Watchdog says HUD has struggled to prevent ‘improper payments’ for 11 years

The U.S. Department of Housing and Urban Development (HUD) Office of the Inspector General (OIG) issued a management alert this week, saying that the department has struggled to identify and prevent “improper payments” related to its programs for 11 consecutive years.

The OIG advised HUD leadership to “address the Department’s longstanding challenges with identifying and preventing improper payments,” and that HUD “has been noncompliant with federal laws requiring agencies and departments to identify, report, and mitigate improper or unknown payments in their programs.”

OIG findings

In an ongoing audit, the OIG discovered that HUD was “unable to estimate improper payments for its two largest rental assistance programs” for a seventh consecutive year, specifically as it relates to the Office of Public and Indian Housing’s Tenant-Based Rental Assistance (PIH-TBRA) program and the Office of Multifamily Housing’s Project-Based Rental Assistance (PBRA) program, for fiscal year 2023.

The OIG went on to state that the last time HUD has produced “sufficient estimate of improper payments in these programs” was in 2016, when it estimated a total of $1.7 billion in improper payments.

“Since then, these rental assistance programs’ payments have increased substantially from $30.7 billion in FY16 to $45.3 billion in FY23, which is 67.5% of HUD’s total expenditures for that fiscal year,” according to a summary of the report. “Without sound estimates, HUD is unable to develop appropriate corrective actions and target resources to fix the root cause of improper payments, resulting in higher risk for potential fraud, waste, and abuse.”

The OIG is also concerned that HUD will not be able to properly estimate the full impacts of these improper payments until at least fiscal year 2027. Not addressing it until then could lead to “hundreds of billions of dollars in HUD rental assistance payments [that] will continue to be at heightened risk of waste, mismanagement, and fraud,” the OIG stated.

Management priorities, HUD response

“Reducing improper payments in its rental assistance programs remains a top management challenge for HUD,” Inspector General Rae Oliver Davis said. “This management alert stresses the need for HUD leadership to set the tone for coordinated action across HUD’s offices to identify improper payments, determine why they are occurring, and act quickly to better protect billions of taxpayer dollars from being misspent.”

The HUD OIG recommended to Deputy Secretary Adrianne Todman that the department “develop and execute a detailed plan and timeline for both testing and reporting estimates of improper payments in the two rental assistance programs in compliance with federal law and Office of Management and Budget guidance.” Todman reportedly agreed with the recommendations and committed to developing an action plan within 30 days.

Congressional oversight

In a recent congressional oversight hearing conducted by the U.S. House of Representatives’ Financial Services Committee, the subject of “waste” came up multiple times as lawmakers questioned HUD Secretary Marcia Fudge.

Fudge told lawmakers that she was not aware of any particular instances of waste, fraud or abuse during her time there. She also indicated a willingness to work with Congress to provide any additional information that lawmakers felt they were not getting.

Rep. Monica De La Cruz (R-Texas) told Fudge that there were nearly 1,000 “open recommendations” from the HUD OIG as of March 2023, while roughly 800 recommendations were outstanding as of January 2024.

“If you would ask the IG today, she would say to you that we have closed 1,000 of those recommendations,” Fudge responded. ”We had almost 2,000.”

Fudge did not give an estimated date for when the outstanding items would be closed but said she would provide one once her office is given time to review the recommendations more thoroughly.