HUD's Fiscal Year 2000 Budget Request: Additional Analysis and
Justification Needed for Some Programs (Letter Report, 09/03/1999,
GAO/RCED-99-251).

Pursuant to a congressional request, GAO reviewed the Department of
Housing and Urban Development's (HUD) fiscal year (FY) 2000 budget
request, focusing on: (1) whether HUD has the capacity to implement, and
adequate justification to support, the new or significantly expanded
programs and initiatives included in its budget request; (2) the
potential for HUD to use available unexpended balances in some programs
to reduce its need for new funding in other programs; and (3) whether
HUD adequately justified its use of or requests for funds in the
following five areas: (a) disaster assistance; (b) salaries and
expenses; (c) Schedule C and non-career Senior Executive Service
positions; (d) rural housing and economic development; and (e)
international housing initiatives.

GAO noted that: (1) out of its total FY 2000 budget request of over $28
billion, HUD has requested $731 million for 19 programs and initiatives
that were not funded in FY 1999; (2) however, in GAO's March 1999
testimony on HUD's FY 2000 budget request, GAO questioned HUD's capacity
to manage this volume of additional work because of the time-consuming
organizational reform occurring at this time and the substantial
resources HUD would need to implement new programs; (3) in GAO's review
of one of the largest of these new programs--Contract Administration,
with $209 million requested for FY 2000--GAO found that HUD has not
accomplished two tasks that are critical for effective implementation;
(4) as proposed, the Contract Administration program would contract out
for the administration of 20,000 multifamily properties in HUD's
project-based section 8 housing assistance inventory; (5) although HUD
has taken steps to identify qualified contractors, HUD has not
established, to date, essential oversight procedures nor assigned key
staff to monitor the contractors' performance; (6) furthermore, HUD
recently decided to exclude certain properties from the program, which
could reduce the need for fully funding the request; (7) therefore, HUD
is not prepared to fully implement the program and likely will not need
the full amount of its FY 2000 budget request for this program; (8) the
potential exists for HUD to better manage unexpended balances in a
number of programs and for some unobligated funding to be used to meet
other needs; (9) however, determining the full extent to which
unexpended balances are available for other purposes will require
additional information and analysis by HUD; (10) GAO's limited review
identified some programs--such as the Homeless Assistance, Rent
Supplement, and Rental Assistance programs--in which the need for
carrying unobligated balances is questionable; (11) it also showed that
the unobligated, unexpended balances for three selected programs are
caused by several factors, including HUD's lengthy process for making
competitive awards and funding allocation policies that delay providing
funds to grantees; (12) taking steps to scrutinize and make more
productive use of its unobligated balances is important because these
balances have grown over the past 3 years for some of HUD's existing
programs; and (13) for 4 of the 5 areas GAO reviewed, GAO found that HUD
had adequate support for its budget request.

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

 REPORTNUM:  RCED-99-251
     TITLE:  HUD's Fiscal Year 2000 Budget Request: Additional Analysis
	     and Justification Needed for Some Programs
      DATE:  09/03/1999
   SUBJECT:  Housing programs
	     Community development programs
	     Federal agency reorganization
	     Budget administration
	     Grant administration
	     Presidential budgets
	     Unexpended budget balances
	     Contract administration
	     Federal grants
IDENTIFIER:  HUD 2020 Management Reform Plan
	     Community Development Block Grant
	     HUD Community Development Disaster Assistance Program
	     HUD Public Housing Drug Elimination Program
	     HUD Contract Administration Program
	     HUD Empowerment Zones and Enterprise Communities Program

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Cover
================================================================ COVER

Report to Congressional Requesters

September 1999

HUD'S FISCAL YEAR 2000 BUDGET
REQUEST - ADDITIONAL ANALYSIS AND
JUSTIFICATION NEEDED FOR SOME
PROGRAMS

GAO/RCED-99-251

HUD's Fiscal Year 2000 Budget Request

(385780)

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

  CDBG - Community Development Block Grant
  FEMA - Federal Emergency Management Agency
  FHA - Federal Housing Administration
  HUD - Department of Housing and Urban Development
  OIG - Office of the Inspector General
  VA - Veterans Administration

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

B-283159

September 3, 1999

The Honorable Christopher S.  Bond
Chairman
The Honorable Barbara A.  Mikulski
Ranking Minority Member
Subcommittee on VA, HUD, and Independent Agencies
Committee on Appropriations
United States Senate

The Honorable James T.  Walsh
Chairman
The Honorable Alan B.  Mollohan
Ranking Minority Member
Subcommittee on VA-HUD, and Independent Agencies
House of Representatives

As the Department of Housing and Urban Development (HUD) looks
forward to fiscal year 2000, it faces a combination of limited funds
and organizational changes.  From fiscal year 1997 through fiscal
year 1999, HUD's discretionary budget increased from $16 billion to
$26 billion, primarily because of the need for additional budget
authority to renew current and increasing numbers of contracts with
rental property owners who provide housing to low-income households. 
In February 1999, HUD proposed an increase to $28 billion to meet its
needs in fiscal year 2000.  In mid-April 1999, the Congress approved
a concurrent resolution that established the congressional budget for
the U.S.  government for fiscal year 2000 and set forth budgetary
levels for fiscal years 2001 through 2009.  Industry groups
representing housing and community development practitioners believe
that these levels could severely limit the amount of new budget
authority available for HUD's programs. 

In addition to managing the Department within federal budget
limitations, HUD is responding to internal changes resulting from the
implementation of its 2020 Management Reform Plan announced in June
1997.  The plan's purpose is to develop ways to manage HUD's programs
and people more efficiently and responsibly.  Under this plan, HUD is
creating new ways of doing business throughout the Department,
including centralizing many activities that had been conducted in
HUD's field offices. 

We agreed with your offices that our review of HUD's fiscal year 2000
budget request would respond to the following questions: 

  -- Does HUD have the capacity to implement, and adequate
     justification to support, the new or significantly expanded
     programs and initiatives included in its budget request? 

  -- What is the potential for HUD to use available unexpended
     balances in some programs to reduce its need for new funding in
     other programs? 

  -- Has HUD adequately justified its use of or requests for funds in
     the following five areas:  disaster assistance, salaries and
     expenses, Schedule C and non-career Senior Executive Service
     positions, rural housing and economic development, and
     international housing initiatives? 

To answer these questions, we relied on HUD's budget documents, as
well as information obtained from HUD's program and budget officials,
HUD's Office of Inspector General, other studies published on
selected programs, and our analysis of HUD's unexpended balance
reports for fiscal years 1996 through 1998.  We also drew on current
or completed work on specific programs.  Our scope and methodology
are discussed in detail in appendix I. 

   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Out of its total fiscal year 2000 budget request of over $28 billion,
HUD has requested $731 million for 19 programs and initiatives that
were not funded in fiscal year 1999\1 (see app.  II).  However, in
our March 1999 testimony on HUD's fiscal year 2000 budget request, we
questioned HUD's capacity to manage this volume of additional work
because of the time-consuming organizational reform occurring at this
time and the substantial resources HUD would need to implement new or
expanded programs.\2 In our current review of one of the largest of
these programs--Contract Administration, with $209 million requested
for fiscal year 2000ï¿½we found that HUD has not accomplished two tasks
that are critical for effective implementation.  As proposed, the
Contract Administration Program would contract out for the
administration of an additional 20,000 multifamily properties in
HUD's project-based Section 8 housing assistance inventory.  Although
HUD has taken steps to identify qualified contractors, HUD has not
established, to date, essential oversight procedures nor assigned key
staff to monitor the contractors' performance.  Furthermore, HUD
recently decided to exclude certain properties from the program,
which could reduce the need for fully funding the request. 
Therefore, HUD is not prepared to fully implement the program and
likely will not need the full amount of its fiscal year 2000 budget
request for this program. 

The potential exists for HUD to better manage unexpended balances in
a number of programs and for some unobligated funding to be used to
meet other needs.  However, determining the full extent to which
unexpended balances are available for other purposes will require
additional information and analysis by HUD.  Our limited review
identified some programs--such as the Homeless Assistance, Rent
Supplement, and Rental Assistance programs--in which the need for
carrying unobligated balances is questionable.  It also showed that
the unobligated unexpended balances for three selected programs--the
Community Development Block Grant (CDBG), Community Development
Disaster Assistance, and Drug Elimination programsï¿½are caused by
several factors, including HUD's lengthy process for making
competitive awards and funding allocation policies that delay
providing funds to grantees.  Taking steps to scrutinize and make
more productive use of its unobligated balances is important because
these balances have grown over the past 3 years for some of HUD's
existing programsï¿½including some programs, such as Homeless
Assistance ($45 million) and Urban Empowerment Zones ($105 million),
for which HUD has requested $234 million in increased funding for
fiscal year 2000.  Furthermore, we reviewed obligated balances in
three programs mentioned above and identified ï¿½excessiveï¿½ balances in
HUD's Community Development Block Grant Program\3 that totaled about
$360 million.  We also are concerned that HUD does not independently
verify, and therefore cannot ensure, the accuracy of the unexpended
balances reported by its program offices. 

For four of the five areas that you asked about, we found that HUD
had adequate support for its budget request.  In one areaï¿½salaries
and expensesï¿½it did not.  HUD's estimate of its fiscal year 2000
staffing level and the corresponding budget authority to support that
level is not supported with a systematic analysis of its needs.  In
particular, HUD has not completed a cost-benefit analysis of its new
cadre of over 780 ï¿½community buildersï¿½ located in its field offices
and headquarters.\4 However, HUD has taken a positive step by working
with the National Academy of Public Administration to develop and
test a staffing allocation model that should allow the Department to
better estimate its resource requirements. 

