Housing and Community Development Products, 1992-94 (Letter Report,
05/95, GAO/RCED-95-61W).

GAO's Housing and Community Development Issue Area studies programs that
seek to deliver affordable housing and maintain vital communities for
all Americans.  This index provides information on GAO products issued
between 1992 and 1994 on housing and community development programs.
The index also includes studies done by other GAO issue areas on related
topics. The index is divided into broad subject areas that should be
helpful in locating material.  Order forms are included.

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

 REPORTNUM:  RCED-95-61W
     TITLE:  Housing and Community Development Products, 1992-94
      DATE:  05/95
   SUBJECT:  Public housing
             Low income housing
             Federal aid for housing
             Disadvantaged persons
             Mortgage loans
             Homeowners loans
             Community development
             Small business assistance
             Disaster relief aid
             Homelessness
IDENTIFIER:  Bibliographies
             
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Cover
================================================================ COVER


Resources, Community, and Economic Development Division

May 1994

HOUSING AND COMMUNITY DEVELOPMENT
PRODUCTS, 1992-94

GAO/RCED-95-61W

Housing and Community Development Products


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

  AFMD - Accounting and Financial Management Division, GAO
  AIMD - Accounting and Information Management Division, GAO
  DBE - Disadvantaged Business Enterprise
  DOD - Department of Defense
  DOE - Department of Energy
  DOT - Department of Transportation
  DPAH - Department of Public and Assisted Housing, District of
     Columbia
  FDICIA - Federal Deposit Insurance Corporation Improvement Act
  FEMA - Federal Emergency Management Agency
  FHA - Federal Housing Administration
  FmHA - Farmers Home Administration
  GAO - General Accounting Office
  GGD - General Government Division, GAO
  GNMA - Government National Mortgage Association
  GSA - General Services Administration
  HEHS - Health, Education, and Human Services Division, GAO
  HRD - Human Resources Division, GAO
  HUD - Department of Housing and Urban Development
  IDB - industrial development bonds
  IRS - Internal Revenue Service
  MAP - Single Family Mortgage Assignment Program
  MPP - Market Promotion Program
  NSIAD - National Security and International Affairs Division, GAO
  OCG - Office of the Comptroller General, GAO
  OGC - Office of General Counsel, GAO
  OP - Office of Policy, GAO
  PATH - Projects for Assistance in Transition From Homelessness
  PHA - public housing authority
  RCED - Resources, Community, and Economic Development Division, GAO
  RTC - Resolution Trust Corporation
  SBA - Small Business Administration
  SSBIC - specialized small business investment companies
  TPCC - Trade Promotion Coordinating Committee
  VA - Department of Veterans Affairs
  8(a) - Minority Small Business and Capital Ownership Development
     Program

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

GAO's Housing and Community Development Issue Area conducts studies
of programs involved in providing affordable housing and maintaining
vital communities for all Americans.  Agencies administering these
programs include the Department of Housing and Urban Development, the
Department of Veterans Affairs, the Farmers Home Administration, the
Small Business Administration, the Federal Emergency Management
Agency, and many private and nonprofit community organizations. 

This index includes information on the products issued between
January 1992 and December 1994 that discuss housing and community
development programs.  The index also includes studies performed in
other GAO issue areas on related topics.  This index is divided into
broad subject areas that should be useful for general information and
research purposes and for understanding the housing and community
development issues that GAO is addressing. 

Questions about this index can be directed to me by mail at the U.S. 
General Accounting Office, Room 1842, 441 G Street, NW, Washington,
D.C.  20548; or by telephone at (202) 512-7631.  Readers interested
in ordering documents or in requesting searches on a specific topic
should call (202) 512-6000 or fax a request to (301) 258-4066. 
Additional ordering details, as well as instructions for getting on
our mailing list, appear at the end of this index. 

Judy A.  England-Joseph
Director, Housing and Community
 Development Issues
Resources, Community, and
 Economic Development Division

Jim Wells
Associate Director, Housing and
 Community Development Issues
Resources, Community, and
 Economic Development Division


PUBLIC AND ASSISTED HOUSING
============================================================ Chapter 1

Estimating Preservation Program's Cost

(Correspondence, 11/17/94, GAO/RCED-95-48R). 

Pursuant to a congressional request, GAO examined the Department of
Housing and Urban Development's (HUD) computer model for estimating
its low-income housing preservation program costs, focusing on the
model's ability to make reliable annual budget estimates for the
preservation program.  GAO noted that (1) the model cannot reliably
estimate the program's annual funding needs, primarily because it
cannot predict when project owners will apply for preservation
incentives and how long it will take HUD to process these
applications; (2) the model's overall design, data, and key
assumptions are reasonable and well founded; (3) because of the
model's limitations, in recent years HUD has relied more on actual
program experience to estimate annual budget costs; and (4) it could
not determine whether use of the budget estimation process based on
actual program experience resulted in more realistic cost estimates
because information on actual costs for fiscal years 1994 and 1995
was not available. 

Federally Assisted Housing:  Expanding HUD's Options for Dealing With
Physically Distressed Properties

(Testimony, 10/06/94, GAO/T-RCED-95-38). 

Under its Section 8 project-based assisted housing programs, the
Department of Housing and Urban Development (HUD) pays part of the
rent for low-income families living in privately owned rental
housing.  HUD provides this assistance for more than 20,000 privately
owned properties nationwide at an estimated annual cost of $5.8
billion.  The mortgages for about half of these properties are also
insured or held by HUD.  This testimony (1) compares the costs of
rehabilitating two properties in poor physical condition--Edgewood
Terrace Apartments in Washington, D.C., and 6000 South Indiana
Apartments in Chicago--with the costs of other alternatives for
housing the tenants; (2) discusses the views of tenants and community
leaders on these options; and (3) identifies legislative and
administrative factors limiting HUD's discretion in dealing with
physically distressed properties. 

Resolution Trust Corporation:  Affordable Housing Disposition Program
Achieving Mixed Results

(Letter Report, 09/28/94, GAO/GGD-94-202). 

This report reviews the Resolution Trust Corporation's (RTC)
Affordable Housing Disposition Program.  Specifically, GAO (1)
assesses RTC's progress in providing home ownership and rental
opportunities for very low-, lower-, and moderate-income families
since GAO last reported in September 1992; (2) assesses RTC's
procedures for ensuring that purchasers of program properties comply
with income and occupancy requirements; and (3) attempts to identify
RTC's costs of running the program.  GAO also provides information on
the status of RTC's and the Federal Deposit Insurance Corporation's
joint plan for continuing the program after RTC closes in December
1995. 

Federally Assisted Housing:  Condition of Some Properties Receiving
Section 8 Project-Based Assistance is Below Housing Quality Standards

(Testimony, 07/26/94, GAO/T-RCED-94-273). 

Physical conditions in the Section 8 assisted properties GAO visited
ranged from very good to very poor.  The properties in good physical
condition show that the Section 8 program can work.  Conditions in
some properties, however, clearly violated the Department of Housing
and Urban Development's (HUD) housing quality standards.  In the
distressed properties, families lived in units with leaking toilets
and sinks, exposed electrical wiring, holes in walls and ceilings,
broken air conditioners and smoke detectors, damaged and missing
kitchen cabinets, and roach and rat infestation.  Moreover, the
landlords for some of these distressed properties collected rents
that were higher than those for well-maintained apartments nearby. 
Although HUD has various enforcement tools to ensure that properties
comply with its housing quality standards, including barring or
suspending landlords from further participation in Section 8 programs
and terminating housing assistance contracts, HUD has used these
tools sparingly and inconsistently. 

Lead-Based Paint Hazards:  Abatement Standards Are Needed to Ensure
Availability of Insurance

(Letter Report, 07/15/94, GAO/RCED-94-231). 

Millions of property owners face significant financial risks because
liability insurance for lead hazards is becoming increasingly
difficult to obtain.  A number of owners and their insurers have
already made payments--some amounting to millions of dollars--to the
families of lead-poisoned children.  To avoid the growing number of
claims, property owners can attempt to remove lead hazards--which can
be costly--but no nationally accepted methods or standards for such
abatement exist.  Consequently, owners cannot be sure their abatement
efforts will reduce their liability, and insurance companies are
reluctant to insure against unpredictable claims for damages
resulting from lead hazards.  Thus, until the Environmental
Protection Agency establishes reasonable standards for the inspection
and abatement of lead hazards in privately owned property, little
progress will be made toward providing insurance for property owners
or abatement contractors. 

Public Housing:  Information on Backlogged Modernization Funds

(Fact Sheet, 07/15/94, GAO/RCED-94-217FS). 

GAO was asked to review the extent to which funds appropriated by the
Congress to modernize the nation's public housing are not being spent
in a timely manner.  This fact sheet discusses the extent of, reasons
for, and federal and local efforts to reduce the accumulation of
unobligated modernization funds.  In summary, through fiscal year
1994, the Congress has appropriated approximately $9.3 billion that
either has not been approved for local use by the Department of
Housing and Urban Development or which public housing authorities
have not obligated for modernization projects.  Of this amount, $1.4
billion has been available to public housing authorities for more
than 2 years and is unobligated. 

Rental Housing:  Use of Smaller Market Areas to Set Rent Subsidy
Levels Has Drawbacks

(Chapter Report, 06/24/94, GAO/RCED-94-112). 

To ensure that needy families are able to live in adequate housing,
the Department of Housing and Urban Development (HUD) provides rent
subsidies to low-income households.  This program, known as the
Section 8 program, served more than 1 million households at a cost of
about $7 billion in 1992.  The amount of rental assistance that a
household receives varies with the market area in which the household
lives.  The size and nature of a market area can vary greatly: 
Entire states, large metropolitan areas, and medium-sized cities can
all be considered market areas.  In response to congressional
concerns that these market areas are too broadly defined to permit
rental assistance payments that reflect true market rents, this
report determines (1) the effects of basing rent subsidy payments on
smaller market areas, including any effects that doing so would have
on recipient households' access to education and employment, and (2)
the extent to which payments made under the current program have an
inflationary effect on the rental rates in surrounding areas.  GAO
also provides information on where Section 8 recipients lived and
their proximity to key services and businesses.  GAO based its
analysis on the following four market areas:  Oklahoma City,
Oklahoma; Seattle, Washington; Washington, D.C.; and Wilmington,
Delaware. 

District of Columbia Public Housing

(Correspondence, 06/03/94, GAO/RCED-94-235R). 

Pursuant to a congressional request, GAO reviewed the performance
standards for the District of Columbia's Department of Public and
Assisted Housing (DPAH).  GAO noted that (1) although 6 of the
Department of Housing and Urban Development's (HUD) 12 indicators
could assist the Congress in measuring DPAH performance, none of the
indicators directly measures tenant satisfaction; (2) the Congress
should reevaluate the need for and usefulness of the indicators
before it incorporates them in its fiscal year 1995 District of
Columbia appropriation bill; (3) adding additional requirements to
DPAH may be premature, since DPAH has been recommended for
receivership; (4) DPAH management and operating processes are
wasteful and inefficient; (5) DPAH and HUD have entered in a
partnership and taken several steps to improve DPAH's overall
operation; (6) DPAH operations are overseen by a five-member board
that includes the Mayor of the District of Columbia and HUD Assistant
Secretary for Public and Indian Housing; and (7) the Congress should
allow sufficient time for the partnership's initiatives to evolve and
management improvements to take effect so that District public
housing residents can be helped. 

Rental Housing:  Distribution and Use of FmHA's Rural Rental Housing
Program Funds

(Letter Report, 06/01/94, GAO/RCED-94-141). 

The Housing Act of 1949 created the Rural Rental Housing Program to
provide affordable housing for lower-income households.  With annual
appropriations of about $574 million for fiscal years 1992 and 1993,
the program provides low-interest loans to borrowers to build and
rehabilitate affordable housing projects in rural areas.  This report
discusses the (1) Farmers Home Administration's (FmHA) procedures for
allocating funds to states and selecting projects within states and
whether these procedures have caused project concentration in a
relatively small number of states; (2) extent to which FmHA's
allocation and project award procedures reflect actual housing needs;
(3) extent to which states have used program funds, including the
amount of unused funds that have been reallocated to other states;
and (4) size and status of the rural rental housing portfolio as of
September 30, 1992. 

Section 8 Rental Housing:  Merging Assistance Programs Has Benefits
but Raises Implementation Issues

(Letter Report, 05/27/94, GAO/RCED-94-85). 

The Department of Housing and Urban Development (HUD) runs two
similar rental housing subsidy programs for low-income
households--the section 8 certificate and voucher programs.  These
two programs, which local and state housing agencies operate for HUD,
enable 1.3 million poor families to live in decent, affordable,
privately owned housing.  Although these programs are in many ways
similar, several statutory and administrative differences can affect
the housing subsidy that households receive.  Over the past several
years, GAO, the Vice President's National Performance Review, and
others have urged that the two programs be combined; legislation now
before the Congress would accomplish that goal.  This report examines
(1) the benefits of a merger, (2) the major program differences that
would need to be reconciled, (3) the effect of a merger on HUD's
budgeting and financial management, and (4) the effort needed to
merge the two programs. 

Lead-Based Paint Poisoning:  Children in Section 8 Tenant-Based
Housing Are Not Adequately Protected

(Letter Report, 05/13/94, GAO/RCED-94-137). 

The lead-based paint inspections that the Department of Housing and
Urban Development (HUD) requires public housing authorities to
conduct in section 8 housing mainly involve visual searches for
chipped or peeling paint.  These inspections do not test for lead
unless a child with elevated lead levels is known to live in the
home.  The four public housing authorities GAO visited--Boston,
Massachusetts; Minneapolis, Minnesota; New Orleans, Louisiana; and
St.  Paul, Minnesota--complied with these requirements, but their
visual inspections did not alert them to lead hazards in intact
painted surfaces, such as floors, window sashes, and window sills. 
HUD officials could not estimate the cost of testing section 8
housing or whether requiring such testing would discourage landlord
participation in the program.  Federal regulations did not adequately
protect children with elevated lead levels living in the four public
housing authorities GAO studied.  Tests by local health agencies
showed that 7 of the 11 residences selected for GAO's study contained
lead-based paint hazards.  The public housing authorities, however,
did not know whether paint testing was being done, and local health
agencies did not routinely determine whether the children they
identified with high lead levels lived in section 8 housing. 
Therefore, the health agencies did not alert the public housing
authorities to the children's condition.  The applicability of the
Lead-Based Paint Poisoning Prevention Act to section 8 housing is
unclear.  Although the act appears to cover section 8 housing, the
legislative history suggests that the Congress intended to exempt
such housing from the act's requirements for lead-based paint risk
assessments and other control measures.  Because these requirements
could be costly, they could discourage landlord participation in the
program, thereby reducing the stock of affordable housing.  HUD,
however, maintains that the act does apply to section 8 housing and
plans to draft rules imposing the act's requirements for dwellings in
the program. 

Distressed Public Housing

(Correspondence, 05/10/94, GAO/AIMD-94-78R). 

Pursuant to a legislative requirement, GAO reviewed the National
Commission on Severely Distressed Public Housing's financial
transactions.  GAO noted that (1) the Commission disbursed about $2
million for contracts, travel, payroll, and miscellaneous
transactions during its existence; (2) although the Commission did
not always adhere to proper administrative procedures, its
disbursements appeared to be reasonable and properly authorized and
documented; (3) accounting procedure problems involved unsigned
approvals for contracts and purchase orders, inadequately documented
expenses and invoices, and unsupported travel expenses; and (4) the
General Services Administration needs to reconcile and recover any
erroneous Commission payments and ensure that other similar entities
use proper accounting and disbursing procedures. 

Multifamily Housing:  Information on Projects Eligible for
Preservation Assistance

(Fact Sheet, 04/15/94, GAO/RCED-94-177FS). 

This fact sheet discusses the Department of Housing and Urban
Development's (HUD) multifamily housing stock that is eligible for
incentives under either title II of the Housing and Community
Development Act of 1987 or title VI of the National Housing
Affordability Act of 1990.  These incentives are offered to preserve
this housing for lower-income households.  This fact sheet details
the characteristics of these projects, such as their number and
locations, and also identifies those projects whose owners have filed
for incentives.  GAO also discusses the cost of the incentives
provided to project owners as of September 30, 1993, the end of the
most recent fiscal year for which data are available. 

Public Housing:  Housing Agency Officials Want More Flexibility in
Replacing Deteriorated Housing

(Testimony, 03/22/94, GAO/T-RCED-94-159). 

The Department of Housing and Urban Development (HUD) classified more
than a dozen large public housing authorities (PHA) as "troubled"
because the public housing they manage is plagued with excessive
vacancy rates.  Although public housing vacancy rates nationwide are
8 percent, troubled agencies average more than double that because
many deteriorated properties are unlivable and have no tenants. 
Until PHAs can demolish or dispose of these properties, HUD continues
to pay PHAs large sums to prevent further deterioration.  Housing
agency officials told GAO that a maze of interrelated constraints
prevents them from replacing worn out and often vacant or
crime-ridden housing with livable stock.  These officials said that
because of inflexible rules and red tape, they spend millions of
dollars on vacant properties and more money to rehabilitate aging
buildings than it would have cost to build new ones.  HUD officials
characterized the process of public housing replacement as gridlock. 
This testimony discusses (1) the one-for-one replacement statute that
requires replacing every demolished or disposed of public housing
unit with one meeting acceptable housing standards; (2) site and
neighborhood standards that seek to avoid over-concentrations of
minorities or persons receiving federal assistance; and (3) HUD
oversight of troubled housing agencies. 

Housing Issues:  The Housing and Community Development Act of 1994

(Testimony, 03/10/94, GAO/T-RCED-94-148). 

H.R.  3838, the Housing and Community Development Act of 1994,
addresses a number of issues that GAO has identified in its housing
work.  For example, the act contains provisions that could reduce the
potential for defaults or foreclosures in three government-sponsored
loan programs:  the Department of Housing and Urban Development's
(HUD) insured multifamily loans, HUD-guaranteed Community Development
Block Grant loans, and the Farmers Home Administration's rural
housing loans.  The act would improve HUD's efficiency in assisting
lower-income households by merging HUD's tenant-based certificate and
voucher assistance programs.  The act also authorizes more funding
for homelessness assistance programs.  On the other hand, GAO is
concerned about how the certificate and voucher assistance programs
and the homeless assistance programs can best be structured to meet
the needs of program recipients while minimizing administrative
burdens on HUD staff and program recipients.  Congressional
monitoring of both the Community Development Block Grant and HUD's
multifamily loan programs will ensure that continued delinquencies,
defaults, and foreclosures do not threaten the program's
effectiveness. 

Lead Poisoning Notification

(Correspondence, 10/14/93, GAO/RCED-94-18R). 

Pursuant to a congressional request, GAO provided information on lead
poisoning and the effectiveness of local health agencies'
notification to public housing authorities (PHA) of children
diagnosed with elevated blood levels.  GAO found that (1) of the six
local health agencies reviewed, five do not timely notify PHAs when
they identify children with elevated blood levels living in public
housing containing lead-based paint hazards; (2) San Francisco has
the only local health agency that coordinates its efforts with its
PHA; (3) although PHAs are responsible for removing lead-based paint
hazards from public housing, the average time between identification
of children with elevated blood levels and PHA notification is 2
months; (4) PHAs could not take any actions to address potential
problems because of notification delays; (5) notification delays
occur because of state or local procedures that require
prenotification testing and the inordinate amount of time required to
complete home testing; (6) although the Centers for Disease Control
has recently encouraged lead poisoning prevention organizations to
develop systems that will expedite testing and ensure more timely
notification, local health agencies have not been advised to change
their notification procedures; and (7) without timely notification,
PHAs cannot reduce children's exposure to lead-based paint hazards. 

Lead-Based Paint Poisoning:  Children in Public Housing Are Not
Adequately Protected

(Chapter Report, 09/17/93, GAO/RCED-93-138). 

Children with elevated blood lead levels who live in public housing
have not been adequately protected from further poisoning from
lead-based paint because the Department of Housing and Urban
Development (HUD) and local housing authorities have not complied
with all the requirements of a 1988 law.  The six public housing
authorities (PHA) GAO reviewed often did not comply with HUD
regulations for testing these children's homes or relied on testing
procedures that may not have fully disclosed the presence of
lead-based paint.  In only 1 of the 50 cases GAO reviewed did PHAs
comply with emergency abatement or relocation regulations for
children with elevated blood lead levels.  Many children ended up
being exposed to lead-based paint for more than a year after PHAs
learned of their diagnoses.  A lack of HUD oversight, coupled with
PHAs' noncompliance, has left these children vulnerable to lead
poisoning and may produce lawsuits that are costly to the federal
government.  Moreover, HUD regulations do not require either
notifying other tenants about lead-based paint dangers or testing
other units in buildings where diagnosed children live.  Overall, HUD
has not complied with all the law's requirements aimed at abating
lead-based paint hazards from public housing and has not ensured that
PHAs comply with its testing, abatement, and notification
requirements. 

Assisted Housing:  Evening Out the Growth of the Section 8 Program's
Funding Needs

(Letter Report, 08/05/93, GAO/RCED-93-54). 

Housing subsidies provided under the government's Section 8 program
have enabled nearly 3 million poor families to obtain decent and
affordable housing from private owners.  The Department of Housing
and Urban Development makes this money available through more than
40,000 contracts with local housing agencies, state finance agencies,
and private owners.  Many of these contracts will expire within 5
years, and the estimated cost to renew them will total almost $59
billion.  This report discusses (1) estimated budget authority needs
to renew expiring Section 8 rental housing assistance contracts in
fiscal years 1994-98, (2) ways to even out the growth in budget
authority for contract renewals, and (3) the relationship between
budget authority needs to fund contract amendments--additional budget
authority for contracts with insufficient remaining funds--and budget
authority needs to renew expiring contracts. 

