Department of Housing and Urban Development: Better Guidance and Performance Measures Would Help Strengthen Enforcement Efforts
Released: 2018-10-30T00:00:00

Letter

Background

HUD established DEC in 1998 to consolidate enforcement activities of PIH, CPD, the Office of Fair Housing and Equal Opportunity (for non-civil rights violations), and MFH into one new organization. The HUD 2020 management reform plan envisioned that DEC would take enforcement action against: (1) public housing agencies that do not pass annual assessments; (2) owners of private, HUD-assisted housing that do not pass physical or financial audit inspections; and (3) local and state governments and non-profit organizations that do not comply with the requirements of grants they received from CPD and the Office of Fair Housing and Equal Opportunity (for non-civil rights violations). In addition, as part of the plan, HUD created the Real Estate Assessment Center (REAC) to help monitor public housing and HUD-insured multifamily housing projects by providing independent assessments of the physical quality and financial condition of public housing and multifamily developments.

DEC’s current mission is to provide independent oversight of the administration of HUD programs and its external partners. According to HUD, DEC’s primary goal is to bring owners to full compliance so that there is no compromise in the quality of HUD-assisted housing. In instances where owners do not bring properties up to standard, and where physical and financial deficiencies persist, DEC can take appropriate enforcement action. This includes administrative sanctions, such as civil money penalties, suspension or debarment, as well as possible referral to HUD OIG when criminal activity is suspected, or to the Department of Justice for civil action. DEC also conducts more targeted oversight reviews for some program offices. These reviews are intended to provide program offices with an independent means to analyze and evaluate the efficiency or vulnerability of their programs and operations.

DEC has staff in HUD headquarters and five field offices. In general, headquarters staff develops policy and coordinates the reviews of the referrals DEC receives from the HUD program offices while field office staff conducts the reviews. DEC works primarily with MFH and conducts more targeted oversight reviews for PIH and CPD. (See Appendix II for a breakdown of DEC referrals by program office and the state where the property is located.) These program offices have staff in headquarters and field offices, which are organized into 10 regions. There is at least one field office or regional office in each state, and the number of field offices varies by region. PIH further combines these regions into six networks.

These program offices oversee different areas within HUD:

MFH oversees the Federal Housing Administration’s multifamily mortgage insurance on loan originations, manages HUD’s portfolio of multifamily housing, provides rental assistance, and helps preserve affordable housing. Additionally, MFH administers project-based rental assistance, supportive housing for the elderly, and programs for persons with disabilities. Collectively, the properties MFH oversees provided affordable rental housing to more than 1.2 million low- income households in 2017.

PIH helps low-income families through a number of programs. PIH provides assistance to state and local public housing agencies that generally own and administer units for eligible tenants. The Housing Choice Voucher program provides tenant-based rental assistance that eligible individuals and families can use to rent houses or apartments in the private housing market. Native American programs provide block grants and loan guarantees to tribal entities for housing development and assistance. PIH is supporting 2.2 million vouchers and 1.1 million public housing units in 2018.

CPD provides financial and technical assistance to states and localities through the Community Development Block Grant and HOME Investment Partnerships programs—the federal government’s largest block grant programs for community development and affordable housing production, respectively. CPD also leads a number of HUD’s efforts to combat homelessness. Additionally, Congress appropriated about $36 billion in new Community Development Block Grant-Disaster Recovery funds in fiscal years 2017 and 2018 to states and local governments that experienced major disasters in 2015, 2016 and 2017. CPD oversaw more than 37,000 grants in 2017.

DEC uses an internal database to manage the referrals it receives from HUD program offices. DEC’s system is designed to capture various data, including the date DEC received the referral, name of the property owner or grantee being referred, cause of the referral, status of the referral, final action to close the referral, and corrections made related to the referral, among other things.

Two of Three HUD Program Offices We Examined Lack Guidance for Making Referrals and Targets Based on Program Risk

DEC and the three HUD program offices we examined have agreements in place that generally describe the process the offices follow to make referrals to DEC and the responsibilities of the parties. However, two of the three program offices (PIH and CPD) do not provide their staff with specific guidance for making referrals, and the target number of referrals these two offices have established to send to DEC does not address the risk of noncompliance.

