Update HUD Handbook 1900.40, Do Not Pay policy, to clearly define the responsibilities for all parties and align it with current laws, processes, and procedures. This should include defining responsibilities for preaward and prepayment verification, and developing a process and governance structure to ensure that preaward and prepayment verification are consistently performed across HUD’s programs.

Status

HUD has until August 25, 2025, to provide its corrective action plan to OIG for review.

Analysis

Updating the HUD Handbook 1900.40 will define responsible parties for ensuring compliance with the Do Not Pay Initiative (DNP).    

The implementation of this recommendation will result in consistent use of DNP, allowing for instant verification of eligibility across the billions in payments that HUD processes, resulting in the reduction of future improper payments.

Determine the appropriate timeframe for when initial management and occupancy reviews (MORs) should be completed for all properties that convert under the Rental Assistance Demonstration and issue updated guidance that includes a system to track the timeliness of initial MORs.

Status

Given current resource constraints, HUD will create guidance based on risk-based Management and Occupancy Review (MOR) parameters to ensure that field staff and leadership perform the initial MOR for PBRA RAD-converted properties. This guidance will specify which assessments can be done on-site or remotely (such as desk reviews). Furthermore, the guidance will require that the existing MOR tracking tools (e.g., PowerApps) be used to monitor planning for the MORs and progress throughout, until final closing of the review. As of July 2025, HUD has completed 233 MORs for the 834 RAD-converted properties. The tool allows HUD staff to filter by the type of conversion (e.g. RAD PIH, RAD PRAC, etc.) as well as other risk indicators (e.g., troubled status), location and servicer (e.g. Account Executive, Senior Account Executive, Resolution Specialist). OIG has concurred with HUD's corrective action plan that it will create guidance to allow for a risk-based approach for completing MORs, which HUD anticipates completing by September 30, 2025.

Analysis

To implement this recommendation, HUD needs to provide evidence that it has updated guidance with appropriate timeframe for conducting MORs and a system to track the timeliness of initial MORs. Failure to determine the timing of the initial MORs could delay HUD's performance of them, which may result in property owners' untimely corrective actions, and thus potentially impact the health and safety of families.

The implementation of this recommendation has the potential to directly impact the health and safety of families.

Complete the initial management and occupancy reviews (MORs) for the Rental Assistance Demonstration properties that have not had an initial MOR.

Status

Given current resource constraints, HUD will create guidance based on risk-based Management and Occupancy Review (MOR) parameters to ensure that field staff and leadership perform the initial MOR for PBRA RAD-converted properties. This guidance will specify which assessments can be done on-site or remotely (such as desk reviews). The guidance will outline the timing requirements for when the initial MOR should be completed. To date, HUD staff have completed 233 MORs for the 834 RAD-converted properties. HUD anticipates completing the initial MORs for the remaining 501 properties by the end of 2027. HUD HQ and field staff will use the Power BI MOR tool to track the MOR through the stages: scheduling, review, issuance of report and finally the closing of the report. As of July 2025, OIG has concurred with HUD's corrective action plan that HUD will begin completing the initial MORs using a risk-based approach. The target completion date for HUD to demonstrate it is taking corrective action is set for December 31, 2025.

Analysis

Completing initial MORs would assist HUD in holding property owners accountable for maintaining the conditions of their properties and sufficient reserve for replacement accounts balances, which could impact property owners' ability to make needed capital repairs.

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

Develop and implement a plan to determine how to implement the risk-based approach to review the Rental Assistance Demonstration properties that have not had subsequent management and occupancy reviews (MORs) in more than 3 years and to require periodic MORs going forward.

Status

Given the current resource constraints, HUD will create guidance based on risk-based Management and Occupancy Review (MOR) parameters to ensure that field staff and leadership perform MORs using a risk-based model for PBRA RAD-converted properties. This guidance will specify which assessments can be done on-site or remotely (such as desk reviews) and the timing requirements for when ongoing MORs should be scheduled once the initial MOR is completed. As of July 2025, 641 MORs need to be scheduled for the Office of Asset Management's portfolio of 834 RAD-converted properties. Of those, 85 properties are managed by Performance-Based Contract Administrators (PBCA). Depending on risk indicators for each property, MORs will be scheduled accordingly. HUD reported that its staff resources are limited in comparison to the PBCAs and will therefore take a risk-based approach for prioritizing the MORs that HUD staff must complete. The Office of Asset Management will develop a plan to address the backlog of RAD-converted MORs using the current risk factors which include the physical condition, last MOR score, financial health of the property and other indicators. The target completion date is December 31, 2025.

