Results Act: Observations on the Department of Housing and Urban
Development's Draft Strategic Plan (Correspondence, 08/08/97,
GAO/RCED-97-224R).

Pursuant to a congressional request, GAO reviewed the Department of
Housing and Urban Development's (HUD) draft strategic plan, focusing on:
(1) whether the draft plan fulfills the requirements of the Government
Performance and Results Act; (2) the plan's overall quality; (3) whether
it reflects HUD's key statutory authorities; (4) whether it reflects
interagency coordination for crosscutting programs, activities, or
functions that are similar or complementary to those of other federal
agencies; (5) whether it addresses major management challenges that GAO
had previously identified; and (6) whether HUD has adequate data and
information systems to provide reliable information for measuring
results.

GAO noted that: (1) while the draft strategic plan is a positive step
toward developing a strategic plan, HUD needs to do additional work
before its draft plan can fulfill the requirements of the act; (2) the
plan is missing one of the required components--a description of how
program evaluations were used in establishing the strategic objectives,
including a schedule of future evaluations; (3) HUD's treatment of the
other five required components is often vague and does not yet fully
comply with the act or the Office of Management and Budget's guidance;
(4) HUD's two mission statements do not define the agency's basic
purpose or focus on its core programs, and the mission statement that
focuses on restoring the public's trust is not clearly supported by
HUD's strategic objectives; (5) while the strategic objectives cover
HUD's major program activities, the statements do not clearly describe
how HUD will assess whether it is making progress toward achieving those
objectives; (6) the discussion of HUD's strategies to achieve its
objectives and the relationship of annual performance goals to the
strategic objectives could be improved by discussing the resources
needed to achieve its objectives and the type of information needed for
its performance goals, as required by the act; (7) the draft plan does
not cover the time frames specified by the act; (8) HUD's draft
strategic plan generally reflects consideration of the key statutes
authorizing the Department's programs; (9) although the draft strategic
plan discusses HUD's consultation process and recognizes its many
community partnerships, the draft plan does not yet reflect whether HUD
coordinated with other federal agencies; (10) furthermore, the draft
plan does not identify programs and activities that are crosscutting or
similar to those of other federal agencies; (11) HUD could improve the
draft strategic plan by more fully integrating the management reform
plan with the strategic plan, providing specific information about how
the strategic plan addresses financial reporting and material internal
control weaknesses identified by HUD's Office of Inspector General, and
addressing HUD's efforts to integrate its financial and management
information systems; and (12) HUD's capacity to provide reliable
information on the achievement of its strategic objectives is uncertain
because the draft strategic plan has not yet been developed sufficiently
to identify the types and sources of data needed to evaluate its
progress toward achieving HUD's objectives.

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

 REPORTNUM:  RCED-97-224R
     TITLE:  Results Act: Observations on the Department of Housing and 
             Urban Development's Draft Strategic Plan
      DATE:  08/08/97
   SUBJECT:  Interagency relations
             Public administration
             Program evaluation
             Internal controls
             Information resources management
             Federal aid for housing
             Agency missions
             Strategic planning
             Financial management
             Congressional/executive relations
IDENTIFIER:  HUD 2020 Management Reform Plan
             
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Cover
================================================================ COVER



September 1997


GAO/RCED-97-224R

HUD's Draft Strategic Plan

(385689)


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

  AIDS - x
  BOP - Federal Bureau of Prisons
  CFO - Chief Financial Officers
  DEA - Drug Enforcement Administration
  DOJ - Department of Justice
  FBI - Federal Bureau of Investigation
  FHA - Federal Housing Administration
  HOPE - Housing Opportunities for People Everywhere
  HOME - x
  HUD - x
  INS - Immigration and Naturalization Service
  NPR - National Performance Review
  OIG - Office of Inspector General
  FMFIA - Federal Manager's Financial Integrity Act
  OMB - Office of Management and Budget

Letter
=============================================================== LETTER


B-277585

August 8, 1997

The Honorable Richard K.  Armey
Majority Leader
House of Representatives

The Honorable John Kasich
Chairman, Committee on the Budget
House of Representatives

The Honorable Dan Burton
Chairman, Committee on Government Reform
 and Oversight
House of Representatives

The Honorable Bob Livingston
Chairman, Committee on Appropriations
House of Representatives

Subject:  Results Act:  Observations on the Department of Housing and
Urban Development's Draft Strategic Plan

On June 12, 1997, you asked us to review the draft strategic plans
submitted by the Cabinet departments and selected major agencies for
consultation with the Congress as required by the Government
Performance and Results Act of 1993 (the Results Act).  This report
is our response to that request concerning the Department of Housing
and Urban Development (HUD). 

