HUD's FY 99 Budget
Congressional Justifications
Office of Inspector General
Salaries and Expenses
The following material discusses the functions, workloads, and proposed staffing levels for the Office of Inspector General for 1999.
APPROPRIATION HIGHLIGHTS
The following table summarizes the funding sources and personnel included in this request:
NOTE:Full-time permanent (FTP) appointments are estimates based on a calculation of the permanent positions made affordable by full-time equivalent (FTE) employment ceilings. They are not control numbers and may vary depending on conditions.
SUMMARY OF BUDGET REQUEST
The salient features of this 1999 budget request are as follows:
- Continuation of the Urban Fraud Initiative, which was initially provided for in H.R. 2158
. In fiscal year 1998, H.R. 2158 would fund teams of auditors, agents, and other experts to examine all HUD funding and activities in two or three locations. The purpose is to identify and eliminate pervasive fraud schemes that thrive despite discrete audits and investigations, schemes that lead to situations where tangible results from massive HUD funding are slim to none.
- Increased FHA funding of $6,060 thousand in order to make the total level of FHA funding consistent with the level of OIG audit and investigative resources devoted to FHA programs
. This increase in FHA funding permits a corresponding decrease in requested Budget Authority.
- Continuation of the 1998 level of Drug Elimination Grant funding for the OIG's Operation Safe Home violent crime activities
. This entails $10,000 thousand for special agent salary and related costs; and $10,000 thousand for law enforcement task force operational costs. Our 1999 budget request also seeks an allocation of 300 section 8 certificates to enable continuation of the witness relocation program in support of Operation Safe Home anti-violent crime efforts.
Overall, the funding request for fiscal year 1999 is $67,371 thousand, the same as our 1998 appropriation. Although, we currently estimate that we will maintain the same FTE level as in 1998 and possibly increase it by 18 positions, the effect of holding our funding request at the fiscal year 1998 level, without any inflation factor, will result in absorption of costs equal to 10 FTE. Depending on efficiencies achieved in 1998 and 1999, and precise costs of the start up of the Urban Fraud Initiative, we hope to squeeze out funding for 18 or 28 additional FTE. However, at this point, we cannot count on these efficiencies and thus believe there might be 28 unfunded FTE.
The HUD donwsizing request might raise questions about why OIG's budget should remain constant. We are pleased to answer those questions.
The OIG Budget Request in Relation to HUD's Downsizing
For a variety of reasons, the OIG's workload can be expected to increase, not diminish, over the next years.
- Most importantly, the downsizing that HUD is embarked on relates solely to the number of HUD employees. HUD's discretionary Budget, on the other hand, continues to rise, as do the number of programs and activities that HUD administers. Three years ago, the OIG counted 240 separate HUD programs and activities. Currently, the OIG's count stands at 340.
- To a significant extent, HUD's Management Reform Plan compensates for decreased HUD staffing by increasing contracting and shifting responsibilities to private sector entities. IG work has repeatedly shown that, as currently administered by HUD, such mechanisms increase the Department's vulnerability to fraud, waste, and abuse. The OIG's current audit of HUD contracting offers graphic illustrations of this vulnerability.
- The Management Reform Plan and pending legislation envision massive changes in HUD's organization, systems, and programs. While not forsaking traditional audit work, the OIG needs to be a vigilant advisor and objective reporter--on a real time basis--throughout the entire change process.
- The Management Reform Plan and pending legislation are further designed to empower communities by devolving responsibilities to States and localities. This will require a continued evolution of the OIG audit function from traditional compliance work to the more difficult task of evaluating outcomes. And, given the decreased availability of HUD staff to perform monitoring, the OIG needs to be prepared to conduct these evaluations on more than a limited test basis. Finally, the OIG will have to take a more aggressive role in ensuring quality work from independent public accountants who are conducting financial audits of HUD programs. Neither HUD staff cuts nor devolution diminish the need for accountability.
- In establishing a HUD Assessment Center and a HUD Enforcement Authority, the Secretary has recognized that the HUD program cylinders have traditionally been reluctant to flag wrongdoing by program participants or to recommend actions against such wrongdoers. If the Center and the Authority work as intended, we can expect a dramatic increase in the number of problems being identified; and we can further expect that early consultation with the OIG about these problems will lead to a dramatic increase in the OIG�s criminal and civil fraud investigative caseload.
As we look ahead to these increases in the OIG's workload, it's important to keep in mind that the OIG's role has been far from static during the past few years. On the investigative side, our involvement in Operation Safe Home violent crime activities has essentially doubled our criminal investigative workload. On the audit side, totally new endeavors--such as the audit of HUD's consolidated financial statements, Operation Safe Home equity skimming, and Operation Safe Home PHA Fraud--are consuming about 20 percent of our resources.
In establishing the HUD Enforcement Center, headed by an FBI agent and comprised in part of contract auditors and investigators, the Secretary has recognized the Department's high vulnerability to fraud, waste, and abuse. Against this backdrop, investing in the OIG--an organization that is already highly skilled and committed to the fight against fraud, waste, and abuse in HUD--makes a great deal of sense.
FUNDING
The following table summarizes this request by object class.