--------------------
\1 We focused on programs and initiatives that the Congress did not
fund in fiscal year 1999 or that could be significantly expanded in
fisal year 2000; however, some of the programs and initiatives may
have received funding in prior years.  HUD believes that only three
of the programs we identified are new and that the remaining programs
and initiatives represent increases or expansion within existing
programs. 

\2 Comments on HUD's Fiscal Year 2000 Budget Request
(GAO/T-RCED-99-104, Mar.  3, 1999). 

\3 HUD defines excessive balances as unspent amounts greater than 1.5
times a grantee's annual award. 

\4 This is a new position that HUD began to staff in 1998.  Persons
in this position assist communities in making effective use of HUD
programs and services and represent HUD in the community. 

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

Established in 1965, HUD was staffed by 9,157 employees as of June
1999 and is the principal federal agency responsible for programs in
four areas--housing assistance, community development, housing
finance, and certain regulatory issues. 

  -- Housing Assistance:  HUD provides (1) public housing assistance
     through allocations to public housing authorities and (2)
     private-market housing assistance under section 8 of the U.  S. 
     Housing Act of 1937 for properties--referred to as project-based
     assistance--or for tenants--known as tenant-based assistance. 
     In contrast to entitlement programs, which provide benefits to
     all who qualify, the benefits of HUD's housing assistance
     programs are limited by budgetary constraints to about
     one-fourth of those who are eligible. 

  -- Community Development:  Primarily through grants to the states,
     large metropolitan areas, small cities, towns, and counties, HUD
     provides community planning and development funds for local
     economic development under its CDBG and Empowerment
     Zone/Enterprise Community programs, housing development and
     related assistance under its HOME program, and assistance to the
     homeless under its McKinney Act Homeless programs.  The funding
     for some programs, such as those for the homeless, may also be
     distributed directly to nonprofit groups and organizations. 
     CDBG funds go to 847 localities and 137 large counties, plus
     3,000 small cities and counties across the nation.  The states
     also receive CDBG funds for distribution to small towns and
     rural counties. 

  -- Housing Finance:  The Federal Housing Administration (FHA)
     insures lenders--including mortgage banks, commercial banks,
     savings banks, and savings and loan associations--against losses
     on mortgages for single-family properties, multifamily
     properties, and other facilities.  The Government National
     Mortgage Association, a government-owned corporation within HUD,
     guarantees investors the timely payment of principal and
     interest on securities issued by lenders of federally insured
     and guaranteed loans.  FHA also administers the General
     Insurance and Special Risk Insurance programs, which include
     specialized single-family mortgage insurance programs, a number
     of multifamily insurance programs, and Title I insurance for
     manufactured homes and lots as well as home improvement loans. 

  -- Regulatory Issues:  HUD is responsible for regulating interstate
     land sales, home mortgage settlement services,
     factory-manufactured housing (prefabricated and mobile homes),
     lead-based paint abatement, and home mortgage disclosures.  HUD
     also supports fair housing programs and is partially responsible
     for enforcing federal fair housing laws. 

The Congress supports HUD's programs through annual appropriations
that are subject to spending limits under the Budget Enforcement Act
of 1990, as amended.  For fiscal year 2000, HUD is seeking about $28
billion in discretionary budget authority.  In combination with
unexpended budget authority from prior years, these funds will help
to support about $34 billion in discretionary outlays, most of which
will be used to provide rental assistance to low-income households.\5
This request represents a 9-percent increase in budget authority over
fiscal year 1999.  In its Fiscal Year 2000 Budget Summary, HUD states
that its proposed budget will provide for the renewal of all Section
8 housing assistance contracts, increases to virtually all program
areas, and continued increases to other areas, such as the CDBG
program and programs to address homelessness, that address
communities' greatest needs.  The summary also states that many
program enhancements will be initiated.  In addition, HUD proposes to
fund several new activities from money set aside within existing
programs, such as CDBG. 

--------------------
\5 Budget authority is the authority provided by federal law to incur
obligations that will result in outlays.  Appropriations are the most
common means of providing budget authority.  Outlays are the measure
of federal spending and are payments to liquidate obligations
incurred over 1 or more years.  Typically, outlays draw from
unexpended funds that were appropriated not only in the current year
but also in prior years.  Therefore, HUD's outlay spending in fiscal
year 2000 will differ from its request for new budget authority. 

   NEW PROGRAMS WILL TAX HUD'S
   CAPACITY, AND ONE OF THE
   LARGEST MAY NOT BE READY FOR
   IMPLEMENTATION
------------------------------------------------------------ Letter :3

In accordance with its 2020 Management Reform Plan, HUD is currently
implementing a complex and far-reaching organizational reform effort
to improve the effectiveness of its operations and to address
long-standing management problems.  In the process, HUD is moving and
retraining many of its employees so that they can staff several new
centralized offices, such as the Financial Management and Real Estate
Assessment Centers.  In this environment, HUD may find that
marshaling the resources necessary to embark on a series of 19 new
programs and initiatives may be difficult.  New or expanded programs
require substantial resources to plan, implement, and manage, and it
is uncertain whether these needed resources will be available as HUD
undergoes the organizational changes outlined in its plan.  While HUD
is making credible progress toward implementing its reforms, we
continue to believe, as we did in our testimony of March 3, 1999,
that the Department may not have the capacity to effectively initiate
and oversee the new or expanded programs being proposed for fiscal
year 2000.  Since the March hearing, HUD has revised its request
slightly by retracting its funding request for 2 of the 19 proposed
initiatives and redirecting those funds to established programs that
HUD believes have already proved their effectiveness (see app.  II
for a listing and a description of all proposed programs that were
not funded in the prior fiscal year).\6

We reviewed HUD's justification for one of the largest of these
programs because of its relatively high dollar value--the Contract
Administration Program--to determine whether the full amount of the
request was justified.  Since 1974, section 8 of the Housing Act of
1937, as amended, has allowed HUD to contract with private property
owners to provide housing assistance on behalf of eligible low-income
households.  Currently, about 4,200 housing assistance contracts are
administered by contract administrators, while HUD field staff
administer the remaining 20,000 contracts.  However, for fiscal year
2000, HUD is requesting $209 million to hire eligible public
agencies, such as public housing authorities or state housing finance
agencies, to administer all 24,200 project-based Section 8 housing
assistance contracts.  Duties performed by contract administrators
include

  -- conducting management and occupancy reviews and taking action on
     health and safety issues and on the results of physical
     inspections;

  -- submitting budgets, paying for Section 8 vouchers, and
     processing, renewing, and adjusting housing assistance payment
     contract rents; and

  -- monitoring owners' actions to address deficiencies in their
     financial statements. 

According to HUD's July 1999 cost-benefit analysis of this proposal,
contracting out for the administration of project-based Section 8
housing assistance could cost as much as $19 million per year more
than administering the program in-house.  HUD officials believe that
the increased cost for contract administrators is justified because,
among other things, it would allow HUD field staff to perform more
property monitoring and owner oversight to ensure that owners are
complying with HUD's regulations, protect against fraud by owners and
tenants, and hold owners accountable for the rental subsidy payments
they receive.  However, before HUD is ready to implement this program
and effectively use the funding it has requested for fiscal year
2000, it needs to complete its planning and implementation of two key
tasks:  (1) establishing and disseminating formal procedures and
performance standards for its staff to use in monitoring the new
contract administrators and (2) adequately staffing the new payment
centers that it has established under its 2020 Management Reform Plan
to manage the program and oversee the contractors. 

We do not believe that HUD will have completed these two tasks in
time to fully implement the Contract Administration Program in fiscal
year 2000.  For the first task, HUD has outlined a schedule for
developing the necessary standards and monitoring plan.  However, at
the time of our review, milestones on HUD's schedule had begun to
slip.  For example, by August 1999, HUD did not have a draft, as it
had planned, of the procedures for identifying and communicating its
performance standards to all the HUD centers, headquarters, and field
offices that are to be responsible for overseeing the contractors and
the properties.  According to a program official, HUD currently plans
to have draft procedures by the end of September 1999 and will make
them final by the end of October 1999.  These procedures are critical
to avoid past problems in overseeing the program--HUD's Office of
Inspector General (OIG) has found instances in which existing
contract administrators did not have the staffing and training needed
to effectively monitor or identify problems in Section 8 properties. 
The OIG also found that some contract administrators were not
performing all required duties, yet HUD was providing them with full
compensation.  \9

Timely completion of the second task is also doubtful.  Since 1997,
HUD has undergone significant staffing changes that have resulted in
reductions and in transfers to new positions and locations.  While
these changes are nearly complete, some locations are still
understaffed, and newly placed staff are still being trained in their
new responsibilities.  According to the OIG, inadequate staffing in
HUD's field offices already has resulted in insufficient oversight of
existing Section 8 contract administrators.  Moreover, in its review
of HUD's financial statements, the OIG cited the need for better
monitoring of contract administrators as a material weakness in
monitoring multifamily projects.\10 We believe that HUD has taken a
positive step by working with the National Academy of Public
Administration to develop a methodology to fully assess its staffing
needs.  However, until HUD completes and applies this methodology in
the fall of 1999, fully staffs its centers, and retrains its staff,
its ability to effectively implement this program and use all of the
funding it has requested in fiscal year 2000 will be questionable. 

