Housing and Community Development Issue Area Plan--Fiscal Years 1996-98
(Letter Report, 08/01/95, GAO/IAP-95-15).

GAO presented its Housing and Community Development issue area plan for
fiscal years 1996 through 1998.

GAO plans to assess the: (1) restructuring of federal housing and
community development agencies to improve service delivery, eliminate
duplication, and produce cost savings; (2) improvement of federal
oversight of housing and community development services to reduce fraud,
waste, abuse, and mismanagement; (3) reduction of the federal
government's financial risk in its mortgage assistance programs; (4)
fostering of self-sufficiency among low-income people while meeting
budgetary constraints; (5) promotion of community economic and social
development; (6) cost-effectiveness of programs that promote small and
minority business development; and (7) control of federal disaster
assistance costs.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  IAP-95-15
     TITLE:  Housing and Community Development Issue Area Plan--Fiscal 
             Years 1996-98
      DATE:  08/01/95
   SUBJECT:  Housing programs
             Community development programs
             Disaster relief aid
             Federal agency reorganization
             Risk management
             Small business assistance
             Disadvantaged persons
             Economic development
             Mortgage programs
             Program abuses
IDENTIFIER:  Community Development Block Grant
             
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Cover
================================================================ COVER


Resources, Community, and Economic Development Division

August 1995

HOUSING AND COMMUNITY DEVELOPMENT
ISSUE AREA PLAN - FISCAL YEARS
1996-98

GAO/IAP-95-15



Abbreviations
=============================================================== ABBREV

  HUD - x
  RHCDS - x
  VA - x
  SBA - x
  FEMA - x
  FHA - x
  GAO - x
  GNMA - x

FOREWORD
============================================================ Chapter 0

As the investigative arm of Congress and the nation's auditor, the
General Accounting Office is charged with following the federal
dollar wherever it goes.  Reflecting stringent standards of
objectivity and independence, GAO's audits, evaluations, and
investigations promote a more efficient and cost-effective
government; expose fraud, waste, abuse, and mismanagement in federal
programs; help Congress target budget reductions; assess financial
and information management; and alert Congress to developing trends
that may have significant fiscal or budgetary consequences.  In
fulfilling its responsibilities, GAO performs original research and
uses hundreds of databases or creates its own to compile and analyze
information. 

To ensure that GAO's resources are directed toward the most important
issues facing Congress, each of GAO's 35 issue areas develops a
strategic plan that describes its key issues and their significance;
the objectives and focus of its work; and the planned major job
starts.  Each issue area relies heavily on input from congressional
committees, agency officials, and subject-matter experts in
developing its strategic plan. 

The Housing and Community Development issue area has audit
responsibility for over $1 trillion of financial services and
assistance programs that are aimed at providing decent, affordable
housing and healthy communities, including assistance to communities
adversely affected by disasters.  Agencies primarily responsible for
these programs include the Department of Housing and Urban
Development (HUD) and its Federal Housing Administration (FHA); the
Department of Veterans Affairs (VA); the Rural Housing and Community
Development Services (RHCDS); the Small Business Administration
(SBA); and the Federal Emergency Management Agency (FEMA).  HUD
provides the bulk of assistance by insuring or guaranteeing mortgage
financing through its $497 billion FHA loan portfolio; guaranteeing,
through the Government National Mortgage Association, about $485
billion in outstanding mortgage-backed securities; annually providing
almost $25 billion in rental subsidies and for the operation of
housing units for about 4.7 million lower-income households; and
annually providing $5 billion for community assistance through its
Community Development Block Grant program. 

In addition, assistance is provided through SBA's $30 billion
business loan portfolio; VA's $174 billion in guarantees on veterans'
home loans; and RHCDS' assistance to rural residents, totalling $30
billion.  Finally, an average of $7 billion (in constant 1993
dollars) was obligated annually between 1977 and 1993 to prepare for
and respond to disasters. 

