The Status of Major HUD Funding Awarded to the Memphis Housing Authority
(Correspondence, 06/06/2000, GAO/RCED-00-150R).

Pursuant to a congressional request, GAO reviewed the Memphis Housing
Authority's (MHA) use of Department of Housing and Urban Development
(HUD) funds, focusing on: (1) MHA's receipt of funds from HUD's
Comprehensive Grant, HOPE VI, and Public Housing Drug Elimination
programs from fiscal year (FY) 1994 through fiscal 1998; and (2) a
comparison of MHA's draw down of funds from these programs with that of
three other public housing authorities that are similar in the number of
housing units they manage and the amount of Comprehensive Grant, HOPE
VI, and Public Housing Drug Elimination funds that they receive from
HUD.

GAO noted that: (1) from FY 1994 through fiscal 1998, HUD awarded MHA
about $64.5 million in Comprehensive Grant funds, about $52.7 million in
HOPE VI funds, and about $8.6 million in drug elimination funds, for a
total of about $126 million; (2) of the Comprehensive Grant and HOPE VI
funds awarded to MHA from FY 1994 through fiscal 1998, the authority
drew down a smaller proportion of funds than the other three public
housing authorities by the end of fiscal 1999; (3) for example, MHA drew
down 50 percent of the Comprehensive Grant funds and 17 percent of HOPE
VI funds awarded during this period; (4) in contrast, the three other
housing authorities--on average--drew down 74 percent of their
Comprehensive Grant and 39 percent of their HOPE VI awards; and (5) of
the drug elimination funds awarded to MHA from FY 1994 through fiscal
1998, the authority drew down a proportion of funding similar to that of
the three other authorities by the end of fiscal 1999.

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

 REPORTNUM:  RCED-00-150R
     TITLE:  The Status of Major HUD Funding Awarded to the Memphis
	     Housing Authority
      DATE:  06/06/2000
   SUBJECT:  Low income housing
	     Housing programs
	     Public housing
	     Federal grants
	     Housing repairs
	     Funds management
	     Federal aid for housing
IDENTIFIER:  Memphis (TN)
	     HUD Comprehensive Grant
	     HUD HOPE VI Program
	     HUD Public Housing Drug Elimination Program
	     San Antonio (TX)
	     Nashville (TN)
	     Seattle (WA)

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GAO/RCED-00-150R

B-285279

June 6, 2000

The Honorable Harold E. Ford, Jr.

House of Representatives

Subject: The Status of Major HUD Funding Awarded to the Memphis Housing
Authority

Dear Mr. Ford:

The Memphis Housing Authority (MHA), like other housing authorities around
the country, annually enters into a contract with the Department of Housing
and Urban Development (HUD) through which HUD agrees to provide funding for
MHA to provide low-income persons with housing that is decent, safe, and
sanitary-MHA's primary mission. MHA, in turn, agrees to manage the housing
in accordance with the contract's provisions. In January 1997, HUD's Office
of the Inspector General (OIG) recommended that HUD declare MHA in violation
of its contract with HUD because the housing authority was not fulfilling
its primary mission. The OIG stated that MHA was not fulfilling this mission
because its "buildings, grounds, and individual dwelling units are in
extremely poor condition" because of age and because MHA had not effectively
maintained or modernized its developments.

HUD declined the OIG's recommendation to declare MHA in violation of its
contract, instead choosing in early 1998 to enter into a performance
agreement with MHA. The agreement, which took effect in July 1998, set broad
goals for the authority, including time lines and specific benchmarks for
improving the overall operation of the authority as well as for addressing
the problems that the OIG identified. However, because of significant
turnover among the authority's top management, MHA made little progress
toward meeting the terms of the agreement. In February 1999, MHA hired a new
executive director; shortly thereafter, the new executive director initiated
discussions with HUD to renegotiate the terms of the agreement to better
reflect his plans for improving MHA's performance. In April 2000, HUD and
MHA entered into a binding memorandum of agreement replacing the March 1998
performance agreement.

