Department of Housing and Urban Development: Status of Achieving 
Key Outcomes and Addressing Major Management Challenges 	 
(06-JUL-01, GAO-01-833).					 
								 
This report reviews the Department of Housing and Urban 	 
Development's (HUD) fiscal year 2000 performance report and	 
fiscal year 2002 performance plan to assess the agency's progress
in achieving selected key outcomes identified as important	 
mission areas for the agency. GAO found that although HUD did not
attain all of the goals pertaining to the selected key outcomes  
in its fiscal year 2000 annual performance plan, the performance 
report shows that HUD made some progress toward achieving the	 
outcomes. However, HUD's progress varied for each outcome, and	 
the information presented in the performance report does not	 
always provide enough information for the reader to evaluate	 
HUD's contribution to achieving the outcome. In general, HUD's	 
strategies for achieving these outcomes appear to be clear and	 
reasonable.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-833 					        
    ACCNO:   A01334						        
  TITLE:     Department of Housing and Urban Development: Status of   
             Achieving Key Outcomes and Addressing Major Management Challenges
     DATE:   07/06/2001 
  SUBJECT:   Housing programs					 
	     Performance measures				 
	     Program evaluation 				 
	     Reporting requirements				 
	     Strategic planning 				 
	     Personnel management				 
	     Information resources management			 
	     GPRA						 
	     Government Performance and Results Act		 
	     Community Development Block Grant			 
	     HUD Empowerment Zones and Enterprise		 
	     Communities Program				 
								 
	     HUD Public Housing Drug Elimination		 
	     Grants Program					 
								 

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GAO-01-833
     
Report to the Ranking Minority Member, Committee on Governmental Affairs, U.
S. Senate

United States General Accounting Office

GAO

July 2001 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Status of Achieving Key Outcomes and Addressing Major Management Challenges

GAO- 01- 833

Page 1 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

July 6, 2001 The Honorable Fred Thompson Ranking Minority Member Committee
on Governmental Affairs United States Senate

Dear Senator Thompson: As you requested, we reviewed the Department of
Housing and Urban Development?s (HUD) fiscal year 2000 performance report
and fiscal year 2002 performance plan required by the Government Performance
and Results Act of 1993 (GPRA) to assess the agency?s progress in achieving
selected key outcomes that you identified as important mission areas for the
agency. 1 These are the same outcomes we addressed in our June 2000 report
on the agency?s fiscal year 1999 performance report and fiscal year 2001
performance plan to provide a baseline by which to measure the agency?s
performance from year to year. 2 These selected key outcomes are:

 increased homeownership;  increased affordable, decent, and safe rental
housing;  improved community economic vitality and quality of life; and 
less fraud, waste, and error in HUD?s programs.

As agreed, using the selected key outcomes for HUD as a framework, we (1)
assessed the progress HUD has made in achieving these outcomes and the
strategies the agency has in place to achieve them; and (2) compared HUD?s
fiscal year 2000 performance report and fiscal year 2002 performance plan
with the agency?s prior year performance report and plan for these outcomes.
Additionally, we agreed to analyze how HUD addressed its major management
challenges, including the governmentwide high- risk areas of strategic human
capital management and information security, that we and HUD?s Office of
Inspector General

1 This report is one of a series of reports on the 24 Chief Financial
Officers (CFO) Act agencies? fiscal year 2000 performance reports and fiscal
year 2002 performance plans. 2 Observations on the Department of Housing and
Urban Development?s Fiscal Year 1999 Performance Report and Fiscal Year 2001
Performance Plan (GAO/ RCED- 00- 211R, June 30, 2000).

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

(OIG) identified. Appendix I provides detailed information on how HUD
addressed these challenges. Appendix II contains HUD?s comments and our
response on a draft of our report.

Although HUD did not attain all of the goals pertaining to the selected key
outcomes in its fiscal year 2000 annual performance plan, the performance
report shows that HUD made some progress toward achieving the outcomes.
However, HUD?s progress varied for each outcome, and the information
presented in the performance report does not always provide sufficient
information for the reader to evaluate HUD?s contribution to achieving the
outcome. In general, HUD?s strategies for achieving these outcomes appear to
be clear and reasonable. Neither the performance report nor the performance
plan discusses strategic human capital management or information technology
issues as part of HUD?s strategies to address the programmatic outcomes,
although some information on those issues is included as part of HUD?s
efforts to address its management challenges and to achieve its goal of
ensuring public trust. We identified management challenges that relate to
two of these outcomes.

Planned outcome: Increased homeownership. The report shows that
homeownership increased. However, the report does not clearly explain how
HUD?s programs contributed to the increases, given the external factors
discussed and the fact that HUD did not achieve some of its programmatic
goals related to homeownership. Although HUD provided clear and reasonable
strategies for achieving its goals, it generally did not provide strategies
for achieving unmet fiscal year 2000 goals.

Planned outcome: Increased affordable, decent, and safe rental housing.

HUD?s performance report shows that it made some progress toward the outcome
of increasing affordable, decent, and safe rental housing. However, it was
less successful in increasing the supply of affordable housing relative to
the number of people who need it most. We found one measure for which the
data in the report do not agree with data that have been reported to us, a
fact that reaffirms our concerns as discussed in other reports about the
reliability of performance data. The performance report and plan generally
discuss the strategies that affect achievement of this outcome, although
they do not discuss specific tools or risk assessments that HUD will use to
address some of the issues discussed.

Planned outcome: Improved community economic vitality and quality of life.
The performance report indicates that HUD made some progress Results in
Brief

Page 3 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

toward achieving this outcome. However, we could not fully assess HUD?s
progress because the report indicates difficulties exist with constructing a
system to measure HUD?s contributions to achieving the outcome. HUD reported
that about half of the related measures were revised or deleted in
subsequent performance plans. The performance report generally discusses the
programs that support this outcome, rather than specific strategies. The
discussions of the performance measures for this outcome acknowledge data
reliability issues more clearly than such discussions under some of the
other outcomes.

Planned outcome: Less fraud, waste, and error in HUD programs. As we
reported last year, HUD does not have a goal to reduce fraud, waste, and
error in its programs; but it includes measures under its strategic goal of
ensuring public trust that would contribute to achieving this outcome. HUD?s
progress toward reducing fraud, waste, and error is not clear based on the
results reported for those selected measures, which indicate that some of
the goals were not met or data were not yet available. However, this
information may result in a somewhat more negative view of HUD?s
accomplishments related to this outcome than is warranted because the 1-
year assessment does not consider the progress HUD has made to address its
management deficiencies and its plans for future improvements. The
performance report provides reasonable strategies to improve HUD?s
operations, some of which are linked to specific performance measures, but
the report does not generally address plans for achieving unmet goals. The
discussion of strategies in the fiscal year 2002 performance plan is
somewhat better than the discussion of strategies for the other outcomes
because these strategies include more specific steps to be taken to achieve
the desired outcomes. However, strategies, goals, or measures that
specifically address fraud, waste, and errors, along with a risk assessment
process to identify the most vulnerable programs, would be useful in future
plans.

HUD has made improvements in its fiscal year 2000 performance report and
2002 annual performance plan over prior years? reports. The performance
report is in the new format HUD developed for its annual performance plans
beginning with fiscal year 2000. This improved the report?s readability and
clarity, although HUD?s progress in achieving some measures is still not
clearly articulated. HUD combined its fiscal year 2000 performance report
with its fiscal year 2000 accountability report, which consolidated a
substantial amount of important information into one document that also
helps the reader understand the scope of HUD?s activities. However, more
needs to be done to improve the usefulness of the performance report, such
as including a more specific assessment of

Page 4 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

the completeness and reliability of performance data. The fiscal year 2002
performance plan includes an expanded discussion of evaluations, more
information on the limitations and advantages of data, and information on
HUD?s human capital challenges. However, we noted that the discussion of
resources, coordination strategies, management challenges, and credibility
of performance data could still be improved.

The performance report and fiscal year 2002 performance plan do not include
specific goals or measures designed to resolve HUD?s management challenges
or the governmentwide management challenges, but they do include numerous
measures pertaining to those issues. Both the performance report and
performance plan state that the management challenges are a high priority
for the Secretary. Two of the outcomes selected for this report relate to
HUD?s management challenges.

HUD generally agreed with the information presented in our report. Overall,
HUD found the report to be balanced and useful for both recognizing the
significant progress that the Department has made and pointing out areas
where more progress is needed. However, HUD identified some areas that it
believed should be clarified. For example, HUD disagreed with our statement
that it generally did not provide strategies for achieving its unmet
homeownership goals because some of the goals were not achieved for reasons
beyond their control and some information on prospective strategies that
would address the issue was discussed. We clarified the report, where
appropriate, in response to these comments.

GPRA is intended to shift the focus of government decisionmaking,
management, and accountability from activities and processes to the results
and outcomes achieved by federal programs. New and valuable information on
the plans, goals, and strategies of federal agencies has been provided since
federal agencies began implementing GPRA. Under GPRA, annual performance
plans are to clearly inform the Congress and the public of (1) the annual
performance goals for agencies? major programs and activities, (2) the
measures that will be used to gauge performance, (3) the strategies and
resources required to achieve the performance goals, and (4) the procedures
that will be used to verify and validate performance information. These
annual plans, issued soon after transmittal of the president?s budget,
provide a direct linkage between an agency?s longer term goals and mission
and day- to- day activities. 3 Annual

3 The fiscal year 2002 performance plan is the fourth of these annual plans
under GPRA. Background

Page 5 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

performance reports are to subsequently report on the degree to which
performance goals were met. The issuance of the agencies? performance
reports, due by March 31, represents a new and potentially more substantive
phase in the implementation of GPRA- the opportunity to assess federal
agencies? actual performance for the prior fiscal year and to consider what
steps are needed to improve performance and reduce costs in the future. 4

HUD encourages homeownership by providing mortgage insurance through its
Federal Housing Administration (FHA) for about 7 million homeowners who
otherwise might not have qualified for loans, as well as by managing about
$508 billion in insured mortgages and $570 billion in guarantees of
mortgage- backed securities. It also makes housing affordable for about 4
million low- income households by insuring loans for multifamily rental
housing and providing rental assistance. In addition, it has helped to
revitalize over 4,000 localities through community development programs. To
accomplish these missions, HUD relies on the performance and integrity of
thousands of mortgage lenders, contractors, property owners, public housing
agencies, communities, and others to administer its programs.

