Homelessness: HUD Funds Eligible Projects According to Communities'
Priorities (Letter Report, 07/24/2000, GAO/RCED-00-191).

Pursuant to a congressional request, GAO reviewed the Department of
Housing and Urban Development's (HUD) funding of Stewart B. McKinney
Homeless Assistance Act projects, focusing on: (1) what process HUD uses
to select projects for funding, whether this process is consistent with
relevant statutes, and how HUD treats new projects and projects that
have been funded in the past (renewal projects); (2) the extent to which
HUD funds projects that communities rank as high-priority under their
Continuums of Care, and why some high-priority projects are not funded
while some low-priority projects are funded; and (3) whether communities
face any common problems when applying for funds from HUD, and what
actions are needed to correct these problems.

GAO noted that: (1) HUD selects projects for funding on the basis of a
three-step process that is consistent with the requirements in relevant
statutes, and it does not distinguish between new or renewal projects;
(2) under the selection process, HUD considers: (a) communities' overall
strategies for addressing homelessness; (b) whether the projects meet
the applicable program standards set in the McKinney Act; and (c) the
relative need for homeless assistance funds for each community; (3) HUD
ranks all eligible projects and awards grants to these projects in the
order they are ranked nationally, until the funds available for the
competition are depleted; (4) most projects that communities ranked as
high priority were awarded funding in 1998 and 1999; (5) for example, in
1999, 92 percent of the projects that were ranked in the top 25 percent
of each community's priority list were funded, for those communities
that had between 4 and 16 projects on their list; (6) however, for those
communities that had three or fewer projects on their priority list, the
project identified as the top priority was funded between 34 to 70
percent of the time; (7) furthermore, in those instances in which
high-priority projects were not funded under the competition and
low-priority projects were funded, it was always because the
higher-ranked projects did not meet the applicable program's eligibility
requirements; (8) most applicants generally understand the application
and paperwork requirements necessary to compete for HUD grants; (9)
however, more than one third of the communities that applied for funds
in 1999 had significant problems in understanding the application
requirements or completing the paperwork; (10) representatives of these
communities cited a variety of difficulties in completing the
application requirements and in getting information from HUD field
office staff about the program and these requirements; (11) for example,
some communities reported difficulties caused by the time-consuming and
resource-intensive paperwork requirements and the lack of clear
instructions and definitions, as well as difficulty in understanding
HUD's selection process; and (12) community representatives GAO spoke
with suggested a number of actions that HUD could take to alleviate the
problems they experienced, such as better training for applicants and
field office staff, more use of technology to provide access to
information, and a simpler application format.

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

 REPORTNUM:  RCED-00-191
     TITLE:  Homelessness: HUD Funds Eligible Projects According to
	     Communities' Priorities
      DATE:  07/24/2000
   SUBJECT:  Homelessness
	     Housing programs
	     Funds management
	     Public assistance programs
	     Eligibility determinations
	     Grant administration
	     Prioritizing
	     Low income housing
	     Federal/state relations
	     State-administered programs
IDENTIFIER:  HUD Supportive Housing Program
	     HUD Shelter Plus Care for the Homeless Program
	     HUD Section 8 Moderate Rehabilitation Program for SRO
	     Dwellings for Homeless Individuals
	     HUD Continuum of Care Program

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GAO/RCED-00-191

Appendix I: HUD's Competitive Homeless Assistance Programs

18

Appendix II: Data on HUD's 1998 and 1999 Competitions

20

Appendix III: HUD's Process for Determining Homeless Assistance
Need

26

Appendix IV: Comments From the Department of Housing and Urban Development

29

Table 1: Funding Status of High-Priority Projects, 1998
Competition 10

Table 2: Funding Status of High-Priority Projects, 1999 Competition 11

Table 3: Number of COC Applications, Projects Requesting
Funding, and Projects Funded During the 1998
Competition 20

Table 4: State-by-State Distribution of COC Applications, Projects,
and Funds Awarded for the 1998 Competition 1 21

Table 5: Number of COC Applications, Projects Requesting
Funding, and Projects Funded During the 1999 Competition 23

Table 6: State-by-State Distribution of COC Applications, Projects,
and Funds Awarded for the 1999 Competition 1 24

Table 7: Calculating the Pro Rata Need Amount for a Community 27

Table 8: Assigning Need Points for Eligible Projects on a
Community's Priority List When the Final Pro Rata Need
Amount is $10,750,000 28

COC Continuum of Care

HUD Department of Housing and Urban Development

SHP Supportive Housing Program

SRO Single Room Occupancy

Resources, Community, and
Economic Development Division

B-284896

July 24, 2000

The Honorable Judy Biggert
The Honorable Donald Manzullo
The Honorable Jerry Weller
House of Representatives

The Stewart B. McKinney Homeless Assistance Act, as amended, established a
wide range of federal programs to provide a comprehensive package of housing
and services to people who are homeless. Several of the McKinney Act
programs are administered by the Department of Housing and Urban Development
(HUD), and for these programs, in fiscal year 1999, HUD awarded almost $1
billion to states, localities, and organizations to provide housing and
services to homeless people. The majority of HUD's McKinney Act funds (about
$750 million in 1999) are dedicated to three programs--the Supportive
Housing Program, Shelter Plus Care, and Section 8 Moderate Rehabilitation
Single-Room Occupancy Dwellings. (App. I describes each of these programs in
detail.) Every year, HUD has a national competition to distribute this
funding, and communities wishing to participate must submit an application
that includes a plan describing their overall strategy for addressing
homelessness, called the Continuum of Care, and information on the
individual projects for which they are seeking funds. The number of projects
that communities included in their applications ranged from over 30 to 3 or
fewer for the 1998 and 1999 competitions. Each community is required to rank
its projects according to the most important needs of the homeless
population in its area. HUD reviews the applications to determine which
projects will receive funds for the three programs.

