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Document

We audited the U.S. Department of Housing and Urban Development’s (HUD) fiscal year 2021 compliance with the Payment Integrity Information Act of 2019 (PIIA) and implementation of Office of Management and Budget (OMB) guidance.  PIIA was enacted to prevent and reduce improper payments and require each agency’s inspector general to perform an annual review of the agency’s compliance with PIIA.  Our objectives were to assess (1) whether HUD had met all requirements of PIIA and OMB Circular A-123, Appendix C-Requirements for Payment Integrity Improvement and (2) HUD’s efforts to prevent and reduce improper and unknown payments.

We found that HUD was noncompliant with PIIA in fiscal year 2021.  Specifically, HUD’s improper and unknown payment estimates were noncompliant and unreliable because HUD was unable to test the full payment cycle for the Office of Public and Indian Housing’s Tenant Based Rental Assistance (PIH-TBRA) and Office of Multifamily Housing’s Rental Subsidy (MF-Rental Subsidy) programs, representing 63 percent of HUD’s total expenditures. This was due to logistical and security challenges, as documentation was not readily available, and HUD could not properly secure the data.  Without completing its testing, HUD reported a 100 percent payment accuracy rate, instead of classifying the rate as unknown in accordance with OMB criteria.  This put HUD at risk of not implementing corrective actions and other compliance requirements.  

In addition, in the PIH-TBRA program, two of the primary monitoring and verification controls for improper payment detection and prevention were suspended due to COVID-19 related issues, increasing the risk of improper payments.  HUD also missed opportunities to detect improper and unknown payments in its Office of Community Planning and Development (CPD) programs.  Finally, there were some errors in HUD’s information on PaymentAccuracy.gov due to new government-wide processes.  While HUD made some progress in fiscal year 2021, significant efforts are needed to bring PIH-TBRA and MF-Rental Subsidy programs into compliance.

For HUD’s noncompliant programs, we recommend that HUD (1) develop and implement a sampling methodology that allows for the timely testing of the full payment cycle and (2) consult with OMB on the appropriate reporting for untested portions of the payment cycle.  Next, we recommend that HUD develop and implement a plan that ensures adequate internal controls over the PIH-TBRA program to detect and prevent improper payments, which can be implemented in a virtual environment.  We also recommend that HUD work with grantees to better identify the risks of improper and unknown payments throughout the payment cycle in its CPD programs and ensure that its risk assessments and improper and unknown payment estimates fully consider these risks.  Finally, we recommend that HUD coordinate with OMB to ensure that its data on PaymentAccuracy.gov are accurate.

Recommendation Status Date Issued Summary
2022-FO-0005-001-A Open June 27, 2022

We recommend that the Deputy Chief Financial Officer…In collaboration with all involved program offices, develop and implement a sampling methodology that allows for a sample size that reasonably allows for the testing of the complete payment cycle within the PIIA reporting timeframe.


Status

These recommendations remained closed per HUD; however, we continue to identify this as a priority open recommendation because HUD continues to be challenged to fully implement this recommendation. Due to this, HUD OIG issued a management alert to the HUD Deputy Secretary entitled "Action Is Needed From HUD Leadership To Resolve Systemic Challenges With Improper Payments", on January 23, 2024. In response to the alert, HUD is working on a plan to address the challenges encountered by the OCFO and bring the Department into compliance. Part of this plan should include information about how the Department plans to address this recommendation.


Analysis

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 timeframe. HUD’s sampling methodology, associated sample testing, and statistical estimation of improper payments could not be completed in time for the required annual reporting of improper payment estimates in the Agency Financial Report (AFR), normally issued in November. To fully address this recommendation, HUD must use a sampling methodology that tests the full payment cycle, and the associated sample testing and statistical estimation must be completed in time to include in the AFR.

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

2022-FO-0005-001-B Closed June 27, 2022 Consult with OMB on the appropriate reporting for the untested portions of the payment cycle (such as reporting as unknown) and report accordingly.
2022-FO-0005-001-C Closed June 27, 2022 Implement a procedure, which ensures that future improper and unknown payment testing that does not test the full payment cycle is reported in accordance with OMB’s guidance.
2022-FO-0005-002-A Open June 27, 2022 Develop and implement a plan that ensures the continuity of adequate internal controls over the PIH-TBRA program to detect and prevent improper payments, which can be implemented in a virtual environment. This plan should include how HUD can review tenant files or other information that validates tenant data remotely without compromising PII.
2022-FO-0005-003-A Closed June 27, 2022 Collaborate with the Deputy Chief Financial Officer to work with grantees in identifying where improper and unknown payments could occur in the CPD-HIM program throughout the payment cycle, to include the risks associated with subgrantee billing, and document this analysis.
2022-FO-0005-003-B Closed June 27, 2022 Collaborate with the Deputy Chief Financial Officer and use the analysis developed in 3A to ensure that HUD’s improper and unknown payment testing procedures are (1) designed to test the full payment cycle and (2) include the review of documentation that supports that final beneficiaries were eligible, goods and services were received, and payments went to the correct final beneficiaries and were for the correct amount.
2022-FO-0005-003-C Closed June 27, 2022 Work with the Office of Community Planning and Development’s Chief Risk Officer and grantees to better identify the risks of improper and unknown payments throughout the payment cycle, to include the risks associated with grantees and subgrantees, and consider these risks when performing the CDBG and Homeless Assistance Grant risk assessments.
2022-FO-0005-003-D Closed June 27, 2022 Work with the Deputy Chief Financial Officer to develop and design a process to ensure that each attribute evaluated during the PIIA risk assessment is evaluated at all levels of the full payment cycle.
2022-FO-0005-004-A Closed June 27, 2022 Coordinate with OMB to ensure that all of HUD’s data posted on OMB’s PaymentAccuracy.gov are accurate, including data before fiscal year 2021.
2022-FO-0005-004-B Closed June 27, 2022 Update its procedures to include verifying all HUD data on PaymentAccuracy.gov immediately after the data are published on the public website to ensure that all data are accurate and if not, coordinate any corrections with OMB.