Government Audit and Accountability of Federally Funded State-Administered Programs Act

— 513 — Department of Housing and Urban Development ENDNOTES 1. At a 1998 Senate hearing, then-HUD Secretary Andrew Cuomo acknowledged that the department “faced a competence gap” and had “the dubious distinction of being the only federal agency designated as ‘high risk’ by the General Accounting [now Government Accountability] Office (GAO),” even referencing the Section 8 rental subsidy as “on the brink of becoming the next savings and loan scandal,” and explained how the department was stepping up enforcement efforts “focused on closing the competence gap by eliminating waste, fraud, and abuse.” See “Testimony of Secretary Andrew Cuomo before the House Appropriations Subcommittee on VA, HUD, and Independent Agencies,” March 25, 1998, https://archives.hud.gov/ testimony/1998/tst32598.cfm (accessed March 4, 2023). 2. H.R. 7984, Housing and Urban Development Act of 1965, Public Law No. 89-117, 89th Congress, August 10, 1965, https://www.congress.gov/89/statute/STATUTE-79/STATUTE-79-Pg451.pdf (accessed March 4, 2023). 3. U.S. Department of Housing and Urban Development, 2023 Budget in Brief, pp. 2 and 7, https://www.hud.gov/ sites/dfiles/CFO/documents/2023_BudgetInBriefFINAL.pdf (accessed March 4, 2023). 4. For example, the Special Applications Center (SAC) located in Chicago, Illinois, was established in 1998 as a division of the Office of Public and Indian Housing to accept, review, and approve all nonfunded, noncompetitive applications and plans for demolition, disposition, and conversion of land subject to an annual contributions contract (ACC) in public housing. 5. The Secretary has delegated full authority for the Administration and enforcement of the Fair Housing Act to the Assistant Secretary of the Office of Fair Housing and Equal Opportunity but also has delegated limited assignment and decision-making authority to the General Counsel. 6. Effectively the HUD Chief Operating Officer and appointed by the President with Senate advice and consent. 7. The Office of Hearings and Appeals (OHA) is an independent adjudicatory office within the Office of the Secretary. Led by a Director who is appointed by the Secretary, it supervises the Administrative Judges of the Office of Appeals, the administrative law judges of the Office of Administrative Law Judges, and the OHA support staff. The HUD Secretary appoints administrative judges and administrative law judges in accordance with the Administrative Procedure Act, 5 U.S.C. Chapter 5, https://www.law.cornell.edu/uscode/text/5/part-I/ chapter-5 (accessed March 4, 2023). 8. HUD currently has a Departmental Equity Assessment Working Group, supported with five FTEs funded by the OSDBU, “as part of the President’s Executive Order 13985, Executive Order On Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.” See U.S. Department of Housing and Urban Development, 2023 Congressional Justifications, p. 35-15, https://www.hud.gov/sites/ dfiles/CFO/documents/2023HUDCongressionalJustificationsFINALelectronicversion.pdf (accessed March 4, 2023), and President Joseph R. Biden Jr., Executive Order 13985, “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government,” January 20, 2021, in Federal Register, Vol. 86, No. 14 (January 25, 2021), pp. 7009–7013, https://www.govinfo.gov/content/pkg/FR-2021-01-25/pdf/2021- 01753.pdf (accessed March 4, 2023). 9. Interestingly, “[t]he 2023 President’s Budget requests $748 thousand for CFBNP, which is $436 thousand less than the 2022 Annualized CR level. The Budget reflects total funding (carryover and new authority) of $1.2 million, $448 thousand less than 2022 total funding.” U.S. Department of Housing and Urban Development, 2023 Congressional Justifications, p. 35-16. 10. See H.R. 558, Stewart B. McKinney Homeless Assistance Act, Public Law No. 100-77, 100th Congress, July 22, 1987, https://www.govinfo.gov/content/pkg/STATUTE-101/pdf/STATUTE-101-Pg482.pdf (accessed March 5, 2023). Later renamed the McKinney–Vento Homeless Assistance Act. 11. Established under the Housing and Community Development Act of 1974, 42 U.S.C. §§ 5301 et seq., https:// www.law.cornell.edu/uscode/text/42 (accessed March 4, 2023). 12. S. 566, Cranston–Gonzalez National Affordable Housing Act, Public Law No. 101-625, 101st Congress, November 28, 1990, Title II, https://www.congress.gov/101/statute/STATUTE-104/STATUTE-104-Pg4079.pdf (accessed March 5, 2023). 