In recent competitions, some concerns have been raised about HUD's decisions
on the homeless assistance projects selected for funding. In particular,
some communities have contended that HUD was not considering the priorities
that they had assigned to projects in their applications. In response to
these concerns, you asked us to determine (1) what process HUD uses to
select projects for funding, whether this process is consistent with
relevant statutes, and how HUD treats new projects and projects that have
been funded in the past (renewal projects); (2) the extent to which HUD
funds projects that communities rank as high priority under their Continuums
of Care, and why some high-priority projects are not funded while some
low-priority projects are funded; and (3) whether communities face any
common problems when applying for funds from HUD, and what actions are
needed to correct these problems. In order to answer these questions, we
reviewed and analyzed information in HUD's databases, surveyed 394
communities that applied for funding in 1999, and interviewed HUD officials
and some community representatives.

HUD selects projects for funding on the basis of a three-step process that
is consistent with the requirements in relevant statutes, and it does not
distinguish between new or renewal projects. Under the selection process,
HUD considers (1) communities' overall strategies for addressing
homelessness, (2) whether the projects meet the applicable program standards
set in the McKinney Act, and (3) the relative need for homeless assistance
funds for each community. HUD ranks all eligible projects and awards grants
to these projects in the order they are ranked nationally, until the funds
available for the competition are depleted.

Most projects that communities ranked as high priority were awarded funding
in 1998 and 1999. For example, in 1999, 92 percent of the projects that were
ranked in the top 25 percent of each community's priority list were funded,
for those communities that had between 4 and 16 projects on their list.
However, for those communities that had three or fewer projects on their
priority list, the project identified as the top priority was funded between
34 to 70 percent of the time. Furthermore, in those instances in which
high-priority projects were not funded under the competition and
low-priority projects were funded, it was always because the higher-ranked
projects did not meet the applicable program's eligibility requirements.

Most applicants generally understand the application and paperwork
requirements necessary to compete for HUD grants. However, more than
one-third of the communities that applied for funds in 1999 had significant
problems in understanding the application requirements or completing the
paperwork. Representatives of these communities cited a variety of
difficulties in completing the application requirements and in getting
information from HUD field office staff about the program and these
requirements. For example, some communities reported difficulties caused by
the time-consuming and resource-intensive paperwork requirements and the
lack of clear instructions and definitions, as well as difficulty in
understanding HUD's selection process. Community representatives we spoke
with suggested a number of actions that HUD could take to alleviate the
problems they experienced, such as better training for applicants and field
office staff, more use of technology to provide access to information, and a
simpler application format.

In 1993, HUD implemented the "Continuum of Care" strategy to encourage and
enable states and localities to develop coordinated and comprehensive
community-based approaches for providing the housing and services that
homeless people need. This strategy is designed to build partnerships among
states, localities, nonprofit organizations, and the federal government, and
it encourages the development of long-term solutions for addressing
homelessness. A locality's Continuum of Care planning effort brings together
a variety of local stakeholders in order to (1) identify the size and scope
of the homelessness problem; (2) inventory the assets available in the
community to alleviate homelessness; (3) rank the community's needs in order
of priority; (4) strategically plan the range of services and programs that
should be implemented to address homelessness; and (5) identify leveraging
resources, including other federal, state, local, and private funds, that
can be used to address homelessness.

HUD uses a "Super Notice of Funding Availability" to announce funding for
homeless assistance grants and other HUD programs. This notice includes both
general and program-specific application procedures and requirements that
applicants must adhere to when applying for funds. A community's application
for homeless assistance grants consists of two parts: (1) the Continuum of
Care plan, which describes the coordinated process the community used to
develop a system for assisting homeless people, and (2) information about
each of the projects that are applying for funds from HUD's three homeless
assistance programs--the Supportive Housing Program, Shelter Plus Care, and
Section 8 Moderate Rehabilitation Single-Room Occupancy Dwellings.

For the 1999 competition, HUD made $750 million available to fund homeless
assistance programs under the Continuum of Care process. For this
competition, HUD received 423 applications, which included funding requests
for about 3,000 individual projects. Applications were received from
communities in 48 states, the District of Columbia, Guam, the Commonwealth
of Puerto Rico, and the U.S. Virgin Islands.1 At least one application from
each of these states, the District of Columbia, and Puerto Rico was awarded
grants, and about two-thirds of all the projects that applied for funds were
awarded grants. (App. II includes a state-by-state analysis of the number of
continuum of care applications and projects that requested and were awarded
funds during the 1998 and 1999 competitions.)

Coordination and Is Consistent With Legislative Requirements

HUD's selection process for homeless assistance projects places the greatest
value on how well communities have planned and coordinated their system for
serving homeless people and is consistent with the criteria established by
the McKinney Act. HUD's selection process includes (1) a review of each
community's Continuum of Care plan; (2) a review of the eligibility,
capacity, and quality (threshold review) of each project competing for
funds; and (3) a determination of the relative homeless assistance need of
each area that has applied for funds. HUD uses a scoring system to assign
points for different parts of the selection process. Specifically, each
project receives points for the quality and completeness of its associated
Continuum of Care plan and points for need based on HUD's need determination
and the priority assigned to the project by the community. These points
collectively make up the final score for each individual project. Projects
are then ranked by their scores in relation to other projects nationwide and
are funded in the order in which they are ranked until the funds available
for the competition are depleted. Throughout this process, HUD does not give
any special preference to new or renewal projects and instead relies on the
priorities set by the communities.

HUD first reviews the Continuum of Care (COC) plan that each community
competing for funds submits as part of the application process. The quality
and completeness of the community's COC plan is critical for the projects
associated with the plan to be competitive with other projects nationwide.
This is because the COC plan represents 60 percent of the total points that
any project can receive as a result of HUD's review.2 Every project
associated with a particular COC plan will receive the same number of points
assigned to the plan. For example, if a community has submitted an
application consisting of 10 projects, and the community's COC plan receives
52 of the possible 60 points, then each project included in the application
will receive 52 points for its COC score. In reviewing COC plans, HUD
evaluates the process that the community uses to develop the plan, the
strategy that the community will use to develop a comprehensive service
delivery system for homeless people, the reliability of the data used to
establish service gaps in the community, the fairness of the process used to
establish project priorities, and the extent to which the community has been
able to attract other resources that will supplement HUD's homeless
assistance grant funds. Generally, applications that are not part of a
larger community-based COC strategy (called solo applications) do not
receive a favorable COC score, according to HUD.

