COVID-19: Additional Risk Assessment Actions Could Improve HUD Oversight of CARES Act Funds
Fast Facts
Millions of Americans had trouble paying their rent or mortgages after the COVID-19 pandemic disrupted the U.S. economy. The CARES Act appropriated $12.4 billion to the Department of Housing and Urban Development to help address emergent needs. For example, funding increased more than tenfold for homelessness assistance under an emergency grant program.
HUD expedited program risk assessments due to the urgency of its pandemic response. HUD found that CARES Act funds didn't affect program risks, but we found that assessments didn't include some leading practices for fraud risk assessment.
We recommended ways to improve HUD's risk assessments.
Highlights
What GAO Found
The Department of Housing and Urban Development's (HUD) oversight of $12.4 billion in CARES Act funding included monitoring spending and addressing reporting requirements, but further action is needed to more fully assess program and fraud risks. As of July 2021, HUD obligated 94 percent of its CARES Act funds, and 34 percent had been expended (see figure). The CARES Act significantly increased funding for some HUD programs—for example the Emergency Solutions Grant (ESG) program for homelessness assistance received more than 10 times its fiscal year 2020 funding. GAO previously reported that programs should update risk assessments when funding or the operating environment changes. To respond to COVID-19, HUD expedited its risk assessment process, and concluded the CARES Act funds did not substantially affect programs' risks or existing controls. While HUD's assessment identified risk factors and short-term steps to address them, it did not include some leading fraud risk management practices GAO previously identified. For example, HUD did not identify programs' new fraud risks or evaluate fraud risk tolerance. Additional risk assessment actions could help HUD better identify and address potential program and fraud risks of its CARES Act programs.
HUD CARES Act Funds' Obligations and Expenditures, as of July 31, 2021
As of July 2021, HUD's Community Development Block Grant (CDBG) and ESG programs expended about 15 percent of their CARES Act funds, mostly for emergency payments that can include rental assistance. HUD officials said spending is slow because some grantees have limited capacity to administer the larger grants, other federal funding is available, and CDBG grantees had until mid-August 2021 to apply for CARES Act funds. HUD is providing grantees with training and support to help them administer and use the CARES Act funds and developing specific monitoring guidance.
Almost all of the CARES Act's $1.25 billion for the Housing Choice Voucher program has been expended. To help public housing agencies navigate COVID-19, HUD issued numerous program waivers, such as letting owners self-certify property conditions in lieu of inspections. To monitor compliance, HUD is developing a portal for public housing agencies to report their use of the funds, which officials anticipate will be operational in December 2021. HUD also awarded a contract to support the program's CARES Act monitoring, including collecting information on waiver use.
Why GAO Did This Study
The COVID-19 pandemic and resulting economic downturn created housing instability for many families and individuals. Congress appropriated about $12.4 billion to HUD in CARES Act funds to prevent, prepare for, and respond to housing needs related to COVID-19. GAO has previously reported on HUD's persistent management challenges and noted the potential for these challenges to affect the implementation and oversight of HUD's COVID-19 response.
The CARES Act includes a provision for GAO to monitor the federal government's efforts to respond to the COVID-19 pandemic. This report examines HUD's actions to oversee its CARES Act funding and manage risks, and HUD's implementation and monitoring of the CARES Act funds of selected community development, homelessness, and rental assistance programs.
GAO reviewed HUD documentation and analyzed HUD spending data, focusing on the four programs that received the most CARES Act funding. GAO also interviewed HUD officials and associations representing HUD funding recipients.
Recommendations
GAO makes two recommendations to HUD to take additional steps to assess, document, and mitigate program and fraud risks for its CARES Act-funded programs. HUD agreed with our recommendation to take additional actions on fraud risk. HUD disagreed with our recommendation to take additional actions on program risks. GAO continues to believe the recommendation is valid, as discussed in this report.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Housing and Urban Development | The Office of the Chief Financial Officer and HCCRT should work with relevant program offices for each of the six CARES Act programs that meet HUD's front-end risk assessment criteria to reassess the need to either (1) conduct a full front-end risk assessment; or (2) take and document additional risk assessment steps to align with key aspects of the front-end risk assessment process, such as ranking risks and developing plans to mitigate identified risks. (Recommendation 1) |
Since our report, HUD officials said they have consistently applied its front-end risk assessment (FERA) policy and completed FERAs when their criteria mandates, such as for programs that received substantial funding increases for the American Rescue Plan Act of 2021. Further, in April 2024, HUD officials said that any remaining CARES Act funds would have been considered in any updated front-end risk assessments completed since the CARES Act. HUD subsequently provided us with copies of recently completed FERAs for three of the programs we determined had met the FERA criteria from the CARES Act funds: Project-Based Rental Assistance, Housing Choice Vouchers, and Office of Native American Programs for CARES Act funding. In addition, HUD completed annual agency-wide risk profiles in 2022 and 2023 which HUD officials stated include office-level input (inclusive of CARES Act funds) that align with aspects of front-end risk assessments and emphasize fraud risk.
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| Department of Housing and Urban Development | The Office of the Chief Financial Officer and HCCRT should work with relevant program offices to identify inherent or new fraud risks, assess the program's fraud risk tolerance, document the program's fraud risk profile, and take appropriate action to mitigate identified potential risks for each of the six CARES Act-funded programs that meet the front-end risk assessment criteria. (Recommendation 2) |
In March 2022, HUD updated its Fraud Risk Management Policy and, in September 2022, updated its Front-End Risk Assessment (FERA) Policy to formalize a new factor for fraud risk considerations. HUD officials stated that all programs subsequently undergoing a FERA assessment have been formally evaluated for this factor. HUD officials also noted that, since the CARES Act, they have completed FERAs for all programs that met the criteria, including those that received funding from the American Rescue Plan Act of 2021. In April 2024, HUD officials provided us with copies of FERAs for three of the six programs discussed in our recommendation (Housing Choice Voucher, Project-Based Rental Assistance, and Native American Programs) that included documentation of fraud risk assessments. (The other three programs no longer met the threshold for conducting a FERA.)
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