13. S. 1, Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, Public Law No. 91-646, 91st Congress, January 2, 1971, https://www.congress.gov/91/statute/STATUTE-84/STATUTE-84-Pg1894.pdf (accessed March 4, 2023). “The URA establishes the minimum Federal requirements for the acquisition of real property for Federally-funded programs and projects, and for the relocation of persons who must move from — 514 — Mandate for Leadership: The Conservative Promise their homes, businesses, or farms as a direct result of acquisition, rehabilitation, or demolition for a Federally- funded program or project.” U.S. Department of Housing and Urban Development, HUD Exchange, “49 CFR Part 24–URA Regulations,” published February 2005, https://www.hudexchange.info/resource/804/ura-and- real-property-acquisition-policies-act-49-cfr-part-24/ (accessed March 4, 2023). HUD is one of the 18 federal departments and agencies that “are subject to the Uniform Act.” U.S. Department of Transportation, Federal Highway Administration, “Uniform Relocation Assistance and Real Property Acquisition for Federal and Federally Assisted Programs,” Federal Register, Vol. 84, No. 243 (December 18, 2019), pp. 69466–69521, esp. p. 69484, https://www.govinfo.gov/content/pkg/FR-2019-12-18/pdf/2019-25558.pdf (accessed March 4, 2023). 14. H.R. 3219, Native American Housing Assistance and Self-Determination Act of 1996, Public Law No. 104-330, 104th Congress, October 26, 1996, https://www.congress.gov/104/plaws/publ330/PLAW-104publ330.pdf (accessed March 4, 2023). 15. U.S. Department of Housing and Urban Development, 2023 Congressional Justifications, p. 6-1. The U.S. Housing Act of 1937 (Wagner–Steagall Act) established the origins of locally chartered housing agencies that administer federal funding for various rental assistance programs—a quintessentially progressive New Deal–era policy that expanded the administrative state’s powers to the housing market—with the primary legislative intent of eradicating slum housing in urban areas, boosting jobs, and providing housing for the working poor. 42 U.S.C. §§ 1437 et seq., https://www.law.cornell.edu/uscode/text/42 (accessed March 4, 2023). A decade later, the Housing Act of 1949 codified federal standards for housing livability—a rationale that HUD and federal legislators have continued to use to justify federal intervention in housing—establishing as a national policy objective the provision of a minimum standard of housing quality for all Americans. This legislation also statutorily established many of the rural housing programs that are administered at USDA and expanded programs facilitating the removal of slum housing in urban areas. 42 U.S.C. §§ 1441 et seq., https:// www.law.cornell.edu/uscode/text/42 (accessed March 4, 2023). 16. U.S. Department of Housing and Urban Development, 2023 Congressional Justifications, pp. 1-2 and 2-2. 17. The National Housing Act of 1934 established the FHA and the statutory authority for the secondary market. The main stated premise was to stimulate jobs and facilitate the housing and construction sector during the Great Depression. 42 U.S.C. §§ 1701 et seq., https://www.law.cornell.edu/uscode/text/12 (accessed March 4, 2023). 18. 42 U.S.C. §§ 2000d et seq., https://www.law.cornell.edu/uscode/text/42 (accessed March 4, 2023). 19. 29 U.S.C. §§ 701 et seq., https://www.law.cornell.edu/uscode/text/29 (accessed March 4, 2023). 20. HUD’s Departmental Enforcement Center (DEC) is led by a Director. It was established in 1998 as part of a broader effort to streamline and consolidate functions at HUD and was later merged with the Office of General Counsel. The DEC “is comprised of the Office of the Director, the Compliance Division, the Operations Division and five Satellite Offices” and describes its mission as “assuring the highest standards of ethics, management and accountability in the resolution of HUD's troubled properties.” U.S. Department of Housing and Urban Development, Departmental Enforcement Center, “Program Offices: Departmental Enforcement Center,” https://www.hud.gov/program_offices/enforcement (accessed March 4, 2023). 21. H.R. 5334, Housing and Community Development Act of 1992, Public Law No. 102-1017, 102nd Congress, October 28, 1992, Title X, https://www.congress.gov/102/statute/STATUTE-106/STATUTE-106-Pg3672.pdf (accessed March 4, 2023). 22. H.R. 8588, Inspector General Act of 1978, Public Law No. 95-452, 95th Congress, October 12, 1978, https://www. congress.gov/95/statute/STATUTE-92/STATUTE-92-Pg1101.pdf (accessed March 4, 2023). 23. Guiding questions: What immediate administrative reforms of HUD and its programs can be made with high probability of success? What short-term legislative reforms can be proposed that, in tandem with administrative reforms, would achieve the HUD vision/mission objective? What HUD offices should be eliminated and/or realigned to reduce any redundancy that may persist in programmatic functions? 24. Wholly aside from reforms that would require legislation, the next Administration must ensure that key political appointees are able to acquit themselves as change agents to execute administrative reforms. Otherwise, whether because of a sheer lack of skill and expertise or simply a lack of will and philosophical alignment with reforms, staff may frustrate the efforts of committed political appointee staff and leadership to execute substantive administrative reforms. To achieve the policy and regulatory reforms outlined in this chapter, political appointees must be carefully placed in positions that reflect not only technical, market/ industry, and operational expertise, but also a shared will and commitment.

