    HUD Management: Actions Needed to Improve Acquisition Management
    (15-NOV-02, GAO-03-157).

    In the 1990s the Department of Housing and Urban Development
    (HUD) dramatically downsized its staff, however, its mission did
    not decrease. As a consequence, HUD relies more heavily on
    private contractors, and needs to hold its contractors
    accountable for results. GAO was asked to determine if HUD has
    processes and practices in place to effectively oversee
    contractors, strategically manages its acquisition workforce, and
    has management information systems that support its acquisition
    workforce.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-03-157
        ACCNO:   A05532
      TITLE:     HUD Management: Actions Needed to Improve Acquisition
    Management
         DATE:   11/15/2002
      SUBJECT:   Accountability
    	     Contract oversight
    	     Management information systems
    	     Federal procurement

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    GAO-03-157

    Report to Congressional Requesters

    United States General Accounting Office

    GAO

    November 2002 HUD MANAGEMENT Actions Needed to Improve Acquisition
    Management

    GAO- 03- 157

    Why GAO Did This Study

    In the 1990s the Department of Housing and Urban Development (HUD)
    dramatically downsized its staff, however, its mission did not decrease.
    As a consequence, HUD relies more heavily on private contractors, and
    needs to hold its contractors accountable for results. GAO was asked to
    determine if HUD has processes and practices in place to effectively
    oversee contractors, strategically manages its acquisition workforce, and
    has management information systems that support its acquisition workforce.

    November 2002 HUD MANAGEMENT Actions Needed to Improve Acquisition
    Management

    www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 157. To view the full report,
    including the scope and methodology, click on the link above. For more
    information, contact Stanley J. Czerwinski (202) 512- 5535.

    Highlights of GAO- 03- 157, a report to the Senate Committee on Banking,
    Housing and Urban Affairs and Subcommittee on Housing and Transportation

    What GAO Recommends

    GAO makes several recommendations regarding HUD*s management of its
    acquisitions. For example, (1) HUD staff should systematically use
    contract monitoring plans as well as a risk- based approach to monitoring,
    (2) HUD should address workload disparities among its acquisition
    workforce and ensure that appropriate training is provided, and (3) HUD
    should improve the usefulness of its contracting information system by
    providing training to staff.

    United States General Accounting Office

    What GAO Found

    HUD*s contracting has increased significantly in recent years. Although
    HUD has taken actions to improve its acquisition management-- such as
    instituting full- time contract monitoring positions and improving its
    contracting information system-- weaknesses remain that limit HUD*s
    ability to identify and correct contractor performance problems, assure
    that it is receiving the services for which it pays, and hold contractors
    accountable for results.

    * HUD, in particular, its multifamily housing program, does not employ
    processes and practices that could facilitate effective

    monitoring. For example, HUD*s monitoring process does not consistently
    include the use of contract monitoring plans or riskbased strategies, or
    the tracking of contractor performance.

    * HUD has not ensured that individuals responsible for managing and
    monitoring contracts have the appropriate workload, skills, and

    training that would enable them to effectively perform their jobs. For
    example, according to HUD*s records, over half of the staff who are
    directly responsible for monitoring contractor performance have not
    received required acquisition training.

    * HUD*s management information systems do not adequately support its
    acquisition workforce in their efforts to manage and monitor

    contracts. Specifically, key information in HUD*s contracting system is
    not reliable and HUD*s financial systems do not readily provide complete
    and consistent contracting obligation and expenditure data.

    HUD paid $227,500 for 15,000 square feet of sidewalk repairs at five
    buildings; however, GAO determined that only about one- third of the work
    HUD paid for was performed. Therefore, it appeared that HUD improperly
    paid its contractor $164, 000. One of the buildings is shown above. Only
    the lighter shaded section of the sidewalk was replaced and not the entire
    sidewalk as was listed on the paid invoices.

    Source: GAO photograph of HUD property.

    G A O Accountability Integrity Reliability

    Highlights

    Page i GAO- 03- 157 HUD Management Letter 1

    Results in Brief 3 Background 6 HUD Has Increased Contracting Activities
    and Taken Steps to

    Improve Acquisition Management 12 HUD Does Not Employ Certain Processes
    and Practices that

    Would Facilitate Effective Contractor Monitoring 15 HUD Does Not
    Strategically Manage Its Acquisition Workforce 23 Weaknesses in
    Programmatic and Financial Management

    Information Systems 26 Conclusions 31 Recommendations for Executive Action
    32 Agency Comments 32

    Appendix I Scope and Methodology 35

    Appendix II Sampling Methodology for GAO Survey of HUD*s Acquisition
    Management Reforms 39

    Objectives 39 Scope and Methodology 39 Study Population 39 Sample Design
    39 Estimates 40 Sampling Error 40 Nonsampling Error 41 Survey Development
    41 Survey Administration 41

    Appendix III Analysis of the HUD Procurement System (HPS) Identified
    Discrepancies in HUD*s Contracting Data 43

    Appendix IV HUD*s Financial Management Information Systems that Contain
    Contracting Obligation and Expenditure Information 45 Contents

    Page ii GAO- 03- 157 HUD Management Appendix V Comments from the
    Department of Housing and Urban

    Development 46 GAO Comments 56

    Appendix VI GAO Contacts and Staff Acknowledgments 59 GAO Contacts 59
    Acknowledgments 59

    Tables

    Table 1: Contract Obligation Data from HUD*s Programmatic and Financial
    Management Information Systems for Fiscal Years 1999 and 2000 29 Table 2:
    Description of Sample 40

    Figures

    Figure 1: HUD Contracting Dollars by Category of Service for Fiscal Year
    2000 7 Figure 2: HUD Contracting Obligations for Fiscal Years 1995 to

    2000 in 2001 Constant Dollars 12 Figure 3: Sidewalk Repairs at HUD
    Property 22

    Page iii GAO- 03- 157 HUD Management Abbreviations

    CO Contracting Officer CCARS Cash Control Accounting Report System CS
    Contract Specialist CSMS/ PMS Comprehensive Servicing and Monitoring

    System/ Property Management System FAR Federal Acquisition Regulation FCO
    Field Contracting Operations FHA Federal Housing Administration FPDC
    Federal Procurement Data Center GAO General Accounting Office GNMA
    Government National Mortgage Association GTM Government Technical Monitor
    GTR Government Technical Representative HOC Homeownership Center HPS HUD
    Procurement System HUD Department of Housing and Urban Development HUDAR
    HUD*s Acquisition Regulation HUDCAPS HUD*s Central Accounting and Program
    System LOCCS Line of Control and Credit System NAPA National Academy of
    Public Administration OIG Office of the Inspector General OCPO Office of
    the Chief Procurement Officer OFPP Office of Federal Procurement Policy
    PAS Program Accounting System REAP Resource Estimation and Allocation
    Project REO Real Estate Owned SAMS Single Family Acquired Asset Management
    System

    Page 1 GAO- 03- 157 HUD Management

    November 15, 2002 The Honorable Paul S. Sarbanes Chairman Committee on
    Banking, Housing, and Urban Affairs United States Senate

    The Honorable Jack Reed Chairman Subcommittee on Housing and
    Transportation Committee on Banking, Housing, and Urban Affairs United
    States Senate

    The Honorable Wayne Allard Ranking Minority Member Subcommittee on Housing
    and Transportation Committee on Banking, Housing, and Urban Affairs United
    States Senate

    The Department of Housing and Urban Development (HUD) assists millions of
    Americans through programs that help to encourage home ownership, house
    the poor, and promote economic development. To accomplish its mission, HUD
    relies on the integrity of thousands of third parties* such as private
    lenders, contractors, nonprofit organizations, and local governments. As
    HUD dramatically downsized its staff in the 1990s* from about 13,500
    people to around 9,000 today* the scope of its mission and the needs of
    the people it serves did not decrease. As a consequence, HUD came to rely
    more and more on private contractors to help carry out its mission. These
    contractors deliver programs and perform many functions that used to be
    done by HUD*s staff, including those in its mortgage insurance and rental
    assistance program areas* areas we have found to be at high risk for
    fraud, waste, abuse, and mismanagement. 1 To guard against fraud, waste,
    abuse, and mismanagement, HUD needs effective oversight processes and
    staff with the right skills and training who are equipped with the right
    tools and information to ensure the

    1 U. S. General Accounting Office, Major Management Challenges and Program
    Risks: Department of Housing and Urban Development, GAO- 01- 248
    (Washington, D. C.: Jan. 1, 2001).

    United States General Accounting Office Washington, DC 20548

    Page 2 GAO- 03- 157 HUD Management

    fulfillment of HUD*s mission and to protect the integrity of and
    accountability over its programs.

    You asked us to study HUD*s acquisition management as part of your broad
    request for a series of our reports on HUD management issues. 2 In this
    report we discuss the challenges HUD faces in overseeing its contractors,
    focusing specifically on (1) trends in HUD*s contracting activity and
    efforts to improve its acquisition management; (2) whether HUD has
    effective processes and practices to effectively manage and monitor
    contracts; (3) whether HUD ensures that its acquisition workforce has the
    appropriate workload, skills, and training to manage and monitor
    contracts; and (4) whether HUD*s programmatic and financial management
    information systems support the acquisition workforce in managing and
    monitoring contracts.

    To assess HUD*s oversight of its contracts, we reviewed HUD*s contracting
    policies and procedures. We focused on contracts in the Office of
    Multifamily Housing because, among other things, in fiscal year 2001,
    Multifamily Housing processed the second highest number of purchase orders
    and contracts that obligated funds* about 25 percent of these
    transactions. In a related assignment, we also reviewed fiscal year 2001
    disbursements under multifamily housing*s property disposition contracts
    using an automated approach to identify unusual transactions and payment
    patterns. 3 To assess the workload, skills, and training of the
    acquisition workforce, we conducted a survey of HUD*s acquisition
    workforce and obtained information on training and certification of the
    acquisition workforce, both in the Office of the Chief Procurement Officer
    (OCPO) and at the program level. To determine whether HUD*s programmatic
    and financial management systems support contract oversight, we analyzed
    contracting data from the various systems that record contracting
    transactions.

    2 In response to this request, we have also issued reports on HUD*s
    information technology acquisition efforts, the status of HUD management
    reforms, and HUD*s human capital planning. U. S. General Accounting
    Office, HUD Information Systems: Immature Software Acquisition Capability
    Increases Project Risks, GAO- 01- 962 (Washington, D. C.: Sept. 14, 2001).
    U. S. General Accounting Office, HUD Management: Progress Made on
    Management Reforms, but Challenges Remain, GAO- 02- 45 (Washington, D. C.:
    Oct. 31, 2001). U. S. General Accounting Office, HUD Human Capital
    Management: Comprehensive Strategic Workforce Planning Needed, GAO- 02-
    839 (Washington, D. C.: July 24, 2002).

    3 U. S. General Accounting Office, Financial Management: Strategies to
    Address Improper Payments at HUD, Education, and Other Federal Agencies,
    GAO- 03- 167T (Washington, D. C.: Oct. 3, 2002).

    Page 3 GAO- 03- 157 HUD Management

    HUD contracting has increased significantly in recent years and the
    department has taken corrective actions to improve its acquisition
    management. According to HUD, its commitments for contract work increased
    by about 62 percent between fiscal years 1997 and 2000, from about $786
    million to almost $1.3 billion (in 2001 constant dollars). Much of this
    increase in contracting activity is attributed to the decline in the
    number of HUD staff and the need to contract for activities previously
    done by HUD employees and new functions, such as the physical building
    inspections of public housing and multifamily projects that were initiated
    under recent management reform. HUD expects contracting to increase,
    partially due to a presidential initiative to increase competition between
    the public and private sectors for work currently done by federal
    employees. In response to criticisms of past contracting practices, HUD
    undertook corrective actions to improve acquisition management. These
    included instituting full- time technical positions at the program level
    with responsibility for monitoring contractor performance, a certification
    training program for HUD staff filling those positions, and a contracting
    information system to improve consolidation of contracting data and its
    integration with HUD*s financial systems. HUD also hired a chief
    procurement officer and created a Contract Management Review Board to
    improve contract administration and procurement planning. While HUD has
    taken actions to improve its acquisition management, it still faces
    significant challenges monitoring contractor performance, managing its
    acquisition workforce, and ensuring the quality of data in its
    programmatic and financial management systems.