1.CHANGES FROM 1997 ESTIMATES INCLUDED IN 1998 BUDGET
The projected 1997 obligations of $53,359 thousand is $5,509 thousand more than the previous estimate of $47,850 thousand which was submitted in the fiscal year 1998 Budget request. The difference is due primarily to funding for Operation Safe Home.
2.CHANGES TO 1998 BUDGET ESTIMATES
The Office of Inspector General's estimate of $67,371 thousand is to carry out the provisions of the Inspector General Act of 1978, as amended. The OIG's 1998 Current estimate reflects a transfer from PIH of $10,000 thousand to cover the needs for Operation Safe Home and $521 thousand from the Consolidated Fee Account. An additional $9,000 thousand in Budget Authority proposed by the House (H.R.2138) and provided in PL-105-65 is also included to begin an Urban Fraud Initiative.
3.ANALYSIS OF INCREASES AND DECREASES
There are net increases of $9,113 thousand in 1998 and $2,275 thousand in 1999 for personal services costs over the prior year's availability.
--The increase in 1998 of $9,113 thousand is the result of an increase in personal services from promotions, within-grade increase, the pay raise and the additional 40 FTE made available in support of the Urban Fraud Initiative. The increase in 1999 is the result of increases for promotions, within-grades, and the pay raise.
There are net increases of $4,899 thousand in 1998 and a $2,275 thousand decrease in 1999 for support costs. The changes result from a reallocation of resources as follows in order to support as much of our 1998 FTE level as possible:
--The 1998 increase in travel of $405 thousand over 1997 includes an increase for travel costs in connection with the additional 40 FTEs. There is a decrease of $200 thousand in 1999 representing efforts to improve efficiencies and reduce operating costs to maintain an appropriate staffing level.
--The 1998 current estimate of transportation of things is an increase of $10 thousand over the 1997 level and $5 thousand over the 1998 level and is due to additional hiring/replacement of staff in both years.
--Other rents, communications and utilities are expected to increase $504 thousand in 1999. The increase in costs for 1999 is primarily due to covering increase staffing from the 1998 hiring and inflationary costs associated with rent, local telephone service, electricity, and postage increases.
--Other services costs increase $4,153 thousand in 1998, reflecting the start up contract costs for the Urban Fraud Initiative; while 1999 reflects a decrease of $220 thousand.
--The 1998 Current estimate for ADP services is a decrease of $23 thousand and a decrease of $2,000 thousand in 1999. This decrease assumes that planned ADP systems development will be completed in 1998.
--There is an increase of $26 thousand for supplies and materials in 1998 and an increase of $11 thousand in 1999.
-- An increase of $69 thousand in 1998 and a decrease of $380 thousand in 1999 for furniture and equipment are expected. Expenditures in prior years represented initial outlays for special equipment/weapons and furniture for new agents hired for Safe Home. The 1999 estimate provides for maintenance of the equipment/weapons and replacement of older obsolete equipment.
--There is an increase in 1998 for insurance claims and indemnities of $1 thousand and no change in 1999.
4.CONTRACTS
This table identifies funding levels and is followed by a brief discussion of OIG contract requirements.
Audit Services consist of contracts and interagency agreements:
--with the Defense Contract Audit Agency (DCAA), which has audit cognizance to conduct audits of certain organizations with whom HUD has business;
--with commercial firms to provide specialized skills and services, such as appraisers, inspectors, tax and automated data processing specialists in support of OIG activities; and
--with public accounting firms to conduct the audits of the financial statements of Ginnie Mae and FHA under the Chief Financial Officers Act.
General Support Services are used to provide funds for Interagency Agreements with the Department of Justice for access to the National Crime Information Center, with the Department of Treasury to assist in the training of OIG personnel through the Auditor Training Institute, and for services with private companies to obtain data and records related to HUD audit and investigative activities.
EXPLANATION OF OBLIGATIONS BY OBJECT CLASS
A description of the various object classifications that are used by the Office of Inspector General is provided on the following pages.
The 1999 Budget estimate for the Office of Inspector General is $67,371 thousand the same as we received in 1998. The 1999 Budget estimate consists of $50,172 thousand in personal services and $17,199 thousand in operating funds (travel--$4,500 thousand; transportation--$45 thousand; rent, communications and utilities--$5,414 thousand; printing--$78 thousand; other services--$6,185 thousand; supplies--$373 thousand; furniture and equipment--$600 thousand; and insurance and indemnities--$4 thousand). The 1998 Budget estimate is $67,371 thousand, consisting of $47,897 thousand in personal services and $19,474 thousand in operating funds.
Specific information which describes the fiscal year 1999 Budget request is detailed below.
The funding request for personal services in 1999 is $50,172 thousand, an increase of
$2,275 thousand over the 1998 estimate of $47,897 thousand. The requested funding increase for 1999 includes funds for projected promotions, within-grade increases and the pay raise. A staffing level of 611 FTEs represents an increase of 18 FTE over the 1998 staffing level. Currently, we estimate we can not fund this increase staffing level.
Office of Inspector General staff travel extensively to carry out their audit and investigative responsibilities. Audit staff travel to program participant and contractor offices to perform project audits, contract audits, evaluations of pricing proposals, and financial audits. Investigation staff also require extensive travel to interview witnesses and subjects of investigations, and to examine records.