Under the COC process, HUD requires communities to reach agreement on which
projects they consider to be the highest priority for homeless assistance
grants before they apply to HUD for funds. This requirement is based on the
premise that communities are more knowledgeable about the needs of homeless
people in their areas than anyone else, and therefore these priorities
should be determined at the local level.

HUD then conducts a review of each project associated with a COC plan to
determine whether it meets the eligibility requirements set in the McKinney
Act. This review is called a threshold review and involves evaluating the
eligibility and capacity of the organizations sponsoring the projects and of
the quality of the projects being proposed. HUD reviews each project
application to ensure that the sponsors of the project, the population to be
served, and the proposed activities are eligible under the applicable
program rules. HUD also reviews each application to determine whether
project sponsors have the necessary knowledge and experience about
homelessness in general and have demonstrated the ability to carry out the
proposed activities for the project. In addition, past HUD grant recipients
must be able to demonstrate that they have implemented prior projects in a
timely manner. Finally, HUD reviews each application to determine the
quality of the proposed project by reviewing the appropriateness of the
proposed housing and services for the populations to be served and the
cost-effectiveness of the project, including the costs associated with
construction, operations, and administration. Projects that do not pass the
threshold review are not considered eligible for funding even though the
community's COC plan may have ranked them as high-priority projects. During
the 1998 competition, of the 2,644 projects requesting funds nationwide, 196
did not pass the threshold review and were not considered eligible for
funds. Similarly, in 1999, of the 3,000 projects requesting funds, 202 did
not pass the threshold review.

For all projects that pass the threshold review, HUD assigns up to 40 "need"
points, according to its determination of the community's relative need for
homeless assistance, called the pro rata need amount. HUD uses a four-step
process to determine a community's pro rata need amount.3 This process is
described in detail in appendix III. The pro rata need amount does not
represent a guaranteed level of funding that communities will receive under
the competition but is instead the mechanism that HUD uses to assign need
points to eligible projects. Based on the pro rata need amount determined
for a community, HUD assigns need points to all eligible projects in the
order of priority set by the community. The top-priority projects on the
community's list receive 40 points each for need; lower-priority projects,
20 points; and the lowest-priority projects, 10 points. See appendix III for
a detailed description of how need points are assigned to a community's
eligible projects.

Once need points have been assigned, HUD develops a total score for each
project by combining the assigned need points with their related-COC plan
score. All eligible projects are then ranked nationwide according to their
total scores. HUD selects projects for funding in the order in which they
are ranked nationally, until the amount of funding available for the
competition is expended. During the 1999 competition, projects that received
a total score of less than 76 were not funded, and during the 1998
competition, projects that received a total score of less than 74 were not
funded.4

Throughout the selection process, HUD does not give special preference to
new or renewal projects but instead bases its award decisions on the
priorities that communities assign to projects in their COC plans.
Consequently, if a community chooses to place a higher priority on new
projects rather than renewal projects, HUD will award funds to the new
projects first, as long as they are eligible for funding.

In recent competitions there has been some concern about HUD's not funding
successful renewal projects and the overall lack of funds available to meet
the growing demand for funds for renewal projects. In recognition of this
growing demand, HUD has increased the pro rata need amount for those
communities that have proportionately greater funding needs for renewal
projects. This adjustment changes the amount of funds that HUD believes
these communities need in order to assist their homeless populations and may
result in a greater number of projects on these communities' priority lists
receiving the maximum number of points for need.

For the 1998 and 1999 competitions, most projects that communities ranked as
high priority received funding. For example, in 1999, 92 percent of the
projects that were ranked in the top 25 percent of each community's priority
list were funded, for those communities that had between 4 and 16 projects
on their list. In these communities, high-priority projects that did not
receive funds usually did not pass HUD's threshold review and were deemed
ineligible for funding. Some of the common reasons high-priority projects
did not pass the threshold review included (1) the populations to be served
or the proposed activities for these projects were ineligible for funding,
(2) the sponsor or applicant did not have the capacity to implement the
project, or (3) the quality of the project did not meet program standards.
In contrast, when high-priority projects in communities that had three or
fewer projects in their applications were not funded generally because their
COC plans received low scores. Low scores caused these high-priority
projects to become less competitive with other projects nationwide. Tables 1
and 2 show the funding decisions for the top-priority projects for COC
applications of different sizes for the 1998 and 1999 competitions,
respectively.

                                               Projects
                                                               Projects that
                               Projects        deemed not      were not
                               funded          eligible for
                                               funding         fundedb
              Total number
 Size of COC  of
 application  high-priority    Number Percent  Number Percent  Number Percent
              projectsa
 8 COC
 applications
 with 30 or   95               93     98       2      2        0      0
 more projects
 25 COC
 applications
 with 17 to 29131              128    98       2      2        1      1
 projects
 183 COC
 applications
 with 4 to 16 305              267    88       13     4        25     8
 projects
 48 COC
 applications
 with 3       48               37     77       1      2        10     21
 projects
 74 COC
 applications
 with 2       74               55     74       3      4        16     22
 projects
 111 COC
 applications
 with 1       111              45     41       14     13       52     47
 projectc

aFor those COC applications that had four or more projects, we considered
the top 25 percent of the projects on the communities' priority lists to be
high-priority projects. For those COC applications that included three or
fewer projects, we considered the first project on the priority list to be
the community's top priority project.

bIn 1998, in its database, HUD did not distinguish between eligible projects
that were not funded and projects that were not reviewed.

cIn 1998, 111 COC applications were submitted for a single project.