    The department, in particular its multifamily housing program, does not
    employ certain processes and practices that could facilitate effective
    monitoring and ensure contractors* accountability. 4 HUD*s monitoring of
    its contractors is not systematic and is largely remote. HUD*s monitoring
    process does not consistently include the use of contract monitoring plans
    or risk- based strategies, or the tracking of contractor performance*
    which would be helpful in the administration of such plans and strategies.
    According to our survey, only 23 percent of HUD staff responsible for
    contract monitoring use a contract administration plan, which the Office
    of Federal Procurement Policy (OFPP) describes as essential for good

    4 We have defined monitoring as an internal control function that is
    performed continually and is ingrained in the agency*s operations. It
    includes regular management and supervisory activities, comparisons,
    reconciliations and other actions people take in performing their duties.
    U. S. General Accounting Office, Standards for Internal Control in the
    Federal Government, GAO/ AIMD- 00- 21. 3.1 (Washington, D. C.: November
    1999). Results in Brief

    Page 4 GAO- 03- 157 HUD Management

    contract administration. HUD*s monitoring of contractors consists mainly
    of reviews of progress reports and invoices, telephone calls, and emails.
    When on- site visits are conducted, they are often not conducted as
    intended, per HUD guidance, and HUD staff are limited in their ability to
    follow up on identified problems. 5 In the absence of a systematic
    approach to oversight and adequate on- site monitoring, the department*s
    ability to identify and correct contractor performance problems and hold
    contractors accountable is reduced. The resulting vulnerability limits
    HUD*s ability to assure itself that it is receiving the services for which
    it pays. In October 2002, we testified that a related review of improper
    payments at HUD identified several examples of contractor performance
    problems that illustrate the problems that can occur as a result of these
    vulnerabilities. 6 In one case, HUD paid five invoices totaling $227,500
    for 15,000 square feet of concrete to be replaced when only about one
    third of that amount was actually replaced. In another case, HUD paid for
    apartment renovations that were not done. These examples demonstrate the
    need for HUD to adopt more effective monitoring procedures.

    In addition, HUD has not taken steps to ensure that individuals
    responsible for managing and monitoring contracts have the appropriate
    workload, skills, and training that would enable them to effectively
    perform their jobs. For example, while a recent resource allocation study
    identified workload disparities within HUD*s primary contracting office,
    HUD has not yet addressed the issues raised in that study. While HUD has
    undertaken an organizationwide workforce planning effort, 7 HUD has not
    assessed the skills and capabilities of its acquisition workforce to
    ensure that it has the skills to manage and monitor the contracts for
    which they are responsible. In addition, according to HUD*s records, over
    half of the staff who are directly responsible for monitoring contractor
    performance have not received required acquisition training. HUD*s
    procurement office management was not aware that the staff were serving in
    that capacity without the required training.

    5 HUD*s Multifamily handbook indicates that quarterly inspections are to
    occur, but the specific sections in the handbook that are to discuss those
    inspections have not yet been developed and are currently blank.

    6 GAO- 03- 167T. 7 In July 2002, we reported that HUD has undertaken some
    workforce planning and has determined how many staff it needs to meet its
    current workload, but it does not have a comprehensive strategic workforce
    plan to guide its recruiting, hiring, and other key human capital efforts.
    GAO- 02- 839.

    Page 5 GAO- 03- 157 HUD Management

    HUD*s programmatic and financial management information systems do not
    readily provide accurate and consistent data that supports its acquisition
    workforce in their efforts to manage and monitor contracts. The
    department*s centralized contracting system does not contain reliable
    information on the number of active contracts, the expected cost of the
    contracts, or the types of goods and services acquired. In addition, HUD*s
    financial management information systems do not readily provide complete
    and consistent obligation and expenditure information for HUD*s overall
    contracting activities or for individual contracts. Five months after our
    request, HUD was unable to provide spending information on 33 contracts.
    To compensate for weaknesses in formal information systems, HUD staff
    overseeing contracts have developed informal or *cuff* systems* personal
    spreadsheets to fulfill their job responsibilities. While helping staff
    perform their jobs, these informal systems are not subject to HUD*s
    policies, procedures, or internal controls to ensure that the information
    maintained in them* and used by HUD*s acquisition workforce to manage and
    monitor individual contracts* is accurate. In addition, the programmatic
    and financial management information systems do not provide HUD managers
    accurate and timely information needed to oversee the department*s
    contracting activities, make informed decisions about the use of HUD*s
    resources, and ensure accountability in the department*s programs.

    HUD has already taken some actions to improve its acquisition management.
    Many of the deficiencies we identified, particularly related to HUD*s
    human capital management and programmatic and financial information
    systems, are long- standing and will likely require years to resolve.
    However, HUD can take immediate steps to address certain acquisition
    management deficiencies. In fact, many of the tools that would help HUD
    address these deficiencies already exist, through HUD and federal
    acquisition initiatives. This report makes recommendations that HUD use
    some of these tools, which would lead to more systematic contract
    monitoring, address planning and training requirements for its acquisition
    workforce, and take steps to improve the accuracy and utility of its
    centralized contracting management information system.

    We provided a draft of this report to HUD for its review and comment. HUD
    agreed that it faces significant long- standing challenges in monitoring
    the performance of its contractors, managing its acquisition workforce,
    and addressing weaknesses in its information systems. HUD stated that it
    is taking actions to address our recommendations. For example, to improve
    contract oversight and monitoring, HUD will require each of its program
    organizations to review its policies and procedures to ensure that

    Page 6 GAO- 03- 157 HUD Management

    they are clear, consistent, and risk- based. The department also stated
    that it plans to take action to improve management of its acquisition
    workforce and address weaknesses in its information systems.

    While HUD agreed with our recommendations, HUD said it believes that its
    acquisition workforce is receiving required training because (1) it has
    developed acquisition training for Government Technical Representatives
    (GTR) in accordance with federal requirements and (2) Government Technical
    Monitors (GTM) do not require the same level of training as GTRs and are
    provided acquisition training appropriate to their duties when needed. 8
    We agree that the department has developed an acquisition training program
    for GTRs in response to federal requirements. However, we found that a
    significant portion of the department*s GTRs have not had this training,
    and HUD did not disagree with our finding. Furthermore, while we agree
    that GTMs may not require the same level of training as GTRs, HUD policies
    permit the duties and responsibilities of GTRs to be delegated to GTMs;
    and its draft Acquisition Career Management Plan* which establishes
    training requirements for HUD*s acquisition workforce* states that the GTR
    training requirements also apply to GTMs. Therefore, we remain concerned
    that, according to HUD*s records, 93 percent of HUD*s GTMs have not
    received any specialized acquisition training. We are, however, encouraged
    by HUD*s comment that it will continue to assess the training needed for
    GTMs to more effectively monitor contractor performance. The full text of
    HUD*s comments and our response appear in appendix V.

    HUD encourages homeownership by providing mortgage insurance for single
    family housing and makes rental housing more affordable for about 4.8
    million low- income households by insuring loans to construct or
    rehabilitate multifamily rental housing and by assisting such households
    with their rent payments. In addition, it has helped to revitalize over
    4,000

    8 The GTR at HUD is the equivalent of a Contracting Officer Technical
    Representative at other agencies, and acts as the Contracting Officer*s
    representative in all matters concerning the technical (i. e., not
    contractual) aspects of a contract. The GTR is often the department*s
    primary point of contact with a contractor; is responsible for giving
    contractors technical advice and guidance related to the work required by
    the contract, and is also the principal judge of contractor performance,
    including the quality and timeliness of work and products, and when
    appropriate, the contractor*s ability to control costs of performance. HUD
    uses GTMs to assist the GTRs, but does not equate them to the contracting
    officer technical representatives or contracting officer representatives
    specified in the FAR. Background

    Page 7 GAO- 03- 157 HUD Management

    localities through community development programs. To accomplish these
    diverse missions, HUD relies on third parties, including contractors, to
    administer many of its programs. As shown in figure 1, according to data
    HUD reported to the Federal Procurement Data Center (FPDC), for fiscal
    year 2000, HUD obligated the bulk of its contracting dollars* over 96
    percent* in three categories of contracting: automated data processing and
    telecommunications services for about $254 million; operation of
    government- owned facilities for about $195 million for one of its
    multifamily contractors; and over $600 million for professional,
    administration, and management support services contracts, such as real
    estate brokerage services, technical assistance, and other services.

    Figure 1: HUD Contracting Dollars by Category of Service for Fiscal Year
    2000

    According to HUD data, about $640 million of the $1.2 billion contract
    obligations for fiscal year 2000 are for Office of Housing contracts; much
    of this contracting was for services HUD needs to manage its foreclosed
    single- family and multifamily housing inventory, which HUD acquires when
    borrowers default on mortgages insured by the Federal Housing
    Administration (FHA). According to HUD*s fiscal year 2001 annual
    performance report, the Secretary holds single- family property with a
    value of about $2.4 billion and multifamily property with a value of about

    Page 8 GAO- 03- 157 HUD Management

    $750 million as of September 30, 2001. 9 In its single- family program,
    HUD contracts for management and marketing contractors who are responsible
    for securing, maintaining, and selling the houses that HUD acquires when
    the owners default on their loans. HUD also contracts for property
    management services, such as on- site management, rent collection, and
    maintenance, for multifamily properties it acquires through foreclosure.
    HUD*s two largest multifamily property management contractors have an
    obligated value of about $650 million over 5 years.

    Contracting is conducted in HUD*s Office of the Chief Procurement Officer
    (OCPO) in Washington D. C., or by one of HUD*s three Field Contracting
    Operations (FCO) offices located in Philadelphia, Pennsylvania; Atlanta,
    Georgia; and Denver, Colorado. OCPO contracts for information technology
    and other services in support of HUD headquarters. FCO offices primarily
    contract for services related to the business operations of HUD*s field
    offices and specialized centers. For example, contracting officers in one
    FCO assist HUD*s two Multifamily Property Disposition Centers (located in
    Atlanta, Georgia, and Ft. Worth, Texas) in contracting for and overseeing
    the property management contractors that are responsible for the day- to-
    day management of foreclosed multifamily properties.

    HUD*s Office of Multifamily Housing field offices and two Property
    Disposition Centers are responsible for the oversight of various programs
    to provide affordable multifamily housing. The largest multifamily
    contracts in the field are for the Property Disposition Centers, which are
    responsible for management of foreclosed multifamily properties. HUD*s
    multifamily housing field offices* comprising 18 hub offices and their
    associated 33 program centers* also contract for inspections of the
    construction of multifamily properties built under its FHA- insured and
    assisted multifamily housing programs, which are for the construction of
    housing for the elderly and disabled. 10 Multifamily Housing has four
    fulltime GTRs located in Atlanta and Ft. Worth who are responsible for
    monitoring most field multifamily contracts; two GTRs are assigned to the

    9 U. S. Department of Housing and Urban Development, FY 2001 Performance
    and Accountability Report.

    10 FHA insures private lenders against losses on mortgages that finance
    multifamily projects to develop affordable housing. The Section 202/ 811
    Supportive Housing for the Elderly and Persons with Disabilities programs
    provide grants for long- term supportive housing for the elderly and
    disabled.

    Page 9 GAO- 03- 157 HUD Management

    Property Disposition Centers and two are responsible for the construction
    inspection contracts. Most of the field contracts are also assigned at
    least one GTMs, who is designated to assist, on a part- time basis, the
    GTRs on the day- to- day technical oversight of the contractors*
    performance.

    Various federal laws, regulations, and policies govern contracting
    operations and procedures. The Federal Acquisition Regulation (FAR)
    establishes uniform policies and procedures for acquisitions by all
    executive agencies. The FAR establishes procedures for all aspects of the
    contracting process, from solicitation to post award monitoring, including
    responsibilities of the various members of the acquisition team such as
    the contracting officer. Also in 1974, the Office of Federal Procurement
    Policy (OFPP) Act created OFPP within the Office of Management and Budget
    to provide, among other things, governmentwide policies for agencies in
    procurement matters. OFPP*s Guide to Best Practices for Contract
    Administration recommends the use of a contract administration plan for
    good contract administration. According to the guide, this plan should
    specify the performance outputs and describe the methodology used to
    conduct inspections of those outputs.

    HUD supplements the FAR through its own regulations called HUD*s
    Acquisition Regulation (HUDAR) and its Procurement Policies and Procedures
    Handbook. The handbook specifies various monitoring tools that the GTR may
    use to monitor contractor performance, such as a quality assurance plan, a
    contractor*s work plan and schedule of performance, or progress reports.
    The purpose of the monitoring is to ensure that (1) the contractor
    performs the services and/ or delivers the products of the type and
    quality that the contract requires, (2) performance is along the most
    efficient lines of effort, (3) performance and deliverables are timely,
    (4) performance is within the total estimated cost, and (5) HUD will be
    able to properly intervene when performance is deficient. For example,
    according to the handbook, often the best way for a GTR to determine the
    quality of the contractor*s performance is through an actual inspection of
    work or products. Inspections may be routine, unannounced, or a
    combination of the two, and the contract should specify any requirement
    for routine inspections, such as the frequency and dates, or other
    occurrences that would trigger an inspection. The handbook does not
    establish specific monitoring requirements, such as timetables for review
    or numbers of site visits; however, some of the policies established by
    individual program offices do include such requirements. For example, the
    Office of Multifamily Housing*s Standard Operating Procedures No. 5
    requires that HUD staff visit construction sites at least twice during
    construction to verify the performance of the

    Page 10 GAO- 03- 157 HUD Management

    inspection contractor who is responsible for inspecting actual
    construction of the project.

