oversight

Inspectors General: HUD Office of Inspector General Resources and Results

Published by the Government Accountability Office on 2012-05-31.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States Government Accountability Office

GAO          Report to Congressional Committees




May 2012
             INSPECTORS
             GENERAL
             HUD Office of
             Inspector General
             Resources and Results




GAO-12-618
                                              May 2012

                                              INSPECTORS GENERAL
                                              HUD Office of Inspector General Resources and
                                              Results
Highlights of GAO-12-618, a report to
congressional committees




Why GAO Did This Study                        What GAO Found
The joint explanatory statement for the       During the 5-year period from fiscal year 2007 through 2011, the Department of
Omnibus Appropriations Act, 2009,             Housing and Urban Development’s (HUD) Office of Inspector General (OIG) had
called for GAO to report on the               budget and staffing resources that were consistent with other OIGs, and a
resources of the HUD OIG in light of          monetary return for each budget dollar which exceeded the average return for
HUD’s recently expanded roles and             Cabinet-level OIGs. During the 5-year period, the HUD OIG had total budgetary
responsibilities. In response, GAO            resources ranging from $121 million to $144 million, consistently ranking it fifth
(1) compared the budgets, staffing            among all Cabinet-level OIGs. However, while the total budgetary resources for
levels, and monetary accomplishments          all Cabinet-level OIGs increased by about 45 percent over the 5-year period, the
of the HUD OIG to that of comparable
                                              HUD OIG’s total budgetary resources increased by 19 percent. In terms of
OIGs during recent years, and (2)
                                              staffing, the HUD OIG’s full-time-equivalent staff (FTE) consistently ranked in the
described the results of the HUD OIG’s
oversight of HUD’s programs.
                                              top four or five of the Cabinet-level OIGs. Also, the HUD OIG’s FTEs increased
                                              by about 13 percent during the 5-year period, as compared to about a 17 percent
GAO compared the budget and staff             average increase for all Cabinet-level OIGs. During the same 5-year period, the
resources of the HUD OIG with that of         HUD OIG reported an estimated average dollar return of about $13.62 for each
other Cabinet-level department OIGs           HUD OIG total budgetary dollar received, while the 16 OIGs in the Cabinet-level
for the 5-year period from fiscal year        departments reported an estimated average dollar return of about $11.12 for
2007 through 2011. GAO also                   each OIG total budget dollar received over the same period.
summarized the monetary
accomplishments of the HUD OIG and            The HUD OIG reported the majority of its audit, inspection, and investigative
other OIGs as reported in their               coverage in the three largest HUD program offices during fiscal years 2007
semiannual reports to the Congress,           through 2011. Specifically, of the OIG’s reported 905 total audit and inspection
and compared the results with their           reports completed over the 5-year period, 90 percent addressed programs in
total budgetary resources to obtain a         HUD’s Offices of Public and Indian Housing, Housing, and Community Planning
return on each budget dollar received.        and Development, which comprised about 93 percent of HUD’s fiscal year 2011
In addition, GAO summarized and               total budgetary resources. Also, of the 6149 investigative cases opened during
described the HUD OIG’s reported              this same period, almost 95 percent involved programs in these same offices. In
oversight coverage and monetary and           addition, the OIG’s reports and investigative cases focused on HUD’s
nonmonetary accomplishments from              responsibilities related to recent increases in hurricane and disaster relief funds
audit and inspection reports and              and HUD’s implementation of the American Recovery and Reinvestment Act of
investigative cases that addressed            2009 (Recovery Act), administered through these HUD program offices. Also, of
HUD’s largest program offices from            the almost $6.94 billion in reported potential monetary savings from the OIG’s
fiscal year 2007 through 2011.                audits and inspections, approximately $2.46 billion (about 36 percent), were in
                                              the three largest HUD program offices. Of the remaining amount, approximately
What GAO Recommends                           $4.45 billion (about 64 percent), was mostly from a financial control deficiency
GAO is not making any                         not directly related to the three large program offices, and an additional $28.4
recommendations in this report. The           million resulted from audits and inspections of hurricane relief and disaster
HUD Inspector General concurred with          assistance not reported as part of a specific HUD program. Of the OIG’s reported
the contents of the draft report.             $1.39 billion in investigative recoveries during the 5-year period, approximately
                                              $1.2 billion (about 86 percent), was related to mortgage fraud investigations in
                                              programs administered by HUD’s Office of Housing. The OIG also reported an
                                              additional $866 million in potential savings from other investigative efforts
                                              throughout HUD’s programs during the 5-year period. In addition, the OIG
                                              reported nonmonetary accomplishments primarily from investigations in HUD’s
                                              three largest program offices, which resulted in 4,759 convictions, pleas, and
                                              mistrials, and 5,761 administrative and civil actions during the 5-year period.
View GAO-12-618. For more information,
contact Beryl H. Davis at (202) 512-2623 or
davisb@gao.gov.

