Complete, within 30 days of the issuance of this audit report, the review for preventing duplication of benefits associated with its 2008 CDBG-DR grant and pursue appropriate remedies for any instances of noncompliance found.

Require lenders to obtain the borrowers’ consent to verify the existence of delinquent Federal taxes with the IRS during loan origination and deny any applicant with delinquent Federal tax debt and no payment plan or a noncompliant payment plan or an applicant refusing to provide consent from receiving FHA insurance to put at least $6.1 billion to better use by avoiding potential future costs to the FHA insurance fund.

Status

The Office of Single Family Housing will need additional tax information to complete the planned action. In July 2024, Single Family Housing proposed closing the recommendation with no action because the primary action discussed would require Congressional authorization, and another option discussed would place an undue burden on borrowers and lenders and was not practical. OIG disagreed with the request. Single Family maintains that without an automated solution from the Internal Revenue Service (IRS), it is not practical for individual borrowers and/or lenders to manually check tax status with the IRS. However, OIG’s position is that action is required since delinquent tax debtors are ineligible for FHA loans under existing FHA and Office of Management and Budget (OMB) guidelines.

Analysis

To fully address this recommendation, HUD will need to provide evidence that it established a method of borrower consent to verify the existence of delinquent federal taxes.

Implementation of this rule should result in HUD putting $6.1 billion to better use.

Reimburse HUD $30,037 from nonproject funds for the overpayment of housing assistance and utility allowances due to incorrect calculations.

Support or reimburse HUD $159,938 from nonproject funds for the unsupported payments of housing assistance cited in the finding.

Pursue collection from the applicable household or reimburse HUD $26,915 from nonproject funds for the overpayment of housing assistance due to unreported income.

Implement adequate quality control procedures to ensure that housing assistance payments are appropriately calculated and supported. These procedures and controls should ensure that $54,257 in program funds is appropriately used for future payments.

Ensure that the management agent’s staff is properly trained and familiar with HUD’s and the project’s requirements regarding housing assistance payments calculations.

Conduct criminal record background checks in accordance with the project’s policies and procedures to ensure that adult members of all households, including the 11 households for which HUD made housing assistance payments totaling $239,500, were eligible to participate in the program. If the participants are deemed ineligible, the owner should follow applicable regulations to terminate or modify assistance and reimburse HUD from nonproject funds for those housing assistance payments deemed ineligible.

Ensure that $1,045,085 in CDBG funds drawn from HUD between July 1, 2015, and October 31, 2018, can be traced to a level, which ensures that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes, or reimburse the CDBG program from non-Federal funds. Footnote 2: Total drawdowns of more than $1.5 million were adjusted to consider $106 questioned in recommendation 1D and $469,974 in recommendation 2A.

Issue guidance to PHAs to ensure any applicant for or tenant of public or assisted housing whose name appears on the SAM excluded parties list are reviewed by PHAs to determine eligibility in a manner consistent with the regulations in 2 CFR 180 and 2424 so that ineligible applicants or tenants are not admitted or recertified to put up to $13.7 million to better use.

Put $417,113 in unspent NSP1 funds associated with three activities to better use by reprogramming the funds to other subrecipients using an appropriate method or return the funds to HUD.

Support or reimburse its NSP1 grant $1,300,000 from non-Federal funds for the unsupported reallocation of grant funds.

Support or reimburse the appropriate NSP grant $1,186,105 from non-Federal funds for the unsupported subrecipient and administrative expenditures.

Update the NSP program income information in HUD’s grant tracking system and quarterly performance reports and reconcile with the Department’s records.

Establish and implement written procedures and provide adequate training to staff associated with administering the NSP grant to help ensure accurate reporting of program income.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to support the appraised fair market values of the 14 properties sampled to ensure that $5,920,097 in settlement costs was supported. This recommendation includes but is not limited to providing support to show that appraisals contained accurate and verified information for the subject and comparable properties, time adjustments were supported, and other adjustments were supported. If support cannot be provided, the State should reimburse the unsupported costs from non-Federal funds.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to support the appraised fair market values of the 942 other properties included in our sampling universe to ensure that $361,465,173 in settlement costs was supported. This recommendation includes but is not limited to providing support to show that appraisals contained accurate and verified information for the subject and comparable properties, time adjustments were supported, and other adjustments were supported. If support cannot be provided, the State should reimburse the unsupported costs from non-Federal funds.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to strengthen controls over the property valuation process for its program to ensure that up to $93,350,616 not yet disbursed is put to better use. This recommendation includes but is not limited to implementing a process to review the appraisal and quality control work to ensure that appraised fair market values are supported and that quality control reviews are performed as required by Federal, State, and industry standards and to take appropriate action for cases in which the work does not comply with requirements.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that $3,119,209 paid for appraisals and poststorm addenda performed by its contractor was reasonable, supported, and for services that were performed in accordance with applicable requirements or reimburse any unsupported costs from non-Federal funds.

We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that $156,940 paid for sales brochures, economic land analysis studies, and consultant fees was reasonable, necessary, supported, and for services that were performed in accordance with applicable requirements or reimburse any unsupported costs from non-Federal funds.