HUD is at a critical juncture in its history.  The Department has
been the subject of sustained criticism for weaknesses in its
management and oversight abilities that have made it vulnerable to
fraud, waste, abuse, and mismanagement and have led to our
designating it as a "high-risk" area.  On June 26, 1997, HUD
announced its HUD 2020 Management Reform Plan to address the ongoing
operational, informational, and management concerns.  HUD based much
of its July 14, 1997, draft strategic plan on the proposals
introduced in its management reform plan, which addresses many of our
concerns and could help HUD's attempts to resolve many of its
problems. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :1

Specifically, you asked us to review HUD's draft strategic plan and
assess (1) whether it fulfills the requirements of the Results Act
and to provide our views on its overall quality; (2) whether it
reflects HUD's key statutory authorities; (3) whether it reflects
interagency coordination for crosscutting programs, activities, or
functions that are similar or complementary to those of other federal
agencies; (4) whether it addresses major management challenges that
we had previously identified; and (5) whether HUD has adequate data
and information systems to provide reliable information for measuring
results. 

We reviewed the July 14, 1997, draft strategic plan that HUD provided
to congressional committees.  It is important to recognize that HUD's
final plan is not due to the Congress and the Office of Management
and Budget (OMB) until September 30, 1997.  Furthermore, the Results
Act anticipated that perfecting the process of developing a strategic
plan may take several planning cycles and that each agency's
strategic plan would continue to be refined as future planning cycles
occur.  Thus, our comments reflect a snapshot of HUD's plan at this
time.  We recognize that this process is dynamic and that HUD is
continuing to revise the draft with input from OMB, congressional
staff, and other stakeholders. 

Our overall assessment of HUD's draft strategic plan was generally
based on our knowledge of HUD's operations and programs, our numerous
reviews of the agency, and other information available at the time of
our assessment.  Specifically, the criteria we used to determine
whether HUD's draft strategic plan complied with the requirements of
the Results Act were the Results Act itself and OMB's guidance on
developing the plans.\1 To judge the overall quality of the draft
plan and its components, we used our May 1997 guidance for
congressional review of the strategic plans (GAO/GGD-10.1.16).  To
determine whether HUD's draft plan contained information on
interagency coordination and addressed management problems and
whether the Department had adequate systems in place to provide
reliable information on performance, we relied on our general
knowledge of HUD's operations and programs, the results of our
previous reports, the HUD Office of Inspector General's (OIG) report
on HUD's fiscal year 1996 financial statements, and HUD's reporting
under the Federal Managers' Financial Integrity Act (FMFIA) for
fiscal year 1996.  In determining whether HUD's draft plan reflects
its major statutory responsibilities, we coordinated our review with
the Congressional Research Service and reviewed material in HUD's
fiscal year 1998 budget explanatory notes for an overview of the
agency's primary functions and activities.  Because HUD's draft
strategic plan relied heavily upon its management reform plan, we
also reviewed that plan to help ensure a complete assessment of HUD's
efforts.  Our work was performed in July and August 1997.  We
obtained comments on a draft of this report from HUD, and its
comments and our responses are incorporated in this report. 


--------------------
\1 Circular A-11, Part 2:  Preparation and Submission of Strategic
Plans and Annual Performance Plans, June 1997. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Established in 1965, HUD is the principal federal agency responsible
for programs dealing with housing, community development, and fair
housing opportunities.\2 Through its programs, HUD currently provides
rental assistance to more than 4 million lower-income households, has
insured mortgages for about 23 million homeowners, has helped
revitalize over 4,000 communities, and helps ensure that access to
housing is equally available to all.  HUD is responsible for the
expenditures of significant amounts of tax dollars.  The total budget
outlays for HUD's programs were just over $36 billion in fiscal year
1996, the vast majority of which was for assisted and public housing
programs.  HUD also is responsible for managing more than $426
billion in mortgage insurance, $497 billion in guarantees of
mortgage-backed securities, and about $170 billion in prior years'
budget authority for which it has future financial commitments. 

The Results Act requires that an agency's strategic plan contain the
following six specific components:  (1) a comprehensive mission
statement covering its major functions and operations; (2) general
goals and objectives, including outcome-related goals and objectives,
for its major functions and operations; (3) a description of how its
general goals and objectives will be achieved, including processes,
skills and technology, and resources required; (4) a description of
the relationship between the annual performance goals and the goals
and objectives in the strategic plan; (5) an identification of the
key external factors affecting the achievement of general goals and
objectives; and (6) a description of how program evaluations were
used in establishing the goals and objectives, with a schedule of
future evaluations.  OMB Circular A-11, Part 2, provides additional
guidance and more detailed directions for preparing a strategic plan. 

According to HUD, its strategic planning process began in the fall of
1993, the same year that the Results Act was passed.  Subsequently,
HUD initiated a series of reinvention efforts to define its mission,
develop the agency's priorities, and refine its performance measures. 
On June 26, 1997, HUD announced a management reform plan that sought
to realign HUD's programs and activities, increase accountability,
and restore the public's trust. 