                                                                                      United States Government Accountability Office
Contents


Letter                                                                                   1
              Background                                                                 3
              Comparison of the HUD OIG’s Budgets, Staffing, and Monetary
                Accomplishments with Other Cabinet-Level OIGs                            7
              HUD’s OIG Reported Oversight and Accomplishments in HUD’s
                Three Largest Program Offices                                          10
              Agency Comments                                                          19

Appendix I    Comments from the Inspector General, Department of Housing and
              Urban Development                                                         20



Appendix II   GAO Contact and Staff Acknowledgments                                     21



Tables
              Table 1: Percentage Change in Total Budgetary Resources of
                       Cabinet-Level OIGs, Fiscal Years 2007 and 2011                    7
              Table 2: Percentage Change in Full-Time-Equivalent Staff of
                       Cabinet-Level OIGs, Fiscal Years 2007 and 2011                    8
              Table 3: HUD’s OIG—Estimated Average Return on Investment of
                       Total Budgetary Resource Dollars, Fiscal Years 2007
                       through 2011                                                      9
              Table 4: All Cabinet-Level OIGs—Estimated Average Return on
                       Investment of Total Budgetary Resource Dollars Received,
                       Fiscal Years 2007 through 2011                                    9
              Table 5: HUD’s OIG Audits and Inspections of Recovery Act
                       Funding, Fiscal Years 2009 through 2011                         19


Figures
              Figure 1: Total Budgetary Resources of HUD’s Largest Program
                       Offices, Fiscal Year 2011                                         4
              Figure 2: FHA-Insured Mortgage Loans, Fiscal Years 2007 through
                       2011                                                              5
              Figure 3: HUD’s OIG Audit and Inspection Reports in Three HUD
                       Program Offices Compared with All Other Programs,
                       Fiscal Years 2007 through 2011                                  11




              Page i                               GAO-12-618 HUD OIG Resources and Results
Figure 4: HUD’s OIG Investigative Cases Opened in Three HUD
         Program Offices Compared with All Other Programs,
         Fiscal Years 2007 through 2011                                                   12
Figure 5: HUD’s OIG Total Monetary Accomplishments from Audits
         and Inspections of Three HUD Program Offices Compared
         with All Other Programs, Fiscal Years 2007 through 2011                          13
Figure 6: HUD’s OIG Total Investigative Recoveries in Three HUD
         Program Offices Compared with All Other Programs,
         Fiscal Years 2007 through 2011                                                   15
Figure 7: HUD’s OIG Convictions, Pleas, and Mistrials in Three
         HUD Program Offices Compared with All Other Programs,
         Fiscal Years 2007 through 2011                                                   17
Figure 8: HUD’s OIG Administrative and Civil Actions in Three
         HUD Program Offices Compared with All Other Program
         Offices, Fiscal Years 2007 through 2011                                          18




Abbreviations

CDBG              Community Development Block Grants
CPD               Community Planning and Development
FBI               Federal Bureau of Investigation
FHA               Federal Housing Administration
FTE               Full-time-equivalent
HUD               Housing and Urban Development
OH                Office of Housing
OIG               Office of Inspector General
OMB               Office of Management and Budget
PHA               public housing authority
PIH               Public and Indian Housing




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Page ii                                       GAO-12-618 HUD OIG Resources and Results
United States Government Accountability Office
Washington, DC 20548




                                   May 31, 2012

                                   The Honorable Patty Murray
                                   Chairman
                                   The Honorable Susan Collins
                                   Ranking Member
                                   Subcommittee on Transportation,
                                     Housing and Urban Development, and Related Agencies
                                   Committee on Appropriations
                                   United States Senate

                                   The Honorable Tom Latham
                                   Chairman
                                   The Honorable John W. Olver
                                   Ranking Member
                                   Subcommittee on Transportation,
                                     Housing and Urban Development and Related Agencies
                                   Committee on Appropriations
                                   House of Representatives

                                   The Department of Housing and Urban Development (HUD) administers
                                   programs that provide assistance for housing and community
                                   development throughout the nation. 1 Its Office of Inspector General (OIG)
                                   was established by the Inspector General Act of 1978 (IG Act) to provide
                                   independent audits and investigations of HUD’s programs and operations;
                                   promote integrity, efficiency, and effectiveness; and detect and prevent
                                   fraud, waste, abuse, and mismanagement. 2 As the market for home
                                   mortgages tightened in recent years, HUD saw its duties expand
                                   significantly as borrowers increasingly turned to federally insured or
                                   guaranteed mortgage loan programs such as those offered by HUD
                                   through the Federal Housing Administration (FHA). As of fiscal year 2011,
                                   FHA oversaw an insured mortgage portfolio of over $1 trillion. Along with
                                   its historical duties, in 2006 and 2007 HUD received about $19.5 billion in
                                   supplemental appropriations to assist states and communities in their
                                   recovery from Hurricanes Katrina and Rita.