Furthermore, changes HUD has recently made to the program could
reduce the need for the full amount of its request for the Contract
Administration Program.  HUD plans to exclude properties that are
owned by HUD, in foreclosure, referred to the Enforcement Center, or
owned by parties who no longer intend to participate in the Section 8
housing assistance program.  HUD based its proposed funding request
on the need to contract out the administration of about 1.1 million
housing units.  However, according to a HUD official, recently
excluded properties could reduce the number of units which, in turn,
may reduce the need for fully funding the proposed program.  HUD
could not provide a firm estimate of the number of housing units to
be excluded. 

--------------------
\6 HUD has asked the Congress to redirect to other housing programs
the (1) $10 million earmarked within the CDBG program for Metro Job
Links and (2) $25 million earmarked for the Regional Affordable
Housing Initiative within the HOME Investment Partnership program. 
However this request has not been approved.  Interim Audit of Bond
Refundings of Section 8 Projects, (93-HQ-119-004, Oct.  1992). 
Multi-Region Audit of Refunding of Bonds for Section 8 Assisted
Projects, (93-HQ-119-0013, Apr.  30, 1993). 

\9 Advisory Report on Section 8 Contract Administration,
(99-BO-119-0801, Oct.  7, 1998). 

\10 U.S.  Department of Housing and Urban Development Audit of Fiscal
Year 1998 Financial Statements, (99-FO-177-0003, March 29, 1999 pp. 
31-34.)

   POTENTIAL EXISTS FOR UNEXPENDED
   BALANCES TO BE USED MORE
   EFFECTIVELY
------------------------------------------------------------ Letter :4

Unobligated balances that are not needed to meet current requirements
in several of HUD's programs may be available to meet other needs,
but additional analysis is needed on unobligated balances before the
availability of these balances can be determined.  In addition,
proposed increases in about eight programs, amounting to $234
million, raise questions because most of these programs have carried
unobligated and undisbursed obligated balances over the last 3
years.\11 We also found excessive obligated but unexpended balances
(excessive balances are those that are greater than 1.5 times the
annual grant amount) in HUD's Community Development Block Grant
Program amounting to $360 million.  We are concerned about the
accuracy of all unexpended balances\12 --both obligated and
unobligated--reported by HUD because most are not independently
verified.\13 HUD officials told us, however, that they are improving
their analysis and reporting in this area through data cleanup
efforts and improved data reporting systems.  Although most of these
efforts have been focused on Section 8 housing assistance programs,
officials said that improvements will occur over time in other
programs.  Finally, we are concerned about delays in approving and
awarding grants for some HUD programs and the contribution these
delays have to creating unobligated balances. 

HUD reported on September 30, 1998, that it had unexpended balances
of about $154 billion.  This amount consists of both obligated ($113
billion, or 74 percent) and unobligated funds ($41 billion, or 26
percent) and is spread among programs that receive both discretionary
and mandatory funds.  Valid reasons exist for HUD to have unexpended
funds.  For example, HUD and its grantees and contractors often need
to expend funds for multiyear construction projects and for housing
assistance contracts that cover periods as long as 40 years and
involve thousands of landlords.  In addition, by law, FHA must
maintain a reserve to cover potential losses in its loan portfolio. 
Funding for this reserve is mandatory and must equal at least 2
percent of the over $380 billion in the outstanding balance of
insurance in force that FHA had guaranteed as of September 30, 1998. 

--------------------
\11 Obligated funds are funds allocated under binding agreements that
will result in outlays.  These funds remain in HUD's budget accounts
until all contractual payments are made.  Unobligated funds are funds
that have not been obligated and remain available for obligation
under law.  HUD has broken its unobligated funds into two
classifications:  reserved, or administratively set aside for a
project, entity, or activity; and unreserved, or fully available for
obligation under law. 

\12 Unexpended balances are funds accumulated from previous years
that have not been used to make payments.  These balances include
both undisbursed obligated and unobligated balances.  The total
unexpended balance ($154 billion) differs slightly from the balance
reported in HUD's Fiscal Year 1998 Financial Statement Report of
March 29, 1999.  This difference exists primarily because HUD updated
amounts reported in the Department's year-end balance reports in
preparing the financial statements and, in part, because of rounding
differences. 

\13 In its audit of HUD's fiscal year 1998 financial statements,
HUD's OIG states as a ï¿½reportable conditionï¿½ that HUD's procedures
for identifying and deobligating funds that are no longer needed to
meet its obligations are not effective.  The OIG attributes this
condition to offices either not reviewing unliquidated obligations or
not doing it in a timely manner. 

      YEAR-END UNEXPENDED BALANCES
      RAISE QUESTIONS ABOUT NEED
      FOR NEW DISCRETIONARY BUDGET
      AUTHORITY
---------------------------------------------------------- Letter :4.1

In its fiscal year 2000 budget documents, HUD estimates that it will
have approximately $5 billion in unobligated discretionary budget
authority at the end of fiscal year 1999 (see app.  III).  Because
this estimate is significantly lower than the $14 billion HUD
reported in its year-end unexpended balance report for fiscal year
1998, we worked with HUD's Office of Budget to determine the current
status and causes of unexpended program balances that are not
obligated for specific program needs.  HUD officials told us that
some programs either do not need those balances for future needs or
that the program's need is not immediate.  For other programs,
additional analysis by HUD is needed to justify the Department's
carrying the unobligated balances forward. 

For example, in two housing assistance programs--Rent Supplement and
Rental Assistance Payments--HUD reported unreserved, unobligated
balances amounting to $930.3 million, as of September 30, 1998. 
Through contracts with property owners, these programs provide
supplemental rent payments to owners on behalf of low-income tenants. 
HUD has approved no new contracts for either program since 1973.  The
initial funding for these long-term contracts may have been
insufficient because of rent increases.  Accordingly, the Congress
appropriated supplemental funding in 1983 so that HUD could amend the
contracts with additional resources.  Approximately $1.5 billion was
provided by the Supplemental Appropriations Act of 1983 to fund
anticipated contract amendment needs over the lives of these two
programs.  HUD believes that the current unobligated balances should
provide sufficient funds to cover the programs' future needs.  HUD
also stated that predicting the state of the economy over the terms
of these contracts is not an exact science; thus, it did not believe
that the funds remaining in the accounts should be viewed as excess. 
However, this conclusion is not based on a contract-by-contract
analysis, as HUD recently has done for its project-based Section 8
rental assistance program.\14 That analysis revealed the amount of
obligated funding available to each contract and whether shortfalls
are expected through the end of the contract term that would require
the contracts to be amended using as yet unobligated funds.  In our
view, without such an analysis of amendment needs of the Rent
Supplement and Rental Assistance Programs, HUD lacks sufficient
information to determine whether the existing unobligated funding
will be needed for these programs or whether some is available for
rescission and reappropriation to these programs on an as-needed
basis. 

Greater attention to unobligated balances in smaller programs is also
needed.  For example, two programs--Nonprofit Sponsor and
Youthbuild--have unreserved and unobligated balances of $5 million
and $400,000, respectively.  According to HUD officials, these
amounts are not needed to meet future requirements and could be
considered for rescission, even though they are small relative to
balances in some other programs. 

In addition, HUD has proposed increases in several existing programs
that have carried unobligated balances from fiscal year 1996 through
fiscal year 1998.  As table 1 shows, eight discretionary programs for
which HUD has requested funding increases amounting to $234 million
for fiscal year 2000 carried unobligated balances in 1998, most since
1996.  Several of these programs also carried obligated balances that
had not yet been disbursed.  Our review disclosed why some of these
unobligated funds have not been obligated.  For example, unobligated
balances in the CDBG program are due to an extensive awards process
to accommodate the increased number of set-asides in the CDBG
program.  Program officials cited similar reasons for balances
observed in HUD's Homeless Assistance Program, including a deliberate
two-step application process that HUD says both it and the grantees
believe maximizes program results even though the process takes
longer.  For the Urban Empowerment Zone program, HUD does not grant
funding to the zone until the zone submits and has received approval
for all of its required planning documents.  According to HUD
officials, the Department is using its technical assistance funds for
this program to assist the zones in developing their planning
documents in order to accelerate the obligation process. 

                                         Table 1
                         
                          Requested Budget Increases for Fiscal
                            Year 2000 Programs with Historical
                                   Unobligated Balances

                                  (Dollars in millions)

                                                       Year-end unobligated balances
                                                   --------------------------------------
                                                                                    9/30/
                      FY 1999   FY 2000             9/30/96   9/30/97   9/30/98        99
Program/initiative    enacted   request  Increase  (actual)  (actual)  (actual)    (est.)
-------------------  --------  --------  --------  --------  --------  --------  --------
Community Planning
 and Development
Community              $4,750    $4,775       $25      $726      $777      $832        $0
 Development Block
 Grant\a
Homeless Assistance       975     1,020        45       888       955     1,019         0
 \a
Housing                   225       240        15        \b        36        40         0
 Opportunities for
 Persons With
 AIDS\a
HOME Investment         1,600     1,610        10       182       210       236         0
 Partnership
 Grants\a
Brownsfield                25        50        25        \b        \b        25         0
 Redevelopment
Urban Empowerment          45       150       105        \b        \b         4         0
 Zones\a
Policy Development
 and Research
Research and               38        40         2         2         3        12         0
 Technology\a
Fair Housing and
 Equal Opportunity
Fair Housing               40        47         7        13         8        23         0
 Activities\a
=========================================================================================
Total                  $7,698                $234
-----------------------------------------------------------------------------------------
\a Also carried undisbursed obligated balances in 1998. 