After decades of costly housing and community development assistance,
the delivery of federal services is being reexamined.  Our work
assists this examination by focusing on the following principal
issues in the housing and community development area: 

  -- restructuring federal housing and community development agencies
     to improve service delivery, eliminate duplication, and produce
     long-term cost savings;

  -- improving federal oversight of housing and community development
     services to reduce fraud, waste, abuse, and mismanagement;

  -- reducing the federal government's financial risk in its mortgage
     assistance programs;

  -- fostering self-sufficiency among low-income people while meeting
     budgetary constraints;

  -- promoting the economic and social development of communities;

  -- improving the cost-effectiveness of programs that promote small
     and minority business development; and

  -- controlling federal disaster assistance costs. 

In the following pages, we describe our key planned work on these
pivotal issues.  Because events may significantly affect this plan,
our planning process allows for updating this plan and responding
quickly to emerging issues.  If you have any questions or
suggestions, please call Jim Wells, Associate Director, at (202)
512-7100, or me at (202) 512-7631. 

Judy A.  England-Joseph
Director
Housing and Community Development Issues


CONTENTS
============================================================ Chapter 1


   FOREWORD
---------------------------------------------------------- Chapter 1:1

1


   TABLE I:  KEY ISSUES
---------------------------------------------------------- Chapter 1:2

4


   TABLE II:  PLANNED MAJOR WORK
---------------------------------------------------------- Chapter 1:3

8


TABLE I:  KEY ISSUES
============================================================ Chapter 2

Issue                         Significance
----------------------------  --------------------------------------------------
Federal housing and           The current focus on "restructuring" and
community development         "reinventing" agency missions and operations has
agencies: What changes must   affected HUD, RHCDS, VA, SBA, FEMA, and other
the federal government make   agencies involved in housing and community
to improve delivery of        development assistance. These agencies are
services, eliminate           proposing to restructure--including downsizing--
duplication, and produce      their organizations and are developing options to
long-term cost savings?       improve delivery of federal services with
                              significant cost savings. HUD, for instance,
                              projects its reinvention will take 6 to 8 years.
                              The 104th Congress has made HUD's restructuring a
                              priority.










Federal management: What      Congress and the administration have mandated that
changes must federal          federal agencies, including HUD, RHCDS, and VA,
agencies make to oversee      improve their accountability for the effective and
housing and community         efficient use of budgetary resources by correcting
development services and      deficiencies in management, accounting, and
reduce fraud, waste, abuse,   information systems. GAO has designated HUD as a
and mismanagement?            high-risk area because of its long-standing
                              departmentwide deficiencies.











Mortgage financing: How can   FHA, VA, and RHCDS underwrite mortgage credit for
the federal government        purchases of residential and rental properties
minimize financial risks in   that are riskier than purchases made in the
mortgage assistance programs  conventional market. These programs support nearly
while meeting affordable      $500 billion in outstanding mortgage loans; HUD's
housing needs?                Government National Mortgage Association (GNMA)
                              guarantees timely payment to investors on $485
                              billion of securities backed by these mortgages.
                              These agencies need to continue working to limit
                              losses, improve delivery of home mortgage and
                              rental housing assistance, and improve oversight.



Low-income housing: How can   Housing the nation's low-income population within
federal low-income housing    existing budget constraints has sparked
programs meet budgetary       considerable debate. Since 1977, real outlays for
constraints while             federal housing assistance have tripled.
effectively serving low-      Accordingly, policymakers must find more cost-
income people and promoting   effective methods to house low-income people,
self-sufficiency?             better ways for federal housing programs to
                              promote self-sufficiency, and the best management
                              practices for assisted housing.
