Public Housing:  Low-Income Housing Tax Credit as an Alternative
Development Method

(Letter Report, 07/16/93, GAO/RCED-93-31). 

Under the National Affordable Housing Act of 1990, GAO is required to
review different ways of developing public housing units.  This
report compares the approaches taken by public housing authorities in
developing housing under the Public Housing Development Program and
the Low-Income Housing Tax Credit Program.  The former provides
direct federal grants, while the latter allows public housing
authorities to raise development funds by forming public-private
partnerships with investors.  The public housing authorities GAO
reviewed used the tax credit program to serve tenants and to develop
programs that differed from those in the public housing program.  For
example, the tax credit projects served smaller households and were
more likely to be located in predominantly low-income households than
were the public housing projects.  Furthermore, if the cost
inefficiencies suggested by GAO's case study in Montgomery County,
Maryland, exist in other tax credit projects, the federal government
may find the tax credit program to be the more costly alternative for
helping very poor households.  Nevertheless, the public housing
authorities GAO reviewed found the tax credit program a valuable
resource for developing public housing in this period of shrinking
federal budgets. 

Public Housing:  Projects Developed With Low-Income Housing Tax
Credit Differ From Traditional Public Housing Development Projects

(Testimony, 06/17/93, GAO/T-RCED-93-54). 

Because of declining federal funding, the number of housing units
added to the nation's public housing stock fell dramatically, from
about 30,000 in 1981 to less than 3,000 a decade later.  Some public
housing authorities, responding to the unmet housing needs of
low-income households, have begun using the tax credit program as a
way to raise money to build more public housing.  This testimony
compares the low-income housing tax credit program and the public
housing program in terms of (1) tenant and project characteristics,
(2) costs to the federal government, and (3) public housing
administrations' experiences with developing each type of project. 

Public and Assisted Housing:  Some Progress Made in Implementing
HUD's Family Self-Sufficiency Program

(Letter Report, 04/08/93, GAO/RCED-93-78). 

The government's family self-sufficiency program was created in 1990
to coordinate federal public housing, Indian housing, and section 8
rental housing assistance with public and private support services. 
The program, by linking housing assistance with support services,
like education and job training, seeks to help lower-income families
attain economic independence and become homeowners.  This report
discusses (1) the program's status, (2) actions by the Department of
Housing and Urban Development (HUD) to coordinate its efforts with
those of other federal agencies that will fund the support services
needed for the program, and (3) HUD efforts to determine how much to
reimburse local housing agencies for the costs of operating their
family self-sufficiency programs. 

Rental Housing:  Serving the Elderly Through the Section 8 Program

(Fact Sheet, 03/29/93, GAO/RCED-93-12FS). 

The Department of Housing and Urban Development (HUD) provides rental
housing assistance to families through its section 8 voucher and
certificate programs.  By subsidizing a portion of household rent,
HUD hopes to enable more low-income families to live in private
rental housing that is decent and safe.  This fact sheet provides
information on the following section 8 issues:  (1) the demographic
characteristics of elderly and nonelderly voucher and certificate
recipients, including sex, race, handicapped status, adjusted income,
and education; (2) the quality of the housing units rented by elderly
voucher and certificate recipients; and (3) the proportion of income
that elderly and nonelderly voucher recipients pay for rent. 

Acquiring Public Housing from RTC

(Correspondence, 03/17/93, GAO/RCED-93-46R). 

Pursuant to a congressional request, GAO reviewed the public housing
authorities' (PHA) acquisition of federal foreclosed properties from
the Resolution Trust Corporation (RTC) to satisfy PHA needs for
low-income housing.  GAO noted that (1) in the six states surveyed,
very few PHAs had acquired federal foreclosed properties from RTC;
(2) obstacles that prevented PHAs from acquiring federal foreclosed
properties included insufficient financing, poor marketing and
advertising, and limitations in the quantity, quality, and type of
properties available; (3) PHAs believed that they had a small chance
of getting federal funds to purchase the properties; (4) PHAs that
were able to acquire RTC properties had problems obtaining adequate
information from RTC on the properties; (5) PHAs had mixed views on
whether RTC was helpful in their attempts to acquire properties; (6)
RTC did not respond timely to PHAs' requests, decisionmakers were not
accessible, approval processes were lengthy, and RTC did not make
properties affordable; and (7) the Affordable Housing Disposition
Program may make multifamily properties more affordable by permitting
its staff to negotiate purchase prices directly with PHAs and
offering discounts on the unrestricted appraised value of the
property. 

Rental Housing:  Additional Information on Our Casas' Use of HUD's
Grant Funds

(Fact Sheet, 08/24/92, GAO/RCED-92-249FS). 

In a March 1992 report (GAO/RCED-92-132FS), GAO discussed how Our
Casas--a nonprofit resident management council in San Antonio,
Texas--spent Housing and Urban Development (HUD) grants meant to
encourage resident management in public housing projects.  This fact
sheet provides supplemental information on Our Casas' use of grant
funds.  GAO discusses (1) Our Casas' organizational structure and
tenant representation, (2) HUD's award of a technical assistance
grant to Our Casas and HUD's monitoring of the council's progress
toward implementing resident management, (3) Our Casas' expenditure
of grant funds, (4) additional costs related to the grant, (5) Our
Casas' choice of a public housing management specialist, and (6) Our
Casas' grant accomplishments.  GAO also discusses areas in which Our
Casas' efforts to move toward resident management seem to have been
hampered by a lack of cooperation with the San Antonio Housing
Authority. 

Public Housing:  Housing Persons With Mental Disabilities With the
Elderly

(Chapter Report, 08/12/92, GAO/RCED-92-81). 

Public Housing:  Issues in Housing the Nonelderly Mentally Disabled
With the Elderly

(Testimony, 03/27/92, GAO/T-RCED-92-44). 

Households having nonelderly persons with mental disabilities occupy
about 9 percent of the public housing units for the elderly that GAO
studied, and the number of such individuals in public housing for the
elderly appears to be on the rise.  Public housing authorities report
that people in almost one-third of those households cause serious
problems like threatening other tenants and having disruptive
visitors.  Although about 78 percent of public housing authorities
say that mental health services are provided in their communities,
the extent to which public housing residents avail themselves of such
services is unclear.  Agreements between public housing authorities
and local mental health services, however, have helped to deliver
needed mental health care to public housing residents with
disabilities.  The rights of the nonelderly mentally disabled to live
in federally subsidized housing primarily serving the elderly vary by
federal program.  Owners or sponsors of housing provided under three
rental housing programs (the sections 202, 221(d)(3), and 236
programs) may lawfully limit occupancy to the elderly and exclude all
nonelderly persons, including those with mental disabilities.  In
contrast, excluding nonelderly persons with mental disabilities from
public housing for the elderly or from section 8 rental housing would
violate the antidiscrimination requirements of the Fair Housing Act
and the Rehabilitation Act of 1973. 

Supportive Housing:  HUD Is Not Assessing the Needs of Elderly
Residents

(Testimony, 08/12/92, GAO/T-PEMD-92-12). 

How well does the Department of Housing and Urban Development (HUD)
assess the need for supportive services for elderly residents in
section 202 housing and the need for modernization and retrofitting
of section 202 buildings?  HUD neither collects data nor has a
methodology for assessing the needs of section 202 housing residents. 
HUD contends that supportive services in section 202 housing are the
responsibility of the Department of Health and Human Services.  Given
that a section 202 building's physical structure and its service
component are fundamentally linked to the concept of supportive
housing, some coordination between the two agencies on this issue
might have been expected.  This does not appear to have been the
case:  A draft memorandum of understanding between HUD and the
Department of Health and Human Services has been around for years but
has never been signed.  Information on resident frailty and the need
for building modernization and retrofitting can be used to target
projects most deserving of available funding.  Information on
resident frailty can also be used to determine the features that
residents need in their buildings.  Currently, HUD neither collects
nor ensures that project sponsors collect data on these subjects. 
Although HUD periodically inspects the physical condition of 202
projects and rates building managers, limited staff and travel
budgets mean that HUD cannot perform inspections annually.  When
inspections are done, no assessment is made of a facility's
retrofitting requirements. 

HUD's Family Self-Sufficiency

(Correspondence, 07/31/92, GAO/RCED-92-248R). 

GAO reviewed the Department of Housing and Urban Development's (HUD)
Family Self-Sufficiency Program, focusing on how the program applies
to Indian housing authorities.  GAO found that (1) although the
Indian community generally agrees with the program's concept and
goals, it has not widely endorsed the program itself; (2) federal and
Indian housing officials have suggested program changes, including
making the program voluntary for Indian housing authorities and
allowing eligible program participants to receive the escrow savings
account set up for them under the program; and (3) those changes
would allow participants to move from HUD-assisted rental housing to
HUD-assisted Indian housing authority home ownership housing, from
which they become ultimate buyers. 

Urban Poor:  Tenant Income Misreporting Deprives Other Families of
HUD-Subsidized Housing

(Chapter Report, 07/17/92, GAO/HRD-92-60). 

A computer match of Internal Revenue Service tax data with the income
reported to local authorities by 175,000 households to establish
their eligibility and rent payments for federally subsidized housing
found that 21 percent of the households may have underreported their
incomes by as much as $138 million.  The Department of Housing and
Urban Development (HUD) provides more than $13 billion in housing
subsidies to 4.6 million needy families, but millions of more needy
families may be going without decent housing because HUD lacks an
accurate, centralized system to verify eligibility and household
income data for families living in subsidized units.  The income
underreporting uncovered by GAO resulted in excess federal subsidies
of $41 million for 1989 alone.  A centralized income and eligibility
verification system could help HUD ensure that subsidized households
are paying appropriate rents and that needy, very low-income families
have access to subsidized housing. 

Rural Rental Housing:  Incentives Maintain Low-Income Housing but
Clearer Guidance Needed

(Letter Report, 06/23/92, GAO/RCED-92-150). 

The Farmers Home Administration (FmHA) is authorized to provide
housing project owners with various financial incentives, such as
equity loans, to encourage them to keep their apartment buildings in
FmHA's rural rental housing program rather than prepaying their loans
and ending their involvement in the program.  Although FmHA has been
successful in preserving its rural rental housing inventory and
preventing displacement of low-income tenants, the financial
incentives FmHA provided to achieve these goals were substantial,
and, in some cases, larger than they should have been.  The
$69-million tab to preserve nearly 6,000 apartment units may actually
be higher because costs associated with the return on investment and
rental assistance incentives are unknown.  Although FmHA has
developed a draft final regulation that should end the payment of
excessive financial incentives, the final regulation has been
continually delayed because of higher priorities. 

Toxic Substances:  Federal Programs Do Not Fully Address Some Lead
Exposure Issues

(Letter Report, 05/15/92, GAO/RCED-92-186). 

Millions of American children have enough lead in their blood to
affect their intelligence and behavior, according to the Centers for
Disease Control.  Because lead harms the developing brain and nervous
system, lead exposure is especially dangerous to fetuses and young
children.  Federal lead reduction programs among three main
agencies--the Environmental Protection Agency, the Department of
Housing and Urban Development, and the Centers for Disease
Control--address some, but not all, of the most serious aspects of
the lead-poisoning problem.  Among the issues yet to be fully
addressed are (1) testing children for elevated blood-lead levels,
(2) removing lead-based paint from homes and schools, (3) relocating
families during paint removal, (4) recycling lead, and (5) removing
lead-contaminated soil.  Information on the extent to which these
matters are being dealt with is limited, and recent data characterize
state and local lead-poisoning prevention programs as patchwork in
scope, raising concerns about how well they are handling the
lead-poisoning problem. 

Rural Rental Housing:  Excessive Profits and Program Abuses in
Multifamily Housing

(Testimony, 05/13/92, GAO/T-RCED-92-63). 

Private developers who combine low-income housing tax credits with
Farmers Home Administration (FmHA) loans to build multifamily housing
for low-income renters in rural areas are reaping returns of up to
970 percent on their initial cash investment.  Overall, GAO testified
that FmHA's multifamily housing program is at high risk for fraud and
abuse.  Overstatement of construction costs, overcharging for project
management and construction fees, and misuse and diversion of project
funds have been a problem for years.  During the past 5 years, 35
indictments and 26 convictions have been handed down against FmHA
multifamily developers and project managers.  FmHA officials
recognize that many of these fraudulent and abusive activities have
arisen because of a lack of internal controls and trained staff. 
FmHA is attempting to strengthen its internal controls, which should
help minimize such problems in the future. 

Public and Assisted Housing:  Linking Housing and Supportive Services
to Promote Self-Sufficiency

(Briefing Report, 04/01/92, GAO/RCED-92-142BR). 

This report discusses the implications of linking federal housing
assistance to supportive services to promote self-sufficiency for
low-income families.  The Family Self-Sufficiency Program has been
established within the Department of Housing and Urban Development
(HUD) to promote local strategies for helping low-income families
achieve greater self-sufficiency.  GAO concludes that several factors
will affect the evaluation and administration of the program.  First,
requiring public housing authorities (PHA) to report how many program
participants have relinquished housing assistance and what
alternatives to assisted housing they have found will permit
meaningful and consistent assessments of the program's progress. 
Second, it is too early to tell whether HUD's proposed prohibition
against the use of motivation as a factor in selecting program
participants will affect how PHAs run their programs--including their
ability to obtain needed support services.  Finally, only limited
data are available to determine the extent to which HUD's
reimbursement of PHAs' administrative costs will cover the reasonable
expenses that PHAs incur in running effective programs. 

Rental Housing:  Our Casas Resident Council's Use of Technical
Assistance Grant Funds

(Fact Sheet, 03/02/92, GAO/RCED-92-132FS). 

This fact sheet reviews how the Our Casas Citywide Resident
Council--a nonprofit resident management council in San Antonio,
Texas--used technical assistance grant funds provided by the
Department of Housing and Urban Development (HUD).  In May 1990, HUD
awarded the Our Casas group an $88,000 grant to help train resident
managers in public housing.  GAO discusses (1) how the grant funds
are being spent by the Our Casas group and whether the expenditures
are in keeping with the purposes of the grant and (2) whether Our
Casas received other federal funding. 

Manufactured Housing in New Mexico

(Correspondence, 01/31/92, GAO/RCED-92-91R). 

GAO reviewed the Farmers Home Administration's (FmHA) manufactured
housing program operated by one of its approved dealer-contractors in
New Mexico, focusing on FmHA efforts to (1) resolve homeowner
complaints against the dealer-contractor and (2) remove the
dealer-contractor from future participation in government programs. 
GAO determined that (1) the dealer-contractor's manufacturer
inspected the claimed defects at 6 of the 10 homes with alleged
defects and agreed to correct the defects at its own expense; (2) the
manufacturer performed repair work on 2 of the remaining 4 homes
prior to the inspection, and FmHA considered the defects resolved;
(3) although in July 1989 FmHA initiated debarment proceedings
against the dealer-contractor, FmHA subsequently decided not to
pursue debarment, since the contractor's company was defunct and its
president was deceased; (4) in August 1991, FmHA initiated debarment
proceedings against the dealer-contractor's surviving principal
partners and its salesman; and (5) in December 1991, the salesman's
debarment was overturned because FmHA failed to demonstrate, by the
applicable standard of evidence, that the asserted grounds for
debarment existed. 


MORTGAGE FINANCING AND HOME
OWNERSHIP
============================================================ Chapter 2

Rural Housing:  Shift to Guaranteed Program Can Benefit Borrowers and
Reduce Government's Exposure

(Letter Report, 12/21/94, GAO/RCED/AIMD-95-63). 

Pursuant to a congressional request, GAO examined the current status
of the Farmers Home Administration's (FmHA) single-family housing
loan portfolio and the merits of allowing borrowers with direct loans
to refinance their loans within the direct loan program or through
FmHA's guaranteed loan program for single-family housing.  GAO
reported that, as of September 30, 1994, FmHA held a portfolio of
about 765,000 direct loans for single-family housing with an
outstanding principal balance of $18.6 billion.  In fiscal years 1991
through 1994, FmHA guaranteed an additional 25,000 housing loans for
about $1.5 billion.  GAO found that the majority of FmHA's direct
loan borrowers would not benefit from refinancing; however, some
nonsubsidized and minimally-subsidized, high interest-paying direct
loan borrowers would benefit from refinancing.  Furthermore, lowering
borrowers' interest rates within the direct program, which is
currently prohibited by regulation, would help FmHA reach its
objective of promoting successful homeownership.  Similarly,
refinancing eligible borrowers through the guaranteed program, which
would require a legislative change, would help FmHA meet the same
objective, as well as meet its requirement to graduate direct loan
borrowers to private credit. 

Mortgage Financing:  Financial Health of FHA's Home Mortgage
Insurance Program Has Improved

(Letter Report, 10/18/94, GAO/RCED-95-20). 

Through its Federal Housing Administration (FHA), the Department of
Housing and Urban Development insures private lenders against losses
on home mortgages financed through its Mutual Mortgage Insurance
Fund.  These mortgages are now valued at nearly $270 billion. 
Although the Fund has historically been financially self-sufficient,
it began to experience substantial losses during the 1980s, mainly
because of high foreclosure rates on single-family homes supported by
the fund in economically depressed areas.  This report (1) summarizes
GAO's assessment of the economic net worth of the Fund at the end of
fiscal year 1993 and (2) describes GAO's econometric and cash flow
modeling approach for forecasting the economic net worth of the Fund. 

Housing Finance:  Implications of Alternative Methods of Adjusting
the Conforming Loan Limit

(Letter Report, 10/05/94, GAO/RCED-95-6). 

The Housing and Community Development Act of 1980 caps the size of
mortgages that can be purchased by either Fannie Mae or Freddie Mac. 
The act allows the conforming loan limit to be adjusted annually so
that Fannie Mae and Freddie Mac can respond to changing conditions. 
For 1994, the conforming loan limit is $203,150.  This report reviews
the methodology used to adjust the conforming loan limit.  GAO (1)
assesses the effect on the loan limit of using alternative adjustment
methods, (2) determines the implications of Fannie Mae's and Freddie
Mac's decisions not to adjust the loan limit for 1994, and (3)
provides information on how users of the Finance Board's data view
the data's accuracy. 

Credit Reform:  Appropriation of Negative Subsidy Receipts Raises
Questions

(Letter Report, 09/26/94, GAO/AIMD-94-58). 

As part of GAO's investigation of several highly technical issues
related to implementation of the Federal Credit Reform Act of 1990,
this report examines agencies' budgetary treatment of negative
subsidies--in which receipts exceed outlays--and whether this
treatment could harm program management and budgeting.  GAO discusses
how the Office of Management and Budget has treated negative
subsidies of the Federal Housing Administration's Mutual Mortgage
Insurance Fund and the Export-Import Bank in the budget.  GAO also
notes the budget treatment of the Government National Mortgage
Association's negative subsidy receipts.  Furthermore, the report
discusses an alternative to appropriating the present value of
estimated negative subsidy receipts and the additional legislative
requirements imposed on the Federal Housing Administration's Mutual
Mortgage Insurance program. 

Credit Reform:  Case-by-Case Assessment Advisable in Evaluating
Coverage and Compliance

(Letter Report, 07/28/94, GAO/AIMD-94-57). 

This report evaluates several highly technical issues related to
implementation of the Federal Credit Reform Act of 1990.  GAO
discusses (1) whether the budgetary treatment of the Government
National Mortgage Association conformed to credit reform
requirements; (2) whether the cost of programs that reduce the credit
subsidy rate should be considered in determining total credit subsidy
costs and, if so, whether the cost of the rental assistance provided
to participants in the Farmers Home Administration's section 515
direct loan program should be added to the cost of the credit
program; and (3) whether the 1990 act's exclusion of the credit
activities of the Resolution Trust Corporation and the Federal
Deposit Insurance Corporation from its requirements was appropriate. 

Mortgage Financing:  Financial Health of FHA's Home Mortgage
Insurance Program Has Improved

(Testimony, 06/30/94, GAO/T-RCED-94-255). 

The Federal Housing Administration's (FHA) Mutual Mortgage Insurance
Fund made significant progress during fiscal year 1993 toward
achieving the capital reserves needed for actuarial soundness under
the law.  Clearly, legislative and other program changes have helped
restore the Fund's financial health and reverse the trend of the late
1980s and early 1990s toward insolvency.  Fiscal year 1993 was,
however, an unusually good year for FHA because actual economic
conditions and forecasts of future economic conditions were
favorable.  Nevertheless, forecasting economic net worth and
resulting capital ratios to determine whether FHA will have the funds
needed to cover its losses over the life of 30-year loans it has
insured is uncertain.  Loan performance, and therefore economic net
worth and capital ratios, will depend on several economic and other
factors, such as the rate of appreciation in-house prices and
premiums charged FHA borrowers.  Loan performance will also be
affected by the demand for FHA-insured loans, which partly depends on
alternatives available from private mortgage insurers.  The desire to
assist home buyers must be carefully weighed against the government's
potential financial risk and expectations for the housing market's
future performance. 

Housing Finance:  Characteristics of Borrowers of FHA-Insured
Mortgages

(Briefing Report, 04/06/94, GAO/RCED-94-135BR). 