\b Balances were not reported in HUD's Year-end Unexpended Balance
Reports. 

When presenting its budget in recent years, HUD has assumed that
large unobligated balances would be obligated by year-end. 
Historically, however, significant amounts of these balances have
remained at year-end, which conflicts with guidance from the Office
of Management and Budget that requires federal agencies to provide
the Congress with a realistic estimate of each program's unobligated
balance, if any.  In addition to the programs shown in table 1 with
estimated zero balances, HUD estimates that 12 other programs will
have zero balances for fiscal year 1999, but these programs
historically have had unobligated balances (see app.  III).  Accurate
estimates are needed to give congressional decisionmakers better and
more useful information for making budget decisions. 

Although our review did not focus as much on programs with obligated
unexpended balances as on those with unobligated balances, we believe
that in some cases obligated funding warrants scrutiny.  For example,
HUD's regulations require CDBG grantees to expend their funds in a
timely manner; however, the grantees do not always do so.  Despite a
prohibition on carrying balances that are more than 1.5 times as
large as a grantee's annual block grant allocationï¿½which HUD defines
as ï¿½excessive balancesï¿½--259 entitlement grantees, or 26 percent, had
balances as of March 31, 1999, that exceeded this restriction.  The
excessive portion amounted to $360 million.  Although HUD has a
process for enforcing its regulation against carrying excessive
balances, it has enforced this regulation only once, according to HUD
officials.  However, according to HUD officials, the Secretary
recently has become personally involved in this matter and
significant follow-up efforts are being made through HUD field
offices, including providing increased technical assistance and
substantially increased efforts in the area of monitoring. 

Although HUD reports that as of May 1, 1999, only $277 million
remains to be obligated in the CDBG program, HUD has not responded to
our request for information on whether recently obligated amounts
have gone to grantees carrying excessive balances.  Comparing
grantees' balances with planned obligations would provide HUD with
the information needed to avoid providing funds to grantees who are
carrying excessive balances and are thus in violation of HUD's
prohibition against such conditions. 

--------------------
\14 As discussed in our July 22, 1998, report, Section 8
Project-Based Rental Assistance:  HUD's Processes for Evaluating and
Using Unexpended Balances Are Ineffective (GAO/RCED-98-202), HUD has
performed such an analysis to determine amendment needs for its
Section 8 project-based rental assistance program. 

      UNEXPENDED BALANCES ARE NOT
      INDEPENDENTLY VERIFIED
---------------------------------------------------------- Letter :4.2

In monitoring its unexpended balances, HUD does not independently
verify the accuracy of the amounts certified and reported by its
various program offices.  Each year, HUD prepares an Unexpended
Balance Report based in part on data provided by its program
offices.\15 In July, HUD's Budget Office prepares an Aging Report
that identifies all program accounts with unexpended balances that
had no activity during the 6-month period ending June 30.  The Budget
Office sends this report to program budget offices for them to
certify whether the funds are still needed.  If needed, the funds
remain obligated to that account; if not, the funds are de-obligated
from the specific project in the program account and made available
for other uses within the existing program.  Funds remain available
for use unless they are statutorily transferred to another account. 
In addition, the Budget Office relies on the program offices'
certifications in order to prepare its annual Statement of Budgetary
Resources for certifying to the Treasury Department, as do other
federal departments and agencies, that all obligations at the end of
the fiscal year are proper. 

HUD's OIG has said, and we agree, that unexpended balances should be
verified before they are reported to Treasury.  Moreover, unexpended
balances should be verified before they are reported on the
Department's Statement of Budgetary Resources.  Although the OIG has
verified Section 8 Assisted Housing funds, which represent a
significant portion of the total reported unexpended balance for
1998, it has not systematically verified the balances reported in
other program accounts.  Verifying balances is important because the
OIG recently found weaknesses in program offices' internal reviews of
obligated balances as well as instances in which program offices
identified but did not subsequently deobligate unneeded
obligations.\16 HUD officials said they are working to improve their
validation process, primarily through a recently implemented data
cleanup effort that independently certifies the estimates for Section
8 contracts.  However, this effort has not been expanded to include
other programs. 

--------------------
\15 Data in the Unexpended Balance Report come from HUD's Government
General Ledger, which contains data imported from program-specific
databases. 

\16 U.S.  Department of Housing and Urban Development Audit of Fiscal
Year 1998 Financial Statements, Mar.  29, 1999. 

      SEVERAL FACTORS IMPEDE THE
      TIMELY OBLIGATION OF FUNDS
---------------------------------------------------------- Letter :4.3

In two programs we reviewedï¿½CDBG and Drug Elimination--we found
substantial growth in unobligated balances from fiscal year 1996
through fiscal year 1998.  In addition, CDBG grantees do not always
spend their funds expeditiously. 

Unobligated balances in HUD's Drug Elimination program grew from $68
million in 1996 to about $346 million in 1998, and unobligated
balances in HUD's CDBG program have grown by more than $50 million
annually since 1996 (see app.  III).  Several reasons account for
these growing unobligated balances.  First, in both programs, HUD's
competitive awards processes have been time-consuming.  For example,
reviewing, rating, and ranking the large volume of Drug Elimination
Grant applications has taken about 14 months, on average, from the
time the funds are appropriated to the time when the awards can be
made.  However, HUD officials believe these grants will be awarded
more quickly after HUD implements a plan to distribute them through a
formula rather than a competitive process in fiscal year 2000. 

In one CDBG program, Disaster Assistance, HUD has accumulated
unobligated balances from 1997 and 1998 Emergency Supplemental
Appropriations totaling $142 million, as of March 3, 1999.  This
balance results primarily because of HUD's policy to hold back a
portion of its emergency funds until the end of the year rather than
to obligate all of them as needed.  This obligation policy contrasts
with that of the Federal Emergency Management Agency (FEMA), which
obligates emergency appropriations from its disaster relief fund as a
disaster occurs.  While HUD's current time frames are comparable to
some of FEMA's obligation time frames for its programs,\17 HUD
officials plan to expedite obligations by changing their program's
policy.  With this policy change, disaster declarations will be
processed individually instead of in batches, which would save over 6
months for some declarations.  If implemented, this and other changes
in the policy would cut the time for obligating funds from almost 2
years to 10 months. 

Other significant differences that affect the obligation of funds
also exist between the two agencies.  For example, HUD's mission in
disaster assistance is to fund unmet needs and to meet the long-term
recovery needs of disaster areas, particularly when they include
low-income communities.  For this reason, the Department must depend
on FEMA to identify communities' unmet needs after disasters are
declared before obligating HUD's emergency funds.  For the 1998
appropriations, FEMA identified unmet needs within 2 months after
HUD's 1998 emergency funds were appropriated.  In addition, HUD's
authority to fund disaster relief is generally granted each year
through an annual emergency supplemental appropriation, which
requires that HUD fund all declared disasters with funds made
available for that year.  FEMA, by contrast, has continuous access to
the Disaster Relief Fund, which provides resources to victims of all
presidentially declared disasters and emergencies.  Consequently,
FEMA has more flexibility than HUD because it can obtain funding as
needed for declared disasters. 

Despite these differences, we believe that HUD could use some parts
of FEMA's approach as the Department moves to expedite its
obligations.  For example, in its annual performance plan, FEMA has
established internal performance standards to increase the timeliness
of services provided to its grantees.  HUD has no such standards. 
Furthermore, FEMA recently received funds totaling $230 million that
were transferred from HUD's Disaster Assistance Program and that
carry the same limitations placed on HUD.  FEMA staff have planned
approaches, as yet untested, for obligating the funds quickly despite
the limitations.  For instance, their initial allocation to states
requires these states to submit projects they want funded within 30
days.  This policy allows FEMA to make award decisions soon after
allocations are made. 

HUD officials indicated that, given the limited funding available to
meet extensive needs, the Department requires substantial needs
analysis in order to make sound award decisions.  HUD currently
obtains this analysis, in part, by requiring the states to submit
action plans.  However, we note that HUD places no time restrictions
on the states for completing these plans, and states have taken from
3 months to 2 years to complete them.  FEMA staff are also
experimenting with conditional obligations that will allow them to
obligate the funds to grantees that meet certain conditions.  In this
way, they can commit the funds quickly under binding agreements with
grantees and still maintain control by placing conditions on the use
of the funds.  Our work also shows that unobligated balances reported
in HUD's unexpended balance report have increased in HUD's CDBG
Disaster Assistance program since 1996--going from $0 in 1996 to $2.7
million in 1998.  HUD budget officials stated, however, that as of
July 13, 1999, only $25,000 remained unreserved. 

--------------------
\17 FEMA's Hazard Mitigation Grant Program and the Public Works
portion of its Public Assistance Program are comparable to HUD's CDBG
Disaster Assistance Program. 

      IN ONE OF FIVE SPECIFIC
      AREAS, HUD DOES NOT HAVE
      ADEQUATE SUPPORT FOR ITS
      BUDGET ESTIMATE
---------------------------------------------------------- Letter :4.4

You asked us to determine whether HUD had adequately supported its
funding in five areas that you believed might affect your
deliberations on the Department's fiscal year 2000 budget request. 
In four of the areasï¿½disaster assistance, Schedule C and non-career
Senior Executive Service positions, rural housing and economic
development, and international housingï¿½we found that HUD's budget was
justified and clearly supported.  However, our review showed that in
the fifth area--HUD's salaries and expensesï¿½adequate support did not
exist. 

