Housing and Urban Development: Comments on HUD's FY 1997 Budget Request
(Stmnt. for the Rec., 06/17/96, GAO/T-RCED-96-194).
GAO discussed the Department of Housing and Urban Development's (HUD)
fiscal year 1997 budget request, focusing on: (1) HUD multifamily
reengineering cost estimates; (2) proposed bonus pools for
high-performing grantees who exceed established performance measures;
and (3) HUD progress in addressing management deficiencies. GAO noted
that: (1) HUD has requested about $22 billion in discretionary budget
authority and plans about $33 billion in discretionary outlays; (2)
overly optimistic cost control assumptions about the major restructuring
of the multifamily housing program could affect the HUD budget request
for rental assistance for low-income families; (3) HUD has requested
$845 million in bonus funding for high-performing grantees in some its
new block grants; (4) implementing HUD performance funds will be
complicated and time-consuming; and (5) HUD has proposed various
internal controls to address management deficiencies.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-RCED-96-194
TITLE: Housing and Urban Development: Comments on HUD's FY 1997
Budget Request
DATE: 06/17/96
SUBJECT: Presidential budgets
Housing programs
Internal controls
Cost control
Federal agency reorganization
Block grants
Federal aid for housing
Reengineering (management)
Future budget projections
IDENTIFIER: HUD Multifamily Coinsurance Program
HUD Multifamily Housing Loan Program
HUD Empowerment Zones and Enterprise Communities Program
HUD Public Housing Management Assessment Program
Housing Certificate Fund
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Cover
================================================================ COVER
Before the Senate Committee on Appropriations, Subcommittee on VA,
HUD, and Independent Agencies, U.S. Senate
Statement Submitted
on June 17, 1996
HOUSING AND URBAN DEVELOPMENT -
COMMENTS ON HUD'S
FY 1997 BUDGET REQUEST
Statement for the Record by Judy A. England-Joseph, Director,
Housing and Community Development Issues, Resources, Community, and
Economic
Development Division
GAO/T-RCED-96-194
GAO/RCED-96-194T
(385626)
Abbreviations
=============================================================== ABBREV
HUD -
FHA -
LLP -
PHMAP -
EZ/EC -
HAF -
CDBG -
PHA -
MROP -
============================================================ Chapter 0
Mr. Chairman and Members of the Subcommittee:
We are pleased to have this opportunity to comment on the Department
of Housing and Urban Development's (HUD) fiscal year 1997 budget
request. When we appeared before the House Appropriations Committee
on March 27, 1996,\1 we noted that for the foreseeable future, HUD's
programs would be at high risk because of their vulnerability to
waste, fraud, and abuse and that limited progress had been made to
address HUD's the programmatic and budget problems. We also said
that although the Congress and HUD had made a start at reexamining
HUD's policies on housing and community development, reaching a
consensus would take time and that few of HUD's proposals for
reinventing itself had been adopted. Many of our observations on
this year's proposed budget were reflected in our March testimony,
and today we raise several new concerns. This information is based
on our past work and on several ongoing assignments for the Congress
(see appendix I).
Our statement today will discuss (1) HUD's multi-family reengineering
cost estimates, (2) the proposed bonus pools for high performing
participants in four of HUD's six proposed block grants to
consolidate existing programs, (3) and HUD's progress in addressing
the management deficiencies we described in our high-risk report.\2
In summary:
-- HUD's estimates of how multifamily portfolio reengineering will
affect its budget in fiscal year 1997 and over the next 6 years
may not be reliable. The uncertainty stems in part from HUD's
use of "best guesses" to develop some estimates rather than
basing them on current, project-specific data. However,
information that HUD recently obtained from an Ernst & Young
study of the multifamily portfolio should help address this
weakness. Furthermore, HUD's assumptions about how quickly it
will be able to restructure projects with high subsidy costs
appear optimistic and could be causing HUD to understate its
need for appropriations to assist low-income renters.
-- HUD's proposal to provide $845 million in performance bonuses to
grantees at the close of fiscal year 1997 could be premature.
Although establishing performance measures could lead to greater
program accountability, HUD has not yet undertaken the
time-consuming effort to fully develop appropriate measures, the
key details for implementation, or information systems adequate
to support performance measurement systems. Not only are these
elements necessary to a fair allocation of bonuses to grantees,
but grantees need to know them before the assessment period
begins. Therefore, we believe that HUD will not be ready to
award performance bonuses next year.