Multifamily Housing Office Makes Referrals to DEC Based on Defined Thresholds

MFH makes automatic and elective referrals to DEC based on specific thresholds for program noncompliance defined in its agreement with DEC. MFH properties are automatically referred to DEC if: (1) the property scores below a certain threshold on a REAC physical inspection; (2) the owner fails to submit audited financial statements to HUD within 60 days following the end of the owner’s fiscal year; or (3) REAC’s automated compliance review of the property’s financial statements identifies unauthorized uses of project funds greater than an agreed-to threshold (see figure 1).

MFH also may make an elective referral to DEC based in part on specific situations of program noncompliance defined in their agreement, such as the failure to comply with program regulations or use agreements. MFH officials told us that they make these referrals on a case-by-case basis if they believe that DEC’s expertise could help resolve the concerns. In addition, MFH officials distributed a 2017 DEC notice that clarified the procedures for making an elective referral to DEC. Whereas automatic referrals are system-generated, MFH can use its discretion whether to make an elective referral to DEC.

From fiscal years 2014 through 2017, the total number of referrals DEC received on MFH properties increased by 23 percent. However, as seen in figure 2, the composition of those referrals varied. Referrals related to failure to submit timely financial statements increased by about 59 percent, while referrals related to other instances of financial noncompliance decreased by about 6 percent. Referrals for physical noncompliance, while relatively few overall, increased by 113 percent.

MFH officials told us that the increase in referrals for failure to file timely financial statements was due, in part, to new program participants from 2011 to 2013 who did not understand the requirements. In addition, according to MFH officials, MFH changed certain thresholds of financial noncompliance from automatic to elective referrals in 2013, which officials believe resulted in fewer referrals for those types of financial noncompliance.

MFH officials also noted that the increase in physical noncompliance referrals in fiscal year 2016 likely resulted from the informal encouragement given to field offices to make more elective referrals. In addition, during this period HUD’s inspection process came under additional scrutiny due to concerns about a multifamily property in Florida. The property had received a passing REAC inspection score in August 2015 but city code inspectors subsequently found multiple and serious deficiencies. The case attracted attention from the media and Congress and culminated in a Senate hearing in September 2016. Subsequently HUD reviewed the integrity of the REAC inspection and DEC referral processes.

DEC officials told us that one reason there are fewer referrals for physical noncompliance compared to financial noncompliance is that a relatively small number of properties reach the threshold for an automatic referral based on physical noncompliance (inspection score less than or equal to 30 out of 100). According to HUD data, REAC conducted approximately 8,700 physical inspections in 2017. Of these inspections, our analysis of DEC data showed that DEC received 64 referrals (0.7 percent of the inspections conducted) for physical noncompliance.

PIH and CPD Program Offices Lack Specific Guidance for Making Referrals

PIH and CPD do not provide specific guidance to staff on when a referral should be made to DEC. This stands in contrast to MFH, whose agreement with DEC includes a more detailed discussion of what problems should result in a risk-based referral.

PIH. A PIH official told us that they periodically send an email to field offices requesting potential candidates for referrals to DEC, and that the email cites factors that might warrant such referrals—such as potential violations of statute, regulation, or agreement. However, beyond that, there is no guidance to help field staff decide when to make a referral. In addition, PIH does not provide direction to field offices on how to use the results of their quarterly risk assessment to identify high-risk PHAs for potential DEC referrals. According to PIH officials, PIH has not issued more detailed guidance because it did not want to be too prescriptive in telling field office staff when to refer a public housing agency to DEC, as a DEC referral may not always be appropriate.

CPD. An official from a CPD field office told us that they may refer a grantee to DEC for an oversight review—for example, if they identify a complex financial issue requiring an in-depth financial investigation beyond the capacity of the field office. However, beyond that, neither DEC nor CPD have developed guidance to help field offices determine when to refer a grantee to DEC. In addition, CPD does not provide direction to field offices on how to use the results of their risk-based assessment of grantees to identify potential DEC referrals. CPD officials told us that they do not provide guidance because they believe that their current approach where field offices make referrals to DEC on a case-by- case basis is better and more effective.

