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We audited the U.S. Department of Housing and Urban Development’s (HUD) Rental Assistance Demonstration.  We initiated the audit under the HUD Office of Inspector General’s annual audit plan.  Our objective was to determine whether HUD had adequate controls over the Demonstration, to include (1) an appropriate completion of a risk assessment that adequately evaluated the following risks: (a) the need for additional administrative funding, (b) a determination of funding level and computation of program funds, (c) site conditions and residents’ ability to return after conversion, and (d) management and information systems capacity by participants; and (2) a plan to reduce these risks to an acceptable level.

The Office of Public and Indian Housing (PIH) did not sufficiently identify the risks that could disrupt an effective implementation of the Demonstration in its front-end risk assessment (FERA), document a plan to reduce these risks to an acceptable level, or conduct the FERA in a timely manner as required, as PIH completed the FERA nearly two years after budgetary approval for the Demonstration and nearly one year after it began accepting applications for the Demonstration.  Additionally, the Office of Housing failed to document its contribution to the FERA prepared by PIH and clearly identify specific risks associated with Housing’s program units.

We recommend that (1) PIH reexamine and modify the FERA completed for the Demonstration, and (2) Housing review the existing FERA and modify it to clearly identify specific risks for its program units, and ensure that its contribution to the FERA prepared by PIH is documented via signatures of the proper Office of Housing officials to ensure that risks are sufficiently identified and a plan for reducing the risks to an acceptable level is in place to promote an effective and successful implementation of the Demonstration.