This section discusses our analysis of HUD?s performance in achieving the
selected key outcomes and the strategies the agency has in place,
particularly in regard to strategic human capital planning and information
technology, for accomplishing these outcomes. 5 In discussing these
outcomes, we have also provided information drawn from our prior work on the
extent to which the agency provided assurance that the performance
information it is reporting is credible.

HUD?s performance report shows that progress was made toward the outcome of
increasing homeownership. For example, HUD reports that it

4 The fiscal year 2000 performance report is the second of these annual
reports under GPRA. 5 Key elements of modern human capital management
include strategic human capital planning and organizational alignment;
leadership continuity and succession planning; acquiring and developing
staffs whose size, skills, and deployment meet agency needs; and creating
results- oriented organizational cultures. Assessment of HUD?s

Progress and Strategies in Accomplishing Selected Key Outcomes

Increased Homeownership

Page 6 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

exceeded its goals in fiscal year 2000 for increasing the national
homeownership rate to 67.7 percent (compared with the target of 67.5
percent), homeownership in central cities to 51.9 percent (compared with the
target of 51.0 percent), 6 and the homeownership rate among families with
incomes below the area median to 52.2 percent (compared with the target of
52 percent). However, HUD?s contribution to the achievement of those goals
is not clear because (1) HUD?s discussion of external factors that affect
homeownership in its annual performance and strategic plans said that HUD
has limited control of homeownership rates, and (2) HUD did not achieve its
goals for some of its programs that support homeownership. The report does
not explain why HUD believes it contributed significantly to the overall
increase in homeownership, even though it did not meet its programmatic
goals.

In discussing the external factors, the report noted that the record
homeownership rate depended in large part on the overall economy, including
low interest rates. This statement is consistent with others HUD has made
that it is not a dominant player in the homeownership market and has limited
impact on whether some national goals are met, including the homeownership
goal. Nevertheless, the report, also states that HUD?s programs contributed
significantly to the achievement of the increases in homeownership; how this
contribution is distinct from the significant external factors that affect
achievement of this goal remains unexplained.

HUD did not achieve some of its specific programmatic goals. For example,
the report cites the Federal Housing Administration (FHA), Government
National Mortgage Association (Ginnie Mae), Community Development Block
Grant (CDBG), and HOME Investment Partnership Grant programs as supporting
HUD?s homeownership objectives, but HUD did not achieve its goals related to
those programs. 7 For example, HUD reported that FHA did not meet its
planned goal of processing 1.26 million single- family mortgage
endorsements; actual performance was 921,283.

6 Central cities are those cities within larger metropolitan areas that meet
certain population and employment characteristics established by the Bureau
of the Census. 7 FHA insures single- family and multifamily mortgages;
Ginnie Mae guarantees the payment of principal and interest to investors of
privately issued securities backed by pools of federally insured loans; CDBG
funds local community development programs for housing and economic
development needs; and HOME Investment Partnership program provides
assistance to renters and first- time homebuyers, builds state and local
capacity to carry out affordable housing programs, and expands the capacity
of nonprofit organizations to develop and manage housing.

Page 7 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

Furthermore, Ginnie Mae did not achieve its goal to securitize 95 percent of
single- family FHA and Veterans Administration loans; actual performance was
86.2 percent of eligible loans. The report does not attempt to explain the
connection between these results, which were less than expected, and the
reported increase in the overall homeownership rates.

HUD?s reasons for not achieving some of its goals are inadequate. For
example, the reasons given for not meeting some goals appear to conflict
with those cited for achieving other homeownership goals. That is, HUD
states that part of the reason for not achieving the projected number of
endorsements is higher interest rates that reduced demand for FHAinsured
loans; lower interest rates were given as a reason for meeting the national
homeownership goals stated above. Although this apparent discrepancy may be
related to the timing of the analyses or methodological issues, the
presentation of the information appears inconsistent, and this inconsistency
is not explained.

Other data necessary to evaluate HUD?s contributions toward achieving the
outcome are not currently part of the report. For example, the report says
that the homeownership goal was met, but it does not mention the specific
numeric target of 2.8 million new homeowners since 1998 that the fiscal year
2000 performance plan said was needed to achieve an increase in the national
homeownership goal or how HUD?s 2.2 million mortgage endorsements processed
since fiscal year 1998 relate to that target. The report also does not
present information on factors that negatively affect homeownership, such as
defaults or foreclosures, that would help evaluate whether home purchasers
are able to retain the homes they buy using HUD?s programs and therefore the
extent to which HUD?s programs contribute to increasing homeownership. The
report did not make an overall assessment of the impact of its fiscal year
2000 performance on fiscal year 2001 performance; however, it shows that HUD
revised some goals for fiscal year 2001 on the basis of its fiscal year 2000
performance.

In the performance report, HUD discusses the programs that support its
overall homeownership objective but does not discuss its strategies, plans,
actions, or time frames for achieving its unmet goals for fiscal year 2000.
The fiscal year 2002 performance plan discusses strategies to increase
homeownership that are clear and reasonable and generally describe the
intended result. The performance plan also includes strategies that HUD will
pursue to help ensure home retention and encourage responsible
homeownership, which are important to sustaining homeownership levels,

Page 8 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

although no specific goals or measures were established related to those
initiatives.

Neither the performance report nor the performance plan discussed strategic
human capital management or information technology issues as part of HUD?s
strategies to address the specific outcome. The performance plan lists
various evaluations and research related to the strategic goal to increase
the availability of affordable housing, but it does not specifically discuss
how those evaluations will be used to identify or improve strategies in the
future. This outcome is related to one of HUD?s management challenges, and
additional information is discussed under the section on management
challenges in this report and in appendix I.

HUD?s performance report indicates that it made some progress toward the
outcome of increasing affordable, decent, and safe rental housing. However,
the report shows that HUD was less successful in demonstrating that it was
able to increase the supply of affordable housing relative to the number of
people who need it most. The report shows that in fiscal year 2000 HUD was
most successful in achieving the output goals that show the units inspected
or properties developed. For example, HUD met its goals to (1) increase the
share of units that meet physical and financial standards by 1 percent (83
and 85 percent for public housing and multifamily development respectively,
exceeding the fiscal year 1999 level of 62.5 and 77.3 percent); (2) develop
properties for elderly and disabled households (completing initial closings
for 278 properties, exceeding the goal of 226); 8 and (3) process
multifamily mortgages (endorsing 579 mortgages exceeding the goal of 400).
HUD was less successful in demonstrating results that show how its actions
increased the overall quantity of affordable and decent housing compared
with the number of low- income households. For example, HUD has five outcome
measures related to improving the ratio of affordable units to low- income
people, but HUD was either unsuccessful in meeting the targets or does not
yet have the data to show the results for the measures. HUD said in the
report that the physical quality of rental housing has improved greatly, but
it also said that housing has become less affordable overall, particularly
for poor households. HUD states that for extremely low- income households,
the

8 However, in the fiscal year 2000 performance plan as issued, this measure
was to bring 200 Section 202 (elderly) projects to initial closing. No
information was provided on why the change was made and whether HUD would
have achieved its original goal to process 200 Section 202 projects.
Increased Affordable,

Decent, and Safe Rental Housing

Page 9 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

need for affordable rental housing has actually increased. The explanations
given for not meeting the goals varied but were generally reasonable given
the significant external factors that also affect achievement of this
outcome. For example, two factors that HUD cited were grantees? changing
priorities and rent increases exceeding inflation due to the strong economy.

The reliability of HUD?s data is generally not discussed for any outcome in
the performance report; a footnote indicates that data issues are discussed
in the annual performance plan. In the introduction to the report, HUD
acknowledges that the performance data collection systems and controls over
data quality remain areas that needs attention. While we recognize that
performance data quality is an area that HUD is addressing, this information
does not yet increase our confidence regarding the reliability of the
performance data, as discussed in previous reports. 9 We also identified one
example where the performance data cited in the report might not be
accurate, based on our work in the rental assistance area. The preliminary
results of our ongoing work with the Office of Multifamily Housing
Assistance Restructuring (OMHAR) indicates that HUD may not have achieved
the results it reported for the mark- to- market program in fiscal year
2000. The mark- to- market program, administered by OMHAR, seeks to retain
affordable rental housing and reduce Section 8 assistance costs by reducing
excessive rental subsidies paid to assisted properties and restructuring
their mortgages where appropriate. 10 Under a measure that ?seventy- five
percent of multifamily mortgages restructured under the Mark to Market
program are closed within 12 months of PAE [participating administrative
entities] acceptance for restructuring,? HUD reports that during fiscal year
2000 OMHAR exceeded the target by completing deals on 494 properties, or
82.7 percent of the 597 properties eligible for restructuring under the
program. However, our analysis of data provided by HUD indicates that OMHAR
completed only four mortgage

9 Results Act: Observations on the Department of Housing and Urban
Development?s Fiscal Year 1999 Annual Performance Plan (GAO/ RCED- 98- 159R,
June 5, 1998);

Observations on the Department of Housing and Urban Development?s Fiscal
Year 2000 Performance Plan (GAO/ RCED- 99- 208R, July 20, 1999); and GAO/
RCED- 00- 211R, June 30, 2000.

10 HUD contracts with private property owners to provide housing rental
assistance, called Section 8 project- based assistance, on behalf of
eligible low- income households. HUD also provides Section 8 vouchers,
through public housing agencies and other state and local designated
entities, that enable low- income families to seek housing in the private
housing market in the neighborhoods of their choice.

Page 10 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

restructurings during fiscal year 2000. Two of these mortgage restructurings
were completed within 12 months of acceptance by the participating
administrative entities for restructuring. 11 OMHAR may be including rent
restructurings (deals in which it reduces property rents to market levels
but does not carry out a mortgage restructuring) and rent comparability
reviews (activities in which OMHAR determines whether current property rents
are above or below market) as part of the totals it is reporting.