As shown in figure 3, in recent years, the number of referrals has declined slightly for PIH and varied for CPD. DEC has agreed with PIH and CPD on a target number of elective referrals they should aim to make to DEC each fiscal year. However, neither program office met their targets for referrals to DEC in fiscal years 2016 and 2017: PIH made 25 and 12 referrals, respectively, but had an annual target of 40, while CPD referred 6 each year but had a target of 10. A number of factors may help explain the decline in referrals and failure to meet targets. For example, PIH officials told us that a new requirement that PIH field offices make every attempt to satisfy oversight review recommendations may have resulted in hesitation to make referrals among some field staff.

However, the lack of formal guidance for field staff may also play a role in the number of referrals made. According to officials from two CPD field offices, many field offices do not understand the role of DEC or the assistance it can provide, and officials from one field office told us that providing formal guidance would be helpful in this regard. Our analysis found that half of the CPD field offices had not made a referral to DEC during the previous two fiscal years and, according to PIH officials, the number of PIH referrals varied for reasons not related to noncompliance risks. The 2016 HUD OIG report noted that when program field offices requested DEC services, they did so largely because of personal relationships and trust between DEC and some field office managers, an observation reiterated by officials from one field office we interviewed.

According to the Office of Management and Budget, a ‘‘guidance document’’ is an agency statement of general applicability and future effect, other than a regulatory action, that sets forth a policy on a statutory, regulatory or technical issue or an interpretation of a statutory or regulatory issue. The office notes that guidance documents, used properly, can channel the discretion of agency employees, increase efficiency, and enhance fairness by ensuring equal treatment of similarly situated parties. In addition, federal internal control standards state that agencies should design control activities to achieve objectives and respond to risks, such as by documenting the responsibilities for these activities through policies and procedures. Because two of the program offices (PIH and CPD) we examined have not developed specific guidance for making referrals for oversight reviews, these offices cannot ensure that field staff are identifying and making referrals on a well- supported, risk-based, and consistent basis, and this may limit DEC’s effectiveness in fulfilling its mission of providing independent oversight of HUD’s programs. Such additional guidance could include information on how the field offices should incorporate the results from their risk assessments, more detailed criteria on when the field office should make a referral, and examples of potential noncompliance that could be referred.

Target Number of Referrals for Two HUD Program Offices Are Not Based on Program Risk

The target number of referrals for two program offices, PIH and CPD, appears to have been selected somewhat arbitrarily, rather than based on the risks to the programs. As noted earlier, DEC, PIH and CPD have agreed to set targets annually for the number of elective referrals they will make. PIH’s quarterly target of 10 public housing agency referrals represents less than 2 percent of the total number of agencies PIH designates as very high-risk and high risk each quarter. In addition, CPD’s target of 10 referrals per year represents about .03 percent of the grantees overseen by CPD and about 1 percent of the grantees monitored by CPD each year.

However, PIH and CPD officials could not explain the basis for selecting these targets, nor is it clear how these targets are related to the overall risk these program offices face. Both program offices’ agreements with DEC state that they will review the agreements each year. PIH officials said this review typically has included a general discussion of the appropriate number of referrals to set as the target. DEC officials told us that future reviews will take a more risk-based approach to selecting that number, but they could not tell us when this would occur. In addition, according to a HUD official, program offices such as CPD are reviewing their processes for managing risk, which could impact the target number of referrals to DEC needed for them to adequately manage their risk.

According to federal internal control standards, management should identify, analyze, and respond to risks related to achieving the defined objectives, and management should design control activities in response to the entity’s objectives and risks to achieve an effective internal control system. Without a target number of referrals based on the risks to the programs, PIH and CPD offices cannot be confident that DEC resources are being used most efficiently to address the risks of noncompliance by housing agencies and grantees.

DEC Lacks Measures Needed to Fully Assess Its Performance

While DEC currently tracks some measures related to its performance, its performance measurement system is lacking in key respects that limit DEC’s ability to fully assess its performance. DEC’s performance measures include the number of work assignments completed, reduction in number of aged referrals (2 or more years old), and the number of families impacted by its enforcement activities. DEC officials told us that they also track other measures, such as the dollar amounts of recoveries, and the numbers of suspensions and debarments. These measures are contextual indicators—measures intended to provide a broader perspective on the conditions that may influence an agency’s ability to achieve its performance goals. As shown in table 1, HUD data shows that for these contextual indicators DEC has recovered millions of dollars in inappropriately used HUD program funds and suspended or debarred some individuals. HUD data shows that DEC generally exceeded its targets for the performance measures.

