Disaster Recovery: HUD Should Develop Data Collection Guidance to Support Analysis of Block Grant Fraud Risks
Fast Facts
Congress gave almost $40 billion in block grants to help homeowners with, among other things, repairing or rebuilding homes damaged by natural disasters from 2017 to 2019. The Department of Housing and Urban Development administers the grants.
But these grants are vulnerable to fraud. For example, some households approved for funds didn't report assistance from FEMA that could impact their award.
Also, HUD monitors individual grantees. But it doesn't assess the risks that some contractors—whose work on damaged homes is paid for using grant funds—may pose across these grants.
Our recommendations would help HUD better manage risks to block grants.
Hurricane Irma damaged homes and flooded roadways in Fort Lauderdale, Florida
Highlights
What GAO Found
GAO's analysis of Community Development Block Grant Disaster Recovery (disaster block grant) applicant data identified vulnerabilities to fraud. Out of 8,260 households reviewed, GAO identified
- Potential duplication of benefits. 500 households were approved for Federal Emergency Management Agency (FEMA) assistance that is potentially duplicative of disaster block grant assistance. The FEMA-only assistance for these households totaled over $1 million. The figure shows other potentially duplicative assistance GAO identified.
- Potentially ineligible households. 197 households with estimated income over limits were approved. Estimated income for two of these households exceeded $330,000—far above the income limits.
Households Potentially Receiving Duplicative Benefits from Multiple Programs
Note: The categories in this figure are not mutually exclusive.
GAO also found that the U.S. Department of Housing and Urban Development (HUD) does not require grantees and subrecipients to collect applicant data in a complete and consistent manner to support applicant eligibility determinations and fraud risk management.
GAO's analysis of the disaster block grant contracting network identified key players who are important to HUD's risk-based monitoring because of the greater potential impact they have on the contracting environment. Specifically, GAO identified 16 contractors and 30 subcontractors that are key players within a network of 1,324 entities. While key players' ability to influence or diffuse information can lead to positive outcomes, fraud risk is heightened when information on control vulnerabilities or wrongdoing is more easily shared across the network.
GAO's analysis of the 16 contractors that are key players illustrates how HUD and grantees could better understand the disaster block grant risk environment by collecting contractor and subcontractor data, such as unique entity identifiers. Currently, HUD's approach to identifying and managing risks focuses on monitoring individual grantees and may not fully assess risks across the contracting environment. HUD does not provide specific guidance to grantees on standards or requirements for collecting data. Additional guidance from HUD on what data elements to collect could support grantees' and subrecipients' ability to identify contractors that are debarred, suspended, or excluded from receiving federal contracts.
Why GAO Did This Study
In response to the damage caused by natural disasters in 2017 through 2019, Congress appropriated approximately $39 billion in disaster block grant funds to HUD. The decentralized environment in which HUD's disaster block grants operate creates vulnerabilities to different types of fraud as funds are distributed to grantees, subrecipients, contractors, and subcontractors.
As part of wide-ranging disaster-related work we are conducting, this report focuses on the potential for fraud in CDBG-DR homeowner assistance programs. This report examines, among other objectives, the extent to which (1) applicant data indicate vulnerabilities to fraud and data quality presents challenges to identifying such vulnerabilities and (2) network and other analyses can help HUD manage risks associated with the contracting environment.
GAO conducted data matching and analysis to identify potentially ineligible households for our selected grantees and subrecipients. GAO also conducted network analysis, among other analyses, to help HUD better understand and monitor its decentralized grant environment.
Recommendations
GAO is making seven recommendations to HUD, including that it develop guidance to collect applicant data to support eligibility decisions and contractor data to facilitate identifying risks. HUD agreed with some, but not all of the recommendations. GAO continues to believe all the recommendations are warranted and should be implemented.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Housing and Urban Development | The Assistant Secretary for Community Planning and Development should develop guidance for CDBG-DR grantees and subrecipients on collecting complete and consistent data to better support applicant eligibility determinations and fraud risk management. (Recommendation 1) |
At the time of the report's issuance, HUD agreed with this recommendation. HUD told GAO that it intended to develop guidance for grantee applicant data collection and provide technical assistance to grantees and subrecipients on best practices for data collection, data format, and personally identifiable information protections. In February 2024, HUD stated that it is working with its Privacy Office to develop training or training materials on data collection, data consistency for data analysis purposes, and protection of personally identifiable information and hoped to complete these actions by September 30, 2024. GAO will continue to monitor HUD's efforts to develop guidance for grantee applicant data collection and provide technical assistance.