Analysis

Developing a plan to implement the risk-based approach would establish the criteria for identifying properties that are at a higher risk of noncompliance.

The recommended corrective action would help HUD to monitor property owners' compliance with its requirements and thus, potentially protect families from living in unsafe units.

Determine an appropriate timeframe in which non-FHA-insured Project-Based Rental Assistance (PBRA) properties converted under the Rental Assistance Demonstration should be initially inspected, work with HUD’s Real Estate Assessment Center (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

As of July 2025, Multifamily Housing planned to develop and implement adequate policies, procedures, and controls to ensure non-FHA insured PBRA properties under RAD are inspected within 90 days after the original date of the HAP contract, unless the property has been approved for inspection delay during major rehabilitation, then within 90 days after the end of the approved inspection delay. Further, Multifamily Housing will provide appropriate updated guidance to both internal and external partners relative to non-FHA-insured PBRA properties converted under RAD. The target completion date is September 30, 2025.

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.

Develop and implement adequate procedures and controls to ensure that (1) staff issues notices of violation and default within 15 calendar days of the inspection report release date and (2) the Office of Multifamily Asset Management and Portfolio Oversight is made aware when notices are not issued within 15 calendar days after the inspection report release date and takes action as appropriate to ensure that future notices are issued in a timely manner. 

Corrective Action

HUD’s Office of Multifamily Housing created procedures to identify failed inspections and notify the appropriate field office that a property in their portfolio had recently failed inspection. The procedures included a timeline for issuing a Notice of Violation/Notice of Default to the owner of the property. Implementation of the recommendation ensures that multifamily property owners are notified of deficiencies in a timely manner to take corrective actions.

Include language in future notices of violation and default clearly stating that owners are required to inspect all units (including vacant units), common areas, grounds, building systems, and sites as part of the owner survey and require owners to include sufficient detail in the surveys to show (1) when the survey was conducted and (2) that the survey was a complete survey of the project.

Corrective Action

HUD’s Office of Multifamily Housing updated the language in the template document to be used in future notices of violation and default, clearly stating that owners are required to inspect all units (including vacant units), common areas, grounds, building systems, and sites as part of the owner survey and require owners to include sufficient detail in the surveys to show (1) when the survey was conducted and (2) that the survey was a complete survey of the project. Specifically, HUD notified all Asset Management Division Directors informing them of the updates to the templates and instructed them to use the templates. The implementation of this recommendation has the potential to positively and directly impact the health and safety of families.

Develop and execute a detailed plan and timeline for both testing and reporting estimates of improper payments in the PIH-TBRA and PBRA programs in compliance with Federal law and OMB guidance.

Status

In response to the Management Alert, the Deputy Secretary stated that she would provide a plan in 30 days. On April 10, 2024, the Chief Financial Officer, Assistant Secretary for Housing, and Principal Deputy Assistant Secretary for Public and Indian Housing (PIH) stated their respective executives had been working together to develop a plan to accelerate HUD’s ability to produce statistically valid estimates. With respect to PBRA, HUD planned to use ongoing data collection for fiscal year (FY) 2023 tier 1 and tier 2 payments to develop a statistical estimate in FY 2024.

However, our recent Payment Integrity Information Act audit determined that neither program produced a compliant estimate in fiscal year 2024. For multifamily-PBRA, HUD made some progress and reported an estimate that captured part of the payment cycle; however, the estimate did not include testing to ensure that housing assistance payments from contract administrators to owners were calculated correctly and supported by tenant-level documentation. The PIH-TBRA program did not produce an estimate at all, noting that IT system modernization must occur first. However, PIH has not yet provided a plan that indicates how the system upgrades will address this issue or a timeline for implementation. As of July 2025, HUD indicated that under its new leadership team it was making progress, but could not provide specifics about the progress made, a detailed plan or timeline, or a management decision detailing its corrective action plan. It remains unclear how HUD will produce a complete estimate of the PBRA programs in future years, and when it will be able to produce an estimate for PIH-TBRA.

Analysis

For HUD to close this recommendation, it must finish testing the full life cycle of payments in these programs and publicly report estimates of the improper payments in them. Merely producing a plan with future action target dates is not sufficient to meet the spirit of this recommendation.

PBRA and PIH-TBRA are the two largest program expenditures in HUD's portfolio, totaling $50 billion in FY 24, or 62.4 percent of HUD's total expenditures. HUD has been challenged with developing a compliant sampling methodology that can test the full payment cycle and that can be executed within the required timeframes. To fully address this recommendation, the sampling methodology should test the full payment cycle, and the associated sample testing and statistical estimation must be completed in time to be included in the Annual Financial Report.