Federal internal control standards state that agency management should define objectives in measurable terms so that performance toward those objectives can be assessed. Consistent with those standards, we identified several challenges with DEC’s system of performance measurement.

Lack of Outcome Measures

DEC’s performance measures do not include outcome measures, which track the results of products and services. Instead, the performance measures track outputs, which are the direct products and services delivered by a program. Prior work and guidance that we have issued stress that performance measurement should evaluate outcomes related to program activities to judge program effectiveness. Previously, DEC tracked some outcome measures, such as the increase in the percentage of residents living in acceptable insured or assisted multifamily housing as a result of civil or administrative enforcement actions. However, DEC no longer tracks those measures, and officials were unable to explain why they stopped tracking them. Similarly, the 2014 agreement between DEC and PIH included examples of outcome measures for program offices– such as financial performance improvements and early detection or prevention of fraud—but these measures are not in the current agreement.

Measuring outcomes can help assess a program’s activities and operations, identify areas that need improvement, and ensure accountability for results. DEC officials told us that outcome measurement is challenging because it can be difficult to establish a direct correlation with DEC’s work. We attempted to independently examine the outcome of DEC’s work. Specifically, we tried to measure the extent to which referrals to DEC resulted in suspensions or debarments of multifamily owners, but, in general, DEC’s data did not readily allow for this type of assessment. Outcome measures such as timeliness and monetary outcomes can still be used to capture essential program information and help assess program effectiveness. By not measuring and reporting on outcomes, DEC cannot fully assess the effectiveness or impact of its activities, or determine where improvement is needed.

Lack of Recommendation Tracking

DEC does not track the status of its recommendations. DEC’s oversight reviews sometimes result in recommendations to program offices to ensure program compliance with regulatory and policy requirements; streamline operations; improve customer service; and reduce program vulnerabilities to fraud, waste, abuse, or mismanagement. According to PIH and CPD’s agreements, the program offices will make every attempt to satisfy the recommendations, but the program offices are not required to implement them. However, according to DEC officials, DEC does not gather information on the status of its recommendations or assess program offices’ progress in implementing them. OGC officials told us that they were concerned about the burden that would be placed on program staff for providing such information, but PIH and CPD officials told us it would not require much additional work. We have previously reported that successful performance measures demonstrate results and provide useful information for decision makers. Without tracking the status of its recommendations and the extent to which program offices are implementing its recommendations, DEC is limited in its ability to assess its effectiveness in improving program operations, such as better program compliance.

Lack of Measure of Timeliness

DEC does not have a performance measure to assess the timeliness of its reviews for the referrals it receives. DEC does not measure how much time it takes to complete a referral from MFH, PIH, or CPD. DEC’s guidance and its agreements with CPD and PIH state that DEC will complete oversight reviews and issue a final report to program offices within 90 business days of the referral. These reviews are intended to be completed within this timeframe so that CPD and PIH program offices will have prompt feedback to address any areas of concern. According to HUD officials, DEC tracks the timeliness of its oversight work. However, DEC has not created a performance measure to track the extent that it is meeting its goals. In addition, DEC has no target timeframe for MFH referrals because, according to DEC officials, these referrals require varying strategies for fact gathering, analysis, and determining a course of action. Our analysis of HUD data showed that from fiscal years 2014-2017, DEC took an average of 168 days to complete its review after receiving a referral from MFH for failure to file financial statements, and an average of 254 days to complete its review for referrals related to financial noncompliance. We have previously reported that one attribute of a successful performance measure was whether the measure covered a government-wide priority, such as timeliness. Because it does not have a measure related to its timeliness in completing its reviews nor report on that information, DEC cannot ensure accountability or evaluate its efficiency for completing the reviews.

