    Management Challenges: GAO's Responses to HUD's Comments (Letter Report,
    07/14/1999, GAO/RCED/AIMD-99-189).

    This report provides (1) the Department of Housing and Development's
    (HUD) comments on GAO's designation of HUD as an area within the
    government at particularly high risk for waste, fraud, abuse, and
    mismanagement and (2) GAO's response to those comments.

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

     REPORTNUM:  RCED/AIMD-99-189
         TITLE:  Management Challenges: GAO's Responses to HUD's Comments
          DATE:  07/14/1999
       SUBJECT:  Internal controls
    	     Financial management systems
    	     Information resources management
    	     Federal agency reorganization
    	     Housing programs
    	     Risk management
    	     Human resources utilization
    	     Accountability
    	     Strategic information systems planning
    IDENTIFIER:  GAO High Risk Program
    	     High Risk Series 1997
    	     Performance and Accountability Series 1999
    	     HUD 2020 Management Reform Plan

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        United States General Accounting Office GAO
        Report to Congressional Requesters July 1999
        MANAGEMENT CHALLENGES GAO's Responses to HUD's Comments
        GAO/RCED/AIMD-99-189 GAO    United States General Accounting
        Office Washington, D.C. 20548 Resources, Community, and Economic
        Development Division B-282678 July 14, 1999 The Honorable Wayne
        Allard Chairman, Subcommittee on Housing and Transportation
        Committee on Banking, Housing, and Urban Affairs United States
        Senate The Honorable John F. Kerry Ranking Minority Member
        Subcommittee on Housing and Transportation Committee on Banking,
        Housing, and Urban Affairs United States Senate As part of the
        work in producing our January 1999 report Major Management
        Challenges and Program Risks: Department of Housing and Urban
        Development (GAO/OCG-99-8), on December 15, 1998, we provided the
        Department with a statement of facts for its review and comment.
        In response, in a letter dated December 28, 1998, the Department
        of Housing and Urban Development's (HUD) Deputy Secretary stated
        that he was disappointed with the conclusion we reached regarding
        HUD's risk status (that the integrity and accountability of HUD's
        programs remain at high risk) and raised several concerns about
        our statement of facts. Specifically, the Deputy Secretary raised
        concerns about (1) our designation of HUD's programs as a high-
        risk area and the criteria we use in designating an area as high-
        risk and in removing that designation; (2) HUD's belief that we
        had not fully addressed the impact and significance of reforms
        that the Department has recently instituted; (3) HUD's belief that
        our December 18, 1998, report on HUD's information systems was not
        accurate and complete;1 and (4) HUD's belief that there were
        inaccuracies in our statement of facts. You asked that we provide
        you with our response to the issues raised by the Deputy
        Secretary. This report responds specifically to the issues HUD
        raised. Appendix I includes HUD's letter; and appendix II, our
        point-by-point evaluation of HUD's comments. 1HUD Information
        Systems: Improved Management Practices Needed to Control
        Integration Cost and Schedule (GAO/AIMD-99-25, Dec. 18, 1998).
        Page 1                                GAO/RCED/AIMD-99-189 HUD's
        Management Challenges B-282678 GAO's Designation of    In summary,
        our conclusion that HUD's programs are a high-risk area is HUD's
        Programs as a     based on the status of four serious, long-
        standing Department-wide management deficiencies that, taken
        together, have placed the integrity High-Risk Area          and
        accountability of HUD's programs at high risk since 1994. We and
        others (i.e., HUD's Inspector General and external auditors) have
        observed these significant management deficiencies that cut across
        HUD's program areas, and we have issued numerous reports about
        them over the past 15 years.2 We designated HUD's programs as a
        high-risk area in 1994 because of (1) internal control weaknesses,
        such as a lack of necessary data and management processes that
        were a major factor leading to the HUD scandals of the late 1980s;
        (2) poorly integrated, ineffective, and generally unreliable
        information and financial management systems that did not meet the
        needs of program managers; (3) organizational deficiencies, such
        as overlapping and ill-defined responsibilities; and (4) an
        insufficient mix of staff with the proper skills, which hampered
        the effective monitoring and oversight of HUD's programs. As
        pointed out in our January 1999 report on HUD's major management
        challenges and program risks, our recent work indicates that,
        while HUD has made credible progress in laying the framework for
        improving its management, internal control weaknesses and problems
        with information and financial management systems persist at the
        Department. Furthermore, recent reforms to address the
        Department's organizational and staffing problems are in the early
        stages of implementation, and it is too soon to tell whether or
        not they will resolve the major deficiencies that we and others
        have identified. Consequently, as we reported in 1995 and 1997,3
        these deficiencies, taken together, continue to place the
        integrity and accountability of HUD's programs at high risk. Our
        criteria for designating a program or agency high-risk and
        removing that designation have been discussed with HUD officials
        on several occasions. In addition, our criteria were included in
        our 1997 High-Risk Series report and in our written response to
        HUD's then Acting Deputy Secretary's June 23, 1998, letter on this
        subject. We have pointed out that our criteria for designating
        programs or agencies as high-risk areas stem directly from our
        professional and objective judgment about patterns of 2App. III
        provides a list of major GAO reports on HUD's management, issued
        from 1984 through April 1999. 3High-Risk Series: Department of
        Housing and Urban Development (GAO/HR-95-11, Feb. 1995) and High-
        Risk Series: Department of Housing and Urban Development (GAO/HR-
        97-12, Feb. 1997). Page 2
        GAO/RCED/AIMD-99-189 HUD's Management Challenges B-282678
        significant management deficiencies uncovered over time in our
        audits, as well as those of inspectors general and others, that
        remain largely unresolved. We stated in our response to HUD's June
        23, 1998, letter that programs and agencies for which we have
        removed our high-risk designation are those that have demonstrated
        results in overcoming management deficiencies. We further stated
        that it is important to note that while reform initiatives are
        important, plans for reform are not sufficient in and of
        themselves. Rather, it is the results of such reform initiatives-
        demonstrating that management problems have been corrected-that
        count. We have also pointed out to HUD officials our consistent
        application of our criteria for high-risk designations.
        Specifically, we reached our conclusion about HUD and all of our
        determinations of which government operations are considered to be
        high-risk in our January 1999 Performance and Accountability
        Series reports4 using the same methodology and criteria, which
        were the same as those used for our February 1997 High-Risk Series
        reports. HUD's Reforms    We disagree with the Deputy Secretary's
        statements that the impact and significance of reforms that HUD
        has recently instituted were not fully addressed in our statement
        of facts. In the statement of facts we provided to HUD and in our
        January 1999 report on HUD's major management challenges and
        program risks that followed, we described the major actions the
        Department has taken and the achievements it has realized since it
        launched its 2020 Management Reform Plan in June 1997. In
        addition, we discussed HUD's goals under the plan for the areas
        where we identified management deficiencies: internal controls,
        systems, organization, and staffing. We also stated that HUD's
        reforms should help to address internal control weaknesses facing
        the agency and described HUD's establishment and implementation of
        risk assessments for programs that were established or
        substantially revised; the Department's development and deployment
        of certain information and financial management systems; and the
        establishment and operation of various HUD offices, including the
        Department's specialized and nationwide centers that consolidate
        processes and functions within and across program areas. Beyond
        the statement of facts provided to HUD, in our final report on
        HUD's management challenges and program risks, our "Overview"
        included a summary of HUD's achievements since its 2020 plan was
        announced and 4Major Management Challenges and Program Risks: A
        Governmentwide Perspective (GAO/OCG-99-1, Jan. 1999). Page 3
        GAO/RCED/AIMD-99-189 HUD's Management Challenges B-282678 our
        conclusion that HUD has made credible progress in laying the
        framework for improving its management. In other recent reports
        and testimonies, we have recognized HUD's continued emphasis on,
        and progress toward, addressing its long-standing management
        deficiencies. HUD's Secretary and leadership team have given top
        priority to addressing the Department's management deficiencies.
        This attention by top management is critical and must be sustained
        in order to achieve real and lasting change. Importantly, given
        the nature and extent of the challenges facing the Department, it
        will take time to implement and assess the impact of any related
        reforms. GAO's Report on        Many of the Deputy Secretary's
        comments on our statement of facts HUD's Information      related
        to a draft of our December 18, 1998, report on HUD's information
        systems. The final report contained our responses to those
        comments as Systems                well as clarifications we made
        to the report as a result of HUD's comments. For example, the
        Deputy Secretary stated that the draft of our December 1998 report
        was not accurate about the amount to be spent to develop financial
        systems and that a more accurate estimate for the effort is $250
        million. In our December 1998 report and statement of facts, we
        had stated the Department expects to spend about $239 million for
        development costs plus $132 million for maintenance costs. We also
        reported that HUD had not yet finalized the plans, costs, and a
        schedule to complete its current financial systems integration
        strategy, so systems costs continue to be uncertain. Accordingly,
        HUD's estimates have fluctuated considerably, as reflected in
        various documents received from the Chief Financial Officer and
        his staff. We reported, for example, that cost estimates have
        changed from the $540 million reported by HUD in June 1998; to the
        $255 million cited in the Department's November 12, 1998, comments
        on our draft report on information systems; to the $239 million
        that HUD reported a week later. However, we found that the $255
        million and the $239 million estimates did not include at least
        $132 million associated with maintaining the systems. As pointed
        out in our December 1998 report, HUD's continuing uncertainty as
        to what the total cost estimate is for its financial systems
        integration demonstrates the Department's need to develop and use
        well-defined cost-estimating processes to prepare reliable cost
        estimates. The Accuracy of Our    We also disagree with the Deputy
        Secretary's statements that there were Statement of Facts
        inaccuracies in our statement of facts. Many of the statements
        identified as Page 4                        GAO/RCED/AIMD-99-189
        HUD's Management Challenges B-282678 inaccurate related to
        statements that clearly described HUD's past problems, and not
        current problems as construed by the Deputy Secretary. For
        example, HUD asserted that the statement, "Managers were not
        actively assessing risks in their programs as required under the
        management control program," was totally false. The statement HUD
        quoted was in a paragraph in our statement of facts that began "In
        February 1997 we reported. . . ." This paragraph summarized the
        information we had reported in our 1997 High-Risk Series report
        regarding internal controls. Our January 1999 report on HUD's
        major management challenges and program risks reiterated the
        phrase "we reported in 1997" to make it clearer that this
        statement referred to past problems at HUD. Lastly, in taking the
        Deputy Secretary's concerns into account, we added information he
        provided to update our final report on HUD's management challenges
        and program risks, including the completion of inspections for
        over 4,200 multifamily properties by HUD's real estate assessment
        center; the referral of 200 cases involving multifamily properties
        to the enforcement center; the increase in debarments of
        multifamily housing landlords; and the progress made by HUD in
        implementing reforms, as reported by HUD's consultants. We also
        added further details on the number of financial management
        systems or components of these systems developed or deployed by
        HUD under its systems integration efforts and the number of HUD
        managers that have completed risk management training. Where
        appropriate, we incorporated other clarifications to our final
        report on the basis of the Deputy Secretary's comments. We are
        sending copies of this report to the appropriate Senate and House
        committees; the Honorable Andrew Cuomo, Secretary of Housing and
        Urban Development; and the Honorable Jacob Lew, Director, Office
        Management and Budget. We will make copies available to others
        upon request. Page 5                        GAO/RCED/AIMD-99-189
        HUD's Management Challenges B-282678 If you or your staff have any
        questions, please call me at (202) 512-7631. Other GAO contacts
        for and key contributors to this report are listed in appendix IV.
        Sincerely yours, Judy A. England-Joseph Director, Housing and
        Community Development Issues Page 6
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Page 7
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Contents Letter
        1 Appendix I
        10 The Department of Housing and Urban Development's Comments on
        the Major Challenges and Program Risks Identified in GAO's
        Statement of Facts Appendix II
        82 GAO's Responses to HUD's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts Appendix III
        128 Major GAO Reports on HUD's Management Appendix IV
        130 GAO Contacts and Staff Acknowledgments Page 8
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Contents
        Abbreviations CFO          Chief Financial Officer DOD
        Department of Defense FHA          Federal Housing Administration
        FMFIA        Federal Managers Financial Integrity Act FSI
        financial systems integration GAO          General Accounting
        Office HUD          Department of Housing and Urban Development
        HUDCAPS      HUD's Centralized Accounting and Program System IG
        Inspector General I-TIPS       Information Technology Investment
        Portfolio System JFMIP        Joint Financial Management
        Improvement Project OIG          Office of the Inspector General
        OMB          Office of Management and Budget REAC         real
        estate assessment center SFFAS        Statement of Federal
        Financial Accounting Standards Page 9
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Note: GAO's responses appear in app. II. The page nos.
        cited in HUD's letter refer to GAO's Dec. 15, 1998, statement of
        facts provided to HUD. HUD's comment 1. Page 10
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 2. HUD's comment 3. Page 11
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 4. HUD's comment 5. Page 12
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 6. Page 13
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 7. Page 14
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 8. HUD's comment 9. Page 15
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 10. Page 16
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 11. HUD's comment 12. HUD's comment 13.