Because HUD has not systematically analyzed its requested fiscal year
2000 staffing levels, which include community builders,\18 it cannot
be certain whether it has accurately estimated its need for staffing
resources and therefore the funds to pay for such resources, in
fiscal year 2000.  We commend HUD for the current effort it has under
way with the National Academy of Public Administration.  In this
effort, HUD is testing a process for identifying and justifying its
staffing requirements.  However, until the new process is completed
and implemented throughout the Department, HUD does not have complete
assurance that it has the right number of people to achieve its
mission.  Thus, HUD may not have adequate support for its proposed
fiscal year 2000 staffing level of 9,383 and for its proposed budget
request of $502 million\19 for the management and administration
account, which includes salaries and related expenses. 

HUD's estimated staffing level for fiscal year 2000 has fluctuated
since 1997.  The Department's 2020 Management Reform Plan initially
established a goal of reducing staffing from about 10,500 to 7,500
full-time staff by 2000, a goal subsequently extended to 2002.  In
our March 1998 report on HUD's Reform Plan, we concluded that
although HUD used historical workload data to allocate predetermined
target numbers of staff among different locations or functions, it
did not systematically analyze how many staff it needed to carry out
individual responsibilities or functions.\20 Our conclusion was
consistent with that of HUD's OIG, which reported that the Department
failed to perform a cost-benefit analysis of its 2020 Management
Reform Plan and adopted a target of 7,500 staff without analyzing the
Department's mission and projected workload.  HUD later revised the
staffing level from 7,500 to approximately 9,000\21 and submitted a
cost analysis to the Congress, pursuant to the Conference Report on
HUD's fiscal year 1998 appropriations act. 

According to HUD's OIG, the Department's cost analysis does not
relate the benefits attributable to community builders to the cost of
maintaining a community builder's workforce.  HUD describes the
position of community builder as (1) the initial point of contact for
all elected officials and (2) the critical link for HUD's customers
to access the full range of HUD's programs and services.  In
addition, community builders are to provide a wide variety of
services to communities and customers in their jurisdiction but
should have no role in the preparation, review, or approval of
applications for HUD assistance.  Furthermore, they are to perform
their work in collaboration with Public Trust Officers, who ensure
that federal funds are used appropriately and in compliance with laws
and regulations.  On June 19, 1999, HUD was staffed by 9,157
full-time employees, including 784 community builders--376 internal
HUD-career employees and 408 external hires.  HUD plans to hire 36
additional external community builders by the end of fiscal year
1999.  However, without performing an analysis of the program that
compares costs with benefits, HUD does not know if the program's
benefits are worth the costs of hiring and training community
builders, particularly those hired from outside of HUD, who will
serve only 2- to 4-year terms. 

To improve its resource estimation process, HUD, with the National
Academy of Public Administration, has developed a proposed
methodology for resource management that will allow the Department to
identify and justify its staffing requirements.  HUD is pilot-testing
the methodology at two field offices.  After these tests are
completed, HUD will consider implementing the methodology throughout
the Department for determining and allocating resources. 

--------------------
\18 HUD's 2020 Management Reform Plan created two positions,
Community Builder and Public Trust Officer, to reflect the
Department's mission of empowering people and communities and
protecting the public trust. 

\19 For fiscal year 2000, the requested appropriation is $1.031
billion, which consists of $502 million in budget authority and
authority to transfer $518 million from various FHA accounts; $9
million from GNMA; $1 million in administrative funds from CDBG
(section 108); $150,000 from title VI Indian Federal Guarantees
Program Account; and $200,000 from Indian Housing Loan Guarantee Fund
Program Account. 

\20 HUD Management:  Information on HUD's 2020 Management Reform Plan
(GAO/RCED-98-86, Mar.  20 1998). 

\21 HUD reported that it would maintain this staffing level and
achieve the staffing of 7,500 by 2002 only if (1) the Congress enacts
legislation to consolidate HUD's programs and (2) a substantial
reduction occurs in the number of troubled multifamily assisted
properties and troubled public housing authorities. 

   CONCLUSIONS
------------------------------------------------------------ Letter :5

While we believe that HUD's justification of its fiscal year 2000
budget request is generally clear, accurate, and improved in some
ways over last year's, we have a number of concerns about the
request.  For example, until HUD resolves issues of contractor
monitoring, the Department will not be ready to implement and use in
fiscal year 2000 all of the proposed funding for the largest of its
proposed new programsï¿½Contract Administration.  Furthermore, the
total amount requested for this program could be reduced, given
changes made by the Department to exclude certain properties. 
Regarding the other newly proposed or expanded programs, the
Department's capacity to take on such work will be uncertain until
its new resource management methodology is implemented.  In addition,
the potential exists for HUD to identify unobligated balances in some
programs that, with congressional direction, could be available for
other uses.  However, fulfilling this potential will require HUD to
further scrutinize funding status and analyze needs to determine
whether unobligated balances could be used for alternate purposes. 
This is particularly true in programs for which HUD is requesting
increases in funding but that also have had substantial unobligated
balances in recent years and in cases of excessive balances
identified for grantees in HUD's CDBG program.  Identifying excessive
program balances in the CDBG program would enable HUD to more
efficiently enforce its own regulation and prevent the accumulation
of unexpended balances.  Moreover, because HUD's Office of Budget
relies on unverified information from the program offices to prepare
its reports to the Congress and to the Treasury Department, the
balances in those reports could be subject to error.  Finally, HUD
may have several opportunities to improve the timeliness of its
disaster assistance obligations by employing some of the management
techniques FEMA uses to obligate funds. 

   RECOMMENDATIONS
------------------------------------------------------------ Letter :6

In its fiscal year 1998 audit of HUD's financial statements, HUD's
OIG found that the Department needed to improve its processes for
reviewing obligation balances.  To address that finding and to
improve HUD's management of unexpended balances, we recommend that
the Secretary of Housing and Urban Development direct the
Department's Chief Financial Officer and its Office of Budget to work
with HUD's program offices to independently verify unexpended
balances that are certified by the program offices. 

We also recommend that the Secretary direct the Office of Budget to
work with HUD's program offices to

  -- identify programs with a history of unobligated and undisbursed
     obligated balances, as well as grantees holding excessive
     balances, so that action can be taken to ensure the expeditious
     obligation and expenditure of these funds and

  -- identify and alleviate barriers to the timely obligation of
     funds in HUD's programs. 

Finally, we recommend that the Secretary

  -- provide, prior to letting new contracts for administering
     multifamily housing assistance contracts, written assurances to
     the Senate and House Committees on Appropriations that HUD has
     (1) established firm monitoring procedures for overseeing the
     performance of contract administrators and the condition of the
     properties they administer through the Contract Administration
     Program and (2) amended its budget request to reflect the
     reduction in the scope of the Contract Administration Program
     resulting from the exclusion of certain properties from the
     program and

  -- adopt, where practicable, the practices used by FEMA for
     obligating emergency funding for disaster reliefï¿½provided HUD's
     authority to fund its disaster assistance program does not
     change. 

   AGENCY COMMENTS
------------------------------------------------------------ Letter :7

We provided copies of a draft of this report to HUD for its review
and comment.  While agreeing with much of the report, HUD identified
several areas that it believed should be clarified or better
described. 

First, we said in our draft report that HUD was requesting funding
for 19 new programs and initiatives.  HUD believes, instead, that it
has only three new programs proposed in its fiscal year 2000 budget
request.  We have revised our report to more clearly state that by
new programs and initiatives we mean programs that were either not
funded by the Congress in fiscal year 1999 or were significantly
expanded for fiscal year 2000 and which will result in substantial
increases in HUD's administrative effort.  As a case in point, HUD
refers to the Contract Administration Program as a program that we
characterize as new but that has been authorized since 1937 and
currently is in operation.  We believe that this program illustrates
our point that the substantial increase in this program's scope will
necessitate corresponding increases in planning and administration
that will be required of HUD staff to implement and monitor this
effort.  HUD proposes to expand the program from covering 20 percent
of the project-based inventory, or about 4,500 properties, to
covering 100 percent, or nearly 25,000 properties. 

Second, HUD disagreed with our conclusion that unexpended balance
reports could be subject to error.  HUD said that the unexpended
balance data come from financial systems that are subject to Office
of Inspector General audit via the annual financial statement audit,
which, in turn, received an unqualified audit opinion from the
Inspector General in March 1999.  While the information contained in
HUD's unexpended balance reports originates from HUD's various
accounting systems, not all of these systems are subject to accuracy
checks and verification, even by the Inspector General.  During our
review, HUD officials in the Office of the Chief Financial Officer
told us that information provided by program offices for these
accounting systems is accepted without being independently verified. 
Moreover, as part of its audit of HUD's fiscal year 1998 financial
statements, HUD's Office of Inspector General audited unexpended
balances.  As part of this audit, the Inspector General reported an
internal control weakness related to HUD's need to improve its
processes for reviewing obligation balances.  In this finding, the
Inspector General reported instances in which program information was
incomplete or inaccurate.  Thus, even with HUD's unqualified audit
opinion, we continue to believe, consistent with the Inspector
General's finding, that balances reported could be subject to error
because that information has not been verified. 

Finally, HUD provided information on the roles and responsibilities
of community builders and on the conceptual foundation of the
Community Builder Program, which it contended should allay our
concerns over the relative benefits and costs of this program.  We
continue to believe that a quantitative analysis of the costs and
benefits of the Community Builder Program would provide a valuable
supplement to the extensive qualitative information that HUD has
already prepared to justify the program. 

