Financial Management
Information on the Mandated Transfer of HUD's Appropriation Law Function to the Chief Financial Officer Gao ID: GAO-04-272R November 21, 2003The Departments of Veterans Affairs and Housing and Urban Development (HUD), and Independent Agencies Appropriations Act, 2003 (the Appropriation Act) gave HUD's Chief Financial Officer (CFO), in consultation with the HUD Budget Officer, the "sole authority" to investigate potential or actual violations under the Anti- Deficiency Act and all other statutes and regulations related to the obligation and expenditure of funds made available in any act. Further, the Appropriations Act provided that the CFO shall determine whether violations occurred and submit the final reports required by law. Finally, the Appropriation Act required the Secretary of HUD to transfer no fewer than four appropriation law attorneys from its Office of General Counsel (OGC) to its Office of Chief Financial Officer (OCFO). These provisions and HUD's actions to implement the Appropriation Act's requirements raised a number of potential implementation issues and led to a Congressional request that we review and provide information on the impact that these provisions have had at HUD. Specifically, Congress asked for information pertaining to five questions, which we have provided in a question and answer format in this report. As discussed, the responses to these questions are primarily based on information obtained from interviews with various HUD and HUD Office of Inspector General (OIG) officials who were affected by the Appropriation Act.
There was general agreement among the HUD officials we spoke with that the OMHAR Anti-Deficiency Act investigation was contentious and highlighted the need for changes to strengthen the department's funds control system and to improve the department's process for responding to Anti-Deficiency Act issues. Some HUD officials also told us that tension over the handling of Anti-Deficiency Act issues led to changes in OGC's provision of legal assistance to OCFO, which hindered timely, informal communications between OCFO and OGC's appropriation law attorneys. However, there were differing views on how to address these matters and on various implementation issues raised about provisions included in the Appropriation Act. There was agreement on what functions and roles OCFO assumed pursuant to the Appropriation Act. HUD transferred four appropriations law attorneys from OGC to OCFO as required. Also, in addition to OCFO's typical responsibilities of accounting, financial reporting, budgeting, and establishing and maintaining the department's funds control system, the HUD officials concurred that OCFO is now responsible for all appropriation law matters, including providing legal interpretations on appropriation law to HUD's Secretary and program offices and leading all Anti- Deficiency Act investigations that may arise within the department. There also was general consensus that having OCFO as a designated focal point within HUD for addressing Anti-Deficiency Act matters was a positive development. OCFO has taken certain steps that it believes will help minimize the potential for, or the appearance of, a conflict of interest by establishing and documenting the process that will be followed if and when future Anti-Deficiency Act violations arise. Additionally, OCFO is also now finalizing the establishment of a new division within OCFO that will be headed by an individual with no budgetary or funds control responsibilities to oversee and report on future Anti-Deficiency Act investigations. The HUD program officials and most of the attorneys, including the head appropriations law attorney in OCFO, we spoke with who work with the program offices every day did say that despite HUD's best efforts to implement the new mandated structure and ensure collaboration among the two groups of attorneys, the transfer of the appropriations law attorneys from OGC to OCFO caused initial and lingering confusion over which group of attorneys should be consulted for legal assistance. Historically, the General Counsel has made the final interpretation. On the other hand, officials from OCFO said the transfer of the appropriation attorneys was necessary because at some point during the OMHAR Anti-Deficiency Act investigation the General Counsel began restricting access to the appropriation law attorneys by requiring formal written requests for all appropriation law services. As a result, an official in HUD's OCFO said that his office and the program offices could not obtain needed assistance on appropriation law issues in a timely manner. Finally, OIG officials told us that they see two conflicts, or at least possible conflicts, between the literal language of the Appropriations Act and the language of the IG Act. First, they said that by providing OCFO with "sole authority" to investigate potential or actual Anti-Deficiency Act violations, the Appropriations Act conflicts with the language of the IG Act that generally authorizes the OIG to investigate HUD matters. In response to this conflict, the OIG is referring all potential Anti-Deficiency Act issues to HUD's OCFO. Second, the OIG officials said they believe there is a possible conflict between OCFO's sole authority to report on Anti-Deficiency Act violations under the Appropriation Act and the OIG's authority to report criminal violations to the Attorney General under the IG Act.
