On Monday June 30, 2014 the U.S. Department of Housing and Urban Development ("HUD") Office of Inspector General ("OIG") issued a report questioning management and other fees allowed by HUD under Asset Management/Project Based Accounting. Specifically, the OIG questioned asset management fees and central office cost centers due to concerns over potential misspending by public housing authorities and the lack of restrictions in the use of such funds.
The OIG believes that HUD lacks adequate justification for allowing housing authorities to charge an asset management fee, resulting in more than $81 million in operating funds being unnecessarily defederalized annually. Since central office cost center funds are considered non-Federal funds and no longer subject to HUD requirements, the OIG believes that there is a greater potential for fraud, waste, and abuse.
The OIG recommends that HUD (1) revise its asset management fee policy to refederalize the Operating and Capital Fund programs’ fee revenue, and (2) eliminate the asset management fee. In other words, the OIG is recommending that the Central Office Cost Center be refederalized.
While the response from HUD is detailed and, among other things, points out that the OMB has promoted the fee for service approach, this may be the beginning of the end for a defederalized COCC.