HUD's draft strategic plan is built around the following two missions
that reflect the concepts embodied in its management reform plan: 
(1) "empower people and communities to improve themselves and succeed
in today's time of transition" and (2) "restore the public trust by
achieving and demonstrating competence." Its draft plan includes
eight strategic objectives that are intended to reflect HUD's core
business functions:\3

  -- "empower communities to meet local needs;

  -- "help communities and States establish a full continuum of
     housing and services designed to assist homeless individuals and
     families achieve permanent housing and self-sufficiency;

  -- "increase access by families and individuals to affordable
     housing in standard condition;

  -- "reduce the isolation of low-income groups within a community or
     geographical area;

  -- "provide empowerment and self-sufficiency opportunities to
     support low-income individuals and families as they make the
     transition from dependency to work;

  -- "provide economic opportunities for low- and moderate-income
     persons through creation and retention of jobs;

  -- "increase homeownership opportunities, especially in Central
     Cities, through a variety of tools, such as expanding access to
     mortgage credit; and

  -- "promote equal housing opportunities for those protected by
     law."

HUD's draft strategic plan also discusses its interdependence on the
management reform plan and on legislative proposals, which generally
include consolidating or reforming many of its programs.  HUD states
that its success depends on the success of all three components--the
strategic plan, the management reform plan, and the legislative
proposals. 


--------------------
\2 For additional information on HUD, see The Department of Housing
and Urban Development:  Information on Its Role, Programs, and Issues
(GAO/RCED-97-173R, July 21, 1997). 

\3 The Results Act requires that agencies establish "general goals
and objectives," which HUD calls "strategic objectives." Throughout
the report, we use HUD's terminology when discussing the provisions
of its draft strategic plan. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :3

While the current draft strategic plan is a positive step toward
developing a strategic plan, HUD needs to do additional work before
its draft plan can fulfill the requirements of the Results Act.  The
plan is missing one of the required components--a description of how
program evaluations were used in establishing the strategic
objectives, including a schedule of future evaluations.  Also, HUD's
treatment of the other five required components is often vague and
does not yet fully comply with the Results Act or OMB's guidance. 
HUD's two mission statements do not define the agency's basic purpose
or focus on its core programs, and the mission statement that focuses
on restoring the public's trust is not clearly supported by HUD's
strategic objectives.  While the strategic objectives cover the
agency's major program activities, the statements do not clearly
describe how HUD will assess whether it is making progress toward
achieving those objectives.  Also, the discussion of HUD's strategies
to achieve its objectives and the relationship of annual performance
goals to the strategic objectives could be improved by discussing the
resources needed to achieve its objectives and the type of
information needed for its performance goals, as required by the
Results Act.  Furthermore, the draft plan does not cover the time
frames specified by the Results Act. 

HUD's draft strategic plan generally reflects consideration of the
key statutes authorizing the Department's programs.  The Results Act
does not require a statement of an agency's major statutory
responsibilities, but HUD describes the major programs that it
believes will enable it to fulfill its various strategic objectives. 
This information helps stakeholders understand the complexity and the
diversity of HUD's activities. 

Although the draft strategic plan discusses HUD's consultation
process and recognizes its many community partnerships, the draft
plan does not yet reflect whether HUD coordinated with other federal
agencies.  Furthermore, the draft plan does not identify programs and
activities that are crosscutting or similar to those of other federal
agencies.  For example, although the draft plan repeatedly refers to
the importance of welfare reform to HUD's goals, it does not reflect
coordination with the Department of Health and Human Services, the
primary federal agency responsible for welfare reform activities. 

HUD's draft strategic plan acknowledges that significant management
challenges face the agency and broadly describes how these problems
will be addressed.  However, HUD could improve the draft strategic
plan by more fully integrating the management reform plan with the
strategic plan, providing specific information about how the
strategic plan addresses financial reporting and material internal
control weaknesses identified by HUD's OIG, and addressing HUD's
efforts to integrate its financial and management information
systems. 

HUD's capacity to provide reliable information on the achievement of
its strategic objectives is uncertain because the draft strategic
plan has not yet been developed sufficiently to identify the types
and sources of data needed to evaluate its progress toward achieving
HUD's objectives.  However, the plan identifies some annual
performance goals for which obtaining reliable data could be
difficult because of weaknesses with HUD's current financial and
management information systems. 