The 1999 request is for $4,500 thousand, which is a decrease from the 1998 Current estimate of $4,700 thousand. The 1999 Budget request covers training and conference travel, program execution travel and miscellaneous travel related to audit and investigative activities.
This classification of expense includes the cost of reimbursement to Office of Inspector General personnel who are authorized the movement of household effects or house trailers when these personnel are transferred from one permanent duty station to another. The 1999 request is for $45 thousand, which is an increase from the 1998 revised estimate of $40 thousand.
The funds under this object classification provide for all rental costs, both space and equipment, as well as communication services and utilities. The 1999 request is for $5,414thousand, which is an increase from the 1998 revised estimate of $4,910 thousand.
The funds included in this object class are for the cost of printing and reproduction services, and related composition and binding operations performed by or through the Government Printing Office (GPO). The Inspector General's Semiannual Report to Congress is also covered under this object classification. The 1999 request is for $78 thousand, which is an increase from the 1998 current estimate.
A multitude of activities is funded under this object of expense. The most significant activities supported by these funds include professional training and development of OIG staff personnel; audit services; general support activities; and ADP maintenance and services. The 1999 Budget request is for $6,185 thousand, which is a decrease of $2,220 thousand from the 1998 revised estimate of $8,405 thousand.
Audit services include the cost of audits performed for HUD by commercial firms or States, or on a reimbursable basis by other Federal agencies--such as the Department of Health and Human Services (HHS), EPA and the Defense Contract Audit Agency (DCAA)--in instances where it is more economical and efficient.
These funds are also used for the purchase of goods and services where source identity or investigative techniques require confidentiality and normal procurement procedures might expose that confidentiality, such as during an undercover investigation.
In addition, the OIG has an Interagency Agreement with the Department of Justice for access to the National Crime Information Center (NCIC) for data related to HUD audit and investigative activities.
Funds are also allocated to support automated data processing services which are provided on a reimbursable basis through the Department's Working Capital Fund. The 1999 estimate reflects a revised estimate for computer support services required by the OIG. Office Automation is also included in this line as well as updates to the local area network (LAN) and the OIG's hardware and software requirements.
Other funds in this object class include amounts for the professional training of OIG personnel, furniture and equipment maintenance, visual arts services, and other miscellaneous contractual requirements.
Funds budgeted under this category of expense cover costs associated with the purchase of office supplies; training supplies; computer and associated supplies; subscriptions to professional magazines, publications and research materials; and other items that are consumed or expended generally within 1 year after purchase.
The 1999 request of $373 thousand is an increase from the 1998 current level.
The 1999 request of $600 thousand is a decrease of $380 thousand from the 1998 revised estimate of $980 thousand. The requested funding includes replacement and maintenance of special equipment/weapon for investigators in support of Operation Safe Home and the Urban Fraud Initiative. Also included in this object class are modular furniture, standard furniture and fixtures, and general office equipment.
This category provides for payments made for or related to the repair or replacement of property (including loss by theft) or for personal injury deemed by law or regulation to be the responsibility of the OIG. This would normally include loss or damage of personal property being used for the benefit of the government. The 1999 request is for $4 thousand, which is no change from the 1998 current estimate of $4 thousand.
STAFFING SUMMARY
1.SCOPE OF ACTIVITY
The Office of Inspector General is the Department's focal point for independent review of the integrity of Departmental operations and, therefore, is the central authority concerned with the quality, coverage, and coordination of the audit and investigation services of the Department. In directing these review activities, the Inspector General emphasizes both the detection and prevention aspects of these services within a comprehensive Departmental effort to attain improved management effectiveness. The Office of Inspector General has authority to inquire into all program and administrative activities of the Department and the related activities of all parties performing under contracts, grants, or other agreements with the Department. These inquiries may be in the nature of audits, investigations, or such other reviews as may be appropriate in the circumstances.
2.WORKLOAD
The principal workload of the Office of Inspector General consists of audits and investigations. The Inspector General Act of 1978 and Amendments of 1988 require the Inspector General to conduct, supervise, coordinate, and provide policy direction for audits and investigations relating to Departmental programs and operations; and to promote economy and efficiency in the administration of, or prevent and detect fraud and abuse in, HUD programs and operations.
In mid-1994, the OIG implemented a new initiative, Operation Safe Home. Operation Safe Home is geared to reducing three major types of criminal activity that undermine HUD programs: violent crime in public housing; fraud in public housing authorities; and equity skimming in multifamily insured housing.
The 1998 House Appropriations Bill calls for the OIG to undertake an Urban Fraud Initiative in two locations. The purpose of this initiative is to examine all HUD funding and activities in order to identify and stop fraud schemes that are enabled by systemic management weaknesses and/or corruption in the locality.
EXPLANATION OF STAFFING REQUIREMENTS
The Office of Inspector General staffing level for fiscal year 1999 is 611 FTEs, 18 FTEs more than fiscal year 1998. The 1999 FTEs of 611 includes 1 FTE for other than full-time permanent positions. These requested staff resources relate directly to the OIG's ability to fulfill its legislated mission and to continue and expand its most recent program initiatives concerning the early detection and correction of significant problems in major Departmental program areas. The following is a summary of the OIG staffing request:
1.SUMMARY OF STAFFING REQUIREMENTS
Note: The Headquarters estimates for 1998 and 1999 include 40 and 58 positions, respectively, for the Urban Fraud Initiative.
