During a House Financial Services Committee hearing prior to the congressional recess, Rep. Tim Moore (R-NC) questioned Stephen Begg, the Acting Inspector General of U.S. Department of Housing and Urban Development, about cracking down on fraud within the agency.
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00:00Chairman Yilts, the gentleman from North Carolina, Mr. Moore, is now recognized for five minutes.
00:04Thank you, Mr. Chairman. Mr. Begg, thank you for coming before the committee today.
00:08I have a slightly different series of questions than some of the folks who've spoken already.
00:14Back last September, Western North Carolina was significantly impacted by Hurricane Helene.
00:21Estimates are, in our state alone, roughly $80 billion in damage.
00:25Families and businesses lost everything. Because of where this happened, most folks didn't have any kind of flood insurance of any kind.
00:35Estimates are indicating that it could be around $15 billion needed for housing assistance and recovery alone.
00:43So just an absolutely immense amount.
00:45I can tell you that after the aftermath, I witnessed firsthand the resilience of the folks in my district and throughout Western North Carolina.
00:53Our state legislature that I was a member of last year stepped up and provided some amazing relief to get funds out there and resources out there to help deal with this catastrophe.
01:06And I've got to say, folks in North Carolina stepped out in a significant way to help one another.
01:11And folks from outside the state, volunteers, you name it.
01:14One of the questions that kept coming up and where folks were scratching their head was the federal response.
01:21And I have to say that the federal response prior to this year was very lacking, particularly as it pertains to HUD and on the housing side.
01:32A lot of folks were not being told exactly what to expect.
01:36They were getting, I guess, for lack of a better word, the runaround.
01:39They weren't even sure what resources were being made available that folks have in their temporary housing, potentially going to be cut off.
01:48I mean, just a lot of really bad things.
01:49I do have to say that after the new administration came in, a lot of that has significantly improved, although it's not perfect, but it has improved.
01:59So we do appreciate that.
02:01But the Department of Housing and Urban Development, Community Development Block Grant Disaster Recovery Program is going to be a critical part of our long-term recovery.
02:14One of the things, though, that, and I don't fully understand it, frankly, as a member of Congress, is that is the formula that HUD uses to determine the CDBGDR allocations.
02:26As far as I know, that may not even be public.
02:28And so I guess that sort of fuels a number of questions.
02:33One is, what vulnerabilities to fraud or abuse are created by the lack of transparency in this allocation process?
02:43Well, with respect to the allocation process, I'm not sure that we've studied how it contributes to potential fraud, waste, and abuse.
02:53There are a number of things that do contribute to that in the disaster program, but we haven't examined the allocation as a contributor to that.
03:03Well, would you believe that it's essential that the CDBGDR money is spent in helping these communities recover?
03:10Absolutely.
03:11And so in January of 2024, of course, this was before your time, the HUD OIG launched an audit to determine whether four Community Development Block Grant Disaster Recovery grantees had made improper payments.
03:26According to y'all's office, the grantees have budgeted more than $904 million and had spent almost $356 million on completed and underway match activities.
03:41Why did – do you know – again, this was before your time, but I don't know if you had a chance to look.
03:45Why did their spending raise red flags?
03:49Well, I was the deputy inspector general when we launched the audit, so I'm familiar with it.
03:55And the match program allows grantees to use HUD funding to contribute their match portion with other federal programs.
04:07The concern that we have is that HUD doesn't require grantees to report to them or track how they use match funds.
04:17So in our examination, we've seen instances where if the match requirement is 90% FEMA, 10% on the grantee, there are instances frequently where we see 90% FEMA, 90% HUD.
04:33And so grantees aren't tracking it, they're not reporting it to HUD, HUD's not able to monitor it, the data system doesn't capture it.
04:41That's our concern is that HUD funding is just being wasted above the amount that's been authorized.
04:47So I guess then, like, what kinds of payments is your office looking to identify and remedy?
04:53It would be those that are above the match cap.
04:56Those are technically improper payments in our view.
04:59And are you share the status of that audit?
05:01We are in the process of issuing a report in that audit.
05:07We believe it will be in the coming months.
05:10We issued an interim report when we identified the lack of tracking to flag that issue for HUD because we thought they needed to take action on it immediately.
05:19But we will be issuing another report on the review soon.
05:22Thank you, sir.
05:23I yield back, Mr. Chairman.