Although HUD did not comment on our recommendations, it did provide a
number of additional comments.  The complete text of HUD's comments
and our responses are included in appendix V. 

   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

To answer your questions about HUD's fiscal year 2000 budget request,
we reviewed the Department's Congressional Justifications for 2000
Estimates.  We also interviewed appropriate officials in HUD's Office
of the Chief Financial Officer, Budget, Public and Indian Housing,
Housing, and Community Planning and Development to obtain more
information on planned uses for the funding requested.  When
available, we reviewed additional information, such as year-end
reports of unexpended balances and other analyses produced by HUD. 
We performed our work from February through August 1999 in accordance
with generally accepted government auditing standards.  For a more
detailed explanation of our objectives, scope, and methodology, see
appendix I. 

---------------------------------------------------------- Letter :8.1

As arranged with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 30 days after the date of this letter.  At that time, we will
send copies of this report to appropriate congressional committees;
the Honorable Andrew M.  Cuomo, Secretary of Housing and Urban
Development; the Honorable Jacob Lew, Director, Office of Management
and Budget; and other interested parties.  We will also make copies
available upon request. 

If you or your staff have any questions about this report, please
contact me at (202) 512-7631.  Key contributors to this report are
listed in appendix VI. 

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

OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

The objectives of our review of the Department of Housing and Urban
Development's (HUD) fiscal year 2000 budget request were to determine
whether (1) HUD has the capacity to implement, and adequate
justification to support, the new or significantly expanded programs
and initiatives included in its budget request, (2) the potential
exists for HUD to use available unexpended balances in some programs
to reduce its need for new funding in other programs, and (3) HUD has
adequately justified its use of or requests for funds in the
following five areas:  disaster assistance, salaries and expenses,
Schedule C and non-career Senior Executive Service positions, rural
housing and economic development, and international housing
initiatives

To determine whether HUD has the capacity to implement its new or
expanded programs, we relied on work that we completed earlier this
year and reported in our March 3, 1999, testimony.  To update this
work, we obtained information from HUD about its staffing of key
field offices and centers.  To determine whether HUD's justification
for implementing key programs was adequate, we selected the largest
proposed program, Contract Administration, to review in depth.  For
this program, we obtained and reviewed HUD's documentation for the
program's need and its budget request.  We also interviewed HUD
budget and program officials and reviewed pertinent documents they
provided.  Finally, we obtained and reviewed reports by HUD's
Inspector General, as well as GAO reports and other studies related
to contracting, and discussed these programs with outside interest
groups. 

To determine whether HUD had unexpended balances available that it
could use to reduce its request for new budget authority, we reviewed
all HUD discretionary programs with reported year-end unobligated
balances for fiscal year 1998.  We also compared unexpended balance
reports for fiscal years 1996 and 1997 to identify whether growth was
occurring over the 3-year period.  We compared these actual balances
with the estimated balances in the Budget Appendix for the
President's fiscal year 2000 budget request to determine whether HUD
was estimating continued growth in fiscal years 1999 and 2000.  We
reviewed HUD's congressional budget justification documentation to
determine the extent to which HUD is requesting increases in funding
for fiscal year 2000.  With this information about which programs had
significant, long-term, or increasing unobligated balances, we asked
HUD to discuss the Department's expectations for the future use of
these balances and to justify carrying them over to succeeding years. 

To understand the reasons for and implications of HUD's unexpended
balances, we selected three programs to reviewï¿½the Community
Development Block Grant (CDBG), CDBG Disaster Assistance, and Drug
Elimination programsï¿½because of the growth in their unexpended
balances over the last 3 years and HUD's continued requests for full
program funding.  Combined, these programs accounted for about 7
percent of HUD's unexpended balances as of September 30, 1998.  We
also reviewed audit reports prepared by HUD's Office of Inspector
General on HUD's annual financial statements, HUD's fiscal year 1999
annual operating plan, and prior GAO reports on unexpended balances
for HUD's Section 8 program.  In addition, we discussed unexpended
balances with representatives from HUD's Office of Budget and from
the three programs we reviewed.  We also discussed disaster
assistance funding issues with several staff from the Federal
Emergency Management Agency.  Finally, we obtained data on unexpended
balances from HUD's general ledger, which has as its source several
data systems maintained by various HUD program offices.  These
systems had been reviewed by HUD's Office of Inspector General as
part of its audit of HUD's fiscal year 1998 financial statements. 
Therefore, to determine the reliability of HUD's data, we reviewed
the financial statement report and discussed the audit work performed
with the Inspector General's staff.  We determined that the data were
sufficiently reliable for the purposes of this report. 

To determine whether HUD supported its funding requests in the areas
of salaries and expenses, disaster assistance, Schedule C and
non-career Senior Executive Service employees, the Rural Housing and
Economic Development program, and the International Affairs Office,
we interviewed HUD budget and program officials as well as officials
in HUD's Office of Personnel Management, HUD's Office of Inspector
General, and the Office of Management and Budget.  We also obtained
and reviewed reports from HUD's Inspector General and other program
documentation. 

We conducted our work from February 1999 through August 1999 in
accordance with generally accepted government auditing standards. 

NEW PROGRAMS AND INITIATIVES\A IN
HUD'S FISCAL YEAR 2000 BUDGET
REQUEST
========================================================== Appendix II

                                        Table II.1
                         
                           New and Expanded Programs and Budget
                                        Authority

                                  (Dollars in millions)

                                                                                   Budget
Programs and Initiatives                           Notes                    authority\b,c
-------------------------------------------------  ------------------  ------------------
Community Planning and Dev
-----------------------------------------------------------------------------------------
Metro Job Links                                    Set-aside\d                      $[10]
Homeownership Zones                                Set-aside                         [25]
EZ/EC Targeted Technical Assistance                Set-aside                         [10]
Round II Planning and Implementation Grants        Set-aside                         [10]
Citizens Volunteer Housing Corps                   Set-aside                          [5]
Regional Connections                                                                   50
Regional Empowerment Zone Initiative                                                   50
America's Private Investment Companies Credit                                          37
 Subsidy
America's Private Investment Companies Guarantee                                  {1,000}
 Commitment Limit
Homeless Multi-Agency Support Services                                                  5
 Demonstration
Incremental Vouchers for the Homeless              18,000 vouchers                  [104]
Regional Affordable Housing Initiative             Set-aside\d                       [25]
Redevelopment of Abandoned Buildings                                                   50
Public and Indian Housing
Incremental Rental Assistance                      42,000 vouchers                    243
Youth Anti-Drug Diversion Program (Drug                                             [100]
 Elimination Grant Program)
Housing Programs
Contract Administration                                                               209
Elderly Capital Grants/Assisted Living             Set-aside                        [100]
Service Coordinators                               Set-aside                         [50]
Mandatory Program
LIHTC Vouchers for the Elderly                     15,000 vouchers                     87
Total new budget authority for line items not in                                     $731
 brackets or braces
-----------------------------------------------------------------------------------------
\a For this table, we defined new programs and initiatives as any
that the Congress did not fund in fiscal year 1999; however, some of
programs or initiatives may have received funding in prior years. 
HUD believes that only three of the programs are new--Redevelopment
of Abandoned Buildings, America's Private Investment Companies and
Regional Connections.  According to HUD, the other initiatives and
programs we identified represent increases or expansion within
existing programs. 

\b Brackets indicate that a program is funded within another program
in HUD's budget request. 

\c Braces indicate that the amount is a guarantee or insurance limit
and not a request for new budget authority. 

\d HUD has asked the Congress to redirect funds from these programs
to housing programs that HUD believes have proved effective.  HUD
proposes using $10 million slated for Metro Job Links to fund Habitat
for Humanity/Self-Help Homeownership Program within CDBG.  In
addition, HUD proposes redirecting $25 million earmarked for Regional
Affordable Housing Initiative to the HOME program.  Of the total
funds available, $7.5 million would be set aside to fund Capacity
Building for Habitat for Humanity, and the remaining $17.5 million
would be provided as regular HOME formula funding. 

Source:  GAO's analysis of HUD's fiscal year 2000 budget documents. 

DESCRIPTIONS OF NEW PROGRAMS AND
INITIATIVES

Community Planning and Development

Metro Job Links (see note d above)

HUD is requesting $10 million for Metro Job Links, an initiative that
would create or strengthen a welfare-to-work infrastructure that is
place-based and regionally oriented to help connect persons needing
employment to places where jobs are located.  Metro Job Links will
serve families living in housing developments operated by community
development corporations or other housing for persons with low
incomes. 

Homeownership Zones

HUD is requesting $25 million to fund five to eight homeownership
zones that will enable cities to undertake large-scale, single-family
developments in inner city neighborhoods.  HUD maintains that the $25
million in grant funds will create an estimated 1,500 new homeowners. 

Empowerment Zones/Enterprise Communities Targeted Technical
Assistance

HUD is proposing to set aside $10 million for technical assistance
and other support to establish partnerships between nondesignated
Empowerment Zones/Enterprise Communities and to assist the
communities in implementing their strategic plans. 

Round II Planning/Implementation Grants

HUD is proposing to set aside $10 million for meritorious communities
that applied for designation in HUD's second competition as
empowerment zones but were not chosen.  The grant funds will be used
to assist the meritorious communities in implementing portions of
their strategic plans. 