                                   1
                                    42 U.S.C. Chapter 44.
                                   2
                                    Pub. L. No. 95-452, 92 Stat. 1101 (Oct. 12, 1978)(codified, as amended, at 5 U.S.C.
                                   App.).




                                   Page 1                                       GAO-12-618 HUD OIG Resources and Results
In the joint explanatory statement accompanying the Omnibus
Appropriations Act, 2009, the Congress expressed concerns about the
recent increases in demands on the department and its OIG resulting
from HUD’s expanding role in insured mortgage loans and in disaster
recovery. The statement directed that we study the HUD OIG’s resources
and those of comparable OIGs in other departments. In response, this
report (1) compares the staffing levels, budgetary resources, and returns
on investment of the HUD OIG with other Cabinet-level OIGs between
fiscal years 2007 and 2011; and (2) presents the HUD OIG’s reported
results of its oversight of HUD’s largest programs for the same 5-year
period.

To address our first objective, we obtained and compared the total
budgetary resources and staffing levels of the 16 OIGs in the Cabinet-
level departments using budget information from the Office of
Management and Budget (OMB). 3 We also obtained the monetary
accomplishments reported by the HUD OIG and the Cabinet-level OIGs in
their semiannual reports for the 5-year period and compared these
accomplishments to their total budgetary resources to determine an
overall return on each budget dollar received.

To address our second objective, we identified HUD’s largest programs
from the relative size of the offices that administer these programs, based
on our analysis of HUD’s total budgetary resources reported by OMB for
fiscal year 2011. We summarized data on the extent of the HUD OIG’s
reported oversight coverage in each large program office, including the
number of audit and inspection reports, and investigative cases opened
as reported by the OIG. We also summarized data on the OIG’s reported
monetary accomplishments, which include potential monetary savings
from audits and inspections and monetary recoveries from OIG
investigations related to each of HUD’s large program offices. In addition,
we summarized the OIG’s reported data on nonmonetary
accomplishments, which include the number of convictions, pleas, and


3
 The President’s Cabinet includes the Vice President and the heads of 15 executive
departments—the Secretaries of Agriculture, Commerce, Defense, Education, Energy,
Health and Human Services, Homeland Security, Housing and Urban Development,
Interior, Labor, State, Transportation, Treasury, and Veterans Affairs; as well as the
Attorney General. The Department of the Treasury has two OIGs. In addition to the
Treasury OIG, the department’s Internal Revenue Service includes the Treasury IG for
Tax Administration, which results in a total of 16 OIGs in the 15 Cabinet-level
departments.




Page 2                                        GAO-12-618 HUD OIG Resources and Results
             mistrials, as well as administrative and civil actions resulting from OIG
             investigations in each large program office. We also reviewed the HUD
             OIG’s annual audit plans, strategic plans for HUD oversight, and annual
             budget justifications to determine the OIG’s reported emphasis in
             providing oversight of HUD’s programs. We interviewed OIG officials at
             HUD headquarters responsible for planning, directing, and managing the
             OIG’s resources to obtain information on their priorities and assessments
             of risks in HUD’s programs; and obtained documentation of reasonable
             assurance on the reliability of the OIG’s reported data.

             We conducted our work from January 2011 to May 2012 in accordance
             with all sections of GAO’s Quality Assurance Framework that were
             relevant to our objectives. The framework requires that we plan and
             perform the engagement to obtain sufficient and appropriate evidence to
             meet our stated objectives and to discuss any limitations in our work. We
             believe that the information and data obtained, and the analysis
             conducted, provide a reasonable basis for any findings and conclusions in
             this report.

             We obtained comments on a draft of this report from the HUD IG which
             are reprinted in appendix I. We also received technical comments which
             we have incorporated as appropriate.


             For fiscal year 2011, HUD’s three largest offices administered programs
Background   that accounted for about 93 percent of HUD’s total budgetary resources
             of approximately $134.3 billion. 4 Specifically, HUD’s Office of Public and
             Indian Housing (PIH) had total budgetary resources of approximately
             $71.2 billion (about 53 percent), the Office of Housing (OH) had about
             $32.9 billion (approximately 24 percent), and the Office of Community
             Planning and Development (CPD) had about $21.4 billion (approximately
             16 percent). (See fig. 1.)

             The remaining 7 percent of HUD’s total budgetary resources included the
             Government National Mortgage Association (Ginnie Mae); the Offices of
             Policy Development and Research, Fair Housing and Equal Opportunity,
             and Lead-Based Paint and Poisoning Prevention; and HUD’s




             4
             Total budgetary resources include all discretionary and emergency HUD funding.




             Page 3                                     GAO-12-618 HUD OIG Resources and Results
management and administration including financial operations across all
of HUD’s programs.

