Public Housing:

HUD's Oversight of Housing Agencies Should Focus More on Inappropriate Use of Program Funds

GAO-09-33: Published: Jun 11, 2009. Publicly Released: Jun 11, 2009.

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The Department of Housing and Urban Development (HUD) provided over $6.7 billion in fiscal year 2008 to housing agencies to operate, modernize, and develop about 1.2 million public housing units. It is important that HUD exercise sufficient oversight of housing agencies to help ensure that public housing funds are being used as intended and properly managed. In this report, GAO examines HUD's oversight processes for detecting housing agencies at risk of inappropriate use and mismanagement of public housing funds. GAO analyzed HUD financial data on about 3,300 housing agencies, compared HUD's oversight policies with program and agency objectives, and interviewed agency officials.

Key HUD oversight processes could be more focused on identifying potential inappropriate use or mismanagement of public housing funds. HUD primarily relies on single audits to identify such problems, although HUD, its Office of Inspector General (OIG), and the President's Council on Integrity and Efficiency (now known as the Council of the Inspectors General on Integrity and Efficiency) have identified weaknesses with some audits. Further, even when these audits do identify issues, HUD does not systematically summarize audit findings to identify and understand emerging and persistent issues to better monitor housing agencies for inappropriate use and mismanagement of public housing funds. Understanding these problems could be useful for identifying housing agencies that are at greater risk of inappropriately using or mismanaging public housing funds. HUD uses the Public Housing Assessment System (PHAS) to monitor and rate the overall condition and financial health of public housing agencies. However, PHAS is not intended to identify inappropriate uses of public housing funds and is limited in its ability to detect potential mismanagement. HUD also analyzes the financial data of public housing agencies, but its review focuses on the accuracy and completeness of the information used to calculate PHAS scores. GAO analyzed financial data from the housing agencies and found many housing agencies showed indicators that they were at risk of potential inappropriate use and mismanagement of public housing funds--while most received passing PHAS scores. For example, GAO found that from 2002 to 2006, 200 housing agencies had written checks for more than the funds available in their bank accounts (bank overdrafts) on average of $25,000 or more. However, 75 percent of these agencies received passing PHAS scores. Such overdrafts raise questions about these agencies' cash management. But HUD does not use these and similar measures to identify housing agencies at greater risk of inappropriately using or mismanaging public housing funds. Without fully leveraging the audit and financial information it collects, the department limits its ability to identify housing agencies that are at greater risk of inappropriately using or mismanaging program funds.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In a June 24, 2011 letter, HUD stated that it agreed with our recommendation to regularly summarize and systematically evaluate the results of HUD's Office of Inspector General and single audits of public housing agencies to allow program managers to identify and understand potential problems. Specifically, HUD implemented a change to its "Monthly Audit Status Report" that includes a trend analysis report. The analysis includes the status of recommendations by types of findings (e.g. findings of deficient policies/procedures or unsubstantiated payments) over a six month period. HUD stated that it believes that providing this trend analysis information is an enhancement to the existing oversight mechanisms. The trend analysis report is distributed to relevant HUD staff.

    Recommendation: In order to strengthen its oversight of housing agencies administering the public housing program and better leverage information that it already collects, the Secretary of the Department of Housing and Urban Development should regularly summarize and systematically evaluate the results of OIG and single audits of public housing agencies to allow program managers to identify and understand problems of potential inappropriate use and mismanagement of public housing funds, identify emerging issues, and evaluate overall monitoring and oversight processes. Summarized results of audits should be disseminated to field offices, housing agencies, and their auditors to help make them aware of emerging or persistent problems and assist them in monitoring and administering HUD's public housing programs.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: HUD has made significant changes to the management of the public housing program since GAO issued its 2009 report. Specifically, HUD has implemented key components of "asset management." Under asset management, local housing agencies report physical and financial data on an individual property level. Previously, local housing agencies reported physical and financial information on a consolidated, agency-wide level. HUD's system for overseeing the public housing program also reported performance data on a housing agency-wide level. Starting on March 25, 2011, HUD implemented a new oversight system that focused on the financial, physical, and management performance on a property level. According to HUD, a central part of this new performance measurement structure will be a system of on-site management reviews of each project. In an April 25, 2013 email, HUD stated that it has developed several system tools to aid in the monitoring of HUD's public housing portfolio by field office staff. For example, HUD has implemented a tool that assesses occupancy of every unit in the public housing program. Summaries of units by status (vacant, occupied, approved for demolition, etc.) are reported at the property, PHA, field office, and national level. The department plans to use these data to identify potential portfolio management problems and ensure that public housing funding is used to maximize occupancy. In addition, HUD developed a "Risk Analysis Dashboard" that reports five key financial indicators for public housing properties, such as indicators that measure property's ability to meet its short-term obligations, liquidity, and expenses. While these financial measures were similar to the ones used under the prior system, the new dashboard provides more granular reporting on individual properties' financial condition, better reflects the specific financial risks individual properties pose to the housing agencies and HUD, and is available to HUD field office staff responsible for monitoring. Given the significant changes to the program and the steps HUD has taken to improve oversight of public housing properties, we are closing this recommendation as implemented.

    Recommendation: In order to strengthen its oversight of housing agencies administering the public housing program and better leverage information that it already collects, the Secretary of the Department of Housing and Urban Development should develop mechanisms--such as financial indicators--to identify housing agencies that are at greater risk of inappropriately using or mismanaging public housing funds. Such mechanisms may be developed based on the department's evaluation of commonly occurring and emerging issues identified in OIG and single audits of housing agencies and developed by leveraging financial information that the department currently collects. Once such indicators are developed, the department should use them as part of its ongoing monitoring and review of housing agencies' use of public housing funds.

    Agency Affected: Department of Housing and Urban Development

 

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