   HUD'S DRAFT STRATEGIC PLAN DOES
   NOT YET FULFILL THE
   REQUIREMENTS OF THE RESULTS ACT
------------------------------------------------------------ Letter :4

Although HUD's draft strategic plan includes five of the six
components required by the Results Act, HUD needs to do additional
work before its plan can meet the act's requirements.  HUD's draft
plan does not fully address several issues and contains no
information on one component--a description of how program
evaluations were used to prepare the strategic plan, including a
schedule of future evaluations.  Additionally, the time frame covered
by the draft plan (fiscal years 1999 to 2003) does not meet the
Results Act's requirement that a strategic plan should cover the 5
years following the fiscal year in which it is submitted.  Because
the strategic plan is required no later than September 30, 1997, it
should include at least fiscal year 1998.  In providing comments, HUD
officials said that they had used various program evaluations to
develop the information discussed in the draft plan and agreed to
incorporate this information in the next version of the draft.  They
also agreed to change the time frame covered by the plan. 


      OVERALL QUALITY OF THE DRAFT
      STRATEGIC PLAN
---------------------------------------------------------- Letter :4.1

Overall, HUD's draft strategic plan does not yet meet the
requirements of the Results Act and could be improved by more
completely describing its efforts to develop the strategic plan and
its long-term vision.  Our specific observations on the five required
components included in HUD's draft strategic plan as well as
observations on the consultation process are discussed in the
following sections. 


      MISSION STATEMENT
---------------------------------------------------------- Letter :4.2

HUD's "twin missions" of empowering people and communities and
restoring the public's trust do not meet the Results Act's
requirement that an agency's comprehensive mission statement cover
its major program functions and operations.  HUD's mission statement
needs to provide a clear vision of why the Department exists, what it
does to meet its mission, and the strategic objectives that it feels
are critical to performing that mission effectively. 

HUD's mission statement that focuses on empowering communities and
people is very broad, does not identify HUD's unique contribution
toward achieving its mission, and does not include the mechanisms by
which it can accomplish its mission.  The mission statement that
focuses on restoring the public's trust reflects the goals of HUD's
management reform plan, rather than defining HUD's major program
functions and operations.  Although we recognize the importance of
the management reform plan to HUD, the reform initiatives in that
plan should be seen as the means by which the Department intends to
more effectively achieve its statutory mission. 

HUD may want to consider revising its mission statement to capture
its core programmatic goals, such as increasing the supply of
affordable housing and opportunities for homeownership, reducing
homelessness, fighting for fair housing, and promoting jobs and
economic development in communities. 


      STRATEGIC OBJECTIVES
---------------------------------------------------------- Letter :4.3

The Results Act requires that an agency's strategic plan contain
objectives for its major functions and operations.  HUD's draft
strategic plan provides eight strategic objectives for accomplishing
its mission, and they generally cover the Department's major
functions and operations, as required by the Results Act.  However,
given that HUD's draft plan does not discuss the relationship between
the objectives and annual performance goals and does not include the
program evaluation section, it is not clear how HUD will assess its
progress in achieving its objectives.  For example: 

  -- The first strategic objective--to empower communities to meet
     local needs--does not clearly describe how HUD can empower
     communities, what local needs HUD can help communities meet
     through its array of core programs, or how the results will be
     measured. 

  -- The third strategic objective--to increase access by families
     and individuals to affordable housing in standard
     condition--does not clearly define how HUD will measure its
     success in expanding access to housing.  This objective also
     does not (1) realistically reflect the problems related to the
     escalating costs of renewing Section 8 contracts, which will
     soon account for half of HUD's discretionary budget authority,
     or (2) explain the impact of the planned demolition of public
     housing on HUD's ability to provide more housing in the near
     future. 

  -- The fifth strategic objective is to provide empowerment and
     self-sufficiency opportunities to support low-income persons
     making the transition from dependency to work, and the sixth
     strategic objective is to create and retain jobs for low- and
     moderate-income persons.  Measuring the results of HUD's
     programs for achieving these objectives, as stated, will be
     difficult because of the myriad federal programs and public and
     private efforts at the state and community levels that provide
     similar services. 

Furthermore, it is not clear how HUD's strategic objectives support
implementing the mission that focuses on restoring the public's
trust. 

HUD could improve its draft strategic plan by (1) phrasing the
strategic objectives to more readily allow for assessment of whether
they are being achieved and (2) clarifying how these objectives
support HUD's mission to restore the public's trust. 


      STRATEGIES FOR ACHIEVING THE
      STRATEGIC OBJECTIVES
---------------------------------------------------------- Letter :4.4

HUD's draft strategic plan lacks an adequate description of how its
strategic objectives will be achieved; HUD discusses only the
operational process or programs it intends to use to achieve them. 
Furthermore, those discussions omit references to some of the major
issues facing HUD, such as the problems related to the Federal
Housing Administration's (FHA) insuring multifamily rental units
where HUD pays high subsidies to landlords, the financial risk is
high, and the units are in poor physical condition. 

Additionally, HUD's discussion of its strategies to achieve its
strategic objectives does not describe, as required by the Results
Act, the resources, such as staff, capital, and technologies, that
are needed to achieve those objectives.  While the introduction to
the draft plan states that it includes "an analysis of the required
resources" for each of the plan's eight strategic objectives, HUD
does not discuss the resources required.  A related footnote states
only that HUD is working on linking its budget and performance
measures. 

