U.S. Department of Housing

and Urban Development

Office of Inspector General

Office of Investigation

Detecting, Preventing,

and Reporting FRAUD

Guidelines for Public Housing Authorities

to Take Charge and Make the Difference
White-collar crime in public housing authorities (PHAs) 

has the same devastating effect as violent crime: the residents 

are victims and HUD programs are abused. All too often, 

victims are at the mercy of the crime and the criminal(s) who 

inflict financial pain, suffering, and conflict. As such, the 

HUD Office of Investigation in the Office of Inspector 

General (OIG) wants to partner with PHAs to actively take 

charge in detecting, preventing and reporting FRAUD so that 

together, WE CAN MAKE THE DIFFERENCE. The OIG is 

fighting back with the help of PHAs to stop the financial 

assault on PHA residents and the HUD programs that are 

designed to help them.

Problem

Crimes such as bribery, kickbacks, bid rigging, 

embezzlement, and false claims can occur in contracting and 

procurement programs of any organization. At PHAs, these 

crimes ultimately affect the tenants because funds intended to 

improve their living conditions are diverted for the personal 

gain of others. In order to prevent such occurrences, it is 

essential that PHA officials develop internal controls to ensure 

that such activities do not occur within their organizations. 

Additionally, the issue of tenants who underreport their 

income or in any way submit false statements to HUD must 

also be addressed.

Objective

PHA management needs to:

Create an environment in which PHA employees 

understand that dishonest acts will be detected and promptly 

addressed; and

Send a message that it will aggressively seek out possible 

fraudulent conduct, instead of waiting for instances to come to 

its attention.

To accomplish this objective, PHAs need to adopt or 

update and aggressively implement a formal Fraud Policy. 

This Policy should establish how dishonest activity will be 

handled, including terminating employment and reporting the 

matter to law enforcement authorities.
Definitions

Fraud is defined as the intentional, false representation or 

concealment of a material fact for the purpose of inducing 

another to act on it to his or her injury.

A Fraud Policy specifies what an organization does to 

reduce fraud, how fraud matters are handled and what action 

is taken as a result of an investigation.

A Fraud Policy is not intended to cover administrative 

matters such as time and attendance problems or minor acts of 

insubordination. Such matters should be resolved within the 

PHA through the initiation of disciplinary measures where 

appropriate.

Commitment by Management to Fraud 

Prevention

Fraud prevention and the fight against fraud cannot be left 

to Auditors and Investigators alone. Management must make 

a positive commitment to fraud prevention and detection. 

Experts agree that it is easier to prevent fraud than to detect it. 

Fraud prevention is based on increasing an awareness that 

potential perpetrators will be detected if they commit 

misdeeds.

Many frauds are committed against organizations by 

employees who feel they were treated unfairly, did not receive 

proper compensation or promotions, had a supervisor who 

was difficult to deal with, feared being terminated, or were 

bored with their jobs. Even honest employees, when faced 

with pressure and perceived opportunity, may rationalize a 

dishonest act. Tenants commit fraud by submitting false 

statements to HUD which enable them to receive overpayments 

of subsidies or subsidies to which they are not eligible.

Fraud can be reduced, but not eliminated, by hiring honest 

people, establishing good personnel policies and procedures, 

better tenant pre-screening, and strict certification procedures.

Increasing the perception of detection might be the most 

effective fraud prevention method. Controls, for example, do 

little good in forestalling theft and fraud if those who may be 

inclined to commit fraud do not know that controls are in 

place. In the audit profession, this means letting employees, 

managers, executives, and tenants know that Auditors are 
actively seeking out information concerning internal theft. In 

the criminal investigation profession, this means Special 

Agents will use those tools that will allow for swift 

prosecution of all violators and will result in the imposition of 

the maximum jail time and payment of restitution, fines, and 

penalties to the fullest extent of the law.

Management is responsible for the detection and 

prevention of fraud. For fraud to be minimized, top 

management must set the proper tone. Unless management 

sets an example and advises employees of what is acceptable 

and unacceptable, fraud will be more likely to occur. If 

employees see management being dishonest or rationalizing 

improper behavior, they will attempt to justify dishonest acts 

of their own. The two most important elements of 

encouraging honesty in others are: (1) properly modeling 

honest behavior (setting a good example); and (2) properly 

labeling actions as acceptable or unacceptable.

The best source of information regarding fraud and abuse 

within an organization is its employees. An organization 

needs to develop a mechanism whereby employees’ 

complaints are properly investigated. The establishment and 

adoption of a Fraud Policy within an organization emphasizes 

the importance that the organization places on combating 

fraud.