Note: The Headquarters estimates for 1998 and 1999 include 40 and 58 positions, respectively, for the Urban Fraud Initiative.
2.SUMMARY OF STAFFING REQUIREMENTS BY GRADE LEVEL
OFFICE OF INSPECTOR GENERAL EMPLOYMENT
The following tables indicate the distribution of full-time permanent appointments and FTEs for the organizations within the Office of Inspector General and are followed by a discussion of the functions and staffing requirements for each of those organizations.
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a/ These 1998 and 1999 estimates include 40 and 58 positions, respectively, for the Urban Fraud Initiative.
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Note: The 1998 and 1999 Headquarters estimates include 40 and 58 positions, respectively, for the Urban Fraud Initiative.
The OIG proposes a 1999 staffing of 590 full-time permanent employees and 593 FTEs, representing an increase of 18 FTEs over the 1998 current levels. An increase of 18 FTEs represents an additional 18 FTEs/FTPs in support of our Urban Fraud Initiative.
1.IMMEDIATE OFFICE OF THE INSPECTOR GENERAL
The Inspector General reports directly to the Secretary and has authority to inquire into all program and administrative activities of the Department. The inquiries are designed to provide constructive advice for Departmental management, to promote economy and efficiency in the administration of HUD programs, and to prevent and detect fraud and abuse in HUD programs and operations.
Staffing for the Urban Fraud Initiative (40 positions in 1998 and 58 in 1999) is being shown within the immediate Office of the Inspector General only until organizational placement and locality decisions are made. The true staff of this office will not increase.
SUPPLEMENTAL URBAN FRAUD INITIATIVE FUNDING
We anticipate the initiation of a unique "Urban Fraud Initiative" focused in two or three metropolitan areas in 1998. This effort will dedicate joint OIG investigative/audit teams to specific municipal areas. The investigative/audit team, (supplying needed HUD programmatic expertise), will engage in a cooperative effort with Assistant U.S. Attorneys and other federal law enforcement entities, to explore the full range of allegations of waste, fraud and corruption involving HUD funds and activities.
A number of troubled cities around the nation receive significant amounts of HUD funds designed to improve the quality of life for their citizens. In some instances improvements that should have resulted from these programs are not readily visible. Reports abound of federal funds being repeatedly diverted from intended public benefit. At many of these locations we have conducted traditional audits and investigations focused on specific HUD programs and identified weaknesses and abuses. However, the results of these discrete audits and investigations have apparently failed to change the underlying systemic problems.
To meet this challenge, we plan to create a unique "Urban Fraud Initiative", to examine and aggressively pursue fraud across the full spectrum of HUD funds flowing to and through a specific municipality. Traditionally, audit and investigative resources work in a cooperative, yet independent atmosphere, where competing priorities for District resources tend to limit the scope of any single audit or investigation. In addition, these locations have not had the benefit of a significant OIG complement assigned to them to provide ongoing, extensive reviews. The "Urban Fraud Initiative" is designed to concentrate an OIG taskforce, which works closely with Assistant U.S. Attorneys and leverages other federal law enforcement assets, to exclusively pursue allegations of corruption, waste, fraud and abuse of all HUD funding going to a single municipality.
Each location selected for the "Urban Fraud Initiative" utilizes a team of Auditors and Investigators, (and other HUD expertise as needed), whose exclusive assignment is to examine the use of all HUD funded programs in the geographic area. In addition to OIG resources, the team links with and leverages supplemental prosecutive resources of one or more dedicated Assistant US Attorneys and other federal law enforcement agencies, such as FBI, IRS, Postal Inspectors and other OIGs as appropriate. Legal expertise, appraisers, cost estimators and/or building inspectors are utilized as necessary. Each team will remain in the selected urban location until such time as its exclusive mission is completed, and then move to another city to repeat the process.
In fiscal year 1998, Congress authorized funding for the dedicated "Urban Fraud Initiative" of $9,000 thousand. These funds will enable the establishment of independent fraud task forces and appropriate support services at two cities, neither of which had any prior significant OIG complement. This will require the reassignment of experienced personnel and the hiring of additional staff at these locations. Each team will consist of 18 FTE, composed of Auditors, Special Agents and corollary specialists.
In addition, a supporting headquarters component of 4 FTE will be created to develop national automated analytic capabilities, which OIG has previously lacked. Analysts will then have the critical capability to actively search and correlate investigative leads from multiple databases. This "link-analysis" capability will allow the investigative teams to follow leads relating multiple entities in the urban area that are receiving HUD funding from HUD's separate components.
2.OFFICE OF COUNSEL
In fiscal year 1994, the Inspector General established the OIG Office of Counsel, which is responsible for independently providing the full range of professional legal services and advice with respect to the formulation, coordination, revision and execution of the entire OIG program.
