Inspectors General: HUD Office of Inspector General Resources and Results
Published: 2012-05-31T00:00:00

Fast Facts:

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

section_title: Letter
paragraphs: The Department of Housing and Urban Development (HUD) administers  programs that provide assistance for housing and community  development throughout the nation. 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. 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.
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). 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  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.
subsections: section_title: Background
paragraphs: For fiscal year 2011, HUD’s three largest offices administered programs  that accounted for about 93 percent of HUD’s total budgetary resources  of approximately $134.3 billion. 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  management and administration including financial operations across all  of HUD’s programs.
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, includes programs for tenant-based  vouchers and project-based rental assistance. During fiscal years 2007  through 2011, the number of PHAs increased from 3,100 to 4,150.
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.)
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  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.
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   The stimulate the economy in response to the recent economic crisis. 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. 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  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.
section_title: Comparison of the HUD OIG’s Budgets, Staffing, and Monetary Accomplishments with Other Cabinet- Level OIGs
paragraphs: For the 5-year period from fiscal year 2007 through 2011, the HUD OIG  had total budgetary resources that were consistently fifth highest out of  the 16 Cabinet-level OIGs. (See table 1.) Over the same 5-year period,  the total budgetary resources for all16 OIGs increased from about   $1.5 billion to almost $2.2 billion, or about 45 percent. In comparison, the  HUD OIG’s budgets increased approximately 19 percent, from about  $121 million to about $144 million, or less than half of the percentage  increase for the total Cabinet-level OIG budgets.
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.
During each year of the 5-year period, from fiscal years 2007 through  2011, the HUD OIG’s reported monetary accomplishments compared with  its total budgetary resources resulted in estimated annual returns on each  total budget resource dollar received. These returns ranged from a low of  $10.73 in fiscal year 2010 to a high of $18.70 in fiscal year 2009. In  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.)
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.
section_title: HUD’s OIG Reported Oversight and Accomplishments in HUD’s Three Largest Program Offices
paragraphs: The HUD OIG reported providing the majority of audits and inspections in  HUD’s three largest program offices during fiscal years 2007 through  2011. Specifically, the OIG reported a total of 905 audit and inspection  reports, which included reviews of the efficiency and effectiveness of  HUD’s management and program operations, and audits of HUD’s  financial statements during the 5-year period. Of these reports, 810— 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.
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.
The HUD OIG’s total monetary accomplishments of approximately   $9.196 billion reported during fiscal years 2007 through 2011 includes  about $6.94 billionreports, about $1.39 billion in monetary recoveries from investigations,  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.    in potential savings from audit and inspection  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.
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- administered programs, and investigations of CPD-administered  programs resulted in about $63.4 million in investigative recoveries during  the same 5-year period.
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.)
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.
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. (See  table 5.)
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.
section_title: Agency Comments
paragraphs: In written comments on a draft of this report, the HUD IG generally  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.
section_title: Appendix I: Comments from the Inspector General, Department of Housing and Urban Development
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Jackson Hufnagle,   Assistant Director; Clarence Whitt; Francis Dymond; Jacquelyn Hamilton;  Katherine Lenane; Arkelga Braxton; Jessica Butchko; Pierre Kamga; and  Janaya Davis Lewis made key contributions to this report.