        HUD's comment 14. Page 17
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 15. Page 18
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 19                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts Page 20
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 21                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts Page 22
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 23                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts Page 24
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 25                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts Page 26
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 16. Page 27
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 28                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts Page 29
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 30                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts Page 31
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 32                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts Page 33
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 17. Page 34
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 35                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts Page 36
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 18. HUD's comment 19. Page 37
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 20. Page 38
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 21. Page 39
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 40                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts HUD's comment
        22. Page 41                            GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix I The Department of Housing and
        Urban Development's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts Page 42
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 23. Page 43
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 24. HUD's comment 25. Page 44
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 26. Page 45
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 27. HUD's comment 28. Page 46
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 29. Page 47
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 30. Page 48
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 49                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts HUD's comment
        31. Page 50                            GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix I The Department of Housing and
        Urban Development's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts HUD's comment 32.
        Page 51                            GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix I The Department of Housing and
        Urban Development's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts HUD's comment 33.
        Page 52                            GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix I The Department of Housing and
        Urban Development's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts HUD's comment 34.
        Page 53                            GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix I The Department of Housing and
        Urban Development's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts HUD's comment 35.
        HUD's comment 36. HUD's comment 37. Page 54
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 38. HUD's comment 39. HUD's comment 40.
        HUD's comment 41. HUD's comment 42. HUD's comment 43. Page 55
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 56                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts Page 57
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 44. HUD's comment 45. Page 58
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 46. Page 59
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 47. HUD's comment 48. Page 60
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 61                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts HUD's comment
        49. Page 62                            GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix I The Department of Housing and
        Urban Development's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts Page 63
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 50. Page 64
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 65                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts Page 66
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 51. Page 67
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 68                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts HUD's comment
        52. HUD's comment 53. Page 69
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 70                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts HUD's comment
        54. Page 71                            GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix I The Department of Housing and
        Urban Development's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts HUD's comment 55.
        HUD's comment 56. Page 72
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 73                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts HUD's comment
        57. Page 74                            GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix I The Department of Housing and
        Urban Development's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts Page 75
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 58. Page 76
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts HUD's comment 59. HUD's comment 60. Page 77
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 78                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts Page 79
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix I The
        Department of Housing and Urban Development's Comments on the
        Major Challenges and Program Risks Identified in GAO's Statement
        of Facts Page 80                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix I The Department of Housing
        and Urban Development's Comments on the Major Challenges and
        Program Risks Identified in GAO's Statement of Facts HUD's comment
        61. HUD's comment 62. Page 81
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts Note: References to
        page numbers refer to those of HUD's letter of December 28, 1998.
        1. HUD's Comment, p. 1 HUD commented that "Comprehensive
        reorganization, major system developments and deployment,
        carefully crafted staffing reforms, and the hallmark achievement
        of HUD's first ever audited financial statements are all glossed
        over by GAO as minor advances and are presented as interesting
        interim movements toward some unknown mark on an undefined
        measuring stick."1 GAO's Response We disagree. In the statement of
        facts we provided HUD on December 15, 1998, we described the major
        actions it has taken and the achievements it has realized since it
        launched its 2020 Management Reform Plan in June 1997, including
        each of the items mentioned above by the Department. In addition,
        we discussed HUD's goals under the plan for the areas where we
        identified management deficiencies: internal controls, systems,
        organization, and staffing. Beyond the statement of facts provided
        to HUD, in our final report2 our "Overview" included a summary of
        HUD's achievements since the 2020 plan was announced and our
        conclusion that HUD has made credible progress in laying the
        framework for improving its management. HUD's comment implies that
        our statement of facts lacked clear criteria for evaluating its
        progress. See our response to comment 3 for a discussion of our
        criteria for evaluating HUD's progress and related matters. 2.
        HUD's Comment, p. 2 HUD commented that under its 2020 Management
        Reform Plan, "the Department implemented a bold initiative to
        fundamentally re-design the manner in which HUD delivers its
        programs." According to HUD, "The profound significance of . . .
        [its] major achievements and accomplishments is missing in the
        report, as well as a corresponding 1HUD was referring to its
        fiscal year 1997 financial statements, upon which it received a
        qualified audit opinion. After HUD responded to our statement of
        facts, HUD's Inspector General issued, on March 29, 1999, its
        unqualified opinion on HUD's consolidated federal accounting-based
        financial statements for fiscal year 1998, which is further
        discussed under HUD's comment 17. 2Major Management Challenges and
        Program Risks Department of Housing and Urban Development
        (GAO/OCG-99-8, Jan. 1999). Page 82
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts description of
        reduced risk at the agency. The Department has developed and
        implemented a detailed plan for reform-a plan that has reduced the
        risk of waste, fraud, and abuse." According to HUD, "the tenor of
        the draft report leaves the reader to conclude that, since there
        are not absolute measurable results in all areas, little that is
        positive has happened at the Department during the past two
        years." GAO's Response As mentioned, the statement of facts we
        provided HUD described a number of positive achievements made by
        HUD since it launched its 2020 reforms. We stated, among other
        things, that HUD's reforms could help to address internal control
        weaknesses facing the agency and described HUD's establishment and
        implementation of risk assessments for programs that were
        established or substantially revised; development and deployment
        of information and financial management systems; and establishment
        and operation of various HUD offices, including its specialized
        and nationwide centers that consolidate processes and functions
        within and across program areas. While the 2020 reforms may help
        reduce HUD's risks, we were not aware of significant evidence
        demonstrating that risks had actually been reduced at the time of
        our work regarding major management challenges and program risks.
        In addition, HUD's comments on our statement of facts do not
        present evidence demonstrating that its risks have been reduced.
        HUD's fundamental contention is that since it has made plans and
        begun implementing changes in the way it delivers programs, risks
        have been reduced. The only evidence HUD provided in its December
        28, 1998, letter demonstrating that its risks have been reduced is
        a 300-percent increase in debarments, which appears to be based on
        the increase in debarments from 30 debarments in 1996 to about 100
        in 1997. Our January 1999 report on HUD's major management
        challenges and program risks included this information. HUD's
        characterization of the tenor of our report may, in part, be
        attributable to the fact that as a statement of facts, the
        document provided to HUD did not include the "Overview" that
        appeared in the final report. As explained previously, the
        "Overview" provided our views on the significance of the 2020 plan
        reforms. Page 83                            GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix II GAO's Responses to HUD's
        Comments on the Major Challenges and Program Risks Identified in
        GAO's Statement of Facts 3. HUD's Comment, pp. 2 and 3 HUD
        expressed concern that we had not provided the specific criteria
        for the "high-risk" designation to be removed since the Department
        raised the question in a June 23, 1998, letter from the
        Department's Acting Deputy Secretary to GAO's Acting Comptroller
        General. In that letter, HUD requested that we present established
        and objective criteria that had been and would be used to
        determine what programs in an agency constitute high risk and what
        makes an entire federal agency high-risk. GAO's Response Our
        conclusion that HUD's programs are high-risk is based on the
        status of four serious, long-standing Department-wide management
        deficiencies that, taken together, have placed the integrity and
        accountability of HUD's programs at high risk since 1994. We have
        issued numerous reports and testimonies over the past 15 years
        pointing to these significant management deficiencies that cut
        across HUD's program areas. We and others (i.e., HUD's Inspector
        General and external auditors) have observed these management
        deficiencies. Because HUD is one of the nation's largest financial
        institutions responsible for managing about $454 billion in
        insured mortgages, about $531 billion in guarantees of mortgage-
        backed securities, and about $24 billion in current budget
        authority and because these four weaknesses continue largely
        unresolved or recent reforms to address them are in the early
        stages of implementation (and it is too soon to tell whether they
        will resolve the deficiencies), our professional judgment is that
        HUD's programs continue to be a high-risk area. On several
        occasions, we have discussed with HUD officials our criteria for
        designating a program or agency high-risk. In addition, we
        included our criteria in our 1997 High-Risk Series report3 and in
        our written response to HUD's Acting Deputy Secretary's June 23,
        1998, letter on this subject. We have pointed out that our
        criteria for designating programs or agencies as high-risk areas
        stem directly from our professional and objective judgment about
        patterns of significant management deficiencies uncovered over
        time in our audits, as well as those of inspectors general and
        others, that remain largely unresolved. We stated in our response
        to HUD's June 23, 1998, letter that programs and agencies for
        which we have removed our high-risk designation are those that
        have demonstrated results in overcoming management deficiencies.
        We further stated that it is important to note that while reform
        initiatives are important, plans for reform are not sufficient in
        and of themselves. Rather, it is the results of 3High-Risk Series:
        Department of Housing and Urban Development (GAO/HR-97-12, Feb.
        1997). Page 84                              GAO/RCED/AIMD-99-189
        HUD's Management Challenges Appendix II GAO's Responses to HUD's
        Comments on the Major Challenges and Program Risks Identified in
        GAO's Statement of Facts such reform initiatives-demonstrating
        that management problems have been corrected-that count. As
        mentioned above, our February 1997 High-Risk Series report on HUD
        clearly laid out the actions-such as eliminating material internal
        control weaknesses-that we believed were necessary to reduce the
        risks to the agency's programs. We also met with HUD officials in
        August 1997 and provided them with a list of corrective actions
        that would need to be substantially completed to address the
        deficiencies that made HUD high-risk in our opinion, such as
        completing improvements to its financial and information
        management systems. The list largely mirrored the discussion in
        our February 1997 report. As pointed out in our January 1999
        report on HUD's major management challenges and program risks, our
        recent work indicates that internal control weaknesses and
        problems with information and financial management systems persist
        at the Department. Furthermore, recent reforms to address the
        Department's organizational and staffing problems are in the early
        stages of implementation, and it is too soon to tell whether or
        not they will resolve the major deficiencies that we and others
        have identified. Consequently, we continue to believe, as we
        reported in 19958 and 1997, that these deficiencies, taken
        together, place the integrity and accountability of HUD's programs
        at high risk. 4. HUD's Comment, p. 3 HUD asserted that we have has
        been unable to articulate what constitutes high risk at the
        Department and for all agencies and in fact have acknowledged that
        no such governmentwide test of high risk exists. HUD also stated
        that it should be provided specific criteria used to determine
        whether an agency is high-risk; the data used to determine whether
        an agency is high-risk; the data showing how other agencies stood
        when we applied that objective, standardized high-risk test; and
        the analysis we used in comparing the data on HUD to the high-risk
        criteria. GAO's Response As discussed in our response to comment
        3, we have informed HUD officials about what constitutes high risk
        at the Department in our opinion, what the Department needs to
        accomplish to remove the designation, and what is not sufficient
        to remove the designation. 8High-Risk Series: Department of
        Housing and Urban Development (GAO/HR-95-11, Feb. 1995). Page 85
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts In response to HUD's
        request that it be provided the criteria we use to determine
        whether any agency is high risk and how the agencies compared when
        we applied our criteria, we have informed HUD officials that the
        criteria we apply to the Department are the same criteria we have
        applied to other agencies. Our criteria included considering
        factors such as the significance of HUD's management deficiencies,
        their impact on program operations, past successes achieved in
        resolving the deficiencies, and the amount of risk inherent in
        HUD's operations. We also have informed HUD officials that
        different agencies' functions, programs, and organizational units
        have been removed and added each time we have updated our high-
        risk designations. Because different agencies present different
        exposures to risk and management deficiencies can differ in their
        impact on programs, we have advised HUD officials that
        independent, professional, and objective judgment of knowledgeable
        GAO professionals plays a role in determining whether a program is
        high-risk. We have also advised them that professional judgment
        will also play a role in determining at what point improvements
        made by HUD in resolving its management deficiencies will mean
        that the agency overall will no longer warrant the designation
        high-risk, but that individual functions and/or specific programs
        within the agency may instead be designated high-risk. In our
        January 8, 1999, response to HUD's Deputy Secretary's letter of
        December 28, 1998, we pointed out our consistent application of
        our criteria for high-risk designations. We explained that we
        reached our conclusion about HUD and all of our determinations of
        which government operations are considered to be high-risk in our
        January 1999 Performance and Accountability Series reports9 using
        the same methodology and criteria, which were the same as those
        used for our February 1997 High-Risk Series reports. 5. HUD's
        Comment, pp. 3 and 4 HUD stated that senior GAO staff had
        indicated that no high-risk test was being applied to all federal
        agencies, that the label of high risk was applied on the basis of
        the professional judgment of GAO staff, and that a high-risk test
        of having four or more agencywide problems had not been applied to
        any other agency. 9Major Management Challenges and Program Risks:
        A Governmentwide Perspective (GAO/OCG-99-1, Jan. 1999). Page 86
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts GAO's Response HUD's
        assertion is incorrect. Senior GAO officials have told HUD
        officials that we consider the implications of all management
        deficiencies in determining whether an agency is high-risk or not.