The Federal Housing Administration (FHA), created during the
Depression to insure lenders against losses on home mortgages and to
expand opportunities for low- and moderate-income persons to buy
homes, had nearly $320 billion in mortgages outstanding as of
September 1992.  FHA insured 5.6 percent of all single-family
mortgages made in 1992.  This briefing report provides information on
the characteristics of borrowers with single-family home loans
insured by FHA through its Mutual Mortgage Insurance Fund.  GAO
examines how the income, age, and race of borrowers of FHA-insured
mortgages and the location of their homes have changed since the
1970s, when FHA first began collecting data on these characteristics. 

Federal Home Loan Bank System:  Reforms Needed to Promote Its Safety,
Soundness, and Effectiveness

(Chapter Report, 12/08/93, GAO/GGD-94-38). 

In response to the savings and loan disaster, the Congress overhauled
federal regulation of the thrift industry.  Many of these changes
directly affected the Federal Home Loan Bank System, which was
established in the 1930s to facilitate mortgage lending to
homebuyers.  This report answers the following questions:  Can the
Federal Home Loan Bank System pay its assessment for affordable
housing and for cleaning up the savings and loan mess while carrying
out its mission?  What are appropriate capital standards for the
Federal Home Loan Bank System?  Should the terms of membership in the
Federal Home Loan Bank System be changed?  What is, and what should
be, the role of the Federal Home Loan Bank System in affordable
housing, and how would system consolidation affect this?  Should the
Federal Home Loan Bank System be allowed to offer new products and
services?  GAO also discusses needed changes in the corporate
governance and regulation of the system. 

Housing Finance:  Expanding Capital for Affordable Multifamily
Housing

(Chapter Report, 10/27/93, GAO/RCED-94-3). 

One of the nation's most critical housing problems today is the
shortage of decent and affordable multifamily rental housing.  The
Congress has been trying to expand the availability of capital to
finance such housing through credit enhancements--mechanisms for
transferring credit risk from one party to another--such as mortgage
insurance.  The Congress has authorized the Federal Housing
Administration to undertake risk-sharing demonstration projects to
test the effectiveness of new forms of federal credit enhancements
for multifamily housing.  This report examines (1) the problems that
have led to the shortage of mortgage financing for affordable
multifamily housing, (2) the factors limiting the expansion of a
secondary market for such housing, (3) alternative forms of federal
credit enhancements, and (4) ways to estimate and limit the federal
government's exposure to risks in adopting specific credit
enhancements. 

Federal Credit Reform:  Information on Credit Modifications and
Financing Accounts

(Letter Report, 09/30/93, GAO/AIMD-93-26). 

Calculating the cost of loan obligation and loan guarantee commitment
modifications and maintaining financing accounts were among the many
new accounting and reporting requirements placed on agencies by the
Federal Credit Reform Act.  Although agencies in the past had not
generally needed to calculate the cost of loan obligation and loan
guarantee commitment modifications, this is an important part of
credit reform for budgetary purposes.  Furthermore, for the most
part, agencies did not update their financial systems or establish
new payment control procedures to accommodate the financing accounts
created by the act.  Instead, several agencies used precredit reform
financial systems and controls and made estimates, adjustments, or
consolidations to provide financing account data, which can affect
the accuracy and the reliability of this information. 

U.S.  Department of Agriculture:  Centralized Servicing for FmHA
Single-Family Housing Loans

(Briefing Report, 09/23/93, GAO/RCED-93-231BR) (Testimony, 02/09/94,
GAO/T-RCED-94-121). 

The Farmers Home Administration (FmHA) makes housing and farm loans
to rural Americans who cannot otherwise obtain the loans on
reasonable terms.  Centralized servicing of loans is widely and
successfully used by the private sector, including mortgage firms
that typically consolidate and centralize loan-servicing functions,
such as loan collections, escrow accounting for taxes and insurance,
and delinquency management.  These products note that FmHA's
single-family housing loan portfolio is far larger than the agency's
farm loan portfolio, FmHA's efforts during the past 5 years to
centralize servicing operations for direct housing loans have not
been fruitful, the advantages of centralization outweigh the
disadvantages, and options for moving forward with centralization
would be consistent with the Department of Agriculture's efforts to
reinvent itself. 

Tax Administration:  Improving Compliance With Real Estate Tax
Deductions

(Testimony, 09/21/93, GAO/T-GGD-93-46). 

This testimony makes three main points about overstated deductions
for real estate tax payments.  First, for the most part individual
taxpayers overstated their deductions for real estate tax payments by
including nondeductible payments, such as user fees.  Second,
confusion over which payments were and were not deductible real
estate taxes contributed to taxpayer noncompliance.  Third, the
Internal Revenue Service can improve compliance by simplifying tax
documents and by redirecting its enforcement efforts and cooperating
with state and local officials. 

Homeownership:  Appropriations Made to Finance VA's Housing Program
May Be Overestimated

(Letter Report, 09/08/93, GAO/RCED-93-173). 

Under its Home Loan Guaranty Program, the Department of Veterans
Affairs (VA) has partially guaranteed $389 billion in home loans made
to veterans by private sector lenders.  The outstanding balance on
these loans was $171 billion as of September 1992.  In an effort to
pin down the actual cost to the government guaranteeing the loans for
their full life--up to 30 years--VA was required, beginning in fiscal
year 1992, to estimate the subsidy cost associated with its new loan
guarantees.  The estimate determines the budgetary appropriations
that are provided in the years that the loans are originated to cover
all estimated future losses from those years' portfolios of mortgage
loans.  This report (1) estimates the costs, under different economic
scenarios, to the federal government of guaranteeing VA's fiscal
years 1992 and 1993 home mortgage loans and (2) compares GAO's
estimates with estimates prepared by the administration. 

Homeownership:  Actuarial Soundness of FHA's Single-Family Mortgage
Insurance Program

(Testimony, 07/27/93, GAO/T-RCED-93-64). 

GAO testified that the Mutual Mortgage Insurance Fund was not
actuarially sound as of the end of fiscal year 1991, but that its
financial health may have improved in fiscal year 1992.  GAO
estimates that the fund had an economic net worth of about -$1.4
billion at the end of fiscal year 1991 and a resulting capital
reserve ratio of -0.46 percent of the amortized insurance-in-force,
valued at $302 billion at that time.  Even if the Federal Housing
Administration (FHA), which runs the fund, were to stop insuring new
loans after September 30, 1991, the fund's reserves would not cover
the federal government's potential liability over the life of the
loans outstanding.  The actual economic net worth and capital reserve
ratios of the fund--and the validity of GAO's estimates--will depend
on a number of future economic factors, including the rate of
appreciation in house prices over the life of the FHA mortgages of up
to 30 years.  This factor is significant because, as house prices
rise, borrowers' equity increases and the probability of defaults and
foreclosures drops.  If house prices increase more or less rapidly
than GAO assumed, the fund's economic net worth will be higher or
lower than GAO anticipated. 

Rural Housing:  FmHA's Home Loan Program Not Meeting the Needs of All
Rural Residents

(Letter Report, 06/14/93, GAO/RCED-93-57). 

The Farmers Home Administration (FmHA), part of the Department of
Agriculture, makes home loans to rural residents who cannot afford
homes through private financing.  GAO found that although rural areas
have the worst housing conditions, they receive a smaller percentage
of housing assistance than areas close to urban centers.  Program
funds lent under FmHA's single-family housing program are
concentrated in and around metropolitan areas and are
disproportionately higher than the demand for housing in these areas
warrants.  Remote rural areas, on the other hand, receive a
disproportionately low amount of funds in relation to housing needs. 
The Congress has acted to ensure that remote rural areas are better
served by the program, but these actions have not yet been
implemented.  FmHA has identified factors contributing to the low
demand for program funds in remote areas, including low-income limits
difficult for remote rural families to meet and subjective
application of criteria used to approve housing for the program. 
This report includes color photos of houses rejected for the program
because of slight violations, such as having a fireplace or too many
windows. 

Lead-Based Paint Poisoning:  Children Not Fully Protected When
Federal Agencies Sell Homes to Public

(Chapter Report, 04/05/93, GAO/RCED-93-38). 

Lead paint was used in homes until the 1970s, including many of the
110,000 homes sold to the public in fiscal year 1992 by the
Department of Housing and Urban Development (HUD), the Department of
Veterans Affairs, and the Farmers Home Administration.  In response
to the devastating consequences of lead poisoning among young
children, the Congress in 1988 strengthened requirements for
single-family homes that the government sells to the public. 
Agencies were required to test--rather than visually inspect--painted
surfaces, treat both defective and intact surfaces containing lead,
and notify purchasers of test results.  Yet, HUD never revised its
regulations to reflect the tougher 1988 testing and treatment
requirements.  Even the less stringent regulations have not been
fully implemented by the agencies' field offices.  For example,
although HUD requires that inspections be documented, the field
offices GAO reviewed could not produce this documentation.  This
report also discusses how recent legislation has affected lead-based
paint hazards. 

VA Housing Loan Program

(Correspondence, 03/29/93, GAO/RCED-93-129R). 

Pursuant to a congressional request, GAO reviewed an independent
report on the Department of Veterans Affairs' (VA) Home Loan Guaranty
Program, focusing on whether the (1) report's recommendations were
supported by sufficient evidence and (2) report contained factual
errors or analytical weaknesses.  GAO found that (1) the report did
not adequately support six of the seven recommendations with
sufficient evidence; (2) the report failed to sufficiently identify a
supportable problem with the home loan program, explain the proposed
problem's impact on the program, and show how the recommendation
would redress the proposed problem; (3) without further explanation
and supporting evidence, VA could not consider corrective action; (4)
the report could be misleading due to inaccuracies and a questionable
analytical methodology; and (5) VA fully implemented one of the
report's recommendations and partially implemented two others. 

Tax Policy:  Many Factors Contributed to the Growth in Home Equity
Financing in the 1980s

(Letter Report, 03/25/93, GAO/GGD-93-63). 

Home equity financing, estimated to represent about 12 percent of all
housing debt, or $357 billion in 1991, grew at an average annual rate
of about 20 percent between 1981 and 1991.  This report reviews the
use of home equity financing, including both home equity loans and
home equity lines of credit, and how the Tax Reform Act of 1986
affected household use of home equity financing compared with other
forms of consumer credit.  GAO discusses (1) what trends exist in
home equity as well as mortgage-backed financing and other kinds of
consumer credit used during the 1980s; (2) who is using home equity
financing and for what purposes; (3) what factors caused the growth
in home equity financing; (4) what problems are associated with this
type of borrowing; and (5) what the implications of various tax
policy options are that might be instituted to constrain home equity
borrowing. 

Appraisal Reform:  Implementation Status and Unresolved Issues

(Letter Report, 10/30/92, GAO/GGD-93-19). 

Title XI of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 requires that real estate appraisals for
transactions involving the federal government be written reports that
conform to uniform standards and be completed by certified
professionals.  Overall, positive strides have been made at the
federal and state levels to implement title XI by the December 31,
1992, deadline.  For example, all 50 states and the District of
Columbia and most U.S.  territories have come up with programs for
licensing and certifying appraisers.  Moreover, as of September 1992,
nearly 60,000 appraisers nationwide had been state-licensed or
-certified.  Similarly, each of the federal financial institutions
regulatory agencies and the Resolution Trust Corporation have issued
appraisal regulations.  These changes have been accompanied by
controversy, however, and several issues remain unresolved, including
appraiser availability and appraisal cost, the appropriate de minimus
threshold, standards for evaluating real estate-related financial
transactions under the de minimus threshold, and state enforcement of
appraisal standards. 

Rural Rental Housing:  Excessive Profits and Program Abuses in
Multifamily Housing

(Testimony, 05/13/92, GAO/T-RCED-92-63). 

Private developers who combine low-income housing tax credits with
Farmers Home Administration (FmHA) loans to build multifamily housing
for low-income renters in rural areas are reaping returns of up to
970 percent on their initial cash investment.  Overall, GAO testified
that FmHA's multifamily housing program is at high risk for fraud and
abuse.  Overstatement of construction costs, overcharging for project
management and construction fees, and misuse and diversion of project
funds have been a problem for years.  During the past 5 years, 35
indictments and 26 convictions have been handed down against FmHA
multifamily developers and project managers.  FmHA officials
recognize that many of these fraudulent and abusive activities have
arisen because of a lack of internal controls and trained staff. 
FmHA is attempting to strengthen its internal controls, which should
help minimize such problems in the future. 

Pension Plans:  Investments in Affordable Housing Possible With
Government Assistance

(Letter Report, 06/12/92, GAO/HRD-92-55). 

While pension fund financing of affordable housing for low- and
moderate-income families has varied widely among the investments GAO
has reviewed, three main characteristics are common.  First, when
investing in affordable housing, pension funds tend to funnel their
assets into fixed-rate securities that can be easily sold to other
investors in a national market.  Second, each investment receives
some kind of government assistance.  Third, pension fund investments
are set up by intermediaries, such as banks, state housing
authorities, and nonprofit developers, that have identified
affordable housing opportunities and arranged financing.  These
intermediaries have provided the staff and the expertise that the
pension funds lack.  Information on rates of return has been limited,
but for the investments on which GAO has information, the pension
funds have generally received rates of return similar to other
investments of comparable risk. 

Mortgage Credit Enhancements:  Options for FHA in Meeting the Need
for Affordable Multifamily Housing

(Testimony, 04/03/92, GAO/T-RCED-92-52). 

Mortgage credit enhancements--financing arrangements to ensure loan
repayments by builders of multifamily rental properties--are among a
broad range of mechanisms that the Federal Housing Administration
(FHA) can use to expand the supply of affordable housing for
lower-income tenants.  If such enhancements are employed, they must
be cost-effective in achieving the desired result.  Yet ensuring
cost-effectiveness depends on having accurate data on the costs and
risks involved, and information on the performance characteristics of
affordable multifamily housing loans is currently nonexistent.  GAO
suggests that Fannie Mae, Freddie Mac, and FHA--because they now hold
large portfolios of multifamily mortgages or insure such mortgages
and are also experienced in maintaining relevant large data
bases--would be good candidates for developing such information. 
Furthermore, the bank regulatory agencies, the Federal Housing
Finance Board, the Bureau of Economic Analysis, and various
professional organizations representing mortgage originators could
lend valuable insight in developing a national affordable housing
data base. 

Government-Sponsored Enterprises:  System of Internal Controls at
Freddie Mac, Fannie Mae, and Sallie Mae

(Letter Report, 03/31/92, GAO/GGD-92-50). 

GAO's review of internal controls at the Federal Home Loan Mortgage
Corporation (Freddie Mac), the Federal National Mortgage Association
(Fannie Mae), and the Student Loan Marketing Association (Sallie Mae)
uncovered no significant weaknesses except for Freddie Mac's controls
over its multifamily business.  GAO's work was not comprehensive
enough, however, to render an opinion on the design or operations of
the entire control system of each of these government-sponsored
enterprises.  As a result of its weaknesses in controls over
purchasing and servicing multifamily loans, Freddie Mac charged off
over $300 million against reserves from 1986 through 1990.  Freddie
Mac has made changes in personnel; suspended purchases of new
multifamily loans; and revamped its methods for buying, servicing,
and monitoring such loans.  Freddie Mac does not plan to resume
purchasing new multifamily loans until sometime in 1992. 

Financial Management:  Analysis of Selected VA and FHA Housing
Program Accounting Methods

(Letter Report, 11/25/91, GAO/AFMD-92-8). 

The Department of Veterans Affairs' (VA) housing program accrues
guaranteed loan losses at loan origination.  The Federal Housing
Administration's (FHA) Mutual Mortgage Insurance Fund accrues such
losses when an insured loan defaults; loans that default generally do
so within 10 years after loan origination.  The timing differences in
accruing loan losses are attributable to variations in the loan
programs involved.  Revenue from VA guaranteed loan fees and Fund
insurance premiums is recognized when the guaranteed or insured loan
losses are recognized; thus, both revenue and related costs are
recorded in the same accounting period.  Both entities value acquired
property at the net amount of cash expected to be realized from the
property's sale.  In addition, the entities, in their financial
statements, offset the principal amount of direct mortgage loans with
an allowance for loan losses, thus valuing loan assets at their net
realizable value.  In fiscal year 1992, VA's housing assistance
program will start including administrative costs as a program
operation cost, as the Fund currently does. 

Federal Home Loan Mortgage Corporation:  Abuses in Multifamily
Program Increase Exposure to Financial Losses

(Letter Report, 10/07/91, GAO/RCED-92-6). 

Commonly referred to as Freddie Mac, the Federal Home Loan Mortgage
Corporation is a federally chartered corporation that buys
multifamily (apartment buildings) as well as single-family
residential mortgages from primary lenders (seller/servicers) who
then usually service the mortgages for Freddie Mac after the sale. 
Following allegations by a Bronx community group that 35 apartment
buildings in the New York borough were overfinanced and allowed to
deteriorate, GAO examined whether Freddie Mac (1) accepted overvalued
appraisals when it bought the properties, which resulted in
overfinancing; (2) had in effect a loan-servicing process in the
years after the mortgage purchase that protected it against
additional risk; and (3) has new procedures to prevent overfinancing
and servicing problems.  Because of weak internal controls, Freddie
Mac did not detect patterns of inaccurate and incomplete information
in the appraisals and reports on the physical and financial condition
of the properties that were provided by seller/servicers. 
Consequently, Freddie Mac overfinanced 27 of the 35 properties by
about 20 percent of its total investment in them and increased the
chances of fraud and program abuse.  As of July 1991, Freddie Mac was
foreclosing on 7 of the 35 properties, and 5 others were 90 or more
days delinquent in mortgage payments.  The internal control
weaknesses identified in this report have also been found in other
reviews of Freddie Mac's multifamily program nationwide.  Freddie Mac
has suspended purchases in its major multifamily program and is now
developing new program procedures.  Purchases will resume when
Freddie Mac determines that these procedures are adequate to prevent
problems in the future.  However, the changes instituted and planned
as of July 1991 do not address all of the problems GAO identified. 
Unless additional controls are in place, Freddie Mac will remain
vulnerable to program abuse and avoidable financial losses. 


HUD MANAGEMENT
============================================================ Chapter 3

HUD:  Mortgage Assignment Program

(Correspondence, 05/31/94, GAO/AIMD-94-123R). 

GAO reviewed the information systems that support the Department of
Housing and Urban Development's (HUD) Single Family Mortgage
Assignment Program (MAP), focusing on whether the systems (1)
substantially support HUD application and loan servicing processes
and (2) contain sufficient data to measure program effectiveness. 
GAO noted that (1) MAP information systems generally support the
program's major loan servicing processes and contain sufficient data
to measure program effectiveness, (2) the MAP assignment log that
records the receipt of and final decisions on MAP applications does
not support many of the application processing tasks performed by
field office staff, (3) HUD loan servicing systems are complex and
difficult to use, (4) loan servicers and supervisors lack adequate
operational training, and (5) HUD lacks systematic processes for
identifying users' information support needs. 

Housing and Urban Development:  Management and Budget Issues in HUD's
Fiscal Year 1995 Appropriation

(Testimony, 05/12/94, GAO/T-RCED-94-206) (Testimony, 05/12/94,
GAO/T-RCED-94-218). 

This testimony offers GAO's comments as part of the fiscal year 1995
appropriations hearing for the Department of Housing and Urban
Development (HUD).  Faced with an increasingly limited budget and
seemingly endless demand for its resources, HUD is scrutinizing the
way it works so that it can do more with less.  HUD's effort is
two-pronged:  the Department is totally reorganizing to improve its
delivery of services at the same time it is "reinventing
itself"--examining the emphasis of its programs, its priorities, and
its way of doing business.  The outcome of these efforts will have a
major impact on the appropriations HUD seeks.  This testimony
identifies a number of issues in need of further study or resolution
in HUD's management of either specific programs or large parts of its
budget. 

HUD Information Resources:  Strategic Focus and Improved Management
Controls Needed

(Chapter Report, 04/14/94, GAO/AIMD-94-34). 

The Department of Housing and Urban Development (HUD) continues to be
plagued by poorly integrated, ineffective, and unreliable information
systems that neither satisfy management needs nor provide adequate
control.  It will take years to fully resolve these problems.  This
situation exists because HUD's information management resources have
not been planned and managed to meet the Department's missions and
strategic objectives.  In addition, HUD has not established adequate
security for its computers that process sensitive and privacy data
and lacks contingency plans for data processing in the event of a
major disruption or disaster.  Finally, HUD's efforts to develop and
implement integrated financial systems have been impeded by
ineffective planning and management oversight.  HUD's recent
commitment to strategic planning and its initial steps to address
strategic planning represent the first substantive actions taken
since GAO reported on the absence of strategic information resources
planning a decade ago. 

Multifamily Housing:  Status of HUD's Multifamily Loan Portfolios

(Fact Sheet, 04/12/94, GAO/RCED-94-173FS). 

The Department of Housing and Urban Development (HUD), through the
Federal Housing Administration (FHA), insures mortgages on
multifamily properties.  In cases of default, a lender may turn over
the mortgage to HUD and be reimbursed for the amount of the insurance
claim--HUD, in effect, becomes the new lender for the mortgage.  The
number of insured multifamily loans that have defaulted and been
assigned to HUD has grown significantly, and the agency believes that
even greater numbers of multifamily loans could default in the
future, producing additional losses.  This fact sheet provides
information on the financial state of HUD's multifamily insured and
assigned loan portfolio.  For the insurance-in-force portfolio, GAO
discusses the number of current and delinquent loans.  For the
HUD-held portfolio, GAO discusses the number of current and
delinquent loans, the ratio of loan delinquencies to the unpaid
principal balances, and steps that HUD has taken to resolve the
delinquencies. 

