PNRC NAHRO Conference Session: HUD OIG Audits- What to Expect and How to Prepare

This is my first attempt at trying to share some of the session material being presented at our annual conference in Portland.  Please tell me if you find it helpful.

Presenter: James Casey Byers, Assistant Regional Inspector General for Audit

Presenter: Jim Siwek, Assistant Special Agent, HUD OIG

The HUD Office of Inspector General (OIG) presented at the Northwest NAHRO Conference about recent audits and investigations involving misconduct in federal housing programs.  The main point of this session was to give updates and help public housing authorities prepare for an OIG audit.

The OIG was established in 1978 to conduct and supervise audits for HUD programs.  The main goal is to keep an eye on housing programs for the secretary of the department and congress.  They are there to detect and prevent fraud, waste, abuse and mismanagement. They then report back on their findings and if corrections have taken place. The high priority focus areas are joint civil fraud, investigate whistle blower cases, pursue civil actions and admin sanctions against those that commit fraud against HUD.   They also check up and audit disaster funds that have been allocated to ensure they are spent correctly.

Audit Selection:

Internal audits revolve around single family housing, multifamily, public housing and community development.  Externally, they look at PHAS, mortgage companies, local governments.  When they are seeing issues while out auditing, that might trigger them to come together and look at those common issues across an entire program.

When selecting auditees, they perform a risk assessment.   This looks at money a housing authority receives, HUD assigned risk levels and historical audit information.  Sometimes referrals from the office of investigation or HUD program staff can key an audit.   They also review local field office data to see if certain PHAs are not performing well.  The speaker from the OIG said that, “If we see an issue in a certain program like HOME in one area, we might go look at another community to see if they are having issues with the HOME program.”

The speaker did say that referrals were one of the best resources when choosing a site for an audit.  That could again be a tip, a HUD office referral or some other entity recommended the agency should be audited.  He did say that they do not always come because of a tip or referral.  Sometimes it simply is the risk assessment that drives the audit.   It became clear that the OIG does not find any value in auditing agencies that do not have any issues.

Audit Plan and Current Hot Button Issues:

They publish a plan every 6 months that describes the primary objectives and concerns for each audit review.  Examples include:

  • PIHs controls over required conversions of distressed housing projects in NYC
  • HUD oversight over the Family Self Sufficiency program in Philadelphia
  • HUDS oversight of lead based paint prevention in public housing in Chicago.
  • Flat rent compliance in Kansas City.
  • REAC housing quality standards inspection processes and procedures in Fort Worth.
  • PHAs expensing of employee benefits in Boston.
  • HUD oversight of direct home-ownership assistance program in Philadelphia.

Public housing agencies should keep these all in mind as any problems that pop up at these audit sites could affect us in the future.

Audit Results and Public Housing Findings:

In 2016, OIG broke out the audits and 39% of everything they did was within Public and Indian housing.  A finding needs to have the following:

  1. a condition,
  2. a cause,
  3. an effect
  4. and then a recommendation.

The speaker said that most of the time a finding comes from a lack of an internal controls.  However; if there is a cause but no effect the agency will not get a finding.   If there is a finding, the recommendation will deal with how the public housing authority can cure the defect.  That might be creating controls, standard operating procedures or paying HUD back in some cases.   HUD does not always need to take the OIG’s recommendation or do something with them.

Special Agent Casey Byers said there are some common failures for public housing.  These include failure to keep eligibility documentation, incurring ineligible expenses, incorrectly calculating housing assistance, procurement violations, HQS inspection issues and waiting list problems.  Common root causes are a lack of process, training issues and policy problems.

Preparing:

The speaker did give some tips just in case your agency is selected for an audit. To properly prepare, always have the documents ready and organized.  Anything that you can do to show that requirements have been met will make the audit go easier for your agency.  Ensure your policies and procedures are up to date.  Have any HUD granted waivers available.  If there were any prior findings, ensure that they were corrected.   The auditors will interview staff so make sure that they know they will be interviewed and ensure their availability.   For those being interviewed, they will need to explain their role in the organization, how processes work, how funds are being used correctly and how internal controls work.

Conclusion:  Statistically speaking, the chances of an OIG audit are small.  There are only three auditors in the northwest to handle several states and internal HUD audits.  The information contained in the session laid out what is happening in the landscape of audits, what to expect when being audited and how to prepare.  The HUD OIG website is a great resource.

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