        The fact that a specific number of agencywide problems exist at a
        particular agency does not automatically mean that an agency or
        program is high-risk. To apply such a limited test would discount
        the effect of such factors as the prevalence of the deficiencies,
        past successes achieved by agencies in resolving them, and
        exposure to risk. Overall, the intent of our special effort to
        review and report on federal government program areas that we
        consider at greater risk is to focus our resources and attention
        as well as those of the Congress and agency management on actions
        needed to correct the most serious problems in selected areas. Our
        criteria for designating programs as high-risk areas stem directly
        from our professional and objective judgment about patterns of
        significant management deficiencies in the federal government
        uncovered over time in our audits, as well as those of inspectors
        general and others, that remain largely unresolved. A
        determination includes our consideration of factors such as the
        seriousness of the management deficiencies identified; their
        cumulative impact on program operations, federal spending, and the
        ability of an agency to carry out its mission; the results
        achieved by past efforts to resolve the deficiencies; and the
        amount of risk of fraud, waste, and abuse inherent in an agency's
        operation. In addition, as we pointed out in our January 1999
        performance and accountability series, an increasing amount of
        information is becoming available through the implementation of
        the performance-based management legislation that the Congress has
        enacted. This information makes it both possible and appropriate
        for GAO to periodically reassess the methodologies and criteria it
        uses to determine which operations, functions, and entities should
        be included in the performance and accountability series reports
        and which should be identified as "high-risk." We also pointed out
        in this January 1999 report that we plan to undertake a
        comprehensive review and reassessment of this area during 1999. In
        conducting this review and reassessment, and in accordance with
        our normal practices, we will consult with key stakeholders,
        including selected congressional and agency representatives,
        before completing our approach to the 2001 series. Page 87
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts Our review effort
        likely will result in new ways of determining and presenting major
        management challenges and program risks, especially in connection
        with selected functions (e.g., strategic planning, organizational
        alignment, human capital strategies, and contract management) as
        well as at the overall department and agency level. This
        reassessment may also result in the consolidation of GAO's current
        high-risk series as an important component of an expanded
        performance and accountability series. The ultimate determination
        of what should be included in this series and what should be
        deemed to be "high-risk" will continue to involve the independent,
        professional, and objective judgment of GAO professionals. 6.
        HUD's Comment, p. 4 HUD asserted that GAO has a shifting standard
        for determining if HUD is high-risk. HUD stated that senior GAO
        staff initially indicated that they would apply a standard for
        removing HUD from the high-risk list if "reasonable progress" was
        achieved in implementing the 2020 reforms and at another time
        stated that the standard would be "results" and a demonstration
        that HUD's problems have been fixed completely-that there were
        substantial, long-term results bearing out the success and
        sustainability of the reforms. GAO's Response Senior GAO officials
        informed HUD officials that we would be fair in assessing the
        progress made by the Department and that reasonable progress in
        successfully resolving its management deficiencies by means of
        verifiable results was the standard we would apply in our review.
        HUD is incorrect in asserting that the standard we said we would
        apply was reasonable progress in implementing the 2020 plan
        reforms. 7. HUD's Comment, p. 5 HUD commented that if we believed
        that it was not possible for HUD to be removed from the list, that
        working assumption must be stated explicitly in the report or the
        report would be misleading. GAO's Response Our views on the
        difficulties faced by HUD in resolving its management deficiencies
        and removing the high-risk designation were communicated to the
        Department and others over a year ago. In testimony before the
        Page 88                            GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix II GAO's Responses to HUD's
        Comments on the Major Challenges and Program Risks Identified in
        GAO's Statement of Facts Subcommittee on Housing Opportunity and
        Community Development, Senate Committee on Banking, Housing, and
        Urban Affairs, on May 7, 1998, we said that HUD's management
        deficiencies have had a long history, that they did not happen
        overnight, and that it will not be easy for HUD to overcome many
        of them. In addition, in response to a specific question from
        Chairman Connie Mack regarding whether HUD was still high-risk and
        the likelihood of removing the agency from our next series of
        high-risk reports, GAO's Director of Housing and Community
        Development Issues, made the following comments: "They are high-
        risk today, and there's a very good chance that they will be high-
        risk early next spring, when we issue our next report. However, I
        think we will be recognizing the progress that the agency has
        made. And the big point is realizing that this is a multiyear
        effort. It is not an easy task that they have set out." A copy of
        the draft hearing transcript was attached to our July 24, 1998,
        letter to the Acting Deputy Secretary. Our January 1999 report on
        HUD's major management challenges and program risks included the
        statement that, given the severity of HUD's management
        deficiencies, it would not be realistic to expect that the
        Department would have substantially implemented its reform efforts
        and demonstrated success in resolving its management deficiencies
        in the 2 years since we issued our last report. 8. HUD's Comment,
        p. 6 HUD asserted that senior GAO staff, in repeated discussions,
        said they believed that HUD had made substantial progress in
        reducing risk, that the agency's risk profile was significantly
        improved over the last time GAO conducted a review. Yet, HUD
        asserted, this view was absent from the report. GAO's Response In
        reports, testimonies, and meetings, senior GAO officials have
        complimented HUD officials for undertaking reforms of its
        programs. The GAO officials have characterized these reforms as
        representing solid progress, as being far-reaching, as affecting
        nearly all operational aspects of the Department, and as
        constituting credible progress. However, they have not
        characterized these reforms as reducing risk or significantly
        improving HUD's risk profile. Rather, they have consistently
        maintained that it must be demonstrated that reforms have led to
        Page 89                            GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix II GAO's Responses to HUD's
        Comments on the Major Challenges and Program Risks Identified in
        GAO's Statement of Facts substantial and verifiable results in
        resolving management deficiencies to remove the high-risk
        designation. At the same time, as we discuss in our responses to
        comments 4 and 5, the independent, professional, and objective
        judgment of knowledgeable GAO professionals plays a role in
        determining whether a program is high-risk. 9. HUD's Comment, p. 6
        HUD commented that GAO's draft report failed to use and cite three
        independent and objectives studies of the Department's reforms by
        management experts-Booz-Allen and Hamilton, the Public Strategies
        Group, and PricewaterhouseCoopers. GAO's Response While GAO's
        statement of facts mentioned the Booz-Allen and Hamilton, Inc.,
        report, the thrust of this report was not discussed in detail in
        our statement of facts. This was because this report as well as
        the Public Strategies Group and PricewaterhouseCoopers reports
        were primarily aimed at describing the progress made in
        implementing the 2020 reforms, and not at developing evidence
        demonstrating that the reforms have led to substantial and
        verifiable results in resolving HUD's management deficiencies. In
        our January 1999 report on HUD's major management challenges and
        program risks, we included information on the Public Strategies
        Group report in addition to the Booz-Allen and Hamilton, Inc.,
        report. 10. HUD's Comment, p. 7 HUD commented that GAO had
        withheld the conclusion section of the report from HUD's review
        and that senior GAO staff were orally characterizing the report as
        maintaining the high-risk label for HUD. The absence of the
        section, HUD said, severely compounded its difficulty in
        responding accurately and appropriately to the specific text of
        the report. GAO's Response The statement of facts we provided HUD
        officials for review did not contain conclusions. This is because
        this statement was provided to HUD officials to obtain their
        comments on the accuracy and completeness of the information we
        obtained and analyses we made. We did not obtain agency Page 90
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts comments on the draft
        conclusions of any of our reports in the January 1999 series on
        major management challenges and program risks. 11. HUD's Comment,
        p. 8 HUD asserted that we characterized its financial management
        systems inaccurately, given the many comprehensive systems
        improvements that have been made within the past few years. HUD
        stated that our discussion was focused almost entirely on process
        improvements and was not properly balanced by the brief summary of
        major system accomplishments. HUD cited the statement in our
        report, "According to its CFO [Chief Financial Officer], HUD
        continues to make progress addressing system problems by deploying
        systems and/or system modules to manage and monitor the
        Department's programs," and stated that "it should be clear to any
        objective viewer that when a large number of systems have been
        successfully developed and deployed, a substantial improvement in
        the systems environment has inevitably occurred." However, HUD
        stated, "GAO refuses to attest to such facts despite its one-year
        review and only attributes this information to 'CFO' hearsay."
        GAO's Response We disagree. Our statement of facts (1) noted that
        HUD had developed and deployed a number of systems or components
        for systems; (2) provided examples of these systems; and (3)
        referred to our report entitled HUD Information Systems: Improved
        Management Practices Needed to Control Integration Cost and
        Schedule (GAO/AIMD-99-25, Dec. 18, 1998), which included a more
        detailed discussion of HUD's major system accomplishments. In our
        December 1998 report, we reported that although HUD had developed
        and deployed various systems or modules for 12 of 14 systems
        integration projects, the Department did not know when the systems
        integration effort would be completed, or at what cost, because
        the Department had not yet finalized detailed project plans or
        cost and schedule estimates for this effort. We concluded that
        without such plans, the Department is likely to continue to spend
        millions of dollars, miss milestones, and still not fully meet its
        objective of developing and fully deploying an integrated
        financial management system. We also disagree with the
        implications of HUD's comment that our December 1998 report on
        HUD's information systems should have Page 91
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts concluded that when a
        large number of systems have been successfully developed and
        deployed, a substantial improvement in the systems environment has
        inevitably occurred. Successfully developing and deploying systems
        depend on several factors, including whether user requirements
        were met, existing material or internal control weaknesses were
        eliminated, and the systems were developed and deployed using
        sound methodologies. Given the objectives and scope of our review,
        we could not conclude in our December 1998 report whether HUD had
        successfully developed and deployed a large number of systems or
        had made substantial improvements in its systems environment. 12.
        HUD's Comment, p. 8 HUD believed that our observation that it did
        not finalize the revised project plans for completing the core
        accounting system (HUDCAPS) was wrong. HUD stated that during the
        initial phase of the 1-year review of systems at HUD, it provided
        us with a completed first-year plan; a final draft of the second-
        year plan; and, in November 1998, the complete project plan. GAO's
        Response HUD's comment relates to our December 1998 report on
        HUD's information systems and not our statement of facts. We agree
        that HUD provided us with copies of the fiscal year 1998 and
        fiscal year 1999 project plans for HUDCAPS. However, we found that
        the fiscal year 1999 plan was incomplete because it did not
        include a schedule that showed key milestones, tasks, task
        dependencies, and a critical path demonstrating how HUDCAPS would
        be completed and integrated with other systems by October 1999,
        the date projected by HUD for completing an integrated core
        financial system. In addition, on December 4, 1998, HUD provided
        to us what the Department referred to as a complete project plan
        for the core accounting system, HUD's Centralized Accounting and
        Program System (HUDCAPS). This was 22 days after HUD provided us
        with official comments on our draft report and 35 days after we
        had requested comments. By that time, our report was already being
        printed for publication and, consequently, was issued without
        noting whether a project plan for HUDCAPS had been completed.
        Also, in our December 1998 report, we pointed out that HUD had not
        yet finalized other detailed project plans that are necessary to
        complete the systems integration effort. Page 92
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts 13. HUD's Comment, p.
        8 HUD commented that it had recently installed a standard general
        ledger and chart of accounts that did not previously exist. It
        asserted, "This is a critical accomplishment that was barely
        mentioned by GAO and is key to the Department's publishing
        integrated financial statements for the entire agency." GAO's
        Response HUD's deployment of a Department-wide standard general
        ledger was mentioned in our statement of facts. However, detailed
        information on it was not included in our statement because it had
        been in effect for so little time during the period of our review.
        The new standard general ledger was not used to prepare HUD's
        fiscal year 1998 consolidated financial statements but will be
        used to prepare its fiscal year 1999 consolidated financial
        statements, for which an audit report will be prepared in the
        spring of 2000. In addition, while the new standard general ledger
        and chart of accounts should greatly improve the efficiency of
        preparing integrated financial statements for the entire agency,
        HUD was already able to produce integrated financial statements
        prior to these improvements. 14. HUD's Comment, p. 9 HUD commented
        that our statement of facts dwelt on the Department's efforts to
        evaluate whether its management systems conform to the
        requirements of Federal Managers' Financial Integrity Act (FMFIA)
        and of the Office of Management and Budget (OMB) Circular A-127.
        HUD also stated that it self-declared certain systems as
        noncompliant based on its interpretation of the general Joint
        Financial Management Improvement Project (JFMIP) criteria. HUD
        asserted that it chose to apply a vigorous standard whereby if
        only 1 of the 12 criteria was unmet, then the system was labeled
        as noncompliant. HUD also stated that it had yet to obtain any
        clear guidance from GAO, despite repeated inquiries, on whether
        the Department was applying a significantly higher standard for
        systems noncompliance than other agencies. GAO's Response HUD's
        comments imply that it was holding itself to a higher standard
        than other federal agencies because it declared systems
        nonconforming if only 1 of the 12 JFMIP criteria was unmet.
        However, HUD's records show that most of the 38 systems it
        declared not in conformance with FMFIA criteria Page 93
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts in 1998 did not
        conform with 3 or more of the 12 criteria. According to HUD's
        records, 21 of 38 nonconforming systems did not meet 3 or more of
        the 12 criteria, and 10 of the 21 nonconforming systems did not
        meet 10 or 11 criteria. Three of the 38 systems were reported as
        nonconforming because they did not meet one criterion; 9 did not
        meet two criteria; information on why 4 systems were not in
        conformance was not available; and another system, although
        reported to be nonconforming, was actually conforming. We have not
        reviewed the standards applied by other federal agencies in
        determining their systems' compliance with JFMIP criteria and
        therefore cannot offer any comments on the standards they follow.