-- As we first reported in January 1994 and several times since
then, four long-standing, Department-wide management
deficiencies--weak internal controls, an ineffective
organizational structure, an insufficient mix of staff with the
proper skills, and inadequate information and financial
management systems--led to our designating HUD as a high-risk
area. To address these problems, HUD has proposed several
initiatives in its Departmentwide reinvention document called
Blueprint II, and we believe that HUD has taken steps in the
right direction by requesting funding in its fiscal year 1997
budget to implement several of these initiatives. Nevertheless,
because the problems are longstanding and complex, the
Department likely will remain in high-risk status for some time
to come.
--------------------
\1 Housing and Urban Development: Limited Progress Made on HUD
Reforms (GAO/T-RCED-96-112, Mar. 27, 1996).
\2 High-Risk Series: Department of Housing and Urban Development
(GAO/HR-95-11, Feb. 1995).
HUD'S FY 1997 BUDGET AND
PROGRAMS
---------------------------------------------------------- Chapter 0:1
Established in 1965, HUD is the principal federal agency responsible
for the programs dealing with housing and community development and
fair housing opportunities. Among other things, HUD's programs
provide (1) mortgage insurance to help families become homeowners and
to help provide affordable multifamily rental housing for low- and
moderate-income families, (2) rental subsidies for lower-income
families and individuals, and (3) grants and loans to states and
communities for community development and neighborhood revitalization
activities.
HUD's fiscal year 1997 budget proposal requests about $22 billion in
discretionary budget authority and plans about $33 billion in
discretionary outlays. Compared with HUD's fiscal year 1996
appropriation, this request represents about a 7-percent increase in
budget authority and 10 percent increase in outlays. HUD believes
that this increase in outlays between fiscal years 1996 and 1997 is
somewhat misleading. For example, 1996 outlays were unusually low
because HUD expended $1.2 billion--which normally would have been
disbursed early in fiscal year 1996--in late fiscal year 1995 because
of the government shutdown. In addition, reforms in the mortgage
assignment program generated a significant one-time savings of over
$1 billion in fiscal year 1996 (under credit reform as scored by the
Congressional Budget Office).
HUD's March 1995 blueprint, HUD Reinvention: From Blueprint to
Action, proposed to merge 60 of its 240 separate programs into three
performance-based funds that would be allocated directly to the
states and localities. HUD's objectives were to provide communities
with greater flexibility and instill a level of accountability in its
programs through the use of performance measures and a series of
rewards and incentives. As of March of this year, few of the
proposals in this reinvention document have been adopted. HUD's
second reinvention proposal, Renewing America's Communities from the
Ground Up: The Plan to Continue the Transformation of HUD, also
known as Blueprint II, would supersede the first proposal but
continue the move toward accountability by fiscal year 1998 by (1)
consolidating over 20 community development programs into three
performance funds where high-performing grant recipients would be
awarded bonuses, (2) replacing 15 separate public housing programs
with two performance funds, and (3) consolidating the 14 existing
voucher and certificate funds. Appendix II summarizes HUD's plans to
fund the proposals in Blueprint II through its fiscal year 1997
budget request.
UPDATED DATA MAY ASSIST IN
EVALUATING HUD'S MULTIFAMILY
REENGINEERING COST ESTIMATES
---------------------------------------------------------- Chapter 0:2
HUD's fiscal year 1997 budget request discusses how a planned, major
restructuring of the multifamily housing program is likely to affect
its budget over the next 6 years and beyond. The restructuring is
aimed at addressing serious and longstanding problems affecting
properties with HUD-insured mortgages that also receive rental
subsidies tied to units in the properties (project-based assistance).
HUD deserves credit for attempting to address these complex problems.
However, HUD's assumptions about its ability to quickly restructure
properties with high subsidy costs appear overly optimistic and could
be responsible for HUD underestimating its request for rental
assistance for low-income families.
According to HUD's latest data, 8,636 properties with about 859,000
apartments would be subject to the restructuring proposal; the unpaid
loan balances for these properties total about $17. 8 billion. In
many cases, HUD pays higher amounts to subsidize properties than are
needed to provide the households living in them with decent,
affordable housing. In other cases, rents set by HUD are lower than
required to maintain the properties' physical condition, contributing
to poor living conditions for families with low incomes. Initially
termed "mark to market" in last year's budget request, and now
referred to as "multifamily portfolio reengineering," the goal and
general framework of HUD's proposal remain the same: eliminate
excess subsidy costs and improve the poor physical condition of some
of the properties by relying primarily on market forces.