HUD's draft strategic plan also does not include several elements
specified in OMB Circular A-11, Part 2.  The draft plan does not
include (1) schedules for initiating or completing significant
actions, including underlying assumptions or projections; (2)
projections of the funding and the staff that will be available over
the time frame covered by the strategic plan; and (3) an outline of
the processes for communicating the goals and objectives throughout
the agency and for assigning accountability to managers and staff for
achieving the strategic plan's objectives. 

HUD's draft strategic plan could be improved if it included a full
discussion of the items required by the Results Act and included in
OMB's guidance.  HUD's draft plan states that the Department cannot
fulfill its empowerment mission if it fails to protect the public's
trust, build competence and excellence from within, and restore the
confidence and faith of the American public.  Because of the
significance of the management reform initiatives to achieving its
mission, HUD may wish to consider incorporating the management reform
plan as part of its strategies to achieve its strategic objectives. 


      RELATIONSHIP BETWEEN ANNUAL
      PERFORMANCE GOALS AND HUD'S
      STRATEGIC OBJECTIVES
---------------------------------------------------------- Letter :4.5

The Results Act requires an agency's strategic plan to describe how
the annual performance goals relate to the strategic objectives. 
While an agency's strategic plan is not required to identify specific
performance goals, OMB's guidance states that the plan should
describe (1) the type, the nature, and the scope of the performance
goals; (2) the relationship between the performance goals and the
strategic objectives; and (3) the relevance and use of the
performance goals in helping to determine an agency's achievement of
its strategic objectives. 

HUD's draft strategic plan provides limited examples of annual
performance goals under each of its eight strategic objectives, but
it does not describe the relationship between them, as required by
the Results Act.  The draft plan also does not provide the more
detailed information, suggested by OMB, which would allow for a
complete analysis of this relationship.  Without such a description,
evaluating whether HUD's performance goals are reasonable and will
allow HUD to assess its progress toward meeting its strategic
objectives is difficult.  For example, under the third strategic
objective--increasing access to housing--it is unclear how
demolishing units or removing and replacing nonviable stock will help
HUD achieve its objective, especially in an environment of decreasing
resources in which funds for replacement housing may not be
available.  It is also unclear how reducing the number of troubled
public housing authorities will increase access to affordable
housing. 

We also noticed an inconsistency in HUD's discussion of its annual
performance goals.  The third strategic objective states that one of
HUD's annual performance goals is to improve the average scores in
HUD's Public Housing Management Assessment Program.  However, the
discussion under this same objective indicates HUD intends to replace
that program with a better assessment method.  In providing comments
on this report, HUD officials said that they were committed to the
Public Housing Management Assessment Program and the plan should have
indicated that HUD is looking at ways to improve that program. 

To meet the requirements of the Results Act, HUD needs to ensure that
its strategic plan discusses the linkage between the annual
performance goals and the strategic objectives and that those goals
logically support the strategic objectives. 


      KEY EXTERNAL FACTORS
---------------------------------------------------------- Letter :4.6

HUD's draft strategic plan only partially meets the requirement of
the Results Act and the guidance provided by OMB to describe key
factors that are external to an agency and beyond its control that
could significantly affect the achievement of its objectives.  OMB
Circular A-11 states that a strategic plan should describe each key
external factor, indicate its link with a particular strategic
objective, and describe how the achievement of the objective could be
affected by the factor.  HUD briefly discusses the external factors
in its draft strategic plan without linking them to specific
strategic objectives.  Additionally, while the draft plan discusses a
few external factors--such as HUD's limited control over numerical
goals and outputs of local, community-based plans; and conditions in
the financial markets, where high interest rates can affect the
feasibility of homeownership--other important external factors are
not discussed.  For example, the draft plan does not discuss the role
that tax policy plays in influencing housing markets and HUD's own
programs and that, consequently, might have an impact on the
achievement of strategic objective seven--increase homeownership
opportunities, especially in cities.  Also, there is no discussion of
how cities' fiscal problems, which lead to lower-quality schools and
other services, could adversely affect HUD's efforts to achieve this
strategic objective. 

Furthermore, although both HUD's draft strategic plan and the
management reform plan refer to proposed legislative changes, the
draft plan does not discuss the impact on the strategic plan or on
HUD's programs if the proposals are not enacted. 


      OTHER OBSERVATIONS
---------------------------------------------------------- Letter :4.7

The draft strategic plan describes HUD's strategic planning process
as being based on the development of the Secretary's priorities, from
which the Department develops its program management plans that
include annual performance goals.  The draft plan also states that
this process has resulted in greater management accountability.  We
note that HUD did not solicit and consider its stakeholders' views
and suggestions during the development of its draft strategic plan. 
HUD's draft plan indicates that HUD is just now in the process of
sharing its completed draft plan with the various organizations and
agencies that may be interested.  Additionally, the draft plan
indicates limited meetings with the Congress in which process issues
were discussed, rather than mission and goals. 

