HUD also provides funds to modernize  and develop public housing units through the Capital Fund. HUD’s Primary Oversight Processes Could Be Better Focused to Detect Housing Agencies at Risk of Inappropriate Uses or Mismanagement of Public Housing Funds

		Persistent Problems with Audit Quality and Gaps in What Audits Cover Can Limit HUD’s Ability to Detect Misuse or Mismanagement of Public Housing Funds

Single audits, HUD’s primary tool for overseeing the use of public housing  funds, are intended to, among other things, promote sound financial  management by serving as a key accountability mechanism in the  oversight and monitoring of recipients’ use of federal funds. Understanding  commonly occurring audit findings could be useful for identifying housing  agencies that are at greater risk of inappropriate use or mismanagement of  public housing funds and assessing vulnerabilities in HUD’s oversight  processes. Specifically, HUD uses its ARCATS to track the resolution  of the HUD Inspector General’s audit findings. PHAS and HUD’s Internal Analyses of Financial Data Could Be Better Focused to Identify Housing Agencies at Risk for Misuse and Mismanagement of Public Housing Funds

PHAS and HUD’s internal analyses of data from housing agencies’ financial  data could be better focused to identify housing agencies that are at  greater risk of potential inappropriate uses or mismanagement of public  housing funds. HUD has stated that it would primarily rely on single audits to identify  such problems. However, we analyzed housing agencies’ financial data and found that  many of these agencies showed signs that they may be at greater risk of  inappropriately using or mismanaging public housing funds, even though  the agencies in question received passing PHAS scores. 2.) 3). Only 1 had a PHAS score indicating  that the agency was troubled. As shown in figure 4, when we  looked at the 200 housing agencies reporting an average bank overdraft of  $25,000 or more from 2002 through 2006, we found that nearly 75 percent  of these housing agencies received passing PHAS and FASS scores. HUD currently uses PHAS to monitor housing agencies, but this system  has not always identified housing agencies at risk of problems such as  cash management issues and was not intended to identify inappropriate  use of public housing funds. Although HUD has developed automated  checks of housing agencies’ financial information to help ensure its  completeness and accuracy for PHAS, the department has not used these  checks as a mechanism to identify housing agencies at greater risk for  potential misuse and mismanagement of public housing funds. Recommendations for Executive Action

In order to strengthen its oversight of housing agencies administering the  public housing program and better leverage information that it already  collects, we recommend that the Secretary of the Department of Housing  and Urban Development:    Regularly summarize and systematically evaluate the results of OIG and  single audits of public housing agencies to allow program managers to  identify and understand problems of potential inappropriate use and  mismanagement of public housing funds, identify emerging issues, and  evaluate overall monitoring and oversight processes.
Why GAO Did This Study

The Department of Housing and Urban Development (HUD) provided over $6.7 billion in fiscal year 2008 to housing agencies to operate, modernize, and develop about 1.2 million public housing units. It is important that HUD exercise sufficient oversight of housing agencies to help ensure that public housing funds are being used as intended and properly managed. In this report, GAO examines HUD's oversight processes for detecting housing agencies at risk of inappropriate use and mismanagement of public housing funds. GAO analyzed HUD financial data on about 3,300 housing agencies, compared HUD's oversight policies with program and agency objectives, and interviewed agency officials.

What GAO Found

Key HUD oversight processes could be more focused on identifying potential inappropriate use or mismanagement of public housing funds. HUD primarily relies on single audits to identify such problems, although HUD, its Office of Inspector General (OIG), and the President's Council on Integrity and Efficiency (now known as the Council of the Inspectors General on Integrity and Efficiency) have identified weaknesses with some audits. Further, even when these audits do identify issues, HUD does not systematically summarize audit findings to identify and understand emerging and persistent issues to better monitor housing agencies for inappropriate use and mismanagement of public housing funds. Understanding these problems could be useful for identifying housing agencies that are at greater risk of inappropriately using or mismanaging public housing funds. HUD uses the Public Housing Assessment System (PHAS) to monitor and rate the overall condition and financial health of public housing agencies. However, PHAS is not intended to identify inappropriate uses of public housing funds and is limited in its ability to detect potential mismanagement. HUD also analyzes the financial data of public housing agencies, but its review focuses on the accuracy and completeness of the information used to calculate PHAS scores. GAO analyzed financial data from the housing agencies and found many housing agencies showed indicators that they were at risk of potential inappropriate use and mismanagement of public housing funds--while most received passing PHAS scores. For example, GAO found that from 2002 to 2006, 200 housing agencies had written checks for more than the funds available in their bank accounts (bank overdrafts) on average of $25,000 or more. However, 75 percent of these agencies received passing PHAS scores. Such overdrafts raise questions about these agencies' cash management. But HUD does not use these and similar measures to identify housing agencies at greater risk of inappropriately using or mismanaging public housing funds. Without fully leveraging the audit and financial information it collects, the department limits its ability to identify housing agencies that are at greater risk of inappropriately using or mismanaging program funds.