— 467 — Department of Health and Human Services l Direct dollars to beneficiaries more effectively and responsibly. The current funding structure for the Medicaid program rewards expansions, lacks transparency, and promotes financing gimmicks. CMS should: 1. End state financing loopholes. 2. Reform payments to hospitals for uncompensated care. 3. Replace the enhanced match rate with a fairer and more rational match rate. 4. Restructure basic financing and put the program on a more fiscally predictable budget (which should include reform of Disproportionate Share Hospital payments to hospitals).31 l Strengthen program integrity. Make program integrity a top priority and the responsibility of the states. To protect the taxpayers’ investment: 1. Incentivize states. An enhanced contingency fee should be paid to states that successfully increase their efforts to decrease waste, fraud, and abuse. The current system’s IT development 90/10 matching rate should be allowed for improvements in states’ current fraud and abuse and eligibility systems. Innovative programs that show a positive return on investment for both the state and federal governments should be allowed without the onerous waiver process. 2. Improve Medicaid eligibility standards to protect those in need. As Medicaid enrollment continues to climb, it is imperative that there are appropriate and accurate eligibility standards to ensure that the program remains focused on serving those who are in need. To this end, CMS should: a. Hold states accountable for improper eligibility determinations. b. Require more robust eligibility determinations. c. Strengthen asset test determinations within Medicaid.32 3. Conduct oversight and reform of managed care.33 l Incentivize personal responsibility. CMS should allow states to ensure that Medicaid recipients have a stake in their personal health care and a say in decisions related to the Medicaid program. Personal responsibility

— 512 — Mandate for Leadership: The Conservative Promise housing model. At best, any new public investments will provide maintenance funds to bring substandard housing units and properties up to livability standards but will still fail to address larger aims of upward mobility and dynamism for local housing markets where land can be sold by PHAs and put to greater economic use, thereby benefiting entire local economies through greater private investment, productivity and employment opportunities, and increased tax revenue. Any long-term view of HUD’s future must include maintaining the strong financial operations and reliable reporting that are needed to run a $50 billion- per-year agency. Before the Trump Administration, HUD effectively did not have a Chief Financial Officer (CFO) for eight years, and HUD’s financial infrastructure inevitably deteriorated. The department’s auditors were unable to conclude that HUD’s internal operations were producing accurate financial reporting. The audi- tors had identified multiple material weaknesses and significant deficiencies in the department’s internal financial controls. Overall, the deterioration of HUD’s financial infrastructure led to a lack of accountability with respect to the use of taxpayer funds as well as to pervasive difficulties with operations and program implementation. However, by hiring a new CFO from the private sector with a proven track record of visionary leadership, HUD was able to implement an agencywide governance structure that improved its financial processes and internal controls and harnessed the power of innovative new technologies to bring a modernized business mindset to the agency’s financial infrastructure. By the end of the Trump Administration, for the first time in nearly a decade, HUD was able to address all of its previously identified material weaknesses, and the auditors were able to issue their first clean audit report on HUD’s financial statements and internal controls. Finally, and more fundamentally, Congress could consider a wholesale overhaul of HUD that contemplates devolving many HUD functions to states and localities with any remaining federal functions consolidated to other federal agencies (for example, by transferring loan guarantee programs to SBA; moving Indian housing programs to the Department of the Interior; moving rental assistance, mortgage insurance programs, and GNMA to a redesignated Housing and Home Finance Agency). Generally, this reform path could consolidate some programs, elimi- nate others that have failed to produce meaningful long-run results, and narrow the scope of many programs so that they are closer to what they were when they were created. — 513 — Department of Housing and Urban Development ENDNOTES 