HUD Promises 'New Day' After GAO Finds Furniture Spending Violated Law

The Housing and Urban Development Department is promising major reforms after a government watchdog found it violated spending laws when purchasing new furniture for its secretary.

HUD violated spending restrictions when it sought to spend more than $40,000 on a dining set and dishwasher for HUD Secretary Ben Carson, the Government Accountability Office said in a report last week, by failing to notify Congress as required. The 2016 appropriations bill that funded HUD required the notification for any furniture, redecorations or improvements to any office of a political appointee. Carson initially denied any role in the spending before ceding to public pressure and canceling the order.

GAO is responsible for enforcing the Antideficiency Act, the law that prohibits federal agencies from incurring obligations in excess of their appropriations.

“Because HUD did not comply with the notification requirement, the funds were unavailable at the time HUD incurred the obligations,” GAO said. “By obligating in excess of the amount available, HUD violated the Antideficiency Act.”

HUD must now report the violation in a letter to Congress and the president, as well as GAO, in which it spells out relevant facts and “all actions taken.” The department told GAO it would report the violations and that “steps are being taken to identify, document, and properly track future obligations or expenditures in a cumulative manner for correct application” of spending law. Guidance from the Office of Management and Budget requires an agency to report the position of the employee(s) responsible, the cause of the violation, the administrative discipline imposed, new safeguards installed and, if the violation occurred knowingly and willfully, confirmation that the proper information was referred to the Justice Department.

Spokesmen for the department did not respond to inquiries into whether any employee was facing discipline as a result of the violation.

Immediately following the report, HUD released a statement noting a series of steps the department has taken since the spending was first reported. In the aftermath of that controversy, HUD established a task force to combat wasteful spending in the department. Irving Dennis, HUD's chief financial officer, is overseeing it and designing a new plan to "protect the financial integrity of the agency and correct lax internal processes and controls."

Dennis, who spent 37 years at Ernst & Young before taking his first job in government, told Government Executive in an interview last year that he was looking to improve HUD's management of people, processes and technology. He is joined in his group by 11 other career and political employees scattered throughout the department. Bringing people from different programs together, Dennis said, would help tear down the silos that had inhibited the department. The committee has met weekly since its inception and has created five project management organizations, each with its own distinct leadership.

Dennis said the group’s goals ranged from big picture changes that will require funding from Congress and three-to-five years to complete, to simpler objectives such as putting a policy in place for furniture purchases by presidentially appointed, Senate-confirmed appointees.

"If you have good processes, good education and good understanding, that helps prevent a lot of that," Dennis said of Carson's spending scandal. "You're always going to have stuff that happens, but you can really mitigate a lot of it with just a good education, and an understanding and policies and procedures."

HUD said that following GAO’s findings it will now finalize new procedures to strengthen internal processes and controls, noting that it was waiting for the auditor’s report to implement procedures for furniture and equipment purchases that will “help combat waste, fraud and abuse.” The department said it has already expanded and refined its internal financial controls, leading to corrections of errors in historical data.

“In the year since we embarked upon this effort, we’ve made significant and measurable improvement to our financial controls, but we still have a lot of work ahead of us,” Dennis said following GAO’s report. “A new day is dawning at HUD. Our job is to make sure systems are in place to protect every taxpayer dollar we spend and to restore sound financial management and stability to the way we do business.”

Sen. Jack Reed, D-R.I., the top Democrat on the Senate Appropriations Committee panel that oversees HUD spending, faulted the department and Carson not just for violating the law but for attempting to conceal the incident, mislead the public and prohibit transparency.

“This may seem like a small amount of money, but it is yet another example of the Trump Administration trying to cast aside the law if it doesn’t suit them," Reed said. "There needs to be more accountability at HUD and stronger oversight of the Trump Administration or else this pattern of unlawful behavior will continue, and I worry it won’t just be a small amount of money the next time."