Specifically, for properties with mortgages insured by FHA that also
receive project-based assistance, HUD has been proposing to let the
market set the property rents to market levels and reduce mortgage
debt if necessary to permit a positive cash flow.\3
In addition, HUD has proposed replacing project-based rental
subsidies with portable tenant-based subsidies, thereby requiring the
properties to compete in the marketplace for residents. While
maintaining this general framework, HUD made several changes to its
proposal this year. For example, under the initial proposal all
rents would have been reset to market levels whether the market rents
were above or below the subsidized rents. The current proposal gives
priority attention initially to properties with subsidized rents
above market. In addition, HUD plans to let state and local
governments decide whether to continue with project-based rent
subsidies after mortgages are restructured or to switch to
tenant-based assistance. HUD has also indicated that it will allow
owners to apply for FHA insurance on the new, restructured mortgage
loans, whereas last year the proposal expressly disallowed FHA
insurance on restructured loans.
We are currently evaluating a study by Ernst & Young LLP released on
May 2, 1996, that was designed to provide the Department with current
information on HUD's multifamily portfolio. This information could
form the basis for the improvement of key assumptions needed to
estimate the net savings or costs associated with the reengineering
proposal. In this regard, HUD's contract with Ernst & Young LLP
requires that the firm update HUD's information on (1) market rents
versus the project-based rents that the agency subsidizes and (2) the
physical condition of the properties.\4 These two variables strongly
influence whether a property can operate at market rents without debt
reduction or what amount of debt reduction is needed to cover the
property's expenses. Having good data on these variables will allow
FHA to better develop claims estimates which will be based on the
amount of debt write-down. In addition, the rent data are integral
to estimating the change in subsidy costs if the project-based rents
are replaced with market rents and the residents receive tenant-based
assistance. HUD also tasked Ernst & Young with developing a
financial model that would show the likely result of reengineering
the portfolio and identify the related subsidy costs and claims
costs.
The results of the Ernst & Young study were not available when the
fiscal year 1997 budget was being developed. Because HUD lacked the
project-specific data contained in the Ernst & Young study, HUD used
assumptions in some cases that represent the Department's "best
guess" as to outcome. These assumptions can affect the budgetary
savings HUD expects to result from reengineering the portfolio.
Ernst & Young's May 2, 1996, report presents information on projects
that are expected to be affected by this reengineering. While the
report did not directly discuss subsidy and claims costs, we are
currently reviewing the results of this study and its cost
implications. We plan to issue our report on the Ernst & Young study
this summer.
On the basis of our ongoing work, we believe that some of the
assumptions HUD used may overstate the projected savings associated
with reengineering the portfolio. We cannot, however, determine the
extent of that overstatement at this time. One of HUD's assumptions
is that a substantial number of mortgages with excess subsidy costs
will be restructured well ahead of the dates that their rental
assistance contracts expire. Although the extent to which HUD will
be able to accomplish this remains unclear, this assumption appears
optimistic and HUD's budget request may understate its need for
funding to renew section 8 rental assistance contracts for fiscal
year 1997 and beyond.
--------------------
\3 Debt restructure amounts will likely be reflected as claims costs
in the Federal Housing Administration General Insurance and Special
Risk Insurance Accounts.
\4 The study is based on a national sample of properties with both
insurance and project-based assistance. The sample was designed to
meet a 90 percent confidence level, with a plus or minus 10 percent
relative precision for the overall population.
HUD NEEDS MORE TIME TO
ESTABLISH A PROGRAM OF
PERFORMANCE BONUSES
---------------------------------------------------------- Chapter 0:3
In its fiscal year 1997 budget, HUD requested $845 million in bonus
funding for high-performing grantees in four of its six new block
grants. HUD calls the block grants "performance funds." HUD believes
that these grants will provide communities with greater flexibility
to design local solutions to local problems. HUD plans to
competitively award bonuses to grantees who exceed the established
performance measures and who submit project proposals. (App. III
summarizes the details of the proposed bonus pools.)
We generally support performance measurement as a method of building
accountability into block grants because it would allow grantees to
achieve objectives while also vesting them with responsibility for
their choices. Moreover, HUD's development of block grants and
performance measures would be consistent with the underlying
principles of the Government Performance and Results Act and
recommendations for program consolidation made by the National
Performance Review. However, the characteristics of the block grants
themselves--their program breadth and the flexibility allowed the
grantees--will greatly complicate and add significant time to HUD's
development of uniform performance measures. HUD is still in the
early stages of developing such measures, however, and without them
grantees will have difficulty understanding HUD's objectives and
performance measurement process. Moreover, because of inadequate
information systems to support performance measurement, we question
whether HUD's request for bonus funding can be effectively used
during fiscal year 1997.