3.OFFICE OF AUDIT
a.Employment and Responsibilities
The Office of Audit is responsible for planning and conducting audits of Departmental activities, including: (a) HUD Headquarters, District and State/Area Office operations, (b) Departmental programs and initiatives, and (c) contractors and other entities doing business with the Department. The Office of Audit's workload is divided into three general categories.
1.Internal Audits - Internal audits (also known as operational audits, program audits, performance audits, or management reviews) are reviews of selected HUD administrative and program operations to evaluate efficiency and effectiveness. Audits are often directed at determining whether management controls are adequate and effective in minimizing program risks. Internal audits are also conducted to evaluate the effectiveness of programs or activities in achieving objectives and anticipated results.
2.External Audits - External audits are independent reviews of the records and performance of organizations or entities (program participants) receiving financial assistance or benefit from the Department, such as various State and local government grant recipients, insured multifamily housing project owners and management agents, mortgage lenders and borrowers, contractors, public housing authorities, and nonprofit program sponsors. The audits are a means of ascertaining: (1) the degree of compliance with applicable statutes, regulations, and the terms and conditions of agreements under which Federal funds or other benefits are made available; (2) the appropriateness of the disposition of funds granted, loaned, or claimed; and/or (3) participant performance and results.
3.Advisory and Assistance Services - This category of audit activity includes: (1) input to legislative and regulatory processes; (2) technical advice and assistance to HUD management on programs and systems; (3) performance of program research; (4) quality control reviews of non-Federal audits of HUD program activities; (5) resolution of audit findings; (6) assistance to U.S. Attorneys in developing criminal and civil cases for prosecution; (7) reviews of hotline and other complaints; (8) joint efforts with the Office of Investigation or program officials to detect or prevent fraud; and (9) other requests for information or assistance from audit clients in the Department, the Office of Management and Budget (OMB), the Congress or the public.
OIG's "audit universe" is large and diverse, including: FHA's $403 billion of housing insurance-in-force and $17.3 billion of property and other assets; $497 billion of mortgage-backed securities and $5 billion of property and other assets in Ginnie Mae; tens of billions of dollars of housing subsidies to provide over 4.6 million families with decent, safe and affordable housing; billions of dollars of operating, modernization and social service funding to over 3,300 public and indian housing authorities; billions of dollars of grant funding to address community needs for development, housing and elimination of homelessness; and over $1billion of internal HUD operating expenses to support nearly 10,400 staff in 81 offices, as well as a contracted services support capacity estimated at an additional 5,000 persons. In total there are over 45,000 entities participating in the delivery of HUD programs.
b.Workload
Overview. Our Semiannual Reports to Congress continue to show significant audit results. Our audit work is taking on an added level of importance because of the dynamics of HUD's rapidly changing program and management environment.
The Office of Audit's long range strategy is to allocate our audit resources in a manner that will assist the Department in reaching its downsizing goals while at the same time improving its delivery structures. HUD is faced with systemic resource management and data system problems, continued material weaknesses in several program areas and a difficult time overseeing all critical functions performed by outside entities.
To better serve HUD management, our plan is to place increased emphasis on the review and oversight of legislative, regulatory and policy changes resulting from a changing HUD environment. We will continue to work with HUD management on various task forces to help improve on existing methods or develop alternative methods of conducting HUD business. We will focus greater attention on those major audit areas that will improve HUD's stewardship of Federal financial resources. Key efforts will include financial audits, information systems and performance audits and continued emphasis on ferreting out fraud and mismanagement in HUD programs. We will expand our Safe Home efforts in detecting Multifamily equity skimming and deterring fraud in Public Housing, as the Offices of Housing and PIH continue to downsize.
Review and Oversight. Major legislative and organizational changes have been proposed which will fundamentally change the way HUD does business. These changes will significantly increase the workload in the Office of Audit. For example, proposed public housing legislation would repeal the United States Housing Act of 1937. This replacement legislation would require new implementing regulations and policies. As these are developed, each will require our review and input to assure that proper safeguards and internal controls are in place to reduce the likelihood of program fraud and abuse. With the reductions in program staff as HUD downsizes, our reviews of regulation and policy changes take on a greater level of importance.
Additionally, some of the proposed legislation will give the OIG added responsibilities. For example, proposed public housing legislation would establish a Housing Foundation and Accreditation Board on which the Inspector General would serve as principal advisor. To effectively serve in this function would require us to assign audit staff to assist the Board. The legislation also calls for an Advisory Counsel for the Housing authority of New Orleans and the Inspector General is designated to serve on this advisory board. New Public Housing legislation also calls for the development of review and evaluation systems and enhanced Secretarial powers to take over PHAs. All of this will require additional audits of at risk PHAs.
New legislation has also been proposed to consolidate six homeless programs administered by the Assistant Secretary of Community Planning and Development into a single grant. If enacted, we will take an active role in reviewing the new regulations and guidelines as they are developed to administer this program. We will have added audit responsibilities to assure that the new program is properly administered in HUD as well as at the local community level.
Our Information Systems Audit Division will continue to consult with HUD management as the Department continues its total financial systems integration overhaul. This requires our staff to be engaged in the process and evaluating the sufficiency of internal control issues as the new systems are designed and implemented.