HUD's final strategic plan needs to take full advantage of the
consultation process that provides the opportunity for HUD and the
Congress to evaluate the continuing appropriateness of HUD's mission,
goals, and strategies.  This is particularly important given that (1)
HUD is pursuing a major management realignment while it is developing
its strategic plan, (2) the Congress is considering legislative
proposals that would overhaul HUD's programs and activities, and (3)
some of HUD's eight strategic objectives may overlap those of other
agencies.  In providing comments on this report, HUD officials said
that the revised plan would include a more in-depth discussion of
their consultation process. 


   HUD'S DRAFT STRATEGIC PLAN
   GENERALLY REFLECTS KEY
   STATUTORY AUTHORITIES
------------------------------------------------------------ Letter :5

HUD's draft strategic plan generally reflects the key statutes
authorizing HUD's programs.  The Results Act does not require a
statement of the major statutory responsibilities, but within each
section HUD describes the major programs it believes will help it
fulfill its various strategic objectives.  This information will help
stakeholders understand the complexity and diversity of HUD's
activities. 

Various HUD housing programs are described in the discussion under
strategic objective three.  HUD describes programs that it will use
to expand rental and homeownership opportunities, including Housing
Opportunities for People Everywhere (HOPE) VI, the HOME Investment
Partnerships, Community Development Block Grants, FHA multifamily
insurance, Sections 202 and 811 (which provide housing for the
elderly and disabled), and Housing Opportunities for Persons With
AIDS. 

Similarly, HUD's community development programs are discussed under
strategic objectives five and six.  HUD describes the following
programs:  Empowerment Zones and Enterprise Communities; Economic
Development and Supportive Services grants, including Bridges to Work
and the Neighborhood Networks; Tenant Opportunity Program; Public
Housing Drug Elimination; Community Development Block Grants;
Youthbuild; Section 108 Loan Guarantee Program; and Economic
Development Initiatives grants.  HUD also mentions Section 3 of the
Housing and Urban Development Act of 1968, as amended by the Housing
Act of 1992, which requires that economic opportunities generated by
financial assistance from HUD shall, to the greatest extent feasible,
be given to low- and very low-income persons. 


   HUD'S STRATEGIC PLAN DOES NOT
   YET INDICATE SIGNIFICANT
   INTERAGENCY COORDINATION
------------------------------------------------------------ Letter :6

Although the draft strategic plan discusses HUD's consultation
process and recognizes HUD's community partnerships, the draft plan
does not clearly indicate whether HUD coordinated with other federal
agencies in developing its plan.  Specifically, the draft plan does
not identify crosscutting programs or those that may duplicate
programs administered by other federal agencies.  Most significantly,
although both the draft strategic plan and the management reform plan
make specific references to the importance of HUD's participation in
welfare reform and plans to implement the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996, the draft strategic plan
provides no evidence that HUD has coordinated with the Department of
Health and Human Services. 

The draft strategic plan lists HUD's extensive partnerships with
various community organizations and working groups and it
specifically mentions HUD's relationship with other federal agencies
in three areas:  (1) HUD's coordination with the Department of
Transportation on a welfare-to-work transportation proposal that is
tied to a HUD demonstration program operating in five cities, (2)
HUD's partnerships with the Environmental Protection Agency and the
Department of the Treasury on the redevelopment of urban toxic sites,
and (3) HUD's responsibility for monitoring government-sponsored
enterprises' compliance with fair-lending laws and establishing goals
for the enterprises' purchase of mortgages in urban, rural, and
underserved areas.  However, the strategic plan does not clearly
indicate whether coordination has occurred in other areas.  For
example: 

  -- The second strategic objective seeks to help communities and
     states establish a full continuum of housing and services to
     assist the homeless, which would include such services as
     immediate shelter and transitional housing with appropriate
     supportive services, such as job training and placement, child
     care, and health services.  To ensure the most effective use of
     resources, these efforts should be coordinated with the
     Departments of Labor and Health and Human Services. 

  -- The fifth and sixth strategic objectives, which seek to empower
     families and individuals via economic development opportunities
     and to support the welfare reform initiatives, do not indicate
     coordination with the Departments of Labor or Health and Human
     Services. 

  -- The eighth strategic objective seeks to promote equal housing
     opportunity under the law and specifically states that HUD
     proposes to double the number of housing discrimination cases
     sent to the Department of Justice for prosecution over the next
     4 years.  The draft strategic plan does not indicate
     coordination with the Department of Justice on this objective,
     although it would seem to directly affect Justice's workload. 