The performance report includes an overall discussion of the general
strategies, programs, and external factors that affect HUD?s efforts to
ensure that affordable rental housing is available for low- income
households; but it does not discuss strategies, plans, or timeframes for
achieving the specific unmet goals for fiscal year 2000. The report
discusses evaluations that HUD has done to improve utilization of Section 8
housing vouchers, accuracy of rent determinations for assisted households,
and accuracy of subsidy amounts paid for assisted households. However, the
information would have been more useful if HUD specifically discussed how
the results of the evaluations would be used to identify or improve
strategies for achieving the goals in the future. HUD reports that the
studies indicate that (1) further attention by management is necessary to
better utilize Section 8 housing vouchers; and (2) HUD continues to pay
excess rental subsidies, partly because tenant income is underreported and
partly because of errors made by public housing agencies, owners, and agents
responsible for program administration.

The fiscal year 2002 annual performance plan discusses HUD?s strategy to
strengthen its existing programs and improve usage of Section 8 housing
vouchers and public housing capital funds. The specific strategies HUD
outlines in the plan support these objectives and the measures related to
the outcome, although they do not discuss specific tools or risk assessments
that HUD will use to implement the strategies and achieve the objectives.
The performance plan refers to HUD?s coordination with other

11 A participating administrative entity is an entity OMHAR has contracted
with to carry out property restructurings under mark- to- market on behalf
of the federal government. As of May 7, 2001, OMHAR had contracts with 35
participating administrative entities, including 26 public agencies (such as
state and local housing finance agencies) and 9 nonpublic entities. Among
other things, the responsibilities of the participating administrative
entities include determining appropriate rent levels, restructuring mortgage
loans, underwriting new or modified loans, and managing the closing process.

Page 11 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

federal agencies to increase affordable rental housing. However, HUD does
not discuss specific coordination activities or other agencies? specific
contributions to HUD?s goals. Neither the performance report nor the fiscal
year 2002 performance plan discusses human capital and information
technology as strategies to achieve this outcome. This outcome is related to
one of HUD?s management challenges, and additional information is provided
under the section on management challenges in this report and in appendix I.

HUD?s performance report indicates that the Department made some progress
toward achieving this outcome. For example, HUD reports that it met its
goals of increasing jobs and reducing poverty in cities, increasing capital
in underserved neighborhoods, 12 reclaiming brownfields (contaminated
commercial and industrial land), reducing crime, and targeting grant funds
to the most needy. HUD also noted a decrease in the number of ?doubly
burdened? cities during fiscal year 2000. 13 The number of cities that were
experiencing both a population loss and a high poverty rate declined from 1
in 7 in 1999 to 1 in 8 in 2000. However, the report also shows problems with
the performance measures and data collected for specific programs that make
it difficult for the reader to determine what HUD contributed to the
achievement of the goals. HUD reports it does not have data for one
performance measure and thus could not report results; two performance
measures were related to programs that were never authorized, and HUD did
not report results. Even for one measure that HUD achieved, the report notes
that the measure was not a reliable indicator of progress because it
fluctuates from year to year. HUD reports that half of the selected measures
related to this outcome were revised or deleted in future performance plans.
Some of the reasons given include that the measures were revised or deleted
to eliminate comparisons between cities and suburbs or to improve
performance measurement, such as to track performance over a 3- year period
to obtain a more reliable indicator of progress. Additionally, HUD?s
discussion of external factors notes the significant challenges it faces
with this outcome. For example,

12 HUD defines an underserved neighborhood in metropolitan areas as census
tracts with either a minority population of at least 30 percent and median
family income below 120 percent of the metropolitan area median or median
family income at or below 90 percent of the area median income regardless of
minority population percentage.

13 The report defines a ?doubly burdened? city as one that experiences
unemployment rates that are 50 percent above the national average
accompanied by either a population loss of 5 percent since 1980 or poverty
rates of 20 percent or higher. Improved Community

Economic Vitality And Quality of Life

Page 12 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

the economic issues mitigating against this outcome, such as mismatches in
the location of jobs and available workers, concentrations of poverty, and
grantees? discretionary use of block grants (they may choose to use the
funds in other ways that may not contribute to specific HUD objectives), may
affect the results that HUD is able to achieve. The report does not discuss
how those problems will be mitigated.

For this outcome, the discussion of the measures more clearly acknowledges
data reliability issues and show HUD?s efforts to address them. This may be
a result of a report from the OIG in March 2001 that identified several
weaknesses in performance data from HUD?s community development programs,
among others, which support much of HUD?s effort to improve community
economic vitality and quality of life. 14 For example, the OIG reported that
projections and estimates were used to formulate program performance
measurements rather than actual grantee accomplishments.

In discussing the strategies that support this outcome, the performance
report discusses the contributions of some of HUD?s major programs, such as
CDBG, Empowerment Zones/ Enterprise Communities, FHA, and the Public Housing
Drug Elimination Grant Program. As previously discussed, however, it does
not address whether and how unmet goals will be achieved. As noted, this may
be because about half of the measures will be significantly revised or
deleted in future years. The fiscal year 2002 performance plan discusses
various strategies to promote relationships with communities, other federal
agencies, industry groups, and nonprofit organizations to achieve this
outcome, but it does not describe specific tools or means of doing this. For
example, the plan includes some strategies that state HUD will encourage
communities to address economic issues. The plan does not describe how HUD
will do this, even though it notes that HUD?s direct impact on specific and
measurable results is somewhat limited. Neither the performance report nor
the fiscal year 2002 performance plan discusses human capital and
information technology as strategies to achieve this outcome. The plan does
not discuss the use of evaluations to identify or improve strategies for
achieving future goals.

14 Review of HUD?s Internal Controls over Fiscal Year 1999 Annual
Performance Data,

Office of Inspector General (2001- FO- 0004, Mar. 28, 2001).

Page 13 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

As we reported last year, HUD?s strategic and annual performance plans do
not contain strategic goals or objectives for reducing fraud, waste, and
error in HUD programs. 15 However, HUD has a strategic goal to ?ensure

public trust? to improve its operations and address its management
challenges. Under this strategic goal, HUD includes performance measures to
achieve more accurate subsidy payments, better data, and better quality
housing, thereby reducing fraud, waste, and error. HUD?s progress toward
meeting the outcome of less fraud, waste and error during fiscal year 2000
is not clear based on the results for these measures. The performance report
shows that HUD met its targets for some significant measures, such as
increasing the share of assisted housing units that met HUD housing
standards, the number of grantees reviewed, and the reporting of tenant
information in a data system. However, the report also shows that HUD did
not achieve its goals for other measures, such as setting baselines for
reducing the share of public housing and Section 8 units managed by troubled
housing authorities, reviewing single- family appraisals, and developing a
data quality plan. This information may result in a somewhat more negative
view of HUD?s accomplishments in reducing fraud, waste, and error than is
warranted because the 1- year assessment does not consider the progress that
HUD has made in recent years to overcome some of its long- term management
deficiencies, and its plans for future improvements.

The performance report generally provides reasonable explanations of why
some goals were not met and how they would be revised in the future. For
example, although we report that HUD did not meet several performance
measures based on the targets set in the fiscal year 2000 performance plan,
HUD reports that it considers the targets ?substantially

met? because the performance was very close to the target. HUD reported that
it ?substantially? met the targets for determining the number of public
housing units managed by troubled housing authorities, determining the
number of multifamily properties with substandard financial management, and
matching tenant income data to tax and Social Security records. The report
states that these were one- time measures to track the implementation of
specific processes designed to improve HUD operations. Because
implementation was successful, HUD states that these measures would not be
reported on in the future. Additionally, the plan states that some of the
measures were dependent upon two of HUD?s assessment activities that were
delayed, one of which was delayed at the

15 GAO/ RCED- 00- 211R, June 30, 2000. Less Fraud, Waste, and

Error in HUD?s Programs

Page 14 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

request of the Congress. The report noted that over half of the performance
measures used in fiscal year 2000 would be significantly revised or deleted
in 2001 or 2002.

The performance report discusses strategies to achieve HUD?s goal of
ensuring public trust and links some of those strategies to the achievement
of specific performance measures related to this outcome. It does not,
however, specifically address plans and time frames for achieving unmet
goals. As stated above, several of the unmet measures were one- time
measures to track implementation of systems or processes. A substantial
number of others will be revised in future years on the basis of performance
or data issues, so there would be no need to discuss strategies for
achieving these goals. The performance report includes some human capital
and information technology strategies under its discussion of external
factors that affect achievement of its efforts to restore public trust. The
report notes that HUD will continue implementing a resource estimation and
allocation process to aid in managing workload, improve risk- based
monitoring techniques, continue to push for simplification of rental subsidy
program requirements, and work with HUD managers to ensure that systems
requirements and data quality controls are properly established.

The discussion of strategies contained in the 2002 performance plan related
to this outcome are somewhat better than those for the other outcomes
because they discuss more specific steps to be taken. They also include some
actions the Department plans to take if public housing authorities, lenders,
or others do not comply with policy. However, we noted that the plan could
be improved by including strategies, goals, or measures that would
specifically address the prevention and detection of fraud, waste, and
errors in HUD programs. This would also include a risk assessment process to
identify the most vulnerable programs and institute internal controls to
prevent and detect occurrences. 16 The performance plan?s strategies also
address some of HUD?s human capital issues, such as training employees,
completing its resources estimation and allocation process, developing a
long- term staffing strategy to deal with expected retirements, and
continuing to develop a performance- based appraisal

16 For examples and case illustrations of information that federal agencies
should consider when developing strategies and planning and implementing
actions that will help prevent and detect fraud and errors, refer to GAO?s
exposure draft, Strategies to Manage Improper Payments: Learning from Public
and Private Sector Organizations (GAO- 01- 703G, May 2001).