Multifamily Housing:  Information on Selected Properties Owned by HUD

(Fact Sheet, 04/11/94, GAO/RCED-94-163FS). 

The Department of Housing and Urban Development's (HUD) inventory of
foreclosed multifamily properties has grown in the past 4 years.  HUD
acquired this inventory mostly through foreclosures on properties
that had loans insured by its Federal Housing Administration.  To
help the Congress evaluate the impact of new legislation intended to
improve HUD's ability to dispose of this inventory, GAO collected
information on HUD-owned multifamily properties in Dallas, Texas, and
Kansas City, Missouri.  A total of 19 properties were included in
GAO's analysis.  This fact sheet discusses (1) the size and vacancy
rates of the properties, the number of units receiving project-based
Section 8 assistance, and the distribution of the units by the number
of bedrooms; (2) HUD's estimates of the money needed to rehabilitate
the properties; and (3) the current tenants' income levels and
percentage of income spent on rent. 

GAO High-Risk Program

(Correspondence, 01/27/94, GAO/AIMD-94-72R). 

Since early 1990, GAO has been reviewing and reporting on government
programs especially vulnerable to waste, fraud, abuse, and
mismanagement.  This report updates the 17 areas included in GAO's
High-Risk Series issued in December 1992 and adds to the list the
Department of Housing and Urban Development (HUD), where billions of
dollars continue be at risk due to long-standing organizational,
systems, and staffing problems.  In GAO's view, HUD warrants the
special focus that comes with high-risk designation. 

Ginnie Mae:  Greater Staffing Flexibility Needed to Improve
Management

(Testimony, 10/29/93, GAO/T-RCED-94-67). 

Despite its status as a government-owned corporation with potentially
huge liabilities for the federal government--$416 billion as of
August 30, 1993--the Government National Mortgage Association (GNMA)
has limited authority to add personnel to manage its assets.  Because
GNMA's staffing needs continue to be tied to the Department of
Housing and Urban Development's (HUD) personnel ceiling, the agency
has been turning to contractors to handle management information
systems, manage and dispose of acquired mortgage portfolios, and
monitor issuers.  A recent HUD staff study concluded that GNMA lacked
enough staff to properly manage its current workload and would need
more employees to undertake new initiatives.  GNMA managers have been
unable to effectively monitor their contractors' activities and have
been unable to respond to changing market conditions by creating new
products that could lower financing costs for Federal Housing
Administration and Department of Veterans Affairs homebuyers. 

Government National Mortgage Association:  Greater Staffing
Flexibility Needed to Improve Management

(Letter Report, 06/30/93, GAO/RCED-93-100). 

In recent years, downturns in the real estate markets and allegations
of mismanagement and fraud have prompted increased scrutiny of
several federal loan guaranty programs.  Some of these programs have
run up huge losses, such as the $2.5 billion loss posted by the
Federal Housing Administration (FHA) in fiscal year 1991.  The
federal government ended up having to pay the lenders for losses on
the defaulted mortgages insured by FHA.  This report focuses on the
Government National Mortgage Association's (GNMA) ability to oversee
its approved mortgage originators, or issuers, and the $426 billion
worth of mortgage-backed securities outstanding as of September 1992. 
The federal government will have to pick up the tab should the GNMA
issuers default.  GAO (1) provides information on how GNMA has
changed to accomplish its mission, (2) identifies recent management
problems experienced by GNMA in overseeing its issuers, and (3)
examines GNMA's efforts to solve its management problems. 

Multifamily Housing:  Impediments to Disposition of Properties Owned
by the Department of Housing and Urban Development

(Testimony, 05/12/93, GAO/T-RCED-93-37). 

The Department of Housing and Urban Development's (HUD) inventory of
multifamily housing surged from 10,000 units in 1990 to 27,000 units
in 1992.  In addition, HUD had begun foreclosing on another 42,000
units.  GAO found that the most significant impediment to the
disposition of this inventory was the shortage of federal funds for
rental subsidies needed to preserve units for low- to moderate-income
tenants.  Once the federal government is obligated to preserve these
units, HUD will pay the cost of preservation whether the properties
are sold or whether they remain in HUD's inventory.  In the absence
of any action to change this situation, HUD would remain the landlord
for a huge inventory of properties--a role that HUD was never
intended to play nor has it been adequately staffed to fulfill. 

FHA Internal Controls

(Correspondence, 09/30/92, GAO/RCED-92-227R). 

Pursuant to a congressional request, GAO reviewed two internal
control reports issued in 1991 on the Federal Housing
Administration's (FHA) single- and multifamily housing loan insurance
programs, focusing on materially significant financial and management
internal control weaknesses reported for the first time.  GAO found
that (1) an independent accounting firm identified 206 internal
control weaknesses in both FHA programs, of which 59 were newly
reported; (2) the accounting firm considered 11 of 147 previously
reported weaknesses and 8 of 59 newly reported weaknesses to be
materially significant; (3) the single-family program had 133
reported weaknesses, of which 34 were new, which mainly affected
mortgage premium and insurance claims processing, mortgage note
servicing, and property disposition; (4) the multifamily program had
73 weaknesses, of which 25 were new, affecting mainly property
disposition, mortgage premium processing and distribution, mortgage
note servicing, and project monitoring; and (5) FHA generally agreed
with the findings and has taken actions, such as developing a
comprehensive risk-based internal control system, to correct all the
reported material weaknesses, but it is too early to tell if the
improvements have been effective. 

HUD's Modernization Allocation

(Correspondence, 08/07/92, GAO/RCED-92-259R). 

Pursuant to a congressional request, GAO provided information on the
Department of Housing and Urban Development's (HUD) process for
allocating Comprehensive Grant Program funds, focusing on (1) whether
extraneous factors were used to allocate funds and (2) the basis for
changes in the preliminary and final allocations.  GAO noted that (1)
the HUD allocations were consistent with final regulations and (2)
inconsistencies between the preliminary estimate and the final
allocations resulted from more complete and accurate data being
available at the time of the final allocation. 

Restructuring Real Property Dispositions

(Correspondence, 08/06/92, GAO/GGD-92-26R). 

GAO commented on the feasibility of restructuring the federal
government's approach to managing and disposing of assets targeted
for disposition.  GAO noted that (1) the six agencies it reviewed did
not maintain comparable data on personnel costs associated with
managing and disposing of real property; (2) some agencies were
reluctant to provide estimates and others would not do so because
they had no basis for making the estimates; and (3) due to the lack
of reliable cost data, analysis would not produce information that
would support restructuring recommendations. 

Political Appointees:  Number of Noncareer SES and Schedule C
Employees in Federal Agencies

(Fact Sheet, 06/08/92, GAO/GGD-92-101FS). 

This fact sheet provides information on the number and placement of
political appointees in the federal government.  GAO discusses (1)
the number of noncareer Senior Executive Service (SES) and Schedule C
appointees at each agency and department and governmentwide; (2) the
number of career SES members governmentwide; and (3) the number,
placement, and employment trends of noncareer SES and Schedule C
appointees at five agencies--the Department of Education, the
Environmental Protection Agency, the Department of Housing and Urban
Development, the Small Business Administration, and the U.S. 
Information Agency. 

Section 8 Budget Needs

(Correspondence, 05/12/92, GAO/RCED-92-187R). 

GAO reviewed the Department of Housing and Urban Development's (HUD)
budgetary needs for expiring section 8 certificate and voucher
contracts for fiscal year 1993.  GAO found that (1) at the three HUD
field offices reviewed, HUD estimated that it will need $237.8
million to renew expiring tenant-based section 8 certificate and
voucher contracts; (2) the HUD estimate for tenant-based certificate
and voucher contracts did not include the $16.4 million in budget
authority needed to renew contracts for fiscal year 1993, but did
include $8.6 million in budget authority for contracts that are not
due to be renewed in fiscal year 1993; and (3) the estimates differed
because HUD field offices and HUD quality control procedures did not
identify contracts that are due to be renewed in fiscal year 1993 and
because data bases used to supplement information supplied by field
offices contained incorrect information. 

HUD Reforms:  Progress Made Since the HUD Scandals but Much Work
Remains

(Letter Report, 01/31/92, GAO/RCED-92-46). 

The underlying causes of the scandal uncovered in 1989 at the
Department of Housing and Urban Development (HUD) involve
long-standing and systemic deficiencies that remain largely
unresolved, leaving the agency vulnerable to waste, fraud, abuse, and
mismanagement.  GAO notes four major department-wide
deficiencies--inadequate information and financial management
systems, including computer systems; weak internal controls;
inappropriate organizational structure; and insufficient staffing. 
Until these deficiencies are corrected, there is no guarantee that
abuses similar to those revealed 2 years ago will not recur.  GAO
concludes that only continued support and oversight can assure the
public that HUD's resources are being used to effectively serve the
intended beneficiaries. 


HOMELESSNESS
============================================================ Chapter 4

Efforts to Assist the Homeless in San Antonio

(Correspondence, 07/11/94, GAO/RCED-94-238R). 

Pursuant to a congressional request, GAO reviewed the role of
McKinney Act programs in assisting the homeless in San Antonio,
Texas.  GAO noted that (1) although the homeless have had access to a
range of low-income assistance programs since 1970, most of these
programs were not targeted specifically toward the homeless; (2)
before McKinney Act programs became available, emergency shelters
were established by charitable organizations and health care was
available through county facilities; (3) McKinney program funding has
played a small but important role in San Antonio's homeless
assistance efforts since 1987; (4) McKinney programs have improved
existing emergency food and shelter programs, funded transitional
housing, expanded health care services, helped link adult education
programs with shelters, established mobile outreach services for the
mentally ill and employment assistance for veterans, and improved
coordination between local organizations and providers; (5) local
service providers believe that their current resources are not
sufficient to meet the special needs of the homeless; (6) service
providers believe that San Antonio needs to increase the amount of
transitional housing, employment training, literacy education,
prenatal care for youths, substance abuse treatment, homeless
prevention efforts, affordable housing for low-income persons, and
high-paying jobs; and (7) San Antonio should seek new and creative
ways to provide low-income housing, since affordable housing
shortages contribute to homelessness in San Antonio. 

Efforts to Assist the Homeless in Seattle

(Correspondence, 07/11/94, GAO/RCED-94-237R). 

Pursuant to a congressional request, GAO reviewed the role of
McKinney Act programs in assisting the homeless in Seattle,
Washington.  GAO noted that (1) homeless social service programs and
emergency services have been available in Seattle for many years and
are funded by local and state governments and private sources; (2)
McKinney program funding has played an important role in Seattle's
homeless assistance efforts since 1987; (3) McKinney programs have
supplemented existing food and emergency shelter services, expanded
employment and education programs, and funded transitional housing,
health care services shelters, and mentally ill outreach programs;
(4) although McKinney funds are provided to cities for food, shelter,
health care, education, and employment programs targeted to the
homeless, the current resources available are not meeting service
demands; (5) service providers believe that without McKinney program
funds, health care outreach services, transitional housing, and
education programs would be greatly reduced or discontinued; (6)
local service providers believe that Seattle needs to increase the
amount of affordable housing for low-income persons, funds for
substance abuse programs, services targeted to youths, and its
employment training, education, and homeless prevention efforts; and
(7) Seattle should seek new and creative ways to provide low-income
housing, since affordable housing shortages contribute to
homelessness in Seattle. 

Efforts to Assist the Homeless in Baltimore

(Correspondence, 07/11/94, GAO/RCED-94-239R). 

Pursuant to a congressional request, GAO reviewed the role of
McKinney Act programs in assisting the homeless in Baltimore,
Maryland.  GAO noted that (1) homeless emergency services have been
available in Baltimore since the 19th century; (2) before McKinney
Act programs became available, churches, missions, and private groups
provided food and shelter services for the homeless; (3) since 1987,
McKinney program funding has played an important role in Baltimore's
efforts to assist the homeless; (4) McKinney programs have
supplemented existing emergency food and shelter services, funded
transitional housing and education programs for adults and children,
expanded health care services, and established mobile outreach
services for the mentally ill and a research demonstration project
for homeless people with chronic mental illness and substance abuse
problems; (5) service providers believe that without McKinney program
funds, case management and health care outreach services,
transitional housing, and adult education programs would be greatly
reduced or discontinued; (6) local service providers believe that
their current resources are not sufficient to meet the special needs
of the homeless and that Baltimore needs to increase the amount of
affordable housing, funds for substance abuse programs, and its
homeless education and prevention efforts; and (7) Baltimore should
seek new and creative ways to provide low-income housing, since
affordable housing shortages contribute to homelessness in Baltimore. 

Efforts to Assist the Homeless in St.  Louis

(Correspondence, 07/11/94, GAO/RCED-94-97R). 

Pursuant to a congressional request, GAO reviewed the role of
McKinney Act programs in assisting the homeless in St.  Louis,
Missouri.  GAO noted that (1) homeless emergency shelter services
have been available in St.  Louis since the 1940s; (2) before
McKinney Act programs became available in St.  Louis, churches,
missions, and city-funded hospitals provided emergency food and
shelter and limited health care services to the homeless; (3) since
1987, McKinney Act programs have played an important role in St. 
Louis' efforts to assist the homeless; (4) McKinney programs have
supplemented existing emergency food and shelter services, expanded
existing employment and adult education services, and funded
innovative programs for homeless mothers with drug abuse problems,
health care services, and mobile outreach services to the mentally
ill; (5) local service providers believe that their current resources
are not sufficient to meet the special needs of the homeless and that
St.  Louis needs to be more responsive to the housing needs of
low-income families; (6) St.  Louis probably undercounts some
homeless subgroups that do not or cannot access services; and (7) St. 
Louis should seek new and creative ways to provide additional
low-income housing. 

Homelessness:  McKinney Act Programs and Funding Through Fiscal Year
1993

(Letter Report, 06/29/94, GAO/RCED-94-107). 

GAO is required to report annually to the Congress on the status of
programs authorized under the McKinney Act.  This report provides
updated program and funding information for fiscal years 1992 and
1993.  The report also provides information on the third
reauthorization of the act.  GAO discusses the legislative history of
the act, describes each McKinney Act program, and identifies the
funding provided under each program by state.  GAO also briefly
describes newly authorized assistance programs for the homeless and
significant changes to existing McKinney Act programs that occurred
during these two fiscal years. 

Homelessness:  McKinney Act Programs Provide Assistance but Are Not
Designed to Be the Solution

(Chapter Report, 05/31/94, GAO/RCED-94-37). 

The Stewart B.  McKinney Homeless Assistance Act of 1987 established
emergency food and shelter programs; programs providing longer-term
housing and supportive services; and programs designed to demonstrate
effective approaches for providing the homeless with other services,
such as physical and mental health, education, and job training.  GAO
evaluated the act's impact in Baltimore, Maryland; San Antonio,
Texas; Seattle, Washington; and St.  Louis, Missouri.  This report
discusses (1) what difference the McKinney Act programs have made in
these cities' efforts to help the homeless, (2) what problems the
cities have experienced with McKinney Act programs, and (3) what
directions the cities' programs for the homeless are taking and what
gaps the McKinney Act programs may fill. 

Homelessness:  Demand for Services to Homeless Veterans Exceeds VA
Program Capacity

(Letter Report, 02/23/94, GAO/HEHS-94-98). 

Veterans are generally believed to be about one-third of the homeless
population in the United States; on any given night, up to 250,000 of
an estimated 600,000 homeless persons living on the streets or in
shelters may be veterans.  Virtually all of these veterans are men,
many of whom suffer from mental illness or drug and alcohol problems. 
The capacity of Department of Veterans Affairs (VA) programs to serve
these homeless veterans, however, falls far short of the demand for
such services.  Furthermore, VA services for homeless veterans are
nonexistent in many areas of the country.  Every VA medical center is
required to assess the needs of homeless veterans, determine the
availability of VA and other services in its area, and establish
plans to meet those needs in coordination with public and private
providers.  VA has not done these assessments and has yet to set
specific target dates.  If VA is to address the medical and social
needs of homeless veterans nationwide, existing substance abuse,
mental health, and housing programs will need to be substantially
expanded and enhanced.  VA may need to open new beds, hire more
staff, contract with private providers of health care/housing, and
either renovate buildings or allow private homeless groups to do so
to provide temporary housing.  In an era of tight federal budgets,
however, increasing services for the homeless could force cutbacks in
services to other veterans. 

Homelessness:  Appropriate Controls Implemented for 1990 McKinney
Amendments' PATH Program

(Chapter Report, 02/22/94, GAO/HEHS-94-82). 

The Department of Health and Human Services' Projects for Assistance
in Transition From Homelessness (PATH) program provides states with
funds to serve homeless persons with serious mental illnesses and
substance abuse problems.  The Department has implemented appropriate
program controls to ensure that PATH expenditures are consistent with
the 1990 McKinney Amendments, which require GAO to report on the PATH
program every 3 years.  In the five states GAO reviewed--California,
Florida, Illinois, New York, and Texas--state grant procedures,
financial oversight, and provider monitoring also helped guarantee
that PATH services reached the target population.  Local providers'
mental health assessments further ensured that PATH services reach
the people they were intended for. 

Homelessness:  Information on and Barriers to Assistance Programs
Providing Foreclosed Property

(Chapter Report, 09/30/93, GAO/RCED-93-182). 

The Department of Housing and Urban Development (HUD), the Department
of Veterans Affairs, the Farmers Home Administration, and the
Resolution Trust Corporation have all developed procedures for
choosing properties from their inventories for sale or lease to
nonprofit groups that assist the homeless.  Through fiscal year 1992,
the four agencies had sold about 560 single-family properties and
leased nearly 2,000 to homeless groups on terms more favorable than
offered to the general public.  HUD accounted for more than 90
percent of this activity.  At the time of these transactions, the
four agencies had nationwide inventories of about 41,000 other
single-family properties available for purchase and 4,000 available
for lease.  Homeless groups see a great need for, and are interested
in acquiring, federal foreclosed properties, but only about 5 percent
of those in GAO's national survey had done so.  GAO found lack of
information to be the main barrier for organizations that had not
participated in the agencies' programs.  Organizations face
additional barriers once they obtain enough information and decide to
participate.  Those participating in HUD's program overwhelmingly
cited the costs they were expected to pay and difficulty in getting
funding from federal and other sources as the main roadblocks to
their acquiring more property.  Although these groups find
multifamily housing useful, they have obtained almost none from the
four programs. 

Homelessness:  McKinney Act Programs and Funding Through Fiscal Year
1991

(Letter Report, 12/21/92, GAO/RCED-93-39). 

This report provides a legislative history of the McKinney Act; a
description of each McKinney Act program; and the amount of money
provided under each program, by state, for fiscal year 1991.  The
report also briefly describes newly authorized assistance programs
for the homeless and significant changes to existing McKinney Act
programs.  Overall, about $2.4 billion was earmarked during fiscal
years 1987 through 1991 for federal programs to help the homeless; 95
percent of the money went for food, shelter, and health care and the
rest went for education and job training. 

Homelessness:  Single Room Occupancy Program Achieves Goals, but HUD
Can Increase Impact

(Chapter Report, 08/27/92, GAO/RCED-92-215). 

During a 25-year period beginning in 1960, the United States lost
about 1 million rooms housing single individuals--about half of the
nation's total supply.  Single persons now make up the bulk of
America's homeless.  In 1987, the Congress created the Section 8
Moderate Rehabilitation Program for Single Room Occupancy Dwellings
for Homeless Individuals.  This report looks at whether the program
is meeting its goals of creating adequate housing and delivering
support services to the single homeless for as long as needed.  GAO
also discusses (1) how the Department of Housing and Urban
Development oversees projects in development and reviews their
financial feasibility and (2) regulations requiring the use of tenant
waiting lists developed by local public housing agencies. 

Homelessness:  HUD Improperly Restricts Applicants for Supplemental
Assistance Program

(Letter Report, 08/13/92, GAO/RCED-92-200). 

The Department of Housing and Urban Development (HUD) has no
authority to decree that only states may apply for certain grants to
aid the homeless, a step HUD took last year after having earlier
awarded grants to cities, counties, tribes, and nonprofit groups. 
The Supplemental Assistance for Facilities to Assist the Homeless
program was created in 1987 as a competitive grant program to (1)
supplement two other McKinney Act programs and (2) fund
comprehensive, innovative programs that meet the immediate and
long-term needs of homeless individuals and families.  Since the
program was established 5 years ago, HUD has awarded grants totaling
$37.5 million, making it HUD's smallest assistance program for the
homeless.  Beginning in fiscal year 1991, only states were eligible
to apply for program grants.  Although HUD's intent was to use
limited program funds more effectively, GAO does not believe that the
agency had the authority to limit eligibility.  Recent HUD
initiatives, if properly implemented, should lead to more effective
and efficient program management.  Furthermore, grantees from fiscal
year 1987 are meeting the objectives outlined in their grant
applications, and the target populations stipulated by the Congress
are being served. 

Homelessness:  HUD's Interpretation of Homeless Excludes Previously
Served Groups

(Letter Report, 08/12/92, GAO/RCED-92-226). 

The Department of Housing and Urban Development (HUD), under new
criteria established in 1991, began limiting its funds to programs
that serve people who are literally homeless, the only exception
being people threatened with immediate homelessness.  Although HUD
has revised its guidance, some of the terms and definitions that
govern the HUD field offices and assistance providers remain vague. 
Terms describing individuals as "imminently" homeless or "in the
later stages" of eviction have been interpreted differently by
various HUD offices, leading to inconsistency and confusion
concerning program eligibility.  HUD's new eligibility criteria have
made the following groups ineligible for funding:  institutionalized
mentally ill or retarded persons; persons doubled up with families or
friends or living in substandard housing; and the rural homeless, who
are often "hidden" in overcrowded or substandard housing. 