    The Clinger- Cohen Act of 1996 requires executive agencies, through
    consultations with OFPP, to establish education, training, and experience
    requirements for acquisition workforces at civilian agencies. Under
    implementing guidance issued by OFPP, an agency*s acquisition workforce*
    including its contracting officers, contract specialists, purchasing
    agents, contracting officer representatives, and contracting officer
    technical representatives* must meet an established set of contracting
    competencies. 11 In addition, OFPP has identified specific training
    requirements for personnel in the contracting and purchasing occupation
    series. OFPP further required that agencies have policies and procedures
    that specify career paths and mandatory training requirements for
    acquisition positions and that agencies collect and maintain standardized
    information on the training of its acquisition workforce. 12

    A strong internal control system provides the framework for accomplishing
    management objectives, accurate financial reporting, and compliance with
    laws and regulations. Effective internal controls, including monitoring,
    serve as checks and balances against undesired actions, thereby providing
    reasonable assurance that resources are effectively managed and accounted
    for. A lack of effective internal controls puts an entity at risk of
    fraud, waste, abuse, and mismanagement. Monitoring is a particularly
    critical management control tool for HUD because its housing programs rely
    extensively on various third parties, such as contractors, to achieve
    HUD*s goals. For many years, HUD has been the subject of criticism for
    management and oversight weaknesses that have made its programs vulnerable
    to fraud, waste, abuse, and mismanagement. In January 2001, we recognized
    the credible progress that HUD had made in improving its management and
    operations, and we reduced the number of HUD program areas deemed to be
    high risk to two of its major program areas* single family mortgage
    insurance and rental housing assistance. These program areas include the
    single family and

    11 Contracting officers have the authority to bind the government legally
    by signing a contract. Contract specialists generally assist contracting
    officers. Purchasing agents commonly issue delivery orders against
    established contracts.

    12 To assist in meeting this requirement governmentwide, the Federal
    Acquisition Institute is scheduled to implement the Acquisition Career
    Management Information System in October 2002. This system is Web- based
    and will collect standardized information on the acquisition workforce for
    all civilian agencies.

    Page 11 GAO- 03- 157 HUD Management

    multifamily property disposition activities cited earlier and comprise
    about two- thirds of HUD*s budget.

    We, HUD*s Office of Inspector General (OIG), and the National Academy of
    Public Administration (NAPA) have reported on weaknesses in HUD*s contract
    administration and monitoring of contractors* performance over several
    years. For example, starting in 1998, we reported on the performance of
    HUD*s single- family contractors* that HUD did not have an adequate system
    in place to assess its field offices* oversight of real estate asset
    management contractors. In three offices that we reviewed, none of the
    offices adequately performed all of the functions needed to ensure that
    the contractors met their contractual obligation to maintain and protect
    HUD- owned properties. HUD*s OIG completed a comprehensive review of HUD*s
    contracting operations in 1997 and found that a lack of adequate planning,
    needs assessment, good initial planning, monitoring, and cost control on
    several multimillion dollar contracts left HUD vulnerable to waste and
    abuse. The OIG found contract monitoring to be very lax throughout the
    program areas. The GTRs and GTMs had a poor understanding of their roles
    and responsibilities, allowing HUD to be overbilled, improperly
    authorizing contract tasks, accepting less than complete contract work
    without financial credits or adjustments, and could not document whether
    certain tasks were completed. In a followup review in 1999, the OIG
    reported that HUD*s reforms had laid the groundwork for an effective
    acquisition process; however, they concluded that HUD*s contracting
    attitudes and practices had not changed significantly. In May 1997, NAPA,
    reported that HUD*s procurement process took too long; FHA*s oversight of
    contracted services was inadequate; and FHA sometimes used contracting
    techniques that limited competition. 13 In 1999, NAPA issued its final
    report on the results of their study and noted that HUD had made progress
    toward improving its procurement processes. 14

    13 National Academy of Public Administration, A Preliminary Review of
    Federal Housing Administration Acquisition Activities (Washington, D. C.:
    May 1997). 14 National Academy of Public Administration, HUD Procurement
    Reform: Substantial Progress Underway (Washington, D. C.: April 1999).

    Page 12 GAO- 03- 157 HUD Management

    HUD*s contracting obligations have been on an upward trend in recent
    years; HUD reports that its contracting obligations increased from about
    $786 million in fiscal year 1997 to almost $1.3 billion in fiscal year
    2000 (in 2001 constant dollars), or about a 62 percent increase within 5
    years. 15 Much of this increase in contracting activity is compensating
    for staff reductions in the early 1990*s from about 13,500 to about 9,000
    by March 1998 and the need to contract out for activities previously done
    by HUD employees, and for new functions, such as the physical building
    inspections of public housing and multifamily insured projects, initiated
    under recent management reforms. Figure 2 shows the change in HUD*s
    contracting dollars from fiscal year 1995 through fiscal year 2000 (in
    2001 constant dollars).

    Figure 2: HUD Contracting Obligations for Fiscal Years 1995 to 2000 in
    2001 Constant Dollars

    Notes: HUD reports that the contracting data are derived from various
    procurement and financial reporting systems.

    Source: HUD data.

    15 HUD obligated about $960 million in fiscal year 2001. According to HUD
    officials, some decisions regarding planned contracts were delayed as a
    result of the change in administration, resulting in a decrease in
    obligations for 2001. HUD Has Increased

    Contracting Activities and Taken Steps to Improve Acquisition Management

    Page 13 GAO- 03- 157 HUD Management

    With recent management reform initiatives, HUD now contracts out for many
    activities formerly done by HUD employees, as well as for new functions.
    For example, HUD*s Homeownership Centers (HOC) hired contractors to review
    single- family loan files and issue mortgage insurance. HUD staff, which
    formerly performed these functions, then became contract monitors. HOCs
    also contracted out for a new type of contractor to manage and market
    acquired single- family properties. They also awarded other contracts to
    inspect 10 percent of the properties handled by each of the management and
    marketing contractors and review 10 percent of the management and
    marketing contractors* property case files each month. HUD*s Office of
    Multifamily Housing contracted out work previously done by HUD employees
    that included inspections of repairs and inspections during construction
    of insured and assisted multifamily properties.

    The department expects its reliance on contracting to continue on an
    upward trend. Although HUD*s Deputy Secretary has expressed an interest in
    possibly returning some of this contract work to HUD employees, the
    President*s fiscal year 2003 budget proposed that federal agencies make at
    least 5 percent of the full- time equivalent positions that are determined
    to be commercial activities subject to competition between public and
    private sectors in fiscal year 2002 and an additional 10 percent in fiscal
    year 2003. HUD*s fiscal year 2003 budget set a goal of opening 290
    additional HUD positions to competition in fiscal year 2003 and an
    additional 580 positions in fiscal year 2004. HUD is also planning to
    renew some of its major contracts in the near future that involve
    substantial financial commitments over an extended period of time. HUD*s
    fiscal year 2002 procurement forecast includes plans to award new
    contracts for its major multifamily property management activities, with
    an expected cost of $800 million over 5 years. HUD also plans to award its
    new information technology systems contract that is expected to cost about
    $2 billion over 10 years.

    Page 14 GAO- 03- 157 HUD Management

    In response to weaknesses in its contracting administration and monitoring
    reported by us, HUD*s Office of Inspector General and NAPA, HUD undertook
    a number of corrective actions to improve its acquisition management in
    recent years. 16 For example, HUD instituted full- time GTR positions in
    its program offices to assist in contract administration. HUD also created
    a GTR certification program in 1998 to establish standard training
    requirements for HUD staff who serve as GTRs and to provide them with an
    understanding of the federal contracting process as implemented at HUD. In
    addition to classroom training, HUD has also developed on- line GTR
    training to supplement the classroom training.

    In 1997, HUD created a centralized management information system, called
    the HUD Procurement System (HPS), to assist in managing its contracts. HUD
    upgraded the system in fiscal year 1998 to consolidate and combine
    headquarters and field contracting data and to improve integration with
    HUD*s financial systems. As a result, for the first time HUD had one
    source for contracting data. In 1999, the HUD Office of Inspector General
    recognized that HUD had shown substantial strides in automating the
    department*s procurement data and establishing the necessary financial
    linkages to integrate HPS with HUD*s core accounting system. 17

    HUD also hired a Chief Procurement Officer and created a Contract
    Management Review Board in 1998 to improve contract administration and
    procurement planning. The Contract Management Review Board reviews all
    contracts over $500,000 to provide a departmentwide planning perspective.
    In addition, HUD has increased its training budget for those in
    acquisition positions (i. e., $66,871 in fiscal year 2000 to $163,537 in
    fiscal year 2002).

    16 U. S. General Accounting Office, Single- Family Housing: Stronger
    Measures Needed to Encourage Better Performance by Management and
    Marketing Contractors,

    GAO/ RCED- 00- 117 (Washington, D. C.: May 12, 2000). U. S. General
    Accounting Office, HUD Management: Contracting Issues Need Continued
    Attention, GAO/ T- RCED- 98- 222 (Washington, D. C.: June 5, 1998). U. S.
    Department of Housing and Urban Development, Office of Inspector General,
    HUD Contracting Activity, 97- PH- 163- 0001 (Washington, D. C.: Sept. 30,
    1997). National Academy of Public Administration, HUD Procurement Reform:
    Substantial Progress Underway (Washington, D. C.: April 1999).

    17 U. S. Department of Housing and Urban Development, Office of Inspector
    General, Followup Review of HUD Contracting, 99- PH- 163- 0002
    (Washington, D. C.: Sept. 30, 1999). HUD Has Taken Several

    Steps to Improve Acquisition Management

    Page 15 GAO- 03- 157 HUD Management

    In addition, HUD has implemented a compliance and monitoring initiative in
    order to assist staff in prioritizing their responsibilities and directing
    their resources. This initiative, although not specifically targeted to
    contract monitoring, emphasizes the importance of risk- based approaches
    to monitoring. HUD reported that over 1,200 staff were trained through
    fiscal year 2001, and the department*s fiscal year 2003 annual performance
    plan anticipates increasing the number of trained staff to more than
    2,000.

    Despite the improvements HUD has undertaken, we have continued to identify
    deficiencies in HUD*s acquisition management. For example, in October
    2001, we reported that HUD relied on contracting to address staffing
    shortfalls rather than assessing whether contracting was a better or more
    effective solution and problems continued in HUD*s oversight of its
    contractors. We concluded that HUD*s acquisition management was one of the
    significant challenges facing HUD in its attempts to sustain the progress
    of its management reform and move toward its goal of becoming a high-
    performing organization. 18 Our current work has found that specific
    deficiencies remain in HUD*s oversight of contracts, management of the
    acquisition workforce, and the reliability and availability of data needed
    to manage contract operations.

    Holding contractors accountable for results requires processes and
    procedures to facilitate effective monitoring. HUD, and in particular the
    multifamily housing program, does not employ certain processes and
    practices that would aid in oversight of its contractors. HUD does not use
    a systematic approach for monitoring its contractors, which would include
    the use of monitoring plans or a risk- based strategy, that would help to
    guide its monitoring. And the monitoring that occurs is generally remote;
    consisting mainly of reviews of progress reports and invoices, telephone
    calls, and emails. Without a systematic approach to oversight and adequate
    on- site monitoring the department*s ability to identify and correct
    contractor performance problems and hold contractors accountable for
    results is reduced. The resulting vulnerability limits HUD*s ability to
    assure itself that it is receiving the services for which it pays.

    18 GAO- 02- 45. HUD Does Not

    Employ Certain Processes and Practices that Would Facilitate Effective
    Contractor Monitoring

    Page 16 GAO- 03- 157 HUD Management

    HUD does not employ a systematic process for monitoring its contractors
    that consistently uses plans and risk- based strategies needed to guide
    its monitoring; nor does HUD track contractor performance needed for such
    plans and strategies. HUD*s Procurement Policies and Procedures Handbook
    provides a framework for the monitoring of contractors and establishes
    various monitoring tools that GTRs should use to ensure that contractors
    are held accountable for results, including a contract administration
    plan, a quality assurance plan, and a contractor*s work plan and schedule
    of performance. However, our review of 43 active contracts out of 49
    contracts administered by HUD*s Office of Multifamily Housing found that
    the GTRs on 30 of these contracts* 70 percent* did not make use of any of
    these plans. Among these plans, OFPP*s Guide to Best Practices for
    Contract Administration describes a contract administration plan as
    essential for good contract administration. According to OFPP, this plan
    must specify the performance outputs and describe the methodology used to
    conduct inspections of those outputs. According to our survey, only 23
    percent of HUD*s GTRs use contract administration plans and 32 percent
    reported that they had never heard of such a plan. In 1999, HUD*s
    Inspector General found that HUD*s various offices did not consistently
    develop and implement formal contract monitoring plans and recommended
    that HUD develop and disseminate a model comprehensive contract-
    monitoring plan for HUD- wide GTR use. 19 In our review of active
    multifamily housing contracts, we found that although HUD reported to the
    Inspector General it had implemented this recommendation, there was no
    evidence of such a model comprehensive contract- monitoring plan in use by
    Multifamily Housing.