Page 15 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

process. However, the plan does not include measures to determine the
effectiveness of those strategies. The strategies also include efforts to
improve HUD?s information technology, such as improving equipment for higher
productivity, improving data quality, and increasing citizen access to
information through electronic means such as HUD?s Web site. Both we and the
OIG have raised concerns about HUD?s strategic human capital management and
information technology issues, and additional information is provided under
the section on management challenges in this report and in appendix I. The
annual performance plan lists a number of significant evaluations planned or
currently under way pertaining to the goal of ensuring public trust, such as
an evaluation of aspects of HUD?s 2020 management reform and efforts to
improve the quality of assisted housing. The studies will be useful for
evaluating HUD?s overall progress in improving its operations and customer
service.

For the selected key outcomes, this section describes major improvements or
remaining weaknesses in HUD?s (1) fiscal year 2000 performance report in
comparison with its fiscal year 1999 report, and (2) fiscal year 2002
performance plan in comparison with its fiscal year 2001 plan. It also
discusses the degree to which the agency?s fiscal year 2000 report and
fiscal year 2002 plan address concerns and recommendations by the Congress,
GAO, the OIG, and others.

HUD revised its performance report for fiscal year 2000 consistent with the
new format developed for its annual performance plans beginning in fiscal
year 2000, which included revised goals, objectives, and many new measures.
This improved the linkage to the annual performance plan and, therefore, the
readability and clarity in presentation of the fiscal year 2000 performance
report, compared with the fiscal year 1999 report. HUD combined the
performance report with its fiscal year 2000 annual accountability report,
which consolidated a substantial amount of important information on HUD?s
operations and activities into one document. The report summarizes HUD
accomplishments for each strategic goal and includes discussions of the
major programs and the most significant performance measures, general
strategies, and external Comparison of HUD?s

Fiscal Year 2000 Performance Report and Fiscal Year 2002 Performance Plan
With the Prior Year Report and Plan for Selected Key Outcomes

Comparison of Performance Reports for Fiscal Years 1999 and 2000

Page 16 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

factors that affect the achievement of the strategic goals. The report also
includes a summary of the management problems identified by the OIG and
HUD?s response to each of the remaining concerns; however, the report
includes only a limited discussion of the current management challenges we
identified. In our opinion, the performance report could be further improved
if it included a discussion of resource issues, an overall assessment of
HUD?s progress toward achieving its strategic goals for the fiscal year, and
a more specific assessment of the completeness and reliability of
performance data.

The performance report did not provide an overall assessment of HUD?s
progress toward achieving its strategic goals and objectives for fiscal year
2000. The report shows that HUD did not achieve many of the results
expected, but no assessment was made on the significance of not achieving
the desired results to the overall achievement of the strategic goals. As
discussed above, where targets were not met, usually no explanation was
provided of what or whether anything could be done to meet those goals in
the future. For example, even in cases where the rise of interest rates or
other economic factors were given as reasons for not achieving the desired
results, a more comprehensive assessment would have been useful to either
identify any other underlying problems or demonstrate that the result was
reasonable given the influence of external factors. In general, some insight
into what kinds of problems were experienced would be useful to the Congress
and other decisionmakers as they consider HUD?s budget and other requests.

Although the performance report made some additional improvements in
discussing data issues, more needs to be done to improve the usefulness of
the performance information. The Reports Consolidation Act of 2000 requires
that the GPRA performance report contain an assessment of the completeness
and reliability of performance data. 17 In the introduction to the
performance report, HUD states that it needs to focus on improving
performance data collection systems and controls over data quality,
particularly in the formula and discretionary grant programs. However, the
report does not provide an overall assessment of the performance data. The
HUD OIG reviewed a sample of the performance data reported in 1999 and found
problems with its reliability. 18 We noted examples where the

17 Reports Consolidation Act of 2000, Public Law 106- 531, Nov. 22, 2000. 18
Review of HUD?s Internal Controls over Fiscal Year 1999 Annual Performance
Data,

Office of Inspector General (2001- FO- 0004, Mar. 28, 2001).

Page 17 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

fiscal year 2000 performance report seemed to address the concerns raised by
the OIG. For example, the report articulates performance measures for which
the results are ?snapshots? rather than performance for the complete fiscal
year, and are estimates rather than actual performance. However, we
identified discrepancies in other information in the report, suggesting that
more work remains to be done. For example, as in the OMHAR example discussed
above, the data in the report do not agree with other data HUD provided to
us. We identified other performance measures in the report where the
methodology for charting progress changed or a baseline that was supposed to
have been set was not, but no information was provided on why such changes
were made or why they were significant.

The fiscal year 2002 performance plan continues to improve over the 2001
performance plan. HUD revised its fiscal year 2002 performance plan to
reflect the updated strategic plan for fiscal years 2000 to 2006, adding one
new strategic objective and revising several others to cover the
Department?s activities more fully. The plan also includes additional
information on the Department?s resources, expands the discussion of
evaluations, creates a new type of measure that will be used for monitoring
purposes only, 19 and includes information on actions to address HUD?s human
capital challenges. For example, the plan refers to research being done on
the outcomes in areas of concentrated CDBG investment that will be used to
shape the performance measures. The plan also adds a measure that will track
implementation of HUD?s resource estimation and allocation process. However,
we noted that the discussion of how resources were linked to the achievement
of performance goals, the credibility of performance data, and the
coordination strategies could be improved. Additionally, goals or measures
for HUD?s management challenges would be useful for tracking HUD?s progress
toward resolving those specific issues.

In its performance plan, HUD includes a table for each strategic goal that
shows the programs, budget authority, and staff levels that HUD estimates

19 HUD established a small number of ?monitors? of certain measures.
According to HUD, monitors measure and report results that the department
deems important for achieving strategic goals and objectives like other
indicators. Unlike other indicators, however, monitors will not have
performance goals attached because the results are nearly entirely
controlled by external factors or by the discretionary decisions of the
Department?s partners. Comparison of

Performance Plans for Fiscal Years 2001 and 2002

Page 18 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

generally support the achievement of that goal. Although this table is a
step toward showing how budgetary and human resources relate to achieving
goals, the information becomes somewhat confusing because HUD also includes
a second table for the underlying strategic objectives that conflicts with
the first table. For example, one table shows that HUD allocated $1.585
billion of CDBG funds to the overall strategic goal of increasing the
availability of decent, safe, and affordable housing in fiscal year 2002. A
table for an underlying objective to increase homeownership shows that an
estimated $4.802 billion of CDBG funds is allocated to achieve the
homeownership objective in fiscal year 2002. Hence, it seems that the
underlying objective requires a larger portion of the budget than the
primary strategic goal that it supports. A footnote for this table indicates
that allocations at the underlying objective level are not currently
available; but the table would have been clearer if HUD either used the
estimated allocations by program that were in the first table, or left out
the information completely until better estimates can be developed.

As discussed above, HUD has made it a priority to address the reliability of
its performance data. Although the plan continues to improve the discussion
of limitations to the performance data and discusses HUD?s plans to improve
its data quality, data credibility is an area we will continue to monitor.
HUD also notes that it has plans to review concerns about performance
measure data in response to a recommendation by the National Academy of
Public Administration. In a July 1999 study of HUD?s compliance with GPRA,
the Academy recommended that HUD develop a plan that outlines a clear,
departmentwide data quality goal with minimally acceptable data quality
standards for key elements, such as timeliness, reliability, and accuracy.
20 The Academy noted that the HUD?s quality assurance approach did not have
data quality standards, a plan for verifying data quality, or assigned roles
and responsibilities for those involved in the quality work.

We have previously discussed with HUD the usefulness of including goals and
performance measures in the performance planning documents that show HUD?s
progress toward resolving its management challenges. The 2002 annual
performance plan takes steps toward this by adding measures

20 GPRA in HUD: Changes for the Better, A Report by the National Academy of
Public Administration for Congress and the Department of Housing and Urban
Development, July 1999.

Page 19 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

and strategies that address some aspects of the management challenges, but
goals or measures that focus on the specific challenges that we and the OIG
have identified would be useful. For example, we have identified HUD?s
single- family insurance program and rental assistance programs as high
risk. Measures designed to address HUD?s progress on the issues related to
the challenges, such as monitoring lenders, overseeing appraisers, managing
single- family properties, or reducing excess subsidy payments, would be
useful in assessing HUD?s progress toward resolving the management
challenges. 21

The one area in which HUD appears to have weakened since the 2001
performance plan is in its coordination with other federal agencies. The
2002 performance plan does not discuss some coordination activity that was
in the 2001 report. For example, under the objective to increase
homeownership, HUD does not mention its coordination with the Department of
Agriculture?s (USDA) or the Veterans Administration?s housing programs.
Also, we reported on the overlap between USDA?s Rural Housing Service and
FHA?s single and multifamily programs and suggested that Congress consider
requiring the two agencies to examine the benefits and costs of merging
those programs. 22 In its response to our report, HUD disagreed with the
suggestion to merge the single family programs but said opportunities to
improve delivery of rural housing services should be explored. These
activities are not discussed in the performance plan. Additionally, some
indicators that were previously identified as potential interagency
indicators are not so designated in the 2002 performance plan. The plan does
not provide information on HUD?s reason for dropping these items or discuss
the impact, if any, on HUD?s achievement of its goals. We have also reported
on the importance of

21 We have issued several reports related to HUD?s management challenges
that include open recommendations HUD has not yet resolved. See our
correspondence to the Secretary on Status of GAO?s Recommendations to the
Department of Housing and Urban Development (GAO- 01- 741R, May 11, 2001).
These reports include: Single- Family Housing: Stronger Oversight of FHA
Lenders Could Reduce HUD?s Insurance Risk

(GAO/ RCED- 00- 112, Apr. 28, 2000); Single- Family Housing: Stronger
Measures Needed to Encourage Better Performance by Management and Marketing
Contractors

(GAO/ RCED- 00- 117, May 12, 2000); Mortgage Financing: FHA?s Fund has
Grown, but Options for Drawing on the Fund Have Uncertain Outcomes (GAO- 01-
460, Feb. 28, 2001);

Public Housing: HUD Needs Better Information on Housing Agencies? Management
Performance (GAO- 01- 94, Nov. 9, 2000); and Benefit and Loan Programs:
Improved Data Sharing Could Enhance Program Integrity (GAO/ HEHS- 00- 119,
Sept. 13, 2000).