GAO-04-272R, Financial Management: Information on the Mandated Transfer of HUD's Appropriation Law Function to the Chief Financial Officer
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November 21, 2003:
The Honorable Christopher S. Bond:
Chairman:
The Honorable Barbara A. Mikulski:
Ranking Minority Member:
Subcommittee on Veteran Affairs, HUD and Independent Agencies:
Committee on Appropriations:
United States Senate:
Subject: Financial Management: Information on the Mandated Transfer of
HUD's Appropriation Law Function to the Chief Financial Officer:
The Departments of Veterans Affairs and Housing and Urban Development
(HUD), and Independent Agencies Appropriations Act, 2003 (the
Appropriation Act)[Footnote 1] gave HUD's Chief Financial Officer
(CFO), in consultation with the HUD Budget Officer, the "sole
authority" to investigate potential or actual violations under the
Anti-Deficiency Act[Footnote 2] and all other statutes and regulations
related to the obligation and expenditure of funds made available in
any act. Further, the Appropriations Act provided that the CFO shall
determine whether violations occurred and submit the final reports
required by law. Finally, the Appropriation Act required the Secretary
of HUD to transfer no fewer than four appropriation law attorneys from
its Office of General Counsel (OGC) to its Office of Chief Financial
Officer (OCFO).
These provisions and HUD's actions to implement the Appropriation Act's
requirements raised a number of potential implementation issues and led
to your request that we review and provide information on the impact
that these provisions have had at HUD. Specifically, you asked for
information pertaining to the following five questions, which we have
provided in a question and answer format in this report. As discussed
with your staff, the responses to these questions are primarily based
on information obtained from interviews with various HUD and HUD Office
of Inspector General (OIG) officials who were affected by the
Appropriation Act.
1. What functions were transferred to OCFO and how has HUD implemented
the administration of these functions within OCFO?
2. Is there any conflict between the CFO's traditional duties and
responsibilities and (a) the sole authority to investigate and report
on potential or actual violations of statutes and regulations related
to the obligation and expenditure of funds or (b) the added
responsibility of sole authority to opine on all appropriations law
issues?
3. What steps has HUD taken to ensure that any conflict of interest has
been identified and eliminated?
4. Are there any issues associated with removing the HUD General
Counsel from being able to review any appropriations law actions of the
CFO or the HUD Budget Officer and render timely, needed advice to the
HUD Secretary on any aspect of appropriations law?
5. Does the "sole authority" to investigate and report provided to the
CFO by the Appropriation Act conflict with or undermine the authority
provided to the Inspector General by the Inspector General Act?
To address your request, we obtained and reviewed the relevant
provisions of the Appropriation Act and related conference and
committee reports. We interviewed several senior level HUD officials
affected by the Appropriation Act's provisions, including the General
Counsel and several other attorneys from HUD's OGC; HUD's Deputy Chief
Financial Officer[Footnote 3] and staff from his office, including the
head appropriations law attorney and HUD's budget officer; and senior
officials from HUD's program offices who receive legal services from
HUD's attorneys. We also interviewed officials from HUD's OIG and
reviewed the OIG's March 2002 report on the Office of Multifamily
Housing Assistance Restructuring (OMHAR) Anti-Deficiency Act
case.[Footnote 4] We also reviewed the Anti-Deficiency Act, the Chief
Financial Officers Act of 1990, and the Inspector General Act of 1978,
as amended (IG Act). Finally, we reviewed the department's revised
funds control handbook dated December 18, 2002, which was updated and
issued just prior to the enactment of the Appropriation Act and which
lays out HUD's process for handling future Anti-Deficiency Act
issues.[Footnote 5] We requested comments on a draft of this report
from the Secretary of Housing and Urban Development and HUD's Inspector
General or their designees. We conducted our work from August 2003
through November 2003 in accordance with U.S. generally accepted
government auditing standards.
Summary:
There was general agreement among the HUD officials we spoke with that
the OMHAR Anti-Deficiency Act investigation was contentious and
highlighted the need for changes to strengthen the department's funds
control system and to improve the department's process for responding
to Anti-Deficiency Act issues. Some HUD officials also told us that
tension over the handling of Anti-Deficiency Act issues led to changes
in OGC's provision of legal assistance to OCFO, which hindered timely,
informal communications between OCFO and OGC's appropriation law
attorneys. However, there were differing views on how to address these
matters and on various implementation issues raised about provisions
included in the Appropriation Act.