    In addition to its limited use of monitoring plans, HUD has not
    effectively incorporated a risk- based approach into its process for
    overseeing contractors. 20 In recent years, HUD has emphasized developing
    risk- based approaches to managing and monitoring its programs, including
    establishing a Risk Management Division within the Office of the Chief
    Financial Officer, and developing a training program and desk guide to
    help staff understand and prioritize their monitoring responsibilities.
    However, we found little evidence that the concept of risk- based

    19 Department of Housing and Urban Development, Office of Inspector
    General, Follow- up Review of HUD Contracting, 99- PH- 163- 0002
    (Washington D. C.: Sept. 30, 1999). 20 We have defined risk assessment as
    the identification and analysis of relevant risk associated with achieving
    the objectives and forming a basis for determining how risks should be
    managed. GAO/ AIMD- 00- 21. 3.1. HUD*s Monitoring of

    Contractors Is Not Systematic

    Page 17 GAO- 03- 157 HUD Management

    management is used in HUD*s oversight of its contracts. Our past work
    found that HUD*s efforts to perform risk- based monitoring and performance
    evaluations on its single family property disposition contractors met with
    limited results* some field offices did not perform required assessments
    while, others did not perform them as often as required. 21

    Our more recent work in HUD*s multifamily program found little evidence
    that the concept of risk management or risk- based monitoring has been
    applied to contract oversight. Acquisition workforce staff said they were
    unaware of any requirements to apply a risk- based methodology to their
    monitoring efforts, and we saw no evidence of any formal risk assessments
    in our review of the Multifamily program*s 43 active contract files. While
    staff indicated that a risk- based approach would be useful, they
    generally told us that monitoring is conducted based on the availability
    of travel funds and location of staff, or after a significant contractor
    performance problem has been identified.

    A key component to developing effective monitoring plans and incorporating
    risk- based approaches to monitoring is tracking past and current
    contractor performance; however, we found little evidence that HUD tracks
    contractor performance systematically. The HUD Procurement System (HPS)
    allows its acquisition workforce across HUD*s programs to track contract
    milestones and deliverable dates, as well as document and record
    contractor performance information* information that could aid in the
    contract monitoring process. However, we found that these data fields are
    often not used. The scheduled deliverable date data field was left blank
    35 percent of the time, and the contractor performance data field was
    incomplete in 73 percent of contracts that are inactive and closed. The
    Deputy Secretary directed that effective January 2000 contractor products
    and performance would be tracked in HPS, initially for all new contracts
    over $1 million.

    Contractor oversight problems in HUD*s multifamily housing programs are
    further compounded by the lack of clearly defined GTR and GTM roles. For
    example, in the Multifamily Property Disposition Centers, GTR and GTM
    roles and responsibilities are not defined consistent with HUD*s policy,
    possibly resulting in gaps in the monitoring process. HUD*s

    Procurement Policies and Procedures Handbook states that *a GTR or 21 GAO/
    RCED- 00- 117.

    Page 18 GAO- 03- 157 HUD Management

    GTM may not provide any direction to the contractor in those areas of
    responsibility assigned to another GTR or GTM,* so as to avoid providing
    potentially conflicting guidance. However, the Multifamily Property
    Disposition Centers modified their contracts to change any place where the
    term *GTR* is used to the term *GTR/ GTM* instead. The effect of this
    change is that the GTRs and GTMs would have the same responsibilities,
    which is what the guidance sought to avoid so that conflicting
    instructions could not be given to the contractors. The roles are further
    complicated by a decision the Property Disposition Centers made to name
    managers as GTMs on the two property management contracts, in one case
    assigning the Center Director as a GTM. HUD*s handbook states that the GTR
    is responsible for monitoring GTM activities. By designating managers as
    GTMs, HUD has created a situation in which the property management GTRs
    are essentially overseeing the work of their supervisor or of someone in a
    management position, in a reporting line above them.

    As noted above, HUD is attempting to improve its oversight and monitoring
    of contractors. For example, Multifamily Housing implemented a structure
    in which four full- time GTRs will provide oversight for procurement
    actions of more than $100,000 in the field. The Property Disposition
    Center has also developed GTR and GTM protocols for the various types of
    services for which it contracts out, in an attempt to more clearly define
    the roles and responsibilities of these positions. However, Multifamily*s
    GTR program is still in transition and not all the roles and
    responsibilities have been clearly delineated.

    The monitoring that occurs in HUD*s multifamily housing program is
    generally remote. In our past work in other program areas, we have noted
    that without adequate on- site inspections, HUD could not be assured that
    it was receiving the services for which it had paid. 22

    The GTRs and GTMs in Multifamily Housing who are responsible for oversight
    of HUD*s property disposition activities report being unable to make
    regular visits. HUD*s oversight and monitoring of contractors consists
    mainly of reviews by HUD staff of progress reports and invoices prepared
    by the contractors, as well as email correspondence and

    22 U. S. General Accounting Office, Single- Family Housing: Improvements
    Needed in HUD*s Oversight of Property Management Contractors, GAO/ RCED-
    98- 65 (Washington, D. C.: Mar. 27, 1998). HUD*s Monitoring of

    Contractors Is Generally Remote

    Page 19 GAO- 03- 157 HUD Management

    telephone conversations between HUD staff and contractors. Site visits to
    multifamily properties to oversee contractor activities do not occur on a
    routine basis, particularly for the two largest multifamily housing
    program contracts, which constitute a total value of almost $650 million
    in obligations over 5 years for the management of HUD*s inventory of
    foreclosed multifamily properties. Although HUD*s multifamily property
    disposition handbook calls for GTRs or GTMs to conduct quarterly on- site
    physical inspections of the properties, the specific guidance related to
    that requirement has not yet been developed.

    Site visits do not routinely occur largely because the properties in HUD*s
    property disposition inventory are located throughout the country, while
    the GTRs and GTMs responsible for the oversight of these properties are
    located in Atlanta, Georgia, and Ft. Worth, Texas, with the exception of
    one GTM located in New York City, New York. A consistent theme among the
    GTRs and GTMs we interviewed is that they believe that in order to
    effectively do their jobs, they should probably be conducting a greater
    number of on- site visits, but they lack the time and resources that would
    allow them to do so. Some noted that the failure to visit the properties
    stems from the workload* the GTM*s are assigned multiple properties under
    the property management contracts that are usually not in good condition
    and are located in different parts of the country* and that it is
    difficult to keep up with everything that needs to be done. Restraints on
    travel funds were often cited as the reason for not making visits.

    The property disposition center staff are not the only multifamily housing
    staff experiencing difficulties making on- site visits to assess
    contractor performance. HUD also contracts with inspectors who monitor
    construction of HUD- assisted and insured multifamily projects throughout
    the phases of construction and during the 1 year warranty period after
    completion of construction. 23 HUD*s construction inspection guidance
    requires that HUD employees make at least two site visits during
    construction to assess the performance of the construction inspectors.
    However, GTMs for these contracts also report being unable to make site
    visits, due to other job responsibilities and because the projects are
    dispersed over a wide geographic area and HUD lacks the necessary travel

    23 According to HUD*s annual performance report, FHA endorsed over 700
    multifamily loans during fiscal year 2001 and completed initial approvals
    for 301 new assisted properties, all of which will require inspections.

    Page 20 GAO- 03- 157 HUD Management

    funds. 24 GTMs for these inspection contracts told us that they primarily
    rely on reviews of reports from the contractors to assess the contractors*
    performance.

    To address its inability to do more on- site monitoring, the multifamily
    housing program uses another inspection contractor to visit selected
    properties and perform property management reviews of some properties
    managed by the two property management contractors. However, according to
    data maintained by HUD, this inspection contractor made 31 visits to 26
    properties for the Atlanta Property Disposition Center since 1997,
    although the property management contractor managed over 100 properties
    during that period. The inspection contractor was not used at all by the
    Ft. Worth Property Disposition Center for the almost 150 properties in its
    inventory. We also found that in those cases where the inspection
    contractor identified a problem, HUD does not routinely follow up on those
    deficiencies to make certain the problems have been resolved. Instead, the
    multifamily housing program staff accepted correspondence from the
    property management contractors as evidence that deficiencies were
    resolved. According to staff, HUD does not routinely follow up because of
    limited resources. HUD will sometimes make a site visit to verify that the
    problems have been resolved, but field staff told us that there normally
    are not enough travel funds to make a special follow- up visit.

    Weaknesses in HUD*s monitoring processes limit the department*s ability to
    identify and correct contractor performance problems, hold contractors
    accountable, and assure itself that it is receiving the services for which
    it pays.

    We have reported that HUD has experienced similar difficulties monitoring
    the contractors that are responsible for managing and disposing of its
    foreclosed single- family properties for several years. In 1998, we
    reported that although HUD*s single- family guidance establishes

    24 The GTMs for these contracts are also responsible for oversight of
    HUD*s Multifamily Accelerated Processing (MAP) program. We recently
    reported that the field office workloads for this program often exceeded
    HUD*s standard; one of the offices we visited in our contracting review
    had more than doubled the standard cases for the MAP program. U. S.
    General Accounting Office, Multifamily Housing: Improvements Needed in
    HUD*s Oversight of Lenders that Underwrite FHA- Insured Loans, GAO- 02-
    680 (Washington, D. C.: July 19, 2002). Weaknesses in Monitoring

    Limit HUD*s Ability to Prevent Contractor Fraud, Waste, or Abuse

    Page 21 GAO- 03- 157 HUD Management

    various methods for monitoring the performance of its single- family real
    estate asset management contractors, such as conducting monthly on- site
    property inspections, these methods were not consistently used in a way
    that would assure HUD that contractors were meeting their contractual
    obligations. 25 Without adequate on- site inspection, HUD could not be
    assured that it was receiving the services for which it had paid. We found
    similar conditions in May 2000 when we reviewed the new marketing and
    management contractors HUD acquired to replace the earlier contractors,
    and in July 2001, we found that HUD*s oversight of these contractors
    remained inadequate 26 As recently as February 2002, in audits of HUD*s
    consolidated financial statements, the independent auditor identified
    HUD*s monitoring of its single- family property inventory as a significant
    internal control deficiency. The auditors recommended that HUD, among
    other things, (1) improve monitoring by enhancing comprehensive oversight
    tools and management reporting and (2) use risk- based strategies in the
    oversight process.

    In our October 2002 testimony before the House Government Reform and
    Operations Committee, Subcommittee on Governmental Efficiency, Financial
    Management and Intergovernmental Relations, we reported improper payments
    identified during the review of the $214 million in disbursements made
    under HUD*s multifamily property management contracts. 27 As we reported,
    one of HUD*s multifamily property management contractors bypassed HUD*s
    controls on numerous occasions by (1) alleging that construction
    renovations were emergencies, thus not requiring multiple bids or HUD pre-
    approval, and (2) splitting renovations into multiple projects to stay
    below the $50,000 threshold of HUD required approval. Over 18 months HUD
    authorized and paid for approximately $10 million of renovations, of which
    each invoice was for less than $50,000, at two properties. HUD did not
    verify that any of the construction renovations were actually performed or
    determine whether the emergency expenditures constituted such a
    classification.

    25 GAO/ RCED- 98- 65. 26 U. S. General Accounting Office, Single- Family
    Housing: Stronger Measures Needed to Encourage Better Performance by
    Management and Marketing Contractors, GAO- 00- 117 (Washington, D. C.: May
    12, 2000); U. S. General Accounting Office, Single- Family Housing: Better
    Strategic Human Capital Management Needed at HUD*s Homeownership Centers,

    GAO- 01- 590 (Washington, D. C.: July 26, 2001). 27 GAO- 03- 167T.

    Page 22 GAO- 03- 157 HUD Management

    As we testified, our review of these payments indicates that HUD paid 5
    invoices totaling $227,500 for emergency replacement of 15, 000 square
    feet of concrete in front of 5 buildings; however, we visited the site and
    determined that only about one- third of the work HUD paid for was
    actually performed. As a result, more than $164,000 of the $227,500 billed
    and paid for *emergency* installation of concrete sidewalk appeared to be
    improperly paid. As an example, figure 3 illustrates that only portions,
    the lighter shaded section, of the sidewalk were replaced in front of one
    of the buildings and not the entire sidewalk as was listed on the paid
    invoices.

    Figure 3: Sidewalk Repairs at HUD Property

    Source: GAO photograph of HUD property.

    At this same property, we found instances where HUD paid construction
    companies for certain apartment renovations, deemed *emergency repairs,*
    that were not made. Three of the 10 tenants that we interviewed told us
    that some work listed on the invoice that the property management firm
    submitted was not performed at their homes. For instance, while one
    invoice indicated that the apartment floor and closet doors had been
    replaced at a cost of $10,400, the tenant stated that the floors and doors
    were never replaced.