Major changes are proposed in the manner in which the Federal Housing Administration conducts its business. Organizationally, as the Department reduces the level of program staff, greater and greater reliance will be placed on our audits to assure that lenders, grantees and other program recipients are spending funds efficiently and effectively and in accordance with program requirements. As community empowerment and public trust become key elements of newly designed programs, oversight monitoring becomes a critical management tool. For example, in the area of Single family loan origination, major staffing cuts are proposed as more and more loan origination responsibilities are shifted from HUD staff to approved lenders. At the same time, HUD plans to triple the size of their mortgagee monitoring and quality assurance staff. This same concept will apply to our role in the Office of Audit; that is, as less time is spent by HUD staff in the day to day operations of programs, our audit role will become more critical as a management tool.
In the area of Multifamily Housing, major program changes are underway or anticipated. Through a process of portfolio reengineering, the Department would bring higher than market rents on subsidized and insured multifamily projects down to a level where they are competitive in the marketplace. We are heavily involved in evaluating several demonstration projects and the procedures to be used for implementing permanent legislation.
The reduced level of HUD staff to monitor programs will result in their placing greater reliance on the work of Independent Public Accountants (IPAs) who conduct audits under the Single Audit Act. This increased reliance on the work of outside accountants will require the OIG to take on a larger role in overseeing and assessing the quality of IPA reviews. Also, we must work closely with program officials to determine the audit work required to be performed by the IPA during their annual audits.
Audit Emphasis. We continue to show significant results in our audits in terms of identifying management control weaknesses, detecting and deterring program fraud and abuse, and recommending improvements to HUD's program delivery and operations structure. The following are some of our traditional workload measurements for the 6-month period ending March 31, 1997.
We anticipate the major Departmental reorganization changes taking place under HUD�s 2020 Reform effort will increase our audit responsibility over the next several years. We need to examine internal controls and other program safeguards as major staffing changes take place, programs are restructured and greater reliance is placed on contractor staff. It is Audit�s responsibility to review these restructured programs and assure that they are designed to protect the public trust.
In the last few years, we have dedicated a large portion of our audit resources to a limited number of projects. For example, our annual financial audit averages about 21 staff years of effort. Our "Safe Home" equity skimming and PHA Probe activities average about 29 staff years of effort. Last year, about 12 staff years went into looking at mark-to-market and preservation issues. Indian Programs took annually about 11 staff years of effort. This year a major Congressional request to review procurement activities required about 8 staff years of effort. There are many potential audit areas that have gone untouched because of the unavailability of staff.
We would like to retain our staffing levels and become more proactive in our audit efforts. For example, we need to conduct major program effectiveness audits. While we regularly review NOFA requirements, we�ve lacked resources to perform sufficient audit work at funding recipients to determine if the funding is getting desired results. We need to add additional focus in this area. Dozens of new programs are added each year to HUD�s list of programs. Most of these programs have not been audited. As an example, we are nearly into the second round of funding for Empowerment Zones and Enterprise Communities, yet we have not audited the effectiveness of this program. We need to look closer at many of our troubled PHAs to make informed recommendations to the Department and Congress. There are numerous areas that deserve greater audit exposure.
We are taking an active and aggressive role in advising the Secretary on how the Department can better define its mission and carry out its Congressional mandates. The Inspector General has testified before Congressional Committees on several occasions this year on HUD's mission, management and performance; high risk problems; perspectives on reinvention and various programmatic problems with Indian Housing Programs. Preparation for each hearing typically requires the completion of detailed audit work as a basis for testimony.
In consideration of HUD's audit environment, OIG objectives, and activities described above, our fiscal years 1997 and 1998 audit plan targets the below listed major areas of emphasis where we believe our work can be of greatest use to the Department and Congress.
-- Financial Audit. Fiscal year 1998 will be the third year we completed the consolidated financial audit of the Department using our own staff resources. This audit has better enabled the OIG to grasp the major problems facing the Department and thereby target our performance audit resources in areas of greatest concern. Another benefit of this financial audit is that it enables us to evaluate internal controls as a measure of HUD's progress in identifying and solving systemic issues. This audit is required by the Chief Financial Officers Act of 1990 and requires a significant portion of our audit resources to complete. We generally conduct this audit with participants from most of our District Offices and the Information Systems Audit Division. It is a major commitment of staff, training and travel resources.
-- Information Systems Audit. The work of the Information Systems (IS) Audit Division has become increasingly important as the Department expands the use of information technology for program delivery with a reduced staff. Much of the work is devoted to support the mandated Financial Statement Audits by reviewing the general and application controls of automated financial systems. These controls impact programs and supporting applications for all system efforts. IS audit work also involves assisting the Department in establishing controls and standards for error prevention; efficient and effective operations; and deterrents to fraud or abuse during system development. Another area of IS audit work is providing technical support to other OIG auditors and investigators. This work includes retrieving and analyzing data from HUD systems, advising field auditors on automated tools for use in their work, and obtaining computer based evidence for investigative purposes.
