During a House Financial Services Committee hearing prior to the congressional recess, Rep. Andrew Garbarino (R-NY) questioned Stephen Begg, the Acting Inspector General of U.S. Department of Housing and Urban Development, about anti-fraud efforts within public housing.
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00:00Chairman Yields, the gentleman from New York, Mr. Garbarino, is now recognized for five minutes.
00:05Thank you, Chairman. Thank you, Mr. Meg, for coming here today.
00:102024 was a record-setting year for the New York City Housing Authority,
00:14but it was just for the right reason.
00:17In February of 2024, 70 NYCHA, current and former superintendents, and staff were arrested
00:22for allegedly pocketing bribes in exchange for granting no bid or microcontract repair work.
00:27This 10-year, $2 million classic pay-for-play corruption scheme was the largest number of federal bribery arrests
00:33brought in a single day in DOJ history and included public housing employees at developments in every borough.
00:40The employees had the power to hand out smaller micro-purchase contracts of $5,000,
00:45which increased to $10,000 after 2019 that fell below the amounts that triggered competitive bidding.
00:52The contractors would then pay kickbacks to NYCHA employees who awarded the contract.
00:56Correct. Mr. Begg, following this incident, your office released a report examining NYCHA's findings.
01:01Its mitigation processes are largely reactionary.
01:06NYCHA is the largest public housing authority in the United States, correct?
01:10That's correct.
01:12And NYCHA receives billions of federal funding from HUD each year?
01:15I believe over $3 billion.
01:16In fact, NYCHA receives over 25% of HUD's rental assistance funding nationwide.
01:22Correct.
01:24Yet the report found that NYCHA did not assess fraud risks across the entire organization.
01:30In fact, NYCHA did not develop a process to identify fraud risk.
01:34It did not develop a response plan.
01:35And it did not implement a process to monitor and evaluate the effectiveness of fraud risk management activities.
01:44As the largest public housing authority in the United States, one would hope that they would be more organized or better organized.
01:51Mr. Begg, I understand that it varies amongst housing authorities.
01:54I worked at a law firm before I came to Congress that represented a housing authority.
01:57We did not have this problem.
01:59But I would say that, would you venture to say that these failures are common across other public housing authorities?
02:06I would.
02:07And with respect to NYCHA, it's a sophisticated organization.
02:13They have many things that are in place.
02:15They have a lot of anti-fraud activities that are happening across their programs.
02:22They're just not structured in a way that's coordinated across the organization and proactive.
02:29And so, in many instances, they're actually farther along than most housing authorities.
02:34They're leading the pack.
02:36But they still have room to go.
02:37So, we do think that these issues are very pervasive at other housing authorities.
02:43That's kind of scary that you said that they're further along than other housing authorities.
02:47But this is still happening.
02:49It's still happening there.
02:50It just happened last year.
02:52What can HUD do to provide more guidance when it comes to mitigating public housing authority fraud risk?
03:00Well, first, they need to assess the risks in each of the programs that housing authorities operate.
03:06HUD needs to do that and identify what it sees fraud risks as.
03:10And then require housing authorities to have anti-fraud programs that meet the standards that GAO has established for federal programs.
03:19And then give them guidance on how to meet those expectations and work with them to strengthen those anti-fraud controls over time.
03:27Do the fraud risks vary by size of a housing authority?
03:33If they do an assessment, does one cover NYCHA all the way down to a small town housing authority?
03:40They do vary depending on the size.
03:43And we recommended in that report that PIH assess fraud risks at large housing authorities like NYCHA.
03:51The no bid contracts that you mentioned in a large organization where there are many of them happening all the time.
03:58It is hard to oversee low dollar contracts.
04:01But if you're in a small housing authority that may have only a handful of people, you're not going to have that kind of traffic.
04:09At the smaller housing authorities, the issues are usually a lack of segregation of duties.
04:14One person controls the money and the accounting.
04:17And so there's no one to know whether it's gone missing.
04:22And so it sounds like it sounds like a lack of formal guidance is a factor in the lack of formal guidance from HUD is a factor
04:29in this risk of fraud.
04:35How often does HUD terminate or suspend funding due to underperformance or fraudulent activity?
04:40I don't have the answer to that off the top of my head.
04:42I'd be happy to get back to you on that.
04:46I have my last question.
04:49Public housing authorities have a governance structure.
04:52Should there be reforms or the makeup of those boards that could result in a more competent or effective board?
04:58I think that depends on the context in terms of governance.
05:03But I know that governance structures across the PHA space have been a challenge.
05:12I'm out of time.
05:13Thank you very much for being here today.
05:14I yield back.