IMPLEMENTING PERFORMANCE
FUNDS WILL BE COMPLICATED
AND TIME-CONSUMING
-------------------------------------------------------- Chapter 0:3.1
Some features inherent to block grants will complicate the
implementation of a performance measurement system in fiscal year
1997. These complications would result in extending beyond fiscal
year 1997 the time HUD needs to develop adequate measures. We have
reported in the past, for instance, that the flexibility and wide
latitude allowed grantees make common and comparative measurement
very difficult. HUD will need to collaborate with the states to
develop performance measures and establish reporting requirements.
These entities' interests could vary markedly because HUD would be
looking to meet national objectives, while the states are trying to
meet local needs. Not only do the federal and state interests
differ, but it will take time for both to develop data collection
systems and reporting capacities once the initial decisions are made.
In addition, measurement is complicated because all observed outcomes
cannot be assumed to result from the programs and activities under
scrutiny. Some outcomes, such as job creation, will be affected by
factors outside of the control of program participants, while other
desired outcomes, such as enhanced quality of life for residents, may
not be quantifiable. Moreover, our work on block grants at other
federal agencies has shown that many of these agencies lack the
ability to track progress, evaluate results, and use performance data
to improve their agencies' effectiveness.\5 For example, HUD's
Inspector General ( IG) recently found that HUD is just beginning to
develop a Department-wide strategic plan, the key underpinning and
starting point for the process of program goal-setting and
performance measurement that the Government Performance and Results
Act seeks to establish throughout the federal government.\6
Program performance information comes from sound, well-run
information systems that accurately and reliably track actual
performance against the standards or benchmarks.\7 Our work has
shown, however, that HUD's information systems may not be adequate to
support the implementation of the four bonus pools. For example, HUD
is proposing a $500 million bonus fund as part of its public housing
capital fund. As a requirement for eligibility, housing authorities
would have to have earned high scores in the Public Housing
Management Assessment Program (PHMAP) and have undertaken substantive
efforts to link residents with education and job training.\8 However,
HUD generally does not confirm the scores of high scoring housing
authorities--many of the data to support the scores are
self-reported--and generally accepts the scores as accurate. Our
analysis, as well as that of the HUD IG and others, has cast doubt on
the accuracy of PHMAP scores for some housing authorities.\9 Three
major public housing industry associations also share concerns about
PHMAP's use as a tool for awarding bonuses. And finally, HUD itself
recently acknowledged that PHMAP scores should not be considered the
sole measure of a public housing authority's performance, noting that
circumstances can exist in which the best decision a housing
authority can make is not always the one that yields the highest
PHMAP score in the short term.\10 We believe, therefore, that
PHMAP--as it is currently implemented--should not be used as a basis
for awarding bonuses to public housing authorities.
HUD has said that it intends to draw on its Empowerment
Zone/Enterprise Community (EZ/EC) experience with benchmarking to
move toward performance-based funding for all HUD programs. However,
HUD officials said that developing benchmarks for the first round of
EZ/EC grants was a difficult task and they recognize that HUD could
have done a better job of explaining the process of developing
benchmarks to communities.
Given this difficulty and the complications mentioned earlier, we are
concerned that HUD is still in the midst of developing its bonus
program and measures for its performance funds. In its fiscal year
1997 budget, the Department is requesting $11 million for its Office
of Policy Development and Research to continue developing
quantifiable measures for each major program, a process for setting
benchmarks with grantees, and improvements in how the Department uses
information on program performance. Because this development is
ongoing, the measures and the processes will not be in place and
known to the grantees before HUD uses them to award bonuses with
fiscal year 1997 funds.
HUD officials believe that bonus funding needs to be offered during
fiscal year 1997 to encourage the states and localities to seek
higher performance and that the details will be worked out as the
program is implemented. We believe that timing is critical in this
matter. For the performance bonuses to have equity and merit, HUD
needs to be able to specify prior to the year over which performance
is measured what results and outcomes will be rewarded and how they
will be measured.
--------------------
\5 For a more complete discussion of accountability with block grants
see Block Grants: Issues in Designing Accountability Provisions
(GAO/AIMD-95-226, Sept. 1, 1995).
\6 Under this act, no later than September 30, 1997, federal agencies
must submit strategic plans covering a period of at least 5 years to
the Office of Management and Budget which, as part of its effort to
link the act and the budget process, is requiring agencies to submit
parts of their strategic plans by June 7, 1996.
