Sneak Preview: HUD OIG Calls for Declaration of Trust Oversight

April 28, 2016 | By Jerry Ashworth | Post a Comment

xsass_bookshot(The following was excerpted from a recent article in the Single Audit Information Service.) The Department of Housing and Urban Development (HUD), Office of Inspector General (OIG) recently recommended that HUD enhance its oversight of public housing agencies (PHAs) to ensure they maintain valid declarations of trust for all HUD-assisted properties. A declaration of trust is a legal instrument that grants HUD an interest in a public housing property supported by federal funds. The legal instrument protects HUD’s financial investment in the property by allowing it to seize and reassign a property in the event of substantial default.

Such procedures could include that HUD work with the Office of Management and Budget (OMB) to amend the Compliance Supplement to require that auditors more thoroughly review public housing properties to adequately determine whether they are included in the PHA’s declaration of trust.

PHAs that receive HUD assistance are required to maintain a declaration of trust for all properties that benefit from federal funding. The declaration of trust also provides public notice that the property was developed, maintained or operated with federal assistance and is, therefore, held in trust by the PHA for the benefit of HUD. It restricts PHAs from leasing or mortgaging the property without HUD’s permission.

In August 2009, HUD issued a policy notice requiring PHAs to be in full compliance with the declaration of trust requirements within 12 months. For those that failed to comply with the policy notice, HUD said it would take actions that included: (1) temporarily withholding cash payments pending correction of the deficiency; (2) wholly or partially suspending or terminating the PHA’s current award; (3) requiring that some or all of the PHA’s grant funds be remitted to HUD; and (4) withholding further awards to the PHA.

The OIG audited HUD’s oversight of the declaration of trust policy from October 2012 to September 2014. Of the 115 properties administered by 82 PHAs that the OIG reviewed, two did not have declarations of trust and 20 properties had declarations of trust with deficiencies that impaired their validity. Among these 20 projects, 12 had declarations of trust that expired or were almost expired; eight had declarations of trust that were not in the form required by HUD; two had declarations that did not contain legal descriptions; and one declaration was not signed by the PHA. The OIG further added that it could not determine whether the declarations of trust were sufficient for 47 other properties.

(The full version of this story has now been made available to all for a limited time on Thompson’s Grants Compliance Expert site.)


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