Department of Housing and Urban Development Fails to Comply with IPERIA Requirements

On June 3, 2019, Regional Inspector General Nikita Irons submitted a report outlining the Department of Housing and Urban Development’s (HUD) failure to follow the Improper Payment Elimination and Recovery Improvement Act (IPERIA). This failure to comply, while common for many agencies, represents the sixth consecutive year that HUD has failed to meet the standards demanded by the statute. An independent contractor has been hired to bring the Department into compliance. The Department’s lack of administrative or financial resources available to properly estimate how much funding was erroneously doled out, however, makes compliance with IPERIA unlikely in the foreseeable future.

In 2010 Congress passed, and the President signed IPERIA, which was later amended in 2012. Passed unanimously in both chambers of Congress, this bill conveyed a serious message to agencies: boost transparency through the identification and elimination of improper payments. Improper payments are defined as “overpayments, payments to the wrong person, or payments for the wrong reason.” Improper payments take many forms, from $180 million to 20,000 dead individuals over the course of three years, to $230 million to felons who were ineligible to receive any benefits. Specifically, in 2016 HUD disbursed $1.7 billion in improper payments. In total, the Federal government processed improper payments totaling $151 billion in FY2018.

To comply with IPERIA, OMB Circular A-123 mandates that agencies 1) identify programs susceptible to significant improper payments, 2) conduct research to determine a statistically valid estimate of the annual improper payments, and 3) create a plan to prevent and reduce  future improper payments. OMB Circular A-123 defines “significant improper payments” as those payments which exceed either 1) 1.5 percent of program outlays and $10 million of all program or activity payments, or 2) $100 million. After a plan is created to prevent future improper payments, the Inspector General reviews all materials submitted to determine whether the agency is in compliance.

Among HUD’s several violations, the Department failed to publish improper payment estimates for the Multi-Family Housing (MF-RAP) and the Tenant-Based Rental Assistance (PIH-TBRA) programs. Additionally, HUD’s contractor payment program exceeded statutory thresholds for allowable improper payments. For every 4 dollars spent by the Department on contractors, nearly 1 dollar was either paid to the wrong contractor, paid for the wrong reason, or constituted an overpayment or underpayment. These discrepancies were outlined in previous reports by the Office of the Inspector General before and recommendations were made to help bring HUD within compliance. None of these recommendations were satisfied.

The fact that HUD is in violation of the statute is not the most troubling issue uncovered by the Inspector General. Of the 24 agencies required to maintain compliance with IPERIA, 14 were non-compliant for one or more reasons in 2017. The most troubling issue is why HUD is in violation. HUD was unable to publish improper payment estimates because the Department did not have the administrative or financial resources available to properly estimate how much funding was erroneously doled out. Furthermore, the existing administrative structure failed to keep enough documentation outlining which payments to contractors were improper. These are indicators of a department already struggling with budgetary constraints and will be facing more as the Trump Administration’s FY 2019 budget called for an additional $8.8 billion in budget cuts. These developments are worrisome, especially for a department with an infamous history of waste, corruption, and incompetence.

IPERIA was passed to eliminate government waste and boost transparency where tax dollars were being paid out. This goal is incompatible with efforts to dismantle bureaucratic structure and eliminate government “waste.” Congress is attempting to enforce strict compliance with IPERIA, yet it continues to sweep the administrative legs out from under agencies with increasing budget constraints. Had capacity building investments been made, HUD would not only remain in compliance with IPERIA, but the Department would also save money by decreasing or eliminating improper payments.[1] While the savings may not be as substantive, the product (affordable and adequate housing) would continue to improve for the consumer (families in dire need of affordable housing).

[1] See Paul C. Light, Monitoring Government: Inspectors General and the Search for Accountability (1993).