Implementation of this recommendation will result in HUD better-safeguarding taxpayer dollars and decrease improper payments.

HUD (a) identify all contracts related to its programs that pre-date July 1, 2013 and that have not yet been modified to include Section 4712 whistleblower protections; and (b) review all contracts entered into on or after July 1, 2013, to ensure they include a clause that requires contractors to comply with Section 4712.

Status

HUD provided a Management Plan that identifies actions HUD is taking to address the recommendation. The OIG and HUD have not reached an agreement that the actions proposed will fully address the recommendation. Additionally, HUD has not completed several of the proposed actions and is evaluating what next steps are appropriate and feasible.

Analysis

To fully address this recommendation, HUD must (a) identify all contracts related to its programs that pre-date July 1, 2013, and that have not yet been modified to include Section 4712 whistleblower protections; and (b) review all contracts entered on or after July 1, 2013, to ensure they include a clause that requires contractors to comply with Section 4712. Implementation of this recommendation will ensure that Section 4712 whistleblower protections will apply to all individuals working for HUD contractors.

Seek voluntary cooperation from program participants to proactively modify pre-2013 contracts for the purpose of including a clause requiring compliance with Section 4712.

Status

HUD provided a Management Plan that identifies actions HUD is taking to address the recommendation. The OIG and HUD have not reached an agreement that the actions proposed will fully address the recommendation. Additionally, HUD has not completed several of the proposed actions and is evaluating what next steps are appropriate and feasible.

Analysis

To fully address this recommendation, HUD must provide evidence that it has sought voluntary cooperation from program participants to proactively modify pre-2013 contracts for the purpose of including a clause requiring compliance with Section 4712. Implementation of this recommendation will ensure that Section 4712 whistleblower protections will apply to all individuals working for HUD contractors.

Use its best efforts to include a clause requiring compliance with Section 4712 at the time of major modifications to contracts with program participants with whom HUD is unable to gain voluntary cooperation.

Status

HUD provided a Management Plan that identifies actions HUD is taking to address the recommendation. The OIG and HUD have not reached an agreement that the actions proposed will fully address the recommendation. Additionally, HUD has not completed several of the proposed actions and is evaluating what next steps are appropriate and feasible. In addition, the President's fiscal year 2026 Congressional Budget Justification includes a request for new legal authority to "expeditiously include whistleblower protections of 41 U.S.C. 4712 within all contracts and grants, including outstanding project-based rental assistance contracts, rather than wait until there is a major modification."

Analysis

To fully address this recommendation, HUD must provide evidence that it has taken steps to ensure that it includes a clause requiring compliance with Section 4712 at the time of major modifications to contracts with program participants with whom HUD is unable to gain voluntary cooperation. Implementation of this recommendation will ensure that Section 4712 whistleblower protections will apply to all individuals working for HUD contractors.

Develop and implement a nationwide inspection review protocol, which includes but is not limited to (1) whether field office staff should mark verification of PHA corrections of life-threatening deficiencies in PASS or any future tracking systems, (2) acceptable documentation for offsite verifications, and (3) whether field office staff should discuss or verify corrections of non-life-threatening deficiencies.

Corrective Action Taken

HUD's Office of Field Operations (OFO) created a protocol describing how it would perform quality control reviews of field office oversight of PHAs’ corrections of life-threatening deficiencies. The implementation of this recommendation resulted in HUD creating a protocol that established consistency in the way HUD field office staff monitored public housing agencies’ corrections of life-threatening deficiencies.

Develop and implement training for field offices that addresses reviewing or following up with PHAs about the correction of life-threatening and non-life-threatening deficiencies and how (1) to review physical inspection reports to effectively ensure that PHAs correct physical deficiencies, (2) PHAs should address or correct each type of deficiency observed in the REAC physical inspection report, and (3) to use PASS or any future tracking system.

Corrective Action Taken

HUD developed and provided training to the field offices on their roles and responsibilities for following up with PHAs on the correction of life-threatening and non-life-threatening deficiencies observed during REAC inspections, the NSPIRE system and standards, protocols, and timelines for deficiency correction and verification. Implementation of the recommendation will help HUD to ensure that field office staff are clear on their roles and responsibilities to communicate with PHAs on how deficiencies should be addressed and verify that PHAs’ inspection deficiencies have been corrected.

Implement a system to track field office inspection review activities and create a repository for the support documentation collected to verify the correction of life-threatening deficiencies.