    On several other occasions, HUD paid the same amount to perform *emergency
    renovations* of apartments of varying sizes. For example,

    Page 23 GAO- 03- 157 HUD Management

    HUD paid three identical $32,100 invoices for the emergency renovation of
    a one bedroom (600 square feet), a two bedroom (800 square feet), and a
    three bedroom (1,000 square feet) apartment. All three invoices listed
    identical work performed in each unit. For example, each invoice listed a
    $4,500 cabinet fee, yet the one bedroom unit had five fewer cabinets than
    the three bedroom unit. We, and the independent construction firm we
    hired, questioned the validity of the same charge for units of varying
    sizes and the likelihood of numerous apartments being in identical
    condition and in need of the same extensive renovations.

    These cases are now being investigated by the HUD Inspector General and
    our Office of Special Investigations. The potential for these and other
    types of problems would be reduced with improved monitoring and oversight.

    Holding contractors accountable requires the appropriate number of people
    in the right positions with the right skills and training. HUD does not
    strategically manage its acquisition workforce to ensure that individuals
    have the appropriate workload, skills, and training that allows them to
    effectively perform their jobs. 28 Specifically, HUD has not yet addressed
    workload issues, assessed the skills and capabilities of its acquisition
    workforce, or provided required training to substantial numbers of its
    acquisition workforce.

    Although HUD identified workload disparities, the department has not yet
    determined the appropriate workload allocation for its acquisition
    workforce. To assist in the department*s efforts to address human capital
    issues resulting from HUD*s diminishing staffing levels, HUD undertook a
    Resource Estimation and Allocation Project (REAP) to determine current
    workload levels agencywide. The resulting study determined that serious
    staffing shortages exist within OCPO and recommended an additional 31
    full- time equivalent positions for OCPO in headquarters and no change for

    28 We have defined strategic human capital management as an effort that is
    consistent with two key principles. First, people are assets whose value
    can be enhanced through investment, while maximizing value and managing
    risk. Second, an organization*s human capital approaches should be
    designed, implemented, and assessed by the standard of how well they help
    the organization achieve results and pursue its mission. U. S. General
    Accounting Office, A Model of Strategic Human Capital Management, GAO- 02-
    373SP (Washington, D. C.: Mar. 15, 2002). HUD Does Not

    Strategically Manage Its Acquisition Workforce

    Workload Issues Not Yet Addressed and Skills and Capabilities Not Yet
    Assessed

    Page 24 GAO- 03- 157 HUD Management

    the field. The study recommended that headquarters staffing be increased
    from the 54 full- time equivalent staff to 85 and that field staff remain
    at 68 full- time equivalent staff. The study observed that the OCPO in
    headquarters is *an organization in crisis,* and that the majority of
    supervisors and contract specialists reported working a very high number
    of uncompensated hours. HUD has taken steps to shift workload around to
    address some disparities, but has not yet utilized the study results to
    determine the appropriate allocation and workload levels of its
    acquisition workforce. OCPO has shifted some activities to the field
    contracting operations, such as closing out contracts, or assigned field
    staff to details in headquarters to assist in addressing workload
    distribution issues and keep field staff fully occupied.

    Our survey results and other work also show that acquisition staff across
    HUD perceive they have too much work to do. According to our survey, 55
    percent of respondents overall said that their contracting workload has
    increased over the past 2 years. Further, 31 percent of HUD*s acquisition
    workforce who manage and monitor more than five contracts believe that the
    number of contracts they monitor is *too many.* Finally, 18 percent of
    HUD*s acquisition workforce reported that they spend *too little* time on
    their contracting related responsibilities.

    Although HUD has taken steps to identify the knowledge, skills, and
    abilities needed by its acquisition workforce to do their work, HUD has
    not assessed the skills and capabilities of its acquisition workforce* a
    critical step in successful workforce management. We have identified an
    agency*s development of a comprehensive strategic workforce plan that
    includes both an analysis of the knowledge, skills, and abilities needed
    by staff to do their work as well as the capabilities of its staff as a
    crucial part of a strategic human capital management approach. 29 HUD has
    taken some steps toward that goal by drafting an Acquisition Career
    Management Plan that discusses the knowledge, skills and abilities needed
    by staff; however, HUD has not yet specifically assessed the skills and
    capabilities of its acquisition workforce. 30 Consequently, HUD is not as
    prepared as it could be to address the human capital challenges, such as
    skill gap deficiencies, within its acquisition workforce. Further, the
    ability for HUD management

    29 U. S. General Accounting Office, Human Capital: A Self- Assessment
    Checklist for Agency Leaders, GAO/ OCG- 00- 14G (Washington, D. C.: Sept.
    2000). 30 HUD developed its Acquisition Management Career Plan to comply
    with OFPP requirements that agencies have policies and procedures that
    specify career paths and include certain mandatory training requirements
    for its acquisition workforce.

    Page 25 GAO- 03- 157 HUD Management

    to make informed decisions, such as recruiting and hiring as well as
    planning for training, is hampered.

    Over half of HUD*s GTRs* who are directly responsible for monitoring
    contractors* may not have received acquisition training required by the
    Clinger- Cohen Act and OFPP. In response to the Clinger- Cohen Act of 1996
    and OFPP policies that require specific training for GTRs, in 1998, HUD
    developed and implemented a GTR training curriculum. During our review, we
    identified 251 individuals serving as full or part- time GTRs on
    contracts; however, according to HUD*s training records, 143 individuals
    who have not taken HUD*s required GTR training are currently serving as
    GTRs on contracts. OCPO management stated that they were not aware that
    these individuals were serving in this capacity.

    HUD*s acquisition workforce also includes about 495 individuals serving as
    GTMs; according to HUD*s training records, only 7 percent of these
    individuals* 35 out of 495* have received specialized acquisition
    training. Although the Clinger- Cohen Act and OFPP policies do not
    establish specific training requirements for GTMs and HUD does not
    explicitly require that GTMs receive acquisition training, HUD documents
    indicate that providing acquisition training to GTMs is necessary and is
    part of OCPO*s intent. Specifically, in discussing the roles and
    responsibilities of GTMs, the department*s procurement handbook states,
    *many of the duties of the GTR can be delegated to GTMs.* Further, HUD*s
    draft Acquisition Career Management Plan indicates that it intends the
    plan to apply to GTMs* it states *the term GTR shall include GTM.*
    However, according to OCPO managers, HUD is not currently requiring GTMs
    to fulfill any acquisition training requirements.

    HUD does not accurately track the training of some of its acquisition
    workforce and has not finalized its acquisition workforce career
    management planning as required by OFPP. According to HUD*s centralized
    training records maintained by OCPO, 89 percent of HUD*s contracting
    officers, contract specialists, procurement analysts, and purchasing
    agents do not meet federal training requirements. 31 In response to our
    observations, the OCPO Director of Policy and Field Operations said that
    while it is likely that some of these individuals do not meet the

    31 At HUD, procurement analysts perform a variety of administrative
    functions for OCPO, such as managing training. Many of HUD*s Acquisition

    Workforce Not Receiving Required Training

    Page 26 GAO- 03- 157 HUD Management

    training requirements, it is probable that many of the individuals have
    met the training requirements. The director offered the following reasons.
    For example, the centralized information system maintained by OCPO has not
    been updated, partly because HUD is waiting for a new governmentwide
    system to be completed that will track such information. Further, the
    training requirements were mandated after some staff had been in an
    acquisition position for a number of years and therefore have not taken
    the training because they possess necessary skills. As a result of our
    review, HUD will institute a training waiver to capture this scenario.
    Also, HUD has not finalized its draft Acquisition Career Management Plan
    that specifies career paths and mandatory training for acquisition
    positions and shows how HUD*s training courses correlate with those
    required by OFPP. 32 This plan has been in draft form since June 2000.
    Further, the draft plan does not meet OFPP requirements because it does
    not specify training requirements for purchasing agents. As a result of
    our review, HUD officials told us they intend to revise their draft plan
    to reflect OFPP requirements.

    Holding contractors accountable requires tools and information to ensure
    that HUD staff can monitor contracts and that HUD management can oversee
    departmentwide contracting activities. HUD*s centralized contract
    management information system and several financial management information
    systems lack complete, consistent, and accurate information* thus, these
    systems do not adequately support the department*s efforts to manage and
    monitor contracts. For example, the centralized contracting system does
    not contain reliable information on the number of active contracts, the
    expected cost of the contracts, or the types of goods and services
    acquired. To compensate for the lack of information, HUD staff have
    developed informal spreadsheet systems to fulfill their job
    responsibilities. The systems deficiencies also mean that HUD managers
    lack reliable information needed to oversee contracting activities, make
    informed decisions about the use of resources, and ensure accountability
    in the department*s programs.

    32 Office of Federal Procurement Policy Letter No. 97- 01, Procurement
    System Education, Training and Experience Requirements for Acquisition
    Personnel, September 12, 1997. Weaknesses in

    Programmatic and Financial Management Information Systems

    Page 27 GAO- 03- 157 HUD Management

    To improve its ability to manage and oversee contracts, HUD implemented a
    contracting management information system* the HUD Procurement System
    (HPS)* to track and manage both field and headquarters contracts. 33 HUD
    uses HPS to (1) monitor workload levels of contracting officers and
    contract specialists; (2) track events throughout the life of a contract*
    such as the award, obligation of funds, contract modification, milestones,
    contractor performance, and close out; (3) identify outstanding
    procurement requests; and (4) report to the Federal Procurement Data
    Center (FPDC) to comply with federal reporting requirements so that the
    Office of Management and Budget (OMB) and the General Services
    Administration (GSA) can manage contracting governmentwide* for example,
    establishing contracting goals for federal agencies. In addition, a
    significant number of HUD*s acquisition workforce, such as contract
    specialists and GTRs, also use HPS to manage and monitor contracts.

    However, the data in HPS are not reliable* that is, the data are not
    consistent, complete, or accurate. We found that

     Over a quarter of those contracts shown as currently active had dates in
    a date completion field, which would indicate that the contract had
    expired, making it difficult for HUD to identify the active contracts it
    is managing. 34 For example, when we asked for a list of active
    multifamily contracts, HUD had to call various field offices and GTRs to
    compile the complete list of multifamily contracts.  HPS showed that for
    4 percent of HUD*s active contracts, HUD has

    obligated a total of $197 million more than the stated total value of the
    contracts because HPS contains errors in the contract value fields.
    Because HPS is a programmatic information system, this discrepancy does
    not necessarily mean that HUD has or will spend more than planned for the
    contracts, but indicates that HUD does not readily know the correct
    obligated amounts or total value of its contracts.  The types of goods or
    services HUD contracts for is not readily apparent

    because HPS contains three separate data fields to capture the type of 33
    HPS also tracks Purchase Orders, Interagency Agreements, and Grants;
    however, this discussion is limited to contracts and purchase orders. 34
    Active contracts may be shown in HPS as *active: awarded,* *active:
    expired,* or *active: closed out,* depending on where they are in the
    contract lifecycle. Our discussion of active contracts includes only those
    contracts that are shown as *active: awarded,* meaning that the contract
    is shown as being an actively managed contract. HUD*s Centralized

    Contracting Information System Does Not Provide Reliable Information on
    Contract Activities

    Page 28 GAO- 03- 157 HUD Management

    good or service being provided and none of them are utilized in such a way
    to provide a picture of the good and services HUD purchases. One field is
    used only by field office staff; another contains narrative descriptions
    of services but no standard terminology is specified; and the third field
    uses governmentwide codes for external reporting, rather than HUD-
    specific codes. (See app. III for a more detailed illustration of
    discrepancies identified in HPS.)

    According to HUD officials, the inconsistencies in HPS are due to data
    entry problems, misunderstandings among staff about what data to record
    and how to record it, and limited verification procedures. For example,
    staff inconsistently record data on multi- year contracts with *base* and
    *option* years. HUD currently has limited verification procedures in place
    to ensure that HPS data are reliable. According to the HPS administrator,
    OCPO staff are not required to routinely verify the accuracy of the data
    they are responsible for maintaining in HPS.

    HUD*s program offices also record contracting obligation and expenditure
    information in various financial management information systems. However,
    these systems do not readily provide consistent and complete information
    for either HUD*s overall contracting activity or individual contracts.
    Concerns about the effectiveness of HUD*s programmatic and financial
    management information systems are not new. We have reported that HUD
    lacks the programmatic and financial management information systems
    necessary to ensure accountability over its programs since 1984. The lack
    of readily available, consistent, and complete contracting information is
    one example of these concerns with HUD*s programmatic and financial
    management information systems.