Components of a Fraud Policy

A comprehensive Fraud Policy should contain the 

following components:

> Policy Statement

The policy should provide that management is responsible 

for preventing, detecting, and reporting fraud, and require 

each member of the management team to be familiar with 

the types of signals suggesting possible fraud within his or 

her scope of responsibilities. The policy statement should 

also state who is in charge of investigating suspected 

irregularities.

`> Scope of Policy

This area of the Fraud Policy sets forth what constitutes 

fraudulent activities and the fact that the policy covers 

everyone from management to employees.
> Actions Constituting Fraud and Related Criminal

Activities

This segment sets forth examples of the most serious of 

these activities:

Bribery or kickbacks

False claims or bid rigging

Theft, embezzlement, or other misapplication of funds or 

assets

Forgery or alteration of documents

Impropriety with respect to reporting financial transactions

Profiting on insider knowledge

Destruction or concealment of records or assets

Tenant underreporting of income

> Reporting Suspected Fraud

The policy should state that where fraud or related 

criminal activity is suspected, it should be reported to the HUD 

OIG Hotline or the Special Agent-in-Charge of the Region that 

has jurisdiction in your state. (A complete listing of the OIG

Offices of Investigation is included at the end of this 

pamphlet.)

> Other Irregularities

This section covers allegations of personal improprieties 

or other irregularities not constituting fraud, such as drug 

abuse, vandalism, littering, disturbing the peace, or other such 

public nuisances or criminal activity, and should state that 

these matters should be resolved by management.

> Confidentiality

This section provides that any investigation resulting from 

suspected irregularities will not be disclosed to outsiders, 

except to the appropriate law enforcement authorities. It also 

provides that management will not retaliate against employees 

who report either fraudulent or non-fraudulent irregularities.

> Authorization for Investigation

This section should advise that the person in charge of the 

PHA’s internal investigation has the authority to take control of 

and examine records.

> Reporting Procedures
This section states that employees suspecting fraud should 

report it and not attempt to conduct an investigation 

themselves. It also states that management and others should 

refrain from discussing the allegations with anyone other than 

those with a legitimate need to know.

> Termination

This section states that any recommendations to terminate 

employees should be reviewed by counsel and management.

Distribution

Upon adoption, PHAs should provide a copy of the Fraud 

Policy to all employees, board members, Resident 

Management Corporations, and the appropriate HUD Field 

Office. Anti-fraud posters should be displayed in common 

areas. A copy of this pamphlet will be available on the 

Internet. The OIG Internet address is 

http://www.hud.gov/oigindex.html

Information on a Fraud Policy

More information concerning fraud prevention and 

detection is contained in the Fraud Examiners Manual, 

Revised Second Edition, published by the Association of 

Certified Fraud Examiners, 716 West Avenue, Austin, TX, 

78701. For information about the Association, please write to 

the address above or call them at (800) 245-3321.

If you are aware of FRAUD, WASTE, and ABUSE in

HUD programs and operations, report it to

HUD’s OIG Hotline!

What Kinds of Things Should You Report?

YOU should report mismanagement or violations of law, 

rules, or regulations by HUD employees or program 

participants. Your complaint will be kept confidential if it is 

received on the phone, through the mail, or in person. We 

cannot guarantee confidentiality if you send your complaint 

by e-mail. Laws protect you from reprisals (any action taken 

against you because you filed this complaint).
You May Submit Your Complaint One of 4 Ways:

• e-mail: We know that filing a complaint is very serious, so 

we want to be sure that you understand that if you send 

your complaint by e-mail, through the Internet, it is 

possible – though unlikely – that others may see it as it is 

transmitted. The HUD OIG cannot guarantee confidentiality. 

If it is important to you that no one sees your complaint –

other than OIG staff – then you should use the phone or 

send it by mail. Remember: if you submit your complaint 

online (through e-mail), it is possible - though unlikely –

that others could read it since the Internet is not secure. If 

you decide to use e-mail, you are agreeing to waive 

confidentiality.

Send e-mail complaints to: hotline@hudoig.gov

• By Phone: Call toll free: 1-800-347-3735

TDD: 202-708-2451, or

1-800-304-9597

• By Fax: 202-708-4829

• By Mail:

Department of Housing & Urban Development

Office of Inspector General Hotline Manager

400 Virginia Avenue, SW, Suite 120

Washington, DC 20024