There was agreement on what functions and roles OCFO assumed pursuant
to the Appropriation Act. HUD transferred four appropriations law
attorneys from OGC to OCFO as required. Also, in addition to OCFO's
typical responsibilities of accounting, financial reporting,
budgeting, and establishing and maintaining the department's funds
control system, the HUD officials concurred that OCFO is now
responsible for all appropriation law matters, including providing
legal interpretations on appropriation law to HUD's Secretary and
program offices and leading all Anti-Deficiency Act investigations that
may arise within the department. There also was general consensus that
having OCFO as a designated focal point within HUD for addressing Anti-
Deficiency Act matters was a positive development.
Regarding the remaining questions you raised, there was much less
consensus concerning potential conflicts of interest and the respective
roles of OCFO, OGC, and the IG. Responses to the remaining questions
revealed different perspectives, most notably over the implication of
the Appropriation Act providing OCFO with "sole authority" to
investigate and determine violations of appropriation law and
transferring attorneys from OGC to OCFO.
Certain HUD officials and the OIG officials we spoke with believe there
is a conflict of interest, or at least the appearance of a conflict, by
having OCFO solely responsible for investigating, determining, and
reporting on potential or actual Anti-Deficiency Act violations in
situations involving breakdowns in HUD's funds control system. The OIG
officials cited the OMHAR Anti-Deficiency Act case as a prime example
of the existence of a conflict as two of the four individuals deemed
responsible for that violation worked within OCFO. Others, particularly
within HUD's OCFO, while acknowledging these concerns, did not
necessarily feel that the Appropriation Act's provisions created a
conflict. Instead they said it was their management responsibility,
even without the legislation, to be involved with and lead
investigations of potential or actual Anti-Deficiency Act violations.
Nevertheless, OCFO has taken certain steps that it believes will help
minimize the potential for, or the appearance of, a conflict of
interest by establishing and documenting the process that will be
followed if and when future Anti-Deficiency Act violations arise.
Additionally, OCFO is also now finalizing the establishment of a new
division within OCFO that will be headed by an individual with no
budgetary or funds control responsibilities to oversee and report on
future Anti-Deficiency Act investigations.
The HUD program officials and most of the attorneys, including the head
appropriations law attorney in OCFO, we spoke with who work with the
program offices every day did say that despite HUD's best efforts to
implement the new mandated structure and ensure collaboration among the
two groups of attorneys, the transfer of the appropriations law
attorneys from OGC to OCFO caused initial and lingering confusion over
which group of attorneys should be consulted for legal assistance.
According to the General Counsel, this confusion delays legal advice,
provides the opportunity for program officials to "shop" for legal
interpretations, and hampers his ability to provide timely, needed
legal advice not only to the Secretary but also to the HUD program
offices. Further, numerous officials said they were not sure how
differing legal views would be resolved. Historically, the General
Counsel has made the final interpretation. On the other hand, officials
from OCFO said the transfer of the appropriation attorneys was
necessary because at some point during the OMHAR Anti-Deficiency Act
investigation the General Counsel began restricting access to the
appropriation law attorneys by requiring formal written requests for
all appropriation law services. As a result, an official in HUD's OCFO
said that his office and the program offices could not obtain needed
assistance on appropriation law issues in a timely manner.
Finally, OIG officials told us that they see two conflicts, or at least
possible conflicts, between the literal language of the Appropriations
Act and the language of the IG Act. First, they said that by providing
OCFO with "sole authority" to investigate potential or actual Anti-
Deficiency Act violations, the Appropriations Act conflicts with the
language of the IG Act that generally authorizes the OIG to investigate
HUD matters. In response to this conflict, the OIG is referring all
potential Anti-Deficiency Act issues to HUD's OCFO. Second, the OIG
officials said they believe there is a possible conflict between OCFO's
sole authority to report on Anti-Deficiency Act violations under the
Appropriation Act and the OIG's authority to report criminal violations
to the Attorney General under the IG Act. On the other hand, officials
from HUD's OCFO said that the OIG should not routinely be involved in
an Anti-Deficiency Act violation until an official determination has
been made by the department. At that time, the OCFO official said it
would be appropriate for the OIG to review the work that went into the
investigation, and more importantly and pursuant to their authority, to
investigate and determine whether criminal acts may have been
committed.
