Issue guidance requiring ESG grantees develop and implement internal controls to prevent any duplication of benefits with other Federal rental assistance programs for the ESG program participants, specifically for rapid rehousing and homeless prevention.

Use the OIG’s fraud risk inventory to enhance its program-specific fraud risk inventory for the Single Family Housing program.

Include lenders and servicers in the fraud risk identification process and communicate the fraud risks and schemes identified for the Single Family Housing program to relevant stakeholders, including relevant HUD program and support staff, lenders, and servicers.

Incorporate data and system enhancements such as those mentioned in this report into its plans to improve HUD’s ability to monitor and respond to fraud risks in the Single Family Housing program.

Implement a process and procedure to ensure a complete and accurate Missing Documents Report is submitted to the General Ledger Division for recording a monthly reclassification entry between HECM loans receivable and accounts receivable.

Develop a process to (1) monitor receipt of original first notes and mortgages and recorded assignments, (2) follow up with mortgagees who fail to submit documents by the required deadline, and (3) initiate repurchase requests for HECM mortgagees who fail to meet assignment requirements.

Implement procedures to (a) ensure all HECM loan terminations are accurately reported, (b) prevent HECM terminated loans from being included in the loans receivable balance, and (c) prevent inspections and tax payments on HECM terminated loans.

Implement comprehensive controls to (a) identify all Single Family partial claims related to terminated first mortgages, (b) update the system record of partial claims that will become due and payable when the refinanced mortgages are terminated, and (c) remove partial claims related to terminated mortgages from SMART.

Consider enhancing the SMART system, by adding fields (a) requiring FHA’s loan servicing contractor to enter the amount on the original mortgage and promissory note and (b) calculating the difference between the partial claim amount in SMART and the amount entered from the documents.

Implement an enhanced review process to ensure the receipt of partial claim documents is accurately marked in SMART so that the Missing Documents Report will be accurate.

Determine which report accurately reflects the status of partial claims without original documentation, certify the completeness and accuracy of the identified report, and provide the report to the General Ledger Division for the reclassification entry.

• A change control protocol for changes in programs, policies, existing controls, and source documents, including impact assessments and approvals.
• Cross-functional review involving the policy, program, accounting, financial reporting, and compliance teams before any changes are finalized.
• Documentation of rationale and expected financial impact for each change.
• Training and  awareness for management on the importance of following the governance framework for change management. 

Record journal entries to reclassify the HECM cases with missing original first notes for more than 90 days from loans receivable to accounts receivable.
 

Ensure the report provided by the NSC to reclassify partial claims from loans receivable to account receivable is appropriate for financial reporting and document the decision.
 

Implement a procedure to test journal entry posting models and their effect on the financial statements and related note disclosures when there are program changes requiring new journal entries.

Develop a standard operating procedure that details the rationale, calculation, and underlying support needed for the amounts and narrative descriptions in the financial statement note disclosures, including borrowing authority.

Implement quality control checks that reconcile financial statement disclosure amounts to the general ledger and other supporting documentation as part of the financial statements review and approval process.
 

Leverage HUD OIG’s fraud risk inventory and continue using the Office of the Chief Risk Officer’s risk catalog to enhance CPD’s fraud risk management process.

Include grantees in the fraud risk identification process and communicate the risks and schemes identified for the disaster recovery program to relevant stakeholders, including, but not limited to, all HUD staff in the CPD Office of  Disaster Recovery, grantees and sub-recipients.

Use CPD’s fraud risk inventory to identify data needs, potential system enhancements, and implement data analysis techniques to improve CPD’s ability to monitor and respond to fraud risks in the Disaster Recovery program.