22 Rural Housing: Options for Optimizing the Federal Role in Rural Housing
Development (GAO/ RCED- 00- 241, Sept. 15, 2000).

Page 20 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

interagency coordination on community growth issues and that opportunities
exist for federal agencies to improve their coordination. 23 We reported
that the large number of federal programs that fund economic development
activities and the large number of federal agencies that administer the
programs can reduce communities? flexibility in pursuing reinvestment
projects. HUD?s programs were among those most frequently mentioned as
helpful to community revitalization, but the plan makes limited mention of
HUD?s coordination activity with other agencies on these interagency issues.
In general, even where coordination activity is discussed, the plan does not
discuss the specific contribution of other agencies to the achievement of
HUD?s goals.

We have identified two governmentwide high- risk areas: strategic human
capital management and information security. 24 Regarding human capital, we
found that the fiscal year 2000 performance report does not explain HUD?s
progress in resolving human capital challenges. However, it does provide
information on the steps HUD is taking to implement a resources estimation
and allocation process and develop a framework to begin addressing human
capital issues. We found that HUD?s fiscal year 2002 annual performance plan
does not include specific goals or measures to address strategic human
capital management; however, it has three performance measures pertaining to
human capital issues. These three measures are that (1) HUD employees are
more satisfied with the Department?s performance and work environment, (2)
HUD will implement the new resource estimation and allocation process, and
(3) HUD will improve the diversity of the workforce. With respect to
information security, the agency?s performance report discusses the status
of a new Enterprise Security Program that the Chief Information Officer is
creating. The report states that this program will provide adequate security
measures and safeguards to protect information resources from unauthorized
access, use, modification, and disclosure. Although the performance report
does not specifically address this high- risk area, it states that during
fiscal year 2000, HUD developed policies, wrote a handbook, and created a
training program for a Critical Infrastructure Assurance program. We found
that HUD?s performance plan does not have

23 Community Development: Local Growth Issues - Federal Opportunities and
Challenges

(GAO/ RCED- 00- 178, Sept. 6, 2000). 24 Major Management Challenges and
Program Risks: A Governmentwide Perspective

(GAO- 01- 241, Jan. 2001). HUD?s Efforts to

Address its Major Management Challenges Identified by GAO

Page 21 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

goals and measures associated with information security, although we have
had open recommendations on this issue since 1994. 25

In January 2001, we reported on three long- standing, major management
challenges facing HUD. 26 We concluded that continued improvements were
needed to reduce HUD?s single- family insurance risk and to ensure that
HUD?s rental housing assistance programs are used effectively and
efficiently. We designated these two programs as high- risk areas for HUD.
We also reported that HUD needs to resolve its information and financial
management systems and human capital issues. In reviewing HUD?s fiscal year
2000 annual performance report, we found that the report does not provide
goals or measures for addressing the management challenges we identified,
but it does state that the high- risk areas are a top priority for the
Secretary. The report also includes some measures that relate to the issues
we have raised in the single- family, rental assistance, and financial
management systems and human capital areas. For example, the report has
measures to increase the use of loss mitigation tools to reduce the number
of foreclosures (which reduces FHA?s insurance costs) and to increase the
net recovery on sales of single- family real estate owned. However, the
report does not include goals or measures related to other aspects of the
single- family program that we have been concerned about, such as lender
oversight. Two of these management challenges are related to outcomes
discussed in this report (increased homeownership and increased affordable,
decent, and safe rental housing).

HUD?s fiscal year 2002 performance plan does not contain goals and measures
to resolve the three management challenges we identified; however, the plan
contains some measures related to aspects of the singlefamily, rental
assistance, and information and financial management and human capital
issues. For example, for the rental assistance management challenge, the
public trust strategic goal includes measures to increase the share of
assisted housing units that meet physical and financial standards and to
improve tenant income verification. The performance plan also includes a
separate section under its public trust strategic goal that discusses HUD?s
management challenges. The section discusses the management challenges
identified by us and states that addressing the

25 HUD Information Resources: Strategic Focus and Improved Management Needed

(GAO/ AIMD- 94- 34, Apr. 14, 1994). 26 Major Management Challenges and
Program Risks: Department of Housing and Urban Development (GAO- 01- 248,
Jan. 2001).

Page 22 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

long- standing management challenges is a top priority for the Secretary in
fiscal year 2002. It also discusses HUD?s recent progress and the activities
planned or being implemented that are expected to yield future improvements.
The plan notes that the Department has corrective action plans to address
the management challenges identified by us. It also states that HUD will use
the performance measures established for its strategic goal of ensuring
public trust to track the results of its management improvements and
identify where further improvements are needed, although it does not
identify those measures. However, as discussed above, strategies, goals, or
measures specific to resolving the management challenges would improve the
plan. See appendix I for a summary of the major management challenges and
related measures.

HUD prepared a performance report that is much improved from last year and
made additional improvements to its fiscal year 2002 performance plan.
Generally, the documents are understandable and well organized. However, HUD
did not achieve all of the performance measures for the four key outcomes.
For some performance measures that were achieved, specifically for the
homeownership outcome, the report did not clearly explain how HUD?s programs
contributed to achieving its goals, given the significant external factors
discussed. The report would be more useful to Congress and other
decisionmakers if it more clearly articulated HUD?s overall progress toward
achieving its goals, including identifying the specific contributions it
makes distinct from external factors or other contributors. HUD has
continued to revise and improve the performance plan; but the quality of
strategies for achieving goals varied by outcome and generally did not
include strategies to mitigate the external factors, resource information
was somewhat confusing, and some coordination discussions from prior years
were eliminated. The performance plan would benefit from further discussion
of HUD?s strategies for achieving the goals; the estimated resources needed
to achieve the goals; and coordination with external partners, specifically
other federal agencies. Although the plan and report discuss HUD?s
management challenges and contain some performance measures that pertain to
those challenges, developing specific performance measures and strategies
would serve to focus HUD?s efforts to improve its management and ensure
accountability in its programs. The performance plan would be more useful if
it included goals, measures, and strategies to address HUD?s management
challenges and its efforts to reduce fraud, waste, and error, along with a
risk assessment process to identify the programs most vulnerable to fraud,
waste, and error. Finally, the report includes statements about HUD?s plans
and efforts to improve the accuracy of its data. To increase Conclusions

Page 23 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

confidence that the results HUD reported accurately and fairly represent its
achievements and to fully comply with the Reports Consolidation Act, the
performance report should contain a specific assessment of the completeness
and reliability of HUD?s performance data.

We recommend that the Secretary of Housing and Urban Development consider
the following improvements to future performance plans and reports:

 Include sufficient information in the performance report to evaluate HUD?s
accomplishments, including an overall assessment of HUD?s progress toward
achieving its goals, identification of HUD?s specific contributions to
achieving the goals, and determination of the contributions of other
entities to HUD?s goals.

 Continue improving the performance plan by better estimating the resources
necessary to achieve the goals, articulating strategies to achieve the goals
and mitigate the problems encountered, and further discussing coordination
strategies with other federal agencies.

 Include sufficient goals, measures, and strategies to demonstrate HUD?s
efforts and progress in addressing its management challenges. In support of
HUD?s efforts to continue improving its management, future performance plans
would benefit from the inclusion of goals, measures, or strategies to assess
the prevention and detection of fraud, waste, and error, as well as a risk
assessment process to identify the most vulnerable programs.

 Include an assessment of the completeness and reliability of performance
data that clearly articulates the implications of relying on that data to
evaluate HUD?s achievements.

As agreed, our evaluation was generally based on the requirements of GPRA;
the Reports Consolidation Act of 2000; guidance to agencies from the Office
of Management and Budget (OMB) for developing performance plans and reports
(OMB Circular A- 11, Part 2); previous reports and evaluations by us and
others; our knowledge of HUD?s operations and programs; our identification
of best practices concerning performance planning and reporting; and our
observations on HUD?s other GPRArelated efforts. We also discussed our
review with the HUD?s OIG and obtained written comments from HUD. The agency
outcomes that were used as the basis for our review were identified by the
Ranking Minority Member of the Senate Committee on Governmental Affairs as
important mission areas for the agency, and three of the four reflect the
outcomes for HUD?s major programs or activities. The major management
challenges Recommendations for

Executive Action Scope and Methodology

Page 24 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

confronting HUD, including the governmentwide high- risk areas of strategic
human capital management and information security, were identified by us in
our January 2001 Performance and Accountability Series and High- Risk
Update. HUD?s OIG identified its top management challenges in December 2000.
We did not independently verify the information contained in the performance
report and plan, although we did draw from our other work for assessing the
validity, reliability, and timeliness of HUD?s performance data. We
conducted our review from April 2001 through June 2001 in accordance with
generally accepted government auditing standards.

We provided HUD a draft copy of this report for review and comment. HUD
generally agreed with the information presented in our report. Overall, HUD
found the report to be balanced and useful for both recognizing the
significant progress that the Department has made and pointing out areas
where more progress is needed. In general, HUD concurred with the need for
further analysis of the Department?s role in meeting specific performance
indicators, as well as larger strategic objectives and goals, specifically
in the homeownership area, and with the need to develop more representative
performance measures, without necessarily increasing the total number of
indicators. While agreeing with most of the report, HUD identified some
areas that it believed should be clarified. For example, HUD disagreed with
our statement that it generally did not provide strategies for achieving its
unmet homeownership goals because some of the goals were not achieved for
reasons beyond their control and some information on prospective strategies
that would address the issue was discussed. We clarified the report to
address most of the issues that were raised by HUD. In addition, we
incorporated HUD?s technical comments where appropriate. HUD?s comments and
our detailed responses are in appendix II.

As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after
the date of this letter. At that time, we will send copies to appropriate
congressional committees; the Secretary, Department of Housing and Urban
Development; and the Director, Office of Management and Budget. Copies will
also be made available to others upon request. Agency Comments

Page 25 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

If you or your staff have any questions, please call me at (202) 512- 7631.
Key contributors to this report were Shirley L. Abel, Steven L. Cohen,
Jeannie B. Davis, Mark H. Egger, David G. Gill, Danielle P. Hollomon, Bonnie
J. McEwan, Sally S. Moino, John T. McGrail, and Kirk D. Menard.

