Department of Housing and Urban Development (HUD) officials refuse to explain why they haven’t fixed poor accounting practices and useless financial books their inspector general (IG) has been exposing for four years.
It’s not clear whether HUD officials understand what they’re doing is wrong because, their spokesman, Brian Sullivan, told The Daily Caller News Foundation Investigative Group that “HUD does apply generally accepted accounting standards.”
Not so, said the IG, whose most recent audit found 11 “material weaknesses,” seven “significant deficiencies” in internal controls, and five instances of “noncompliance with applicable laws and regulations.”
The laundry list of accounting failures, “were due to an inability to establish a compliant control environment, implement adequate financial accounting systems, retain key financial management staff, and identify appropriate accounting principles and policies,” the IG said.
The same conclusions have now been reported by the IG for three straight years. (RELATED: HUD’s Books Are Basically Worthless)
“Due to late restatements performed by HUD’s component entities, the Government National Mortgage Association (Ginnie Mae) and Federal Housing Administration (FHA), and delays in HUD’s reporting process, HUD was unable to provide final consolidated financial statements and accompanying notes in a timeframe that would allow us to obtain sufficient, appropriate evidence to determine if they were free from material misstatement,” the latest IG report summarized. “Therefore, we are unable to provide an opinion on the fiscal year 2016 and 2015 (restated) consolidated financial statements and accompanying notes at this time.”
The IG added that accounting for HUD’s Office of Community Planning and Development (CPD) “was not performed in accordance with federal generally accepted accounting principles (GAAP), which resulted in misstatements in HUD’s combined statement of budgetary resources,” the IG said. “Therefore, we could not assess whether the balances reported were reasonable.”
The department’s financial books are something the next HUD secretary will confront after succeeding current Secretary of Housing and Urban Development Julian Castro. The department has a history of failing to comply with IG recommendations on financial management, ignoring 63 of them since 2012.
Ginnie Mae, a key player in the 2008 housing crisis, for the third year in a row, “could not bring its material asset balances” over some of its loan assets “into an audit-able state,” the IG added in its laundry list of HUD’s financial woes.
HUD’s lawyers also refused to sign off on a letter detailing all actual or possible litigation against HUD and include that litigation in financial statements, meaning the IG has no idea if HUD is properly accounting for all legal claims and assessments in its books.
“Due to legal counsel’s refusal to sign off on these matters, which is a scope limitation, we lacked assurance that all known or possible litigation, claims and assessments had been properly accounted for or disclosed in the consolidated financial statements in accordance with generally accepted accounting principles,” the IG said.
HUD’s Sullivan said the department issued separate legal letters detailing that information, although he wouldn’t tell TheDCNF why HUD refused to comply with the IG’s method.
“It looks like they didn’t make any progress,” Bill Bergman told TheDCNF. Bergman is research director at the Chicago-based nonprofit government watchdog Truth in Accounting,
“That’s the point. That’s what smells. HUD is a symptom of an inability to learn from history that we keep paying a price for,” Bergman said of the federal department with a $50 billion annual budget.
Bergman called HUD’s failure to fix CPD’s accounting “problematic. That’s something you could fix or you should be able to fix and it’s problematic that they haven’t. It may suggest not only an inability but perhaps an unwillingness to do this, which is perhaps more concerning.”
The private sector would never tolerate HUD’s approach to accounting, Bergman said.
“These types of disclaimers in the private sector have much more severe consequences in the private sector,” Bergman said. “The board of directors will typically act to any repeated failures like this and you will see new faces.”
“Perhaps we need to consider the relevant committees in Congress as a part of the solution as well,” Bergman suggested.
Curtis Kalin, spokesman for Citizens Against Government Waste, said HUD’s failure to address its financial accounting problems speaks to more than incompetency.
“Effective auditing is essential to prevent government waste,” Kalin told TheDCNF. “HUD’s failure to properly maintain basic financial documents calls into question the department’s commitment to safeguarding taxpayer dollars.”
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