Homelessness:  Policy and Liability Issues in Donating Prepared Food

(Letter Report, 12/09/91, GAO/RCED-92-62). 

To what extent do federal laws, regulations, or policies hinder
federal facilities like cafeterias from making prepared food that is
uneaten available to the homeless?  Of 14 federal departments that
maintain food service facilities, 13 said that they had little
unconsumed food to donate.  The remaining agency--the Defense
Department--has only just begun its donation policy and could not
estimate how much food might be available.  Almost all of the
Departments use food service contractors to run their facilities. 
These contractors are allowed to use their own discretion in donating
food.  None of the contractors GAO contacted had written policies on
donating unconsumed food, but they said they do donate some food on
an ad hoc basis.  States have enacted food donation statutes, called
good samaritan laws, that provide food donors various degrees of
immunity from civil or criminal liability should someone become ill
after eating donated food.  Federal food service facilities that
choose to donate food are covered by these statutes. 


COMMUNITY DEVELOPMENT
============================================================ Chapter 5

Rural Development:  Patchwork of Federal Programs Needs To Be
Reappraised

(Chapter Report, 07/28/94, GAO/RCED-94-165). 

The traditional sources of America's economic vitality--such as
farming and industries based on natural resources--have undergone
gradual yet significant restructuring during the 20th century.  This
restructuring has been accompanied by long-term economic
disappointments.  Poverty rates have remained high in rural counties,
and unemployment rates have generally been higher in rural areas than
in cities.  These conditions have fueled an exodus from many rural
areas, worsening their problems.  This report (1) identifies the
factors that influence a rural area's economic success or failure and
(2) evaluates whether federal programs efficiently address rural
economic problems. 

Housing Issues:  The Housing and Community Development Act of 1994

(Testimony, 03/10/94, GAO/T-RCED-94-148). 

H.R.  3838, the Housing and Community Development Act of 1994,
addresses a number of issues that GAO has identified in its housing
work.  For example, the act contains provisions that could reduce the
potential for defaults or foreclosures in three government-sponsored
loan programs:  the Department of Housing and Urban Development's
(HUD) insured multifamily loans, HUD-guaranteed Community Development
Block Grant loans, and the Farmers Home Administration's rural
housing loans.  The act would improve HUD's efficiency in assisting
lower-income households by merging HUD's tenant-based certificate and
voucher assistance programs.  The act also authorizes more funding
for homelessness assistance programs.  On the other hand, GAO is
concerned about how the certificate and voucher assistance programs
and the homeless assistance programs can best be structured to meet
the needs of program recipients while minimizing administrative
burdens on HUD staff and program recipients.  Congressional
monitoring of both the Community Development Block Grant and HUD's
multifamily loan programs will ensure that continued delinquencies,
defaults, and foreclosures do not threaten the program's
effectiveness. 

Community Development:  Block Grant Economic Development Activities
Reflect Local Priorities

(Chapter Report, 02/17/94, GAO/RCED-94-108). 

To help state and local governments develop viable communities, the
Congress has appropriated more than $62 billion to the Community
Development Block Grant Program since 1975.  Grantees have broad
discretion, but funded activities must either benefit low- or
moderate-income households, help prevent or eliminate slums, or meet
other urgent community development needs.  This report (1) provides
information on the funding of economic development activities and the
impediments that grantees have experienced; (2) identifies issues
related to the proper use of these funds; (3) provides information on
the types and quality of jobs resulting from programs funding and
identifies possible criteria for measuring job quality; and (4)
identifies potential performance indicators for measuring the overall
effectiveness of economic development activities under the program. 

Property Insurance:  Data Needed to Examine Availability,
Affordability, and Accessibility Issues

(Letter Report, 02/09/94, GAO/RCED-94-39). 

In the wake of the 1992 Los Angeles riots, concerns have been raised
about the availability and affordability of insurance needed for
rebuilding.  This report examines several issues involving property
insurance in urban areas.  This report discusses (1) the types of
data that are now collected for determining the availability,
affordability, and accessibility of property insurance for homeowners
and small businesses in urban neighborhoods; (2) the types of data
that would be needed to assess these issues if available data are
inadequate; and (3) options that are available for collecting these
data for homeowners insurance. 

Industrial Development Bonds:  Achievement of Public Benefits Is
Unclear

(Chapter Report, 04/22/93, GAO/RCED-93-106). 

The federal government gave up more than $2 billion in revenue in
1991 because of the tax-exempt status of small issue industrial
development bonds.  The bonds, issued by state and local governments,
fund the creation and expansion of manufacturing facilities.  Because
of the public benefits associated with these bonds, interest earned
by investors from them is exempt from federal tax.  GAO found that
although these bonds are being used for their intended
purpose--financing manufacturing facilities--additional benefits
being claimed, such as creating jobs, assisting economically
depressed areas, and fostering start-up companies, are hard to
substantiate.  Concerns that the bonds are subject to high default
rates or are paid off early, thus removing restrictions requiring the
project to remain in manufacturing, were not substantiated by GAO's
work. 

Rural Credit:  Availability of Credit for Agriculture, Rural
Development, and Infrastructure

(Letter Report, 11/25/92, GAO/RCED-93-27). 

In response to congressional concerns about the deterioration of
rural communities, GAO looked into the availability of credit in
rural America in four states--Kansas, Mississippi, Montana, and
Virginia.  This report examines (1) the extent to which adequate
credit exists to fund agricultural production; rural development,
which for the purposes of this report is limited to the needs of
businesses; and the development of the rural infrastructure
(including roads, bridges, and water systems) and (2) the extent to
which rural lending institutions are investing in their communities
as opposed to more distant areas. 

Industrial Development Bonds

(Correspondence, 07/24/92, GAO/RCED-92-247R). 

Pursuant to a congressional request, GAO provided information on
small issue industrial development bonds (IDB), issued by state or
local governments to help private companies finance the construction
or expansion of small manufacturing projects.  GAO noted that (1) the
federal government forgoes about $2 billion annually in tax revenue
for IDB interest, which is tax exempt; (2) in 1991, states issued
about $1.2 billion in IDB; (3) the Internal Revenue Code only
requires that IDB be restricted to manufacturing projects that do not
exceed $10 million and does not require IDB issuers to establish
criteria to assess public benefits of IDB-financed projects; (4) most
states and localities do not have any criteria other than the
Internal Revenue Code requirements for issuing IDB; and (5) in 1991,
Ohio approved 33 IDB-financed projects, but generally did not target
IDB approval for such public benefits as fostering economic
development in distressed areas, creating jobs, assisting start-up
companies, and keeping manufacturing operations in the United States. 

Community Development:  Neighborhood Reinvestment Corporation Should
Improve Program Management

(Chapter Report, 07/08/92, GAO/RCED-92-174). 

The Congress created the Neighborhood Reinvestment Corporation in
1978 to encourage reinvestment in older neighborhoods by financial
institutions working in tandem with local governments and residents. 
The Corporation provides these partnerships, known as NeighborWorks
Organizations, with about $6 million in grants each year.  The
Corporation's oversight of the organizations, however, has fallen
short as a result of inadequate program reviews and financial audits. 
Grant management, which should alert the Corporation to potential
problems at the organizations before they become critical, has
suffered because of this poor oversight.  Unapproved transfers of
grant funds to pay for organizations' operating expenses often went
undetected.  The Corporation is relying increasingly on competition
in awarding contracts for professional services and is making policy
changes to increase competition in its procurements.  It is not yet
clear, however, how effective these policy changes will be.  Lowering
the dollar threshold above which competitive bidding is required
would guarantee more competition. 

Community Development:  HUD Oversight of the Dallas Block Grant
Program Needs Improvement

(Letter Report, 11/27/91, GAO/RCED-92-3). 

Newspaper articles have alleged that the city of Dallas poorly
administered housing programs funded by the Dallas Community
Development Block Grant program.  GAO found that the Department of
Housing and Urban Development (HUD) did not adequately oversee and
monitor the program.  This report focuses on HUD's monitoring of the
city's (1) timely expenditure of program funds, (2) use of program
funds for enforcement of local housing codes, (3) control over
subrecipients, and (4) accounting for planning and administrative
costs. 


DISASTER ASSISTANCE
============================================================ Chapter 6

GAO Work on Disaster Assistance

(Correspondence, 08/31/94, GAO/RCED-94-293R). 

Pursuant to a congressional request, GAO (1) summarized its work
related to federal disaster assistance and (2) provided information
on federal agencies' responses to its prior recommendations.  GAO
noted that in response to its recommendations (1) the Federal
Emergency Management Agency (FEMA) has required states to upgrade
their responses to catastrophic disasters, assisted local, state, and
federal agencies to better prepare and anticipate disasters, improved
its cost information collection operations, and revised its
historical reimbursement regulations; (2) the Congress has proposed
legislation that will establish a commission to coordinate federal
agency response to severe droughts, allow federal agencies to better
prepare for catastrophic disasters when there is adequate warning,
allow the President to appoint an official to oversee federal
preparedness for and response to disasters, and improve the
management and coordination of the National Flood Insurance, Federal
Crop Insurance, and All-Hazard Insurance Programs; (3) the Congress
has not taken any substantive actions to define FEMA's role in
providing disaster-related long-term housing or mitigating the
dangers workers face in moderate- to high-risk areas; (4) states have
made limited progress in identifying and correcting seismic-related
bridge deficiencies; and (5) there have been various efforts to
develop a more effective approach to administering agriculture
disaster assistance payments. 

Los Angeles Earthquake:  Opinions of Officials on Federal Impediments
to Rebuilding

(Letter Report, 06/17/94, GAO/RCED-94-193). 

In January 1994, an earthquake measuring 6.8 on the Richter scale
shook Los Angeles, killing 61 people, injuring 18,000 others, and
leaving 25,000 homeless.  More than 55,000 buildings were damaged,
and the city's freeway system was severely damaged.  Damage was
estimated to be as high as $15 billion and prompted the largest
number of applications for disaster relief in the history of the
Federal Emergency Management Agency.  GAO is required to report to
the Congress on federal laws, unfunded mandates, and regulatory
requirements that may prevent or hinder state and local authorities
from quickly rebuilding in Southern California.  This report draws on
GAO's interviews with federal, state, and local officials and
summarizes their views about such barriers. 

Federal Disaster Insurance:  Goals Are Good, but Insurance Programs
Would Expose the Federal Government to Large Potential Losses

(Testimony, 05/26/94, GAO/T-GGD-94-153). 

Although the insurance industry has absorbed losses from recent
natural disasters without systemic failures, concerns exist about its
ability to handle losses from potentially larger disasters.  The
federal government has absorbed a large portion of the losses from
past disasters and is likely to pay out even larger amounts in the
future.  S.  1350 would set up three interrelated programs--a
multihazard disaster mitigation program, a primary insurance program
for earthquakes and volcanic eruptions, and a reinsurance program to
cap insurers' losses when major disasters occur.  This testimony
explains in detail the provisions of S.  1350 and provides GAO's
analysis and concerns about the legislation. 

Hurricane Iniki Expenditures

(Correspondence, 04/18/94, GAO/RCED-94-132R). 

GAO reviewed whether the U.S.  Fish and Wildlife Service used
emergency appropriated funds for the repair and replacement of
national wildlife refuge facilities damaged by Hurricane Iniki.  GAO
noted that (1) the Fish and Wildlife Service did not have
authorization to use emergency funds for reconstruction work at two
refuges; (2) the Service planned to use emergency funds for enlarging
selected buildings at one refuge and remodeling the visitors' center
at another refuge; (3) approximately $12.8 million in emergency
disaster assistance was appropriated to the Fish and Wildlife Service
for construction projects; and (4) of the amount appropriated, the
Service allocated $6.2 million for the rehabilitation of the refuges. 

Flood Insurance:  Financial Resources May Not Be Sufficient to Meet
Future Expected Losses

(Letter Report, 03/21/94, GAO/RCED-94-80). 

The National Flood Insurance Program, a key component of federal
flood disaster relief, was always intended to be subsidized. 
Therefore, overall premium income for the program is not enough to
build reserves that can cover anticipated flood losses.  For example,
41 percent of the program's policies are subsidized, and it is
inevitable that claims losses and program expenses will at some point
exceed program funds.  In the event of a catastrophe, not even the
Federal Emergency Management Agency's borrowing authority would be
enough to cover potential claims.  Raising premiums would improve the
program's financial health but could lead to canceled policies,
creating a future burden on other flood relief programs.  On the
other hand, greater program participation by property owners,
although likely to cut the cost of other federal disaster assistance
programs, would place a greater financial burden on the National
Flood Insurance Program because of the need to cover additional
subsidized properties. 

Flood Insurance:  Information on Various Aspects of the National
Flood Insurance Program

(Testimony, 09/14/93, GAO/T-RCED-93-70). 

A series of recent disasters--the December 1992 nor'easter, the March
1993 storm in Florida, and the record floods in the Midwest this
summer--have virtually wiped out the National Flood Insurance
Program, raising doubts about whether it will have enough money to
meet current and future claims arising from flood damage.  GAO notes
that the fund is not, nor is it required to be, actuarially sound,
mainly because the Congress authorized below-market insurance rates
for policyholders without providing annual appropriations to cover
the subsidy.  This testimony reviews (1) the actuarial soundness of
the fund and the implication of ending its subsidized flood insurance
rates, (2) procedures used to set the program's flood insurance
rates, and (3) financial management problems addressed in Inspector
General audits of the fund. 

Disaster Management:  Improving the Nation's Response to Catastrophic
Disasters

(Letter Report, 07/23/93, GAO/RCED-93-186). 

The nation's management of disasters was strongly criticized after
Hurricane Andrew leveled much of South Florida and Hurricane Iniki
devastated the Hawaiian island of Kauai in 1992.  Even before these
storms, the federal government's response to major disasters like
Hurricane Hugo and the Loma Prieta earthquake drew intense criticism. 
The government's response to Hurricane Andrew, in particular, raised
doubts about whether the Federal Emergency Management Agency was
capable of responding to such catastrophes and whether it had learned
any lessons from Hurricane Hugo and the Loma Prieta earthquake.  GAO
has testified repeatedly in 1993 on the inadequacy of the federal
strategy for responding to disasters.  This report summarizes GAO's
analyses, conclusions, and recommendations. 

Disaster Assistance:  DOD's Support for Hurricanes Andrew and Iniki
and Typhoon Omar

(Letter Report, 06/18/93, GAO/NSIAD-93-180). 

Within a 3-week period, Florida, Louisiana, Hawaii, and Guam were
ravaged by storms that inflicted billions of dollars in damages and
disrupted the lives of hundreds of thousands of people.  As part of
the government's response to Hurricanes Andrew and Iniki as well as
Typhoon Omar, the Federal Emergency Management Agency asked the
Defense Department to help provide humanitarian assistance to the
disaster victims.  This report (1) identifies the roles and the
missions of the active military and National Guard forces that
provided the assistance; (2) identifies problems affecting their
delivery of assistance; (3) determines whether their participation
affected their units' readiness and training; (4) determines whether
the military needs to reorient its roles, training, equipment, and
doctrine for these kind of operations; and (5) identifies the costs
and the sources of funding associated with the military's
participation in disaster assistance. 

Rural Disaster Assistance

(Correspondence, 06/14/93, GAO/RCED-93-170R). 

Pursuant to a congressional request, GAO reviewed (1) whether there
are differences in the way federal disaster assistance is provided to
rural and urban areas, (2) whether the needs of a rural area with a
low population density differ from those of an urban area, and (3)
the role of the Federal Emergency Management Agency (FEMA) in
fighting forest fires.  GAO noted that (1) the disaster assistance
provided in rural areas is not different from the assistance provided
in urban areas; (2) federal assistance is available when state and
local resources are insufficient; (3) disaster response in rural
areas places a greater burden on state and local emergency management
personnel, since they have to cover large geographic areas with fewer
personnel and resources; (4) FEMA believes that threats and needs are
more concentrated in urban areas; and (5) FEMA generally has little
involvement in forest fires on federal lands unless there is a
presidential declaration of disaster. 

Disaster Management:  Recent Disasters Demonstrate the Need to
Improve the Nation's Response Strategy

(Testimony, 05/25/93, GAO/T-RCED-93-46) (Testimony, 05/18/93,
GAO/T-RCED-93-20). 

Several recent catastrophes--especially Hurricane Andrew in South
Florida--have led to growing dissatisfaction with the nation's system
for responding to major disasters.  The federal strategy lacks
provisions for the federal government to (1) comprehensively assess
damage and the needs of disaster victims and (2) provide food,
shelter, and other essential services when local volunteer efforts
are not enough.  Even when there is warning of an impending disaster,
advance preparations are not clearly authorized until after the
President has issued a disaster declaration.  In addition, the
Federal Emergency Management Agency (FEMA) could make better use both
of its own resources as well as those it provides to state and local
governments to improve overall preparedness for catastrophes.  GAO
recommends that FEMA establish a disaster unit to independently
assess damage and estimate response needs following a catastrophe. 
Second, the President should appoint a senior White House official to
oversee FEMA and the federal response to disasters. 

Disaster Management:  Recent Disasters Demonstrate the Need to
Improve the Nation's Response Strategy

(Testimony, 03/02/93, GAO/T-RCED-93-13) (Testimony, 01/27/93,
GAO/T-RCED-93-4). 

The federal government's strategy for responding to catastrophes like
Hurricane Andrew is deficient.  The federal government lacks plans
for (1) comprehensively assessing damage and the needs of disaster
victims or (2) delivering quick, responsive assistance.  The federal
government also does not have explicit authority to adequately
prepare for a disaster when there is warning.  Finally, state and
local governments generally do not have the training and funding
needed to respond on their own to disasters.  In the case of
Hurricane Andrew, shortcomings included inadequate damage
assessments, inaccurate estimates of needed services, and
miscommunication and confusion at all levels of government--all of
which slowed the delivery of vital services to disaster areas.  On
the other hand, the military proved that it can respond very
efficiently to the immediate needs of the disaster victims.  GAO
outlines several steps that the Federal Emergency Management Agency
and the Congress could take to strengthen the government's response
to natural disasters. 

Disaster Relief Fund:  Actions Still Needed to Prevent Recurrence of
Funding Shortfall

(Letter Report, 02/03/93, GAO/RCED-93-60). 

The fiscal year 1991 shortfall in the Federal Emergency Management
Agency's (FEMA) Disaster Relief Fund occurred essentially because (1)
large expenses were paid from the fund during fiscal year 1991 as a
result of disasters from previous years, such as the Loma Prieta
earthquake and Hurricane Hugo; (2) no appropriation was made for
fiscal year 1991; and (3) the enactment of the supplemental
appropriation was delayed.  Recent steps taken by the Congress and
FEMA should lessen the chances of another shortfall.  For example,
legislation enacted in 1991 stating that supplemental appropriations
for the Disaster Relief Fund will be considered as emergency funds
should help to reduce the delay in making funds available.  Also,
FEMA is trying to develop more accurate and timely estimates of
disaster costs.  Although major disasters like Hurricane Andrew
involve huge costs paid over many fiscal years, FEMA's budget
submission to the Congress gives no idea how much of the balance of
the Disaster Relief Fund at the start of the year will be needed to
pay for disaster costs arising from previous years.  The Congress
could use such information in considering the need for and the amount
of appropriations. 

Earthquake Recovery:  Staffing and Other Improvements Made Following
Loma Prieta Earthquake

(Chapter Report, 07/30/92, GAO/RCED-92-141). 

The Loma Prieta earthquake, which struck northern California in
October 1989, was the most destructive earthquake that the Federal
Emergency Management Agency (FEMA) has had to deal with since the
agency's creation a decade ago.  FEMA has provided more than $350
million in federal assistance to repair damaged buildings and plans
to obligate another $164 million, but many requests for disaster
assistance remain unfulfilled.  FEMA and local authorities have
gotten into disputes over funding, primarily over grant eligibility
and amounts.  This report assesses (1) FEMA's guidance for
determining funding eligibility for rebuilding public and nonprofit
structures and (2) the agency's strategy for staffing an earthquake
recovery effort. 

Flood Insurance:  Information on the Mandatory Purchase Requirement

(Testimony, 07/27/92, GAO/T-RCED-92-86). 

The Flood Disaster Protection Act of 1973 requires the purchase of
flood insurance for (1) any federal loan or grant used to buy or
build a home in certain flood areas and (2) loans secured by improved
property in certain flood areas if the loans are made by financial
institutions regulated or insured by the federal government.  A key
objective of legislation pending before the Congress is to expand the
number of properties required to have such flood insurance.  GAO's
limited review of victims in two floods in Texas and Maine shows that
most households in Maine that were subject to the mandatory purchase
requirement did have flood insurance; however, most in Texas did not. 
GAO could not discover the reason for this disparity, although the
large majority of flood victims in both states were not subject to
the mandatory purchase requirement.  The two main reasons for this
were that many Maine households had unmortgaged property and many
mortgages in Texas were held by unregulated lenders who are exempt
from the mandatory purchase requirement. 

Small Business:  SBA Needs to Improve Administrative Practices for
Disaster Operations

(Letter Report, 05/07/92, GAO/RCED-92-144). 