                                               Projects        Eligible
                                                                                Projects not
                               Projects        deemed not      projects that    reviewed by
                               funded          eligible for    were not
                                               funding         funded           HUD
              Total number
 Size of COC  of
 application  high-priority    Number Percent  Number Percent  Number Percent   NumberPercent
              projectsa
 15 COC
 applications
 with 30 or   169              165    98       4      2        0      0         0     0
 more projects
 25 COC
 applications
 with 17 to 29131              122    93       7      5        1      1         1     1
 projects
 187 COC
 applications
 with 4 to 16 326              301    92       13     4        8      2         4     1
 projects
 53 COC
 applications
 with 3       53               37     70       4      8        9      17        3     6
 projects
 57 COC
 applications
 with 2       57               35     61       6      11       9      16        7     12
 projects
 86 COC
 applications
 with 1       86               29     34       3      3        21     24        33    38
 projectb

aFor those COC applications that had four or more projects, we considered
the top 25 percent of the projects on the communities' priority lists to be
high-priority projects. For those COC applications that included three or
fewer projects, we considered the first project on the priority list to be
the community's top priority project.

b In 1999, 86 COC applications were submitted that included a single
project.

In those communities where low-priority projects5 received funding under the
competition and high-priority projects did not, the high-priority projects
on the communities' priority lists were ineligible for funding.6 For
example, in 1999, a California community had a total of 16 projects on its
priority list. HUD determined that the projects ranked 1 and 14 on the list
were ineligible for funding and therefore funded all the other projects on
the list except these two. Similarly, a Maryland community requested funding
for 47 projects on its priority list. However, HUD determined that eight
projects (ranked 17, 19, 21, 22, 29, 40, 42, 47) on the list were ineligible
for funding and funded all the other projects on the list except these
eight.

Most communities that applied for funds during the 1999 competition had few,
if any, problems in understanding HUD's application requirements and
completing the paperwork, according to our survey of these communities.
Their experiences with the application process indicate that

ï¿½ about 63 percent had very few, if any, problems in understanding HUD's
requirements and completing the paperwork;

ï¿½ 18 percent had significant problems; however, these problems were resolved
quickly and easily; and

ï¿½ 20 percent had significant problems that took a considerable amount of
time and/or effort to resolve, or were never resolved.

To determine the specific nature of problems with the application process,
we randomly selected and interviewed representatives from communities
reporting significant problems. Representatives from these communities
identified a wide array of concerns, such as voluminous, time-consuming, and
resource-intensive paperwork requirements; lack of clear instructions and
definitions; redundant information requirements; and difficulty in
understanding HUD's scoring process. In addition, some community
representatives raised concerns about the inability of HUD's field office
staff to provide adequate technical information about the programs and the
application requirements. Several community representatives stated that they
received information from field office staff that contradicted information
they received from HUD's headquarters staff and that field office staff were
generally not knowledgeable about the program and application requirements.
We did not identify any common factor that would explain why these
communities had significant problems with the application process. However,
several community representatives indicated that their communities lacked
people with adequate experience in completing the paperwork requirements,
and others said that they had to hire professional grant writers or
consultants to help them complete the process. Furthermore, some community
representatives stated that differences between homelessness and assistance
delivery systems in rural and urban areas make it difficult for rural
communities to compete for these funds. For example, they said that because
HUD's COC strategy is more suited to urban conditions, rural communities are
at a disadvantage in preparing the narrative and collecting the data
required to complete the application.

Over the years, HUD has provided various opportunities for applicants to
receive training and information about the competition. For example, since
1996, HUD has held information broadcasts via satellite so that potential
applicants across the country could learn more about the homeless assistance
grants and how to prepare the application. Moreover, during the last two
competitions, HUD has made several modifications to improve the clarity of
the application process and information required. For example, beginning in
1998, HUD consolidated the application process for all three programs into a
single competition, with uniform time frames, paperwork, and selection
criteria. Also, starting in 1998, HUD supplemented the application forms and
instructions sent to communities with a list of commonly asked questions and
answers, as well as information on program changes made since the prior
year's competition. In 1999, HUD attempted to make the language used in the
notice announcing the competition simpler and easier to understand by using
plain language, active voice, and shorter sentences. Also, in 1999,
applicants were able to obtain general information about the competition as
well as the necessary forms and instructions from HUD's Internet site. HUD
officials told us that they are continuing to make improvements as they
receive feedback from the communities after each competition. For example,
HUD has instituted a 25-page maximum for the COC plan narrative to ensure
that no applicant has an unfair advantage during the rating process for the
COC plans.

The community representatives we spoke to acknowledged that HUD has made
improvements to the application process, but they also suggested the
following additional actions that HUD could take in order to alleviate the
problems they experienced.

ï¿½ Clarify the definitions and instructions in the application by providing
examples of the type of information applicants should include.

ï¿½ Prescribe the information that should be included on an application, but
not the format. This would allow communities more flexibility in presenting
the information for their areas and would help eliminate some of the
redundancy in the application.

ï¿½ Increase the amount of training provided to applicants and field staff.
Specifically, HUD could provide more advanced technical training for
experienced applicants and detailed training about the application process
for its field staff.

ï¿½ Provide more detailed information on the scoring criteria used to select
projects for funding. One community representative said the information HUD
provided during the debriefings held after the awards were announced needs
to be more specific so that communities can improve their applications in
the future.

ï¿½ Hold technical assistance forums so that (1) applicants can ask questions
of HUD headquarters staff and (2) HUD can post these questions and responses
to the Internet and update this information throughout the application
cycle.

ï¿½ Allow more time between the announcement for the competition and the date
when applications are due.

ï¿½ Eliminate the competition and deliver the funds through block grants to
the communities. This view was held by several of the community
representatives we spoke with.

The process that HUD uses to select projects for homeless assistance grants
is complicated and may be difficult for some applicants to
understand--particularly those with limited experience in applying for
federal funds. In this regard, HUD has taken several steps to improve
communications with applicants and help them better understand the
requirements of the application process. The community representatives we
spoke with recognized many of HUD's actions as steps in the right direction.
However, because over one-third of the communities that applied for funds
reported having significant problems in completing the application process
in 1999, we believe that it is important for HUD to continue its efforts to
provide more information and training to applicants and simplify and
streamline the paperwork requirements of the application process.