Because of your interest in MHA's performance and because the authority's
use of HUD funds has been and will remain an essential part of improving
conditions at the authority, you asked us to report on the status of MHA's
use of these funds. As agreed with your office, this report (1) presents
information on MHA's receipt of funds from HUD's Comprehensive Grant, HOPE
VI, and Public Housing Drug Elimination programs from fiscal year 1994
through fiscal 1998 and (2) compares MHA's draw down of funds from these
programs with that of three other public housing authorities that are
similar in the number of housing units they manage and the amount of
Comprehensive Grant, HOPE VI, and Public Housing Drug Elimination funds that
they received from HUD. We selected these three programs because they
represent some of the most significant resources that MHA will depend on to
improve the physically deteriorated conditions that the OIG identified
(Comprehensive Grant and HOPE VI) and at the same time address some of the
nonhousing needs of its residents (Drug Elimination).

In summary, we found the following:

   * From fiscal year 1994 through fiscal 1998, HUD awarded MHA about $64.5
     million in Comprehensive Grant funds, about $52.7 million in HOPE VI
     funds, and about $8.6 million in drug elimination funds, for a total of
     about $126 million.

   * Of the Comprehensive Grant and HOPE VI funds awarded to MHA from fiscal
     year 1994 through fiscal 1998, the authority drew down a smaller
     proportion of funds than the other three public housing authorities by
     the end of fiscal 1999. For example, MHA drew down 50 percent of the
     Comprehensive Grant funds and 17 percent of HOPE VI funds awarded
     during this period. In contrast, the three other housing authorities-on
     average-drew down 74 percent of their Comprehensive Grant and 39
     percent of their HOPE VI awards. Of the drug elimination funds awarded
     to MHA from fiscal year 1994 through fiscal 1998, the authority drew
     down a proportion of funding similar to that of the three other
     authorities by the end of fiscal 1999.

Background

MHA receives several grants from HUD. Once HUD awards grant funds to housing
authorities, the funds are available to them upon request to be drawn down;
specifically, a housing authority is responsible for contacting HUD and
requesting that HUD disburse all or part of the awarded funds to the housing
authority on a 3-day turnaround basis. Once a housing authority draws down
funds, it then uses the funds to pay for the various eligible invoiced
activities that each program supports. The three HUD programs highlighted in
our review are the Comprehensive Grant, HOPE VI, and Public Housing Drug
Elimination programs. Table 1 shows the housing authorities that we compared
with MHA, their size, and the total funding that HUD awarded to them from
these three programs from fiscal year 1994 through fiscal 1998.

Table 1: Statistics of Selected Public Housing Authorities

                   Public     Total funding awarded from
 PHA               housing
                   units      FY 1994 through FY 1998

 Comprehensive
 grant
                   HOPE VI    Drug elimination
 (modernization)
 Memphis, Tenn.    6,243      $64,536,581      $52,705,049 $8,570,090
 Nashville, Tenn.  6,261      52,100,490       13,963,876  8,147,290
 San Antonio, Tex. 6,809      68,072,270       98,581,070  7,412,905
 Seattle, Wash.    6,303      68,882,394       66,325,953  8,196,242

Legend

FY = fiscal year

Through the Comprehensive Grant Program, HUD makes funds available to public
housing authorities--on a formula basis--to correct physical and management
deficiencies and keep its housing safe and desirable. This program is
commonly known as the modernization program. As table 1 illustrates, HUD
awarded the four housing authorities similar amounts of modernization
funding from fiscal year 1994 through fiscal 1998.

Through the HOPE VI program, HUD awards competitive grants to rehabilitate
the most distressed public housing developments in the nation. The grants
are used by housing authorities for three general purposes: physical
improvements (including construction), management improvements, and social
and community services to address residents' needs. Because housing
authorities must compete for HOPE VI funds and typically do not receive
grants from the program annually (as they do from the formula-driven
modernization program), the amounts that HUD awards to authorities each year
fluctuate greatly. HUD did not award comparable amounts of funding annually
to each of the four authorities from fiscal year 1994 through fiscal 1998.
However, the HOPE VI grants that HUD awarded these authorities have general
similarities. For instance, all of the authorities received one to three
small grants as well as one or two large grants during this 5-year period.

