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We conducted further analysis of our reported findings in fiscal years 2013 and 2014 that the U.S. Department of Housing and Urban Development’s (HUD) formula grant accounting did not comply with generally accepted accounting principles (GAAP), resulting in misstatements on the financial statements, and that HUD did not comply with the HOME Investment Partnership Act (also known as the HOME Statute).  The additional analysis was performed as we became particularly concerned about a potential Antideficiency Act violation regarding HOME Investment Partnerships Program funds based on HUD’s implementation of the cumulative method to meet commitment deadlines; specifically, its use of the first-in, first-out (FIFO) method to commit and disburse funds for this program.  Our objective was to determine whether grant funds were obligated and spent in accordance with statutory requirements.

We found that HUD’s use of the cumulative method to determine compliance with the HOME Statute’s 24-month commitment deadline incorrectly permitted some jurisdictions to retain and commit HOME program grant funds beyond the statutory commitment deadline.  If funds are retained by grantees beyond the statutory deadline, HUD may incur an Antideficiency Act violation because funds remain available for obligation or expenditure by the grantee.  The Antideficiency Act prohibits Federal agencies from making or authorizing an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation.  In fiscal year 2014, we found that HUD continued to use the cumulative and FIFO methods for commitments and disbursements.  Therefore, we concluded that the conditions remained and the potential for an Antideficiency Act violation continued to exist.

We recommend that the Chief Financial Officer (1) open an investigation and determine the impact of FIFO and the cumulative method for commitments for the HOME program on HUD’s risk of an Antideficiency Act violation; (2) as part of the investigation, obtain a legal opinion from GAO and OMB to determine whether maintaining the cumulative method for determining compliance with the HOME Statute results in noncompliance with the Statute and potential Antideficiency Act violations; and (3) if HUD incurred an Antideficiency Act violation, comply with the reporting requirements at 31 U.S.C. 1351 and 1517(b) and OMB Circular No. A-11, Preparation, Submission, and Execution of the Budget, section 145 (June 21, 2005).