We provided a draft of this report to HUD for review and comment. In
general, HUD stated that the report represented a fair and accurate
portrayal of the Continuum of Care process and the way in which the
Department makes funding determinations. However, HUD questioned the
objectivity of the report's conclusion and stated that, according to the
report's findings, 80 percent of the communities either reported no problems
with the process or experienced problems that were quickly resolved. We
disagree with HUD's view. We believe that by combining the percentage of
communities that had few, if any, problems with the percentage of
communities that had significant problems that were resolved, HUD is
ignoring the fact that 18 percent of these communities did experience
significant problems with the application process. Our conclusion--that over
one-third of the communities applying for funding in 1999 had significant
problems in understanding HUD's requirements and completing the paperwork
for the application--more accurately reflects the information reported to us
by the communities. HUD also provided us with a technical comment, which we
incorporated into the report. (App. IV includes the full text of HUD's
comments and our detailed responses.)

To obtain information on the criteria HUD uses to determine which homeless
assistance projects will be funded and to determine whether these criteria
are consistent with congressional intent, we interviewed agency officials
and obtained and reviewed HUD documents, Federal Register notices, and
relevant statutes. To obtain information on how HUD allocates funds to
communities for new versus renewal projects, we interviewed HUD officials
and obtained and reviewed relevant HUD documents.

To determine the extent to which HUD funds projects that communities rank as
high priority in their Continuum of Care applications, and to determine why
some high-priority projects were not funded while some low-priority projects
were funded, we obtained and analyzed the information contained in HUD's
database for the results of the 1998 and 1999 competitions. We also
interviewed HUD officials and reviewed relevant documents. We conducted a
limited review of the data in HUD's database to verify its accuracy and
reviewed the procedures that HUD uses to ensure the accuracy of the data
that are entered into the system. We found no errors in the information that
we verified.

To determine whether communities face common problems when applying for
funds from HUD and to determine what actions are needed to correct these
problems, we surveyed 388 organizations responsible for developing 395
Continuum of Care applications for their communities.7 We received 329
responses, which represents an 85-percent response rate. To obtain specific
information on the problems that communities faced when applying for funds
from HUD, we randomly selected and interviewed almost half of the
organizations that reported having significant problems with the application
process. However, the information we obtained from these organizations
cannot be generalized to all of the organizations that encountered problems
with the application process. We asked these organizations to identify
corrective actions that were needed to resolve the problems they faced.

We conducted our work from January through July 2000 in accordance with
generally accepted government auditing standards.

We are sending copies of this report to appropriate congressional
committees; the Honorable Andrew M. Cuomo, Secretary of Housing and Urban
Development; and other interested parties. Copies will also be made
available to others on request.

If you have any questions about this report, please call me or Anu Mittal at
(202) 512-7631. Other key contributors to this assignment were Angelia
Kelly, Lynn Musser, and Hattie Poole.
Stanley J. Czerwinski
Associate Director, Housing and Community
Development Issues

HUD's Competitive Homeless Assistance Programs

This appendix provides information on three Housing and Urban Development
(HUD) homeless assistance programs--the Supportive Housing Program, Shelter
Plus Care, and Section 8 Moderate Rehabilitation Single-Room Dwellings--that
provide grants to projects through a national competition. These three
programs were created by the Stewart B. McKinney Act, as amended, (P.L.
100-77) to provide communities with the funding they need to create housing
and services for homeless people.

The Supportive Housing Program (SHP) is designed to promote the development
of supportive housing and supportive services,8 including innovative
approaches to help homeless people make a transition from homelessness and
live as independently as possible. States, local governments, and other
governmental entities (such as public housing authorities); private
nonprofit organizations; and community mental health associations that are
public nonprofit organizations can compete for grants through an annual
national competition. Because no funds have been appropriated for the Safe
Havens program since 1994,9 HUD has elected to provide funding for this
program under SHP. Consequently, SHP grants may be used to provide (1)
transitional housing for a period of 24 months, and up to 6 months of
follow-up supportive services for residents who move to permanent housing;
(2) permanent housing with appropriate supportive services for homeless
people with disabilities to enable them to live as independently as
possible; (3) supportive services only, with no housing; (4) safe havens for
homeless individuals with serious mental illness; and (5) innovative
approaches to supportive housing that will meet the long-term needs of
homeless people.

SHP funds can be used to acquire buildings, new construction, and leasing.
However, portions of the grant must be used to serve certain populations,
such as homeless people with children and homeless people with disabilities.
In addition, a dollar-for-dollar match is required for grants involving the
acquisition or rehabilitation of buildings or new construction. A 25- to
50-percent cost share is required for operating assistance, and a 25-percent
match is required for supportive services. The initial grant for a SHP
project is for up to 3 years; after this period, projects may apply for
renewal funding.

The purpose of the Shelter Plus Care program is to provide rental assistance
for homeless people with disabilities together with supportive services that
are funded from other sources. The program can provide (1) tenant-based
rental assistance, (2) sponsor-based rental assistance, (3) project-based
rental assistance, or (4) single-room-occupancy assistance. States, units of
general government, and public housing agencies are eligible to apply for
project grants through a national competition. Grants can be used to provide
rental assistance payments for either 5 or10 years, depending on the type of
rental assistance requested and the grantee's meeting other program
requirements. Each grantee must match the federal funds provided for rental
assistance with equal funding for supportive services.