Figure 1: Total Budgetary Resources of HUD’s Largest Program Offices, Fiscal Year
2011




PIH-administered programs are intended to ensure safe, decent, and
affordable housing for low-income families; create opportunities for self-
sufficiency and economic independence; reduce improper payments; and
support mixed income developments to replace distressed public
housing. These programs include grants and subsidies to public housing
authorities (PHA) nationwide to provide affordable housing opportunities
for about 3.3 million low-income families. Section 8 of the United States
Housing Act of 1937, as amended, 5 includes programs for tenant-based
vouchers and project-based rental assistance. 6 During fiscal years 2007
through 2011, the number of PHAs increased from 3,100 to 4,150.



5
 42 U.S.C. § 1437f.
6
 Vouchers are administered at the local level by PHAs and provide subsidies that low-
income families can use to lower their rents in the private market. Project-based rental
assistance is a form of rental subsidy that is attached to a unit of privately owned housing
where low-income families moving into the housing pay a reduced rent on the basis of
their incomes.




Page 4                                         GAO-12-618 HUD OIG Resources and Results
The OH-administered programs include FHA, which insures mortgages
and loans made by FHA-approved lenders for single and multifamily
housing units intended to serve borrowers who are not being adequately
served by the conventional market, including first-time homebuyers,
minorities, low-income families and residents of underserved
communities. During the recent mortgage crisis, larger segments of the
market began using FHA-insured loans, resulting in the more than
doubling of the dollar amount of these mortgage loans from about
$439 billion in fiscal year 2007 to over $1 trillion in fiscal year 2011.
(See fig. 2.)

Figure 2: FHA-Insured Mortgage Loans, Fiscal Years 2007 through 2011




CPD provides funding mainly through the Community Development Block
Grants (CDBG) Program, which is the most widely available source of
federal assistance to state and local governments for neighborhood
revitalization, housing rehabilitation activities, and economic
development. Because of the funding mechanism that the CDBG
Program already has in place to provide federal funds to states and
localities, the program is widely viewed as a convenient tool for disbursing
large amounts of federal funds to address emergencies. Over the past
two decades, CDBG has repeatedly been adapted as a vehicle to


Page 5                                   GAO-12-618 HUD OIG Resources and Results
respond to federal disasters, such as floods, hurricanes, and terrorist
attacks—including being used to facilitate disaster relief funds in the
wakes of Hurricanes Katrina and Rita in 2006 and 2007. 7

In addition, HUD programs are used to deliver funds for activities
associated with the American Recovery and Reinvestment Act of 2009
(Recovery Act), which is one of the federal government’s key efforts to
stimulate the economy in response to the recent economic crisis. 8 The
goals of the Recovery Act include helping preserve and create jobs,
promoting economic recovery from the recent economic recession,
providing investments to increase economic efficiency by spurring
technological advances, and investing in infrastructure to provide long-
term economic benefits. Under the Recovery Act, HUD received
$13.6 billion in appropriations to be used to fund several housing program
areas, and the OIG received an additional $15 million to its annual
appropriation for the oversight and audit of HUD programs, grants, and
activities funded by the act.

The Cabinet-level OIGs, including the HUD OIG, were established by the
IG Act which, among other things, requires each OIG to report specific
accomplishments in semiannual reports provided for the Congress. 9 This
includes the number of audit reports issued and the questioned costs,
unsupported costs, and funds to be put to better use, identified by the
OIGs’ audits. As defined by the IG Act, questioned costs include either
alleged violations of laws, regulations, contracts, grants, or agreements
governing the expenditure of funds; costs not supported by adequate
supporting documentation; or the expenditure of funds for an intended
purpose that was unnecessary or unreasonable. In addition, unsupported
costs are defined as costs that do not have adequate supporting
documentation, and funds to be put to better use are inefficiencies
identified by the OIG in the use of agency funds. The OIGs also include



7
 Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes
in the Gulf of Mexico and Pandemic Influenza Act, 2006, Pub. L. No. 109-148, 119 Stat.
2680, 2779-2780 (Dec. 30, 2005); Emergency Supplemental Appropriations Act for
Defense, the Global War on Terror, and Hurricane Recovery, 2006, Pub. L. No. 109-234,
120 Stat. 418, 472 (June 15, 2006); and Department of Defense Appropriations, Pub. L.
No. 110-116, 121 Stat. 1295, 1343 (Nov. 13, 2007).
8
Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
9
5 U.S.C. App. § 5.




Page 6                                       GAO-12-618 HUD OIG Resources and Results
                      investigative accomplishments in their semiannual reports. These can
                      include monetary accomplishments such as fines and restitutions
                      resulting from settlements or court-ordered actions resulting from illegal
                      activities investigated by the OIGs, and nonmonetary accomplishments
                      such as cases opened, convictions, and administrative actions.


