Public Housing: HUD's Oversight of Housing Agencies Should Focus More on Inappropriate Use of Program Funds

In a June 24, 2011 letter, HUD stated that it agreed with our recommendation to regularly summarize and systematically evaluate the results of HUD's Office of Inspector General and single audits of public housing agencies to allow program managers to identify and understand potential problems. Specifically, HUD implemented a change to its "Monthly Audit Status Report" that includes a trend analysis report. The analysis includes the status of recommendations by types of findings (e.g. findings of deficient policies/procedures or unsubstantiated payments) over a six month period. HUD stated that it believes that providing this trend analysis information is an enhancement to the existing oversight mechanisms. The trend analysis report is distributed to relevant HUD staff.

HUD has made significant changes to the management of the public housing program since GAO issued its 2009 report. Specifically, HUD has implemented key components of "asset management." Under asset management, local housing agencies report physical and financial data on an individual property level. Previously, local housing agencies reported physical and financial information on a consolidated, agency-wide level. HUD's system for overseeing the public housing program also reported performance data on a housing agency-wide level. Starting on March 25, 2011, HUD implemented a new oversight system that focused on the financial, physical, and management performance on a property level. According to HUD, a central part of this new performance measurement structure will be a system of on-site management reviews of each project. In an August 2015 email, HUD stated that its National Risk Assessment measures and assesses risk at PHAs. The system uses a combination of quantitative system data and qualitative survey responses from HUD staff. Each PHA is measured in four broad categories: management, financial, physical, and governance (which includes performance and compliance items). The scores from each of these categories is rolled up into an entity score. PHAs are considered risky if they receive a designation of moderate or higher. These designations are based on central tendencies, defining moderate risk as an overall score that is more than one standard deviation from the mean score, high risk as more than two standard deviations from the mean, and highest risk as more than three standard deviations from the mean. Indicators of potential inappropriate use of funds include trends in PHA's total cash, bank overdrafts, and interfund transfers. Given the significant changes to the program and the steps HUD has taken to improve oversight of potential mismanagement of program funds, we are closing this recommendation as implemented.