Public Housing Authorities (PHAs) can become vulnerable to fraud and corruption—by both external and internal parties— if proper precautions are not taken to safeguard these agencies against such risks. This article will discuss the measures Public Housing Authorities can take to prevent and detect potential fraud risks.

Types of Fraud

The Office of the Inspector General lists several of the most common fraud schemes that occur in Public Housing Authorities and other organizations that receive Housing and Urban Development funds. Some examples of common schemes are:

• Embezzlement and theft
• Contracting and procurement fraud
• Bribery and kickbacks
• Conflicts of interest
• Identity theft
• Disaster recovery grant fraud
• False billing
• Tenant/applicant fraud

Establishing a Formal Fraud Policy

The most important means of fraud prevention is a formal fraud policy. A formal fraud policy should be comprehensive, outlining the procedures for preventing and responding to fraud. The policy should be accessible and easily understood by tenants and employees. According to the Office of the Inspector General, a formal fraud policy should accomplish the following: declare the organization’s commitment to preventing fraud, lay out the activities that constitute fraud, ensure confidentiality in reporting, identify officials with authority to investigate suspected fraud, state the consequences and penalties for fraud, assure due process, and provide instructions for reporting suspected fraud. PHAs should consult with legal counsel to review their fraud policies and ensure compliance with tenant-landlord laws, as well as alignment with HUD policies.

Educating Relevant Parties

Awareness of a PHA’s fraud policy and procedures is key in fraud prevention. PHAs should make their fraud policies accessible to management, tenants, employees, contractors, and other relevant parties by distributing printed copies, hanging posters in common areas, and/or making the policy available online. Employees and stakeholders should be trained to recognize and report suspicious activity. Awareness of a strong anti-fraud policy can also help to deter potential fraudsters.

Maintaining Strong Preventative Procedures and Internal Controls

To safeguard against fraud, PHAs must have board-approved operational and financial procedures in place. These procedures should include systems for verifying tenant eligibility, policies for vetting vendors and third-party service providers, and regular risk assessments to determine the likelihood of various fraud scenarios. PHAs should conduct regular reviews and audits of processes and controls to ensure compliance and effectiveness. In addition to periodic audits, PHA staff should monitor data and transactions on a daily basis. Data analytics and AI technology can be utilized to improve the accuracy and efficiency of monitoring processes.

Establishing a Whistleblower System

PHAs must ensure that the systems in place for reporting fraudulent activity are clear, accessible, and confidential for those reporting. Whistleblowers who report suspected fraud, waste, or abuse are protected by the law from retaliation.

How Can an Accounting Firm Help Mitigate Fraud Risk?

It is critical that the proper policies and procedures are in place to prevent and detect fraud threats—from both inside and outside of the organization. A reliable accounting firm can help carry out these crucial procedures.

RBT CPAs provides a variety of services that help prevent fraud within Public Housing Authorities and other organizations. These include:

1. Internal control assessments: review controls to ensure proper checks and balances are in place to prevent fraud (segregation of duties, approval processes, etc.).
2. Fraud risk assessments: identify areas within the Authority’s operations with greater potential for fraud.
3. Agreed-Upon Procedures: perform specific tasks requested by an Authority, such as reviewing selected financial information.
4. Annual financial and compliance audits: conduct independent audits to ensure accuracy and compliance with accounting standards and regulatory requirements.
5. Consulting/Advisory services: provide insight and advice on various topics, such as strategies to mitigate financial, operational, and compliance risks; assist with the development of policies and procedures.
6. Bookkeeping/Fee Accounting services: maintain accurate financial records and assist the Authority in maintaining compliance.
7. Forensic audits: examine the Authority’s financial records for evidence of suspected fraud.

Protecting Public Housing Authorities from fraudulent activity is crucial for maintaining the operational integrity and reputation of these agencies. RBT CPAs’ accounting, tax, audit, and advisory experts are here to help safeguard your organization from fraud. Call us today and find out how we can be Remarkably Better Together.