Sincerely yours, Stanley J. Czerwinski Director, Physical Infrastructure
Issues

Appendix I: Observations on the Department of Housing and Urban
Development?s Efforts to Address Its Major Management Challenges

Page 26 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

The following table identifies the major management challenges confronting
the Department of Housing and Urban Development (HUD), which includes the
governmentwide high- risk areas of human capital and information security.
The first column lists the management challenges that we and/ or HUD?s
Office of Inspector General (OIG) have identified. The second column
discusses the progress, as discussed in its fiscal year 2000 performance
report, HUD made in resolving its challenges. The third column discusses the
extent to which HUD?s fiscal year 2002 performance plan includes performance
goals and measures to address the challenges that we and HUD?s OIG
identified. We found that HUD?s performance report discusses the management
challenges identified by the OIG, as authorized by the Reports Consolidation
Act, but does not specifically discuss the agency?s progress in resolving
the management challenges we identified in January 2001, other than to note
that they were a high priority for HUD management. Of the agency?s 15
management challenges, its performance plan had measures that were directly
related to 10 of the challenges, had measures that were indirectly
applicable to 2 challenges, and had no goals or measures related to 3 other
challenges. Appendix I: Observations on the Department

of Housing and Urban Development?s Efforts to Address Its Major Management
Challenges

Appendix I: Observations on the Department of Housing and Urban
Development?s Efforts to Address Its Major Management Challenges

Page 27 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

Table 1: Major Management Challenges Major management challenge

Progress in resolving major management challenges as discussed in the fiscal
year 2000 performance report Applicable goals and measures in the

fiscal year 2002 performance plan GAO- designated governmentwide high risk

Strategic Human Capital Management: GAO has identified shortcomings at
multiple agencies involving key elements of modern human capital management,
including strategic human capital planning and organizational alignment;
leadership continuity and succession planning; acquiring and developing
staffs whose size, skills, and deployment meet agency needs; and creating
resultsoriented organizational cultures.

The report does not specifically discuss this governmentwide management
challenge. However, in the context of its strategic goal to ?Ensure Public
Trust,? the report discusses HUD?s resource estimation and allocation
process (REAP), which will establish a baseline for estimating resources and
making staff allocations. HUD has experienced some delays with this process,
but completion is expected by December 2001. The report includes a goal that
HUD?s workforce and partners are empowered, capable, and accountable for
results, which includes measures of employee satisfaction and capabilities,
overall workforce diversity, and the number of women and minority employees
at and above the GS- 13 level. HUD reported that employee satisfaction
improved, and the representation of women and minorities at GS13 and above
exceeded the goal; however, HUD did not achieve its diversity targets.

The performance plan does not include specific goals or measures to address
the human capital issues identified by GAO. However, the plan includes three
measures related to HUD?s human capital activities:

 HUD employees will become more satisfied with the Department?s performance
and work environment.

 The REAP initiative will be fully implemented and will establish a
baseline for estimating resource requirements and prioritizing staffing
allocations by program and office

 HUD continues to improve the workforce to reflect the nation?s diversity
by increasing the representation of underrepresented groups by 0.3
percentage point.

Information Security: Our January 2001 high- risk update noted that the
agencies? and governmentwide efforts to strengthen information security have
gained momentum and expanded. Nevertheless, recent audits continue to show
federal computer systems are riddled with weaknesses that make them highly
vulnerable to computerbased attacks and place a broad range of critical
operations and assets at risk of fraud, misuse, and disruption.

The report does not specifically discuss this governmentwide management
challenge. However, the report states that as part of the financial
management systems activities led by HUD?s Chief Information Officer during
fiscal year 2000, HUD initiated a Critical Infrastructure Protection support
effort, developed an enterprise security architecture strategy, and
developed an Enterprise Security Remediation Program Plan. The report states
that the program is intended to provide safeguards to protect from
unauthorized access, use, modification, and disclosure. However, the report
also notes that as of the end of fiscal year 2000, there were management
concerns and material nonconformance that carried over from fiscal year 1999
in departmental financial management systems. In particular, according to
the independent auditor?s report, there were weaknesses related to the need
to improve (1) controls over HUD?s computing environment, (2) administration
of personnel security operations, (3) reliability and security of critical
financial systems. In addition, on October 31, 2000, the OIG issued a report
entitled HUD Entity- wide Security Program, which stated that HUD?s security
program needs significant

The performance plan does not include specific goals or measures to address
the information security high- risk area.

Appendix I: Observations on the Department of Housing and Urban
Development?s Efforts to Address Its Major Management Challenges

Page 28 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenges as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the

fiscal year 2002 performance plan

improvement and that HUD has not placed the appropriate emphasis on
information systems security. Specifically, the report noted that risks are
not adequately assessed or managed; security plans are either not documented
or not kept current; incident tracking, reporting, and response capability
needs improvement; an effective training and awareness program is not in
place; and HUD?s Critical Infrastructure Protection Plan is inadequate and
out of date. We have reported open recommendations on computer security at
HUD since 1994.

GAO- designated major management challenge

Continued improvements needed to reduce HUD?s single- family mortgage
insurance risk: To reduce financial risks, HUD?s FHA needs to continue to
improve its management over home mortgage loans made by private lenders that
it insures against nearly all losses. While FHA has accumulated capital
reserves of about $16.6 billion on insured home loans valued at about $454
billion, we estimate that FHA lost about $1.9 billion during fiscal year
2000 on the sale of foreclosed loans that it had insured. We reported that
HUD has opportunities to strengthen FHA?s management and internal controls
that include strengthening the loan origination process; promoting better
monitoring of lenders, appraisers, and property management and marketing
contractors; and ensuring that sufficient staff with the right skills are
available to carry out FHA?s home loan mission.

The report includes a paragraph on HUD?s highrisk issues and states that
these issues are among the highest priorities. The report does not include
goals or measures to resolve HUD?s management challenges. However, the
report includes four measures that directly relate to issues raised by GAO.
HUD has two measures to assist in managing losses that may be experienced in
HUD?s single- family programs. For the measure to increase returns on real
estate owned, HUD did not achieve the expected amount of return. For another
measure, to increase the use of alternatives to foreclosure (and thereby
reduce losses to the insurance fund), HUD reported that it substantially
exceeded the goal. The report also includes a measure to hold appraisers
accountable for high- quality appraisals by having HUD electronically review
single- family appraisals submitted for endorsement. HUD did not achieve the
numeric goal for reviewing appraisals; but it reports that this was a one-
time effort to implement the system, and as such HUD considered it
successful. The report also includes a measure that FHA?s insurance fund
will meet the mandated reserve levels. HUD reports meeting this goal.

The performance plan does not include specific goals or measures to resolve
the single- family high- risk area identified by GAO. However, the plan
includes four related measures, two of which are directly related, on issues
GAO has raised about reducing HUD?s singlefamily insurance risk:

 The share of FHA mortgage defaults resolved by loss mitigation
alternatives to foreclosure increases by 2 percentage points to 38. 1
percent.

 The FHA Mutual Mortgage Insurance Fund meets congressionally mandated
capital reserve targets.

 The net recovery of FHA real estate owned sales increases by 1 percentage
point to 64. 8 percent.

 The share of FHA single- family appraisals determined to be unacceptable
is reduced.

Continued improvements needed to ensure HUD?s rental housing assistance
programs are used effectively and efficiently: Because HUD is able to serve
fewer than half of the households who are eligible for assisted housing, it
is essential that it ensure that these programs are used efficiently and
effectively to maximize the number of households that can be assisted.
Significant opportunities still

The report includes a paragraph on HUD?s highrisk issues, but it does not
include specific goals, measures, or strategies to resolve the rental
assistance management challenge. However, the report includes 19 measures
that directly relate to the issues associated with this management challenge
- improving the quality of housing and ensuring that accurate benefits are
paid only to eligible persons. HUD reported it did not meet 11 of the stated
goals, or the results were unclear; set baselines for 3 measures; and

The performance plan does not include specific goals or measures to resolve
the rental assistance high- risk area. However, the plan includes 23
measures, some of which are directly related, on various aspects of ensuring
that quality housing is provided to eligible households that pay the correct
amount of rent. For example:

 Among units occupied by low- income households, the share containing

Appendix I: Observations on the Department of Housing and Urban
Development?s Efforts to Address Its Major Management Challenges

Page 29 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenges as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the

fiscal year 2002 performance plan

exist to reduce excess subsidy payments estimated to total over $3 billion
for the last 4 years by ensuring that only eligible families occupy units
and that they pay the correct rents; ensure that providers of rental housing
maintain housing that is decent, safe, sanitary and in good condition; and
be certain that HUD has the capital resources and controls needed to detect
and address problems that exist in its rental housing assistance programs.

met 5 of the performance targets. threats to health and safety decreases by
0.2 percentage points to 5.5 percent by 2003.

 The share of units that meet HUDestablished physical standards increases
by 3 percentage points to 73.9 percent of public housing units and 89. 5
percent of assisted multifamily units.

 The share of HUD- assisted properties observed with exigent health and
safety or fire safety deficiencies decreases by 1. 0 percentage point for
public housing and by 0.6 percentage point for assisted multifamily housing.

 As part of the effort to eliminate 100,000 units of the worst public
housing, demolish 13,000 units during fiscal year 2002.

 The share of tenant- based Section 8 units managed by troubled housing
agencies decreases by 5 percentage points.

 The share of households for which rent determinations are correct
increases by 15 percent from fiscal year 2000 levels for public housing,
project- based Section 8 and tenantbased Section 8 by fiscal year 2003.

Resolution needed for information and financial management systems and human
capital issues: HUD has determined that its financial management systems do
not meet all of its needs and has plans under development to address this
issue. We reported that HUD must continue to focus on improving its
information technology management processes to help ensure success in
systems initiatives across the Department. HUD must also resolve a number of
human capital issues, such as adjusting workload to consider implementation
of the new centers, complete actions to measure workload, and staff its
programs adequately.