        15. HUD's Comment, p. 9 HUD stated, "We strongly believe that it
        is very important that these system accomplishments be highlighted
        and discussed in greater detail, and that these changes are
        reflected in a changed GAO analyses of HUD's systems." GAO's
        Response See our response to comment 11. 16. HUD's Comment, p. 18
        HUD commented that during the past year, the Department had
        aggressively tackled the issue of computer matching and income
        verification and improved subsidy verification. HUD established a
        task force with staff from Public and Indian Housing; Policy
        Development and Research; the Assessment Center; and the Chief
        Financial Officer's (CFO) Office to expand capabilities for
        ensuring that subsidies are paid on the basis of tenants' incomes
        that are correct. GAO's Response Our statement of facts pointed
        out the material internal control weakness over the process of
        uncertain verification of tenants' incomes. The statement also
        explained that in fiscal year 1998, HUD unveiled a multifaceted
        plan to address this weakness. The effectiveness of the steps HUD
        has taken to address this issue, however, will most likely not be
        known until the fiscal year 1999 financial statement audit is
        completed in the spring of 2000. Page 94
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts 17. HUD's Comment, p.
        25 Concerning the Department's financial statements, HUD commented
        that it received its first-ever qualified audit opinion 2 years
        ago (in prior years, auditors issued disclaimers of opinion) and
        that it was on track to receive an unqualified (clean) opinion for
        its fiscal year 1998 consolidated financial statement. According
        to HUD, "This is a keystone achievement and reflective of the
        changing attitude of HUD managers in recognizing their fiscal
        responsibilities and the vast improvement in HUD's financial
        systems and financial data." GAO's Response Our statement of facts
        on HUD's major management challenges and program risks pointed out
        that HUD had received a qualified opinion on its fiscal year 1997
        financial statements. Beyond the statement of facts provided to
        HUD, in our final report our "Overview" pointed out HUD's
        improvement in receiving a qualified opinion on its fiscal years
        1996 and 1997 financial statements. After we issued our report on
        HUD's major management challenges and program risks, HUD's
        Inspector General issued, on March 29, 1999, its unqualified
        opinion on HUD's consolidated federal accounting-based financial
        statements for fiscal year 1998. The Inspector General stated in
        this report that in previous fiscal years, she was unable to
        conclude that HUD's consolidated financial statements were
        reliable in all material respects. Therefore, her ability to
        conclude that HUD's fiscal year 1998 financial statements were
        reliable was noteworthy. We agree that obtaining an unqualified
        opinion on its fiscal year 1998 financial statements was a
        noteworthy accomplishment for HUD. However, the Inspector General
        also stated that because of continued weaknesses in HUD's internal
        controls and financial management systems, this accomplishment
        came only after HUD and its contractors went through extensive ad
        hoc analyses and special projects to develop account balances and
        necessary disclosures. 18. HUD's Comment, p. 28 HUD commented that
        credit reform (the reason for the qualified opinion in fiscal year
        1997) initiatives within the Department have made significant
        progress. The Federal Housing Administration (FHA) has received
        from a major public sector accounting firm an unqualified (clean)
        opinion on its Page 95                            GAO/RCED/AIMD-
        99-189 HUD's Management Challenges Appendix II GAO's Responses to
        HUD's Comments on the Major Challenges and Program Risks
        Identified in GAO's Statement of Facts statements since 1993, HUD
        explained. The Department expected compliance with the
        requirements of credit reform in its fiscal year 1998 financial
        statements and stated that significant work has already been
        accomplished. GAO's Response Our January 1999 report on HUD's
        major management challenges and program risks included material
        recognizing that during 1998, HUD, with the assistance of
        independent contractors, focused significant effort on improving
        its ability to prepare loan program cost estimates in accordance
        with federal accounting standards and credit reform requirements.
        Our January 1999 report also stated that HUD has developed a plan
        that, if fully implemented, should help it prepare reasonable
        estimates of loan program costs in the future. Also, although FHA
        received an unqualified audit opinion on its fiscal year 1997
        financial statements, the amounts reported for FHA's loan program
        costs were derived using private sector generally accepted
        accounting principles that are significantly different from those
        prepared on the basis of federal accounting standards. After we
        issued our report on HUD's major management challenges and program
        risks, HUD's Inspector General and the public accounting firm KPMG
        LLP issued unqualified audit opinions on HUD's consolidated and
        FHA's federal accounting-based financial statements for fiscal
        year 1998. These unqualified opinions indicate that HUD and FHA
        were able to develop reasonable estimates of loan program costs
        for fiscal year 1998. However, the Inspector General also noted
        that this required extensive ad hoc efforts by HUD's Office of
        Housing and contractor support personnel. 19. HUD's Comment, p. 28
        HUD commented, "GAO says that [the Department's] systems are
        inadequate because they are poorly integrated, ineffective and
        generally unreliable." Disagreeing, HUD stated that over 60
        percent of its systems are compliant, including its financial
        systems. In support of this, HUD stated, "Our financial statements
        are now considered accurate (save for a single audit qualification
        on credit reform) and thus, the underlying data are accurate-which
        was not true two years ago." HUD contended that we downplayed this
        accomplishment despite the significant attention focused on this
        goal by the Congress, OMB, and GAO management. Page 96
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts GAO's Response HUD's
        comment on our characterization of its systems misstated the
        statement of facts we provided to the Department. Our
        characterization appeared in a passage that began, "However, these
        systems have been inadequate because . . ." and went on to
        summarize the information we had reported in our 1997 High-Risk
        Series report regarding information and financial management
        systems. In our January 1999 report on HUD's major management
        challenges and program risks, we added the phrase "we have
        reported in the past" to make it clearer that the statement
        referred to HUD's past problems. 20. HUD's Comment, p. 29 HUD
        commented that significant work has been done to develop new
        accounting and financial management systems: "We now have a new
        standard, fully compliant HUD-wide general ledger. And, we have
        developed and deployed 11 new financial management systems." GAO's
        Response See our response to comment 13 for a discussion of HUD's
        general ledger. Our January 1999 report on HUD's major management
        challenges and program risks recognized the development and
        deployment of the 11 financial management systems. Our December
        1998 report on HUD's information systems contained additional
        information on the status of HUD's systems integration projects.
        21. HUD's Comment, pp. 30-32 HUD asserted that there have been
        major, comprehensive accomplishments in financial systems
        integration. Accordingly, HUD said that we should be able to
        state, on the basis of the documentation submitted, that the
        listed 11 systems have been developed and deployed during the past
        few years: the Integrated Disbursement and Information System; the
        Integrated Business System; the HUD Procurement System; the Grants
        Evaluation Management System; HUDCAPS; the Tenants Rental
        Assistance Certification System; the Budget Formulation System;
        the Community 2020 Geographic Information System; the Budget
        Outlay Support System; the Single Family Premium Collection
        System; and the Real Estate Management System. Page 97
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts GAO's Response Our
        statement of facts mentioned that HUD was continuing to make
        progress addressing system problems by deploying systems or
        modules to manage and monitor departmental programs and provided
        examples of these systems. Our December 1998 report on HUD's
        information systems included a detailed discussion on the status
        of HUD's financial systems integration and the systems that have
        been developed and deployed to support it. (Also, see our response
        to comment 11.) 22. HUD's Comment, pp. 32 and 33 HUD commented
        that the Department agreed with a principal finding of our
        December 1998 report on its information systems-that the
        Department must improve its information technology capital
        planning process. However, according to HUD, our report did not
        take note of several major accomplishments and, in effect,
        suggested that no process was in place. HUD commented that it has
        had in place a structured process for selecting information
        technology investments since 1989 and has consistently made
        improvements to that process over the past decade. GAO's Response
        We disagree. Our statement of facts and December 1998 report
        stated that HUD did not have an effective process to manage its
        information technology investments. This is not the same as
        stating that there was no process in place, as suggested by HUD's
        comments. Specifically, in our December 1998 report, we explained
        that we reviewed HUD's recent selection and control processes
        beginning with fiscal year 1997 and found that both processes were
        incomplete and inadequate to make sound investment decisions and
        properly manage the selected investments. The major deficiencies
        we found with HUD's processes were that (1) investment decisions
        were made without reliable, complete, up-to-date project-level
        information and (2) oversight was not based on project-specific
        measures, which are required to effectively monitor and control
        information technology projects. Page 98
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts 23. HUD's Comment, p.
        34 HUD asserted that the statement, "Managers were not actively
        assessing risks in their programs as required under the management
        control program," was totally false. HUD went on to discuss risk
        assessments that have been prepared since 1996, as well as its
        Community Planning and Development's grants management system.
        GAO's Response The statement HUD quoted was in a paragraph in our
        statement of facts that began, "In February 1997 we reported. . .
        ." This paragraph summarized the information we had reported in
        our 1997 High-Risk Series report regarding internal controls. Our
        January 1999 report on HUD's major management challenges and
        program risks reiterated the phrase "we reported in 1997" at the
        end of the paragraph to make it clearer that this statement
        referred to past problems at HUD. Contrary to the implications of
        HUD's comments on risk assessments, our statement of facts
        discussed the Department's activities regarding the preparation of
        risk assessments for its nationwide centers, as well as other
        programs. In addition, our statement discussed a number of other
        activities HUD initiated to address its internal control problems,
        including the establishment of the Risk Management Division and
        real estate and enforcement centers and the development of a risk
        evaluation database. Also, in our February 1997 High-Risk Series
        report, we pointed out that in July 1994, HUD began implementing
        its new management planning and control program, which was based
        on front-end risk assessments of certain programs. At the time of
        our work on HUD's major management challenges and program risks,
        we were completing a review of HUD's Community Planning and
        Development's grant management system. Subsequently, on April 27,
        1999, we issued a report entitled Community Development: Weak
        Management Controls Compromise Integrity of Four HUD Grant
        Programs (GAO/RCED-99-98). 24. HUD's Comment, p. 35 HUD commented
        that the heading "2020 Reform Plan Directed Toward Internal
        Control Weaknesses" was a misleading statement and needed to be
        revised to accurately reflect that the plan was not solely
        directed toward internal control weaknesses and to state that 2020
        effectively Page 99                            GAO/RCED/AIMD-99-
        189 HUD's Management Challenges Appendix II GAO's Responses to
        HUD's Comments on the Major Challenges and Program Risks
        Identified in GAO's Statement of Facts addressed those problems.
        HUD also noted that 1,100 field and headquarters managers received
        internal control training during fiscal year 1998. GAO's Response
        Our statement of facts described actions initiated by HUD under
        its 2020 reform plan that were intended to address its internal
        control problems as well as its other management deficiencies. In
        the "Overview" section of our statement, which was not provided to
        HUD, we stated that HUD's 2020 reform plan addresses more than its
        management deficiencies. However, we disagree that HUD's actions
        effectively addressed the internal control weaknesses that we and
        others previously reported. Our statement of facts and January
        1999 report on HUD's major management challenges and program risks
        showed that internal control problems persist at HUD. As pointed
        out in those documents, material internal control weaknesses
        persist in its (1) management of the Section 8 subsidy payment
        process, which provides $18 billion in rental assistance; (2)
        management of staff resources; (3) management of losses resulting
        from defaults in the single-family and multifamily housing
        insurance programs; (4) implementation of automated systems to
        provide needed management information or reliable data; (5)
        monitoring of multifamily properties and single-family and
        multifamily housing notes inventories; and (6) contracting
        procedures. Furthermore, since we issued our February 1997 High-
        Risk Series report on HUD, we have reported that the Department
        has not adequately monitored, among other things, its real estate
        asset management contractors, the performance of appraisers of
        properties purchased with FHA-insured loans, and its process for
        deobligating funds no longer needed for Section 8 project-based
        rental assistance contracts. Finally, the statement of facts
        recognized that as of September 30, 1998, the CFO's Risk
        Management Division completed risk management training for
        headquarters and field managers and supervisors at or above the
        GS-13 level. Our January 1999 report on HUD's major management
        challenges and program risks included the information that over
        1,100 HUD headquarters and field managers completed risk
        management training. Page 100
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts 25. HUD's Comment, p.
        35 HUD commented that the statement, "REAC [the real estate
        assessment center] will not be fully functional until 2000," does
        not acknowledge that "significant aspects of REAC's housing
        assessment operations are already functioning well beyond any
        systems ever used at HUD." As an example, HUD explained that the
        center's new physical inspection data collection device and
        protocol are already in operational use, with over 4,200
        inspections completed through mid-December 1998. HUD felt that we
        "should . . . acknowledge that all critical components of REAC's
        housing assessment processes are scheduled to be functioning to
        improve the Department's monitoring and enforcement activity
        before the year 2000." In addition, HUD explained, the center has
        completed initial advisory scores for several hundred public
        housing authorities and is assisting the enforcement center with
        physical and financial assessments of 200 enforcement case
        referrals made by the multifamily housing program center's staff.
        GAO's Response Our statement of facts pointed out that as part of
        its reform plan, HUD established a real estate assessment center,
        which had issued regulations on the physical and financial
        assessments of multifamily properties and public housing
        authorities. It also pointed out that the center would not be
        fully functional until 2000 because it would not begin financial
        assessments of multifamily properties until around April 1999,
        when audited financial statements on the properties were to be
        submitted to HUD. Lastly, our statement of facts pointed out that
        although physical inspections of public housing authorities would
        start in 1999, financial assessments would not begin until 2000.
