GAO: More Transparency Needed on HHF’s Administrative Costs

The ""U.S. Government Accountability Office"":http://www.gao.gov/ (GAO) released a ""report"":http://www.gao.gov/assets/600/592707.pdf evaluating the Treasury's monitoring of state housing finance agencies' (HFA) and their implementation of the Hardest Hit Fund.

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Recently, Treasury came under fire when ""SIGTARP reported HHF spent only 3 percent"":http://dsnews.comarticles/agency-reveals-hardest-hits-inefficiences-and-culprits-2012-04-12 of its budget as of December 31, 2011. HHF first began in February 2010 and was provided with $7.6 billion through taxpayer dollars to help struggling homeowners in the hardest hit states.

Since the SIGTARP report, states have picked up the pace and have spent 5 percent of the HHF budget as of March 31, 2012, according to the GAO report.

To address the Treasury's ability in monitoring the HFAs, GAO reviewed Hardest Hit Fund program documentation provided by Treasury and interviewed and obtained information from officials in five states part of the Hardest Hit Fund programs.

According to the report, all but one state that was interviewed expected to spend the full allocated amount.

Treasury officials said that they expected initial administrative spending to be high as states establish their programs, with a chart from the report showing that 27 percent of states' total spending was for administrative expenses as of March 31, 2012. In dollar terms, about $132 million has been spent on administrative costs during the same time period.

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For Nevada, more than 70 percent of funds have gone towards administrative expenses, and New Jersey has spent more than 50 percent of its budget so far on administrative costs.

According to the report, HHF officials in one state said their program faced large initial costs because they lacked the infrastructure needed to implement the programs.

While Treasury has been monitoring states' performance and compliance, the report stated it has not reported consolidated performance and financial data, such as administrative expenses.

This, the GAO said, limits transparency and efforts to ensure resources are used effectively to achieve program goals.

Beginning with the third quarter of this year, Treasury officials said states would be required to publicly report administrative costs, according to the report.

Currently, Treasury has several ways of monitoring each states' activity, including through annual compliance reviews, annual financial and internal controls audits performed by independent third parties, and quarterly performance and monthly progress reports submitted directly to Treasury.

However, while the number of borrowers assisted and the total amount of assistance the states provided are publicly available in the quarterly performance reports, states do not have to publicly disclose their administrative expenses.

In addition, Treasury does not aggregate the quarterly performance and financial data it receives to provide policymakers and the public with a snapshot of the Hardest Hit Fund's status, GAO stated.

GAO emphasized the need for transparency in the report, stating it could help policymakers and the public better understand the costs of providing HHF assistance and the results of the program.