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Disaster Recovery: HUD Should Develop Data Collection Guidance to Support Analysis of Block Grant Fraud Risks

GAO-23-104382 Published: Aug 17, 2023. Publicly Released: Aug 17, 2023.
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Fast Facts

Congress gave almost $40 billion in block grants to help homeowners with, among other things, repairing or rebuilding homes damaged by natural disasters from 2017 to 2019. The Department of Housing and Urban Development administers the grants.

But these grants are vulnerable to fraud. For example, some households approved for funds didn't report assistance from FEMA that could impact their award.

Also, HUD monitors individual grantees. But it doesn't assess the risks that some contractors—whose work on damaged homes is paid for using grant funds—may pose across these grants.

Our recommendations would help HUD better manage risks to block grants.

Hurricane Irma damaged homes and flooded roadways in Fort Lauderdale, Florida

Photo showing palm trees being blow over and water filling the street in front of a row of houses.

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Highlights

What GAO Found

GAO's analysis of Community Development Block Grant Disaster Recovery (disaster block grant) applicant data identified vulnerabilities to fraud. Out of 8,260 households reviewed, GAO identified

  • Potential duplication of benefits. 500 households were approved for Federal Emergency Management Agency (FEMA) assistance that is potentially duplicative of disaster block grant assistance. The FEMA-only assistance for these households totaled over $1 million. The figure shows other potentially duplicative assistance GAO identified.
  • Potentially ineligible households. 197 households with estimated income over limits were approved. Estimated income for two of these households exceeded $330,000—far above the income limits.

Households Potentially Receiving Duplicative Benefits from Multiple Programs

Households Potentially Receiving Duplicative Benefits from Multiple Programs

Note: The categories in this figure are not mutually exclusive.

GAO also found that the U.S. Department of Housing and Urban Development (HUD) does not require grantees and subrecipients to collect applicant data in a complete and consistent manner to support applicant eligibility determinations and fraud risk management.

GAO's analysis of the disaster block grant contracting network identified key players who are important to HUD's risk-based monitoring because of the greater potential impact they have on the contracting environment. Specifically, GAO identified 16 contractors and 30 subcontractors that are key players within a network of 1,324 entities. While key players' ability to influence or diffuse information can lead to positive outcomes, fraud risk is heightened when information on control vulnerabilities or wrongdoing is more easily shared across the network.

GAO's analysis of the 16 contractors that are key players illustrates how HUD and grantees could better understand the disaster block grant risk environment by collecting contractor and subcontractor data, such as unique entity identifiers. Currently, HUD's approach to identifying and managing risks focuses on monitoring individual grantees and may not fully assess risks across the contracting environment. HUD does not provide specific guidance to grantees on standards or requirements for collecting data. Additional guidance from HUD on what data elements to collect could support grantees' and subrecipients' ability to identify contractors that are debarred, suspended, or excluded from receiving federal contracts.

Why GAO Did This Study

In response to the damage caused by natural disasters in 2017 through 2019, Congress appropriated approximately $39 billion in disaster block grant funds to HUD. The decentralized environment in which HUD's disaster block grants operate creates vulnerabilities to different types of fraud as funds are distributed to grantees, subrecipients, contractors, and subcontractors.

As part of wide-ranging disaster-related work we are conducting, this report focuses on the potential for fraud in CDBG-DR homeowner assistance programs. This report examines, among other objectives, the extent to which (1) applicant data indicate vulnerabilities to fraud and data quality presents challenges to identifying such vulnerabilities and (2) network and other analyses can help HUD manage risks associated with the contracting environment.

GAO conducted data matching and analysis to identify potentially ineligible households for our selected grantees and subrecipients. GAO also conducted network analysis, among other analyses, to help HUD better understand and monitor its decentralized grant environment.

Recommendations

GAO is making seven recommendations to HUD, including that it develop guidance to collect applicant data to support eligibility decisions and contractor data to facilitate identifying risks. HUD agreed with some, but not all of the recommendations. GAO continues to believe all the recommendations are warranted and should be implemented.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Housing and Urban Development The Assistant Secretary for Community Planning and Development should develop guidance for CDBG-DR grantees and subrecipients on collecting complete and consistent data to better support applicant eligibility determinations and fraud risk management. (Recommendation 1)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Department of Housing and Urban Development The Assistant Secretary for Community Planning and Development should update the Monitoring Handbook for Disaster Recovery Community Development Block Grant monitoring activities to provide additional guidance in the selection of contracts for review. This should include factors such as contractors that present increased risk to the CDBG-DR environment, including those where allegations of fraud, waste, or abuse have been made. (Recommendation 2)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Department of Housing and Urban Development The Assistant Secretary for Community Planning and Development should identify ways to collect and combine contractor and subcontractor data across grantees and subrecipients to facilitate risk analyses, such as by expanding the Disaster Recovery Data Portal, Disaster Recovery Grant Reporting System, or other appropriate systems. (Recommendation 3)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Department of Housing and Urban Development The Assistant Secretary for Community Planning and Development should develop and implement guidance for CDBG-DR grantees and subrecipients to collect contractor and subcontractor data to facilitate identification of contractor and cross-cutting fraud risks through approaches such as network analysis. (Recommendation 4)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Department of Housing and Urban Development The Assistant Secretary for Community Planning and Development should develop guidance on data elements to be collected by grantees and subrecipients, to determine if a contractor has been suspended, debarred, or excluded from working on government contracts. (Recommendation 5)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Department of Housing and Urban Development The Assistant Secretary for Community Planning and Development should ensure that grantees and subrecipients have attended fraud-related training as required. This could include requesting and reviewing attendance documentation from the OIG and grantees. (Recommendation 6)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Department of Housing and Urban Development The Assistant Secretary for Community Planning and Development, in coordination with the HUD Office of Inspector General, should ensure that grantees and subrecipients are made aware of available fraud-related training and make training available on demand to grantees and subrecipients. (Recommendation 7)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

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Topics

Assistance programsBlock grantsCommunity developmentCompliance oversightData collectionDisaster recoveryDisastersEligibility determinationsFraudGrant programsHomeownershipHousingHurricanesSmall businessLow-income households