Through the Public Housing Drug Elimination Program, HUD made funds
available on a competitive basis to public housing authorities to combat
drug use and drug-related crime. As table 1 illustrates, HUD awarded the
four housing authorities similar amounts of drug elimination funding from
fiscal year 1994 through fiscal 1998.

Memphis Housing Authority Has Drawn Down Less Than Half of Its Awarded Funds

By the end of fiscal year 1999, MHA drew down about $48 million (or 38
percent) of the $126 million in modernization, HOPE VI, and drug elimination
funds awarded by HUD to the authority from fiscal year 1994 through fiscal
1998. Almost 80 percent of the funds drawn down by MHA have been used by the
authority in the following ways:

   * About $26 million was from MHA's annual modernization grants and paid
     for building or acquiring dwelling structures, expanding existing
     dwelling units, or converting unused space into residential units.

   * About $6 million was from its HOPE VI grants and paid for family
     relocation and demolishing distressed buildings.

   * About $6 million was from its drug elimination grants and paid for the
     reimbursement of law enforcement and the employment of investigators.

Table 2 shows the modernization, HOPE VI, and drug elimination funds awarded
annually to MHA from fiscal year 1994 through fiscal 1998 and the remaining
balances of these awards at the end of subsequent fiscal years.

Table 2: Memphis Housing Authority Authorized Amounts and Fiscal Year End
Balances of Three HUD Programs
              Fiscal
 HUD program  year of    Authorized   FYE 1995    FYE 1996   FYE 1997    FYE 1998    FYE 1999
              award      amount       balance     balance    balance     balance     balance
              1994       $14,831,217  $14,825,725 $13,425,700$11,645,920 $297,961    $0

 Modernization1995       14,039,752                          13,245,594  10,224,118  1,515,421

              1996       11,659,770                          11,426,294  10,578,656  8,635,615

 1997         11,691,495                                     10,061,087  10,011,333

 1998         12,314,347                                                 12,306,181
 Subtotal                $64,536,581  $14,825,725 $13,425,700$36,317,809 $31,161,821 $32,468,550
              1994 (p)   481,000      396,688     91,868     84,312      0
 HOPE VI
              1995 (p)   400,000                  370,522    22,435      0

 1995 (i)     47,281,182              46,930,448  46,430,536 44,760,626  43,756,150

 1996 (i)     4,542,867                                      375,477     0
 Subtotal                $52,705,049  $396,688    $47,392,838$46,537,283 $45,136,103 $43,756,150
              1994       1,741,759    1,386,964   590,154    82,440      0
 Drug
 Elimination  1995       1,752,750                1,648,564  852,432     0
              1996       1,733,281                           1,611,803   407,103     0

 1997         1,821,300                                      1,382,967   481,079

 1998         1,521,000                                                  1,337,666
 Subtotal                $8,570,090   $1,386,964  $2,238,718 $2,546,675  $1,790,070  $1,818,745
 Cumulative
 total                   $125,811,720 $16,609,377 $63,057,256$85,401,766 $78,087,994 $78,043,445

Legend

FYE = fiscal year end

(i) = implementation grant

(p) = planning grant

Note: Funds awarded during fiscal year 1994 through fiscal 1998.

Memphis Housing Authority Drew Down a Smaller Proportion of Its
Modernization and HOPE VI Funds Than Three Other Authorities Did

As shown in figure 1, MHA has been noticeably slower in its draw down of
modernization funds than the three other housing authorities, particularly
for the last 3 years for which we obtained data. By the end of fiscal year 1999, MHA had drawn down 50 percent of the
modernization funds awarded from fiscal 1994 through fiscal 1998, while the
three other housing authorities-on average-had drawn down 74 percent during
this period.

The years during which MHA drew down a smaller proportion of its
modernization funds than comparable housing authorities did partially
coincided with the OIG's review that ultimately recommended that HUD declare
the authority in violation of its contract. Regarding Memphis' use of
modernization funds, HUD's OIG specifically found that "it takes the Memphis
housing authority an exorbitant amount of time to complete renovation
activity after it receives funding." A subsequent review by the U.S. Army
Corps of Engineers found that MHA continued to have difficulty expediting
its use of modernization funds in the years following the OIG's report. In
October 1999, the Corps of Engineers reported that the authority was not
obligating these funds in a timely manner.