Citizens Volunteer Housing Corps

HUD is requesting $5 million to mobilize a corps of citizens to help
reclaim and rebuild abandoned and dilapidated housing in 80 cities
across the country.  According to HUD, this initiative will
complement and be coordinated with ongoing AmeriCorps programs and
other volunteer initiatives. 

Regional Connections

HUD is requesting $50 million for the Regional Connections program,
which will provide competitive funding to states and partnerships of
local governments (where at least one member is a CDBG entitlement
community) to help them develop and implement new, locally driven
strategies that address regional economic and community development
needs across jurisdictions.  Regional Connections will complement
existing federal programs that promote local and regional
partnership, and influence growth and investment patterns. 

Regional Empowerment Zone Initiative

HUD is requesting $50 million for a new Regional Empowerment Zone
Initiative to help Empowerment Zones/Enterprise Communities link
their economic development strategies to broader metropolitan
regional economies.  HUD plans to award competitive grants to help
current and future Empowerment Zones/Enterprise Communities finance
regional strategies to expand their revitalization efforts, with an
emphasis on increasing the level of youth employment. 

America's Private Investment Companies

HUD is requesting $37 million to subsidize and secure $1 billion in
privately issued federally guaranteed loans to go with $500 million
in private equity commitments to create for-profit venture capital
funds known as America's Private Investment Companies.  This new
program will significantly expand private equity capital for the
creation or relocation of large-scale businesses in distressed
central cities and rural areas.  HUD maintains that the $37 million
federal credit subsidy will leverage an estimated $1 billion in
private capital, thus creating thousands of jobs through direct job
stimulus and spillovers.  HUD and the Small Business Administration
will jointly administer this program. 

Homeless Multi-Agency Support Services Demonstration

HUD is requesting $5 million for a pilot project that will bring
together major federal agencies and departments that have programs to
serve the homeless.  The purpose of this demonstration is to test new
ways to better link and integrate these programs and the services
they provide to improve the efficiency of assisting the homeless and
expanding self-sufficiency results. 

Incremental Vouchers for the Homeless

HUD is requesting $104 million to provide 18,000 new Section 8
vouchers for homeless individuals and families.  These vouchers will
be used to assist homeless persons who have become sufficiently
independent to secure permanent housing. 

Regional Affordable Housing Initiative (see note d above)

HUD is requesting $25 million for the Regional Affordable Housing
Initiative, a competitive pilot program that will address critical
housing needs in targeted metropolitan regions.  This program seeks
to increase the availability of affordable housing in areas with high
job growth and inadequate supplies of affordable housing for low-wage
workers, as well as to promote the creation and implementation of
regional affordable housing strategies. 

Redevelopment of Abandoned Buildings

HUD is requesting $50 million for the Redevelopment of Abandoned
Buildings Initiative, which will provide local governments with
competitive grants to support the demolition of blighted, abandoned
buildings as part of a holistic plan to redevelop properties for
commercial use or for single-family and multifamily housing.  This
3-year program will require significant private-sector and local
government commitment and provide an average of $30,000 per building
to pay for demolition, deconstruction, debris removal, environmental
remediation of soils, and site preparation. 

Public and Indian Housing

Incremental Rental Assistance

HUD is requesting $243 million to provide 42,000 new certificates and
vouchers for Section 8 incremental rental assistance.  This
assistance will be used for various Section 8 activities, including
the Family Unification Program, litigation-related needs, and
portability requirements. 

Youth Anti-Drug Diversion Program

HUD is requesting $100 million for the Youth Anti-Drug Diversion
Program.  This program will emphasize fighting drug-related activity
by youths in public housing and provide mentoring, after-school, and
family-strengthening activities. 

Housing Programs

Contract Administration

HUD is requesting $209 million to procure contract administrators who
will oversee HUD's project-based program.  These non-HUD personnel
will assume many duties currently performed by HUD employees, such as
conducting annual physical inspections, reviewing projects' financial
statements, conducting management and occupancy reviews, and
reviewing management agents among other things. 

Elderly Capital Grants/Assisted Living

HUD is requesting $100 million for a new initiative that will provide
competitive grants to existing HUD subsidized (Section 202) projects
for the elderly that convert some or all units to assisted living
facilities. 

Service Coordinators

HUD is requesting $50 million for service coordinators who will link
elderly or disabled residents of eligible housing with supportive
services provided by community agencies.  The purpose of this program
is to help elderly or disabled persons live independently in their
own homes.  Service coordinators may provide case management, serve
as advocates or mediators, coordinate group programs, or train
housing management staff.  Program funds will be used to pay the
salaries and fringe benefits of service coordinators and related
administrative costs. 

Mandatory Program

Low Income Housing Tax Credit Vouchers for the Elderly

HUD is proposing $87 million in mandatory spending for 15,000 new
vouchers for the elderly.  The vouchers will be targeted to elderly
persons with very low incomes who move into projects constructed
using Low-Income Housing Tax Credits. 

ACTUAL VERSUS ESTIMATED
UNOBLIGATED BALANCES FOR HUD'S
DISCRETIONARY PROGRAMS
========================================================= Appendix III

                                  (Dollars in millions)

                          9/30/96       9/30/97       9/30/98       9/30/99       9/30/00
                         (actual)      (actual)      (actual)    (estimate)    (estimate)
-------------------  ------------  ------------  ------------  ------------  ------------
Community Planning
 and Development
Community                    $726          $777          $832            $0            $0
 Development Block
 Grant
Youthbuild                    2.6            .1            .4             0             0
Homeless Assistance           888           955         1,019             0             0
 Grants
Housing                        \a            36            40             0             0
 Opportunities for
 Persons with AIDS
Emergency Shelter              .3            .4             1             0             0
 Grants
Supplemental                    1             1             1             0             0
 Assistance for
 Facilities to
 Assist the
 Homeless
Supportive Housing             31            19            17             0             0
 Program
Section 8 Moderate            106            86            85             0             0
 Rehabilitation
 Single Room
 Occupancy
Shelter Plus Care              16            10             6             0             0
HOME Investment               182           210           236             0             0
 Partnership Grants
Brownfields                    \a            \a            25             0             0
 Redevelopment
Urban Empowerment              \a            \a             4             0             0
 Zones
Capacity Building               0            30             8             0             0
 for Community
 Development and
 Affordable Housing
Public and Indian
 Housing
Annual                      6,399         2,291         1,103            79             0
 Contributions
 Account
Disaster Assistance             0             0             3            \a            \a
Public Housing                  0             0         1,611             1             1
 Capital Fund
Prevention of                   0         3,486            72            \a            \a
 Resident
 Displacement
PIH Homeownership              38            11            11            11            11
Drug Elimination               68           281           346             0             0
 Grants for Low-
 Income Housing
Revitalization of             539           698           630           600           600
 Severely
 Distressed Public
 Housing (HOPE VI)
Indian Housing Loan            .1             0             4             0             0
 Guarantee Fund
 Program Account
Rental Assistance             467           463           455            \a            \a
 Program
Native American                \a            \a           136             0             0
 Indian Housing
 Block Grant
Housing Certificate            \a            \a         3,405           986             0
 Fund
Rental Housing                  1             1             1             1             1
 Assistance
Housing Programs
Section 235                    16            16            16            \a            \a
 Restructuring
Housing for Special            \a            \a         2,864         2,231         1,543
 Populations
Capital Grants                 \a            \a            10            \a            \a
 Preservation
 Account
Rent Supplement               519           502           496            \a            \a
Section 235                     7             7             7            \a            \a
 Refinancing
Nonprofit Sponsor               6             6             6             0             0
 Assistance
 Liquidating
 Account
Flexible Subsidy              142           179           235           276           292
 Fund
Nehemiah Housing               21            21             1             0             0
 Opportunity Fund
FHA General and               590           506           443           338            38
 Special Risk
 Program Account
Policy Development
 and Research
Research and                    2             3            12             0             0
 Technology
Fair Housing and
 Equal Opportunity
Fair Housing                   13             8            23             0             0
 Activities
=========================================================================================
Total                     $10,781     $10,603.5     $14,164.4        $4,523        $2,485
-----------------------------------------------------------------------------------------
\a Indicates the program was not included in the document reviewed. 

Source:  HUD's Unexpended Balance Reports for fiscal years 1996,
1997, and 1998 for actual amounts.  HUD's fiscal year 2000 budget
request documents for estimates. 

INCREASES IN EXISTING PROGRAMS
INCLUDED IN HUD'S FISCAL YEAR 2000
BUDGET REQUEST
========================================================== Appendix IV

                                  (Dollars in millions)

                                                         Budget authority\a
                                                       ----------------------
                                                          FY 1999     FY 2000
Program/Initiative                                        enacted     request    Increase
-----------------------------------------------------  ----------  ----------  ----------
Community Planning and Development
Community Development Block Grant                          $4,750      $4,775         $25
Youthbuild                                                   [43]        [75]        [32]
Homeless Assistance Grants                                    975       1,020          45
Housing Opportunities for Persons with AIDS                   225         240          15
HOME Investment Partnership Grants                          1,600       1,610          10
Brownfields Redevelopment                                      25          50          25
Public and Indian Housing
Regional Opportunity Counseling                                10          20          10
Public Housing Operating Fund                               2,818       3,003         185
Section 8 Renewals/Amendments                               9,599      10,640       1,041
Administrative Fee Increase                                    \b          \b           6
Housing Programs
Housing Counseling Assistance (funded in HOME)               [18]        [20]         [2]
FHA Mutual Mortgage Insurance and Cooperative                 329         491         162
 Management Housing Insurance Funds program account
FHA Mutual Mortgage Insurance and Cooperative           {110,000}   {120,000}    {10,000}
 Management Housing Insurance Funds program account
Government National Mortgage Association
Mortgage-Backed Securities Guarantee program account            9          15           6
Mortgage-Backed Securities Guarantee                    {150,000}   {200,000}    {50,000}
Policy Development and Research
Research and Technology                                        38          40           2
Fair Housing and Equal Opportunity
Fair Housing Assistance Program                                17          20           3
Fair Housing Initiatives Program                               23          27           4
Management and Administration
Salaries and Expenses                                         535         559          24
Mandatory Programs
FHA General Insurance and Special Risk                         46       1,164       1,118
 Insurance Funds liquidating
Manufactured Home Inspection and Monitoring                    15          16           1
Urban Empowerment Zones                                        45         150         105
=========================================================================================
Total increase in new budget authority requested          $21,059     $23,840      $2,787
 (Total does not include items in brackets or
 braces.)
-----------------------------------------------------------------------------------------
\a Brackets indicate that a program is either a set-aside under
another program or is funded within another program in HUD's budget
request.  Braces indicate that an amount is a guarantee or insurance
limit and not a request for new budget authority. 

