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We audited the U.S. Department of Housing and Urban Development’s (HUD) oversight of disaster grantee procurement processes.  We conducted the audit after prior audits identified procurement issues.  Our objective was to determine whether HUD provided sufficient guidance and oversight to ensure that disaster grantees followed proficient procurement processes when purchasing products and services.

HUD did not provide sufficient guidance and oversight to ensure that State disaster grantees followed proficient procurement processes.  Since HUD agreed to correct procurement issues from a previous audit, we issued 17 audit reports on disaster grantees with questioned costs totaling nearly $391.7 million related to procurement.  These conditions occurred because HUD was so focused on providing maximum feasible deference to State grantees that it was unable to ensure that grantees followed proficient procurement processes.  HUD also believed that State grantees were not required to have procurement standards that aligned with each of the Federal procurement standards.  As a result, HUD lacked assurance that State grantees purchased necessary products and services competitively at fair and reasonable prices.

We recommend that HUD (1) clarify that if a State receives a disaster recovery grant and chooses to certify that its procurement process is equivalent to Federal procurement standards, “equivalent” means that its procurement process fully aligns with, or meets the intent of, each of the Federal procurement standards; (2) improve its controls to ensure that appropriate staff adequately evaluates the proficiency of State grantee procurement processes for States that select the equivalency option; (3) clarify and improve its guidance for State grantees to explain what it means to have a procurement process that fully aligns with, or meets the intent of, each of the Federal procurement standards; and (4) provide procurement training and technical assistance to State grantees to ensure that they understand the intent of each of the Federal procurement standards.