Federal Reports

We found the selected nonstatistical sample of the FSA’s ECAP applications contained accurate information, but determined FSA should establish additional oversight activities for commodity information for self-certified applications the agency considered low risk.

Background

The U.S. Postal Service delivers over 108 billion pieces of mail annually, and each piece requires an approved stamp or other payment indicator. Bad actors, however, are increasingly selling, printing, or distributing counterfeit stamps. To combat this threat to its finances and customers, the Postal Service and its primary law enforcement arm, the U.S. Postal Inspection Service, focus on preventing counterfeit stamps from entering the mail system through public education, removing online fraud schemes, or partnering with other federal law enforcement to interdict illicit inbound shipments.

What We Did

Our objective was to evaluate the Postal Service and Postal Inspection Service’s efforts to mitigate the threat of counterfeit stamps. We reviewed related policies, initiatives, and data; engaged a contractor to assess online threats; and tested equipment.

What We Found

Postal Service and Postal Inspection Service mitigation efforts are limited, with no substantive approach to identify counterfeit stamps in the Postal Service network. While the Postal Service and the Postal Inspection Service have increased prevention-related efforts, the quantity of counterfeit stamps in the network remains unknown.

The Postal Service has not developed a comprehensive, risk-based strategy for identifying and mitigating counterfeit stamps. Developing such a strategy would help coordinate efforts across the organization, putting the Postal Service in a stronger position to protect its revenues and customers. The urgency of this threat also necessitates immediate actions to address other mitigation shortfalls. First, the Postal Service did not set mail processing equipment’s detection capabilities to a level to sufficiently detect counterfeit stamps or conduct sample testing to quantify the potential revenue loss. Second, the Postal Service has no identification capabilities across any other points of mail entry. We estimate these shortfalls resulted in over $349 million in revenue loss and $1.7 billion of revenue at risk in fiscal year 2026. Lastly, the Postal Service takes more than twice as long as comparable companies to disable online threats due to legal considerations.

Recommendations and Management’s Comments

We made four recommendations to address the issues identified in the report, and management agreed with all four. We consider management’s comments responsive, as corrective actions should resolve the issues. Management’s comments and our evaluation are at the end of each finding and recommendation

We audited Solis Gardens Apartments’ management of its HUD-insured Section 207/223(f) multifamily property as part of our annual work plan.  The owner of Solis Garden Apartments manages 62 units in accordance with HUD requirements and its regulatory agreement which includes restrictions on the use of project funds and assets.  We selected Solis Gardens Apartments for an audit based on risk indicators, such as surplus cash deficiencies, missed or late mortgage payments, HUD’s risk rating, and the absence of any HUD Management and Occupancy reviews.  Our audit objective was to determine whether the owner managed Solis Gardens Apartments in accordance with HUD requirements and its regulatory agreement.

The owner of Solis Garden Apartments did not manage its property in compliance with HUD requirements or its regulatory agreement.  Specifically, the owner made improper routine cash distributions totaling more than $1.5 million and improperly deposited $35,979 of reserve for replacement funds into an owner-controlled account while the property was in a non-surplus cash position. The owner also accrued $25,210 in excess asset management fees and charged more than $16,764 in excess property management fees.  Lastly, property accounting records were not maintained in accordance with HUD requirements.  These conditions occurred due to insufficient oversight by the owner, and owner-established policies that conflicted with HUD requirements.  Collectively, these deficiencies demonstrate a failure to maintain transparent and HUD-compliant financial management and accounting practices.  Without corrective action, these conditions increase the risk of further regulatory violations and undermine the long-term financial viability of the property.

We recommend that the San Francisco Region Director of Multifamily Housing require the Solis Gardens Apartments’ owner to, (1) reimburse the property $1,556,322 from non-property funds for the ineligible distributions into the owner-controlled account; (2) reimburse the property account $35,979 from non-property funds for the ineligible deposits into the owner-controlled account from the reserve for replacement disbursements; (3) reverse the asset management fee accruals by $25,210 for the net over-accrual from 2023 and 2024; and (4) reimburse the property account $16,764 for excess property management fees.
 

The Tennessee Valley Authority’s (TVA) three nuclear plants, Browns Ferry, Sequoyah, and Watts Bar, are capable of generating an average of 8,275 megawatts of electricity, making TVA the third-largest nuclear fleet in the United States.  In fiscal year 2025, TVA generated 56,157 million kilowatt hours of nuclear power, accounting for 33 percent of TVA’s total fleet power generation.  To maintain the nuclear fleet, TVA is making significant investment.  For fiscal year 2025, the TVA Board of Directors approved $257 million to support reliable operation of the seven units across TVA’s three nuclear plants. 

Due to potential risks to cost and schedule from rework, we performed an evaluation of contractor rework for nuclear projects at TVA.  The objectives were to evaluate TVA’s oversight of contractor rework and determine if rework was being handled in accordance with contract terms and conditions.  Our scope included active nuclear projects in the implementation phase.

We reviewed nine contracts associated with our sample of projects and identified rework was required for one.  We could not determine if all rework identified was handled in accordance with contract terms and conditions due to a lack of formal documentation and tracking of rework.  In addition, we identified a lack of guidance for oversight of rework.  Specifically, TVA and Nuclear’s project management Standard Programs and Processes do not define rework or provide any information on how rework should be documented and tracked, which contributed to the inability to determine if all rework was handled in accordance with contract terms and conditions.

We identified a significant increase in the amount of funds drawn by HOME Investment Partnerships Program (HOME) and HOME American Rescue Plan (ARP) grantees near the time of the January 2025, hold in Federal funds, which increased the risk that the funds may have been drawn prematurely, without support, or used improperly.  Therefore, our audit objective was to identify if HOME and HOME ARP draws made near the time of the hold in federal funds were in accordance with program requirements.    

Out of eight grantees selected for review, two (New York City and the City of Anaheim) violated program requirements when they prematurely drew HOME and HOME ARP funds near the time of the hold in federal funds and made improper payments.  New York City and its subrecipient, the New York City Housing Authority (NYCHA), could not adequately support how $81.9 million in HOME ARP funds were used for a tenant arrears program, of which, over $6 million was used for ineligible tenants that were over the allowable income limit.  Both grantees drew a combined total of over $87 million in HOME and HOME ARP funds in advance of their immediate needs, in violation of program requirements.  Further, the City of Anaheim admitted to drawing an additional $404,630 in HOME and HOME ARP funds prematurely.  Both grantees earned interest income while holding the funds from their premature draws that they did not report to HUD and had not remitted to the U.S. Treasury.  Each grantee had different reasons for why these issues occurred including over-reliance on NYCHA, delays transferring and applying the funds, and concerns the hold in funds would jeopardize ongoing housing development.  The funds used for the ineligible tenants could have been used for other eligible and supported program activities to reduce homelessness and increase housing stability.  In addition, the combined premature draws of over $87 million misled HUD about the need for the funds and the resulting accumulated interest must be remitted to the U.S. Treasury.

We recommend that the Directors of HUD’s New York and Los Angeles Offices of Community Planning and Development, (1) require New York City to provide documentation to support its $81,913,050 draw of HOME ARP funds or repay its HOME Investment Trust Fund Treasury Account, (2) require both grantees to support the amount of interest earned while holding the funds and remit the funds to the U.S. Treasury, (3) review additional premature draws to determine eligibility, and (4) assess the adequacy of both grantees procedures and controls to ensure draws are made in accordance with program requirements.  We also recommend that HUD collaborate with its Office of Program Enforcement to consider potential administrative actions against both grantees for violating program requirements.