Beginning in 2021, the U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG) conducted several audits to assess HUD’s anti-fraud efforts and to develop inventories of fraud risks for several of its programs. Our previous work found that HUD’s fraud risk management program was in its early stages of development and we recommended that HUD perform program-specific fraud risk assessments and incorporate these assessments into an agency-wide plan to further advance its program. To continue assisting HUD in improving its anti-fraud efforts, we conducted this work to identify potential fraud risks and schemes that could negatively impact HUD’s Office of Community Planning and Development disaster recovery funding.
CPD had made progress in its efforts to identify fraud risks for its disaster recovery program. Specifically, CPD identified several fraud risks at the disaster recovery program level and documented them in a fraud risk inventory. To further assist CPD with its fraud risk efforts, we developed our own fraud risk inventory that includes additional fraud risks. To develop our inventory, we first identified seven fraud risk factors affecting disaster recovery funding that increase the chance of fraud by heightening the incentives, opportunities, and likelihood for rationalization by individuals inclined to commit fraud. We then used those fraud risk factors, along with the results of brainstorming sessions, interviews, and reviews of audit reports, investigations, press releases from HUD’s Office of Inspector General (HUD OIG) and other Federal agencies, to develop the inventory containing 57 potential fraud risks, 20 of which CPD had previously identified in its fraud risk inventory. Fraudulent misappropriation of disaster recovery funding undermines program integrity, compromises taxpayer dollars, and hinders disaster recovery efforts, ultimately harming the affected communities.
We recommend that HUD’s Office of Community Planning and Development (CPD) improve its anti-fraud efforts by using the fraud risk inventory our office developed and its Office of the Chief Risk Officer’s risk catalog. We also recommend involving key stakeholders in the disaster recovery program’s risk identification process and communicating the identified fraud risks to relevant stakeholders, such as grantees and subrecipients, to enhance fraud prevention, detection, and response efforts within HUD and grantees’ disaster recovery programs. We further recommend that CPD use its fraud risk inventory to help identify data needs and potential system enhancements to improve its ability to monitor and respond to fraud risks in the Disaster Recovery program.
