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While performing audit work to determine whether the U.S. Department of Housing and Urban Development’s Office of Community Planning and Development (HUD CPD) monitored and ensured that grantees complied with the 24-month statutory expenditure requirement contained in the Disaster Relief Appropriations Act, 2013, we noted issues with (1) the recording of grants in the Line of Credit Control System (LOCCS) and (2) the grantees’ recording of expenditures in the Disaster Recovery Grants Reporting (DRGR) system.  These issues require immediate action by the Office of the Chief Financial Officer (OCFO) as they are potential violations of the Antideficiency Act (ADA) and do not appear to follow generally accepted accounting principles (GAAP). 

As of January 19, 2018, two of the six grantees had recorded total expenses in the DRGR system in excess of what CPD had obligated for a grant round, which totaled more than $160 million.  Five grantees also recorded expenses in the DRGR system before CPD executed a grant round amendment and after a grant round expired, which totaled more than $435 million.  In addition, four grantees made revisions to completed and revised vouchers totaling more than $496 million in the DRGR system a year or more after they entered the initial voucher.  These issues had a variety of causes, including (1) systemic weaknesses in the DRGR system, (2) CPD’s entering into one grant agreement with multiple amendments with multiple deadlines, (3) how CPD and OCFO treated the grants in LOCCS, (4) a lack of voucher monitoring by CPD’s Office of Block Grant Assistance (OBGA), and (5) OBGA’s incorrect decisions on how to account for the funds.  These expenses appeared to have been potential ADA and GAAP violations and could potentially have a negative effect on both HUD’s and the grantees’ financial statements.  If OCFO does not require corrections to how it and CPD account for Disaster Recovery funds, these issues will continue to occur with the remaining $6.4 billion in 2013 Disaster Recovery funding and the future $35.4 billion for 2017 and 2018 Disaster Recovery funding. 

We recommended that OCFO determine whether (1) summary expenditures totaling more than $160 million, which exceeded the grant round obligations for the two grantees; and (2) revised and completed detail transactions totaling to more than $435 million, which occurred before and after grant rounds obligation and expenditure dates, were ADA violations. We also recommended that OCFO determine whether the revised and completed transactions totaling more than $496 million and made more than a year after the original DRGR voucher entry were GAAP violations.  We further recommended that CFO enter expiration terms into LOCCS for DRGR funding and require CPD to implement additional controls to prevent the identified issues from occurring in 2017 and 2018 Disaster Recovery funding.

Recommendation Status Date Issued Summary
2018-FW-0802-001-A Cerrado Mayo 15, 2018 We recommend that the Chief Financial Officer determine whether the summary expenditures totaling $160,360,714, which exceeded the grant round obligations for the two grantees, were ADA violations. If the transactions were violations, action should be taken as required by the ADA.
2018-FW-0802-001-B Cerrado Mayo 15, 2018 We recommend that the Chief Financial Officer determine whether the revised and completed detail transactions totaling to $435,263,268, which occurred before and after grant rounds obligation and expenditure dates, were ADA violations. If the transactions were violations, actions should be taken as required by the ADA.
2018-FW-0802-001-C Cerrado Mayo 15, 2018 We recommend that the Chief Financial Officer determine whether the revised and completed transactions totaling $496,913,235 and made more than a year after the original voucher entry were GAAP violations. If the transactions were violations, appropriate actions should be taken, including but not limited to adjusting the transactions in LOCCS and HUD’s financial statements.
2018-FW-0802-001-D Cerrado Mayo 15, 2018 We recommend that the Chief Financial Officer enter a 24-month expiration term into LOCCS for Disaster Recovery funding provided by the 2017 Act and monitor to ensure that expenses are not entered before or after the grant period.
2018-FW-0802-001-E Cerrado Mayo 15, 2018 We recommend that the Chief Financial Officer require CPD to enter into a separate grant agreement for each grantee’s round of disaster funding for funding provided by the 2017 and 2018 Acts.
2018-FW-0802-001-F Cerrado Mayo 15, 2018 We recommend that the Chief Financial Officer require CPD to monitor the detailed voucher transactions in the DRGR system to ensure that grantees appropriately record transactions.
2018-FW-0802-001-G Cerrado Mayo 15, 2018 We recommend that the Chief Financial Officer require CPD to prohibit grantees from revising completed vouchers in the DRGR system and require adjustments to be entered as new vouchers into the DRGR system, which will ensure that LOCCS records and tracks revisions.