Rights of HUD Auditors To Review Case Files of Clients Serviced Under HUD Grants

The opinion of GAO was asked concerning the rights of Department of Housing and Urban Development (HUD) auditors to review case files and/or obtain the names and addresses of clients serviced under HUD grants by legal associations funded by the Legal Services Corporation. Three such organizations have refused to permit HUD access to the case files in connection with HUD audits of their grants. They believe that to permit HUD to examine the files which contain information identifying the clients would violate the ethical obligation of an attorney to preserve the confidences and secrets of his clients. HUD questioned whether the attorney-client privilege could be properly asserted in this instance where housing counseling services are concerned. HUD cited its need to have access to those files to complete its audits and suspended the funding of the organizations until such audits have been conducted. In connection with the grants, the legal services signed contracts containing assurances permitting HUD complete access to the grantees' books and records. In conducting audits of the legal services associations, GAO recognizes the ethical obligation of attorneys to preserve their clients' confidentiality and has accepted a restriction that information be divulged without identifying the names of the clients. It was the opinion of GAO that the legal services associations' attorneys are under an ethical obligation to protect client files that may contain confidential information. While this obligation should be respected, the Government should make every reasonable effort to assure that the grant funds are properly spent. GAO suggested that HUD arrange with the legal services associations to obtain the necessary information without client-identifying material. Several alternatives exist to resolve the problem. GAO did not recommend any particular method because the arrangements are dependent on the scope and extent of the audit being conducted.