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We contracted with the independent public accounting firm of CliftonLarsonAllen LLP (CLA) to audit the financial statements of HUD as of and for the fiscal years ended September 30, 2022 and 2021, and to provide reports on HUD’s 1) internal control over financial reporting; and 2) compliance with laws, regulations, contracts, and grant agreements and other matters, including whether financial management systems complied substantially with the requirements of the Federal Financial Management

Improvement Act of 1996 (FFMIA). Our contract with CLA required that the audit be performed in accordance with U.S. generally accepted government auditing standards, Office of Management and Budget audit requirements, and the Financial Audit Manual of the U.S. Government Accountability Office and the Council of the Inspectors General on Integrity and Efficiency.

In its audit of HUD, CLA reported:

  • The financial statements as of and for the fiscal years ended September 30, 2022 and 2021, are presented fairly, in all material respects, in accordance with U.S. generally accepted accounting principles.
  • One material weakness for fiscal year 2022 in internal control over financial reporting, based on the limited procedures performed. The material weakness was related to (a) Federal Housing Administration’s (FHA) financial accounting and reporting controls over borrowing authority and loan receivables and (b) HUD’s financial reporting controls over grant accruals and Public and Indian Housing’s cash management process.
  • Two reportable matters for fiscal year 2022 of noncompliance with provisions of applicable laws, regulations, contracts, and grant agreements or other matters.
    • Noncompliance with federal financial management system requirements, federal accounting standards, and the U.S. Standard General Ledger at the transaction level.
    • Noncompliance with the Single Audit Act.

In connection with the contract, we reviewed CLA’s reports and related documentation and inquired of its representatives. Our review, as differentiated from an audit of the financial statements in accordance with U.S. generally accepted government auditing standards, was not intended to enable us to express, and we do not express, opinions on HUD’s financial statements or conclusions about 1) the effectiveness of HUD’s internal control over financial reporting; 2) HUD’s compliance with laws, regulations, contracts, grant agreements, or other matters; or 3) whether HUD’s financial management systems complied substantially with the three FFMIA requirements. CLA is responsible for the attached Independent Auditors’ Report, dated November 17, 2022, and the conclusions expressed therein. Our review disclosed no instances in which CLA did not comply, in all material respects, with U.S. generally accepted government auditing standards.

 

HUD’s Agency Financial Report, which includes HUD’s audited financial statements, can be found at afr2022.pdf (hud.gov).

Recommendations

Chief Financial Officer

  •   2023-FO-0004-001-A

    Closed on July 31, 2023

    Develop and issue a departmental grant accrual validation policy or update the existing grant accrual policy to include the validation process. The policy should include 1) specific control activities over the grant accrual validation and outline all of the specific roles and responsibilities; 2) a periodic review of the grant accrual validation to evaluate and reassess its continued relevance and control effectiveness, and ensure any changes are designed and implemented appropriately; and 3) a clear communication plan that requires formal and documented communications between appropriate program offices and OCFO to ensure the validation results are used to update the grant accrual methodology and subsequent period’s estimate, as appropriate.

  •   2023-FO-0004-001-B

    Closed on August 10, 2023

    Develop and document internal procedures to ensure the OCFO’s responsibilities specified within the new or updated grant accrual validation policy are addressed.

  •   2023-FO-0004-001-C

    Closed on August 10, 2023

    Develop and implement procedures to ensure that planning for the CPD grant accrual validation is done early in the accounting cycle to allow for: • Sufficient resources to be available to perform the validation of the prior year grant accrual. • Validation efforts to start earlier to allow for follow-up on non-responsive grantees or grantees that provided incomplete information. • Materiality risk to be considered when planning and evaluating the CPD grant accrual validation.

  •   2023-FO-0004-001-D

    Closed on February 02, 2023

    Revise CPD Validation Review Instructions to specify documentation requirements similar to those provided to the grantee and specify verification of dates for when the costs were incurred.

  •   2023-FO-0004-001-G

    As part of the validation process for CPD’s accrued grant liabilities, review CPD’s accrued grant liabilities estimation methodology to ensure that it is based on verifiable grantee supporting documentation and all assumptions and variables used for the grant accrual estimate were properly established, supported, and documented.

  •   2023-FO-0004-003-A

    Closed on March 14, 2024

    Establish a formal policy addressing HUD’s federal awarding agency responsibilities under 2 CFR § 200.513(c). The policy should identify those involved in the process and their roles in addressing this single audit oversight function. The policy should also address how it will be carried out and documented.

Community Planning and Development

  •   2023-FO-0004-001-E

    Develop and document internal procedures to ensure that they will address the Program Office’s responsibilities within the departmental grant accrual validation policy.

  •   2023-FO-0004-001-F

    Re-evaluate and adequately document justification for the establishment of the percentages and other key assumptions used to determine the accrual amount for each program in CPD’s accrued grant liabilities estimate.