The purpose of the Single-Room Occupancy (SRO) program is to bring more
standard single-room occupancy units into the local housing supply and make
these units available to homeless individuals. Single room occupancy housing
units are intended for occupancy by a single person and may or may not
contain food preparation and/or sanitary facilities. Under this program, HUD
enters into annual contribution contracts with public housing authorities
for the limited rehabilitation of residential properties, so that when the
work is done the properties will contain multiple single-room units. The
public housing authority is responsible for selecting properties that are
suitable for assistance and for identifying landlords who will participate.
Under this program, public housing authorities and private nonprofit
organizations are eligible to compete for Section 8 rental subsidies. Rental
assistance payments are provided for 10 years. The guaranteed cash flow from
the federal rental assistance payments helps the owners of the properties
obtain private financing to rehabilitate the property, cover operating
expenses, service the project's debt, and make a profit on the project.

Data on HUD's 1998 and 1999 Competitions

This appendix provides information from HUD's database of Continuum of Care
(COC) applications and projects requesting and receiving funds for both the
1998 and 1999 competitions. This information is also provided on a
state-by-state basis.

During the 1998 competition, communities submitted a total of 449 COC
applications consisting of 2,644 projects requesting funds. Of these
projects, 1,489, or about 56 percent, were funded. About 88 percent of the
funded projects represented COC applications that consisted of four or more
projects. In general, COC applications with four or more projects
represented 85 percent of the projects requesting funds and 88 percent of
the funded projects. See table 3 for general information on the 1998
competition, and table 4 for a state-by-state analysis for the number of COC
applications and projects submitted to and funded by HUD during the 1998
competition.

                                   Total number of
                 Number of COC                     Total numberPercent of
                                   projects
 COC application applications      requesting      of projects projects
 size            submitted to HUD  funds           funded      funded
 Applications
 with 30 or more 8                 383             268         70
 projects
 Applications
 with 17-29      25                544             312         57
 projects
 Applications
 with 4-16       183               1,314           723         55
 projects
 Subtotal        216               2,241           1,303       58
 Applications
 with 3 projects 48                144             62          43
 Applications
 with 2 projects 74                148             79          53
 Applications
 with 1 project  111               111             45          41
 Total           449               2,644           1,489       56

              Number of COC Number of COC Number of
                                                      Number ofTotal funds
 State        applications  applications  projects    projects awarded to
              submitted to  receiving     requesting
              HUD           funds         funds       funded   state
 Alabama      6             5             22          8        $5,429,022
 Alaska       3             3             6           6        1,995,160
 American
 Samoa        1             0             1           0        0
 Arizona      3             2             32          12       11,872,922
 Arkansas     8             4             14          4        2,138,795
 California   37            32            349         182      125,348,523
 Colorado     8             7             36          17       7,397,329
 Connecticut  7             5             19          8        5,066,787
 Delaware     1             1             21          10       2,419,729
 District of
 Columbia     2             1             44          21       8,829,470
 Florida      22            16            138         57       30,023,872
 Georgia      10            10            68          31       14,434,821
 Hawaii       2             2             6           4        2,509,013
 Idaho        3             2             9           3        1,261,617
 Illinois     19            15            101         67       40,641,076
 Indiana      8             7             69          45       10,613,775
 Iowa         3             2             16          8        5,167,099
 Kansas       3             0             5           0        0
 Kentucky     4             4             30          14       10,174,431
 Louisiana    12            8             59          42       11,562,347
 Maine        2             1             12          6        956,126
 Maryland     7             7             61          44       15,185,895
 Massachusetts21            21            118         73       31,536,074
 Michigan     18            13            107         61       28,612,011
 Minnesota    11            11            55          36       12,140,670
 Mississippi  4             3             10          4        1,645,478
 Missouri     8             7             27          13       25,176,073
 Montana      1             1             8           6        1,012,233
 Nebraska     4             3             22          9        4,048,915
 Nevada       2             2             10          6        3,163,610
 New Hampshire3             3             32          23       2,704,078
 New Jersey   15            11            70          38       18,568,338
 New Mexico   5             4             21          11       3,815,909
 New York     27            19            219         167      84,880,780
              Number of COC Number of COC Number of
                                                      Number ofTotal funds
 State        applications  applications  projects    projects awarded to
              submitted to  receiving     requesting
              HUD           funds         funds       funded   state
 North
 Carolina     22            12            74          28       4,631,303
 North Dakota 1             1             1           1        112,801
 Ohio         9             8             85          65       31,567,471
 Oklahoma     4             1             20          15       2,637,662
 Oregon       12            9             50          16       6,887,053
 Pennsylvania 22            18            117         80       46,890,495
 Puerto Rico  10            3             27          9        5,078,527
 Rhode Island 1             1             25          11       3,832,835
 South
 Carolina     5             5             18          16       4,738,717
 South Dakota 2             1             2           1        222,325
 Tennessee    6             5             39          20       9,066,283
 Texas        17            11            118         61       31,006,849
 Utah         6             3             22          10       1,961,340
 Vermont      2             2             13          6        1,637,819
 Virgin
 Islands      1             0             3           0        0
 Virginia     16            14            79          32       11,444,012
 Washington   9             8             68          52       19,751,199
 West Virginia8             4             14          5        1,644,908
 Wisconsin    4             4             45          24       12,393,892
 Wyoming      2             1             7           1        64,765
 National
 total        448           342           2,644       1,489    $725,902,234

1For the 1998 competition, Guam was the only area that did not apply for
funds.

During the 1999 competition, communities submitted fewer COC applications
than in 1998. However, the number of individual projects increased by 13
percent, to a total of 3,000 projects. Of these projects, 1,894, or about 63
percent, were funded. The majority of these funded projects, about 91
percent, are from COC applications that consisted of four or more projects.
Although the total number of projects requesting funds increased between
1998 and 1999, the greatest increase occurred in COC applications with 30 or
more projects, which accounted for 23 percent of the applications in 1999,
compared to 15 percent in 1998. In contrast, COC applications with one or
two projects decreased by 36 and 30 percent, respectively. See table 5 for
general information on the 1999 competition and table 6 for a state-by-state
analysis of the number of COC applications and projects submitted to and
funded by HUD during the 1999 competition.