Lack of Consistent Recording of Dates and Corrective Actions Taken

DEC did not consistently record two pieces of information that could be relevant in assessing its performance—date of referral and corrective action taken. We analyzed an internal spreadsheet DEC uses to track the referrals it received from CPD and PIH to conduct oversight reviews of grantees and housing agencies. DEC did not record the date that the referral was assigned a DEC lead analyst (the point DEC begins tracking the referrals) or the date DEC signed the final report for 36 percent of the CPD referrals and 20 percent of the PIH referrals DEC completed from fiscal years 2015-2017. Consequently, we could not reliably evaluate DEC’s average timeframes for completing an oversight review referral.

In addition, DEC did not consistently record information on the corrective actions taken by DEC or MFH following a DEC review. DEC’s MFH referral-tracking database includes an “Outcomes” module with a “Corrections Made” field where DEC analysts can choose a description of the corrections made as a result of the review by either MFH or by the owner of the property, such as filing an annual financial statement. However, based on our review of this database, DEC analysts are not regularly using the “Corrections Made” field.

According to DEC officials, the inconsistent recording of dates and corrective actions was likely due to human error. This may suggest the lack of a process or controls to ensure accurate and complete recording of this information. Federal internal control standards state that an agency’s managers should use quality information, such as the accurate and timely recording of transactions, to achieve the agency’s objectives and manage risk. Without such controls, DEC will continue to have unreliable data to measure its timeliness in completing reviews and will not be able to reliably track the status of its recommendations to MFH and hold that office accountable for their implementation.

Information Technology Challenges Have Affected DEC’s Ability to Achieve Its Mission

Information technology challenges have affected the ability of DEC to achieve its mission. Although DEC has experienced staffing declines over time, there is disagreement about the extent to which these declines have impacted DEC’s ability to achieve its mission. Further, disagreement exists over DEC’s placement within HUD and the impact on DEC’s ability to achieve its mission.

Information Technology

DEC has experienced various information technology challenges that have affected its ability to achieve its mission. For example, the system does not allow DEC to easily determine the basis for a financial referral it receives from REAC on MFH properties. Instead, according to HUD, to determine the issues that triggered the referral, DEC staff must review each property’s financial statements—a labor-intensive process. In addition, DEC’s information technology system is designed to share information among staff but not to analyze or track information. Its referral data are stored in databases that generally cover one fiscal year each, according to OGC officials, which makes it challenging to identify trends. Further, DEC officials told us that the system has experienced continuing outages and breaks in service.

HUD has acknowledged that DEC needs more robust information technology to carry out its enforcement and tracking functions. The HUD Enforcement Management System is part of the department’s efforts to streamline, consolidate, and automate its enforcement business processes. According to HUD, the system will consolidate six enforcement-related systems into one and automate the monitoring and compliance review processes for several offices within HUD. Officials said this will help DEC manage its workflow and reviews and enable it to more easily track the focus of a review and any monetary findings. OGC officials noted that the department implemented the first phase of the HUD Enforcement Management System in December 2015, initially focusing on HUD’s Office of Fair Housing. However, HUD’s development contract expired in March 2017. Due to funding constraints, as of June 2018, HUD had not awarded a new contract that would incorporate DEC, and such funding is not expected to be allocated until at least fiscal year 2020, according to OGC officials.

Staff Resources

Although DEC has experienced staffing declines over time, disagreement exists within HUD about the impact of these staffing declines on DEC’s ability to achieve its mission. DEC’s staff level in fiscal year 2017 (an estimated 95 full-time equivalents) represented its lowest staff level since fiscal year 1999. HUD OIG reported in 2016 that limits on DEC resources resulted in lost opportunities to improve program effectiveness and strengthen conditions that discouraged waste, fraud, and abuse. The report also noted that these limits had prevented DEC from extending comprehensive enforcement activities to all program offices, which had reduced its effectiveness. OIG’s report further noted that DEC said it would need additional staff to perform financial analysis and enforcement if DEC were to expand its efforts with PIH and CPD. OIG recommended that OGC provide DEC with the resources and support to strengthen enforcement across HUD programs.

