HUD watchdog sounds alarm on fraud activity

Sequestration staffing cuts make oversight more difficult

More fraudulent and abusive activity is surfacing within government housing programs as the Department of Housing and Urban Development (HUD) finds itself struggling with fewer staff members after sequestration and an inability to implement certain best practices, HUD Inspector General David Montoya said Tuesday.

Montoya testified in front of the House Financial Services Committee, sounding the alarm on the impact HUD's limited staffing capacity has had on the agency's ability to comply with Inspector General recommendations.

"Achieving HUD’s mission while exercising the appropriate level of oversight to prevent or mitigate fraud, waste and abuse continues to be an ambitious challenge for its limited staff," Montoya said.

He added, "This has forced HUD to continue to rely heavily on contractors to carry out many of its programs and to expect that local and state jurisdictions and recipients of HUD funds conduct their own oversight and due diligence. This only serves to magnify the importance of having robust information systems to help HUD meet its oversight responsibilities."

To put it into perspective, HUD currently has nearly 8,300 staff members compared to roughly 9,700 a decade earlier and even higher levels in the 1990s. Many field offices closed in the wake of monetary squeeze. Last year, HUD had a negative estimate in the budget for roughly $700 million. However, the agency reported a nearly $4 billion surplus for 2012 due to loan volumes.

Many congressmen agreed that a contributing factor to HUD’s obstacles in appropriately tracking the distribution of funds is sequestration cuts.

"We can’t overlook the fact that HUD is understaffed and sequestration is having an impact on the agency and its programs," said Congressman Al Green, D-TX.

Sequester cuts could result in 100,000 formally homeless individuals being removed from their housing or emergency shelters, Green suggested. Additionally, cuts could also result in 7,300 fewer lower-income households receiving rent and utility assistance, he added.

Congressman Mike Fitzpatrick, R-Penn., says HUD is facing serious challenges in monitoring disaster program funds generally provided to states, cities and local governments.

The challenge is pressing for HUD because of the limited resources it has to directly perform oversight, the nature of the projects, and the duration of the projects.

However, Montoya pointed out that structural changes have occurred since the Hurricane Katrina disaster program. The most important development that could take place would be the implementation of a timeframe to spend the funds allocated to disaster programs, the inspector general said.

"It requires people to manage money more quickly," he explained, adding that faster distribution means more help early on for impacted communities.

Nonetheless, when dealing with a sufficient amount of money there’s bound to be fraudulent activity. As a result, the OIG and other oversight committees are pressuring HUD to be more proactive in its responsibility of distributing funds.

Another area the OIG continues to monitor is public and assisted housing programs, which provide affordable housing units for 4.5 million households.

Various audits of Public Housing Agencies’ Housing Choice Voucher programs focus on whether HUD is correctly appropriating the funds and following the Inspector General's recommendations.

The challenge seems to be proper monitoring of the Housing Choice Voucher program, which is electronically monitored through self-assessments and other information collected through HUD’s information systems.

"Based on recent audits and HUD’s on-site confirmatory reviews, it is clear the self-assessments are not always accurate and there remains some question as to the reliability of the information contained," Montoya stated.

Overall, improving management of the nation’s public and assisted housing program will continue to be a long-term challenge that will require HUD to put forth solutions in an appropriate timeframe.

"It’s the tip of iceberg," Montoya argued. "The appropriate funds are not going to those who really need it and it’s instead going to fraudulent activity. We’ll continue to oversee HUD and it’s activity in housing programs to better manage this."

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