    To obtain aggregate information on HUD*s contract obligations and
    expenditures, HUD managers must manually query several financial
    management systems. However, according to a HUD official, these ad hoc
    queries are only useful in identifying transactions that *look like*
    contracts. These queries do not reliably produce obligation and
    expenditure data on all HUD*s contracting activity and also include
    obligation and expenditure data for activities other than contracts. After
    attempting to obtain data for us over a period of about 5 months, HUD was
    able to provide only partial data. HUD officials provided multiple reasons
    for this, including that several of HUD*s financial management information
    HUD*s Financial

    Management Information Systems Do Not Readily Provide Contracting
    Obligation and Expenditure Data

    Page 29 GAO- 03- 157 HUD Management

    systems do not track obligation data and HUD does not have ready access to
    some FHA data for fiscal years 1998 and 1999 because FHA no longer uses
    the systems. 35 As a result, HUD*s different information systems provide
    widely different pictures of HUD*s contracting activity. Specifically, as
    shown in table 1, the aggregate obligation data from HUD*s financial
    management systems were not consistent with the data HUD reported from in
    its centralized contracting management information system, HPS (discussed
    further in page 27). (See app. IV for a listing and brief description of
    the various financial systems that maintain contracting information.)

    Table 1: Contract Obligation Data from HUD*s Programmatic and Financial
    Management Information Systems for Fiscal Years 1999 and 2000

    HUD Procurement System HUD*s financial

    management information systems

    Fiscal year 1999 $1.1 billion $485 million Fiscal year 2000 $1.2 billion
    $924 million

    Total $2.3 billion $1.409 billion

    Source: HUD data as shown.

    After over 5 months of working on our request, HUD was also unable to
    provide us obligation and expenditure data on 33 of 115 individual
    contracts, and what it could provide was often not consistent with data
    maintained in HPS. 36 We requested data on two groups of HUD contracts;
    for one we judgmentally selected 66 active contracts from all HUD program
    offices and for the second we used all 49 active multifamily contracts
    with an obligated value over $100,000. HUD staff cited several reasons why
    they could not identify data on specific contracts, including the fact
    that HUD tracks some obligation and expenditure information using the
    contractor*s Tax Identification Number. As a result, when HUD

    35 To be compliant with the core financial systems requirements
    established by the Joint Financial Management Improvement Program (JFMIP),
    and therefore be in substantial compliance with the Federal Financial
    Managers Improvement Act (FFMIA) of 1996, financial systems must track
    obligation data. In its audits of HUD*s consolidated financial statements,
    the Inspector General reports a material weakness that *HUD*s financial
    systems are not compliant with federal financial standards.* HUD reports
    17 of its 57 financial management systems do not materially conform to the
    requirements of FMFIA and OMB Circular A- 127, including several of the
    systems used for this analysis.

    36 Of these 33 contracts, 29 were from the multifamily analysis and 4 were
    from the HUDwide analysis.

    Page 30 GAO- 03- 157 HUD Management

    has multiple contracts with one contractor, it often cannot separate
    obligations and expenditures by individual contract.

    Of the 82 contracts for which HUD was able to provide information on
    contract obligations and expenditures, the obligation information in the
    financial management systems was consistent with HPS for only 37. 37 Some
    of the inconsistencies included cases where the amount shown in the
    financial systems as spent on the contract exceeded the amount shown in
    HPS that was obligated for the contract. In the HUD- wide group, for
    example, the expenditure information in the financial management systems
    exceeded the obligation amount shown in HPS for 13 of the contracts,
    indicating that HUD paid a total of $59 million more than what HPS
    recorded was obligated. For the multifamily contracts, 3 of the 49
    contracts had obligated amounts in the financial management systems that
    exceeded that shown in HPS with a total difference of $1.4 million.

    As a result of the systems limitations, HUD*s acquisition workforce do not
    have basic information about the contracts for which they are responsible
    readily available to them. This is particularly significant because, as
    previously discussed, HUD relies extensively on remote monitoring
    strategies, which would be most effective with readily available and
    reliable contract information. In the absence of such data, HUD*s
    acquisition workforce have developed informal or *cuff* systems* personal
    spreadsheets to track, manage, and monitor contracts. While helping staff
    perform their jobs, these informal systems are not subject to HUD*s
    policies, procedures, or internal controls to ensure that the information
    maintained in them* and used by HUD*s acquisition workforce to manage and
    monitor individual contracts* is accurate. Further, the use of informal
    spreadsheets indicates that duplicate data collection efforts may be
    occurring (e. g., some data maintained in the spreadsheets are identical
    to data maintained in HPS), which in an environment of decreasing
    resources and increasing workload is not an efficient use of resources.
    Since the spreadsheets are maintained and used by individuals, this
    information is not readily accessible by HUD management to support their
    oversight responsibilities. Finally, since HPS data are not reliable and
    the accuracy of the data maintained in the personal spreadsheets is not
    known, HUD does not have a dependable

    37 Of these 37, 31 were from the HUD- wide analysis and 6 were from the
    multifamily analysis. System Limitations Impede

    Efforts of HUD*s Acquisition Workforce and HUD Management

    Page 31 GAO- 03- 157 HUD Management

    *early warning system* to alert staff to contracts with high- risk
    characteristics. As a result, HUD*s ability to ensure that its contract
    resources are protected from waste, fraud, abuse, and mismanagement is
    reduced.

    HUD*s programmatic and financial management information systems also do
    not provide managers with accurate and timely information needed to
    effectively manage and monitor the department*s programs. HUD cannot
    readily obtain complete aggregate contracting obligation and expenditure
    information from the department*s financial systems to oversee the
    agency*s activities, make informed decisions about the best use of HUD*s
    resources, and ensure accountability on an ongoing basis. Because HPS does
    not contain reliable data, HUD management cannot readily obtain accurate
    information on HUD*s contracting activity to report contracting
    information, assist in making management decisions, and ensure the proper
    stewardship of public resources. Without reliable data on the number of
    active contracts, management cannot accurately analyze HPS for trends,
    which would assist in assessing and/ or realigning staff workload, or
    making decisions about what activities to contract and or retain. Finally,
    because the department uses HPS to report acquisition data to FPDC to
    comply with federal contract activity reporting requirements, HUD*s
    submissions to FPDC are inaccurate.

    Ensuring that HUD*s mission is accomplished and its contractors are held
    accountable requires (1) processes and practices that effectively monitor
    contractors* performance; (2) an acquisition workforce with the right
    workload, training, and tools to carry out its mission; and (3) effective
    programmatic and financial management information systems. HUD has already
    taken steps toward improving its acquisition management; however,
    weaknesses remain in HUD*s monitoring processes, management of its
    acquisition workforce, and programmatic and financial management systems
    that support its contracting. Many of the tools that would help improve
    how HUD monitors its contractors already exist, either through plans and
    strategies HUD already developed or through OFPP guidance. Using these
    tools and employing a systematic, risk- based approach to contractor
    oversight would allow HUD to target its scarce resources to areas posing
    the greatest risk and to identify potential problems, such as those we
    have identified in this report, before they become more serious.

    In large measure, the challenges HUD faces in relation to its acquisition
    workforce and contracting information systems are symptomatic of the
    Conclusions

    Page 32 GAO- 03- 157 HUD Management

    larger challenges the department faces to strategically manage its human
    capital and to improve its programmatic and financial management systems.
    Both are complex, long- standing management challenges that we have
    identified in our high- risk work that will be addressed on a
    departmentwide basis over a period of many years. Nevertheless, to improve
    its management of acquisitions, HUD can take shorter term and more
    immediate actions to maximize the effectiveness of the department*s
    acquisition workforce by completing existing career planning and training
    activities. It could also enhance the information and tools available to
    that workforce by improving the accuracy and utility of its centralized
    contracting management information system.

    To address weaknesses we identified, we recommend that the Secretary of
    HUD

     Implement a more systematic approach to HUD contract oversight that (1)
    uses monitoring/ contract administration plans; (2) uses a risk- based
    approach for monitoring to assist in identifying those areas where HUD has
    the greatest vulnerabilities to fraud, waste, abuse, and mismanagement;
    and (3) tracks contractor performance.  Clarify the roles and
    responsibilities of the multifamily housing GTRs and

    GTMs, including the need to (1) clearly define reporting lines and (2)
    reduce overlap of responsibilities consistent with HUD guidance.  Improve
    management of HUD*s acquisition workforce by (1) addressing

    workload disparities, (2) finalizing and implementing the Acquisition
    Management Career Plan, (3) assessing the skills and capabilities of the
    existing acquisition workforce, and (4) ensuring that appropriate training
    is provided to staff with contract oversight responsibilities and that
    staff meet federal training requirements.  Improve the usefulness of
    HUD*s centralized contracting management

    information system by (1) providing training to staff on the definitions
    of data intended to be captured; (2) providing training to program office
    staff on the functions, such as tracking milestones, deliverables and
    contractor performance, of the system, and (3) developing and implementing
    verification procedures.

    We provided a draft of this report to HUD for its review and comment. HUD
    agreed that it faces significant long- standing challenges in monitoring
    the performance of its contractors, managing its acquisition workforce,
    and addressing weaknesses in its information systems. HUD stated that it
    is taking actions to address our recommendations. For example, according
    to HUD, the department is requiring each program organization
    Recommendations for

    Executive Action Agency Comments

    Page 33 GAO- 03- 157 HUD Management

    to review its contracting oversight and monitoring polices and procedures
    to ensure that they are clear, consistent, and risk based. To strengthen
    oversight of the mulitfamily program*s property management contractors,
    HUD stated that when the multifamily property management contracts are
    renewed and awarded again in 2003, HUD plans to strengthen their oversight
    requirements. For example, the contractors will be required to provide a
    quality control plan to, among other things, monitor the work assignments
    of employees and subcontractors.

    The department also stated that it is taking action to improve management
    of its acquisition workforce and address weaknesses in its information
    systems. HUD stated that it expects to finalize its Acquisition Career
    Management Plan during 2003, and is clarifying the roles,
    responsibilities, and reporting lines of GTRs and GTMs in the multifamily
    program. For example, HUD said that it would ensure that staff are not
    overseeing the work of a supervisor or management personnel. HUD also said
    that it agreed with our findings and recommendations concerning its
    centralized contracting management information system, and would implement
    our recommendations to improve its usefulness by revising its training to
    provide better definitions of data to be captured and more emphasis on the
    system*s functions.

    While HUD agreed with our recommendations, HUD said it believes that its
    acquisition workforce is receiving required training because (1) it has
    developed acquisition training for GTRs in accordance with federal
    requirements and (2) GTMs do not require the same level of training as
    GTRs and are provided acquisition training appropriate to their duties
    when needed. We recognize that the Clinger Cohen Act does not establish a
    specific training curriculum for GTRs; however, the act requires executive
    agencies, through consultations with OFPP, to establish training
    requirements for positions in their acquisition workforces and HUD has
    defined its acquisition workforce to include both GTRs and GTMs. We agree
    that the department has developed an acquisition training program for GTRs
    in response to federal requirements. However, we found that a significant
    portion of the department*s GTRs have not had this training, and HUD did
    not disagree with our finding. Furthermore, while we agree that GTMs may
    not require the same level of training as GTRs, HUD policies permit the
    duties and responsibilities of GTRs to be delegated to GTMs; and its draft
    Acquisition Career Management Plan* which establishes training
    requirements for HUD*s acquisition workforce* states that the GTR training
    requirements also apply to GTMs. Therefore, we remain concerned that,
    according to HUD*s records, 93 percent of HUD*s GTMs have not received any
    specialized acquisition training and we did

    Page 34 GAO- 03- 157 HUD Management

    not change the report in response to this comment. We are, however,
    encouraged by HUD*s comment that it will continue to assess the training
    needed for GTMs to more effectively monitor contractor performance.

    HUD also provided technical comments, which we have incorporated as
    appropriate. The full text of HUD*s comments and our response appear in
    appendix V.

    We are sending copies of this report to other interested congressional
    committees and the Secretary of Housing and Urban Development. We will
    also make copies available to others upon request. In addition, the report
    will be available at no charge on the GAO Web site at http:// www. gao.
    gov.

    If you or your staffs have any questions about this report or need
    additional information, please contact me or Steve Cohen at 202- 512-
    2834. Major contributors to this report are listed in appendix VI.

    Stanley J. Czerwinski Director, Physical Infrastructure

    Appendix I: Scope and Methodology Page 35 GAO- 03- 157 HUD Management

    To determine whether HUD has the processes in place to facilitate managing
    and monitoring its contractors, and the extent to which HUD monitors its
    contractors to ensure that they are held accountable for results, we
    focused on HUD*s policies, procedures, and data related to activities
    after a contract is awarded to a successful bidder. We first reviewed
    HUD*s guidance for managing and monitoring its contracts, including HUD-
    wide guidance, as well as that for the Office of Multifamily Housing. We
    also interviewed HUD officials at the Office of Chief Procurement Officer,
    Office of Administration, Office of Housing, Office of Public and Indian
    Housing, Community Planning and Development, and Fair Housing and Equal
    Opportunity to obtain information on their oversight and management of
    contracts. We also interviewed officials at HUD*s Atlanta, Philadelphia,
    Denver, and Ft. Worth Field Contracting Operations (FCO) to obtain an
    understanding of their oversight of the contract process and relationship
    with the multifamily program operations in their jurisdiction.