HUD disagreed with the OIG’s conclusion that staffing declines limited DEC’s ability to achieve its mission. HUD noted that DEC’s decrease in workload over time mitigated the effect of reduced staffing. In addition, HUD said that despite its reduced resources, DEC had succeeded in preventing some individuals from participating in MFH programs through suspension or debarment, and in encouraging compliance. HUD stated that DEC had sufficient staffing to handle MFH referrals under current protocols and serve as HUD’s troubleshooter by conducting oversight reviews for CPD and PIH. As of August 2018, HUD had not provided the department’s status of actions taken or planned related to OIG’s recommendation to the OIG.

Organizational Structure

Disagreement also exists regarding the placement of DEC within HUD. At its creation in 1998, DEC was located within HUD’s Office of the Deputy Secretary, but in 2002 it was moved to OGC. HUD OIG and DEC officials have stated that DEC’s placement within OGC limits DEC’s ability to achieve its mission. OIG reported in its 2016 report that DEC’s initial placement within the Deputy Secretary’s office provided DEC with independent enforcement authority. In addition, DEC officials told us that DEC’s initial placement highlighted HUD’s commitment to enforcement and that its current placement limits its authority to oversee program areas and hold them accountable for corrections.

In a December 2017 internal paper, DEC proposed returning to the Deputy Secretary’s office. It noted that DEC’s oversight of programmatic operations began to decline in 2016, and that PIH referrals to DEC through December 2017 represented less than one-half of the goal of one percent of PIH’s inventory. DEC’s paper also noted that a return to the Deputy Secretary’s office would highlight HUD’s responsibility to develop and maintain effective internal controls, independent of the program areas. Finally, DEC stated that its placement within the Deputy Secretary’s office would provide an opportunity to consolidate the department’s enterprise risk management functions. According to HUD officials, as of August 2018, the department had no plans to move DEC and did not request funding for such a move in HUD’s fiscal year 2019 budget.

In response to the 2016 OIG report, HUD stated that DEC’s current location within OGC had not affected DEC’s ability to make referrals for enforcement or initiate suspension or debarment actions. HUD added that placing DEC within OGC achieved significant efficiencies by consolidating DEC’s administrative, information technology, and legal functions without affecting the ability of either office to carry out its mission. OGC officials told us that DEC’s current placement within OGC is similar to the Federal Bureau of Investigation’s placement within the Department of Justice. They also noted that DEC’s enforcement and compliance analysts and attorneys coordinate enforcement activities and that DEC field office directors routinely seek legal advice from OGC attorneys. According to OGC, returning DEC to the Deputy Secretary’s office would have adverse effects on the administrative efficiencies achieved.

It is unclear whether DEC’s placement within OGC has adversely affected DEC’s ability to fulfill its mission. We asked DEC staff for documentation that would support a move to the Deputy Secretary’s office, but the information we received did not provide specific examples of how DEC’s current placement limited its ability to achieve its mission. Furthermore, as part of their 2017 paper discussing a proposed relocation, DEC officials did not identify how DEC’s placement in OGC adversely impacted it. Other factors besides DEC’s current location may explain why DEC may not be utilized more effectively. For example, we previously identified findings related to the lack of guidance that might contribute to program offices’ underutilization of DEC. In addition, as we note above, the absence of guidance on when program offices should make referrals may limit DEC’s ability to assess its enforcement efforts. These findings generally are independent of DEC’s organizational location.

Conclusions

DEC has recovered millions of dollars in inappropriately used HUD program funds, suspended or debarred some individuals, and helped strengthen program offices’ monitoring efforts. However, our review identified opportunities for DEC to better achieve its mission and assess its impact:

Guidance. PIH and CPD field office staff use their discretion in deciding which cases to refer to DEC, but these decisions do not appear to always be based on well-supported assessments of risk.

Without specific guidance to help staff direct their decision making, DEC and the program offices cannot ensure that referrals are made using a consistent and risk-based approach, limiting DEC’s effectiveness in fulfilling its mission of providing independent oversight of HUD’s programs.

Target number of referrals. The target number of referrals that PIH and CPD aim to make to DEC has not been chosen based on a risk- based process and it is not clear how these targets related to the programs’ overall risks. Without a determination of appropriate risk- based target numbers, PIH and CPD cannot ensure that they are using DEC resources efficiently to address the risks of noncompliance by housing agencies and grantees.