                 Number of COC     Total number of Total numberPercent of
                 applications      projects        of projects projects
                 submitted to HUD  requesting      funded      funded
                                   funds
 COC Size
 Applications
 with 30 or more 15                679             439         65
 projects
 Applications
 with 17-29      25                543             340         63
 projects
 Applications
 with 4-16       187               1,419           942         66
 projects
 Subtotal        227               2,641           1,721       65
 Applications
 with 3 projects 53                159             89          56
 Applications
 with 2 projects 57                114             55          48
 Applications
 with 1 project  86                86              29          34
 Total           423               3,000           1,894       63

              Number of COC Number of COC Number of
                                                      Number ofTotal funds
 State        applications  applications  projects    projects awarded to
              submitted to  receiving     requesting
              HUD           funds         funds       funded   state
 Alabama      5             4             23          14       $6,873,228
 Alaska       2             2             18          8        2,501,214
 Arizona      4             3             70          32       20,274,932
 Arkansas     7             3             16          7        2,090,392
 California   35            30            377         211      115,216,515
 Colorado     10            7             39          19       8,462,818
 Connecticut  8             7             19          14       6,327,463
 Delaware     1             1             22          11       3,424,667
 District of
 Columbia     1             1             45          23       7,938,849
 Florida      22            17            128         85       38,907,450
 Georgia      15            8             86          47       13,242,745
 Guam         1             0             4           0        0
 Hawaii       2             2             16          11       4,187,492
 Idaho        2             2             22          12       1,674,949
 Illinois     21            18            149         88       46,356,450
 Indiana      8             8             65          55       12,190,793
 Iowa         3             3             11          9        4,281,229
 Kansas       5             4             17          11       6,808,842
 Kentucky     4             4             52          40       9,653,477
 Louisiana    9             7             66          46       12,940,165
 Maine        3             3             29          17       5,588,139
 Maryland     9             7             118         77       17,080,933
 Massachusetts21            21            204         141      33,765,276
 Michigan     14            11            87          61       32,302,953
 Minnesota    12            9             68          53       15,275,263
 Mississippi  3             1             4           1        355,950
 Missouri     9             6             34          19       11,443,837
 Montana      1             1             5           5        1,351,768
 Nebraska     3             3             17          7        1,671,503
 Nevada       4             3             9           5        2,891,976
 New Hampshire3             3             28          9        1,290,635
 New Jersey   15            12            80          44       14,879,064
 New Mexico   3             2             18          14       3,601,572
 New York     20            14            196         153      81,672,977
              Number of COC Number of COC Number of
                                                      Number ofTotal funds
 State        applications  applications  projects    projects awarded to
              submitted to  receiving     requesting
              HUD           funds         funds       funded   state
 North
 Carolina     13            10            58          35       4,068,972
 Ohio         10            9             87          68       42,899,574
 Oklahoma     5             4             39          21       7,591,135
 Oregon       9             8             42          25       6,258,128
 Pennsylvania 21            15            114         72       42,805,381
 Puerto Rico  7             2             16          2        379,566
 Rhode Island 1             1             30          21       4,523,765
 South
 Carolina     6             4             26          15       4,874,673
 Tennessee    6             5             47          34       9,397,612
 Texas        18            11            140         93       36,485,090
 Utah         5             4             12          5        942,613
 Vermont      2             2             13          5        1,926,359
 Virgin
 Islands      2             0             4           0        0
 Virginia     14            14            78          46       12,390,107
 Washington   9             9             96          66       24,099,347
 West Virginia5             2             10          5        1,323,195
 Wisconsin    4             4             43          31       12,258,802
 Wyoming      1             1             3           1        195,326
 National
 total        423           332           3,000       1,894    $758,945,161

1For the 1999 competition, North and South Dakota and American Samoa were
the only areas that did not apply for funds.

HUD's Process for Determining Homeless Assistance Need

This appendix describes how HUD determines the relative homeless assistance
need, called the pro rata need amount, for those communities that have
applied for homeless assistance funds through the Continuum of Care process.
In addition, this appendix describes how HUD assigns "need points" to each
eligible project that has applied for funds.

HUD uses a four-step process to determine the pro rata need amount for the
geographical area covered by a community's Continuum of Care plan. First,
HUD establishes a preliminary pro rata need amount for each geographical
area in the country that is based on the formula used for the Emergency
Shelter Grant program and the total amount of money available for the
competition.10 Second, HUD determines which geographical areas did not apply
for funds under the competition and redistributes the funds initially
assigned to these areas proportionately among the communities that did
apply. This new amount is called the "rolled-up pro rata need amount."
Third, in recognition of the heavy renewal burden that some communities
face, HUD further adjusts the pro rata need amount for those communities
where the total amount requested for renewal projects exceeds the rolled up
pro rata need amount. The amount of the adjustment is based on the
difference between the total amount of renewal funding requested and the
community's rolled up pro rata need amount, and the type of projects that
are requesting renewal funding. For example, if all the renewal projects in
a community's application are for the Supportive Housing Program, then 33
percent of the difference will be added to the rolled up need amount to
determine the "renewal adjusted pro rata need amount" for a community.
However, if all of the renewal projects in a community's application are
Shelter Plus Care projects, then 50 percent of the difference will be added
to the rolled-up need amount.11 If a community has a mixture of Supportive
Housing Program and Shelter Plus Care renewal projects, then the adjustment
will be based on the proportion of Supportive Housing Program and Shelter
Plus Care renewal projects requesting funds. Fourth, to fulfill the
30-percent permanent housing requirement set in the 1999 and 2000
appropriations acts,12 HUD adds a bonus of up to $250,000 to the renewal
adjusted pro rata need amount, if the community designates a new permanent
housing project as its top priority. Table 7 provides an example of how the
pro rata need amount is determined for a community.

 Calculation                                                   Amount
 Preliminary pro rata need amount                              $8,500,000
 Portion of unclaimed funds allocated to the community         1,000,000
 Rolled up pro rata need amount                                9,500,000
 Renewal adjustment based on a total renewal need of
 $12,500,000 for Supportive Housing Program projects.

