Financial accounting in two housing and urban development programs is so tight, the Inspector General issued a warning. HUD cannot detect improper payments in these programs. Couldn’t do it for years. I won’t be able to do this for many more years. for information, Federal Drive with Tom Temin Spoke to Deputy IG Stephen Baig.
tom temin So what did you find in which programs that caused you to issue a management alert? It is more than just issuing an IG report or audit.
Stephen Begg This is correct. A management alert is essentially a short report that our Inspector General uses to immediately raise issues of significant deficiencies or risks to the HUD Secretary or Deputy Secretary. And the point raised here is simply that HUD needs to do more to protect taxpayers’ money from being misspent in its two largest programs, the two programs that issue our rental assistance program and there The law that exists requires federal agencies, as you know, to spend time investigating their programs that are susceptible to improper payments and then taking action to reduce that risk so that taxpayers’ money is misspent. Don’t be. Those improper payments may come in the form of over- or underpayments made to the wrong people or businesses. Duplicate payments and, in the worst cases, payments made in fraudulent schemes go to people who are not entitled to them.
tom temin Now these are rental assistance programs. And what was the second one?
Stephen Begg These are two rental assistance programs. So, these are the largest programs that HUD uses to help millions of families across the country make monthly rent payments. They come in two variations. One where HUD works with housing authorities or contractors to provide vouchers to households where they have the option to work with any landlord of their choice to find housing. and another where HUD works directly with landlords to provide assistance to entire buildings or projects.
tom temin So these are payments to both individuals, or housing operators or landlords in some cases. In other cases.
Stephen Begg Payment ultimately goes through the participants. So, housing authorities and contractors go directly to landlords, which is part of the challenge of making sure they are fair. They have many different stages. And so, tracking the payments and verifying that they are accurate all the way down to the ground level. This is really a challenge.
tom temin Correct? These are not exactly like programs like the Department of Labor where large amounts of money are sent to the states. And then states administer the programs. These are between HUD and local housing authorities and landlords.
Stephen Begg Yes. So, there are many levels. Payments are made from HUD to housing authorities or contract administrators. And then those institutions will make payments to the landlords. Therefore, testing the accuracy and appropriateness of those payments at both levels has been a challenge for HUD for many years.
tom temin Yes. I think finding out who owns the house with the money received from the treasury can be quite complicated. Tell us the extent of what you found in terms of dollars and potential improper payments.
Stephen Begg Sure. So, in terms of size in 2016, the money spent through these two payments totaled more than $30 billion. This amount is expected to increase to more than $45 billion in 2023. And you know, our office and the Government Accountability Office have considered these programs vulnerable to improper payments for many years. In 2000, the estimated number of improper payments into programs from HUD’s account was $3.2 billion. GAO labeled the program as high risk in 2001, noting that the program had significant opportunities for HUD to reduce overpayments. And again in 2016. The last time HUD was able to estimate how much improper payments went into these programs, they estimated that $1.7 billion were potentially misspent or could not be verified. We have been emphasizing for several years in our annual report on HUD’s Top Management Challenges that there really is a need to address improper payments into these two giant rental assistance programs, which account for nearly two-thirds of all HUD spending. .
tom temin We’re talking to Stephen Begg. He is the Deputy Inspector General of Housing and Urban Development. And your report says that, as you just pointed out, they’re not actually able to know their unreasonable payment levels, which is a way of not being held accountable for the program at all in some sense since 2016 , but they don’t think they’ll be able to do so until 2027. What is that system?
Stephen Begg That’s why our office issued this management alert. You know, we complete an annual audit of HUD’s compliance with the law that requires them to examine and estimate improper payments in their programs. And this year, we learned for the first time that HUD was not confident that they would complete those testing practices by 2027. We did not feel that we should wait until our annual report came out to alert HUD leadership about that risk. And so, in our management letter, we have identified two areas where we believe HUD leadership needs to intervene and the first is the lack of planning and coordination across HUD program offices. There are many offices where there are inequalities. The two rental assistance programs we talked about are separate programs that administer them, but HUD finance offices and its IT offices also have a role in gathering information that is useful for us to test and then potentially integrate into the programs. Necessary to estimate improper payments. Which is really the first step in the process, because once you’ve estimated what risks your program has for improper payments, HUD needs to develop an action plan to mitigate and address them. Is. So here, without completing the process of gathering and examining the information, HUD cannot take action to address this.
tom temin Correct. So, in some sense they have to get a lot of information, a lot of data from all levels of the line to somehow correlate it if that’s even possible. And then ultimately HUD’s responsibility is to know whether the payments were appropriate. So, there’s a kind of combination of trust and data and verification here. It seems like, frankly, this is a hairball to top from a HUD standpoint.
Stephen Begg Because it involves many program offices. You know, we felt it would be appropriate to bring this together with HUD leadership to intervene. But apart from the moving parts, we feel that HUD is unable to complete the first step of estimation, mainly because their approach is flawed. They have not developed a solid methodology for gathering all the information at the various levels you mention, allowing them to complete the trial within the time frame required by law.
tom temin Correct. Could it be true that the process they have developed over decades to provide housing assistance may be so complicated that no one can trace the money, and they should probably rethink the entire program from the ground up? Where does the money go? It leaves the HUD or, you know, leaves the treasury.
Stephen Begg You know, our position has been that HUD has the ability to work in its offices in a way to better protect the programs so that rental assistance funds that come from taxpayers are used to support those Americans. This can be maximized for those who need it. Our alert recommends the HUD Deputy Secretary bring the offices together to really reset the plan to get to that point.
tom temin But you think it’s possible to gain control over the system the way it’s designed now if they try for it.
Stephen Begg We do Absolutely.
tom temin And what kind of response did you get from HUD leadership when you issued this warning?
Stephen Begg The Deputy Secretary’s response agreed with our recommendation, which we were pleased with, and agreed with the need for a detailed plan to accelerate this exercise. The response indicated that the Deputy Secretary will provide that plan within 30 days, and she is working with HUD program office leadership to complete the work. We are encouraged by this, and we look forward to working with HUD and supporting that effort.
tom temin Correct. So, in other words, this program fell off the high risk list somewhere. So, we know it’s possible that it happened.
Stephen Begg However, our concern is that over the last seven years, and if HUD estimates, three more years out of a possible ten years, there will be a gap in monitoring it in terms of improper payments and then taking action to reduce them. . So, in our estimation, there is a fairly large gap in what we know about the probability of high risk.
tom temin Yes. And what happened in 17, 18, 19 we will probably never know.
Stephen Begg This is correct. This is correct.
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