In providing comments on this report, HUD officials indicated that
they have coordinated with some federal agencies, including the
Department of Health and Human Services, and that the coordination
will be included in the final strategic plan. 


   DRAFT STRATEGIC PLAN ADDRESSES
   SOME MANAGEMENT CHALLENGES, BUT
   MORE INFORMATION IS NEEDED
------------------------------------------------------------ Letter :7

In recent years, we and others have reported on the major management
problems that HUD faces in carrying out its mission.  HUD's draft
strategic plan acknowledges some of the management problems it faces
and broadly describes how these problems will be addressed.  However,
HUD could improve the draft plan by more fully integrating its
management reform plan into its draft strategic plan; by providing
specific information about how the strategic plan addresses financial
reporting and material internal control weaknesses identified by
HUD's OIG; and by addressing HUD's efforts to integrate its
information and financial management systems, including how these
efforts and strategies support the achievement and the measurement of
HUD's strategic objectives. 

In 1994, we designated HUD as a high-risk area because of four
long-standing, agencywide deficiencies:  weak internal controls,
inadequate information and financial management systems, an
ineffective organizational structure, and an insufficient mix of
staff with the proper skills.  In February 1997, we reported that HUD
had formulated approaches and initiated actions to address these
deficiencies.  However, we also reported that HUD's efforts were far
from reaching fruition; that HUD's programs continued to pose a high
risk to the government in terms of their vulnerability to waste,
fraud, abuse, and mismanagement; and that HUD and the Congress would
need to work together to successfully eliminate these deficiencies.\4

HUD's draft strategic plan acknowledges the significant management
challenges the Department faces and indicates that they will largely
be addressed through its management reform plan and the mission
statement that focuses on restoring the public's trust.  The draft
strategic plan summarizes the management reform plan and links each
strategic objective to the management reform plan by including in the
discussion of each objective a listing of applicable sections of the
management reform plan.  However, OMB's circular states that agencies
should provide details in their strategic plans when the achievement
of goals is predicated on a significant change in resources, in
technological levels or capacities, or in the mode or functioning of
the processes.  HUD's proposed management reforms are calling for
changes similar to those discussed in OMB's circular.  Specifically,
the management reform plan includes reducing the number of programs
and/or activities from over 300 to about 70; reducing staffing levels
from about 10,600 as of the beginning of fiscal year 1997, to 7,500
by the end of fiscal year 2000; retraining the majority of staff;
reorganizing the 81 field offices; modernizing and integrating the
financial and management information systems; developing and
strengthening internal controls; and increasing program monitoring
and measurement.  To be consistent with OMB's guidance, HUD should
more fully integrate the management reform plan into the strategic
plan by (1) describing the relationship of the specific changes
planned to each strategic objective; (2) indicating the impact that
the change, or lack thereof, would have on reaching each strategic
objective; (3) providing timetables for implementing the changes; (4)
estimating the resources needed to bring about the changes; and (5)
describing the legislation required to implement the changes. 

In April 1997, HUD's OIG issued a qualified opinion on the
Department's fiscal year 1996 consolidated financial statements.\5
One qualification related to HUD's inability to accurately estimate
excess subsidies being paid under its rental assistance programs and
to comply with generally accepted federal accounting standards for
reporting loans and loan guarantees.\6 The report also identified
seven material internal control weaknesses, including HUD's failure
to have a control structure in place to help ensure that $19 billion
in rental subsidies are based upon tenants' correct income; HUD's
failure to adequately monitor multifamily projects; FHA's lack of
sufficient staff and administrative resources needed to mitigate
multifamily housing losses and properly manage troubled assets; and
HUD's lack of an adequate system to determine staff needs.  HUD's
draft strategic plan does not clearly address these financial
reporting and material internal control weaknesses. 

Finally, HUD--like many federal agencies--faces a major challenge in
managing information resources to ensure that information technology
tools and resources are aligned to support the accomplishment of its
mission.  Neither the draft strategic plan nor the management reform
plan address (1) HUD's current efforts, ongoing since 1991, to
integrate its management information systems; (2) HUD's current
strategies for managing information technology; or (3) how these
efforts and strategies support the achievement and measurement of
HUD's strategic objectives.  HUD's information technology strategy
should contain information on how the agency plans to comply with the
Clinger-Cohen Act of 1996.  This act calls for agencies to implement
a framework of modern technology management based on practices
followed by leading private-sector and public-sector organizations
that have successfully used technology to dramatically improve their
performance and meet their strategic goals. 


--------------------
\4 High-Risk Series:  Department of Housing and Urban Development
(GAO/HR-97-12, Feb.  1997). 

\5 U.S.  Department of Housing and Urban Development Audit of Fiscal
Year 1996 Financial Statements, Office of Audit, HUD, Office of
Inspector General (97-FO-177-003, Apr.  10, 1997). 