Performance measurement. Although DEC reports on some aspects of its performance, it lacks measures that assess outcomes rather than outputs and does not report on the timeliness of its reviews or track program offices’ implementation of its recommendations. Without improvements in its performance measurement, it will be difficult for DEC to fully assess and demonstrate its effectiveness, ensure accountability, and identify and prioritize potential improvements.

Data recording. Controls to ensure that analysts consistently record referral dates and corrective actions taken would give DEC more reliable data with which to assess its timeliness and the impact of its enforcement activities.

Recommendations for Executive Action

We are making the following eight recommendations to HUD: The Director of the Departmental Enforcement Center and the Assistant Secretary for Community Planning and Development should develop written guidance for CPD’s field offices to use when determining whether to make a referral to the Departmental Enforcement Center. (Recommendation 1)

The Director of the Departmental Enforcement Center and the Assistant Secretary for Public and Indian Housing should develop written guidance for PIH’s field offices to use when determining whether to make a referral to the Departmental Enforcement Center. (Recommendation 2)

The Director of the Departmental Enforcement Center and the Assistant Secretary for Community Planning and Development should develop targets for the number of referrals that CPD should make to DEC that are based on program risk. (Recommendation 3)

The Director of the Departmental Enforcement Center and the Assistant Secretary for Public and Indian Housing should develop targets for the number of referrals that PIH should make to DEC that are based on program risk. (Recommendation 4)

The Director of the Departmental Enforcement Center should develop and implement performance measures that assess the outcomes, or desired results, of its enforcement activities. (Recommendation 5)

The Director of the Departmental Enforcement Center should develop and implement performance measures of its timeliness in completing oversight reviews. (Recommendation 6)

The Director of the Departmental Enforcement Center should track the implementation of the recommendations that it makes to program offices as a result of its oversight reviews. (Recommendation 7)

The Director of the Departmental Enforcement Center should develop controls to ensure that analysts consistently and reliably record dates related to referral activity, corrective action taken, and other key information used to determine DEC’s impact. (Recommendation 8)

Agency Comments

We provided a draft of this report to HUD for review and comment. HUD provided written comments that are reprinted in appendix III. HUD disagreed with three of the eight recommendations and agreed with the other five. In its general comments, HUD indicated that it planned to use DEC to address the most egregious violators of HUD’s programs. HUD also anticipated assessing the current agreements between DEC and HUD program offices and, where appropriate, revising those agreements to incorporate current agency goals and priorities, among other things. HUD further noted that DEC’s work would continue to be a part of HUD’s agency-wide risk and fraud management mitigation activities.

HUD disagreed with the third and fourth recommendations that DEC should work with CPD and PIH to develop targets for the number of referrals that the program offices should make to DEC that are based on program risk. In its written comments, HUD said that developing “targets” for the number of referrals made to DEC could potentially be inconsistent with the methodology of basing referrals on program risk and that a single measure of risk-based referrals would be a more effective strategy. As discussed in the report, the current target numbers of referrals for the program offices to make to DEC appear to have been selected somewhat arbitrarily and the officials could not explain the basis for selecting these targets. By identifying a target number of referrals based on the anticipated need for DEC reviews, the program offices can more efficiently plan the use of their resources. Setting the targets will also allow DEC and the program offices to better assess whether they are achieving their goals and objectives, and may encourage program offices to refer entities to DEC.

HUD also disagreed with our sixth recommendation that DEC should develop and implement performance measures that measure its timeliness in completing reviews, noting that DEC has tracked the timeliness of its oversight work since 2014. However, as we discuss in the report, DEC has not included performance measures related to the timeliness of its reviews, which is separate from tracking the information. We revised the language in the final report to note that DEC tracks this information, but has not created a related performance measure.

HUD agreed with our remaining five recommendations and provided information about planned steps to implement them. HUD noted in its response to our first and second recommendations that CPD and PIH would establish parameters for when a referral will be made to DEC. With respect to our fifth recommendation, HUD stated that DEC would work with relevant offices in fiscal year 2019 to develop performance measures that assess outcomes of enforcement activities and would consult with federal enforcement agencies to understand how they measure outcomes. In response to our seventh recommendation, HUD stated that DEC would make improvements to its information system to track the implementation of the oversight review recommendations. Finally, HUD noted that it anticipates incorporating quality control components into DEC’s data collection efforts to ensure that dates, corrective actions taken, and other key information are captured consistently and reliably to address our eighth recommendation.

