Review the HUD business documents, such as the RAD conversion commitment, HAP contract, and regulatory agreement, for the four properties that did not contain consistent reserve for replacement information and update the documents to be consistent as appropriate.

Issue guidance to RAD property owners clarifying that the owner is responsible to follow both the HUD business documents and the property’s business documents and that the most restrictive document indicates the amount and timing of the annual deposits into the reserve for replacement account.

Develop and implement a process to ensure that the reserve for replacement requirements in HUD’s business documents are consistent for all converted properties.

Develop and implement a plan to review the reserve for replacement accounts for all converted properties from the date on which the account was established to the date of the review. Based on the reviews completed, HUD should take appropriate actions to ensure that reserve for replacement accounts are appropriately funded or determine whether overfunded accounts should have the deposits suspended for a specified period.

Implement adequate procedures and controls to ensure that servicing lenders comply with HUD time requirements in scheduling initial inspections of FHA-insured RAD PBV properties.

Determine an appropriate timeframe in which non-FHA-insured PBRA properties converted under RAD should be initially inspected, work with REAC to ensure that inspections are ordered and completed within that timeframe, and update HUD’s publicly available and internal guidance to ensure consistent messaging in accordance with HUD’s determination.

Status

HUD has not provided a draft plan for corrective action yet.

Analysis

Determining the appropriate timeframe for initial inspections would result in the timely identification and correction of life-threatening and non-life-threatening deficiencies.

The recommended corrective action has the potential to directly impact the health and safety of families.

We recommend that the Deputy Assistant Secretary for Operations of Community Planning and Development enhance CPDs existing Grant Accrual Standard Operating Procedures to strengthen governance within CPD and to effectively work within the framework established by the OCFO in recommendation 1A. The updated procedures should include increased ownership and oversight over the reviews, authorizations, approvals, and changes to the CPD grant accrual estimates and methodology.

We recommend that the Chief Financial Officer enhance existing policies to establish a formal grant accrual risk management framework to help ensure consistent standards across HUD with regard to the development, review, and execution of the grant accrual and validation. This framework should include 1) identifying grant accrual estimation risk, assessing the magnitude of this risk, and managing the risks that arise when using certain quantitative estimation methods, 2) a governance structure that includes estimation ownership, oversight, and framework assessment, 3) the creation of a committee that is responsible for establishing a holistic approach to estimation risk management, including key stakeholders from OCFO and program offices, such as CPD, and 4) a requirement for documentation of committee meeting agendas, minutes, and key decisions and discussion points which impacts the various grant accrual methodologies across the Department.

We recommend that HUD’s Deputy Assistant Secretary for Fair Housing and Equal Opportunity update protocols to promote consistent expectations for timely supervisory, legal, and headquarters reviews of complex cases.

We recommend that HUD’s Deputy Assistant Secretary for Fair Housing and Equal Opportunity review and update the MOUs with OGC for each region to identify and remove inefficiencies that can lead to longer FHEO investigation times and OGC review times and identify best practices that can be implemented across all regions.

We recommend that HUD’s Deputy Assistant Secretary for Fair Housing and Equal Opportunity review and update investigative processes followed by each regional office to identify best practices that can be implemented across all regions and identify and remove inefficiencies that can lead to longer investigation times.

Take corrective action for the subrecipient monitoring and agreement issues cited for eight of the ESG-CV grantees reviewed, and provide additional guidance and technical assistance as needed to ensure that they understand requirements.

Develop and implement additional subrecipient monitoring training and guidance for all ESG grantees.

Provide evidence to support that the owners corrected the 46 deficiencies for the 20 units with outstanding deficiencies. If the owners fail to provide evidence that they made the required corrections, HUD should require the Authority to implement its HAP enforcement procedures and provide supporting documentation to HUD evidencing that it did so.

Improve its quality control process for monitoring its inspectors to enhance the effectiveness of its unit inspections and ensure that all units meet HUD’s and its own requirements to prevent more than $34 million in Program funds from being spent on units that do not meet HQS over the next year. This process should include but not be limited to procedures (1) requiring its staff to use the quality control inspection results to evaluate and monitor the performance of the Authority’s inspectors, along with maintaining adequate supporting documentation on feedback provided to the inspectors for recurring inspection deficiencies and (2) for evaluating the training provided to its inspectors to determine what improvements are needed to ensure that unit deficiencies are detected.

Pursue collection from the applicable owners or reimburse its HCV Program from non-Federal funds $106,477 ($180,309 - $73,832) in inappropriate HAP

Provide evidence to HUD that it has improved its controls and procedures for its stop payment process to ensure that (1) payments to owners comply with its HCV Program administrative plan and HUD requirements and (2) it maintains documentation to support stop payments and resumption of those payments for each unit as applicable.

Provide documentation to support that HAP was appropriately paid to the owners for the 66 units that had more than one stop payment. If additional HAP was inappropriately paid, the Authority should pursue collection from the applicable owners or reimburse its HCV Program from non-Federal funds.

Review its records to confirm whether it had cases of children with EBLLs during our audit period and work with the owner(s) of the HCV Program units to provide required documentation to HUD.

Update publications and educational materials to owners to ensure that they understand their reporting responsibilities to HUD regarding confirmed cases of children with EBLLs.