    To identify potentially improper payments made by HUD, we used computer
    analysis and data mining techniques to identify unusual transactions and
    payment patterns in the department*s fiscal year 2001 disbursement data.
    We focused our review on the $214 million of payments made for the goods
    and services at HUD*s multifamily properties during fiscal year 2001. 1

    To obtain a more detailed understanding of the practices associated with
    monitoring and oversight of contracts, we selected contracts in the Office
    of Multifamily Housing to review. We selected Multifamily Housing
    contracts because (1) of the contracting dollars associated with
    multifamily housing activity; (2) of the value of the inventory, insurance
    and grants associated with HUD*s multifamily programs; and (3) we recently
    completed reviews that addressed acquisition issues in HUD*s single-
    family housing program and systems acquisition and development efforts.
    The Office of Multifamily Housing contracts for services associated with
    HUD*s multifamily insurance program, as well as management of those
    properties that HUD acquires when owners default on insured mortgages. We
    reviewed the GTR files for 43 of the 49 active multifamily housing program
    contracts over $100,000, and then conducted

    1 U. S. General Accounting Office, Financial Management: Strategies to
    Address Improper Payments at HUD, Education, and Other Federal Agencies,
    GAO- 03- 167T (Washington, D. C.: Oct. 3, 2002). Appendix I: Scope and
    Methodology

    Appendix I: Scope and Methodology Page 36 GAO- 03- 157 HUD Management

    structured interviews with the 17 GTRs responsible for administering these
    contracts. 2 These contracts included both headquarters and
    fieldadministered contracts. For the 43 GTR files, we obtained and
    reviewed documentation that described the extent to which the GTRs are
    able to monitor HUD contractors. The structured interviews focused on (1)
    the processes HUD has in place to facilitate managing and monitoring its
    contractors, (2) the extent to which the GTRs monitor the contractors, (3)
    the types of information and data systems used by the GTRs to help them
    manage and monitor the contractors, and (4) the types of
    contractingrelated training the GTRs have received. We also interviewed
    selected government technical monitors.

    To supplement our work in the multifamily program and obtain information
    from a cross- section of HUD*s acquisition workforce, we also conducted a
    telephone survey to gather information on HUD*s contracting activities.
    Our objectives were to obtain information on workload, the availability
    and perceived usefulness of training, the extent to which programmatic and
    financial management information systems support contract oversight, and
    oversight methods. We completed 185 interviews with randomly selected
    employees who were currently working in acquisition positions. In the
    survey, we asked questions about the training HUD provides its acquisition
    workforce, the opinions of the acquisition workforce of the data systems
    they use, and HUD*s monitoring of contractor performance. (See app. II for
    the survey scope and methodology.)

    To assess HUD*s management of its acquisition workforce and compliance
    with federal procurement requirements and policies, we reviewed related
    federal laws and policies, including the Clinger- Cohen Act and OFPP
    Policy Letters 92- 3 and 97- 01. Further, we asked HUD for the
    department*s definition of its acquisition workforce and asked the
    department to identify the names of staff meeting that definition. HUD
    defined its acquisition workforce to include those staff serving as GTMs.
    Since HUD did not centrally maintain a listing of staff currently serving
    as GTRs and GTMs in the program offices, we contacted each program office
    and requested that they identify staff currently serving in that capacity.
    Using the definition of acquisition workforce that HUD provided and the
    lists of

    2 We did not review 6 of the 49 multifamily housing program GTR files
    because of constraints resulting from HUD*s ongoing transfer of its
    multifamily housing program field contracts to two locations, and the fact
    that these 6 contracts, which were not located at the offices to which we
    did travel, were similar in nature to the contracts we did review.

    Appendix I: Scope and Methodology Page 37 GAO- 03- 157 HUD Management

    staff provided by program offices, HUD*s acquisition workforce totals 833
    people. Additionally, we requested data on HUD*s training records for
    contracting officers, contract specialists, purchasing agents, and GTRs;
    HUD provided a spreadsheet that contained summary information. We then
    compared HUD*s training records to OFPP training requirements to determine
    whether HUD*s acquisition workforce is meeting federal training
    requirements. We also reviewed HUD*s training requirements and policies as
    well as the GTR training manual.

    To obtain information on the adequacy of the data systems that support
    HUD*s acquisition workforce, we obtained and analyzed data from several of
    HUD*s programmatic and financial management information systems. We
    obtained data from HUD*s centralized system, the HUD Procurement System
    (HPS). Our analysis of HPS was two- fold. First, we performed reliability
    assessments on several data fields for all contracts that were identified
    as *active/ awarded,* that is, currently active contracts. The data fields
    we analyzed were as follows: contract value, obligated amount, contract
    status, completion date, last completion date, and type of service.
    Second, we identified two groups of active contracts and purchase orders
    and downloaded the total dollar amounts obligated for these procurements
    from HPS. The first group was a judgmentally selected sample of 66
    contracts and purchase orders from various HUD program offices. 3 The
    second group was all active contracts in HUD*s multifamily housing program
    with an obligated value over $100,000 as of March 2002. We also obtained
    obligation and expenditure data from numerous HUD financial management
    systems for these contracts and purchase orders. (See app. IV for a
    description of these systems.) We then compared HPS data on those
    contracts and purchase orders to the data maintained in HUD financial
    management information systems. We requested aggregate data on HUD*s
    contract obligations and expenditures. We also obtained data from the
    Federal Procurement Data Center (FPDC) to which HUD

    3 This sample, although it contains procurements from numerous program
    offices, is not representative of HUD*s contracting actions as a whole and
    we did not extrapolate our findings HUD- wide.

    Appendix I: Scope and Methodology Page 38 GAO- 03- 157 HUD Management

    reports detailed information on its contracting activity over $25,000 in
    accordance with federal requirements.

    Appendix II: Sampling Methodology for GAO Survey of HUD*s Acquisition
    Management Reforms

    Page 39 GAO- 03- 157 HUD Management

    Our primary objectives in the survey were to (1) assess the acquisition
    workforce workload, (2) assess the availability of training and the
    perceived usefulness of the training that the staff receive, (3) determine
    the extent to which HUD*s data systems are used to support its contract
    management and monitoring, and (4) determine the ways in which the
    acquisition workforce monitor HUD*s contractors.

    To attain our objective, we surveyed a statistically representative sample
    of HUD*s acquisition workforce. We developed and administered a survey
    designed to estimate characteristics of HUD*s acquisition workforce
    relating to contract monitoring, training and workload issues, and data
    systems. The survey was administered from April to June 2002 by trained
    GAO employees to a stratified sample of 250 HUD acquisition workforce
    employees through telephone interviews that were entered into a computer-
    assisted data collection instrument. Our work was conducted in accordance
    with generally accepted government auditing standards.

    The study population for this survey consisted of 833 employees in HUD*s
    acquisition workforce as of March 2002. We developed a list of acquisition
    workforce employees based on data from two sources. The first source used
    was the training records compiled by HUD*s OCPO, the office responsible
    for providing the training required for acquisition workforce employees.
    In further audit work with HUD program offices that have contracts, we
    discovered that this list was not complete. We then supplemented the OCPO
    list by contacting 15 program offices to identify the number of
    acquisition workforce staff in each office, and the positions that those
    individuals hold.

    When we administered the survey, we found that not all of the employees we
    identified in our study population were in HUD*s acquisition workforce at
    the time of contact. Respondents who were no longer members of the
    acquisition workforce were *out of scope,* and were excluded from the
    analysis.

    The sample design for this study is a single- stage stratified sample of
    acquisition workforce employees in the study population. The strata were
    based on reported job position categories, based on the list we compiled
    from program office records. Of the total sample of 250, we received 185
    completed responses from employees who were in the acquisition workforce
    at the time of the survey (in scope). We obtained sufficient Appendix II:
    Sampling Methodology for GAO

    Survey of HUD*s Acquisition Management Reforms

    Objectives Scope and Methodology

    Study Population Sample Design

    Appendix II: Sampling Methodology for GAO Survey of HUD*s Acquisition
    Management Reforms

    Page 40 GAO- 03- 157 HUD Management

    information for an additional 28 employees to determine that they were not
    in the acquisition workforce at the time of the survey (out of scope). The
    remaining 37 cases could not be contacted or refused to participate. These
    results are summarized by sampling stratum in table 2.

    Overall, we obtained a response rate of 85 percent, and of those
    respondents, all estimates are based only upon the in scope respondents
    (in the acquisition workforce).

    Table 2: Description of Sample Stratum

    Population size a

    Sample size Respondents b In scope

    respondents c Response

    rate (%) d

    (1) Contracting Officers 33 25 20 19 80 (2) Contract Specialists 50 34 30
    29 88 (3) Government Technical Monitors (GTM) 500 82 67 55 82 (4)
    Government Technical Representatives (GTR) 187 65 57 47 88 (5) Both GTR
    and GTM 69 42 37 34 88 (6) Purchasing Agents 2 2 2 1 100

    Total 841 250 213 185 85

    a Based upon GAO compilation of HUD office records. b Total number of
    questionnaires for which at least some sample data were obtained. c *In-
    scope* responses exclude respondents misidentified as part of the
    acquisition workforce, and those respondents who were away on extended
    leave at the time of the survey. d This is the ratio of the respondents to
    the sample size for each stratum.

    Source: GAO.

    All estimates produced in this report are for a target population defined
    as HUD*s acquisition workforce during the study period. Estimates were
    determined by weighting the survey responses to account for the effective
    sampling rate in each stratum. The weights reflect both the initial
    sampling rate and the response rate for each stratum.

    Because we surveyed a sample of HUD*s acquisition workforce, our results
    are estimates of actual acquisition workforce characteristics and thus are
    subject to sampling errors that are associated with samples of this size
    and type. Our confidence in the precision of the results from this sample
    is expressed in 95 percent confidence intervals. The 95 percent confidence
    intervals are expected to include the actual results for 95 Estimates

    Sampling Error

    Appendix II: Sampling Methodology for GAO Survey of HUD*s Acquisition
    Management Reforms

    Page 41 GAO- 03- 157 HUD Management

    percent of the samples of this type. We calculated confidence intervals
    for our study results using methods that are appropriate for a stratified
    probability sample. For the percentages presented in this report, we are
    95- percent confident that the results we would have obtained if we had
    studied the entire study population are within +/- 10 or fewer percentage
    points of our results, unless otherwise noted. For example, our survey
    estimates that 54.5 percent of the acquisition workforce believes that
    their contracting workload has increased over the past 2 years. The 95
    percent confidence interval for this estimate would be no wider than +/-
    10 percent, or from 44.5 percent to 64.5 percent.

    In addition to these sampling errors, the practical difficulties in
    conducting surveys of this type may introduce other types of errors,
    commonly referred to as nonsampling errors. For example, questions may be
    misinterpreted, the respondents* answers may differ from those of people
    who did not respond, or errors could be made in keying questionnaires. We
    took several steps to reduce such errors.

    Data were collected using computer- assisted telephone interviewing, and
    the GAO staff who administered the survey over the telephone attended a
    training session to familiarize them with the use of the computer-
    assisted survey instrument. In addition, computer analyses were performed
    to identify inconsistencies and other indicators of errors, and a second
    independent analyst reviewed all computer programs.

    We identified areas to cover in the survey based on the congressional
    request and initial interviews with top- level HUD managers and staff.

    The survey was pretested at HUD headquarters, through a simulated
    telephone interview. A GAO analyst administered the survey to two members
    of HUD*s acquisition workforce over the telephone from an offsite
    location, while another GAO analyst observed the HUD employee onsite. The
    HUD employees were debriefed after the pretest, and the audit team was
    able to make appropriate changes to the questionnaire prior to
    implementation. The final survey contained 165 questions.

    A team of 30 GAO staff conducted the survey in April, May, and early June
    of 2002, through a computer- assisted telephone survey, the results of
    which were entered simultaneously in our computer- assisted data
    collection instrument. We called all initial nonrespondents at least three
    times in order to encourage a high response rate. Nonsampling Error

    Survey Development Survey Administration

    Appendix II: Sampling Methodology for GAO Survey of HUD*s Acquisition
    Management Reforms

    Page 42 GAO- 03- 157 HUD Management

    We performed our work between February and June 2002 in accordance with
    generally accepted government auditing standards.

    Appendix III: Analysis of the HUD Procurement System (HPS) Identified
    Discrepancies in HUD*s Contracting Data

    Page 43 GAO- 03- 157 HUD Management

    Reliability problems identified with HPS data elements Examples

    Obligated amount is greater than the overall value of the contract A
    portion of HUD*s active contracts contain a total obligated amount that is
    greater than

    the contract total value amount.