During the fiscal year 1994 through fiscal 1999 period, MHA drew down 17
percent of the HOPE VI funds awarded to the authority from fiscal year 1994
through fiscal 1998. As figure 2 illustrates, the proportion of the awarded
funds that MHA drew down is only comparable to that of the San Antonio
Housing Authority and is much less than the proportion drawn down by the
housing authorities in Nashville, Tennessee, and Seattle, Washington.
Specifically, by the end of fiscal year 1999, the three other housing
authorities-on average-had drawn down 39 percent of their awards during this
period.

Figure 2: Percentage of HOPE VI Program Funding Awards Fiscal Years 1994-98
Drawn Down by End of Fiscal 1999

Although HUD established the HOPE VI program in 1993, grant agreements and
funding were not available to housing authorities until fiscal year 1995. In
July 1998, we reported that a large share of the HOPE VI grant funds awarded
from fiscal year 1994 through fiscal 1998 remained to be drawn down across
all public housing authorities. We attributed this delay to the lag time
between planning and construction as well as unique site-specific delays.

For the years for which we obtained data, MHA drew down a proportion of drug
elimination funds similar to that of the other three housing authorities, as
figure 3 illustrates.

Figure 3: Percentage of Housing Authorities' Fiscal Years 1994-98 Drug
Elimination Funding Drawn Down by End of Fiscal 1999

Agency Comments

We provided HUD with a draft copy of this report for review and comment. In
commenting on the draft, the Deputy Assistant Secretary for HUD's Office of
Troubled Agency Recovery advised us of HUD's position that it expects to see
a marked improvement in MHA's expenditure of funds as a result of the
actions MHA's new executive director has taken, including entering into the
memorandum of agreement with HUD. HUD plans to monitor MHA's progress
monthly in meeting the terms of the agreement and expects to see, in
addition to improvements in MHA's use of funds, a significant overall
improvement in the condition of the authority. Because of MHA's history of
troubled performance as documented by HUD's OIG, we believe that such
monitoring by HUD would be beneficial. HUD also provided several technical
changes and clarifications to the report, which we made, as appropriate.

Scope and Methodology

We compared MHA's use of modernization, HOPE VI, and drug elimination funds
awarded by HUD from fiscal year 1994 through fiscal 1998 with that of three
similar housing authorities. We selected these three grant programs because
(1) HUD awarded a large amount of funding to MHA during the period of
inquiry via these three programs and (2) sufficient data were available
among the four housing authorities. We obtained the data from HUD's Line of
Credit and Control System database.

Our analysis covered the amounts that HUD had authorized for each housing
authority from the grant programs and the amounts that each housing
authority had drawn down. For the analysis of the financial data on the
modernization and drug elimination programs, we compared the annual draw
down of funds by each authority because HUD awarded comparable grants to
these authorities during each fiscal year. For the analysis of the HOPE VI
financial data, we compared the total amount awarded during the fiscal year
1994-98 period; we carried out the analysis in this manner because HUD did
not award comparable amounts to each authority during each fiscal year.
However, the HOPE VI grants awarded to the four housing authorities during
this period have general similarities. Specifically, all of the authorities
received one to three small grants as well as one or two large grants during
this 5-year period.

We supplemented this analysis with information that we obtained from MHA,
HUD officials, HUD's Office of Inspector General, and our reviews of
background and other pertinent program information.

We conducted our work from October 1999 through June 2000 in accordance with
generally accepted government auditing standards.

- - - - -

As arranged with your office, unless you publicly announce this report's
contents earlier, we plan no further distribution of the report until 15
days from the date of this letter. We will then send copies to the Honorable
Andrew Cuomo, Secretary of Housing and Urban Development. We will also make
copies available to others on request.

Please contact me at (202) 512-7631 if you or your staff have any questions
about this report. Key contributors to this report were Anne Cangi, Bill
MacBlane, and Eric Marts.

Sincerely yours,

Stanley J. Czerwinski

Associate Director, Housing, Community Development,

and Telecommunications Issues

(385847)
  
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