Shortly after Hurricane Hugo struck the U.S.  Virgin Islands in
September 1989, the Small Business Administration (SBA) set up
temporary offices in St.  Thomas and St.  Croix to help homeowners
and businesses obtain disaster assistance loans.  A number of
allegations were raised about improper hiring practices involving
temporary employees and improper reimbursement of travel expenses. 
GAO found that some SBA hiring, supervision, promotion, and pay
practices were inappropriately handled during the Hugo disaster
operation.  While SBA is undertaking steps to prevent a recurrence of
these problems, SBA procedures for issuing temporary waivers of the
automatic reduction in per diem paid to temporary employees still do
not include documentation and periodic review requirements.  In
addition, because of a 6-month limit on paying per diem to temporary
disaster employees, SBA had to release or transfer some employees
before their work was done, disrupting the work flow and making the
SBA work force less efficient. 


SMALL BUSINESS
============================================================ Chapter 7

U.S.  Government Aid to Business:  Federal Government Programs That
Provide Management and Technical Assistance

(Fact Sheet, 10/14/94, GAO/GGD-95-3FS). 

This fact sheet provides information on federal government programs
that give management and technical assistance to businesses.  GAO
identifies, given the limited time constraints of the assignment, as
many federal government programs that provide such help as was
possible; briefly describes these programs and identified the target
customers that these programs were designed to serve; and reports the
current funding levels for these programs. 

Small Business:  SBA's Health Care Reform Activities

(Letter Report, 09/06/94, GAO/RCED-94-240). 

In late September 1993, anticipating strong interest in the
administration's health care reform proposal, the Small Business
Administration (SBA) and the Commerce Department jointly produced a
brochure describing how health insurance would be provided and what
role small employers would play in financing insurance for their
workers under the proposed Health Security Act.  GAO concludes that
SBA did not violate the statutory prohibition on lobbying by
preparing and distributing the brochure.  The brochure did not
unlawfully lobby for the President's plan because it did not urge
businesses to contact Members of the Congress to support the plan. 
Furthermore, SBA has the authority under the Small Business Act to
publish and distribute the brochure.  When SBA distributed copies of
the brochure to the Democratic National Committee--one of many
recipients of the document--it did not follow customary government
procedures for distributing large quantities of agency publications. 
Government agencies usually do not give large quantities of free
publications to private sector organizations; however, SBA initially
gave the Democratic National Committee 10,000 free copies of the
brochure.  Democratic National Committee officials later paid SBA
$5,000 for copies of the brochure. 

Highway Contracting:  Disadvantaged Business Program Meets Contract
Goal, but Refinements Are Needed

(Chapter Report, 08/17/94, GAO/RCED-94-168). 

The Transportation Department's Disadvantaged Business Enterprise
Programs seeks to eliminate the effects of historical discrimination
by helping small businesses owned by socially and economically
disadvantaged individuals.  Under the program funded by the Federal
Highway Administration, the states are required to set goals and
award contracts so that not less than 10 percent of their federal-aid
highway funds goes to firms in the program.  The Federal Highway
Administration also funds state-provided technical and business
development assistance for Disadvantaged Business Enterprise firms
through its supportive services program.  This report evaluates (1)
whether the states were meeting their Disadvantaged Business
Enterprise participation goals and how effective the Federal Highway
Administration's efforts were in ensuring that they did, (2) whether
the Federal Highway Administration effectively provided technical and
business development assistance through its supportive services
program, and (3) whether "graduation" from the program equates to
business success. 

Small Business:  SBA Cannot Assess the Success of Its Minority
Business Development Program

(Testimony, 07/27/94, GAO/T-RCED-94-278). 

Although the Small Business Administration (SBA) has improved some
aspects of its 8(a) business development program, which provides
federal contracts to small businesses owned by socially and
economically disadvantaged persons, SBA is still not in a position to
evaluate the program's overall success in enabling minority
businesses to compete in the commercial marketplace after they leave
the program.  The value of 8(a) contracts awarded competitively
during fiscal year 1992 was higher than the value of contracts
awarded during the preceding year, but the distribution of contracts
continued to be concentrated among a very small percentage of firms. 
Also, SBA could not say whether its revised business plans for 8(a)
firms are being reviewed annually, as required by law, or whether the
firms are meeting the non-8(a) contract goals to reduce the firms'
reliance on program contracts.  Finally, the information SBA provided
GAO shows that its failure to properly plan the redesign of the
program's management information system continues to hamper the
implementation of a system of providing SBA managers with basic 8(a)
program information. 

Defense Conversion:  Capital Conditions Have Improved for Small- and
Medium-Sized Firms

(Letter Report, 07/21/94, GAO/NSIAD-94-224). 

Cuts in the Defense Department's (DOD) procurement budget are forcing
a consolidation of the defense industrial base and job loss for many
defense industry workers.  This situation has prompted initiatives to
help defense firms, particularly small ones, convert defense-related
technology to commercial use.  The Defense Department is authorized
to provide up to $15 million for guaranteed loans to help small firms
in the defense industry convert to commercial applications.  This
report provides information on general trends in the availability of
capital for small- and medium-sized firms and on federal and
nonfederal initiatives to improve access to capital for these firms. 

Regulatory Flexibility Act:  Status of Agencies' Compliance

(Letter Report, 04/27/94, GAO/GGD-94-105). 

The Regulatory Flexibility Act requires federal agencies to assess
the effects of their proposed rules on small entities, which include
small businesses, small government jurisdictions, and small
not-for-profit groups.  As a result of their assessments, agencies
must either do an analysis describing the impact of the proposed
rules on small entities or certify that their rules will not have "a
significant economic impact on a substantial number of small
entities." This report reviews (1) the Small Business
Administration's (SBA) annual compliance with the act and generalizes
from the reports about which agencies have or have not implemented
the act effectively and (2) SBA annual reports and related documents
on the extent to which SBA has complied with the act's requirements
that the agency periodically examine its rules. 

Small Business Administration:  Inadequate Documentation of
Eligibility of Businesses Receiving SSBIC Financing

(Letter Report, 04/26/94, GAO/RCED-94-182). 

Specialized small business investment companies (SSBIC) often do not
comply with the Small Business Administration's (SBA) guidance for
documenting the eligibility of the small businesses they finance. 
GAO estimates that for more than a third of the small businesses
financed, SSBICs did not prepare eligibility profiles documenting
that the businesses were owned by socially or economically
disadvantaged persons.  Even when SSBICs did prepare eligibility
profiles, they often cited a single factor as the basis for
eligibility--typically minority ownership--although SBA has told
SSBICs to base eligibility on a composite of factors, such as owners'
minority status, limited education, and low income.  One possible
reason for the lack of compliance with SBA guidance is that SSBICs do
not believe documentation is always needed, particularly when the
small business is minority owned.  SBA's requirement that examiners
accept eligibility determinations on the basis of minority status
alone continues to be inconsistent with the agency's instructions to
SSBICs to use a composite of factors as a basis for determining
eligibility.  Consequently, examiners would not be expected to spot
cases in which SSBICs are financing businesses owned by ineligible
persons. 

DOD Contracting:  Extent and Impact of Contract Bundling Is Unknown

(Letter Report, 04/14/94, GAO/NSIAD-94-137). 

The Department of Defense's (DOD) centralized contracting data do not
identify contracts that have been bundled.  Bundling occurs when
agencies package contract requirements into acquisitions, a practice
that can effectively preclude small businesses from competing.  The
Small Business Administration (SBA) has begun to collect data on the
extent of contract bundling where it has assigned resident
representatives, but only about half of DOD's contract dollars are
obligated at these locations.  SBA's data-gathering effort could
yield empirical data on the magnitude of the problem.  Should such
data be deemed insufficient, however, GAO believes that there should
be reasonable assurances that any new collection effort will
accomplish its objectives without the cost exceeding the expected
benefits.  DOD officials and others believe that bundling could harm
small businesses that want to compete for government contracts but
could also benefit government procurement activities by reducing
their workload.  GAO found no empirical evidence proving the costs or
benefits of bundling.  Existing guidance in the Federal Acquisition
Regulation does not ensure that contracting officers properly
identify all bundled contracts.  Furthermore, the existence of
multiple definitions creates confusion about what constitutes
bundling. 

Small Business:  Information on Participation in SBA's Bonding
Activities

(Letter Report, 03/24/94, GAO/RCED-94-134). 

The Small Business Administration's (SBA) Preferred Surety Bond
Guarantee Program allows approved insurance companies to issue
SBA-guaranteed surety bonds without SBA's prior approval of
individual bonds.  Surety bonds ensure that a contract will be
completed, and supplier and workers paid, should the contractor fail
to perform the contract.  The goal is to encourage large insurance
companies to issue SBA-guaranteed bonds and in turn increase the
access to the surety bonds by small businesses owned and operated by
minorities and disadvantaged individuals.  GAO found that the program
has boosted large insurance company participation in SBA's bonding
activities.  The impact on minority firms is unclear, however. 

Small Business Administration:  Inadequate Oversight of Capital
Management Services, Inc.--an SSBIC

(Letter Report, 03/21/94, GAO/OSI-94-23). 

Failure of the Small Business Administration (SBA) to recognize signs
that Capital Management Services, Inc., a specialized small business
investment company in Little Rock, was operated improperly led to the
loss to federal taxpayers of $3.4 million.  David Hale, then a
municipal court judge, ran Capital Management in an improper manner
by entering into prohibited transactions, including loans to business
associates and loans for real estate purchases.  By taking advantage
of flexible SBA guidelines for determining socially or economically
disadvantaged persons, Hale was able to make loans to persons with
questionable claims to program eligibility.  GAO was unable to fully
analyze transactions with Susan McDougal, Castle Sewer and Water, and
Southloop Construction because key participants were unavailable for
interview and records were incomplete.  Nevertheless, the loan to
Susan McDougal, who along with her husband had a reported net worth
of $2.2 million, is an example of loans made to someone with
questionable eligibility. 

Procurement Reform:  Comments on Proposed Federal Acquisition
Streamlining Act

(Testimony, 03/10/94, GAO/T-OGC-94-1). 

By virtually any measure, the government's system of buying goods and
services does not work well.  In GAO's view, any reform effort must
be guided by three principles:  fostering intelligent decisionmaking
that takes advantage of commercial ingenuity and expertise,
streamlining to maximize the use of declining resources, and managing
for results instead of process.  This testimony discusses S.  1587,
the Federal Acquisition Streamlining Act, which seeks to simplify and
streamline the government procurement process.  GAO strongly supports
this measure.  Except for the testing provisions, GAO believes that
the bill represents an important reform in the way the government
buys its goods and services. 

Federal Research:  Interim Report on the Pilot Technology Access
Program

(Letter Report, 03/07/94, GAO/RCED-94-75). 

As part of the federal effort to bolster U.S.  industries'
competitiveness, the Pilot Technology Access Program provides small
businesses with access to (1) computerized data bases containing
technical and business information that they typically are unaware of
or cannot afford, and (2) experts knowledgeable in a wide range of
technical fields.  The program is being implemented at several small
business development centers, which provide counseling, training, and
research assistance to small businesses nationwide.  The centers are
run by the Small Business Administration.  In 1991, six centers in
Maryland, Missouri, Oregon, Pennsylvania, and Wisconsin were chosen
to implement the program.  This report discusses the status,
implementation, and evaluation of the program.  GAO also includes the
views of the participating centers' directors on the program's effect
on small businesses' productivity and innovation. 

Energy Management:  DOE Can Improve Distribution of Dollars Awarded
Under SBA's 8(a) Program

(Letter Report, 02/23/94, GAO/RCED-94-28). 

Contract dollars awarded by the Department of Energy (DOE) under the
Small Business Administration's 8(a) program are concentrated among a
small number of firms.  Nearly 60 percent of DOE's $1 billion worth
of active contracts in April 1992 went to 13 firms.  This
concentration is due, in part, to the fact that DOE, like other
federal agencies, is authorized to direct noncompetitive 8(a) awards
to firms that it specifies.  In addition, DOE's Oak Ridge office has
contributed to the concentration of awards by combining several
procurements into a single larger procurement, resulting in the award
of only one contract rather than several.  Although these practices
are not prohibited, DOE is missing an opportunity to have a positive
impact on a large number of firms.  Agencies are required to award
8(a) contracts competitively if the estimated prices of the contracts
exceed certain thresholds.  DOE, however, has kept price estimates
for contracts artificially low and structured contracts so that their
estimated prices fall below the thresholds specified for competition. 
This practice has further contributed to the concentration of 8(a)
contract dollars among a small number of firms. 

DOD Minority Contracting

(Correspondence, 02/18/94, GAO/NSIAD-94-117R). 

Pursuant to a congressional request, GAO provided data on Department
of Defense (DOD) minority contracting and the price premiums paid to
small disadvantaged business contractors.  GAO noted that (1) DOD
obligates a large portion of small disadvantaged business contract
dollars to a small number of companies; (2) DOD contracting officers
are required to make small disadvantaged business offers more
competitive by increasing other offers by 10 percent; (3) DOD
reported price premiums of about $32.5 million for fiscal years 1990
through 1992; (4) 13 companies received premiums of at least $100,000
between fiscal years 1990 and 1992, and 7 of these companies received
premiums of over $1 million; and (5) the premiums paid to small
disadvantaged business contractors are based on orders and deliveries
under their contracts. 

Defense Contracting:  Implementation of the Pilot Mentor-Protege
Program

(Letter Report, 02/01/94, GAO/NSIAD-94-101). 

To increase the participation of small disadvantaged businesses in
military subcontracting, the Congress mandated the Pilot
Mentor-Protege Program in 1990.  This program encourages mentoring
relationships between major prime contractors and subcontractors. 
Because program implementation has been slow, not enough information
is available to determine whether the program's goals can be achieved
or whether reauthorization and extension is warranted.  Pentagon
officials said that all fiscal years 1992 and 1993 appropriated funds
for the pilot program have been committed.  As of September 1993,
however, the Department of Defense (DOD) had neither (1) complied
with its own regulation to assess programs and accomplishments
realized under any of the agreements nor (2) compiled the required
data on the eight measures that it planned to used to evaluate
program success.  DOD obtained some initial participation on a
"credit-only" basis and limited participation through a mix of credit
and cost reimbursement through the mentor's overhead cost pool. 
DOD's direct reimbursement of mentors' cost has exceeded $1 million
in support of each protege during a 3-year period.  Unless additional
nonmonetary incentives are developed to encourage mentor
participation, it is unlikely that the program will reach the number
of proteges envisioned by the Congress or significantly increase the
total number of subcontracts awarded to small disadvantaged
businesses. 

Export Promotion:  Governmentwide Plan Contributes to Improvements

(Testimony, 10/26/93, GAO/T-GGD-94-35). 

This testimony discusses the federal strategic plan to promote
exports that was issued in September 1993 by the interagency Trade
Promotion Coordinating Committee.  GAO's initial assessment of the
strategic plan, "Toward a National Export Strategy," is that it
represents a big step toward implementing the requirements of the
Export Enhancement Act of 1993.  The report notes some potentially
significant changes that have resulted from the Trade Promotion
Coordinating Committee's deliberations to date.  The plan clearly
commits the administration to completing the difficult job of setting
governmentwide priorities and creating a unified budget for federal
export promotion activities within the fiscal year 1995 budget. 

Export Promotion:  Initial Assessment of Governmentwide Strategic
Plan

(Testimony, 09/29/93, GAO/T-GGD-93-48). 

This testimony examines a just-released report by the Trade Promotion
Coordinating Committee on the development of an overall government
plan for federal trade promotion programs.  GAO views this newly
issued plan as a status report on progress to date.  The report
identifies some potentially major changes that have resulted from the
committee's deliberations, including the creation of a network of
"one-stop shop" trade promotion centers.  In addition, the report
clearly commits the administration to completing the difficult tasks
of setting governmentwide priorities and creating a unified budget
for export promotion activities as part of the fiscal year 1995
budget.  GAO is also encouraged by the plan's commitment to a more
systematic use of measures to evaluate trade promotion programs and
by its proposal to better coordinate trade promotion and trade policy
agencies. 

Small Business:  Problems Continue With SBA's Minority Business
Development Program

(Letter Report, 09/17/93, GAO/RCED-93-145). 

Small Business:  The Small Business Administration's Progress in
Restructuring Its Business Development Program

(Testimony, 09/22/93, GAO/T-RCED-93-56). 

Concerned that gaining access to the 8(a) business development
program was a lengthy and burdensome process, that the program's
administration was inefficient, and that few firms were able to
compete successfully in the open market, the Congress mandated
wholesale changes to the program in 1988.  Although the Small
Business Administration (SBA) has made some changes to the program,
which promotes the development of small businesses owned by socially
and economically disadvantaged persons, the program still falls short
in several areas.  SBA's latest estimate for completing the redesign
work is late 1995, 5 years later than originally projected.  The
program lacks a management information system, developed in
accordance with federal guidelines, that yields complete and accurate
information.  As a result, the Congress and program managers are in
the dark about what assistance is being provided to 8(a) firms and
whether the program is effective.  In addition, access to the program
still needs improving.  Although SBA must provide 8(a) program
applicants with timely feedback on their eligibility to participate
in the program, it continues to operate without an
application-tracking system that provides timely information on where
and why application-processing problems are occurring.  Finally, SBA
needs to periodically review the business plan of each 8(a) firm. 
Without such a review, SBA cannot be sure that each plan is
up-to-date, that the 8(a) firms' business development goals are
realistic, and that the firms are making progress toward these goals. 

Bank Regulation:  Regulatory Impediments to Small Business Lending
Should Be Removed

(Letter Report, 09/07/93, GAO/GGD-93-121). 

Bank and Thrift Regulation:  FDICIA Safety and Soundness Reforms Need
to Be Maintained

(Testimony, 09/23/93, GAO/T-AIMD-93-5). 

The Congress, the administration, and bank and thrift regulators
should be extremely cautious in considering short-term measures to
encourage more liberal lending practices by insured institutions. 
Commercial banks remain the dominant suppliers of credit to small-
and medium-sized businesses, which have become the main source of job
growth in this country.  According to the Census Bureau, most of the
net increase in employment during the 1980s occurred in companies
with fewer than 100 workers.  In GAO's view, however, it would be
imprudent to periodically weaken and tighten bank regulation in
response to recession and inflation.  This report and testimony
identify areas in which the regulatory burden on small business
lending could be safely reduced. 

Surety Bond Waiver Program

(Correspondence, 08/24/93, GAO/NSIAD-93-255R). 

Pursuant to a legislative requirement, GAO reviewed the Department of
Defense's (DOD) implementation of a test program in which it would
award construction contracts to small and disadvantaged businesses
exempted from submitting performance and payment surety bonds.  GAO
found that (1) although the bond exemption test program was to be
developed and implemented in 1989, the Small Business Administration
(SBA) and DOD have made little use of their exemption authority; (2)
between 1992 and 1993, DOD and SBA did not meet the minimum test
program requirements of awarding 30 contracts utilizing their bond
exemption authority and awarded only 9 contracts; (3) DOD agencies
often did not follow regulations or procedures when using bond waiver
authority; and (4) DOD and military service officials believe that
surety bond requirements do not significantly impede small or
disadvantaged firms, and bond exemption authority increases financial
risk and affords little benefit to contractors. 

Minority Contracting:  DOD's Reporting Does Not Address Legislative
Goal

(Letter Report, 07/27/93, GAO/NSIAD-93-167). 

This report examines the Defense Department's (DOD) implementation of
10 U.S.C.  2323, which recommends the award of 5 percent of DOD
contract dollars to minority small businesses, historically black
colleges and universities, and minority institutions.  These
contracts could involve procurement; military construction; operation
and maintenance; and research, development, test, and evaluation. 
GAO discusses DOD's (1) progress toward the 5-percent program goal,
(2) use of certain contracting procedures authorized to achieve the
section 2323 goal, and (3) progress in boosting participation by
minority small business concerns. 

Export Promotion Strategic Plan:  Will It Be a Vehicle for Change? 

(Testimony, 07/26/93, GAO/T-GGD-93-43). 

GAO discussed the Trade Promotion Coordinating Committee's (TPCC)
role in prioritizing and rationalizing federal export promotion
efforts.  GAO noted that (1) legislation establishes requirements for
developing the strategic plan that guide TPCC efforts to reshape
federal export promotion activities; (2) federal export promotion
programs reflect no national priorities and are fragmented, poorly
designed, and inefficiently implemented; (3) TPCC will need
high-level support from the Departments of Commerce and Agriculture,
Eximbank, and the Agency for International Development to make its
strategic planning process a success; (4) it is important that the
strategic plan utilize a well-reasoned analytical methodology for
setting federal export promotion priorities; and (5) a cooperative
effort to develop the plan could form the basis for more cooperation
and integration in program delivery. 

Women-Owned Businesses

(Correspondence, 06/07/93, GAO/RCED-93-159R). 

Pursuant to a congressional request, GAO provided information on
federal agencies' efforts to achieve contracting goals for
women-owned businesses, focusing on (1) how many of the 18 major
federal procuring agencies have women-in-business specialists; (2)
whether agencies with such specialists award a greater percentage of
contract dollars to women-owned businesses; and (3) whether
procurement procedures to solicit contract bids ensure that women
business owners are aware that such contracts are available.  GAO
found that (1) federal agencies are not required to have
women-in-business specialists and the Office of Personnel Management
has not established an occupation classification for the position;
(2) nine agencies have women-in-business specialists, and the other
nine have staff that assist all small businesses; (3) agencies with
women-in-business specialists are not more successful in increasing
their percentages of contract dollars awarded to women-owned
businesses; (4) only Commerce attributed its increase in contract
dollars awarded to women-owned business solely to its specialist's
efforts; and (5) all agencies, except the Tennessee Valley Authority,
generally follow the Federal Acquisition Regulation in soliciting
bids and do not provide services beyond the usual small business
assistance to women-owned businesses. 