Background:
In its report[Footnote 6] on the fiscal year 2003 Departments of
Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Bill, the House Appropriations Committee noted
that in prior years it and others, including GAO and the Office of
Management and Budget (OMB), had raised concerns about HUD's system of
funds control and compliance with the Anti-Deficiency Act. Congress
enacted the Anti-Deficiency Act and has amended it over many years to
prohibit agencies from making obligations and expenditures in excess of
the appropriations provided to them. Among other things, the Anti-
Deficiency Act prohibits officers or employees of the United States
government, unless otherwise authorized by law, from (1) making or
authorizing an obligation or expenditure in excess of an available
appropriation or fund, (2) involving the government in any contract or
obligation in advance of appropriations, or (3) making obligations or
expenditures in excess of an apportionment or the amount permitted by
agency regulations. To help protect against violating the Anti-
Deficiency Act's prohibitions, Congress amended the Anti-Deficiency Act
on several occasions to establish requirements for agency systems of
funds control. When violations do occur, the Anti-Deficiency Act
requires that agency heads report to the President and Congress and
subjects the officers and employees responsible for the violation to
possible adverse personnel actions and criminal penalties.[Footnote 7]
The House Appropriations Committee report also noted that these
concerns and three recent Anti-Deficiency Act violations[Footnote 8]
that were brought to the Committee's attention prompted an
investigation by the Committee's Survey and Investigations staff into
HUD's procedures to investigate and enforce the Anti-Deficiency Act.
According to the House Appropriations Committee report, the House
investigators determined that HUD lacked adequate funds control
policies and procedures with respect to oversight, checks and balances,
automated systems, audits, and training.
On the basis of these findings, the House Appropriations Committee
included bill language and additional funding to assist HUD's efforts
to improve funds control and its financial management systems.
Additional bill language vested the sole authority to investigate,
determine, and report compliance with the Anti-Deficiency Act and all
other appropriations law with HUD's OCFO. The bill language also
required the transfer of no fewer than four appropriation law attorneys
from OGC.
The Senate's version of the fiscal year 2003 appropriations bill for
HUD did not contain any similar provisions. The Departments of Veterans
Affairs and Housing and Urban Development, Independent Agencies
Appropriations Act, 2003, was ultimately enacted on February 20, 2003,
as part of the Consolidated Appropriations Resolution, 2003.[Footnote
9] The appropriations for HUD "Management and Administration, salaries
and expenses" essentially adopted the language from the House bill that
involved OCFO's responsibilities for Anti-Deficiency Act and other
appropriation law matters and the transfer of four appropriation law
attorneys.[Footnote 10] In the conference report[Footnote 11] on the
Consolidated Appropriations Resolution, 2003, the conferees reiterated
the concerns expressed in the House report about the severe chronic
funds control problems at HUD, including the department's failure to
make timely, formal determinations of the violations of the Anti-
Deficiency Act and other appropriations statutes. As of March 2003, HUD
had completed the mandated transfer of the four appropriation law
attorneys from OGC to OCFO.
Questions and Answers:
1. What functions were transferred to OCFO and how has HUD implemented
the administration of these functions within OCFO?
Provisions in the Appropriations Act, gave OCFO, in consultation with
the Budget Officer, the "sole authority" to investigate potential or
actual violations of the Anti-Deficiency Act and all other statutes and
regulations related to the obligation and expenditure of funds. In
addition, OCFO is to determine whether violations exist and is to
submit the final reports on violations to the Secretary, the President,
OMB, and Congress.
As required by the Appropriations Act, HUD transferred four attorneys
from the Legislation Division, Office of Legislation and Regulations,
Office of General Counsel to OCFO. Two of these attorneys had what HUD
described as "significant" appropriations law experience, while the
other two had lesser amounts of appropriations law experience. OCFO's
appropriations law function is now responsible for providing legal
assistance on all appropriations law matters to HUD's program offices
as well as the HUD Secretary. The appropriation law attorneys are
supervised by a GM-15 attorney and are currently reporting to HUD's
Deputy CFO, who is not an attorney.
2. Is there any conflict between the CFO's traditional duties and
responsibilities and (1) the sole authority to investigate and report
on potential or actual violations of statutes and regulations related
to the obligation and expenditure of funds or (2) the added
responsibility of sole authority to opine on all appropriations law
issues?