                      For the 5-year period from fiscal year 2007 through 2011, the HUD OIG
Comparison of the     had total budgetary resources that were consistently fifth highest out of
HUD OIG’s Budgets,    the 16 Cabinet-level OIGs. (See table 1.) Over the same 5-year period,
                      the total budgetary resources for all16 OIGs increased from about
Staffing, and         $1.5 billion to almost $2.2 billion, or about 45 percent. In comparison, the
Monetary              HUD OIG’s budgets increased approximately 19 percent, from about
                      $121 million to about $144 million, or less than half of the percentage
Accomplishments       increase for the total Cabinet-level OIG budgets. 10
with Other Cabinet-
Level OIGs            Table 1: Percentage Change in Total Budgetary Resources of Cabinet-Level OIGs,
                      Fiscal Years 2007 and 2011

                       Dollars in millions
                             Cabinet-level OIGs           Fiscal year 2007 Fiscal year 2011 Percentage change
                       1     Department of Health
                             and Human Services                     $285             $393                 38%
                       2     Department of
                             Defense                                $221             $330                 49%
                       3     Treasury IG for Tax
                             Administration                         $135             $157                 16%
                       4     Department of
                             Homeland Security                      $128             $155                 21%
                       5     Department of Housing
                             and Urban
                             Development                            $121             $144                 19%
                             Total for all 16
                             Cabinet-level OIGs                    $1.499           $2.176                45%
                      Source: GAO analysis of OMB data.




                      10
                        The HUD OIG’s fiscal year 2011 budgetary resources of about $144 million include
                      temporary supplemental funding for oversight of HUD’s disaster relief efforts and HUD’s
                      Recovery Act activities.




                      Page 7                                           GAO-12-618 HUD OIG Resources and Results
                          When comparing the full-time-equivalent (FTE) staff of the Cabinet-level
                          OIGs during the same period, the HUD OIG was fifth in fiscal year 2011.
                          In prior years the HUD OIG ranked fourth, immediately ahead of the
                          Department of Homeland Security OIG during fiscal years 2007 through
                          2009, and immediately behind the same OIG during fiscal years 2010 and
                          2011. (See table 2.) The HUD OIG increased its level of FTEs by about
                          13 percent during the 5-year period, a similar but somewhat smaller
                          increase than the approximately 17 percent average increase in FTEs for
                          all the Cabinet-level OIGs.

                          Table 2: Percentage Change in Full-Time-Equivalent Staff of Cabinet-Level OIGs,
                          Fiscal Years 2007 and 2011

                                   Cabinet-level OIGs         Fiscal year 2007 Fiscal year 2011 Percentage change
                           1       Department of Health                 1,513            1,745                15%
                                   and Human Services
                           2       Department of                        1,387            1,613                16%
                                   Defense
                           3       Treasury IG for Tax                   792              823                  4%
                                   Administration
                           4-5     Department of                         550              728                 32%
                                   Homeland Security
                           4-5     Department of                         632              712                 13%
                                   Housing and Urban
                                   Development
                                   Total for all 16                     8,387            9,843                17%
                                   Cabinet-level OIGs
                          Source: GAO analysis of OMB data.




Monetary                  During each year of the 5-year period, from fiscal years 2007 through
Accomplishments           2011, the HUD OIG’s reported monetary accomplishments compared with
Reported by the HUD OIG   its total budgetary resources resulted in estimated annual returns on each
                          total budget resource dollar received. These returns ranged from a low of
and Other Cabinet-Level   $10.73 in fiscal year 2010 to a high of $18.70 in fiscal year 2009. In
OIGs                      addition, HUD’s OIG reported that total monetary accomplishments from
                          audits, inspections, and investigations over the 5-year period were
                          approximately $9.2 billion. When compared to the HUD OIG’s total
                          budgetary resources for the entire 5-year period of $675 million, the
                          estimated average return for each total budgetary resource dollar
                          received was about $13.62. (See table 3.)




                          Page 8                                           GAO-12-618 HUD OIG Resources and Results
Table 3: HUD’s OIG—Estimated Average Return on Investment of Total Budgetary Resource Dollars, Fiscal Years 2007
through 2011

                                       Fiscal year          Fiscal year              Fiscal year             Fiscal year      Fiscal year
HUD OIG                                      2007                 2008                     2009                    2010             2011     Totals
Total budgetary resources                      $121                  $122                     $142                    $146          $144      $675
(dollars in millions)
Monetary accomplishments                    $1,347                 $1,749                   $2,656                  $1,566        $1,878     $9,196
(dollars in millions)
Estimated average dollar return on          $11.13                 $14.34                   $18.70                  $10.73        $13.04     $13.62
each total budgetary resources
dollar received
                                          Source: GAO analysis of the HUD OIG’s semiannual reports and OMB data.