        The additional year is needed to give housing authorities time to
        convert their annual financial statements from HUD's accounting
        guidance to generally accepted accounting principles in accordance
        with the uniform financial standards for HUD's housing programs.
        In addition, our statement of facts discussed the potential
        benefits that HUD expects to achieve through the establishment of
        the real estate assessment center and acknowledged that HUD plans
        to physically and financially assess the total inventory of
        multifamily properties and public housing authorities. However, to
        date neither HUD nor we are able to evaluate the extent to which
        this reform has led to substantial and verifiable results in
        resolving management weaknesses. Page 101
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts Regarding the
        inspections completed by the center, our January 1999 report on
        HUD's major management challenges and program risks recognized
        that 4,200 inspections had been completed as of late-December
        1998. Our report also recognized that 200 cases had been referred
        to the enforcement center. In this regard, it should be noted that
        HUD's portfolio of multifamily properties totals around 32,000,
        and more than 13,000 public housing developments nationwide. 26.
        HUD's Comment, p. 36 HUD commented that our statement, "Although
        the Enforcement Center began operations on September 1, 1998, it
        is not scheduled to perform all of its centralized functions until
        around April 1999, when it is to begin receiving referrals of
        troubled multifamily properties from the Real Estate Assessment
        Center," did not recognize that the enforcement center had been
        receiving cases and performing all of its functions and was
        regularly receiving additional cases from Housing and the real
        estate assessment center. To date, HUD reported, the enforcement
        center had received 200 cases, and the Department had dramatically
        improved enforcement at the agency, for example, increasing
        debarments of bad landlords by 300 percent over the years. GAO's
        Response HUD's comment that the enforcement center had received
        200 cases from Housing and the real estate assessment center is
        inconsistent with other statements made in the letter, which said
        that the 200 referrals came from the Office of Multifamily Housing
        (see comment 25). On January 8, 1999, an enforcement center
        official advised us that all referrals had come from the Office of
        Multifamily Housing only. As discussed previously, our January
        1999 report on HUD's major management challenges and program risks
        recognized the 200 cases received by the enforcement center and
        the increase in debarments. 27. HUD's Comment, p. 37 HUD commented
        that we would be more accurate if we stated that material
        weaknesses are found within the financial statements at all
        federal agencies and departments. According to HUD, "Most cabinet
        level agencies have on the average 8-24 material weaknesses with
        DOD [the Department of Defense] exceeding 50 open material
        weaknesses." Consequently, HUD felt Page 102
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        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts that this problem is
        not isolated to HUD and that we needed to make this
        acknowledgment. GAO's Response Our statement of facts and January
        1999 report on HUD's major management challenges and program risks
        were about HUD and not other federal agencies. Other GAO reports
        have been prepared on such challenges and risks faced by other
        agencies. However, it should be noted that on the basis of fiscal
        year 1997 audits, there were six federal entities that had no
        material internal control weaknesses. Also, we have designated
        DOD's financial management as high-risk since 1995. 28. HUD's
        Comment, pp. 37 and 38 HUD commented that "GAO fails to tell the
        entire story," particularly about how HUD compares to other
        federal agencies regarding compliance with the reporting
        requirements under credit reform and Statement of Federal
        Financial Accounting Standards (SFFAS) No. 2. Approximately 60
        percent of the agencies that credit reform affects have not
        achieved full compliance, HUD stated. However, HUD pointed out,
        FHA has achieved compliance for its credit programs in accordance
        with private sector accounting standards-that is, FHA has received
        an unqualified (clean) audit opinion under generally accepted
        accounting principles for its financial statements since 1993. As
        a result of the qualification in HUD's fiscal year 1997
        consolidated financial statement audit, FHA has developed a plan
        to comply with the reporting requirements of SFFAS No. 2. HUD
        asserted that its work and accomplishments in this area had been
        praised in another GAO report titled Credit Reform: Key Credit
        Agencies Had Difficulty Making Reasonable Loan Program Cost
        Estimates. (Our credit reform report was a draft report at the
        time HUD made these comments). HUD concluded, therefore, that
        there appeared to be a tension, if not direct contradiction,
        between this other report and the statement of facts. Also, HUD
        stated that we should emphasize the accomplishment of receiving a
        qualified opinion because 2 years ago, the Department was not able
        to receive any type of opinion on its financial statement. Page
        103                           GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix II GAO's Responses to HUD's
        Comments on the Major Challenges and Program Risks Identified in
        GAO's Statement of Facts GAO's Response Our report on credit
        reform entitled Credit Reform: Key Credit Agencies Had Difficulty
        Making Reasonable Loan Cost Estimates (GAO/AIMD-99-31) was issued
        on January 29, 1999. This report showed that three out of the five
        key credit agencies we reviewed were not able to comply with
        credit reform, including HUD. The discussion in that report
        related to HUD's ability to comply with credit reform was entirely
        consistent with our January 1999 report. For example, our credit
        reform report stated, "HUD was unable to provide adequate
        supporting data for its fiscal year 1997 financial statements
        estimates of its loan program costs, which resulted in a qualified
        audit opinion from HUD's IG [Inspector General] on those financial
        statements. This lack of supporting data also raises questions
        about the integrity of loan program cost information submitted for
        budgetary purposes." The report also contained a discussion of the
        effort made by HUD in 1998 to resolve this problem and the plan it
        developed. (Also, see our response to HUD's comment 18 on the
        fiscal year 1998 financial statement audits.) 29. HUD's Comment,
        p. 38 HUD commented that our statement, "Although HUD has reduced
        its material weaknesses from 51 in fiscal year 1991 to the 9
        remaining open as of fiscal year 1997, some of the remaining
        weaknesses are long-standing," was very dismissive in its tone, so
        HUD suggested deleting the "although." HUD maintained that the
        reduction was real progress. GAO's Response Our statement intended
        to provide evidence of the progress HUD has made since 1991 in
        this area. At the same time, it is important to note that some of
        the nine material weaknesses remaining open as of fiscal year 1997
        are indeed long-standing-one dates back to 1983, while four others
        date back to 1993-and some, such as those relating to the $18
        billion rental assistance program, involve billions of dollars. It
        should also be noted that in our February 1997 High-Risk Series
        report, we reported that at the end of fiscal year 1995, HUD
        reported that it had nine material internal control weaknesses,
        the same number as in 1997. Since our February 1997 report, HUD
        has removed four material Page 104
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        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts weaknesses and added
        four, so the total remains at nine. The four areas in which
        material weaknesses were removed were community development block
        grant entitlements, Section 236 excess rental income, Section 235
        accounting system, and the title II prepayment and preservation
        program. The four material weaknesses added involved the
        monitoring of insured mortgages and multifamily projects,
        Secretary-held multifamily and single-family mortgage notes,
        income verification, and contracting. We deleted the word
        "although" in our January 1999 report, as suggested by HUD. 30.
        HUD's Comment, p. 39 HUD questioned the use of material from our
        report Housing Preservation: Policies and Administrative Problems
        Increase Costs and Hinder Program Operations (GAO/RCED-97-169,
        July 18, 1997) as an illustration of monitoring problems at HUD.
        The Department pointed out that the program is no longer funded
        and that the remaining issues from that report relate to oversight
        of those projects that were funded and their compliance with
        affordability restrictions that owners agreed to in exchange for
        financial incentives. According to HUD, since the report was
        issued in July 1997, the Department, along with Multifamily
        Housing in particular, has taken significant steps that will
        greatly enhance its ability for project oversight to ensure
        compliance with program requirements. HUD also explained the steps
        it has taken to enhance its ability to ensure compliance with
        program requirements. GAO's Response The description in our
        statement of facts of the problems we found in HUD's preservation
        program was accurate. Contrary to HUD's assertion that the report
        dealt mainly with funding and targeting aspects of the program,
        substantial segments of the report dealt with problems in HUD's
        management and oversight of the program. As noted in our report,
        these problems contributed to the program's high cost and hampered
        its effectiveness. One of the key problems we identified was that
        headquarters' oversight of its field offices' implementation of
        the program was limited. For example, headquarters did not conduct
        systematic reviews of field offices that processed preservation
        transactions, and the information received by headquarters was
        generally limited to the aggregate dollar amounts of the
        preservation incentives approved by field offices. As a result,
        HUD headquarters was not in a position to identify or Page 105
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        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts respond effectively
        to problems and issues that arose. We also questioned whether some
        of the reviews performed by HUD field offices of applications for
        preservation funding were sufficient to ensure that the costs were
        prudent and represented the best use of preservation funds. While
        the Congress terminated funding for the preservation program, a
        key factor in the Congress's decision was HUD's poor management of
        the program-a point clearly stated in our statement of facts we
        provided to the Department. HUD remains responsible for ensuring
        that property owners who participated in the program comply with
        affordability restrictions that were placed on their properties
        and stated that its newly created Office of Quality Assurance will
        be testing cases and project managers' follow-up to ensure that
        HUD's field offices are addressing the affordability and
        compliance requirements under the preservation program. While we
        have not performed any recent work to assess HUD's actions in this
        area, the Department did not indicate that any such reviews have
        been performed or that it has formulated any specific guidance for
        its field offices to follow on how they should monitor property
        owners' compliance with affordability restrictions (a weakness
        identified in our report). 31. HUD's Comment, p. 41 According to
        the Department, GAO's statement, "HUD's inability to implement
        plans under 2020 for handling properties on which borrowers
        defaulted was due to a shortage of Single Family staff because of
        downsizing." was false. HUD asserted that it has adequate staffing
        in its single-family housing operations. GAO's Response HUD's
        comment misstated the statement of facts we provided to the
        Department. Our statement of facts said that the Inspector General
        reported that "The problem [of oversight of contracts] was due to
        a shortage of single-family staff because of downsizing and HUD's
        inability to implement plans under 2020 for handling properties on
        which borrowers defaulted." Our statement of facts did not state
        or imply that HUD's inability to implement the 2020 plan was due
        to a shortage of staff because of downsizing. Also, we attributed
        the assessment to HUD's Inspector General in her December 1998
        semiannual report to the Congress. Page 106
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts However, we revised
        the above statement in our January 1999 report on HUD's major
        management challenges and program risks to reflect the specific
        wording used in the Inspector General's semiannual report and to
        more fully describe her reasons for characterizing the oversight
        of contractors as inadequate. 32. HUD's Comment, p. 42 HUD
        commented that we gave "only passing reference to the Home Buyer
        Protection Plan, in fact just one sentence." HUD explained that it
        is aggressively implementing the plan, which was announced in June
        1998. GAO's Response We disagree that more information on the Home
        Buyer Protection Plan was needed in our January 1999 report. Many
        of the plan's procedures and operations had not been finalized or
        implemented at that time. Therefore, we are unable to comment on
        whether the Home Buyer Protection Plan has led to substantial and
        verifiable results in improving HUD's appraisal process. After we
        issued our report on HUD's major management challenges and program
        risks, in April 1999 we issued a report on HUD's appraisal
        process, which discussed, among other things, potential changes to
        various processes resulting from the Home Buyer Protection Plan.4
        33. HUD's Comment, p. 43 HUD disagreed with our statement that it
        is too early to assess the effectiveness of the reform efforts to
        address internal control weaknesses. HUD stated that giving only
        one sentence for such a major reform is misleading to the reader
        and indicates a bias against documenting how substantially HUD has
        reduced risk. HUD stated that we are taking the approach that
        unless "operational perfection is attained . . . then the work and
        efforts to date remain unrecognized, unmeasurable, and without
        impact on the HUD operations." HUD also stated that our statement
        of facts did not recognize the risk assessments that had been
        completed, the internal control training provided to its managers,
        the high-level management attention paid to corrective action
        plans, and the demonstrable steps taken toward resolving several
        open material weaknesses. HUD also pointed to the Booz-Allen
        Hamilton study issued in March 1998 as further evidence that
        progress is being made. 4Single-Family Housing: Weaknesses in
        HUD's Oversight of the FHA Appraisal Process (GAO/RCED-99-72, Apr.
        16, 1999). Page 107                              GAO/RCED/AIMD-99-
        189 HUD's Management Challenges Appendix II GAO's Responses to
        HUD's Comments on the Major Challenges and Program Risks
        Identified in GAO's Statement of Facts GAO's Response Our
        statement of facts recognized the steps HUD has taken to address
        its internal control weaknesses, such as risk assessments that
        have been and are being performed and internal control training
        provided to its managers, as discussed in our response to comment
        23. We also recognized in our statement of facts that the 2020
        reform plan has potential for addressing HUD's deficiencies. Our
        basic point on internal control weaknesses and HUD's other
        management deficiencies is that HUD is making significant changes
        and has made credible progress since 1997 in laying the framework
        for improving the way the Department is managed. However, given
        the nature and extent of the challenges facing the Department, it
        will take time to implement and assess the impact of any related
        reforms. While major reforms are under way, several are in the
        early stages of implementation, and it is too soon to tell whether
        or not they will resolve the major deficiencies that we and others
        have identified. Consequently, we continue to believe, as we
        reported in 1995 and 1997, that these management deficiencies,
        taken together, place the integrity and accountability of HUD's
        programs at high risk. HUD indicated that a study by Booz-Allen is
        further evidence that progress is being made. This review, which
        primarily involved Booz-Allen's review and analyses of HUD's
        staffing requirements under the 2020 reorganization, was conducted
        from December 19, 1997, through February 27, 1998. Booz-Allen
        obtained information for its study primarily by reviewing HUD's
        implementation plans and assessing the adequacy and reasonableness
        of the staffing levels proposed in each plan. While the Booz-Allen
        study noted that the 2020 organization is in place, as stated in
        HUD's comments, it also characterizes some of the changes under
        the reorganization much the same as we did, namely, as being in
        process. For example, the study stated that the organization "is
        being staffed" and that "progress has been made in implementing
        the revised organizations." The study did not offer evidence of
        substantial and verifiable results in resolving HUD's management
        deficiencies as a result of the 2020 reforms. Furthermore, the
        study is dated March 1998, before all of the centers were
        operational, HUD's downsizing was officially halted, or the
        "unplaced" staff were given permanent assignments. Page 108
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        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts 34. HUD's Comment, p.