HUD's OCFO typically has been responsible for the department's
accounting, financial reporting, and budgeting functions, as well as
for creating and maintaining HUD's system of funds control to ensure
appropriated funds are used lawfully and as intended. Given these
responsibilities, several of the HUD officials and the OIG officials we
interviewed told us that they do believe the new responsibilities
provided in the Appropriation Act have led to or increased the
potential for a conflict of interest or at least the appearance of a
conflict of interest. A chief concern is that OCFO is now solely
responsible for investigating potential Anti-Deficiency Act violations
that involve breakdowns in the funds control system, which it is
responsible for administering. Also, OCFO attorneys are now in the
position of having to render legal interpretations that may directly
implicate the performance of the CFO for whom they now work.
Additionally, there were some concerns raised about the supervision and
rating of the OCFO attorneys. The OIG officials cited the OMHAR Anti-
Deficiency Act case as prime example of why the Appropriation Act
created a conflict of interest. In the Secretary's OMHAR Anti-
Deficiency Act report, two of the four persons or positions deemed
responsible for the violation worked within OCFO.
Others at HUD, principally in OCFO, told us they do not believe there
is a clear conflict. Their belief is that since OCFO has been delegated
responsibility for funds control within the department, management of
that responsibility dictates that OCFO should also be responsible for
and involved with assessing where that system failed, and if an Anti-
Deficiency Act violation occurred. Further, HUD's budget officer
believes the Anti-Deficiency Act and OMB circulars make it clear that
the funds control responsibilities rest within OCFO.
The Deputy CFO and some others said the Appropriation Act was useful in
that it clearly establishes who within HUD has responsibility for
leading and making future Anti-Deficiency Act violation determinations.
During the OMHAR Anti-Deficiency Act investigation, these
responsibilities were not clearly defined and this hampered the
investigation. HUD's updated funds control handbook now specifies
individuals' responsibilities with respect to future Anti-Deficiency
Act issues. Further, the Deputy CFO stated that the appropriation law
attorneys now assigned to his office can focus on reviewing newly
required funds control plans, which he and others believe are a key
component in strengthening HUD's system of funds control to prevent
future Anti-Deficiency Act violations.
The Deputy CFO said that OCFO did recognize that others have concerns
about the potential for an appearance of a conflict of interest and
therefore, as discussed in the response to question 3, has taken or
plans certain actions to help mitigate these concerns.
3. What steps has HUD taken to ensure that any conflict of interest has
been identified and eliminated?
Given the responsibilities of HUD's OCFO, it would be difficult to
completely eliminate the potential for a conflict of interest or the
appearance of a conflict of interest. However, HUD has taken or is
planning to take certain steps to try to mitigate this risk.
Specifically, we were told that OCFO is in the process of establishing
a new division within OCFO that is to be headed by an individual with
no funds control or budget responsibilities to lead future Anti-
Deficiency Act inquiries. The investigative team is also to be
comprised of staff not associated with the activity where the Anti-
Deficiency Act violation is alleged. We were told that OCFO
appropriations law attorneys would provide legal assistance to this
group and the new division would submit its report - a report that we
were told will serve as the department's report as required by the
Anti-Deficiency Act and OMB Circular A-11--to the CFO and HUD Secretary
for acceptance. A HUD official told us that this division is staffed
and ready to begin work pending notification to Congress.
Additionally, prior to the enactment of the Appropriations Act, HUD's
OCFO made substantial revisions to its funds control handbook. Included
in this revised handbook is a chapter that lays out the department's
process for responding to future Anti-Deficiency Act issues. The
process spells out who to notify when an Anti-Deficiency Act violation
is suspected, delineates responsibilities for conducting the
investigation, and prescribes the documentation that is to be
maintained. HUD is now in the final stages of updating the funds
control handbook again to reflect the organizational changes mandated
by the Appropriations Act and the establishment of the new division
within OCFO that will lead future Anti-Deficiency Act investigations.
4. Are there any issues associated with removing the HUD General
Counsel from being able to review any appropriations law actions of the
CFO or the HUD Budget Officer and render timely, needed advice to the
HUD Secretary on any aspect of appropriations law?