DOD Contracting:  Techniques to Ensure Timely Payments to
Subcontractors

(Chapter Report, 05/28/93, GAO/NSIAD-93-136). 

Subcontractors depend on cash flow generated by progress or other
periodic payments from prime contractors to meet payrolls and pay
other bills.  This report focuses on whether federal prime
contractors are paying subcontractors promptly, a significant issue
given that payments to subcontractors sometimes constitute well over
50 percent of prime contract costs.  This report (1) identifies
existing statutory and regulatory provisions that provide payment
protection for federal subcontractors and (2) evaluates the
feasibility and desirability of additional payment protection for
subcontractors. 

Small Business Participation in MPP

(Correspondence, 05/19/93, GAO/GGD-93-42R). 

Pursuant to congressional requests, GAO provided information on the
extent of small business participation in the Foreign Agricultural
Service's Market Promotion Program (MPP).  GAO noted that (1) 11 of
the top 50 firms in the program meet the Small Business
Administration's (SBA) size standards for small businesses; (2) the
11 firms received 17.6 percent of MPP funding in fiscal year 1992;
(3) although the top 50 firms received 64 percent of the allocated
funds, they were not representative of the 550 firms that received
MPP funds during fiscal year 1992; and (4) the overall MPP
participation rate of small businesses is probably higher than
estimated, since smaller firms are not likely to have marketing
programs large enough to receive significant MPP funds. 

Resolution Trust Corporation:  Status of Minority and Women Outreach
and Contracting Program

(Letter Report, 05/19/93, GAO/GGD-93-106). 

Although the Resolution Trust Corporation (RTC) took some steps in
1992 that have increased the number of contracts awarded and the
amount of fees paid to minority- and women-owned businesses, RTC
recognizes that work remains in key areas to achieve the goals of the
Minority and Women Outreach and Contracting Program.  Expanding
opportunities for minority- and women-owned businesses, achieving
agency goals, and ensuring that businesses claiming to be minority-
or women-owned actually meet the program's requirements are key areas
that require RTC's full attention.  RTC intends to address these
areas, in part by developing a plan to increase opportunities for
businesses and law firms owned by minorities and women. 

Small Business:  Financial Health of Small Business Investment
Companies

(Letter Report, 05/05/93, GAO/RCED-93-51). 

Under a program created by the Small Business Investment Act of 1958,
small business investment companies provide financing to small
businesses through equity investments (stock) and debt (loans).  The
companies obtain their money primarily from two sources--privately
invested capital and long-term-debentures guaranteed by the Small
Business Administration (SBA).  When a company has losses exceeding
half of its private capital or is unable to repay SBA for leverage,
the agency may liquidate the company.  When this occurs, small
businesses lose an important source of financing, and the private
investors and the federal government can lose all or part of their
investments.  Between October 1986 and September 1991, SBA incurred
losses of more than $90 million due to such liquidations.  This
report provides information on (1) reasons for small business
investment companies' liquidations between January 1986 and March
1991, (2) a comparison of the financial performance of active and
liquidating companies, and (3) the statistical correlation of several
key characteristics of the companies and their investments with their
liquidations and financial performance. 

Export Promotion:  Improving Small Businesses' Access to Federal
Programs

(Testimony, 04/28/93, GAO/T-GGD-93-22). 

This testimony discusses the lack of coherent funding for the federal
government's export promotion programs; the need for a governmentwide
export promotion strategy; and the Export Enhancement Act of 1992,
which created an interagency group to overcome these problems.  GAO
also examines the status of federal programs to help small businesses
export, focusing on the role of the Small Business Administration,
and suggests ways in which small companies' access to these programs
might be improved. 

SBA's Refinancing of Loans in New England

(Correspondence, 03/08/93, GAO/RCED-93-112R). 

Pursuant to a congressional request, GAO analyzed the Small Business
Administration's (SBA) New England Lending and Recovery Project,
focusing on (1) whether SBA had expanded the Project to states beyond
New Hampshire; (2) how many employees SBA assigned to the project
from other SBA offices and at what cost; (3) how many additional
people SBA hired and assigned to the project; and (4) how many loans
SBA examined and guaranteed during the project.  GAO noted that (1)
during 1992, SBA expanded the project to five other New England
states; (2) from January through August 1992, SBA assigned 19
employees to work on project loans in other states; (3) salary,
overtime, and travel costs for the 19 employees totaled 15 percent of
the project's operating costs; (4) from January through September
1992, SBA temporarily hired 33 employees for the project; (5) as of
December 1992, SBA had examined 12,701 Federal Deposit Insurance
Corporation-held loans in Connecticut, Maine, Massachusetts, New
Hampshire, and Rhode Island and had approved and guaranteed 277 loans
totaling $82.8 million; and (6) in Connecticut, Massachusetts, and
Rhode Island, 78 loans totaling $31 million are still pending SBA
approval. 

GSA Procurement:  Public Utilities' Plans for Small and Small
Disadvantaged Subcontractors

(Letter Report, 01/29/93, GAO/GGD-93-44). 

The law requires that federal contracts exceeding $500,000 include
subcontracting plans that maximize opportunities for small
businesses, especially those owned and managed by socially and
economically disadvantaged individuals.  GAO reported in 1989 that
several utilities providing services to the federal government
declined to sign formal contracts because they objected to the
statutory requirements for subcontracting plans.  In most instances,
federal agencies had no choice but to accept and pay for these
utility services without a contract because alternative sources were
unavailable.  This report provides updated information on the number
of utilities that supply service to the General Services
Administration (GSA), how many utilities had entered into contracts
with GSA, and how many had submitted subcontracting plans. 

Disadvantaged Business Enterprise Program

(Correspondence, 01/19/93, GAO/RCED-93-89R). 

GAO reviewed the implementation of the Department of Transportation's
(DOT) Disadvantaged Business Enterprise (DBE) Program, focusing on
whether (1) certain minority groups that DOT determined were eligible
to participate in the state DBE program were eligible under federal
laws and regulations and (2) 38 firms certified as DBE firms were
fronts for nonminority contractors.  GAO noted that (1) minority
groups that DOT presumed were eligible to participate in the DBE
program met the program's eligibility criteria; (2) two nationality
groups that DOT presumed eligible were not listed as participants in
the program; (3) the DBE program eligibility guidance has been
confusing and has hindered states from consistently applying the
program's eligibility criteria; (4) DOT will institute procedures to
automatically update its list of eligible groups whenever the Small
Business Administration modifies its eligibility list; (5) the status
of the 38 minority contractors could not be verified, since none of
the 38 firms were currently certified in Pennsylvania for the DBE
program; and (6) of the 10 firms certified between 1982 and 1987, 6
did not apply for recertification when their existing certification
expired and 4 had their certifications revoked for failing to provide
information requested by DOT. 

Small Business:  Nonprofit Agencies Employing the Disabled Seldom
Seek Set-Aside Contracts

(Letter Report, 11/27/92, GAO/RCED-93-44). 

Public or private nonprofit organizations for the handicapped--that
is, nonprofit agencies employing persons with disabilities--have been
authorized to compete for small business set-aside contracts awarded
by federal agencies between 1989 and 1993.  These nonprofit groups
sponsor rehabilitation programs for the disabled or provide them with
employment.  The latest available data, however, show that these
nonprofit groups received less than 1 percent of all such federal
contracts set aside during a 2-1/2-year period.  Furthermore, the
total value of these contracts was lower than the ceilings set by
law.  The nonprofit agencies claim that they are not bidding more on
set-aside contracts because (1) legislation prohibits nonprofit
agencies from supplying a good or service on a permanent,
noncompetitive basis once the product or service has been awarded
under a competitive set-aside contract and (2) they are unaware that
they may bid on set-aside contracts or do not know how to do so. 
Efforts to boost nonprofit agencies' participation in set-aside
contracts have been limited.  The Congress may want to consider (1)
designating a federal agency to counsel nonprofit groups about
bidding on set-aside contracts and (2) allowing products and services
provided under the set-aside contracts to be added to the list of
items that nonprofit agencies provide to federal agencies on a
permanent, noncompetitive basis. 

One-Stop Shops

(Correspondence, 10/06/92, GAO/GGD-93-1R). 

Pursuant to a congressional request, GAO provided information on
making federal export financing and export promotion programs more
accessible to small businesses.  GAO noted that (1) the Trade
Promotion Coordinating Committee (TPCC) has not addressed the issue
of streamlining the government's export promotion structure; (2)
proposed legislation would create a field network of consolidated
export promotion offices, which would reduce the amount of effort
required for small businesses to seek export promotion or financing
assistance; (3) a pilot program to integrate export financing and
promotion programs could involve Small Business Administration,
Export-Import Bank, and U.S.  Foreign and Commercial Service field
staff jointly providing export counseling; (4) adequate training and
personnel selection would be crucial to such a pilot program's
success; and (5) TPCC would be responsible for formally assessing the
program's success at each pilot site. 

Small Business in Southern Nevada

(Correspondence, 10/06/92, GAO/RCED-93-36R). 

Pursuant to a congressional request, GAO provided information on the
Small Business Administration's (SBA) performance in southern Nevada,
focusing on (1) the Las Vegas district office's staffing
requirements; (2) the district office's effectiveness in approving
and servicing loans; (3) the extent to which federal installations in
Nevada provided procurement contracts to small businesses; and (4)
the level of small business outreach and counseling programs in
Nevada.  GAO noted that (1) the Las Vegas district office is
understaffed, resulting in district office personnel performing a
large amount of collateral duties; (2) the district office staff
successfully perform loan approval and servicing duties; (3) Nevada
federal installations that award procurement contracts meet small
business contract goals; and (4) SBA has taken steps to improve its
small business procurement outreach and counseling programs in
Nevada. 

Small Business:  Federal Agencies' Contracting Goals for Women-Owned
Businesses

(Testimony, 09/17/92, GAO/T-RCED-92-95). 

As part of the federal effort to provide contracts to women-owned
small businesses, the Small Business Administration negotiates with
executive branch agencies to set fiscal year contracting goals for
such businesses.  The goals--expressed as a percentage of the dollar
value of each agency's total estimated procurement for the fiscal
year--are nonbinding targets.  GAO testified that the vast majority
of agencies have contracting goals, which should result in 1.2 to 1.4
percent of the value of prime contracts being awarded to women-owned
firms.  Furthermore, in fiscal year 1990, 14 of the 17 major
procurement agencies met or exceeded their goals. 

Export Promotion:  Problems in the Small Business Administration's
Programs

(Letter Report, 09/02/92, GAO/GGD-92-77). 

The Small Business Administration (SBA) spent about $3.7 million on
export promotion programs in fiscal year 1991.  Most of SBA's export
promotion assistance is delivered through 21 subcenters of its Small
Business Development Center program.  These subcenters specialize in
providing international trade assistance.  GAO found that SBA has
neither consistently emphasized export promotion nor fully determined
its role in the federal effort to boost exports.  SBA's export
counseling lacks a strategic focus and, as a result, could be
targeting the same clients that the Commerce Department is trying to
serve.  A 1990 law restricting SBA's ability to impose any new rules
or regulations on its Small Business Development Center program makes
it hard for SBA to better target its export counseling.  Moreover,
SBA's main export finance promotion program has been little used, and
the agency may be overstating the extent to which its other finance
programs help small businesses export.  Also, SBA's ability to
provide export promotion assistance beyond basic outreach and
referral is hindered by the agency's domestic orientation and
management structure. 

Small Business:  Efforts to Provide Federal Procurement Dollars to
Women-Owned Businesses

(Letter Report, 07/28/92, GAO/RCED-92-185). 

The Small Business Administration (SBA) serves as the government's
advocate for promoting and developing women-owned small business. 
SBA works with executive branch agencies to set fiscal year
contracting goals for women-owned businesses and report on
procurement assistance provided to them.  This report looks at (1)
how federal agencies' contracting goals are established for
women-owned businesses and whether these goals have been achieved
lately and (2) the procedures agencies use to certify that such
businesses are, in fact, owned by women.  GAO also discusses how the
Department of Transportation has tried to address the problem of
women-owned and other small businesses having to be certified as
"disadvantaged business enterprises" each time they bid on a contract
from a different state or local agency. 

Small Business:  Use of the Surety Bond Waiver Has Been Limited

(Letter Report, 07/07/92, GAO/RCED-92-166). 

Under a pilot Surety Bond Waiver Program, the Small Business
Administration (SBA) is permitted to waive federal surety bond
requirements for socially and economically disadvantaged contractors
participating in SBA's 8(a) program.  Separate legislation called for
the Department of Defense (DOD) to make every effort to award at
least 30 contracts that used bond waivers in fiscal years 1990 and
1991.  Only 13 contracts awarded in fiscal years 1989 through 1991
used bond waivers, and only 9 of those were awarded by DOD.  Reasons
for this limited use of bond waivers include the following:  (1) 8(a)
program legislation does not provide the flexibility the SBA needs to
select nonbondable contractors; (2) implementing the Surety Bond
Waiver Program required certain regulation revisions that delayed
issuance of program guidelines; and (3) the opportunities to use bond
waivers were limited by a military construction freeze from January
1990 to May 1991, the military base closure program, and Operation
Desert Storm.  SBA has begun to address other factors contributing to
the waiver's limited use, such as poor staff training and outreach
efforts.  GAO notes that for the eight bond waiver projects completed
as of March 1992, contractor performance was considered satisfactory
or better. 

Small Business:  Analysis of SBA's Preferred Lenders Program

(Letter Report, 05/15/92, GAO/RCED-92-124). 

Under its Preferred Lenders Program, the Small Business
Administration (SBA) gives its best private lenders the authority to
approve and service SBA-guaranteed loans.  The goal is to improve
service to small businesses without increasing SBA's involvement. 
Early indicators show that the program has had favorable results in
terms of the number of preferred loans made, the efficiency with
which these loans are processed, and the rate at which these loans
fail.  GAO notes, however, that most preferred loans have not reached
the stage at which most loans typically fail, and the Office of
Inspector General has found that some preferred lenders are not
complying with SBA rules and regulations.  Because SBA has not
identified all loans with temporary lender identification numbers and
its loan accounting system data base cannot automatically link
temporary and permanent identification numbers, SBA cannot quickly
compile data on the amount of lending by and loan failures for
individual lenders.  SBA officials said that while they can obtain
accurate failure rates by manually compiling each preferred and
certified lender's guaranteed loan portfolio, they cannot do so for
regular loans because of the high volume of regular loans.  With the
increasing volume of preferred loans, manual compilation will become
a major chore. 

Small Business:  Losses on Individual SBA Loan Programs Are Not Fully
Disclosed

(Letter Report, 04/17/92, GAO/RCED-92-90). 

The 7(a) general business loan program, the Small Business
Administration's (SBA) largest financial assistance program, aids
small businesses that cannot obtain credit at reasonable terms from
conventional lenders without government assistance.  Losses for the
program, however, are not fully disclosed in SBA's annual loss study
because the actual results from the sale of acquired collateral are
omitted.  In addition, expenses incurred in managing and selling
collateral are not included in collateral sales accounts nor in the
annual loss study.  While SBA may not consider these unreported
losses significant when compared with total cumulative loan program
losses or program disbursements, they do amount to millions of
dollars and should be disclosed so that individual 7(a) loan program
losses are more accurately reported to SBA program managers and the
Congress.  In formulating protective bids to acquire collateral, SBA
does not consistently comply with its standard operating procedures
for determining collateral values and sometimes acquires collateral
that costs the taxpayers more than it is worth.  Furthermore, the
assigned collateral values may provide borrowers excessive debt
relief and preclude SBA from future collection opportunities. 

Small Business:  Problems in Restructuring SBA's Minority Business
Development Program

(Letter Report, 01/31/92, GAO/RCED-92-68) (Testimony, 03/04/92,
GAO/T-RCED-92-35). 

The 8(a) program was created to improve the viability of small
businesses owned by socially and economically disadvantaged
individuals.  Under the program, the Small Business Administration
(SBA) enters into contracts with other federal agencies and
subcontracts the work to firms in the program.  Firms in the program
are also eligible for financial, technical, and management assistance
from SBA to aid their development.  Concerned that obtaining access
to the program was lengthy and burdensome, program administration was
inefficient, and few firms were able to compete upon leaving the
program, the Congress passed the Business Opportunity Development
Reform Act of 1988.  This legislation requires that (1) applications
be processed within 90 days, (2) 8(a) firms submit revised business
plans so SBA can better monitor the firms' development, and (3) firms
compete for certain contracts.  SBA has had problems implementing
many of these changes, and its lack of valid data on program
activities has hindered effective program management. 

Small Business:  Improving SBA Loan Collateral Liquidations Would
Increase Recoveries

(Chapter Report, 12/19/91, GAO/RCED-92-5). 

The Small Business Administration (SBA) has the authority to provide
assistance to new or existing small businesses through direct
(government-funded) loans or guaranteed loans made by private
lenders.  With almost $11.5 billion in outstanding loans, the general
business loan program is SBA's largest financial assistance effort. 
However, more than $1.2 billion of these loans are in liquidation. 
SBA is experiencing substantial losses in liquidating loans because
(1) collateral is insufficient to cover the losses when loans are
liquidated and (2) SBA does not maximize recoveries on existing loan
collateral.  This report provides an overview of SBA's liquidation of
loan collateral for defaulted loans, including losses on liquidated
loans; the adequacy and valuation of collateral; and collateral
recovery efforts by SBA and private lenders. 

Small Business:  Financial Condition of SBA's Business Loan Portfolio
Is Improving

(Letter Report, 12/03/91, GAO/RCED-92-49). 

This report provides information on loans made to small businesses
under section 7(a) of the Small Business Act.  This program, run by
the Small Business Administration, was created to provide financial
help to eligible small businesses that cannot borrow at reasonable
terms from conventional lenders without government assistance.  GAO
discusses (1) the number and dollar amounts of direct and guaranteed
loans in the portfolio by loan program, as well as demographic
information on loan recipients, including their race, gender, and
geographic location; (2) the performance of the portfolio as shown by
the amount of outstanding principal that is current, in default, or
in liquidation; and (3) statistics on overall losses to the direct
and guaranteed portions of the portfolio, as well as losses incurred
by each loan program. 


SPECIAL PUBLICATIONS
============================================================ Chapter 8

Status of Open Recommendations:  Improving Resources, Community, and
Economic Development Programs

(Letter Report, 01/15/93, GAO/OP-93-1B). 

This annual report is part of a four-volume set summarizing the
findings and open recommendations resulting from GAO audits and other
review work in federal agencies for which satisfactory legislative or
administrative actions have not yet been completed.  To encourage
prompt, responsive actions on its recommendations, GAO follows up on
them.  This report contains information on 2,522 GAO recommendations
that were open as of September 30, 1992.  The report is available
from GAO in either a four-volume set totaling more than 1,000 pages
or on computer disk. 

Housing and Community Development Issues

(Letter Report, 12/92, GAO/OCG-93-22TR). 

This report is part of the transition series, a set of 28 reports
summarizing GAO's findings on major problems confronting federal
agencies, as well as economic and management issues facing the
Congress and the incoming administration.\1 One cluster of transition
reports, including those on the budget deficit and investment,
addresses broad policy issues affecting government as a whole and its
relationship to the economy.  Another group of reports addresses
issues affecting specific federal agencies, such as the Defense
Department and the Internal Revenue Service.  A third group of
reports looks at cross-cutting management issues--everything from
financial management to information management.  GAO highlighted many
of these problems in a similar set of reports issued in 1988.  In
some instances, progress has been made; all too often, however, the
problems have continued to fester and grow worse.  In general, the
state of management in the federal government is poor.  Too many
management ideas--and resulting agency structures and processes--that
worked well in the past now hinder the government from responding
quickly and effectively to a world in tremendous flux.  Most agencies
have no strategic vision of the future, lack sound systems to collect
and apply financial and program information to gauge operational
success and accountability, and too often do without people with the
skills necessary to accomplish their missions. 

Housing and Community Development Products 1990-91

(Letter Report, 03/92, GAO/RCED-92-111). 

This publication summarizes GAO reports and testimonies on housing
and community development issues, such as prevention of homelessness
and revitalization of blighted urban areas.  Grouped under seven
categories--homeownership assistance, rental and public housing,
homelessness, community development, small and minority business,
disaster assistance, and related topics--these abstracts profile
GAO's work in this area during 1991.  Order forms are provided to
obtain specific reports or testimonies. 


--------------------
\1 This series was summarized in testimony (see "Major Issues Facing
a New Congress and a New Administration," GAO/T-OCG-93-1, Jan.  8,
1993). 


RELATED PRODUCTS
============================================================ Chapter 9

Government Sponsored Enterprises:  Freddie Mac's and Fannie Mae's
Accounting for Costs of Foreclosed Property

(Letter Report, 05/27/94, GAO/AIMD-94-75). 

This report provides information on the accounting changes made by
two government-sponsored enterprises--the Federal Home Loan Mortgage
Corporation and the Federal National Mortgage Association--in
adopting the American Institute of Certified Public Accountants'
Statement of Position 92-3, Accounting for Foreclosed Assets. 
Freddie Mac and Fannie Mae are federally chartered, privately owned,
for-profit corporations created by the Congress to ensure the
availability of reasonably priced loans to home buyers.  GAO (1)
assesses whether the accounting changes made by the
government-sponsored enterprises in adopting the Statement of
Position 92-3 were in accordance with generally accepted accounting
principles, (2) estimates the changes' effects on their respective
loan loss reserves, and (3) estimates the changes' effects on
compliance with minimum capital requirements set by the Federal
Housing Enterprises Financial Safety and Soundness Act of 1992.  GAO
also considers the potential effects of accounting guidance issued by
the Financial Accounting Standards Board that conflicts with the
Statement of Position 92-3 relative to recognizing selling costs. 

