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Earlier this month, the Government Accountability Office (GAO), at the request of members of Congress, issued a report titled “Improvements Needed in HUD’s Oversight of the Housing Trust Fund Program.”

The GAO notes that the U.S. faces a widespread shortage of affordable rental housing, and that Congress authorized the Housing Trust Fund (HTF) in 2008 to increase and preserve the supply of housing for people with the lowest incomes. HTF is funded by set-asides from Fannie Mae and Freddie Mac that began in fiscal year 2016. HUD administers HTF and allocates funding to state grantees.

The resulting report examines the number and production rate of HTF units, how selected grantees have used HTF and other funding sources, and the development costs of their projects; and HUD’s HTF oversight and reporting.

Fundamentally, the report strongly suggests that HUD’s Community Planning and Development (CPD) arm needs to improve oversight. And since HTF is often merged with other programs, it also appears that the layering of subsidies is causing confusion and non-compliance, which HUD’s risk-monitoring protocols are not always catching.

What the GAO Recommends for Housing Trust Fund Oversight

GAO made five recommendations, including that HUD centrally monitor HTF grantees’ compliance with project completion timelines and data requirements, communicate the cost certification requirement to grantees, schedule and conduct a fraud risk assessment, and disclose limitations in external reports. HUD generally agreed with the recommendations and will pursue corrective measures.

Issues with total-units data

One the areas of concern in the OIG’s audit was inaccurate reporting on the total number of units at properties assisted by the HTF Program. This was particularly acute with properties with multiple programs, where the data often only included the HTF units. HUD CPD officials said that future monitoring by its field offices may identify inaccuracies in total-units data and lead to corrections. However, HTF grantees may not be subject to in-depth field monitoring every year. As a result, some inaccuracies could go undetected for long periods and reduce the usefulness of Integrated Disbursement and Information System data for program evaluation and reporting.

  • Underreporting of total units could potentially be avoided if grantees were more aware of the need to update the pre-populated data field at project completion.
  • Providing grantees additional instruction on data entry requirements and centrally reviewing the data for likely errors (e.g., projects with the same number of total units and HTF units) could result in more accurate information for future program monitoring and evaluation.

Issues with completion times

Since HUD is not reviewing project completion times, it is not aware of grantee noncompliance with or misunderstanding of the HTF requirement. Although future monitoring by CPD field offices may identify such cases, CPD may not monitor every HTF grantee or program each year under its risk-based monitoring approach. Establishing a centralized process to regularly review open activities (similar to HUD’s review of funding deadlines) would provide HUD greater assurance that grantees are entering HTF project completion information in a timely manner and would better position HUD to address grantees’ potential confusion or any issues preventing project completions.

Issues regarding compliance with a cost certification requirement

When GAO brought the results of the review to their attention in April 2023, CPD officials said the extent of noncompliance we found was very concerning and required attention. In response, HUD posted a frequently asked question section on its HTF website to explain to HTF grantees that the cost certification requirement should be included in the written agreement and evidence of the certification should be in the project file. HUD officials also said that future in-depth monitoring will check for compliance with both of these requirements and that failure to obtain a certification is a program violation that requires correction.

Fraud risks on Housing Trust Fund Programs

Like other housing development and federal grant programs, HTF faces fraud risks. GAO’s Fraud Risk Framework describes leading practices for fraud risk management, including fraud risk assessments. The Fraud Risk Framework emphasizes regularly conducting fraud risk assessments that are tailored to the program and that identify inherent fraud risks affecting the program, assess the likelihood and impact of those fraud risks, determine fraud risk tolerance, examine the suitability of existing fraud controls and prioritize residual fraud risks, and document the results.

In addition, HUD’s fraud risk management policy, which became effective March 31, 2022, identifies the responsibilities of senior program management to prevent, detect, and respond to fraud.

What happens next?

Based on the responses to the GAO, HUD will be increasing oversight on the Housing Trust Fund program, both at the reporting and property level.

Scott Precourt is the Managing Partner and Founder of US Housing Consultants.