--------------------------------------------------------------------------------
Objectives                                Focus of work
----------------------------------------  --------------------------------------
--Analyze the restructuring proposals,    --Analysis of HUD's, other agencies',
including HUD's "reinvention              and congressional reinvention
blueprint."                               proposals affecting housing and
                                          community development programs
--Assess the alternatives for
restructuring FHA, including making it a  --Analysis of the Rural Housing Act of
government-owned corporation.             1949 to determine ways to improve and
                                          streamline housing assistance to rural
--Assess the effects of reinvention       residents
proposals on program costs and
customers.                                --Review of the proposals to
                                          restructure HUD's multifamily housing
--Assess the feasibility of transforming  and FHA, including the proposals'
HUD's current programs, such as assisted  effects on FHA's customers and
housing, into performance-based funds.    financial position

                                          --Review of the efforts to determine
                                          the oversight necessary at the federal
                                          level and administrative
                                          responsibilities that may be
                                          transferred to state and local
                                          governments as a result of
                                          consolidating programs

--Identify and target spending            --Potential savings in HUD's budget
reductions to decrease the federal
deficit.                                  --Implementation of initiatives at HUD
                                          to correct long-term management
--Monitor HUD's and FEMA's actions to     deficiencies
correct long-standing departmentwide
management deficiencies, including        --Improvement of financial and
financial and information systems.        information systems at HUD and FEMA

--Recommend ways to improve mission       --Review of agencies' efforts to
focus, program effectiveness, and design  develop better performance measures
of controls to reduce fraud, waste,
abuse, and mismanagement in agency
operations.



--Identify options for mortgage           --Improvement of the financial
financing programs to limit the federal   position of FHA's mortgage assistance
government's exposure to losses.          programs for single-and multifamily
                                          properties
--Recommend ways to improve controls
over property disposition.                --Reduction of losses through better
                                          management over property disposition
--Analyze alternatives to provide         activities
mortgage financing options to urban and
rural residents.                          --Reduction of risks through changes
                                          in FHA's and RHCDS' programs

--Identify ways to better manage and      --Improvements in the federal
maintain urban and rural federally-       oversight, regulatory framework, and
assisted multifamily properties.          budgeting practices of assisted
                                          housing
--Evaluate ways to improve the cost-
effectiveness of housing subsidies.       --Analysis of the cost and
                                          programmatic implications of project-
--Evaluate options to better link         versus tenant-based housing
housing and human services to encourage
self-sufficiency.                         --Integration of federal housing
                                          programs with social service programs
                                          to encourage self-sufficiency among
                                          low-income households

--------------------------------------------------------------------------------
Issue                         Significance
----------------------------  --------------------------------------------------
Community development: What   Over a dozen federal agencies provide community
roles do HUD and other        development assistance. Congress is currently
federal agencies play in      debating whether to consolidate some of these
promoting the economic and    programs into performance-based funds or block
social viability of           grants to improve effectiveness and efficiency.
communities and their         Consolidation must also factor in performance
residents and with what       measures that ensure appropriate use of funds,
level of capacity and types   safeguards against duplicate federal programs, and
of performance measures?      the effects of the loss of needed services to
                              communities.

















Small and minority-owned      Although several SBA loan, technical assistance,
business development: Do      grant, and equity investment programs are directed
existing programs meet        at establishing or preserving small and/or
clearly defined goals; what   minority-owned businesses, only about 7 percent of
benefits have been accrued;   all small business lending is SBA-backed. Other
and what is the most cost-    agencies also provide similar services that appear
effective way to deliver      to overlap SBA's goals. Federal purchasing
these services?               requirements annually direct billions of dollars
                              to support small business development. Congress
                              has raised concerns about the benefits of these
                              programs, and court cases have challenged minority
                              set-asides and mandates.








Disaster assistance: How can  Twenty-six federal agencies are involved in
the federal government        disaster relief and recovery, which has totaled
reduce expenditures for       more than $17 billion since 1989. Policymakers
disaster relief while         face simultaneous needs to encourage choices that
improving service delivery?   lessen future federal costs, minimize federal
                              spending, eliminate duplicative efforts, and
                              promote economic growth. The 103rd Congress
                              established bipartisan Task Forces on Disasters,
                              whose reports are expected to spark a number of
                              legislative proposals during current and future
                              congressional sessions.

