\6 These standards essentially mirror the Federal Credit Reform Act
of 1990. 


   HUD'S CAPACITY TO PROVIDE
   RELIABLE INFORMATION ON THE
   ACHIEVEMENT OF ITS STRATEGIC
   OBJECTIVES IS UNCERTAIN
------------------------------------------------------------ Letter :8

To measure progress in achieving its strategic objectives, HUD needs
reliable data.  HUD's draft strategic plan has not yet been developed
sufficiently to identify the types and the sources of the data needed
to evaluate HUD's progress in achieving its strategic objectives. 
However, the draft plan identifies some annual performance goals for
which obtaining reliable and accurate data could be difficult because
of weaknesses in HUD's current financial and management information
systems.  For example: 

  -- The April 1997 report by HUD's OIG on the Department's
     consolidated financial statements for fiscal year 1996 cited as
     material internal control weaknesses both HUD's efforts to
     improve its systems and FHA's accounting and financial
     management systems.  The report stated that while HUD has been
     improving its financial management systems, delays have occurred
     in improving some these systems and some of FHA's systems either
     do not provide needed management information or do not provide
     reliable information.  Also, in our 1996 telephone survey, a
     third or more of the HUD field directors interviewed rated the
     following areas of information systems as fair to poor:  the
     accuracy of the data, the ease of generating reports, and the
     usefulness of the information systems that support monitoring
     and other program management activities.\7

  -- HUD's self-assessment reporting under the Federal Managers'
     Financial Integrity Act continues to state that most of its
     systems do not comply with FMFIA.  In its fiscal year 1996
     accountability report, which included the assessment of
     compliance with FMFIA, HUD stated that 85 of its systems did not
     comply with FMFIA.\8 According to HUD's information as of
     November 1996, HUD had a total of 98 systems and subsystems
     classified as either financial or mixed (providing both
     financial and program information).\9

Once HUD develops its final annual performance goals, it will need to
determine whether system modifications or new systems are needed to
capture and provide the essential management and measurement
information.  Such information is needed to measure compliance with
the Results Act and to comply with the Chief Financial Officers Act
of 1990, which requires the development of cost information to enable
the systematic measurement of performance and the integration of
program, accounting, and budget systems. 


--------------------
\7 HUD:  Field Directors' Views on Recent Management Initiatives
(GAO/RCED-97-34, Feb.  12, 1997).  We surveyed 155 persons serving as
Directors of Single-Family Housing, Directors of Multifamily Housing,
Directors of Community Planning and Development, and Directors of
Public Housing in the 40 largest HUD field offices in terms of staff. 

\8 U.S.  Department of Housing and Urban Development Accountability
Report Fiscal Year 1996 (Washington, D.C.:  Mar.  1997). 

\9 The actual number of systems in HUD's inventory may vary,
depending on how the systems and subsystems are counted. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :9

We provided HUD with a draft of this report for review and comment. 
We met with HUD's Deputy Chief Financial Officer for Finance; the
Director, Office of Internal Control and Audit Resolution; and other
HUD officials, who said that HUD generally agreed with our
observations and will consider the changes we suggested as it moves
forward in completing the strategic plan.  They emphasized that the
strategic planning process is an iterative one and that they expect
that the strategic plan will continue to improve. 

HUD officials expressed two principal concerns with our draft report. 
First, they disagreed with our assessment of the mission statements
and stated that these statements are consistent with the management
reform plan and reflect HUD's direction.  We continue to believe that
the mission statement in HUD's strategic plan should reflect HUD's
major program functions and operations, as required by the Results
Act, rather than restate the goals of HUD's management reform plan. 
Second, HUD disagreed with our assessment that its capacity to
provide reliable assessment data is uncertain.  HUD officials stated
that the Department has had problems with its data integrity but is
addressing them.  They added that their March 1997 accountability
report noted that significant improvements have been made in some
systems.  While we agree that the report noted some improvements, it
also stated that most of the agency's systems do not comply with
FMFIA.  Nonetheless, we clarified the discussion of HUD's actions in
connection with assessment data in our report.  HUD officials also
provided some technical comments that have been incorporated into the
report as appropriate. 


---------------------------------------------------------- Letter :9.1

As arranged with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this letter for
30 days.  At that time, we will send copies of this report to the
Ranking Minority Members of your Committees; the Chairmen and Ranking
Minority Members of other Committees that have jurisdiction over
HUD's activities; the Secretary of Housing and Urban Development; and
the Director, Office of Management and Budget.  Copies will be made
available to others on request. 

Major contributors to this product are Nancy Boardman, J.  Davis,
Larry Goldsmith, John McGrail, and Nancy Simmons.  Please call me at
(202) 512-7631 if you or your staffs have any questions concerning
this report. 

Stanley J.  Czerwinski
Associate Director, Housing and Community
 Development Issues

*** End of document. ***