 12,500,000 − 9,500,000 = 3,000,000                      1,000,000

 33% of 3,000,000 = 1,000,000
 Renewal adjusted pro rata need amount                         10,500,000
 Permanent housing bonus based on a new permanent housing
 project designated as the community's top priority            250,000
 Final adjusted pro rata need amount                           $10,750,000

After the final adjusted pro rata need amount is determined for each
community that has applied for funds, HUD uses the pro rata need amount to
assign the number of "need points" that each project on the community's
priority list will receive. Starting at the top of the priority list, HUD
assigns 40 need points to each eligible project, if at least half of the
amount requested falls within the community's final adjusted pro rata need
amount. The next tier of eligible projects, referred to as the "second
tier," will be assigned 20 points each for need, if at least half of the
amount requested falls between the final adjusted pro rata need amount for
the community and twice the pro rata need amount. The remaining eligible
projects on the priority list will each receive 10 points for need. If a
community does not rank its projects, all eligible projects in the
application will receive 10 points for need. Table 8 shows how need points
are assigned to each project on a community's priority list when the final
adjusted pro rata need amount for the community is $10,750,000.

      Eligible                         Cumulative share of Points awarded
 Tier projects on      Amount of funds the pro rata need   for need to each
      priority list    requested       amount              project
 1    Project 1        2,500,000       2,500,000           40
      Project 2        2,000,000       4,500,000           40
      Project 3        3,250,000       7,750,000           40
      Project 4        3,000,000       10,750,000          40
 2    Project 5        5,000,000       15,750,000          20
      Project 6        2,750,000       18,500,000          20
      Project 7        3,000,000       21,500,000          20
 3    Project 8        2,000,000       23,500,000          10
      Project 9        4,000,000       27,500,000          10
      Project 10       1,000,000       28,500,000          10

Comments From the Department of Housing and Urban Development

1. We made no change to the report in response to this comment because we
believe that our report accurately reflects the information we received from
the communities. The report states that 63 percent of the communities we
surveyed had few, if any, problems in understanding HUD's requirements and
completing the paperwork for the application process. In contrast, 18
percent of the communities we surveyed had significant problems that were
resolved quickly and easily, and 20 percent had significant problems that
were never resolved. To state that 80 percent of the communities had no
problems in understanding and completing the application process, or that
any problems they had were quickly resolved, HUD combined the percentage of
communities that had few, if any, problems with the percentage of
communities that had significant problems that were easily resolved. We
believe that by combining these percentages HUD is ignoring the fact that 18
percent of the communities had significant problems with the application
process and overall more than a third of the communities that applied for
funds in 1999, had significant problems in understanding the requirements
and completing the paperwork for the application process.

2. We revised the report to more fully recognize the types of assistance HUD
has provided to applicants.

3. We revised the report to clarify this point.

(385844)

Table 1: Funding Status of High-Priority Projects, 1998
Competition 10

Table 2: Funding Status of High-Priority Projects, 1999 Competition 11

Table 3: Number of COC Applications, Projects Requesting
Funding, and Projects Funded During the 1998
Competition 20

Table 4: State-by-State Distribution of COC Applications, Projects,
and Funds Awarded for the 1998 Competition 1 21

Table 5: Number of COC Applications, Projects Requesting
Funding, and Projects Funded During the 1999 Competition 23

Table 6: State-by-State Distribution of COC Applications, Projects,
and Funds Awarded for the 1999 Competition 1 24

Table 7: Calculating the Pro Rata Need Amount for a Community 27

Table 8: Assigning Need Points for Eligible Projects on a
Community's Priority List When the Final Pro Rata Need
Amount is $10,750,000 28
  

1. Communities in North and South Dakota and American Samoa did not apply
for funds in 1999.

2. Most projects can receive a total of 100 points from HUD. However, some
projects may receive up to four bonus points--two points for projects that
fall within an empowerment zone or enterprise community (which are the 72
urban or 33 rural communities designated as the most economically distressed
in the nation) and two points for court-ordered consideration of
applications received from projects located in Dallas, Texas.

3. In determining each community's pro rata need amount, HUD makes
adjustments to (1) reflect the heavy renewal burden that some community's
face and (2) ensure that 30 percent of homeless assistance program funds are
used for permanent housing, as required by the fiscal year 1999 and 2000
appropriations acts.

4. In the 1999 competition, HUD reserved the authority to select eligible
renewal projects for funding on a noncompetitive basis under the Supportive
Housing Program. These projects would normally not be selected as part of
the competition because their related COC plans received low scores;
however, to be selected on a noncompetitive basis, these projects must have
received 40 points for need.

5. For our analysis, we defined low-ranking projects as those projects in
the lowest 25 percent of each community's priority list, for those
communities that had four or more projects on their list.

6. In the 1999 competition, HUD funded four projects outside of the
competition, even though they were in the lowest 25 percent of their
communities' priority lists and other higher ranking priority projects on
the list were eligible and did not receive funding. This is because HUD
reserved the authority to fund projects on a noncompetitive basis when they
are renewal projects under the Supportive Housing Program and have received
40 points for need.

7. We could not obtain contact information for 28 communities that submitted
applications in 1999.

8. Supportive services include child care, employment assistance, health
care, and case management activities.

9. Safe Havens is a form of supportive housing that serves hard to reach
homeless people with severe mental illness who are living on the street and
have been unable or unwilling to participate in supportive services.

10. The Emergency Shelter Grant formula is based on the following factors:
data on poverty, housing overcrowding, population, age of housing, and
growth lag.

11. According to HUD officials, in this process, Shelter Plus Care renewal
projects are weighted more heavily, in recognition of the legislatively
mandated 5-year term for Shelter Plus Care projects, compared with
Supportive Housing Program renewal projects, which may have a 1-, 2-, or
3-year term.

12. To ensure that HUD funds are being used to create permanent housing, the
Congress mandated a 30-percent permanent housing requirement in HUD's fiscal
year 1999 and 2000 appropriations acts.
*** End of document. ***