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We performed a review of the U.S. Department of Housing and Urban Development’s (HUD) Housing Counseling Program, located within the Office of Housing Counseling.  We selected this program based on an audit suggestion that was included in our annual audit plan to help address HUD’s strategic goal to strengthen the housing market to bolster the economy and protect consumers.  Our objective was to determine whether HUD adequately administered its program.

HUD did not adequately administer its program in accordance with Federal regulations and its requirements.  Specifically, it (1) did not adequately perform its agency approval and performance review processes, (2) approved grant vouchers without ensuring that agencies provided sufficient supporting documentation to verify the related expenses, and (3) did not ensure that termination and posttermination processes were adequately performed.  These conditions occurred because HUD did not have adequate controls over its program and due to weaknesses in its Housing Counseling System.  As a result, HUD did not have assurance that (1) agencies classified as approved in its system were properly qualified to provide services, (2) more than $1.3 million in grant funds disbursed to agencies was for eligible and supported costs, and (3) unqualified agencies stopped advertising and providing services as HUD-approved agencies in a timely manner.

We recommend that HUD (1) identify housing counseling agencies that were classified as reapproved without performance reviews being performed upon expiration of their approvals and determine whether they were properly qualified to provide services; (2) obtain documentation for seven housing counseling grants to show that more than $1.3 million in grant funds disbursed was for eligible and supported costs; (3) develop and implement updated standard operating procedures to ensure consistency and adequacy of the agency approval, performance review, voucher approval, and termination and posttermination processes; and (4) ensure that the new system being developed provides the ability to adequately oversee the work of its staff and track important housing counseling agency milestones, including HUD approval expirations and required terminations.