-- Performance Audits. A major part of our staff time is spent conducting audits of high risk program participants. As mentioned earlier, our audit work in these areas will become more important as HUD continues to downsize. It will become of greater importance that we provide periodic reviews to assure that programs are operating effectively and that program participants are meeting program requirements. Some of the more critical program areas include:
- Departmental Management
- Insured Multifamily Project Operations
- Management Agents
- PHA Operations and Modernization
- Severely distressed and troubled PHAs
- Section 8 Administration by PHAs and owners
- Single Family Origination and Servicing
- CDBG Grantees and Subgrantees
- Homeless Program Providers
- Technical Assistance
- HOME Program participants
- Empowerment Zones and Enterprise Communities
- Hope VI
In all of our audit work we will continuously look for ways to streamline programs, provide greater flexibility, strengthen performance measures and accountability and provide appropriate and effective enforcement.
Safe Home Efforts. The identification and pursuit of "equity skimming" in insured multifamily housing projects is a principal Safe Home focus. Our strategy is to obtain successful criminal and civil prosecution, sending a message to owners that equity skimming will not be tolerated. We have focused on affirmative civil enforcement opportunities with direct referral of cases to the U.S. Attorneys. The burden of proof is less on these civil cases and provides for more immediate impact. Since initiation of the program, we have identified some 209 cases of equity skimming involving over $166 million. We have reached settlement on 61 of these cases and had court settlement or convictions on another 21 cases. As the Offices of Housing and PIH continue to downsize, we must increase our aggressive pursuit of equity skimming cases.
We continue to perform Public Housing fraud probes to root out and deter white collar crime. Since our efforts with Safe Home began in February 1994, these fraud probes have resulted in more than a million dollars in fines and restitution, over 100 indictments, and more than 50 years in prison sentences. This effort will become even more important as the Department downsizes and dedicates less and less time to on-site monitoring of PHAs.
4.OFFICE OF INVESTIGATION
a. Employment and Responsibilities
The Office of Investigation is responsible for the development and implementation of the Department's investigative activities. These activities are performed by personnel located at HUD Headquarters and in Field Offices. The Office initiates investigations of possible violations of laws or regulations in the administration of HUD programs and activities or misconduct on the part of HUD employees. These initiatives include investigations of possible criminal violations for criminal and/or civil prosecution by the Department of Justice and investigations of program irregularities for civil and/or administrative actions by HUD. In carrying out these responsibilities, the Office of Investigation works very closely with other Federal agencies and State and local law enforcement officials. Numerous successful investigations have occurred because of the combined efforts of more than one investigative agency. These efforts not only intensify the investigation, but can broaden the scope of the inquiry and jurisdictional range of potential violations.
The Office of Investigation is divided into a Headquarters function and Field operations. The Headquarters function performs a control and quality assurance role, performs sensitive investigations and directs the activities of eleven District Offices. The Special Agents in Charge (SACs) are responsible for conducting investigations, referring allegations to prosecutors (Federal, State, and local) and assisting the activities of special agents in their respective Districts.
b.Workload
Our Semiannual Report to the Congress continues to show significant results from our investigative efforts. The following is a summary of our investigative results for the six month period October 1, 1996 through March 31, 1997.
During fiscal year 1998, we will continue working to effect a balance between two major areas of concern. We will continue our ongoing investigative fraud work in those programmatic areas of the Department that held the greatest potential for return, including the initiation of a unique "Urban Fraud Initiative". We will also continue our "Operation Safe Home" effort to reduce violent crime and thereby enhance the quality of life for residents of publicly funded housing.
The most egregious white collar abuses result in one or more of the following: affirmative prosecutive action, monetary recovery, or administrative sanction. Each of our District offices has focused their resources on those most significant cases involving alleged fraudulent activity concerning the Department's programs. This has required utilizing excellent working relationships with other law enforcement agencies such as the Federal Bureau of Investigation in ensuring that our resources are being used in the most efficient manner. Investigations have continued to yield significant prosecutive results for activity such as embezzlement or the submission of false claims in the Community Development Block Grant program, theft of project funds by management agents, and the improper receipt of rent subsidies because of false statements. These were in addition to the continuing efforts in the area of fraud in the single family mortgage insurance program such as loan origination fraud (e.g., false income information).
Operation Safe Home was initiated in February 1994 as a collaborative effort between the Departments of Housing and Urban Development, Justice and Treasury to address the level of violent crime plaguing much of publicly funded housing. The initiative focuses the combined efforts of Federal, State and local law enforcement resources on the problem.
As Operation Safe Home has evolved, the Office of Inspector General, HUD, has found that it fills a unique position in facilitating the introduction of aggressive law enforcement attention within violent public housing developments. The traditional Federal law enforcement agencies temporarily focus their assets on identifying and removing the criminal elements from targeted locations; at which time they have completed their task and go elsewhere. The OIG not only participates as a full partner in law enforcement task forces, but also interfaces with the public housing development managers and HUD to facilitate the introduction of "post-enforcement" activities to enhance the quality of life for the residents of these areas. OIG's position transcends that of merely enforcement activities. OIG's relationship with public housing authorities provides it with expertise to "target" specific crime-ridden developments and provide intelligence information from within the authority to law enforcement counterparts and to then follow-up task force actions with the facilitation of post-enforcement activities.
OIG special agents are currently participating in 208 Safe Home Task forces targeting violent crime in publicly funded housing.