Impoundment Control:  President's Second Special Message for Fiscal
Year 1994

(Letter Report, 03/18/94, GAO/OGC-94-23). 

This letter reports on the status of budget authority that was
proposed for rescission by the President in his second special
impoundment message for fiscal year 1994.  The Congress passed an
emergency supplemental and rescission bill on February 11, 1994, that
approves most of the rescissions proposed by the President in his
second special impoundment message.  The bill also approved most of
the rescissions proposed by the President in his fourth special
impoundment message.  The President signed the bill into law on
February 12, 1994.  The Office of Management and Budget said that all
budget authority withheld pursuant to those proposals was released
for obligation on March 1, 1994. 

Benefits for Illegal Aliens:  Some Program Costs Increasing, but
Total Costs Unknown

(Testimony, 09/29/93, GAO/T-HRD-93-33). 

The benefits available to illegal aliens and their U.S.  citizen
children make up a small but rising percentage of costs for some
government programs, such as Medicaid, public education, and food
stamps.  Existing cost estimates, however, provide at best a sketchy
picture of the situation.  Illegal aliens are not required to reveal
their status to receive some benefits; in other cases, officials are
prohibited from asking about alien status.  National cost data are
only available for welfare benefits, which in fiscal year 1992
totaled $479 million for illegal aliens with children who are U.S. 
citizens.  The five states accounting for nearly 80 percent of the
illegal immigrant population--California, Texas, New York, Illinois,
and Florida--pegged the total cost of federal, state, and local aid
to illegal aliens at about $2.9 billion.  The costs of providing
these benefits appear to be on the upswing.  These cost estimates,
however, exclude government revenues attributable to illegal aliens. 

Toxic Substances:  The Extent of Lead Hazards in Child Care
Facilities and Schools Is Unknown

(Letter Report, 09/14/93, GAO/RCED-93-197). 

Toxic Substances:  Information on Lead Hazards in Child Care
Facilities and Schools Is Limited

(Testimony, 09/15/93, GAO/T-RCED-93-48). 

Millions of children have so much lead in their blood that they may
suffer from lifelong intelligence and behavioral problems.  Efforts
to reduce lead hazards have focused mainly on housing, but concern is
mounting over the presence of lead in child care facilities and
schools, particularly since children spend so much time there.  The
combined efforts of federal, state, and local governments to counter
lead hazards in child care facilities and schools, however, are
limited in scope and do not provide a comprehensive approach for
defining and alleviating the problem.  Little information is
available on either the full extent of the danger that lead poses to
the nation's school children or on efforts to address the hazard. 

Impoundment Control:  Comments on the President's Sixth Special
Impoundment Message for Fiscal Year 1993

(Letter Report, 08/18/93, GAO/OGC-93-10). 

This letter discusses the status of funds proposed for rescission in
the President's sixth special impoundment message.  The funds involve
programs at the Departments of Housing and Urban Development,
Justice, and Transportation.  The Office of Management and Budget
reports that the funds proposed for rescission were not withheld from
obligation.  After receiving a rescission proposal, the Congress has
a 45-day period of continuous congressional session in which to act
on rescission bills.  Otherwise, the funds proposed for rescission
must be made available for obligation.  For the rescission proposal
submitted in the sixth special message, the 45-day period ended on
July 31, 1993, without the Congress having passed a bill for two of
the proposals. 

Self-Sufficiency:  Opportunities and Disincentives on the Road to
Economic Independence

(Letter Report, 08/06/93, GAO/HRD-93-23). 

The Family Self-Sufficiency Program, a partnership between the
federal government and local public housing authorities, promotes
local strategies to help poor families achieve economic independence
and self-sufficiency.  This report (1) examines how housing and
social services policies affect beneficiaries when they land a job
and increase their income and (2) analyzes the extent to which the
law creates disincentives to upward income mobility.  GAO concludes
that training and supported work programs have successfully increased
the earning of the economically disadvantaged who participate in
them, but on average the earnings increases are not enough for a
family to break free from all housing and public assistance programs. 

Army Housing:  Overcharges for On-Base Lodging Have Not Been Repaid

(Letter Report, 08/03/93, GAO/NSIAD-93-188). 

In a September 1990 report (GAO/NSIAD-90-241) on Army facilities used
to lodge military personnel temporarily assigned for training or
other purposes, GAO found that Army bases had overbilled soldiers by
$70 million and used the money to subsidize officers' clubs, golf
courses, guest houses, and similar activities.  GAO found that the
Army has yet to repay the overcharges that have accumulated from
inflated transient lodging fees.  Transient lodging service charges
have been reduced somewhat but continue to be inflated. 

Impoundment Control:  Comments on the President's Sixth Special
Impoundment Message for Fiscal Year 1993

(Letter Report, 07/19/93, GAO/OGC-93-8). 

On June 4, 1993, the President submitted to the Congress the sixth
special impoundment message for fiscal year 1993.  This message
proposed six rescissions of budget authority affecting the
Departments of Housing and Urban Development, Justice, and
Transportation.  GAO concludes that the President's justifications
for each proposed rescission are accurate.  GAO has been told
informally that the amounts proposed for rescission are being
withheld pending congressional action.  GAO has been unable to verify
this information, however, because neither the agencies involved nor
the Office of Management and Budget could provide any documentation
showing amounts of budget authority available or amounts being
withheld. 

Small Pension Plans:  Concerns About the IRS Actuarial Audit Program

(Letter Report, 06/30/93, GAO/HRD-93-64). 

After discovering that some highly paid professionals were reaping
huge tax deductions by making extremely large contributions to their
pension plans, the Internal Revenue Service (IRS) began in 1989 a
nationwide audit of small defined benefit pension plans--those with
one to five participants.  IRS concluded that in many cases large tax
deductions were being taken on the basis of unreasonably conservative
actuarial assumptions used in calculating allowable pension
contributions.  Many taxpayers and their accountants complained that
IRS was merely trying to generate federal revenues at the expense of
small businesses.  This report analyzes the impact of the IRS audit
program on small business sponsors of defined benefit pension plans. 
GAO examines the validity of the complaints about IRS's reasons for
undertaking the audit program, identifies whom the program targeted,
and determines whether IRS considered taxpayer facts and
circumstances before substituting its own actuarial assumptions. 

Farm Finance:  Number of New Farmers is Declining

(Letter Report, 05/03/93, GAO/RCED-93-95). 

The number of new farmers has declined considerably in recent years,
largely because of unfavorable economic conditions in the
agricultural sector.  Also, people interested in farming often
encounter problems in obtaining financing to cover the costs of
acquiring and operating a farm.  The Farmers Home Administration
(FmHA), "lender of last resort" for the nation's farmers, has not
targeted loan funds to beginning farmers, but such individuals can
get loans if they are able to meet the agency's relatively lenient
loan-making standards.  FmHA has given beginning farmers priority in
leasing or purchasing from its inventory of farm properties, but the
suitability of these properties for beginning farmers is often
questionable.  Additionally, some states sponsor programs that target
loan assistance to beginning farmers.  Beginning farmers may have
difficulty, however, in qualifying for credit through these programs
or at FmHA.  FmHA has yet to fully implement the beginning farmer
provisions of the 1990 Farm Bill, such as establishing innovative
programs for financing and for assisting in land transfers between
generations of farmers.  In October 1992, the Congress mandated that
the agency establish programs targeting farm ownership and farm
operating loans to beginning farmers. 

Political Appointees:  10-Year Staffing Trends at 30 Federal Agencies

(Fact Sheet, 04/30/93, GAO/GGD-93-74FS). 

Political appointees at the 30 federal agencies GAO reviewed
accounted for 91 percent of the nearly 2,500 appointees
governmentwide as of the end of 1991.  Except for cyclical drops in
the number of appointees during the first year of new administrations
(1989 and 1981), there was little change in the total number of
appointees at the 30 agencies and governmentwide during the 10-year
period.  Half of all appointees governmentwide were clustered at the
following eight agencies:  the Departments of Commerce, Agriculture,
Health and Human Services, Energy, Education, State, and Justice and
the Office of the Secretary of Defense.  Governmentwide, about 29
percent of the political appointees were noncareer senior executive
service appointees in 1991, with about half of the 30 agencies
exceeding this governmentwide average.  At several smaller agencies,
all appointees were Schedule C appointees.  Smaller agencies also
tended to have a higher ratio of political appointees to full-time
permanent employees. 

Rural Development:  Profile of Rural Areas

(Fact Sheet, 04/29/93, GAO/RCED-93-40FS). 

This fact sheet presents a demographic and economic profile of rural
areas that GAO developed on the basis of existing data sources.  GAO
discusses (1) trends in the population and age of persons in
nonmetropolitan counties; (2) trends in nonmetropolitan per capita
income, employment, and economic activities; and (3) the geographic
distribution of farm program payments. 

Impoundment Control:  Comments on the President's Third Special
Impoundment Message for Fiscal Year 1993

(Letter Report, 03/30/93, GAO/OGC-93-5). 

On February 26, 1993, the President submitted to the Congress his
third special impoundment message for fiscal year 1993.  GAO reviewed
the message's three deferrals of budget authority, which involve
funds for international disaster assistance and timber salvage sales,
and found them to be in accordance with the Impoundment Control Act. 
GAO notes that the unreported impoundment of budget authority
mentioned in GAO's February 1993 letter (GAO/OGC-93-4) is reported in
the President's special message. 

Tax Administration:  Overstated Real Estate Tax Deductions Need to Be
Reduced

(Letter Report, 01/19/93, GAO/GGD-93-43). 

The Internal Revenue Service (IRS) needs to reduce overstated real
estate tax deductions that lead to millions of dollars in tax losses
for federal, state, and local governments.  From 1982 to 1990,
individuals' federal deductions of real estate taxes increased 81
percent--from $27 billion to $49 billion.  IRS audits show that
individuals in 1988 overstated their real estate tax deductions by an
estimated $1.5 billion nationwide.  GAO believes that this level of
noncompliance has resulted in nearly $300 million in federal income
tax loss for 1988 and has increased to about $400 million for 1992. 
However, GAO's review of IRS audits of taxpayers who claimed the
deduction for 1988 in three locations--Montgomery County, Maryland;
New Jersey; and Minnesota--uncovered a much higher level of
noncompliance.  IRS detected only about $37 million (29 percent) of
$127 million in overstated deductions that arose from user fee and
rebate errors.  Examiners would have caught more noncompliance had
they followed IRS audit guidelines on checking source documents to
verify taxpayers' support for deductions. 

Air Pollution:  Actions to Promote Radon Testing

(Letter Report, 12/24/92, GAO/RCED-93-20). 

To promote radon testing, the Environmental Protection Agency began a
public information campaign and gave states grants to encourage radon
testing by home owners.  Although this effort appears to have
significantly heightened public awareness of the problem, only 9
percent of home owners surveyed have actually tested their
residences.  As a result, a panel that was convened by the
Environmental Protection Agency recommended in May 1992 that the
current voluntary approach be continued but with certain programmatic
changes.  These changes include targeting areas where radon levels
are considered high and promoting testing and mitigation at the time
of real estate transactions.  To support state radon efforts, the
Congress authorized a grant program for yearly grants of $10 million
for 3 years.  Funds for this program were recently extended for a
fourth year through fiscal year 1993.  Although information to
measure states' success in promoting testing by home owners was
generally unavailable, GAO did identify some state projects that have
increased radon testing by targeting homes in areas with potentially
high radon levels.  In two states that GAO surveyed, the voluntary
use of disclosure statements as part of a real estate sales contract
was common; in one state, radon testing often took place during real
estate transactions in areas with high radon levels.  For the most
part, the six housing agencies and federally chartered secondary
mortgage institutions that finance or insure much of the nation's
housing do not require either testing for radon or the disclosure of
radon information for participation in their programs. 

Impoundment Control:  President's 104th Special Message for Fiscal
Year 1992

(Letter Report, 11/03/92, GAO/OGC-93-2). 

On August 26, the President submitted to the Congress his 104th
special impoundment message for fiscal year 1992.  The message
reports one deferral of budget authority, which affects the Housing
Guarantee subsidy account for the Agency for International
Development.  The Housing Guarantee program extends guarantees to
U.S.  private investors that make loans to developing countries to
help them formulate and execute sound housing and community
development policies that meet the needs of the poor.  GAO found the
deferral to be in accordance with the Impoundment Control Act. 

Foreign Direct Investment

(Correspondence, 07/01/92, GAO/GGD-92-12R). 

Pursuant to a congressional request, GAO assessed the Department of
Commerce's and the Treasury's responses to two GAO reports on foreign
direct investment in the U.S.  real estate sector, the Department of
Agriculture's (USDA) views on a GAO report on foreign investment in
U.S.  farmland, and the Department of Housing and Urban Development's
(HUD) views on two issues relating to the U.S.  residential property
market.  GAO noted that (1) Commerce agreed that the cost of capital
in Japan was lower than in the United States, although by less than
the nominal interest rate differential would indicate; (2) Treasury
commended the comprehensive and thorough GAO analysis and supported
its conclusions; (3) USDA closely monitored foreign purchases of
farmland at the state and county levels, and foreign ownership
accounted for 1 percent of privately held American farmland in fiscal
year 1988; (4) HUD believes that the inflow of foreign capital into
the U.S.  property market has been beneficial in providing American
citizens with greater access to capital for investment in real
estate; and (5) the Department of Defense commented on the types of
information gathering and analysis performed by the administration in
reviewing national security-related foreign investments. 

Elderly Americans:  Health, Housing, and Nutrition Gaps Between the
Poor and Nonpoor

(Testimony, 06/24/92, GAO/T-PEMD-92-10). 

GAO discussed issues involving the elderly poor and near-poor
population, focusing on the size and characteristics of the
population; and the relationship between poverty and various aspects
of health care, housing, and nutrition.  GAO noted that the elderly
poor and near-poor:  (1) in 1990, totaled 19 percent of the elderly
population, or 5.7 million persons, excluding homeless and borderline
poverty level elderly; (2) tend to be elderly women, minorities, and
persons over 75 years of age; (3) rely on Social Security benefits as
their major source of income; (4) receive 95.7 percent of health
insurance coverage through Medicare, but limitations and uncovered
costs of the Medicare system account for major expenses to the
elderly poor; (5) experience a higher degree of negative health
status; (6) benefit from public rental housing, section 8
certificates and vouchers, and section 202 housing; (7) have an
inadequate nutritional intake on which data are limited; and (8) have
low enrollment in government assistance programs. 

Defense Force Management:  Housing Allowances for Military Personnel
in North Carolina and Virginia

(Letter Report, 06/22/92, GAO/NSIAD-92-159). 

Military personnel not living in government quarters are eligible for
a monthly subsidy to rent or buy private-sector housing.  In 1991,
about 48,000 military personnel received housing allowances in North
Carolina, and about 80,000 received them in Virginia at a total
estimated monthly cost of more than $63 million.  In comparing the
total housing allowance that military personnel received with fair
market rent rates set by the Department of Housing and Urban
Development for various housing areas, GAO has discovered several
inconsistencies.  For example, the total housing allowance rate for
some military families exceeds the two-bedroom fair market rate for
all housing areas in North Carolina; and in Elizabeth City, North
Carolina, the allowance exceeds the three-bedroom-unit rate. 

Impoundment Control:  Comments on the President's Fifth Through
Seventy-Second Special Impoundment Message for Fiscal Year 1992

(Letter Report, 04/29/92, GAO/OGC-92-7). 

On March 20, 1992, the President submitted to the Congress his fifth
through 72nd special messages for fiscal year 1992, which report 68
proposed rescissions of budget authority affecting the Department of
Housing and Urban Development, the Department of the Interior, and
the Environmental Protection Agency.  GAO reviewed each rescission
message and found them to be in accordance with the Impoundment
Control Act.  Funds proposed for rescission must be made available
for obligation unless the Congress passes a rescission bill within 45
days after receiving the proposal.  GAO and the Office of Management
and Budget agree that the 45-day period is scheduled to end on May
20, 1992. 

Resolution Trust Corporation:  Oversight of Certain Loan Servicers
Needs Improvement

(Letter Report, 04/24/92, GAO/GGD-92-76). 

Under agreements entered into by failed thrifts, the Resolution Trust
Corporation (RTC) relies on thousands of commercial banks, thrifts,
and mortgage companies to help service its inventory of mortgages and
loans.  In December 1991, these institutions--known as inherited
third-party servicers--serviced more than 300,000 mortgages and
loans, which is more than one-third of RTC's total inventory of
mortgages and loans held by thrifts in receivership.  These servicers
are to collect and remit to RTC millions of dollars in principal and
interest payments each month.  GAO concludes that the lack of
oversight of inherited servicers could jeopardize RTC's recovery of
asset values by decreasing loan collections and reducing the market
value of loan portfolios.  Also, without evaluating servicer
performance, RTC cannot identify and take action against servicers
that are not performing satisfactorily. 

Impoundment Control:  President's Fourth Special Message for Fiscal
Year 1992

(Letter Report, 04/22/92, GAO/OGC-92-6). 

On March 10, 1992, the President submitted to the Congress his fourth
special impoundment message for fiscal year 1992.  This message
reports 30 proposed rescissions of budget authority.  GAO has
reviewed these proposals and found them to be in accordance with the
Impoundment Control Act. 

Impoundment Control:  President's Third Special Message for Fiscal
Year 1992

(Letter Report, 04/20/92, GAO/OGC-92-8). 

This letter discusses the status of budget authority the President
proposed for rescission in his third special impoundment message for
fiscal year 1992, but for which the Congress has not yet passed a
rescission bill.  The funding involves programs at the Department of
Housing and Urban Development, the Agency for International
Development, and the Forest Service.  All the budget authority
withheld under this rescission proposal has been released for
obligation by the Office of Management and Budget.  Funds proposed
for rescission must be made available for obligation unless the
Congress passes a rescission bill within 45 days after receiving the
proposal.  The 45-day period ended on April 4, 1992, without the
Congress having passed such legislation. 

Impoundment Control:  President's Third Special Message for Fiscal
Year 92

(Letter Report, 03/25/92, GAO/OGC-92-5). 

On February 19, 1992, the President submitted to the Congress his
third special impoundment message for fiscal year 1992.  This message
reports one proposed rescission of budget authority and one new
deferral.  It also revises the amount of one deferral already
reported.  GAO found the deferrals, which involve international
disaster assistance funds at the Agency for International Development
and timber salvage funds at the Forest Service, to be in accordance
with the Impoundment Control Act.  Funds proposed for rescission must
be made available for obligation unless the Congress acts on
rescission bills within a 45-day period after receiving the proposal. 
GAO and the Office of Management and Budget agree that the 45-day
period ends on April 4, 1992. 

Budget Issues:  Compliance Report Required by the Budget Enforcement
Act of 1990

(Letter Report, 02/14/92, GAO/AFMD-92-43). 

The Budget and Enforcement Act of 1990 requires GAO to certify that
each order the President issues and each report the Office of
Management and Budget and the Congressional Budget Office issue under
section 254 complies with the act's requirements or indicate the
respects in which it does not.  In GAO's opinion, the Office of
Management and Budget and Congressional Budget Office reports
substantially complied with the act except for Office of Management
and Budget's Within-Session Sequester Report and the President's
order implementing it.  GAO believes that the within-session
sequestration was unnecessary.  GAO also found several cases--minor
in nature--in which either or both of these offices were not in
compliance with the act.  GAO also discusses (1) some areas of the
act that were interpreted differently by the Office of Management and
Budget and the Congressional Budget Office, (2) other implementation
issues, and (3) technical corrections the Congress may want to make
to the act to clarify certain areas and allow more precise
implementation. 

Tax Policy:  Summary of GAO Work Related to Expiring Tax Provisions

(Testimony, 01/28/92, GAO/T-GGD-92-11). 

This testimony summarizes GAO's work on 5 of the 12 expiring tax
provisions that were last extended by the Tax Extension Act of 1991. 
These provisions include the tax exemption for qualified mortgage
revenue bonds, tax credit for targeted jobs, tax credit for
low-income rental housing, tax credit for qualified research
expenditures, and exclusion for employer-provided educational
assistance benefits.  Of the 12 provisions, these 5 account for about
70 percent of the estimated foregone federal revenues in fiscal years
1992 through 1996. 

Drinking Water:  Inadequate Regulation of Home Treatment Units Leaves
Consumers at Risk

(Chapter Report, 12/27/91, GAO/RCED-92-34). 

Concerned about the safety of drinking water, consumers have
increasingly turned to home water treatment units.  Gross sales of
these units grew almost 50 percent during the latter half of the
1980s, totaling nearly $1.8 billion by 1990.  Yet, as sales of these
units have increased, so have reports of questionable sales practices
and false claims of product effectiveness.  This report looks at (1)
the consumer and health concerns associated with these units, (2) the
regulatory controls that protect the public from fraudulent claims or
increased health risks, and (3) whether the Environmental Protection
Agency or other federal agencies should take additional steps to
protect the public. 


MAJOR CONTRIBUTORS
=========================================================== Chapter 10

Stephen F.  Palincsar
Shirley A.  Perry
Nancy A.  Simmons

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