The report includes a paragraph on HUD?s highrisk issues, but it does not
include specific goals, measures, or strategies to resolve the information
systems and human capital management challenge. However, the report includes
measures that address certain aspects of these issues. It describes systems
measures to highly rate automated systems, develop a Performance Data
Quality Assurance Plan, and ensure that each program office has an approved
data quality plan. HUD reports that during fiscal year 2000, it was
necessary to modify these goals, and the performance expected was generally
not achieved. For example, HUD decided to focus on missioncritical data
systems, rather than on program offices. As a result, the program offices do
not have approved data quality plans. The report states that the quality
assurance planning process was not sufficiently refined to warrant
independent assessment, and the Department instead decided to independently
assess the

The performance plan does not include specific goals or measures to address
the information and financial management systems and human capital
management challenge. However, the plan includes five measures related to
these issues:

 HUD employees become more satisfied with the Department?s performance and
work environment.

 The REAP initiative will be fully implemented and will establish a
baseline for estimating resource requirements and prioritizing staffing
allocations by program and office.

 HUD continues to improve the workforce to reflect the nation?s diversity
by increasing the representation of underrepresented groups by 0.3
percentage point.

 HUD automated data systems are rated highly for usefulness, ease of

Appendix I: Observations on the Department of Housing and Urban
Development?s Efforts to Address Its Major Management Challenges

Page 30 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenges as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the

fiscal year 2002 performance plan

usability, usefulness, and life- cycle costs of HUD data systems, rather
than track user perceptions of quality. Also, under a discussion of its
financial management accountability, HUD reports on progress made in
improving its financial management systems. For human capital issues, the
report states that HUD?s employee responses to the National Partnership for
Reinventing Government survey improved, and the representation of women and
minorities at GS- 13 and above exceeded the goal; however, HUD did not
achieve its diversity targets.

use, and reliability.

 During fiscal year 2002, eight missioncritical data systems will be
assessed (for data quality) and those systems will be certified that
critical data elements conform to the program?s business rules by the end of
fiscal year 2003.

OIG- designated major management challenges

HUD 2020 Management Reforms: The OIG reports that many aspects of the plan
are far from completion and that some of the critical aspects of the plan,
such as staffing and financial management systems, are still under
development. The OIG cites a HUD sponsored study which noted that the
transition is happening slowly and there is a pervasive tension between
centralized control and local empowerment. Moreover, since HUD has never
performed an adequate cost benefit analysis, there is no assurance that
changes being implemented will fundamentally improve the financial and
program operations of the Department.

As required by the Reports Consolidation Act, the report included a summary
of the OIG?s assessment of the management challenges facing HUD. It also
included HUD?s response to each of those issues, which states that progress
has been made and some improvements were realized. However, HUD notes that
further efforts are needed to institutionalize those changes and ensure
consistency in operations. The report does not include goals or measures
that directly relate to assessment of the effectiveness of the 2020
Management Reform plan or the financial management and staffing issues
raised by the OIG. However, the report includes a strategic goal to ?ensure
public trust in HUD? that includes measures for certain aspects of the
reforms, such as for measuring the activities of the new centers, as
discussed below.

The performance plan does not include specific goals or measures to address
this management challenge identified by the OIG. However, the plan includes
a strategic goal to ?ensure public trust? with an objective that HUD and its
partners effectively deliver results to customers. The plan states that this
objective articulates the Department?s continued efforts to address its
management challenges and to make HUD a high- performing agency, which were
the general purposes of the 2020 Management Reform Plan.

Financial Management Systems: The OIG has reported concerns about HUD?s
efforts to improve and integrate its financial management systems, including
integrating FHA?s general ledger into HUD?s departmentwide systems. Most
recently, the OIG was concerned about HUD?s decision to restart its efforts
to integrate its systems with a $1.45 million purchase of software licenses
because the Department had not performed adequate study and analysis before
making this procurement decision. The OIG recommended that HUD delay
development efforts for the purchased software package until adequate
systems development

HUD states that it established a core standard general ledger that is
inefficiently integrated with HUD?s accounting and business processes. To
overcome these inefficiencies and continue improving its systems, the Chief
Financial Officer has developed a new financial management systems vision
that is currently under review. The report does not include goals or
measures that directly relate to the OIG?s concerns about HUD?s integrated
financial management systems and FHA?s general ledger. We do not consider
the performance measure to ?obtain clean audit opinions? to relate to the
information and financial management systems aspect of the management
challenge. This is because a clean audit opinion is not an indication of
adequate data systems. In HUD?s consolidated financial statement audit, the
OIG reported that HUD

The performance plan does not include specific include goals or measures to
address this management challenge. However, the plan includes one measure
that indirectly relates to the management challenge:

 During FY 2002, eight mission- critical data systems will be assessed (for
data quality) and those systems will be certified by the end of fiscal year
2003.

Appendix I: Observations on the Department of Housing and Urban
Development?s Efforts to Address Its Major Management Challenges

Page 31 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenges as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the

fiscal year 2002 performance plan

studies and analysis are conducted and the Enterprise Architect Plan is
issued and considered.

remains noncompliant with Federal Financial Management Improvement Act
requirements for federal financial management systems and Standard General
Ledger at the transaction level. Real Estate Assessment Center (REAC): The
OIG reports that HUD is placing heavy reliance on its new REAC, which
consolidated physical and financial assessments into one organization. The
OIG notes that the property inspections are costing millions of dollars
annually, information systems to support this operation are costly, industry
participants have raised serious questions about the reliability of the
assessments, and there are concerns that the results of the assessments are
not being used effectively.

HUD states that it is retooling some aspects of REAC?s assessment systems to
better ensure the quality and consistency of assessments. The report does
not directly address the OIG?s stated concerns about the costs of REAC?s
work and use of the information obtained. However, the report includes six
measures that relate to the implementation of some of REAC?s assessment
activities. HUD reports it set the baseline for one performance measure, as
planned. For five other performance measures, HUD did not achieve the
specific targets set; however, it states the goals were ?substantially met?
and implementation was successful. The report states that the five measures
will no longer be reported.

The performance plan does not include specific goals or measures to address
this management challenge.

Departmental Enforcement Center (DEC): The vision for the DEC was to combine
non- civil rights compliance enforcement actions for all of HUD?s program
offices into one organization. However, the Center has not been working to
capacity. Nearly all the focus has been on multifamily programs and HUD has
not given the DEC critical delegation authority crucial to tougher
enforcement actions. Without this authority, the Center may never realize
the independence or autonomy planned. The OIG believes that the Department
needs to be more aggressive in taking administrative actions and that the
DEC needs to be fully operational.

The report does not include specific goals or measure related to this
management challenge. HUD states that the DEC?s resources have been targeted
to the most egregious cases of compliance deficiencies in the program areas
with the highest risk. The report states that other programs are viewed as
lower risk. HUD states it is pursuing improved performance measurement and
reporting to hold program partners accountable.

The performance plan includes one measure directly related to the management
challenge:

 The DEC will improve management by multifamily housing partners by
reducing the multifamily cases in the DEC as of September 30, 2001, by 80
percent, by closing 75 percent of all cases received in FY 2002 that have
been in the DEC for 180 days and by completing all cases received in FY 2002
and closed in FY 2002 in an average of 180 days.

Troubled Agency Recovery Centers (TARCs): The OIG found that the TARCs were
working at less than 10 percent of their planned capacity, due to delays in
implementation of an assessment system and no clear direction from
headquarters on data or procedures to assist field staff in determining
whether a housing authority should be designated as

?troubled? and forwarded to the TARCs for servicing.

HUD states that delays in implementing the new Public Housing Assessment
System (PHAS) rule have delayed full deployment of the TARCs. The report
does not include goals or measures that directly relate to the capacity of
the TARCs, but the report includes five measures related to the
identification and management of troubled public housing authorities.
According to the performance report, HUD did not achieve any of these
measures during fiscal year 2000.

The performance plan includes one measure directly related to the management
challenge:

 The number of public housing units managed by troubled housing agencies
that are assigned to a TARC as of October 1, 2001, decreases by 15 percent
by September 30, 2002.

Appendix I: Observations on the Department of Housing and Urban
Development?s Efforts to Address Its Major Management Challenges

Page 32 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenges as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the

fiscal year 2002 performance plan

Use of Staff Resources: The OIG reported that HUD still lacks the capability
to support resource allocation. HUD?s implementation of its new REAP process
is currently behind schedule. The OIG also stated that even if the studies
are completed in a fair and unbiased manner, they will not address how the
information will be used in determining staff allocations or adjustments.
The OIG remains concerned whether the results will be used to better utilize
staff resources and notes that budget limitations may further limit HUD?s
ability to properly redistribute its resources if needed.

HUD states that it has developed a ?Succession

Planning? document that in combination with its REAP study will provide the
basis for a Workforce Plan that will enable HUD to address its human capital
needs. The report does not include goals or measures that directly relate to
the resource estimation and allocation issues raised by the OIG.

The performance plan contains one measure directly related to the issue
raised by the OIG in the staff resources management challenge:

 The REAP initiative will be fully implemented and will establish a
baseline for estimating resource requirements and prioritizing staffing
allocations by program and office.

FHA Single- Family Loan Origination Practices: Procedures and practices
pertaining to HUD?s single- family loan origination program have undergone
considerable change, particularly in the last 5 years. Changes have included
significant changes in loan underwriting requirements, transfer of loan
production and program monitoring from HUD staff to contractors. The OIG has
reported on problems in FHA?s reviews of lender underwriting, property
appraisals, monitoring of lenders, oversight of pre- endorsement
contractors, and the accuracy of information in the automated tracking
system.

HUD states that it has accepted improvements made by both GAO and the OIG to
reduce risk in its single- family insurance program. HUD states it is
proposing a change to the National Housing Act to confirm its authority to
terminate a lender?s approval to originate mortgages when the lender have a
high level of early defaults. HUD states that an improved control structure
is in place, but the remaining challenge is to ensure operational
consistency and apply appropriate sanctions. The report does not include
goals or measures that directly relate to the lender monitoring issues
associated with this management challenge.