5. SUPPLEMENTAL SAFE HOME FUNDING
To meet the critical violent crime situations in publicly funded housing that OIG identified, $5 million was provided for tactical operations in fiscal year 1997. These funds are currently being used to share in operational costs for task force efforts focused in publicly funded housing at 167 municipalities in which OIG is actively involved. The funds help defray the costs of police overtime, the purchase of contraband evidence, and other operational expenses, as well as "seeding" some post enforcement initiatives. None of this funding is provided in the form of a "grant" that would be controlled by a law enforcement entity, but is being used to help fund those operations in which OIG is an active partner.
In 1998, we anticipate receiving $10,000 thousand from drug elimination grant funds to support joint task force operations, plus an additional transfer from PIH of $10,000 thousand in order to obtain additional law enforcement FTE. This increased FTE will enable OIG to more adequately address violent crime within the larger urban areas, such as Miami, Chicago, Detroit, Atlanta, San Francisco, Los Angeles and New Orleans, some of the areas in which OIG has had a critical shortage of personnel to assign to task force work.
The $10,000 thousand to support tactical operations also enables OIG to facilitate increased law enforcement attention in larger urban areas. For example, overtime for a single police officer assigned to such a task force is capped at approximately $9,000. One task force in a highly urban area, such as Chicago, can have ten officers assigned. This, coupled with funds for the purchase of contraband evidence and other operational support for task force efforts can easily exceed a cost of $150,000 in a year. The $10,000 thousand is targeted to enhancing law enforcement operations within the most crime-ridden public housing developments, based upon OIG's experience in the joint HUD/DOJ "Priority Cities" project. These projects entail the close collaboration of all law enforcement entities, in cooperation with PHA management, to identify, address and rectify the crime situation within specific communities.
One of the most critical components of Operation Safe Home was developed in direct response to a request from the Director, FBI, who advised the Secretary that a Witness Relocation initiative was necessary in order to address violence plaguing Washington, DC. Violent crime in publicly funded housing can only be addressed with the critical help of witnesses who come forward to assist law enforcement and testify as to the crime. Unfortunately, many times such witnesses rightfully fear for their lives and those of their family if they assist law enforcement.
Since the initiation of Operation Safe Home, OIG has facilitated the relocation of 322 witness/families, some of whose testimony was directly responsible for the conviction of murderers who left trails of multiple homicides through public housing.
After 2 years of cajoling the assistance of various public housing authorities to relocate a witness/family, at the request of a prosecutor, in fiscal year 1996, HUD provided approximately 200 Section 8 vouchers specifically for this purpose.
The continuation of this effort remains critical. Therefore, in fiscal year 1999, we are requesting 300 Section 8 vouchers be made available for this program. Throughout the development of Operation Safe Home, representatives of every law enforcement component, including the Attorney General, the Director/FBI, as well as supervisors and street agents of ATF, DEA and FBI, all agree this is one of the most vital programs developed. The Department, working with OIG, has developed a system to rapidly relocate a witness/family based upon requests of law enforcement and prosecutors, and still protect the identity and location of the witness.
Operation Safe Home represents a more efficient way of "doing business", requiring highly collaborative efforts on the parts of multiple responsible entities, to address a crime problem in the broadest approach.
Since its inception in February 1994, OIG has participated in affecting the arrests of over 12,000 persons committing a wide range of crimes in and around publicly funded residential communities. Over 1,450 search warrants have been served, resulting in the seizure of over
$22 million in drugs and $2.75 million in drug-related cash. A total of over 1,600 firearms have been seized in public housing, including 180 assault guns and shotguns.
However, the more significant accomplishment is more intangible. It is the enhancement of the quality of life for residents, allowing them a greater sense of peace in their homes. In communities like Kelly Miller in Washington DC, Mission Hill in Boston, MA, John Hope Homes in Atlanta, parts of Cabrini Green in Chicago, and in sections of the Housing Authorities of New Orleans, San Francisco, Omaha and New York, there have been marked reductions in the levels of violence and residents can begin to venture outside of their units. It can further be seen in the enhanced maintenance that is being performed in areas where it was previously unsafe for an authority employee to work.
Finally, Operation Safe Home is more than just a law enforcement focus. It has spotlighted underlying management issues such as eviction and occupant applications, issues that initiatives like "One Strike" and obtaining NCIC access for PHA's strive to address.
6.OFFICE OF MANAGEMENT AND POLICY
a.Employment and Responsibilities
The Office of Management and Policy (OMAP) provides OIG-wide administrative support in areas such as budget and financial management, personnel management, employee training, internal policy development, ADP and automated office support services, and records management. In fiscal year 1999, the Office of Management and Policy plans to improve its administrative support to the OIG in the areas of training, ADP services and internal evaluations.
b.Workload
In fiscal year 1999, OMAP will continue to be the OIG focal point for streamlining operations, policies and procedures as well as other initiatives stemming from Executive Orders and the National Performance Review Report.
OMAP is also responsible for the OIG quality assurance program, which assesses
OIGwide compliance with professional audit and investigative standards. The program, as currently designed, calls for three areas (Great Plains, Midwest, and New York/New Jersey) to be evaluated in fiscal year 1999.
Content Archived: January 20, 2009
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