In our discussions concerning this question, agency officials had
different views. Most of the attorneys we interviewed from HUD's OGC,
including the General Counsel, shared the opinion that the current
organizational structure does not lend itself to ensuring the Secretary
receives the best, most timely legal advice. In fact, there was broad
consensus among those we spoke to that the current organizational
structure is awkward. On the other hand, officials in OCFO said the
transfer of attorneys was necessary because in the wake of the OMHAR
Anti-Deficiency Act investigation, OGC restricted access to the
appropriation law attorneys making it very cumbersome for OCFO staff
and program office officials to obtain timely, needed advice on
appropriation issues. We were told that collaboration occurred
informally prior to the OMHAR Anti-Deficiency Act investigation. At
some point during the OMHAR Anti-Deficiency Act investigation, OGC
instituted a policy of requiring formal written requests for all
appropriation law services.
The General Counsel expressed three key concerns about the change in
organizational structure mandated by the Appropriations Act. First, he
was concerned that under the current structure his office might not be
informed of all legal issues that arise within the department,
including those that should be elevated to the Secretary's attention.
Second, he and others commented that now the Secretary and even the
program assistant secretaries could be presented with two conflicting
legal interpretations and that there is currently no mechanism for
resolving these differences. In the past the General Counsel, after
hearing the opposing views, would make the final interpretation of law.
Third, he thought that under the current structure there was a greater
risk for program office officials to "shop" for the legal
interpretation that best met their goals. He said having all the
attorneys placed within OGC reduces that risk because all legal issues
ultimately were subject to review and resolution by the General
Counsel.
Officials within OCFO told us that they believe the creation of a
separate appropriations law function within OCFO has resulted in an
increase in the level of legal staff effort and service devoted to
appropriations law issues, and that this increased focus and effort
should be sustained regardless of its organizational placement within
HUD. An OGC official told us that prior to their transfer to OCFO, the
four appropriation law attorneys assigned to her spent less than half
their time on appropriation law issues.
Several HUD officials from both OGC and OCFO said that the OMHAR Anti-
Deficiency Act investigation highlighted the need for additional
resources and expertise in its appropriation law function and that
prior to the enactment of the Appropriation Act, OGC had hired an
additional attorney with considerable appropriations law experience to
bolster that function. However, this attorney was not one of those
transferred to OCFO because, according to HUD's General Counsel, at the
time of the transfer this individual was not assigned to the division
that was specifically identified in the Appropriation Act as having to
transfer staff.
While most of the HUD attorneys we spoke with, including the head OCFO
appropriations law attorney, believed that HUD has done its best under
the new structure to ensure that coordination between the program
attorneys and the appropriation law attorneys continues, nearly all
acknowledged that there was initial and even lingering confusion in
some situations as to what group of attorneys has responsibility over a
particular issue. The HUD program office officials raised the same
issue.
Two attorneys stated that it is often difficult to seperate
appropriation law issues from other legal issues, which highlights the
need for good coordination and communication between all of HUD's
attorneys. There was further concern raised that as the attorneys in
OGC and OCFO change over time the level of coordination between the two
groups could deteriorate under the current structure. Currently, OGC
and OCFO attorneys have the benefit of long-standing working
relationships with one another.
5. Does the "sole authority" to investigate and report provided to the
CFO by the Appropriations Act conflict with or undermine the authority
provided to the Inspector General by the Inspector General Act?
The IG Act provides that IGs shall have the duty and responsibility to
"conduct, supervise, and coordinate — investigations relating to the
programs and operations of the agency."[Footnote 12] The IG Act also
provides that an IG "shall report expeditiously to the Attorney General
whenever the Inspector General has reasonable grounds to believe there
has been a violation of Federal criminal law."[Footnote 13] The OIG
identified these provisions of the IG Act as being in conflict, or at
least potentially in conflict, with the literal language of the
Appropriations Act.
The HUD OIG officials we met with, including the counsel to the
Inspector General, pointed to the language in the Appropriations Act
that provides the OCFO with "sole authority to investigate potential or
actual violations under the Anti-Deficiency Act" as conflicting with
the language of the IG Act providing the IG with general authority to
investigate HUD matters. They believe the literal language of the
Appropriations Act precludes the OIG from investigating potential Anti-
Deficiency Act violations, including those that might be identified
during routine or ongoing OIG jobs or those that are reported via the
Inspector General's fraud hotline. As a result, the OIG officials said
they are referring all potential Anti-Deficiency Act matters to OCFO.
