COVID-19: Additional Risk Assessment Actions Could Improve HUD Oversight of CARES Act Funds

GAO-21-104542 Published: Sep 30, 2021. Publicly Released: Sep 30, 2021.
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Fast Facts

Millions of Americans had trouble paying their rent or mortgages after the COVID-19 pandemic disrupted the U.S. economy. The CARES Act appropriated $12.4 billion to the Department of Housing and Urban Development to help address emergent needs. For example, funding increased more than tenfold for homelessness assistance under an emergency grant program.

HUD expedited program risk assessments due to the urgency of its pandemic response. HUD found that CARES Act funds didn't affect program risks, but we found that assessments didn't include some leading practices for fraud risk assessment.

We recommended ways to improve HUD's risk assessments.

Department of Housing and Urban Development headquarters

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Highlights

What GAO Found

The Department of Housing and Urban Development's (HUD) oversight of $12.4 billion in CARES Act funding included monitoring spending and addressing reporting requirements, but further action is needed to more fully assess program and fraud risks. As of July 2021, HUD obligated 94 percent of its CARES Act funds, and 34 percent had been expended (see figure). The CARES Act significantly increased funding for some HUD programs—for example the Emergency Solutions Grant (ESG) program for homelessness assistance received more than 10 times its fiscal year 2020 funding. GAO previously reported that programs should update risk assessments when funding or the operating environment changes. To respond to COVID-19, HUD expedited its risk assessment process, and concluded the CARES Act funds did not substantially affect programs' risks or existing controls. While HUD's assessment identified risk factors and short-term steps to address them, it did not include some leading fraud risk management practices GAO previously identified. For example, HUD did not identify programs' new fraud risks or evaluate fraud risk tolerance. Additional risk assessment actions could help HUD better identify and address potential program and fraud risks of its CARES Act programs.

HUD CARES Act Funds' Obligations and Expenditures, as of July 31, 2021

HUD CARES Act Funds' Obligations and Expenditures, as of July 31, 2021

As of July 2021, HUD's Community Development Block Grant (CDBG) and ESG programs expended about 15 percent of their CARES Act funds, mostly for emergency payments that can include rental assistance. HUD officials said spending is slow because some grantees have limited capacity to administer the larger grants, other federal funding is available, and CDBG grantees had until mid-August 2021 to apply for CARES Act funds. HUD is providing grantees with training and support to help them administer and use the CARES Act funds and developing specific monitoring guidance.

Almost all of the CARES Act's $1.25 billion for the Housing Choice Voucher program has been expended. To help public housing agencies navigate COVID-19, HUD issued numerous program waivers, such as letting owners self-certify property conditions in lieu of inspections. To monitor compliance, HUD is developing a portal for public housing agencies to report their use of the funds, which officials anticipate will be operational in December 2021. HUD also awarded a contract to support the program's CARES Act monitoring, including collecting information on waiver use.

Why GAO Did This Study

The COVID-19 pandemic and resulting economic downturn created housing instability for many families and individuals. Congress appropriated about $12.4 billion to HUD in CARES Act funds to prevent, prepare for, and respond to housing needs related to COVID-19. GAO has previously reported on HUD's persistent management challenges and noted the potential for these challenges to affect the implementation and oversight of HUD's COVID-19 response.

The CARES Act includes a provision for GAO to monitor the federal government's efforts to respond to the COVID-19 pandemic. This report examines HUD's actions to oversee its CARES Act funding and manage risks, and HUD's implementation and monitoring of the CARES Act funds of selected community development, homelessness, and rental assistance programs.

GAO reviewed HUD documentation and analyzed HUD spending data, focusing on the four programs that received the most CARES Act funding. GAO also interviewed HUD officials and associations representing HUD funding recipients.

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Recommendations

GAO makes two recommendations to HUD to take additional steps to assess, document, and mitigate program and fraud risks for its CARES Act-funded programs. HUD agreed with our recommendation to take additional actions on fraud risk. HUD disagreed with our recommendation to take additional actions on program risks. GAO continues to believe the recommendation is valid, as discussed in this report.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Housing and Urban Development The Office of the Chief Financial Officer and HCCRT should work with relevant program offices for each of the six CARES Act programs that meet HUD's front-end risk assessment criteria to reassess the need to either (1) conduct a full front-end risk assessment; or (2) take and document additional risk assessment steps to align with key aspects of the front-end risk assessment process, such as ranking risks and developing plans to mitigate identified risks. (Recommendation 1)
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In November 2021, HUD acknowledged that its rapid risk assessment performed by HCCRT did not thoroughly document how HUD assessed risks or define its longer-term plans for mitigating identified risks, including fraud risk. HUD noted that the goal of the rapid risk assessment process was to target resources for those risks that the program offices communicated as their top risks, and the resulting list was only those risks considered as high impact to the department. HUD maintained that it did not concur with the recommendation to retroactively conduct full front-end risk assessments. However, HUD noted that, going forward, it will apply the criteria to conduct FERAs under the fully operationalized FERA process. With respect to the second option of the recommendation to take additional risk assessment steps, in January 2022, HUD officials stated that Risk Profiles that are being conducted for fiscal year 2022 will include the CARES Act programs and will also emphasize fraud risk. In August 2022, HUD officials said that the profiles were being finalized and would be ready in fall 2022.
Department of Housing and Urban Development The Office of the Chief Financial Officer and HCCRT should work with relevant program offices to identify inherent or new fraud risks, assess the program's fraud risk tolerance, document the program's fraud risk profile, and take appropriate action to mitigate identified potential risks for each of the six CARES Act-funded programs that meet the front-end risk assessment criteria. (Recommendation 2)
Open
In November 2021, HUD stated that its Chief Risk Officer, in coordination with HUD program offices, will develop a strategic roadmap to implement a fraud risk management program. HUD stated that the roadmap will include identification of existing fraud risk management activities, a Fraud Risk Exposure assessment, and steps to fully implement criteria consistent with the GAO Framework for Managing Risks in Federal Programs. In January and August 2022, HUD officials stated that CARES Act funds will be included in the new fraud risk management program and the target completion time frame is December 2023.

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