     The two relevant data fields in HPS are *total value amount* and *total
    obligated amount.*

     The total value amount data field represents the total value of the
    contract

     The total obligated amount represents the total amount of funds that
    have been obligated to date.

     According to the HPS administrator, the figure in the total value amount
    field should be greater than or equal to the figure in the total obligated
    amount data field; as funds should not be obligated in excess of the value
    of the contract.

     According to HPS, 4 percent of HUD*s active contracts contain a total
    obligated amount that is greater than the overall contract total value
    amount, which means that according to HPS, HUD has obligated $197 million
    in excess of the contracts* value. Overall value of the contract and
    obligated amount is greater than the Indefinite delivery Indefinite
    quantity (IDIQ) Maximum

    About a quarter of HUD*s active IDIQ contracts contain inconsistent data
    within three HPS data fields; according to HPS, HUD has obligated about
    $14 million in excess of the maximum associated with the contract.

     The three relevant data fields in HPS are *total value amount,* *total
    obligated amount,* and *IDIQ Max.*

     The total value amount data field represents the total value of the
    contract.

     The total obligated amount represents the total amount of funds that
    have been obligated to date.

     The IDIQ Max identifies the maximum dollar amount for the contract;
    specifically, according to the HPS administrator, the IDIQ Max represents
    a ceiling and therefore the contract total value amount and total
    obligated amount should not exceed the IDIQ Max.

     According to the HPS administrator, the figure in the IDIQ maximum field
    should be greater than or equal to the total contract value and the total
    obligated amount data fields.

     According to HPS

     24 percent of active awarded IDIQ contracts have a total obligated
    amount that exceeds the IDIQ maximum.

     28 percent of active awarded IDIQ contracts have a total value amount
    that exceeds the IDIQ maximum. Status of contract not consistent with date
    information and significant number of data fields blank

    About a quarter of all active awarded contracts contain inconsistent
    contract status and date information, and some date fields are blank.

     The three relevant data fields in HPS are *status,* *completion date,*
    and *last completion date.*

     The status represents the current status of the contract (e. g., pre-
    award, active: awarded, and inactive: closed- out).

     The completion date tracks the completion date by which the contractor
    will deliver product( s) and /or service( s).

     The last completion date indicates the very end of the contract,
    including option periods.

     According to the HPS administrator

     All of these data fields should be populated.

     If a contract has a status of active: awarded, then the last completion
    date should be in the future.

     The completion date should be prior to or equal to the last completion
    date.

     According to HPS

     For 27 percent of contracts identified as active: awarded, the last
    completion dates are in the past.

    Appendix III: Analysis of the HUD Procurement System (HPS) Identified
    Discrepancies in HUD*s Contracting Data

    Appendix III: Analysis of the HUD Procurement System (HPS) Identified
    Discrepancies in HUD*s Contracting Data

    Page 44 GAO- 03- 157 HUD Management

    Reliability problems identified with HPS data elements Examples

     For 21 percent of the contracts identified as active awarded, the
    completion date is after the last completion date.

     For 17 percent of the contracts identified as active awarded, the last
    completion date data field is blank. Service Type data fields not Complete
    or not Consistent The data does not readily lend itself for analysis
    because the data is not complete or

    consistent. HPS contains three separate data field to capture the *type of
    good or service* being provided by the contractor.

     The three relevant data fields in HPS are the *type of service,*
    *deliverable description,* and *product service code.*

     The type of service field is populated by HUD field staff when they
    select the appropriate description from a drop down menu.

     The deliverable description data field is populated by all HUD staff
    when they are entering information on individual deliverables.

     The product service code field is populated by all HUD staff. The codes
    are based on the Federal Procurement Data System*s (FPDS) codebook.

     According to the HPS administrator, HUD conducts analysis on the type of
    service and deliverable description data fields.

     According to HPS

     The type of service data fields are blank for about a third of the
    active awarded contracts because only field staff are required to complete
    this field.

     The deliverable description data field contains narrative entries
    generated by HUD staff who do not use standard terminology to describe the
    service being purchase.

    Source: GAO analysis of HUD data.

    Appendix IV: HUD*s Financial Management Information Systems that Contain
    Contracting Obligation and Expenditure Information

    Page 45 GAO- 03- 157 HUD Management

    Financial system Description

    HUD*s Central Accounting and Program System (HUDCAPS) HUDCAPS is the
    department*s General Ledger and Funds Control System, and it

    serves as a focal point for integrating other HUD financial systems. The
    Chief Financial Officer sponsors the system. All HUD offices use HUDCAPS
    to control and manage administrative and program budgets. For example,
    since fiscal year 2000, the obligations and expenditures for all of FHA*s
    administrative contracts (i. e., headquarters and field) are processed
    from the HUDCAPS system. Program Accounting System & Line of Control and
    Credit System (PAS & LOCCS)

    PAS & LOCCS are two financial systems that are integrated. PAS is the
    projectlevel funds control system and is used to record, control, and
    report on the commitment, obligation, and expenditure of funds. LOCCS is
    the payment control system that is used by those requesting payments.
    Together, PAS& LOCCS is an accounting system that tracks the reservation,
    obligation, and expenditure of funds, and it is the department*s primary
    disbursement and cash management system for the majority of HUD programs.
    For example, obligations and expenditures associated with the Office of
    Public and Indian Housing*s (PIH) contracts are tracked in these systems.
    Further, prior to fiscal year 2000, LOCCS was the financial system that
    maintained information on FHA*s administrative contracts in the field. The
    Chief Financial Officer sponsors this system. Single Family Acquired Asset
    Management System (SAMS)

    SAMS tracks information on single- family properties that HUD acquires due
    to foreclosure; the system tracks the property from acquisition to sale
    and the system is used to manage the properties. For example, this system
    tracks the expenditures that are associated with contracts for services
    provided by closing agents; this system does not track obligations. Cash
    Control Accounting Report System (CCARS) CCARS tracks and disburses funds
    received by FHA, from the Department of the

    Treasury, to various internal FHA offices. These funds are received
    electronically and are downloaded into the CCARS database daily. Prior to
    FY 2000, CCARS maintained obligation and expenditure information on FHA*s
    administrative contracts in headquarters. Comprehensive Servicing and
    Monitoring System/ Property Management System (CSMS/ PMS)

    CSMS/ PMS tracks HUD- held Multifamily properties and certain HUD- held
    defaulted notes, which are in mortgagee- in- possession (MIP) status. a
    CSMS/ PMS performs several management and accounting functions for these
    properties (e. g., property management, tax servicing, tenant leases,
    accounts receivable, accounts payable and disbursements processing,
    financial accounting, and management reports). A HUD contractor maintains
    CSMS/ PMS. Macola Macola is Ginnie Mae*s financial system. The system is
    commercial off- the- shelf

    software and tracks obligations and expenditures of funds. a An MIP case
    occurs when HUD takes over property management responsibilities from the

    mortgagor, but the loan has not yet gone into foreclosure. Source: HUD
    data.

    Appendix IV: HUD*s Financial Management Information Systems that Contain
    Contracting Obligation and Expenditure Information

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

    Page 46 GAO- 03- 157 HUD Management

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

    Page 47 GAO- 03- 157 HUD Management

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

    Page 48 GAO- 03- 157 HUD Management

    See comment 2. See comment 1.

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

    Page 49 GAO- 03- 157 HUD Management

    See comment 4. See comment 3.

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

    Page 50 GAO- 03- 157 HUD Management

    See comment 5.

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

    Page 51 GAO- 03- 157 HUD Management

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

    Page 52 GAO- 03- 157 HUD Management

    See comment 6.

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

    Page 53 GAO- 03- 157 HUD Management

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

    Page 54 GAO- 03- 157 HUD Management

    See comment 8. See comment 7.

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

    Page 55 GAO- 03- 157 HUD Management

    See comment 8. See comment 8.

    See comment 8.

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

    Page 56 GAO- 03- 157 HUD Management

    The following are GAO*s comments to HUD*s letter dated October 23, 2002.

    1. HUD has defined its acquisition workforce to include contract officers,
    contracting specialists, purchasing agents, GTRs, and GTMs. Therefore, our
    report recommends that HUD assess the skills and capabilities of its
    existing acquisition workforce, not simply the contract officers and
    contracting specialists in the 1102 series.

    2. We believe that the report accurately and properly distinguishes the
    different acquisition positions at HUD-- including GTRs, GTMs, and various
    OCPO staff-- and accurately reflects the federal training requirements
    associated with these positions. Specifically, the ClingerCohen Act
    mandates that executive agencies, through consultations with OFPP,
    establish specific education, training, and experience requirements for
    acquisition workforces. Under implementing guidance issued by OFPP, an
    agency*s acquisition workforce* including its contracting officers,
    contract specialists, purchasing agents, contracting officer
    representatives, and contracting officer technical representatives, which
    HUD calls GTRs* must meet an established set of contracting competencies.
    HUD has developed a GTR training program in response to federal
    requirements; however, we found that a significant portion of staff
    serving in this capacity have not received this training. In addition, HUD
    has identified GTMs as part of its acquisition workforce and HUD*s
    policies permit the duties and responsibilities of GTRs to be delegated to
    GTMs; and its draft Acquisition Career Management Plan* which establishes
    training requirements for HUD*s acquisition workforce* states that the GTR
    training requirements also apply to GTMs. Therefore, we remain concerned
    that, according to HUD*s records, a significant portion of the
    department*s GTRs have not received training and that 93 percent of GTMs
    have not received any specialized acquisition training.

    3. We agree that GTMs may not require the same level of training as GTRs;
    however, HUD policies and handbooks indicate that providing acquisition
    training to GTMs is necessary and is part of its intent. And therefore, as
    discussed in comment 2, we remain concerned that, according to HUD*s
    records, 93 percent of GTMs have not received any specialized acquisition
    training. We revised the report to reflect the increases in HUD*s training
    budgets discussed in its response. GAO Comments

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

    Page 57 GAO- 03- 157 HUD Management

    4. As discussed in comment 2, we recognize that HUD is providing required
    training to some members of its acquisition workforce and we are
    encouraged by HUD*s plans to assess the training needed for GTRs and GTMs
    to more effectively monitor contractor performance. However, we remain
    concerned that not all components of HUD*s acquisition workforce are
    receiving the required training and, based on the reasons discussed in
    comment 2, we made no changes to our conclusions or recommendations.

    5. We recognize that HUD has multiple information systems that are used to
    manage and monitor the department*s contracting activities and that some
    might be better suited to track the deliverables of specific types of
    contracts than others. However, we found that HUD staff were not utilizing
    HPS to its fullest potential, including its ability to track deliverables.
    We clarified the wording in our report to make clear that we are not
    suggesting that HPS be used to track specific deliverables for all HUD
    contracts.

    6. HUD*s emphasis on reviewing subcontractor work would not necessarily
    identify the improper payments we found. The improprieties occurred, in
    part, because the vendors split the work into multiple invoices to fall
    below HUD*s established threshold of review and subcontractor
    requirements. HUD*s plan to review the property management subcontracting
    file documentation and on- site invoices to assure that work orders were
    not deliberately split to avoid competition and/ or HUD approval is a step
    to assist in catching such irregularities; however, we believe that part
    of developing a risk- based approach and monitoring contractor performance
    is to include monitoring those disbursements made by the property
    management contractors that are under the dollar threshold for individual
    anomalies and unusual disbursement patterns to identify potentially
    improper billing practices.

    7. The review of improper payments that HUD refers to was part of a
    separate congressional request to review disbursement processes that are
    particularly susceptible to improper payments and determine whether
    improper payments occurred. Based on our review of the multifamily
    disbursements, it was evident that the existing internal controls would
    not prevent and detect improper payments in the normal course of business.
    Consequently, a random sample approach was unnecessary, and we used our
    data mining approach to search for and identify irregularities that
    indicated the existence of possible improper payments. While the annual
    financial statement audit is

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

    Page 58 GAO- 03- 157 HUD Management

    designed to broadly assess internal controls, the auditors would not
    necessarily focus their work on payments not expected to have a material
    impact on the financial statements. Our improper payments review was not
    limited by such constraints and therefore, could be a much more detailed
    analysis of the areas that we determined to be particularly susceptible to
    improper payments.

    8. We modified the report to reflect these clarifications.

    Appendix VI: GAO Contacts and Staff Acknowledgments

    Page 59 GAO- 03- 157 HUD Management

    Stanley J Czerwinski, (202) 512- 5535 Steve Cohen, (202) 512- 2834

    In addition to those named above Amy Bevan, Dan Blair, J Bryant, Anne
    Cangi, Bonnie Derby, Eric Diamant, Colin Fallon, Evan Gilman, Barbara
    Johnson, Irvin McMasters, Andy O*Connell, Mark Ramage, and Nico Sloss made
    key contributions to this report. Appendix VI: GAO Contacts and Staff

    Acknowledgments GAO Contacts Acknowledgments

    (541009)

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