 different Federal Register notices governing use of CDBG-DR funds. More than $47.7 billion has been distributed to 59 grantees with 112 active grants. The report raises concerns about the lack of grantee capacity to properly administer disaster relief grants, citing specific issues such as “improper procurements, inadequate environmental reviews, and an unsupported national objective.” By allowing grantees (primarily states) to use state standards to certify procurement compliance, HUD is permitting grantees to circumvent federal procurement regulations. As a consequence, “products and services may not have been purchased competitively at fair and reasonable prices.” Additionally, the report cited barriers individual citizens face in receiving disaster recovery assistance due to the patchwork nature of the federal response to natural disasters.

The OIG report also raises concerns regarding HUD’s management of FHA mortgage insurance funds, finding that HUD may have paid “an estimated $2.23 billion in unreasonable and unnecessary holding costs over a 5-year period.” Other management concerns included the lack of investment in modernizing HUD’s IT infrastructure and the agency’s reliance on maintaining legacy systems, as well as the lack of sound financial management governance due to a lack of a CFO for six of the last seven years.

Read the OIG’s report at:

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