        44 HUD commented that the heading in our statement of facts "Much
        Work Remains on HUD's Information and Financial Management
        Systems" mischaracterized the work that the Department has done in
        the past 2 years. For example, HUD stated that it has developed
        and implemented 11 new systems and that all of its accounting
        systems are A-127 compliant. HUD suggested that the heading be
        revised to "Much Work Has Been Accomplished Relating To HUD's
        Information and Financial Management Systems." GAO's Response Our
        statement of facts and December 1998 report on HUD's information
        systems noted that progress has been made in developing and
        deploying systems. However, our December 1998 report concluded
        that while the Department has developed and deployed various
        modules and systems for 12 of the 14 different projects initiated
        under the 1993 and 1997 financial systems integration strategies,
        the systems integration effort has not yet been completed.
        Additional work that must be completed before HUD has integrated
        its financial management and information system includes (1)
        developing interfaces between the mixed systems and the core
        financial management system and (2) completing the individual
        systems integration projects (i.e., the mixed systems) such as the
        Grants Evaluation Management System, FHA's Mortgage Insurance
        System, and the FHA Financial Data Warehouse. In addition, as
        pointed out in our 1999 report on HUD's major management
        challenges and program risks, work on cleaning and verifying
        certain data elements from 18 different financial and mixed
        systems is in process. 35. HUD's Comment, p. 45 HUD commented that
        our statement that most of HUD's systems, "did not comply with
        Federal Managers' Financial Integrity Act (FMFIA) and therefore
        could not be relied upon to provide timely, accurate and reliable
        financial information and reports to management," was misleading,
        given the documentation that had been provided to us. HUD also
        stated that it has had far more vigorous standards for compliance
        with FMFIA than any other federal agency. While HUD noted that
        some nonfinancial systems are not yet compliant with the act, it
        stated the systems that have the most risk exposure for HUD are
        fully compliant. Page 109                           GAO/RCED/AIMD-
        99-189 HUD's Management Challenges Appendix II GAO's Responses to
        HUD's Comments on the Major Challenges and Program Risks
        Identified in GAO's Statement of Facts GAO's Response HUD's
        comment misstated the statement of facts we provided to the
        Department. The statement appeared in a paragraph that began, "In
        1997 we reported. . . ." This paragraph summarized the information
        we had reported in our 1997 High-Risk Series report regarding
        information and financial management systems. We reported that at
        that time, 93 of HUD's 116 systems did not comply with FMFIA. In
        our January 1999 report on HUD's major management challenges and
        program risks, we reiterated the phase "in our 1997 report" to
        make it clearer that the statement referred to HUD's past
        problems. In our statement of facts, we acknowledged that HUD in
        1998 reported that 38 of its 92 systems were not in compliance
        with FMFIA. However, we also reported that for three systems we
        reviewed, HUD's determination that the systems complied with FMFIA
        requirements was based upon staff members' knowledge, without any
        verification or documentation. In addition, our statement of facts
        reported that the Inspector General's March 1998 report to the
        Congress pointed out that 21 of the 31 systems that HUD had
        reclassified as conforming in 1998 did not have detailed
        assessments and justifications available, as required by HUD's
        CFO. HUD's internal guidance for these reviews did not stipulate
        when or how the program staff should verify that the systems met
        OMB's requirements. (Also see our response to comment 14 regarding
        the Department's assertion that it may have more vigorous
        standards for complying with FMFIA than any other federal agency.)
        36. HUD's Comment, p. 45 HUD commented that our statement of facts
        negatively described HUD's data clean up efforts and that our
        description had a dismissive tone that incorrectly ignored its
        work to date. GAO's Response We disagree. Our statement of facts
        presented a factual discussion of the status of HUD's data cleanup
        efforts, which we said were ongoing, and concluded that it was too
        soon to assess their impact. Page 110
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts 37. HUD's Comment, p.
        45 HUD commented that it agreed with the general recommendations
        in our December 1998 report on HUD's information systems but that
        the thrust of our report was not properly focused and was in some
        cases inaccurate. According to HUD, "The report is not accurate
        concerning the dollars expended on the development of financial
        systems; the report does not properly compare like systems when
        year to year comparisons are made; and most importantly, the
        report does not cite in its conclusions the many system
        improvements that HUD has accomplished. In short, the conclusions
        and recommendations are focused almost entirely on process
        improvements and are not properly balanced by summarizing the
        major system accomplishments of the Department." GAO's Response
        The majority of these comments are associated with our December
        1998 report and do not relate to issues discussed in our statement
        of facts. HUD's comments and our responses to those comments were
        contained in our December 1998 report and are discussed in the
        following passages-items 38 through 43. 38. HUD's Comment, pp. 46-
        49 HUD commented that our December 1998 report was not accurate
        about the dollars expended on the development of financial
        systems. HUD also commented that the report indicated that the
        initial cost of the Department's financial systems integration
        (FSI) strategy was $103 million; that the number increased to $206
        million with the 1993 strategy; and that by the end of fiscal year
        1999, the cost would be approximately $540 million. According to
        HUD, this interpretation was misleading and inaccurate because it
        did not compare like systems and did not differentiate development
        costs, maintenance costs, and non-FSI costs. "A more accurate
        estimate for the FSI effort is $250 million. This is a key point,"
        HUD asserted, "and the numbers and the text should be corrected. .
        . ." Page 111                           GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix II GAO's Responses to HUD's
        Comments on the Major Challenges and Program Risks Identified in
        GAO's Statement of Facts GAO's Response In our December 1998
        report and statement of facts we stated the Department expects to
        spend about $239 million for development costs plus $132 million
        for maintenance costs. However, we also reported that HUD had not
        yet finalized the plans, cost, and schedule to complete its
        current FSI strategy, and, therefore, FSI costs continue to be
        uncertain. Accordingly, HUD's estimates have fluctuated
        considerably, as reflected in various documents we received from
        the CFO and his staff. For example, cost estimates have changed
        from the $540 million reported by HUD in June 1998, to the $255
        million cited in the Department's November 12, 1998, comments on
        our draft report on information systems, to the $239 million that
        HUD reported a week later. However, we found that the $255 million
        and the $239 million estimates did not include at least $132
        million associated with maintaining FSI systems. As pointed out in
        our December 1998 report, HUD's continuing uncertainty as to what
        the total cost estimate is for FSI through September 1999,
        demonstrates the Department's need to develop and use well-defined
        cost-estimating processes to prepare reliable cost estimates. 39.
        HUD's Comment, p. 46 HUD commented that our December 1998 report
        did not properly compare like systems when year-to-year
        comparisons were made. GAO's Response In our December 1998 report,
        we responded to this comment by stating that we were asked to
        identify the initial objectives; development, deployment, and
        maintenance costs; and completion dates for HUD's FSI effort and
        how they had changed. Our report described the systems and the
        estimated costs that were included as part of the three plans and
        strategies for achieving integrated financial management systems.
        In addition, in our December 1998 report, we explained that HUD's
        underlying strategy to implement integrated financial management
        systems had changed three times. In finalizing the December 1998
        report, we also clarified estimates for the FSI strategies and the
        expected costs through fiscal year 1999. Page 112
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts 40. HUD's Comment, p.
        46 According to HUD, we did not cite the many system improvements
        that HUD has accomplished. GAO's Response As described, HUD's
        comment relates to our December 1998 report. We responded to this
        comment in our December 1998 report by summarizing the actions
        taken by HUD to date in our conclusions and adding information to
        our discussions of various FSI systems throughout the report. 41.
        HUD's Comment, p. 46 HUD commented that it was not given credit
        for the fact that it was one of the first agencies to implement
        the Information Technology Investment Portfolio System (I-TIPS).
        GAO's Response Our December report gave HUD credit for deploying
        I-TIPS to select information technology investments. However, it
        did not state that HUD was among the first agencies to implement
        I-TIPS because our work did not focus on comparing HUD to other
        federal agencies in implementing I-TIPS. Our objective was to
        determine whether HUD had followed industry best practices and had
        implemented the provisions of the Clinger-Cohen Act of 1996 and
        the Paperwork Reduction Act of 1995 that are required to manage
        FSI projects as investments. 42. HUD's Comment, p. 46 HUD
        commented that we also observed that the Department did not
        finalize the revised project plans for completing the core
        accounting system, HUDCAPS. HUD explained that it provided the
        final plan for completing HUDCAPS to us earlier. Furthermore, the
        Department pointed out that it recently installed a standard
        general ledger and chart of accounts, which the Department felt
        was barely mentioned in the statement of facts. Page 113
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        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts GAO's Response See
        GAO's response to comments 12 and 13. 43. HUD's Comment, pp. 46
        and 47 HUD felt that the accomplishments of the Department were
        scattered throughout and not properly brought together and
        highlighted; "cumulatively," HUD asserted, "they paint a very
        different picture of the agency's progress." GAO's Response HUD's
        comment is primarily associated with our December 1998 report on
        the Department's information systems. To respond to HUD's comment,
        we summarized the status of HUD's FSI effort to date and expanded
        the discussion of individual FSI projects to reflect the new
        information provided by HUD. Also, for our January 1999 report on
        HUD's major management challenges and program risks, we added
        information stating that HUD had told us that it had developed and
        deployed various modules and systems for 11 financial management
        systems. 44. HUD's Comment, p. 49 HUD commented that we made "a
        very weak mention" of the fact that the Department had completed
        its Year 2000 renovation of all systems, both mission critical and
        noncritical ahead of schedule. HUD also stated that we failed to
        mention that it was 93 percent complete with the certification of
        its systems and 86 percent complete with its implementation as of
        December 1998. GAO's Response Our January 1999 report on HUD's
        major management challenges and program risks was updated to
        reflect that recently HUD reported that the certification of its
        systems was 93 percent complete and its implementation was 86
        percent complete. Page 114
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        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts 45. HUD's Comment, p.
        49 HUD disputed our use of the weaknesses we reported in its
        estimates of project-based Section 8 amendment needs and
        recaptures of project-based Section 8 funding as an example of a
        financial management systems problem.6 (The reports in question
        are our reports entitled Section 8 Project-Based Rental
        Assistance: HUD's Processes for Evaluating and Using Unexpended
        Balances Are Ineffective (GAO/RCED-98-202, July 22, 1998) and
        Section 8 Tenant-Based Housing Assistance: Opportunities to
        Improve HUD's Financial Management (GAO/RCED-98-47, Feb. 20,
        1998). HUD asserted that the Congress's decision to reduce budget
        authority associated with project-based Section 8 amendments by
        $2.9 billion was a policy decision rather than attributable to a
        systems problem. GAO's Response While the Congress's decision to
        reduce the funding for Section 8 amendments was ultimately a
        policy decision, HUD failed to note that the decision was reached
        only after we identified serious flaws in the estimates of the
        project-based Section 8 amendment needs that HUD had provided to
        the Congress in connection with its fiscal year 1999 budget
        request. More specifically, we found that HUD had substantially
        overestimated its long-term funding needs for project-based
        Section 8 amendments and had underestimated the amount of
        recaptured funds that could be used to meet its fiscal year 1999
        amendment needs. These problems occurred because HUD did not
        ensure that the data used to analyze project-based Section 8
        amendment needs were complete, accurate, and current. HUD also did
        not sufficiently review the analyses of amendment needs that a HUD
        contractor performed to ensure that they were reliable. We found
        substantive errors in these analyses. When these errors were
        corrected and the analyses were updated to take into account the
        OMB's then-current economic assumptions, the estimate of long-term
        shortfalls in Section 8 amendment needs decreased from $19 billion
        to less than $2 billion. Furthermore, while HUD's budget request
        indicated that only $463 million in recaptured funds could be used
        to offset fiscal year 1999 Section 8 amendment needs, the revised
        analyses indicated that HUD would be able to recapture almost $3.7
        billion from Section 8 contracts expiring in fiscal years 1998 and
        1999, a substantial portion of which could be used to offset these
        needs. We also note that in responding to our December 1998
        report, HUD agreed with our recommendation for 6Amendment funding
        is provided to Section 8 contracts that have insufficient funding
        available for HUD to make rental assistance payments through the
        remaining life of the contracts. In contrast, for project-based
        Section 8 contracts for which expenditures have been less than
        anticipated, funds may be recaptured and used to help fund other
        Section 8 contracts. Page 115
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts improvements in its
        preparation of future budget requests for the Section 8 project-
        based program. 46. HUD's Comment, p. 50 HUD commented that we
        painted an inaccurate picture of its oversight of the Section 8
        tenant-based and project-based assistance programs. HUD pointed
        out that no housing authority had ever double-paid administrative
        fees and that it had not yet agreed with our assertion that fees
        have been double-counted for project-based assistance. HUD
        disputed the reference to $1 billion and believed that $1,416,000
        (annual cost) would depict a more adequate accounting picture. HUD
        also asserted that its process model was appropriate, although we
        and the Congress disagreed with the approach and assumptions that
        provided for level funding of increases for Section 8 over the
        budget period and the application of current excesses. GAO's
        Response We agree that language in our statement of facts could
        have been construed to mean that administrative fees to housing
        agencies had been double paid in both the tenant- and project-
        based programs, although this was not the statement's intent. Our
        January 1999 report on HUD's major management challenges and
        program risks clarified that the double-counting occurred only in
        the budgeting process and did not involve the project-based
        portion of the Section 8 program. However, our statement that HUD
        in September 1997 submitted to the Congress a revised budget
        estimate that was over $1 billion less than its original estimate
        for renewing Section 8 housing assistance contracts was correct.