We are sending copies of this report to the appropriate congressional committees and the Secretary of Housing and Urban Development. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-8678 or GarciaDiazD@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in Appendix IV.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to examine (1) the processes that selected Department of Housing and Urban Development (HUD) program offices have in place to make referrals to the Departmental Enforcement Center (DEC), (2) how DEC assesses its performance, and (3) challenges that may affect the ability of DEC to achieve its mission.

We focused our review on DEC and three HUD program offices: Community Planning and Development (CPD), Multifamily Housing (MFH), and Public and Indian Housing (PIH). Collectively, these three program offices accounted for 73 percent of the total referrals DEC received from fiscal years 2014 through 2017 (6,724 of the 9,258 total referrals). To address the first objective, we reviewed DEC’s formal agreements with CPD, MFH, and PIH to determine the roles and responsibilities of the parties, any criteria for making referrals, and any goals on number of reviews. In addition, we reviewed guidance developed by program offices for monitoring multifamily properties, public housing agencies, and grantees to determine what, if any, criteria existed for making referrals to DEC. We also observed demonstrations of the system DEC uses to manage referrals and the risk assessment tool PIH uses in its reviews of public housing agencies. We compared the guidance and the processes for determining the role DEC should play against federal internal control standards.

We analyzed data from DEC’s system for managing referrals from program offices (extracted as of March 2018) and a spreadsheet DEC maintains to track referrals from CPD and PIH (as of March 2018). We used the data extract to compute the number and type of referrals DEC received from the program offices from fiscal years 2014 through 2017. We interviewed DEC and program office staff about the number of referrals that program offices made during this time period. To assess the reliability of the data, we performed various tests—including searching for missing data and dates, and checking for completeness of the data. We concluded that the data from DEC were sufficiently reliable for purposes of describing general trends.

We interviewed DEC and program office officials at HUD headquarters to discuss how program offices make referrals to DEC and any guidance or training DEC or program offices provide regarding the referral process. We also conducted interviews with staff in each of HUD’s six PIH networks and in CPD field offices in Atlanta, Georgia; Denver, Colorado; Fort Worth, Texas; and Los Angeles, California. We selected the Fort Worth and Los Angeles CPD field offices because they had made referrals to DEC between fiscal years 2016 and 2017, and selected Atlanta and Denver because they had not.

To address the second objective, we reviewed the current and previous performance measures used by DEC. We compared DEC’s practices against federal internal control standards and against practices GAO has previously identified as being associated with agencies that were successful in measuring their performance. We used the data extract discussed above to compute the average number of days DEC took to complete referrals on multifamily properties and the extent that information was not recorded. We also interviewed DEC and OGC officials regarding the performance information DEC collects and reports.

To address the third objective, we reviewed prior reports from GAO and from the HUD Office of Inspector General that identified and discussed challenges DEC faces in achieving its mission. We also reviewed internal HUD documents related to these challenges, including plans for a new information technology system, historical staff levels, and a proposal DEC officials created to relocate DEC back to the Deputy Secretary’s Office. We also interviewed officials from various HUD headquarters and field offices, HUD’s Office of Inspector General, and DEC about challenges DEC may face in achieving its mission.

We conducted this performance audit from July 2017 to October 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix II: Location of Entities That Were Referred to the Departmental Enforcement Center, Fiscal Years 2014-2017

From fiscal year 2014 through 2017, the Department of Housing and Urban Development’s Departmental Enforcement Center received about 8,000 referrals from the agency’s program offices. Table 3 provides details on the number of referrals by program and state from fiscal years 2014 through 2017.

Appendix III: Comments from Department of Housing and Urban Development

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, GAO staff who made key contributions to this report include Marshall Hamlett (Assistant Director), Daniel Newman (Analyst-in-Charge), William R. Chatlos, Laura Gibbons, John McGrail, Marc Molino, and Tovah Rom.