Corrective Action Taken

HUD’s Office of Field Operations (OFO) had created a quality assurance tracker as well as a life-threatening deficiency tracker, which contained data specific to the inspections selected by OFO HQs, for quality assurance reviews. The documentation (photographs, work orders, etc.) of the life-threatening deficiency correction was maintained in HUD’s NSPIRE Salesforce system.

Implementation of the recommendation resulted in HUD creating a system to track HUD field offices’ verifications of PHAs’ corrections of life-threatening deficiencies.

Develop and implement a nationwide protocol for field offices, describing how PHA self-inspections should be reviewed, based on REAC's determination of the number and frequency of PHA self-inspections.

Status

HUD closed this recommendation in August 2024, an action which HUD OIG disagrees with. HUD provided guidance for field office staff to send to PHAs with NSPIRE inspections that scored below 60 points. However, HUD did not provide a protocol detailing how it would receive and review PHAs' self-inspections for compliance with HUD requirements. Therefore, HUD has not fully addressed the gap in controls identified in the audit that hinders HUD's oversight over PHA self-inspections. OIG will continue to seek clarification from HUD on the implementation and closure of this recommendation. However, as of July 2025, HUD has not provided any additional documentation.

Analysis

To fully resolve this recommendation, HUD needs to provide a policy or procedure that provides guidance to the field offices on how public housing self-inspections should be reviewed for compliance with its requirements.

Implementation of this recommendation will result in public housing units that are decent, safe, and sanitary because it mandates oversight to ensure PHAs are addressing identified deficiencies.

Implement adequate policies, procedures, and controls to ensure that public housing properties will be inspected within required timeframes.

Status

As of July 2025, according to HUD, all development and enhancement of the NSPIRE software system are presently on hold pending Administrative guidance on HUD funded software system improvements. Additionally, the required software changes recommended under this finding depend on the final Public Housing Assessment System (PHAS) rule, but most regulatory work has been paused for review per Executive Order from the Administration. Pending the required resources and funding approval, HUD cannot move forward at this time. According to HUD, it has planned for and proposed the needed improvements to meet this recommendation and will provide updates when available. The current final action target date is September 30, 2025.

Analysis

To fully address this recommendation, HUD must provide evidence demonstrating that it has implemented control activities that ensure public housing properties are inspected within the required timeframes.

Implementation of this recommendation will result in HUD accurately tracking the dates on which public housing properties should be inspected and that they are timely completed.

Due to the uncertainty of when software changes to NSPIRE can take place to enforce the timing of inspections, REAC cannot enforce the requirements of inspection timing.

Update its policy and procedures to define its authority for marketing troubled issuer portfolios and the conditions that must exist to extinguish issuers using rapid relocation.

Corrective Action Taken

As of February 2024, HUD addressed this recommendation in a Management Decision by providing the updated extinguishment SOP, the Rapid Relocation Process Flow, and the Rapid Relocation Extinguishment Process Steps, updated to include the conditions that must be present to execute an extinguishment using rapid relocation. We believe that these guidance enhancements will help Ginnie Mae to reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.

Update its policy and procedures to define what type of information Ginnie Mae may disclose and how it will handle protected information before extinguishment.

Corrective Action Taken

Ginnie Mae provided the updated SOP to clarify data and information handling through all phases of the termination/extinguishment process. Specifically, the updated procedures state that Ginnie Mae does not disclose Issuer or portfolio information within the Rapid Relo process. Ginnie Mae provided clarity in this enhancement that will reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.

Update its Policies and procedures to define how Ginnie Mae will determine the portfolio value and price before Sale.

Corrective Action Taken

Ginnie Mae updated its Rapid Relocation Extinguishment SOP to specify the valuation model for rapid relocations will use the same valuation models as other extinguishment options, including examples of portfolio valuation. We believe this guidance enhancement will help Ginnie Mae to reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.

Update its policies and procedures to define how Ginnie Mae intends to identify and evaluate prospective buyers to ensure its ability to absorb the extinguished portfolio before executing the purchase and sale agreement.

Corrective Action Taken

Ginnie Mae updated its Rapid Relocation Extinguishment SOP to require an Impact Analysis Evaluation of each prospective buyer under the Rapid Relocation Extinguishment program. The Impact Analysis Evaluation mirrors similar activities performed on select standard Pool Transfer participants and includes details (such as adjusted net worth, delinquency, loan court and total unpaid principle balance) to confirm prospective buyers are able to absorb the extinguished portfolio before executing the purchase and sale agreement. We believe this guidance enhancement will help Ginnie Mae to reduce exposure to risk when facilitating a sale and transfer of a troubled issuer’s portfolio and ensure that it sells portfolios with limited loss to the Government and with minimal disruption to the mortgage market.