        Furthermore, the principal reason for this amended budget request
        was, as HUD stated in its comments on our report, the
        identification of the double-counting error and its subsequent
        adjustment. Regarding project-based Section 8 amendments, HUD was
        incorrect in stating that we and the Congress disagreed with the
        approach and assumptions that provided for a level funding of
        Section 8 increases over the budget period. Our concerns with
        HUD's estimates of Section 8 amendment needs had nothing to do
        with the concept of leveling out funding shortfalls. The revised
        analyses cited in our report on project-based Section 8 unexpended
        balances all used the leveling methodology that HUD built into its
        Budget Forecasting System model. Under this approach, HUD spreads
        estimated funding shortfalls over the Page 116
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        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts remaining term of a
        Section 8 contract rather than beginning to recognize them in the
        year in which the contract is projected to run out of funds.
        Instead, as discussed in our response to the previous comment, our
        concerns related to the fact that HUD's estimates of amendment
        needs were overstated because of errors, omissions, and
        methodological weaknesses. 47. HUD's Comment, p. 51 HUD commented
        that we repeated our statement, "In 1997... we noted that HUD had
        reported most of its systems did not comply with FMFIA and
        therefore could not be relied upon to provide timely, accurate,
        and reliable financial information and reports to management."
        four times and that HUD finds no fault with its methodology to
        determine compliance with FMFIA. HUD suggested that we rewrite
        this section in a more positive tone. GAO's Response HUD is
        incorrect. This statement was not repeated in our statement of
        facts, although we did mention FMFIA a number of times in
        describing HUD's management deficiencies in internal controls and
        information systems. As in the other sections of our statement of
        facts, we began the discussion of information and financial
        management systems with a summary statement of concerns described
        in our 1997 High-Risk Series report, which included this
        statement. We then discussed the current status of systems'
        compliance and HUD's determination of their conformance with FMFIA
        standards. In our statement of facts, we also discussed FMFIA
        under the section on internal controls. That discussion focused on
        the material internal control weaknesses identified through HUD's
        FMFIA assessment, and we noted that HUD had reduced the number of
        weaknesses identified. We did not reword the lead-in paragraph to
        this section, as HUD suggested, because it was a restatement of
        facts in an issued GAO report. Material weaknesses reported under
        FMFIA are those management control deficiencies that the agency
        head determines are significant enough to be reported in the
        annual FMFIA report. In addition, government auditors are also
        required to identify management control weaknesses that, in their
        opinion, pose a risk or threat to the internal control systems of
        an audited entity, such as a program or operation, even if the
        management of the entity would not report the weaknesses outside
        of the agency. HUD's Office of Inspector General uses the terms
        "material weaknesses" and "reportable conditions" to identify
        these weaknesses. Page 117
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        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts 48. HUD's Comment, p.
        51 HUD commented that we painted a negative picture of FHA's
        compliance with the Credit Reform Act of 1990. GAO's Response See
        our responses to comments 18 and 28. In our January 1999 report,
        we moved the paragraph to which HUD referred and combined it with
        the discussion of credit reform in a section on internal controls.
        49. HUD's Comment, p. 53 HUD commented that our statement, "HUD
        expects to improve both the efficiency and effectiveness of its
        operations through these organizational changes," did not reflect
        that HUD's organizational changes, implemented through the HUD
        Management Reform Plan, were already improving the efficiency and
        effectiveness of operations. As proof, HUD cited excerpts from two
        reports prepared by HUD consultants. GAO's Response As described
        in our statement of facts, while HUD's organizational structure is
        in place, it is too early to assess whether the problems we
        identified in the past have been corrected. Specifically, the
        enforcement, financial management, and real estate assessment
        centers will not be performing all of their centralized functions
        until 1999 and 2000, when the transfer of functions from the field
        offices to the centers has been completed. Consequently, we cannot
        yet determine if these reform efforts have led to substantial and
        verifiable results in resolving HUD's management deficiencies.
        Moreover, neither HUD nor the consultants it cited provided any
        evidence demonstrating that the organizational changes have led to
        substantial and verifiable results in resolving management
        deficiencies. Rather, one of the consultants, David Osborne,
        endorsed the 2020 plan's concept and discussed improvements that
        will occur to HUD's operations once the plan is implemented. The
        other consultant, PricewaterhouseCoopers, in its December 1998
        report on HUD's 2020 reforms, found that implementation of some of
        the 2020 plan's reforms-such as the establishment of the community
        builders and the enforcement, real estate assessment, and troubled
        agency recovery centers-is well under way, with each project Page
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        Management Challenges Appendix II GAO's Responses to HUD's
        Comments on the Major Challenges and Program Risks Identified in
        GAO's Statement of Facts meeting or substantially meeting all of
        the critical milestones that HUD established for completion as of
        September 1; however, the report did not address the effectiveness
        of the changes being made or completed. 50. HUD's Comment, p. 55
        HUD commented that our statement, "the organizational changes were
        generally not based on empirical analysis or studies," was
        completely inaccurate. HUD referred to a March 5, 1998, letter to
        GAO, which laid out different analytical methods used to design
        the 2020 plan, including the review of critical reports; pilot
        program experience; change agent teams; and consultations with
        outside experts, affected constituent groups, the Congress, and
        HUD's Inspector General. HUD also commented that it consulted with
        recognized management experts prior to the June 1997 release of
        the 2020 plan, and with affected constituent groups and the
        Congress after the plan's release. In addition, HUD stated that it
        had incorporated the Inspector General's suggestions into its
        implementation plans. GAO's Response HUD's March 5, 1998, letter
        was in response to a draft of our report entitled HUD Management:
        Information on HUD's 2020 Management Reform Plan (GAO/RCED-98-86,
        Mar. 20, 1998). In both that report and our statement of facts, we
        stated that the efficiencies HUD claimed under the 2020 plan were
        generally not based on detailed empirical analyses or studies.
        Instead, HUD relied on a variety of factors, including workload
        data; the limited results of one pilot project; best practices
        identified in HUD field offices; benchmarks from other
        organizations, and managers' and staff members' experience and
        judgment. We agree that consultations with management experts,
        affected constituent groups, the Congress, and HUD's Inspector
        General are useful in improving the reforms being undertaken
        (including organizational changes) and building support for them.
        However, the purpose of our January 1999 report was to provide
        information on HUD's analytical support for the efficiencies it
        expects from the reforms-that is, the extent of data supporting
        the anticipated quantitative and qualitative benefits stated in
        the 2020 reform plan. Page 119
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        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts 51. HUD's Comment,
        pp. 58-60 HUD commented that our heading "Organizational Structure
        Is in Place, but Transfer of Functions and Responsibilities Is in
        Transition" and the information following it should be changed to
        reflect that centers established under the 2020 plan are
        "performing significant functions which provide vital support to
        all of the Department's major program areas." HUD discussed the
        operations of some of the centers, other management reforms in
        program areas, and the efforts of the community builders and
        community builder fellows. GAO's Response We believe that our
        heading was supported by the information we included in the
        section and that it provided an accurate description of HUD's
        status in implementing its organizational changes under the 2020
        reforms. For example, when the transfer of the financial
        management workload for approximately 21,000 housing assistance
        contracts from the Office of Housing field offices to the
        financial management center occurs will depend on when contract
        administrators are selected and deployed. According to the
        director of the financial management center, the transfer may not
        take place until late 1999 or early 2000. Our basic point is that
        although a new field organization structure is now in place and
        operational, it is too early to assess the effectiveness of this
        structure in correcting organizational deficiencies. The
        enforcement, financial management, and real estate assessment
        centers will not be performing all of their centralized functions
        until 1999 and 2000, when the transfer of functions from the field
        offices to the centers has been completed. 52. HUD's Comment, p.
        60 HUD commented that we made a broad generalization in saying
        that "most managers and staff said the transfer of functions was
        in transition and they did not know when it would be complete."
        Since we visited "only five HUD offices and a small number of
        headquarters organizations," the Department asserted, we were
        "reporting hearsay rather than statistically significant fact."
        Page 120                           GAO/RCED/AIMD-99-189 HUD's
        Management Challenges Appendix II GAO's Responses to HUD's
        Comments on the Major Challenges and Program Risks Identified in
        GAO's Statement of Facts GAO's Response From July through October
        1998, we interviewed HUD officials in the Denver homeownership
        center; the Ft. Worth, Chicago, Houston, and New Orleans field
        offices; the troubled agency recovery center at Memphis; and the
        real estate assessment and enforcement centers in Washington,
        D.C., about various aspects of their operations before the 2020
        reforms were implemented and after their implementation. We also
        interviewed randomly selected professional staff from each of the
        program areas in those locations. In total, we interviewed over 50
        program managers and professional staff from 25 programs at the
        locations we visited. The purpose of our interviews was not to
        obtain a statistically valid sample of HUD employees' views on the
        reorganization. Rather, it was to obtain information from program
        managers and staff at selected locations affected by the
        reorganization. In response to HUD's comment, however, our final
        report, where appropriate, indicated that the views expressed are
        those of the HUD staff that were interviewed only. 53. HUD's
        Comment, p. 60 HUD commented that our statement, "Although a field
        organization structure is in place, staffing decisions were only
        recently completed, and some centers are significantly
        understaffed," was "just wrong." HUD stated that staffing at the
        enforcement center would be completed in February and that
        staffing at the real estate assessment center was on target with
        its phased systems. GAO's Response It was not the intent of our
        statement of facts to imply criticism about staffing levels but,
        rather, to provide evidence on the status of staffing. As we
        stated in our statement of facts, staffing decisions for about
        1,300 employees were completed in September 1998, when the
        unplaced staff were given permanent assignments. The reported
        staffing levels at the centers were based upon our interviews
        through October, and the time frames were noted in our statement
        of facts. We also recognized in our statement of facts that HUD
        managers expected to advertise the unstaffed positions in 1999. In
        its comments, HUD also noted that full staffing at the centers had
        not yet been achieved. We deleted the word "significantly" from
        the discussion of staffing levels in our January 1999 report on
        HUD's major management challenges and program risks. Page 121
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts 54. HUD's Comment, p.
        62 HUD commented that our statement, "Staff losses were recovered
        after HUD decided in May 1998 to assign unplaced staff to
        permanent positions," failed to recognize one of the major goals
        of the 2020 plan, which is to change the way the Department
        operates. According to HUD, to ensure that additional staff
        addressed management deficiencies, unassigned staff were placed in
        areas that represented long-standing departmental problems that
        2020 had addressed. GAO's Response It is not clear to us what HUD
        intended with this statement. The point of this section of our
        statement of facts was to demonstrate that staffing under HUD's
        new organizational structure was in transition because some
        positions were only recently filled and some of the centers
        established under the 2020 plan were not yet fully staffed. 55.
        HUD's Comment, p. 63 HUD commented that we should update our
        statement that "the Enforcement Center had only 62% of its staff"
        to reflect the staffing level it intended to achieve by the end of
        January 1999. HUD also noted that the remaining positions were due
        to be filled by February 1999. GAO's Response Our statement of
        facts noted what HUD's staffing levels were as of the time of our
        work and stated that the managers of the centers planned to
        advertise the remaining positions in 1999. To add material to our
        final report on when expected staffing levels would be met would
        not have been appropriate in our opinion because of the degree of
        uncertainty that surrounded some of HUD's staffing expectations.