                                          When compared to the average 5-year return on total budgetary resource
                                          dollars for all 16 Cabinet-level OIGs, HUD OIG’s return was again similar,
                                          but somewhat higher. Specifically, the 16 Cabinet-level OIGs reported
                                          monetary accomplishments in their semiannual reports that totaled about
                                          $106.2 billion over the same period. When compared to their combined
                                          total budgetary resources of approximately $9.547 billion, these OIGs had
                                          an overall estimated average return on investment of about $11.12 for
                                          each total budgetary resource dollar received. (See table 4). The OIGs’
                                          combined estimated average return on total budgetary resource dollars
                                          during this 5-year period ranged from a low of $7.54 in fiscal year 2007 to
                                          a high of $14.33 in fiscal year 2011.

Table 4: All Cabinet-Level OIGs—Estimated Average Return on Investment of Total Budgetary Resource Dollars Received,
Fiscal Years 2007 through 2011

                                     Fiscal year           Fiscal year            Fiscal year            Fiscal year         Fiscal year
Cabinet-level OIGs                         2007                  2008                   2009                   2010                2011      Totals
Total budgetary resources                $1.499                  $1.603                  $2.074                    $2.195        $2.176      $9.547
(dollars in billions)
Total monetary                          $11.305                 $13.006                $25.981                $24.808           $31.191     $106.20
accomplishments
(dollars in billions)
Estimated average dollar return           $7.54                    $8.11                 $12.48                    $11.30        $14.33      $11.12
on each total budgetary
resource dollar received
                                          Source: GAO analysis of OIG semiannual reports and OMB data.




                                          Page 9                                                          GAO-12-618 HUD OIG Resources and Results
                      The HUD OIG reported providing the majority of audits and inspections in
HUD’s OIG Reported    HUD’s three largest program offices during fiscal years 2007 through
Oversight and         2011. Specifically, the OIG reported a total of 905 audit and inspection
                      reports, which included reviews of the efficiency and effectiveness of
Accomplishments in    HUD’s management and program operations, and audits of HUD’s
HUD’s Three Largest   financial statements during the 5-year period. Of these reports, 810—
Program Offices       about 90 percent—addressed HUD programs administered by PIH, OH,
                      and CPD.

                      The OIG reported coverage of PIH-administered programs with a total of
                      339 audit and inspection reports, which was the greatest number of
                      reports in any of HUD’s program offices. (See fig. 3.) The emphasis on
                      the PIH programs is a result of the OIG’s concerns with the overpayment
                      of housing assistance in the Section 8 programs. The OIG addressed
                      CPD-administered programs through 270 reports with an emphasis on
                      the oversight of funding that goes to nonprofit organizations that have
                      historically not participated in federal programs and may lack the capacity
                      to comply with all grant requirements. Also, according to OIG officials, the
                      OIG’s 201 audit and inspection reports of OH-administered programs are
                      a result of the OIG’s recognition that FHA’s share of mortgage
                      originations has been at an all-time high over the past few years.




                      Page 10                                GAO-12-618 HUD OIG Resources and Results
Figure 3: HUD’s OIG Audit and Inspection Reports in Three HUD Program Offices
Compared with All Other Programs, Fiscal Years 2007 through 2011




The HUD OIG also reported opening a total of 6,149 investigative cases,
with most of them providing investigative coverage of HUD’s three largest
program offices during the 5-year period. Specifically, of these cases,
5,841 (about 95 percent), were in programs administered by PIH, OH,
and CPD. The OIG opened 2,944 investigative cases to address alleged
fraud in PIH-administered programs, which included rental assistance
programs and the administration of public housing authorities. (See fig.
4.) In addition, through expanded mortgage fraud initiatives to address
the unprecedented increase in the number of new and refinanced FHA
loans, the OIG reported opening 2,018 investigative cases in OH-
administered programs. The OIG also reported opening 879 investigative
cases into alleged public corruption within the management of housing
projects as well as the administration of grant programs funded to state
and local governments through CPD-administered programs.



Page 11                                  GAO-12-618 HUD OIG Resources and Results
                     Figure 4: HUD’s OIG Investigative Cases Opened in Three HUD Program Offices
                     Compared with All Other Programs, Fiscal Years 2007 through 2011




HUD’s OIG Reported   The HUD OIG’s total monetary accomplishments of approximately
Monetary and         $9.196 billion reported during fiscal years 2007 through 2011 includes
Nonmonetary          about $6.94 billion 11 in potential savings from audit and inspection
                     reports, about $1.39 billion in monetary recoveries from investigations,
Accomplishments
                     and about $866 million from additional related investigative efforts. These
                     include the monetary amounts of funds put to better use; questioned
                     costs identified by audits and inspections; and investigative recoveries
                     from fines, settlements, and restitutions.