The performance plan does not include specific goals or measures to address
this management challenge. However, the plan has one measure related to the
management challenge:

 The share of FHA single- family appraisals determined to be unacceptable
is reduced.

Single- Family Section 203( k) Program: An OIG audit of this program found
investors and nonprofit borrowers abusing the program. The program as
designed encouraged risky property deals, land sale and refinance schemes,
overstated property appraisals, and phony or inflated fees.

HUD states that it will consider eliminating one part of the program because
it is a high- risk area that is not critical to the achievement of HUD?s
core mission. The report includes one measure to increase the number of
single- family properties using the program by 4 percentage points. HUD did
not achieve the goal, attributing the failure to increased interest mortgage
rates and the weakening of the housing market. However, HUD also noted that
tightening program procedures to reduce programmatic abuses reduced market
acceptance of the program, and it is reviewing options about the future
direction of the program.

The performance plan does not include specific goals or measures to address
the issues associated with this management challenge; however, it contains
one measure indirectly related to the management challenge:

 Maintain the number of single- family properties rehabilitated under
Section 203( k).

Single- Family Property Disposition Program: An OIG audit of HUD?s
management and marketing contractors found the contractors did not maximize
the return to the

HUD states that it is considering recommendations made by GAO and the OIG to
make further improvements in the program. The report includes one measure on
increasing the recovery of single- family properties; however,

The performance plan includes one measure directly related to this
challenge:

 The net recovery of FHA real estate owned sales increases by 1

Appendix I: Observations on the Department of Housing and Urban
Development?s Efforts to Address Its Major Management Challenges

Page 33 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenges as discussed in the fiscal year 2000 performance report
Applicable goals and measures in the

fiscal year 2002 performance plan

mortgage insurance fund or maintain properties in a manner that strengthened
neighborhoods and communities. The OIG found problems with all seven
contracts reviewed and noted that outsourcing of the disposition program
resulted in reduced returns to the insurance fund of about $188 million.
These losses were attributed to poor sales performance and substantially
increased costs.

HUD did not achieve its expected performance due to programs that removed
properties from inventory more quickly but that also reduced the sales
price.

percentage point to 64. 8 percent. Section 8 Program Administration: The OIG
reported that HUD is not adequately administering the Section 8 Rental
Assistance program. HUD continued to experience problems in accounting and
budgeting funds, pay excessive subsidies, provide inadequate monitoring of
contract administrators, inadequately oversee its own Section 8 portfolio,
and have difficulty in timely identifying unneeded excess funds remaining on
expired project- based Section 8 contracts.

HUD states that it recognizes that this is a material management control
weakness, and it is developing a comprehensive corrective action plan. The
report included five measures for fiscal year 2000 that relate to some
aspects of the Section 8 issues raised by the OIG, such as improving
accuracy of Section 8 subsidies. HUD did not achieve its goal to set the
baselines in fiscal year 2000 for four of the measures as planned primarily
due to delays in implementing SEMAP, but it states that baselines will be
set in fiscal year 2002. For the fifth measure, HUD did not achieve its goal
to increase the accuracy of rent determinations during fiscal year 2000
because the baseline was not set until fiscal year 2000, rather than during
1999 as planned.

The performance plan does not include specific goals or measures to address
this management challenge, but it does include measures on improving
management of Section 8 and ensuring that accurate subsidies are paid:

 Utilization of Housing Choice Vouchers increases by 2 percentage points
from the fiscal year 2000 level to 94 percent.

 By helping housing agencies issue rental vouchers in timely fashion, HUD
decreases the share of the program administered by housing agencies with
substandard lease- up rates by 10 percent.

 The household- weighted average SEMAP score increases.

 The share of tenant- based Section 8 units managed by housing agencies
that score highly for determination of rent reasonableness increases.

 The share of households for which rent determinations are correct
increases by 15 percent from FY 2000 levels for public housing, projectbased
Section 8 and tenant- based Section 8 by FY 2003.

Appendix II: Comments from the Department of Housing and Urban Development

Page 34 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

Appendix II: Comments from the Department of Housing and Urban Development

Note: GAO comments supplementing those in the report text appear at the end
of this appendix.

Appendix II: Comments from the Department of Housing and Urban Development

Page 35 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

See comment 1.

Appendix II: Comments from the Department of Housing and Urban Development

Page 36 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

See comment 2. See comment 4. See comment 3.

Appendix II: Comments from the Department of Housing and Urban Development

Page 37 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

See comment 7. See comment 6.

See comment 5.

Appendix II: Comments from the Department of Housing and Urban Development

Page 38 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

See comment 9. See comment 8.

Appendix II: Comments from the Department of Housing and Urban Development

Page 39 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

The following are GAO?s comments on the Department of Housing and Urban
Development?s letter dated June 21, 2001.

1. To address HUD?s concerns that our statements about strategic human
capital management and information technology strategies appear
contradictory, we clarified the report to emphasize that strategic human
capital management and information technology were not discussed as
strategies related to the programmatic outcomes selected for this review.
However, we recognize they are discussed as part of HUD?s efforts to address
its management challenges and achieve its goal of ensuring public trust as
shown in other parts of the performance report.

2. We believe the report recognizes that HUD has included strategies and
performance measures that address aspects of reducing fraud, waste, and
error in its programs, and our analysis of HUD?s progress included most of
the measures HUD cites in its letter. Our intent was not to say that HUD did
not have such measures but that our analysis indicated that the results did
not present a clear picture of HUD?s progress toward achieving this outcome.
Our analysis of the selected measures, including most of those mentioned in
HUD?s comments, showed that for all but five, HUD set baselines, modified
the measure, did not achieve the results expected, or will not set baselines
until fiscal year 2002 so that performance related to those measures can not
yet be assessed. We clarified the report to emphasize that HUD?s progress
toward reducing fraud, waste, and error is not clear based on the results
reported as of fiscal year 2000. However, as stated in our report, we
believe that the strategies, goals, and measures, (and therefore the plan)
could be improved by specifically including a focus on preventing and
detecting fraud and errors. Additionally, this would be in line with our
requester?s interest in seeing an outcome related to reducing fraud, waste,
and error in HUD programs. This report contains a reference to our exposure
draft on this subject; we have agreed to discuss with HUD ways of developing
goals and measures that more specifically measure HUD's progress in reducing
fraud, waste, and error in future performance plans.

3. We recognize that in some places the performance report notes where unmet
measures would be revised or deleted, or other actions would be taken in the
future, although we did not specifically list all of those situations.
However, there are also places where unmet goals provide the opportunity to
evaluate HUD?s performance and future actions, GAO?s Comments

Appendix II: Comments from the Department of Housing and Urban Development

Page 40 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

particularly where significant external factors affect its ability to
achieve its goals as planned. These external factors do not release HUD from
the responsibility to develop strategies to mitigate the extent of those
external factors or to determine whether or how the goals and measures
should be revised to compensate for those factors. In fact, the extensive
external factors the Department faces (also see comment 4) in trying to
achieve its goals make it especially important that HUD have these
strategies to address its unmet goals, and evaluations may be useful for
that purpose. This comment specifically refers to our observation about the
homeownership outcome for which HUD notes the external factors are
particularly complex.

4. We agree that the issue of determining the impact of an agency?s role in
achieving goals for which there are many external partners and economic
influences is complex. We have agreed to discuss this issue with HUD, and we
also encourage the Department to consult with OMB and the Congress on the
most appropriate strategies and means for the Department to measure the
impact of its programs. (See also comment 3.)

5. We appreciate the Department?s concerns about accurately portraying data
reliability issues, and we clarified the discussion to (1) emphasize that
HUD also recognizes that more work remains to be done in this area, and (2)
this is one example of our concerns. However, we did not change the example
because the performance report does not explain the substantial difference
between what the measure says it will achieve and the results reported. The
report is written in such a way that only those familiar with this program
would detect the discrepancy and understand the possible reason for the
difference. Until we are assured that the performance reports show results
based on accurate data for all the key outcomes and that the results
presented are a fair representation of HUD?s activities, we will continue to
report concerns about the reliability of the performance data.

6. We clarified the report, where appropriate, to make it clear in the
examples cited that we are not saying that HUD did not achieve specific
numeric goals but that HUD did not achieve its goals to set baselines in
fiscal year 2000 as planned. For the purposes of our analyses, we considered
a goal to set a baseline by the same criteria as other measures that were to
achieve a specific numeric target. We believe this is an important issue
because until baselines are set, HUD cannot measure its progress toward
achieving its goals.

Appendix II: Comments from the Department of Housing and Urban Development

Page 41 GAO- 01- 833 HUD: Status of Achieving Key Outcomes

7. The intent of our observation was not necessarily to recommend that HUD
develop more measures but develop goals and measures that focus more on
resolving the specific management challenges. We clarified the report to
emphasize that the goal is to develop measures that effectively address the
specific management challenges. We have agreed to consult with HUD on
possible ways of developing goals and strategies that reflect the management
challenges; but we also suggest that HUD consult with the Congress and OMB
on this issue, particularly since OMB?s Circular A- 11 requires goals that
address agency management challenges. Such goals, according to OMB, often
will be expressed as milestone events for specific remedial steps.

8. We clarified our report to note that the performance report includes
measures that relate to aspects of HUD?s 2020 Management Reform, such as for
the new centers, but it generally does not include goals that relate to the
specific issues raised by the OIG.

9. Our observation on HUD?s performance measure to obtain clean audit
opinions was included in the report to explain why we did not include this
measure in our analysis of HUD?s efforts to address its management challenge
related to financial systems. Although we do not consider it a measure that
helps evaluate HUD?s progress toward improving its systems or addressing it
management challenges, this should not be construed as a criticism of HUD?s
decision to include the measure in its GPRA documents, if it finds the
measure useful. Achievement of a clean audit opinion is an important
milestone; however, until HUD addresses the Inspector General?s concerns
about HUD's integrated financial management systems and FHA?s general
ledger, it will not be in a position to provide reliable, timely information
on a day- to- day basis to support ongoing management and accountability.

(391016)

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Contact one:

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 1- 800- 424- 5454 (automated answering system) Ordering Information

To Report Fraud, Waste, and Abuse in Federal Programs
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