HUD PIH’s Required Conversion Program Was Not Adequately Implemented

OIG
We audited the U.S. Department of Housing and Urban Development’s (HUD) required conversion program activities to determine whether HUD ensured that public housing agencies (PHA) properly evaluated their distressed units and converted them to tenant-based rental assistance programs. We selected this program for review based on an approved internal audit suggestion in our annual audit plan. Our audit objective was to determine whether HUD adequately implemented its required conversion program to ensure that its PHAs complied with the procedures for the required conversion of distressed public housing developments to tenant-based rental assistance programs.

HUD did not adequately implement its required conversion program. Specifically, HUD did not properly identify potential projects requiring conversion and did not follow up to ensure that PHAs took action by conducting proper analyses to determine if listed projects should be converted to tenant-based rental assistance. HUD also did not apply available remedies when PHAs did not properly identify projects or implement required conversions. We attributed this deficiency to lack of oversight and miscommunication among the Office of Public and Indian Housing (PIH), Office of Field Operations; the Special Application Center; regional PIH field offices; and the PHAs. As a result, HUD did not require PHAs to identify and convert distressed projects, and up to $75 million in operating subsidies and capital funds could continue to be spent on projects that have not been determined to be physically viable or less expensive than tenant-based rental assistance.

We recommend that HUD develop and implement policies and procedures to identify potentially distressed projects and monitor and enforce the required conversion program. Additionally, we recommend that HUD determine whether nine PHAs provided appropriate documentation to support whether potentially distressed projects should be converted to tenant-based rental assistance and if conversion is required that it is accomplished timely, thereby ensuring that up to $75 million is used effectively for projects that are cost effective and have long term viability and ensuring that tenants receive other rental assistance.

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