Watchdog Slams Federal Agency That Spends Billions, But Cannot Be Audited

The Department of Housing and Urban Development has ignored financial management recommendations for years, and things have gotten worse.

By Published on August 23, 2016

Department of Housing and Urban Development (HUD) officials have ignored 63 financial management recommendations from Congress’ investigative arm since 2012 and only half-heartedly followed many more, resulting in the $43 billion agency’s books to be all but useless.

Things have gotten so bad at HUD so rapidly, that auditors who found only one “material weakness” in the department’s accounting in 2012 found nine in 2015, according to a Government Accountability Office (GAO) report published Monday.

Housing Secretary Julian Castro, who has been at HUD’s helm during much of its slide into financial disrepair, was prominently mentioned prior to the Democratic National Convention as a potential running-mate for Democratic presidential nominee Hillary Clinton.

“The Department of Housing and Urban Development (HUD) has struggled to resolve persistent management challenges, in part because it has not consistently incorporated requirements and key practices identified by GAO to help ensure effective management into its operations,” GAO said. “In addition, HUD’s past remedial actions were not always effective because they were not sustained.”

“Turnover among senior leadership, shifting priorities, and resource constraints have contributed to HUD’s difficulties in implementing needed changes,” the report continued. “As a result, GAO and others continue to find deficiencies in numerous aspects of HUD’s operations.”

The report — drawing from 15 years of GAO and HUD Office of Inspector General (IG) audits — particularly faulted HUD officials for failing to fix seven of eight financial accountability recommendations, and neglecting to dedicate staff members or policies to preventing waste, fraud and abuse.

GAO’s concern for HUD’s financial state surrounded poor audits. Auditors found more “material weaknesses” with each passing year; the number jumped from one in fiscal year 2012 to nine in fiscal year 2015. HUD’s books, which auditors gave a “clean” opinion for 13 consecutive years until 2013, were in such bad shape in 2014 and 2015 that auditors couldn’t issue an opinion on them.

GAO also criticized HUD for neglecting its oversight duties. The department “has not formalized key practices for program oversight and evaluation,” or “formally designated entities to manage fraud risk,” GAO said. HUD’s complicated structure, consisting of thousands of local housing authorities and contractors and dozens of programs, makes it ripe for waste and fraud, GAO said.

“The range of eligible activities that can be funded makes oversight difficult,” GAO said. “Combined with finite resources for monitoring activities, these challenges strain HUD’s ability to effectively oversee its programs.”

In a related development, HUD’s IG detailed new oversight failures in a Monday report, claiming HUD’s loan servicing contractor failed to recover about $21.5 million for Federal Housing Administration’s insurance fund in fiscal year 2015 from terminated FHA-insured mortgages.

The Daily Caller News Foundation has reported extensively on HUD’s oversight failures leading to waste.

The DCNF earlier this month revealed HUD allowed 1,300 fugitives to live in subsidized public housing, violating federal law.

A HUD employee with two federally funded Section 8 apartments refused to vacate them when she was caught, and used a tax-funded organization to fight the government’s order that she leave, another DCNF investigation found.

The department often hires criminals because it “does not have an effective case management system for the timely review and evaluation of the character, background, and history, of candidates for employment,” according to a 2013 IG report prompted by a government employee’s mortgage fraud scheme.

HUD told GAO it’s working on those 63 recommendations, claiming it’s “building a stronger HUD.”


Follow Kathryn on Twitter. Send tips to [email protected].

Copyright 2016 Daily Caller News Foundation

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