1. At a 1998 Senate hearing, then-HUD Secretary Andrew Cuomo acknowledged that the department “faced a competence gap” and had “the dubious distinction of being the only federal agency designated as ‘high risk’ by the General Accounting [now Government Accountability] Office (GAO),” even referencing the Section 8 rental subsidy as “on the brink of becoming the next savings and loan scandal,” and explained how the department was stepping up enforcement efforts “focused on closing the competence gap by eliminating waste, fraud, and abuse.” See “Testimony of Secretary Andrew Cuomo before the House Appropriations Subcommittee on VA, HUD, and Independent Agencies,” March 25, 1998, https://archives.hud.gov/ testimony/1998/tst32598.cfm (accessed March 4, 2023). 2. H.R. 7984, Housing and Urban Development Act of 1965, Public Law No. 89-117, 89th Congress, August 10, 1965, https://www.congress.gov/89/statute/STATUTE-79/STATUTE-79-Pg451.pdf (accessed March 4, 2023). 3. U.S. Department of Housing and Urban Development, 2023 Budget in Brief, pp. 2 and 7, https://www.hud.gov/ sites/dfiles/CFO/documents/2023_BudgetInBriefFINAL.pdf (accessed March 4, 2023). 4. For example, the Special Applications Center (SAC) located in Chicago, Illinois, was established in 1998 as a division of the Office of Public and Indian Housing to accept, review, and approve all nonfunded, noncompetitive applications and plans for demolition, disposition, and conversion of land subject to an annual contributions contract (ACC) in public housing. 5. The Secretary has delegated full authority for the Administration and enforcement of the Fair Housing Act to the Assistant Secretary of the Office of Fair Housing and Equal Opportunity but also has delegated limited assignment and decision-making authority to the General Counsel. 6. Effectively the HUD Chief Operating Officer and appointed by the President with Senate advice and consent. 7. The Office of Hearings and Appeals (OHA) is an independent adjudicatory office within the Office of the Secretary. Led by a Director who is appointed by the Secretary, it supervises the Administrative Judges of the Office of Appeals, the administrative law judges of the Office of Administrative Law Judges, and the OHA support staff. The HUD Secretary appoints administrative judges and administrative law judges in accordance with the Administrative Procedure Act, 5 U.S.C. Chapter 5, https://www.law.cornell.edu/uscode/text/5/part-I/ chapter-5 (accessed March 4, 2023). 8. HUD currently has a Departmental Equity Assessment Working Group, supported with five FTEs funded by the OSDBU, “as part of the President’s Executive Order 13985, Executive Order On Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.” See U.S. Department of Housing and Urban Development, 2023 Congressional Justifications, p. 35-15, https://www.hud.gov/sites/ dfiles/CFO/documents/2023HUDCongressionalJustificationsFINALelectronicversion.pdf (accessed March 4, 2023), and President Joseph R. Biden Jr., Executive Order 13985, “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government,” January 20, 2021, in Federal Register, Vol. 86, No. 14 (January 25, 2021), pp. 7009–7013, https://www.govinfo.gov/content/pkg/FR-2021-01-25/pdf/2021- 01753.pdf (accessed March 4, 2023). 9. Interestingly, “[t]he 2023 President’s Budget requests $748 thousand for CFBNP, which is $436 thousand less than the 2022 Annualized CR level. The Budget reflects total funding (carryover and new authority) of $1.2 million, $448 thousand less than 2022 total funding.” U.S. Department of Housing and Urban Development, 2023 Congressional Justifications, p. 35-16. 10. See H.R. 558, Stewart B. McKinney Homeless Assistance Act, Public Law No. 100-77, 100th Congress, July 22, 1987, https://www.govinfo.gov/content/pkg/STATUTE-101/pdf/STATUTE-101-Pg482.pdf (accessed March 5, 2023). Later renamed the McKinney–Vento Homeless Assistance Act. 11. Established under the Housing and Community Development Act of 1974, 42 U.S.C. §§ 5301 et seq., https:// www.law.cornell.edu/uscode/text/42 (accessed March 4, 2023). 12. S. 566, Cranston–Gonzalez National Affordable Housing Act, Public Law No. 101-625, 101st Congress, November 28, 1990, Title II, https://www.congress.gov/101/statute/STATUTE-104/STATUTE-104-Pg4079.pdf (accessed March 5, 2023). 13. S. 1, Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, Public Law No. 91-646, 91st Congress, January 2, 1971, https://www.congress.gov/91/statute/STATUTE-84/STATUTE-84-Pg1894.pdf (accessed March 4, 2023). “The URA establishes the minimum Federal requirements for the acquisition of real property for Federally-funded programs and projects, and for the relocation of persons who must move from