                     11
                       This includes $28.4 million in monetary accomplishments resulting from audits and
                     inspections of hurricane relief and disaster assistance not reported by the OIG as part of a
                     specific HUD program.




                     Page 12                                        GAO-12-618 HUD OIG Resources and Results
Of the almost $6.94 billion in reported potential monetary savings from
audits and inspections, approximately $2.46 billion (about 36 percent),
was in HUD’s three largest program offices. Of the remaining amount,
about $4.45 billion (approximately 64 percent), was mostly from a
financial control deficiency and not directly related to HUD’s large
program offices. (See fig. 5.) The majority of this figure—approximately
$4.27 billion (about 96 percent), is related to ongoing significant
deficiencies reported by the OIG in HUD’s financial process for reviewing
outstanding obligations and recapturing amounts no longer needed to
fund them. This process was reported by the HUD OIG as a significant
deficiency in fiscal year 2011 and in prior years because it allowed invalid
obligations to remain in HUD’s accounting records.

Figure 5: HUD’s OIG Total Monetary Accomplishments from Audits and Inspections
of Three HUD Program Offices Compared with All Other Programs, Fiscal Years
2007 through 2011




Page 13                                 GAO-12-618 HUD OIG Resources and Results
The HUD OIG identified about $1.25 billion in monetary accomplishments
over the 5-year period from audits and inspections of PIH-administered
programs, particularly the Section 8 programs. These monetary
accomplishments were from audits and inspections of tenant eligibility
issues, the accuracy of rental assistance payments, the quality of
housing, and the cost of administering the programs.

Over the 5-year period, the OIG reported monetary accomplishments
from audits and inspections of CPD-administered programs of
approximately $835.7 million. These audits and inspections focused on
the control systems in place, especially for subrecipients of HUD grant
funds, to determine whether these controls provide the review and
oversight necessary to ensure funds are spent on eligible activities and
put to good use.

Also, over the same period, the HUD OIG reported monetary
accomplishments of about $381.3 million related to OH-administered
programs. The HUD OIG’s audits and inspections target FHA lenders
based on a number of high-risk indicators. In fiscal year 2010, the OIG
conducted Operation Watchdog that involved reviewing the underwriting
of 284 mortgages. Of these mortgages, the OIG concluded that almost
50 percent never should have been insured and resulted in an estimated
loss in excess of $11 million. The OIG recommended that HUD take
administrative actions against each lender and that HUD develop and
implement a risk-based selection of loans to verify that the loans met FHA
requirements.

The HUD OIG reported a total of about $1.392 billion in investigative
recoveries during fiscal years 2007 through 2011. Approximately
$1.2 billion (about 86 percent), of these recoveries were from
investigations in OH’s housing programs administered by FHA. (See fig.
6.) The OIG reported mortgage fraud investigations into FHA’s programs
as a continuing priority and reported working closely with the Federal
Bureau of Investigation (FBI) to coordinate mortgage fraud initiatives. OIG
investigations focused on various frauds perpetrated by mortgage
companies and brokers, title companies, loan officers, real estate agents,
closing attorneys, appraisers, builders, and nonprofit entities. For
example, a HUD OIG investigation found that HUD, Ginnie Mae, and
other financial entities had realized losses in excess of $1.9 billion due to
bank, wire, and securities fraud committed by the chairman of a former
FHA-approved lender. The chairman was sentenced to 30 years in prison
and ordered to forfeit $38.5 million. For investigative recoveries related to
other HUD offices, the OIG reported about $94.5 million in PIH-


Page 14                                GAO-12-618 HUD OIG Resources and Results
administered programs, and investigations of CPD-administered
programs resulted in about $63.4 million in investigative recoveries during
the same 5-year period.

Figure 6: HUD’s OIG Total Investigative Recoveries in Three HUD Program Offices
Compared with All Other Programs, Fiscal Years 2007 through 2011




Regarding nonmonetary accomplishments in HUD’s three largest
program offices, the HUD OIG reported that its PIH-related investigative
priorities include Section 8 rental assistance fraud committed by tenants
and landlords, Section 8 administrators, and PHAs. An important part of
the investigative efforts in this area included outreach by the OIG staff to
meet with executive directors of housing authorities, provide training
seminars for the identification of fraud, and develop liaisons for referrals.
As a result, during fiscal years 2007 through 2011, the OIG reported
participating in almost 3,000 convictions, pleas, and mistrials (See fig. 7.),
and 3,655 administrative and civil actions to address wrongdoing in PIH-
administered programs. (See fig. 8.)