The OIG also brought up that, in addition to providing OCFO with the
sole authority to investigate potential or actual Anti-Deficiency Act
violations, the language in the Appropriations Act provides that OCFO
shall determine whether violations exist and submit final reports on
violations.[Footnote 14] The OIG said that there is a possible conflict
between this language and the language in section 4(c) of the IG Act,
which directs the IG to report to the Attorney General if the IG
reasonably believes there has been a violation of criminal
law.[Footnote 15] The OIG is unclear how to reconcile this provision
with OCFO's current authority. OIG officials told us that they have not
yet been faced with a situation that required resolution of this issue.
An OCFO official expressed a somewhat different view of the
Appropriation Act's potential effect on the IG. The officials stated
that the OIG should not routinely be involved in an Anti-Deficiency Act
violation until the department has determined whether an actual
violation has occurred. At that time, the OCFO official said it would
be appropriate for the OIG to review the work that went into the
investigation, and more importantly and pursuant to their authority to
investigate, determine whether criminal acts may have been committed.
Agency Comments and Our Evaluation:
On November 19, 2003, HUD's Assistant Inspector General for Audits
provided us with oral comments expressing the Office of Inspector
General's agreement with the information presented that pertained to or
was attributable to the OIG. HUD did not take an official position on
the issues discussed in this report but instead provided separate
letters containing technical comments from its Deputy Chief Financial
Officer and the Deputy General Counsel. We considered these comments
and as we deemed appropriate made revisions to the report.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 14 days
from its date. At that time, we will send copies to the Secretary of
Housing and Urban Development, the Inspector General, and interested
congressional committees. We will also provide copies to others on
request. The report will also be available at no charge on the GAO Web
site at http://www.gao.gov.
If you have any questions about this report, please contact me at (202)
512-9508, or Phillip McIntyre, Assistant Director, at (202) 512-4373.
You may also reach us by E-mail at calboml@gao.gov or
mcintyrep@gao.gov. Other key contributors to this report were Jeffrey
Jacobson and Jack Hufnagle.
Linda M. Calbom:
Director, Financial Management and Assurance:
Signed by Linda M. Calbom:
(190107):
FOOTNOTES
[1] Pub. L. No. 108-7, Div. K, 117 Stat. 11, 474 (2003).
[2] 31 U.S.C. §§ 1341, 1342, 1350, 1517, 1519 (2000).
[3] HUD's Chief Financial Officer position is currently vacant.
[4] HUD Office of Inspector General Audit Memorandum Report 2002-DE-
0801 (March 22, 2002), "Alleged Violations of the Anti-Deficiency Act
and the HUD Reform Act by the Office of Multifamily Housing Assistance
Restructuring (OMHAR)." There was consensus among HUD officials that
HUD's handling of this Anti-Deficiency Act case played a significant
role in the events leading to enactment of the Appropriation Act's
provisions that are the subject of this request.
[5] HUD is currently revising its funds control handbook (Handbook No.
1830.2 Rev-4) to incorporate the organizational changes mandated by the
fiscal year 2003 Appropriation Act.
[6] H.R. Rep. No. 107-740, at 78-79 (2002).
[7] OMB Circular A-11 provides requirements for funds control and
instructions for required agency head reports if the agency head
determines that an Anti-Deficiency Act violation occurred. For an
extensive discussion of the Anti-Deficiency Act, see chapter 6 of GAO's
Principles of Federal Appropriations Law.
[8] The most significant Anti-Deficiency Act violation involved HUD's
Office of Multifamily Housing and Assistance Restructuring's (OMHAR)
use of technical assistance grant funds. HUD's investigation into this
matter was lengthy and resulted in mixed opinions about whether an
Anti-Deficiency Act violation actually occurred. Both HUD's General
Counsel and the Office of Inspector General concluded that with respect
to the OMHAR case no Anti-Deficiency Act violation occurred. However,
HUD's Secretary ultimately concluded there was an Anti-Deficiency Act
violation and reported it.
[9] Pub. L. No. 108-7, Div. K, 117 Stat. 11, 474 (2003).
[10] 117 Stat. at 499-500.
[11] H.R. Conf. Rep. No. 108-10, at 1427 (2003).
[12] 5 U.S.C. Appendix § 4(a)(1)(2000). Other provisions of the IG Act
also support the IG's authority to investigate.
[13] 5 U.S.C. Appendix § 4(c).
[14] The Anti-Deficiency Act provides for heads of agencies to report
violations to the President and Congress. 31 U.S.C. §§ 1351, 1517(b).
[15] An Anti-Deficiency Act violation may be subject to criminal
penalty. 31 U.S.C. §§ 1350, 1519 (2000).