        For example, the director of the enforcement center told us that
        he was not sure whether positions would be filled at the center
        because they had been advertised previously but had not been
        filled. 56. HUD's Comment, p. 63 HUD commented that our interviews
        must have been premature because our statement, "to date there has
        not been a significant shift of workload from the field offices to
        the centers, according to the staff and managers we interviewed
        from July through October," was totally inaccurate. HUD Page 122
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts provided an example
        of 200 referrals of troubled projects to the enforcement center
        and spoke of the shift of some work to the financial management
        center and the grants management center. GAO's Response Our
        statement of facts reflected the status of workload transfers at
        the time of our review. As pointed out in our January 1999 report
        on HUD's major management challenges and program risks, the real
        estate assessment, enforcement, and financial management centers
        will not be performing all of their centralized functions until
        1999 and 2000. While the real estate assessment center had
        inspected over 4,200 multifamily properties as of December 1998,
        it would not begin financial assessments of multifamily properties
        until around April 1999, and it will not begin its physical
        inspections and financial assessments of public housing
        authorities until 1999 and 2000, respectively. In this regard, it
        should be noted that HUD's portfolio of multifamily properties
        totals around 32,000 and more than 13,000 public housing
        developments nationwide. Furthermore, the enforcement center was
        not scheduled to begin receiving referrals of multifamily
        properties from the real estate assessment center until around
        April 1999. The transfer of the Section 8 financial management
        processing workload from HUD's public housing field offices to the
        financial management center was expected to be completed in
        January 1999. However, the transfer of the Section 8 financial
        management workload relating to 4,600 annual contribution
        contracts from the Office of Housing field offices to the
        financial management center was not to begin until February 1999
        and was expected to be completed in mid- to late summer 1999.
        Also, when the transfer of the financial management workload for
        approximately 21,000 housing assistance contracts from the Office
        of Housing field offices to the center occurs will depend on when
        contract administrators are selected and deployed. According to
        the director of the financial management center, the transfer may
        not take place until late 1999 or early 2000. In addition, we do
        not believe that the referral of 200 cases of troubled projects to
        the enforcement center represents a significant shift in workload
        because HUD has at least 2,500 troubled multifamily projects in
        inventory, and, by some of its own estimates, the total may be as
        high as 5,000. In addition, a significant function of the
        financial management center relates to the Office of Housing's
        workload, which has yet to be transferred. Page 123
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts 57. HUD's Comment, p.
        65 In reference to our statement that "HUD's single family
        homeownership centers cannot handle the current workload of HUD's
        inventory," the Department stated that FHA had not yet implemented
        scheduled staffing reductions in the single-family HUD-owned
        property disposition or asset management divisions and that any
        criticism of FHA's performance in this area could not be linked to
        a reduction in staffing levels for single-family properties. HUD
        also pointed out that the fact that about 60,000 properties were
        sold indicates that staffing levels are adequate. HUD also stated
        that FHA is in the process of implementing new marketing and
        management contracts to maintain, protect, and sell HUD-owned
        properties, which will allow for a realignment of HUD staffing.
        The contract is based on a pilot program operated in three
        locations over the last 2 years. GAO's Response We revised our
        January 1999 report on HUD's major management challenges and
        program risks, deleting the reference to inadequate staffing as a
        reason for not being able to handle the workload. Our statement
        was based on HUD's Inspector's General's December 1998 report to
        the Congress. HUD's conclusion that selling 60,000 properties
        indicates that staffing is adequate is questionable. When the 1989
        HUD scandals occurred, HUD was selling a large number of
        properties. The problem was not selling properties; rather, it was
        exercising proper control over the agents who were doing the
        selling and over the properties while they were in HUD's
        inventory. It should be noted that in discussing the contracting
        pilot, HUD focused on its successful aspects and did not mention
        other aspects of the pilot that were less successful. For example,
        HUD stated that at two pilot sites, the average sales price
        increased and FHA's average profit per property sold increased or
        remained constant. This is not the complete story. According to
        HUD's evaluation of the pilot, the sales price at one office
        increased by 17 percent, but the increase at the other site was
        minimal-less than 1 percent. The third site experienced an 8-
        percent loss. Regarding profit, one site experienced a 15-percent
        increase, a second experienced a 2-percent decrease, and at the
        third there was a "dramatic" decrease (the percentage is not cited
        in HUD's analysis). Thus, while the new approach Page 124
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts seems to offer
        potential, it is not clear how much more successful the new
        approach will be than HUD's traditional approach. 58. HUD's
        Comment, p. 67 HUD commented that our statement, "Because of the
        workload situation, it is taking HUD longer to sell the properties
        and, as a result, the OIG [Office of Inspector General] estimates
        the agency is incurring additional costs of $1 million a day," was
        "wholly inaccurate." GAO's Response Our statement was based on a
        December 1998 HUD Inspector General report to the Congress and was
        so attributed in our statement of facts. Because we had not
        independently verified this information, we deleted this sentence
        from our January 1999 report on HUD's major management challenges
        and program risks. 59. HUD's Comment, p. 68 HUD maintained that
        our statement, "Because staffing reforms have not been fully
        implemented, their effectiveness in correcting management
        deficiencies cannot be demonstrated," was wrong for two reasons.
        First, HUD stated that the 2020 staffing plan and placement
        actions were, for the most part, completed and implemented.
        According to HUD, "Nine thousand placement actions have been
        completed by the Department, as part of establishing new and
        operational management reform organizations." Second, HUD stated
        that reform operations were well under way, as "evidenced by the
        actual performance of workload requirements by all program and
        consolidated centers." GAO's Response We revised our January 1999
        report on HUD's major management challenges and program risks to
        state that, "Because staffing reforms and workload transfers from
        the field offices to the centers are still in transition, the
        effectiveness of HUD's changes in correcting staffing deficiencies
        cannot be determined." While we agree that the bulk of the
        staffing decisions resulting from the 2020 reforms have been made,
        we disagree that there is evidence that the resulting staffing
        levels are adequate to meet workload needs. As previously stated,
        workload transfer from the field offices to the centers is still
        in a transitional phase. Until Page 125
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix II GAO's
        Responses to HUD's Comments on the Major Challenges and Program
        Risks Identified in GAO's Statement of Facts most of that transfer
        takes place, neither the field offices nor the centers will know
        whether they can handle the workload. The director of the
        financial management center told us, for example, that the
        center's authorized staffing level would be inadequate once it
        assumed its full workload in about a year. In addition, as pointed
        out in our statement of facts and January 1999 report, both we and
        HUD's Inspector General reported that monitoring and oversight of
        programs continues to be a problem at HUD. 60. HUD's Comment, p.
        68 HUD noted that we cited HUD's material internal control
        weakness of "inadequate emphasis on providing early warning of and
        preventing losses due to defaults on insured mortgages" in our
        statement of facts. HUD provided information on actions it had
        planned or taken to address this weakness. GAO's Response The
        material internal control weakness cited by HUD was reported by
        independent public accountants in their audit of FHA's fiscal year
        1997 financial statements. On March 12, 1999, after the issuance
        of our January 1999 report on HUD's major management challenges
        and program risks, the same material internal control weakness was
        reported by an independent public accountant in its audit of FHA's
        fiscal year 1998 financial statements. 61. HUD's Comment, p. 72
        Criticizing a point we made about travel funds ("The lack of
        sufficient travel funds to conduct on-site monitoring of program
        activities is a problem. According to some officials, the scarcity
        of travel funds has prevented them from conducting some on-site
        reviews"), HUD characterized the statement as "another example of
        how GAO takes isolated comments garnered from a non-statistically
        significant base and extrapolates into broad generalizations and
        then does not even check the underlying facts." HUD pointed out
        that the travel budget has significantly increased from $13.5
        million to $15.6 million to $19 million for fiscal years 1997,
        1998, and 1999. Page 126                           GAO/RCED/AIMD-
        99-189 HUD's Management Challenges Appendix II GAO's Responses to
        HUD's Comments on the Major Challenges and Program Risks
        Identified in GAO's Statement of Facts GAO's Response We disagree
        with HUD's characterization of our statements. In our statement of
        facts, we clearly established that the information obtained was
        from interviews of managers and staff conducted during visits to
        six field locations. The information was not intended to be nor
        was it presented as the views of a larger group of HUD employees.
        Nevertheless, we revised our January 1999 report on HUD's major
        management challenges and program risks to specify that 15 of the
        program managers and groups of staff out of the 38 we interviewed
        expressed concerns regarding the availability of travel funds for
        monitoring. We also included in our January report HUD's comments
        regarding the increase in the budget for travel funds. However, it
        should be noted, as pointed out in the report, that increases in
        travel funds do not necessarily translate into more travel funds
        for monitoring programs. Finally, HUD's Inspector General has also
        reported that it has been told that travel funds for program
        monitoring may not be adequate. 62. HUD's Comment, p. 72 HUD
        commented that our statement, "Program officials and a community
        builder in one HUD field office identified a need for HUD to
        clarify the authority of the community builders in dealing with
        HUD staff, locally elected officials, and industry
        representatives," reflected an isolated instance that had been
        dealt with in training; therefore, HUD felt the statement should
        be deleted. GAO's Response We had included this example in our
        statement of facts because the incident that prompted both the
        community builder and program officials to bring it to our
        attention was in our opinion, and theirs, very serious. However,
        we deleted the example from our final report. Page 127
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix III
        Major GAO Reports on HUD's Management Community Development: Weak
        Management Controls Compromise Integrity of Four HUD Grant
        Programs (GAO/RCED-99-98, Apr. 27, 1999). HUD Information Systems:
        Improved Management Practices Needed to Control Integration Cost
        and Schedule (GAO/AIMD-99-25, Dec. 18, 1998). Section 8 Project-
        Based Rental Assistance: HUD's Processes for Evaluating and Using
        Unexpended Balances Are Ineffective (GAO/RCED-98-202, July 22,
        1998). Home Improvement: Weaknesses in HUD's Management and
        Oversight of the Title I Program (GAO/RCED-98-216, July 16, 1998).
        Appraisals for FHA Single-Family Loans: Information on Selected
        Properties in New Jersey and Ohio (GAO/RCED-98-145R, May 6, 1998).
        Housing Finance: FHA's Risk-Sharing Programs Offer Alternatives
        for Financing Affordable Multifamily Housing (GAO/RCED-98-117,
        Apr. 23, 1998). Single-Family Housing: Improvements Needed in
        HUD's Oversight of Property Management Contractors (GAO/RCED-98-
        65, Mar. 27, 1998). Year 2000 Computing Crisis: Strong Leadership
        Needed to Avoid Disruption of Essential Services (GAO/T-AIMD-98-
        117, Mar. 24, 1998). HUD Management: Information on HUD's 2020
        Management Reform Plan (GAO/RCED-98-86, Mar. 20, 1998). Section 8
        Tenant-Based Housing Assistance: Opportunities to Improve HUD's
        Financial Management (GAO/RCED-98-47, Feb. 20, 1998). Housing
        Preservation: Policies and Administrative Problems Increase Costs
        and Hinder Program Operations (GAO/RCED-97-169, July 18, 1997).
        High-Risk Series: Department of Housing and Urban Development
        (GAO/HR-97-12, Feb. 1997). HUD: Field Directors' Views on Recent
        Management Initiatives (GAO/RCED-97-34, Feb. 12, 1997).
        Multifamily Housing: Effects of HUD's Portfolio Reengineering
        Proposal (GAO/RCED-97-7, Nov. 1, 1996). Page 128
        GAO/RCED/AIMD-99-189 HUD's Management Challenges Appendix III
        Major GAO Reports on HUD's Management Housing and Urban
        Development: Limited Progress Made on HUD Reforms (GAO/T-RCED-96-
        112, Mar. 27, 1996). Homeownership: Mixed Results and High Costs
        Raise Concerns About HUD's Mortgage Assignment Program (GAO/RCED-
        96-2, Oct. 18, 1995). Housing and Urban Development: Public and
        Assisted Housing Reform (GAO/T-RCED-96-25, Oct. 13, 1995).
        Federally Assisted Housing: Expanding HUD's Options for Dealing
        With Physically Distressed Properties (GAO/T-RCED-95-38, Oct. 6,
        1994). Federally Assisted Housing: Condition of Some Properties
        Receiving Section 8 Project-Based Assistance Is Below Housing
        Quality Standards (GAO/T-RCED-94-273, July 26, 1994). Section 8
        Rental Housing: Merging Assistance Programs Has Benefits but
        Raises Implementation Issues (GAO/RCED-94-85, May 27, 1994). HUD
        Information Resources: Strategic Focus and Improved Management
        Controls Needed (GAO/AIMD-94-34, Apr. 14, 1994). Multifamily
        Housing: Status of HUD's Multifamily Loan Portfolios (GAO/RCED-94-
        183FS, Apr. 12, 1994). Multifamily Housing: Impediments to
        Disposition of Properties Owned by the Department of Housing and
        Urban Development (GAO/T-RCED-93-37, May 12, 1993). HUD Reforms:
        Progress Made Since the HUD Scandal, but Much Work Remains
        (GAO/RCED-92-46, Jan. 31, 1992). Increasing the Department of
        Housing and Urban Development's Effectiveness Through Improved
        Management (GAO/RCED-84-9, Vols. I and II, Jan. 10, 1984). Page
        129                        GAO/RCED/AIMD-99-189 HUD's Management
        Challenges Appendix IV GAO Contacts and Staff Acknowledgments GAO
        Contacts       Judy A. England-Joseph, (202) 512-7631 Linda M.
        Calbom, (202) 512-9508 Joel C. Willemssen, (202) 512-6408
        Acknowledgments    In addition to those named above, Shirley L.
        Abel, Yvette R. Banks, Jeannie B. Davis, David G. Gill, Angelia V.
        Kelly, Robert Procaccini, Phillis L. Riley, Stewart O. Seman, and
        John H. Skeen, III, made key contributions to this report.
        (385787)           Page 130                       GAO/RCED/AIMD-
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