Page 15                                  GAO-12-618 HUD OIG Resources and Results
The OIG also reported full-time participation on the FBI National
Mortgage Team with mortgage fraud task forces at over 40 locations
throughout the country. These activities led to increased investigations,
as well as civil actions, to address fraud in HUD’s single family programs.
As a result the OIG reported 1,440 convictions, pleas, and mistrials and
1,680 administrative and civil actions in OH-administered programs.

With respect to recent increases in HUD oversight responsibilities, the
HUD OIG reported investigative activities that focused on CDBG grants
that included federal funding for hurricane and disaster assistance. As a
result, the OIG reported a total of 308 convictions, pleas, and mistrials
and 200 administrative and civil actions during the 5-year period. For
example, a 2010 OIG investigation resulted in a Gulf Coast resident being
charged in U.S. District Court with making false statements in the theft of
government funds after receiving $300,000 in CDBG disaster assistance
funds for damaged property that was not the recipient’s primary residence
during Hurricane Katrina and therefore did not qualify for disaster
assistance.




Page 16                               GAO-12-618 HUD OIG Resources and Results
Figure 7: HUD’s OIG Convictions, Pleas, and Mistrials in Three HUD Program
Offices Compared with All Other Programs, Fiscal Years 2007 through 2011




Page 17                                  GAO-12-618 HUD OIG Resources and Results
               Figure 8: HUD’s OIG Administrative and Civil Actions in Three HUD Program Offices
               Compared with All Other Program Offices, Fiscal Years 2007 through 2011




Recovery Act   In fiscal year 2009, the Congress provided the HUD OIG with additional
               funding of $15 million to provide oversight of Recovery Act funds through
               HUD’s programs. This resulted in an increased focus by the OIG on
               HUD’s Recovery Act responsibilities. The coverage and accomplishments
               reported by the OIG include a total of 177 audit and inspection reports
               that address the Recovery Act, as well as about $133.7 million in related
               monetary accomplishments during fiscal years 2009 through 2011. 12 (See
               table 5.)



               12
                 The OIG’s investigative activities related to the Recovery Act are included in the
               information reported by the OIG for each of HUD’s programs. For example, the Recovery
               Act funds made available through CDBG programs are included in the OIG’s oversight of
               CPD and the accomplishments are reported with all other CPD results.




               Page 18                                     GAO-12-618 HUD OIG Resources and Results
                  Table 5: HUD’s OIG Audits and Inspections of Recovery Act Funding, Fiscal Years
                  2009 through 2011

                   Audit and inspections                      Fiscal year          Fiscal year   Fiscal year
                   reports                                          2009                 2010          2011      Totals
                   Number of Recovery Act                                  31              62            84         177
                   audit and inspections
                   reports
                   Monetary accomplishments                            $36.8             $32.3        $64.6      $133.7
                   (dollars in millions)
                  Source: GAO analysis of HUD OIG ‘s semiannual reports.



                  The HUD OIG considers Recovery Act activities to be high risk with the
                  potential for housing-related fraud because significant allocations of these
                  funds are processed in an unusually short time frame. The OIG’s
                  Recovery Act audits and inspections included determining whether funds
                  are awarded and distributed in a prompt, fair, and reasonable manner. In
                  addition, the OIG’s audits are to help to determine whether recipients and
                  users of funds are transparent to the public, whether funds are used for
                  the authorized purposes, and whether program goals are achieved.


                  In written comments on a draft of this report, the HUD IG generally
Agency Comments   concurred with the report contents. We also received technical
                  suggestions which we incorporated as appropriate.


                  We are sending copies of this report to the HUD IG and interested
                  congressional committees. In addition, this report will be available at no
                  charge on the GAO website at http://www.gao.gov. If you have any
                  questions or would like to discuss this report, please contact me at
                  (202) 512-2623 or davisb@gao.gov. Contact points for our Offices of
                  Congressional Relations and Public Affairs may be found on the last page
                  of this report. Major contributors to this report are listed in appendix II.




                  Beryl H. Davis
                  Director
                  Financial Management and Assurance




                  Page 19                                                       GAO-12-618 HUD OIG Resources and Results
Appendix I: Comments from the Inspector
              Appendix I: Comments from the Inspector
              General, Department of Housing and Urban
              Development


General, Department of Housing and Urban
Development




              Page 20                                    GAO-12-618 HUD OIG Resources and Results
Appendix II: GAO Contact and Staff
                  Appendix II: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Beryl H. Davis, (202) 512-2623
GAO Contact
                  In addition to the contact named above, Jackson Hufnagle,
Staff             Assistant Director; Clarence Whitt; Francis Dymond; Jacquelyn Hamilton;
Acknowledgments   Katherine Lenane; Arkelga Braxton; Jessica Butchko; Pierre Kamga; and
                  Janaya Davis Lewis made key contributions to this report.




(197218)
                  Page 21                              GAO-12-618 HUD OIG Resources and Results
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