\b The administrative fee is paid to public housing authorities that
administer the Section 8 tenant-based assisted housing program and is
included in the baseline unit cost for the Section 8 tenant-based
program.  Therefore, the exact amount of the aggregate fee for fiscal
years 1999 and 2000 is not known.  Differences in authority between
fiscal year 1999 and fiscal year 2000 do not agree with total
increases because the administrative fee of $6 million is counted as
a requested increase for fiscal year 2000. 

Source:  GAO's analysis of HUD's fiscal year 2000 budget documents. 

(See figure in printed edition.)Appendix V
COMMENTS FROM THE DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT
========================================================== Appendix IV

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

here. 

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

GAO'S COMMENTS

1.  In response to HUD's comment, we revised the report to more
clearly state that by new programs and initiatives, we mean any that
the Congress did not fund in fiscal year 1999 or that would be
significantly expanded in fiscal year 2000.  However, some of these
programs and initiatives may have received funding in prior years. 

2.  We continue to believe that new initiatives or programs that were
not funded last year or have gone through a period of no funding will
require substantial resources to plan, implement, restart, and
manage.  HUD's estimate of resources needed to administer these
programs---one-quarter of 1 percent of its salaries and expense
budget, or approximately 23 staff personsï¿½seems to be an
unrealistically low figure to initiate the volume of new or expanded
work proposed in the Department's budget request.  In the Contract
Administration Program, for example, HUD has assigned 19 staff--some
full-time and some part-time--from several headquarters and field
offices to plan and prepare for program implementation.  Some of
these staff will serve full-time once the program is under way. 
Adequate administration of new or expanded programs is important to
the success of those programs; however, without overall increases in
HUD's staffing, administering additional programs will strain HUD's
ability to properly monitor its current programs, an issue that we
and HUD's Office of Inspector General (OIG) have reported on in the
past. 

3.  Our prior work on HUD's management reforms shows that HUD's
efforts to transfer staff to new positions and locations and train
them adequately are not yet complete.  Moreover, we asked for
evidence of staffing analysis, but HUD cannot provide this
information until completing its staffing pilot.  For these reasons,
we remain concerned about HUD's ability to initiate and properly
administer a significant volume of new workload. 

4.  Although HUD has had the authority to contract out housing
assistance payments to third-party contractors and has contracted out
over 20 percent of the properties to third-party contractors in the
past, this effort was not funded in fiscal year 1999 as a separate
item, as is proposed in this year's budget request.  We believe that
this program illustrates our point that the substantial increase in
scope will necessitate corresponding increases in planning and
administration that will be required of HUD staff to implement and
monitor this effort.  HUD proposes to expand the program from
covering 20 percent of the project-based inventory, or about 4,500
properties, to covering 100 percent, or nearly 25,000 propertiesï¿½a
fivefold increase in scope. 

5.  We continue to believe that effective implementation of the
Contract Administration Program is in jeopardy.  HUD states that it
still has not developed the monitoring procedures nor identified the
staffing needed to adequately implement this program and prevent
oversight problems reported on by HUD's OIG in the past.  According
to program officials, HUD currently plans to have the draft of these
procedures completed by September 1999.  The need for these critical
procedures was raised by HUD's OIG in fiscal year 1998.  Without this
procedural guidance and adequate staffing, the benefits of
contracting out for the administration of housing assistance
payments, which are outlined in HUD's cost-benefit analyses, will not
be realized.  Furthermore, HUD began this effort 2 years ago, and it
was originally scheduled for implementation this year.  However, as a
result of input from HUD's OIG as well as the Office of Management
and Budget designed to improve the program, HUD has continued to
delay the implementation of this effort.  Because HUD is still in the
process of developing its monitoring procedures, has not identified
the staff needed to operate the program, and now expects to exclude
some properties from the program as well as to delay program
implementation until the second quarter of calendar year 2000, we
question HUD's ability to fully implement the Contract Administration
Program in fiscal year 2000 as well as the need for the full amount
of its budget request for this program. 

6.  HUD disagrees with our conclusion that unexpended balance reports
could be subject to error.  HUD said that the unexpended balance data
come from financial systems that are subject to OIG audit via the
annual financial statement audit, which, in turn, received an
unqualified audit opinion from the Inspector General in March 1999. 
While the information contained in HUD's unexpended balance reports
originates from HUD's various accounting systems, not all of these
systems are subject to accuracy checks and verification, even by the
Inspector General.  During our review, HUD officials in the Office of
the Chief Financial Officer told us that information provided by
program offices for these accounting systems is accepted without
being independently verified.  Moreover, as part of its audit of
HUD's fiscal year 1998 financial statements, HUD's OIG audited
unexpended balances.  As part of this audit, the Inspector General
reported an internal control weakness related to HUD's need to
improve its processes for reviewing obligation balances.  In this
finding, the Inspector General reported instances in which program
information was incomplete or inaccurate.  Thus, even with HUD's
unqualified audit opinion, we continue to believe, consistent with
the Inspector General's finding, that balances reported could be
subject to error because that information has not been verified. 

7.  HUD refers a Booz-Allen & Hamilton, Inc., study on the
Department's implementation of its 2020 reform plan; however, HUD did
not provide evidence from the study to show that it has compared the
costs of this program with its benefits.  Our review of a Booz-Allen
study on HUD's 2020 Implementation Review (dated March 25, 1998)
shows workload and staffing analysis for the Department as a whole,
but the study does not provide a detailed cost-benefit analysis of
the Community Builder program. 

8.  Our report does not question the Department's concerted planning
efforts to provide high-caliber program planning and customer service
delivery, only the cost of the program relative to its benefits. 

9.  We made appropriate changes to our report to reflect this
comment. 

10.  We made appropriate changes to our report to reflect this
comment. 

11.  We made appropriate changes to our report to reflect this
comment. 

12.  We made appropriate changes to our report to reflect this
comment. 

13.  We made appropriate changes to our report to reflect this
comment. 

14.  Although HUD may have identified some unobligated balances that
were excess and included them as offsets in the fiscal year 2000
budget estimate, we believe that further analysis could show that
additional offsets are possible.  We believe that additional analysis
has potential, especially because HUD's fiscal year estimates of $5
billion in unobligated balances are significantly lower than the $15
billion in unobligated balances that HUD reported at the end of
fiscal year 1998. 

15.  We continue to believe that a contract-by-contract analysis for
the Rent Supplement and Rental Assistance programs, which together
represent nearly $1 billion in unobligated funding, warrants a
contract-by-contract analysis to determine the programs' true future
needs.  Analysis of the project-based and tenant-based Section 8
programs, although larger programs, revealed significant budget
authority that was not needed to meet program requirements, most of
which the Congress rescinded and reappropriated for other uses,
including meeting the annual contract renewal needs of assisted
housing. 

16.  We made appropriate changes to our report to reflect this
comment. 

17.  We agree that the difference between the Community Development
Block Grant grantees' program years and the federal fiscal year can
affect timely obligations of funds.  However, according to HUD
officials, it is not the only reason block grant funds are not being
obligated in a timely manner.  Moreover, HUD's comment here is not
consistent with other comments in this attachment where the
Department states, ï¿½ .  .  .  unobligated balance growth reflects in
part the expansion of the number of competitive set-asides in the
CDBG program which thus require Notices of Funding Availability and
an extensive awards process prior to obligation.ï¿½

18.  We made appropriate changes to our report to reflect this
comment. 

19.  We believe that even relatively small amounts of unobligated
funding should be scrutinized for whether they continue to be needed. 
By highlighting unneeded amounts in all programs, HUD would be in a
better position to suggest to the Congress how funds could be moved
from one program area to another to best address the most urgent
needs.  Therefore, we continue to discuss this point in our report. 

20.  We made appropriate changes to our report to reflect this
comment. 

21.  We made appropriate changes to our report to reflect this
comment. 

22.  We made appropriate changes to our report to reflect this
comment. 

GAO CONTACTS AND STAFF
ACKNOWLEDGMENTS
========================================================== Appendix VI

GAO CONTACTS

Eric Marts, (202) 512-6771

ACKNOWLEDGMENTS

Johnnie Barnes, Diane Brooks, Mike Curro, Sherrill Dunbar, Christine
Fishkin, Rick Hale, Pat Moore, and Bill Sparling made key
contributions to this report. 

*** End of document. ***