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| Department of Housing and Urban Development | The Assistant Secretary for Community Planning and Development should update the Monitoring Handbook for Disaster Recovery Community Development Block Grant monitoring activities to provide additional guidance in the selection of contracts for review. This should include factors such as contractors that present increased risk to the CDBG-DR environment, including those where allegations of fraud, waste, or abuse have been made. (Recommendation 2) |
At the time the report's issuance, HUD neither agreed nor disagreed with this recommendation. HUD maintained that fraud data analytics are led at the department level. HUD also stated it planned to initiate a fraud risk management process over the next 12 months that involves oversight from the department's Chief Risk Officer. In February 2024, HUD told GAO that it is communicating with the HUD Office of Inspector General to collaborate on a fraud risk training session, tentatively scheduled for May 2024. Additionally, HUD stated it plans to provide one-on-one fraud risk technical assistance and intends to do so by the end of FY2024 or early FY2025. GAO will continue to monitor HUD's efforts to provide additional monitoring guidance.
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| Department of Housing and Urban Development | The Assistant Secretary for Community Planning and Development should identify ways to collect and combine contractor and subcontractor data across grantees and subrecipients to facilitate risk analyses, such as by expanding the Disaster Recovery Data Portal, Disaster Recovery Grant Reporting System, or other appropriate systems. (Recommendation 3) |
At the time of the report's issuance, HUD neither agreed nor disagreed with this recommendation. HUD stated it was taking steps to improve its fraud risk assessment and annual grantee risk analysis. In February 2024, HUD told GAO it plans to develop and implement fraud analytics. HUD did not provide a timeframe for completion but committed to providing regular status updates. GAO will continue to monitor HUD's efforts to identify ways to collect and combine data across grantees and subrecipients to facilitate risk analyses.
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| Department of Housing and Urban Development | The Assistant Secretary for Community Planning and Development should develop and implement guidance for CDBG-DR grantees and subrecipients to collect contractor and subcontractor data to facilitate identification of contractor and cross-cutting fraud risks through approaches such as network analysis. (Recommendation 4) |
At the time of the report's issuance, HUD disagreed with this recommendation. HUD stated there was no program requirement for a grantee to undertake specific actions beyond attendance at mandatory HUD Office of Inspector General training. Additionally, HUD did not consider it practical for grantees to simultaneously administer network analysis and recovery programs. In February 2024, HUD told GAO that it plans to develop and implement fraud analytics. However, it is unclear how HUD's use of fraud analytics will develop and implement guidance for grantees and subrecipients on data collection to identify fraud risks. HUD did not provide a timeframe for completing its fraud analytics, but committed to providing regular status updates. GAO will continue to monitor HUD's efforts to develop and implement guidance for grantees and subrecipients to collect contractor and subcontractor data to identify fraud risks.
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| Department of Housing and Urban Development | The Assistant Secretary for Community Planning and Development should develop guidance on data elements to be collected by grantees and subrecipients, to determine if a contractor has been suspended, debarred, or excluded from working on government contracts. (Recommendation 5) |
At the time of the report's issuance, HUD agreed with this recommendation. HUD stated it will develop guidance on data elements. In February 2024, HUD told GAO that it will provide training for grantees on how to use SAM.gov, clarify the data elements associated with debarment checks, and increase awareness of state and local debarment lists at HUD's CDBG-DR Problem Solving Clinic in May 2024. GAO will continue to monitor HUD's efforts to develop data collection guidance to determine a contractor's suspension or debarment status.
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| Department of Housing and Urban Development | The Assistant Secretary for Community Planning and Development should ensure that grantees and subrecipients have attended fraud-related training as required. This could include requesting and reviewing attendance documentation from the OIG and grantees. (Recommendation 6) |
At the time of the report's issuance, HUD disagreed with this recommendation. HUD stated it was planning on coordinating with the HUD Office of Inspector General to request attendance documentation and additional training for grantees but disagreed with monitoring CDBG-DR grantees for this purpose. In February 2024, HUD told GAO that it is communicating with the HUD Office of Inspector General to develop a process for validating fraud training attendance documentation and expects to implement a solution by the third quarter of FY2024. GAO will continue to monitor HUD's efforts to ensure that grantees and subrecipients have attended fraud-related training.
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| Department of Housing and Urban Development | The Assistant Secretary for Community Planning and Development, in coordination with the HUD Office of Inspector General, should ensure that grantees and subrecipients are made aware of available fraud-related training and make training available on demand to grantees and subrecipients. (Recommendation 7) |
At the time of the report's issuance, HUD agreed with this recommendation. In February 2024, HUD told GAO that the HUD Office of Inspector General conducted training on "Prevention of Fraud, Waste, and Abuse." HUD posted the training presentation materials, recording, and transcript to its HUD Exchange website, which is available to grantees and subrecipients on-demand. HUD plans to share fraud-related training resources with its grantees in the future. While HUD has taken an initial step by providing the training to grantees and subrecipients, GAO will continue to monitor HUD's efforts to ensure that grantees and subrecipients are aware of fraud-related training and make the training available on-demand.
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