A new HUD Office of Inspector General (OIG) audit published last week levied intense criticism at HUD’s implementation of public housing asset management. Focusing on HUD’s methodology and monitoring of asset management and other fees and central office cost centers – the cornerstone of HUD’s public housing asset management requirements - the OIG audit recommends the reversal of key provisions of asset management.
HUD’s public housing asset management requirements represent a heavily negotiated, but also very controversial, overhaul of the way that public housing is operated and managed. With the publication of a final rule in 2005, housing authorities were required to transition to project-based based budgeting and to use a fee allocation system to support centralized office functions. Housing authorities were required to overhaul their financial systems and reporting mechanisms in order to comply. Housing authorities have now fully transitioned to the asset management model. Compliance with the asset management requirements was compulsory, but one “carrot” given to housing authorities to incentivize participation was the defederalization of fee income earned to support central office costs.
Among the recommendations of the OIG report were for HUD to do the following:
Refederalize the Operating Fund’s program management and bookkeeping fees and the Capital Fund program’s management fees
Eliminate asset management fees
Reassess management and bookkeeping fees periodically
Develop automated controls and written procedures to augment HUD oversight
The OIG audit’s recommendation to re-federalize these funds would be a significant departure from the representations made to housing authorities by HUD and would also significantly increase HUD’s oversight responsibilities. HUD’s response to the OIG audit (included at the back of the report) strongly disagrees with the OIG’s findings, so it will be interesting to see how HUD and the OIG work to resolve the findings, as well as its impact on housing authorities.