--------------------------------------------------------------------------------
Objectives                                Focus of work
----------------------------------------  --------------------------------------


--Identify any overlap among programs     --Economic development in distressed
that support community development and    urban areas and overlap and
recommend ways to streamline them.        differences among community
                                          development programs across agencies
--Identify options to integrate social,
economic, and housing programs to         --The effects of performance-based
maximize service delivery.                funds and block-grant consolidation on
                                          community development programs
--Assess performance indicators used to
rate existing programs and recommend      --The integration of social, economic,
other indicators to improve oversight of  and housing programs
these programs.
                                          --The impact of fund allocation
                                          formulas, including equitability, and
                                          standards for consistent performance
                                          measures








--Determine what market needs SBA serves  --Markets and sources serving these
and whether those needs could be met in   businesses and approaches for
other ways.                               assisting them

--Measure the extent to which existing    --Program goals and achievement of
programs have met, or contributed to,     intended outcomes
specified goals to promote small and
minority-owned business development and   --Overlaps and gaps among programs
the effectiveness of technical            providing support to small and
assistance and guidance.                  minority-owned businesses among
                                          agencies
--Identify the most cost-effective ways
to assist small and minority-owned
businesses.





--Identify potential inefficiencies       --Duplication and lack of coordination
arising from having 26 federal agencies   in federal programs helping
involved in disaster relief.              communities recover from recent large
                                          disasters
--Recommend options to reduce the
federal government's exposure to claims   --Options to reduce costs, such as
for disaster relief and recovery.         revising the eligibility criteria for
                                          federal assistance, providing
                                          incentives to mitigate disasters, and
                                          increasing the use of insurance
                                          mechanisms








--------------------------------------------------------------------------------

TABLE II:  PLANNED MAJOR WORK
============================================================ Chapter 3

Issue                      Planned major job starts
-------------------------  -----------------------------------------------------
Federal housing and        --Assess HUD's reinvention proposals, including
community development      transformation of FHA into a government-owned
agencies                   corporation.
                           --Evaluate existing rural housing programs to
                           determine whether they meet current needs.
                           --Evaluate options to restructure HUD's multifamily
                           housing program.

Federal management         --Analyze HUD's $26-billion budget to identify
                           budgetary savings.
                           --Assess implementation of HUD's management and
                           information resource management reforms, including
                           their potential for adopting leading industry
                           practices.
                           --Analyze changes needed in information management
                           systems for a restructured HUD.
                           --Review information management and systems support
                           for FEMA's disaster assistance programs.

Mortgage financing         --Review economic net worth of FHA's single-family
                           program.
                           --Evaluate program changes to reduce risk in single-
                           family housing programs.
                           --Review multifamily risk-sharing arrangements.
                           --Assess the low-income property disposition
                           program.
                           --Analyze alternatives to provide mortgage financing
                           to rural areas.

Low-income housing         --Assess the concept of vouchering out public housing
                           in terms of comparative costs, feasibility in all
                           situations, performance measurement, and local
                           management capability.
                           --Assess the link between housing and other human
                           service programs and the extent these programs
                           promote economic independence.

Community development      --Identify federal assistance programs that support
                           economic development in distressed urban areas and
                           review overlap and differences among community
                           development programs across agencies.
                           --Evaluate and identify performance indicators and
                           formulas for delivering community development
                           programs.

Small and minority-owned   --Identify target markets served by SBA's programs.
business                   --Determine interagency overlaps and gaps among
development                programs providing support to small businesses,
                           including programs in the Small Business
                           Administration and the Department of Commerce's
                           Minority Business Development Agency.

Disaster assistance        --Identify options to reduce costs in federal
                           disaster assistance.
                           --Identify advantages and disadvantages of
                           consolidating major disaster assistance programs and
                           propose solutions for coordination problems
                           identified after recent large disasters.
--------------------------------------------------------------------------------

*** End of document. ***