\7 The EZ/EC program defines benchmarks as the long-term desired
outcome by which progress and achievement are measured. Under this
definition, its "benchmarks" are similar to strategic goals.
\8 Under the assessment program, a score of less than 60 on a
100-point scale earns a housing authority the performance
classification of "troubled"; a score of from 60 to 90 earns the
housing authority the classification of "standard performer"; and a
score over 90 earns the housing authority the classification of "high
performer."
\9 Housing and Urban Development: Public and Assisted Housing Reform
(GAO/RCED-96-25, Oct. 13, 1995).
\10 "Office of the Assistant Secretary for Public and Indian Housing;
Public Housing Management Assessment Program,"Federal Register, Vol.
61, No. 88, May 6, 1996, p. 20358.
HUD'S BUDGET PROPOSES FURTHER
ACTION TO ADDRESS MANAGEMENT
DEFICIENCIES
---------------------------------------------------------- Chapter 0:4
As we have reported,\11 four long-standing, Department-wide
management deficiencies led to our designation of HUD as a high-risk
area in January 1994.\12 These deficiencies were weak internal
controls, an ineffective organizational structure, an insufficient
mix of staff with the proper skills, and inadequate information and
financial management systems. In February 1995, we reported that
HUD's top management had begun to focus attention on overhauling the
Department's operations to correct these management deficiencies.\13
In that report, we outlined actions that the agency needed to take to
reduce the risk of waste, fraud, and abuse.
In reviewing the proposed 1997 budget, we found budgetary support for
the implementation of several of these recommendations. First, we
recommended consolidating programs to give the communities greater
flexibility in applying for funds and reducing administrative burden.
The 1997 budget proposes the consolidation of many individual
programs, either now or in the near future, into block grant programs
to increase participants' flexibility. HUD is beginning to develop
performance measures for many programs to assess the participants'
progress. Second, we recommended that HUD be authorized to use more
innovative initiatives to leverage private investment in community
development and affordable housing. Several HUD programs will now or
in the future involve mechanisms such as grant proposals or loan
programs that will require either participation or investment by
private organizations. In addition, FHA proposes creating new
mortgage products that would expand homeownership and that would
share risk with other entities.
Third, we recommended that HUD continue to strengthen and coordinate
its long-range planning. The budget proposal describes new
investments to upgrade and expand its computer systems to
specifically support implementation of Blueprint II. HUD anticipates
that the proposed investments will improve efficiency and reduce
operating costs.
However, HUD's budget proposes several new, specialized initiatives
that seem to run counter to the agency's consolidation efforts to, as
described in Blueprint II, "sweep away the clutter of separate
application procedures, rules and regulations that has built up at
HUD over the past 30 years." For example, HUD is requesting $290
million for its Housing Certificate Fund to assist several groups of
people needing preferred housing. These programs include the
Welfare-to-Work initiative and housing for homeless mothers with
children. However, this funding request is inconsistent with
Blueprint II, in which HUD urges the Congress to do away with the
statutes that require such preferences.
Although the Department deserves credit for its continuing resolve in
addressing its long-standing management deficiencies, HUD's recently
initiated actions are far from reaching fruition, and the agency's
problems continue. In addition, specialized programs are beginning
to reappear, and they may undermine the major restructuring of the
agency, reduce efficiency, and increase administrative burdens.
Therefore, we believe that both now and for the foreseeable future,
the agency's programs will continue to be high-risk in terms of their
vulnerability to waste.
--------------------
\11 Housing and Urban Development: Limited Progress Made on HUD
Reforms (GAO/T-RCED-96-112, Mar. 27, 1996).
\12 Improving Government: Actions Needed to Sustain and Enhance
Management Reforms (GAO/T--OGC-94-1, Jan. 27, 1994).
\13 High-Risk Series: Department of Housing and Urban Development
(GAO/HR-95-11, Feb. 1995).
CONCLUSIONS
---------------------------------------------------------- Chapter 0:5
Our statement today discussed several issues that will affect HUD's
programs and their need for appropriations. We identified new issues
and highlighted changes in other issues on which we have previously
testified. By continuing to focus on improving its internal
management and coming to closure on how and when it will use the
market to eliminate excess subsidy costs and improve the poor
physical conditions of its assisted multifamily housing, HUD will be
better able to use additional appropriations and implement new
policy. Although HUD has recognized many of its management
deficiencies and has budgeted funds to address them, we see this as a
long-term effort that will continue into the foreseeable future.
In connection with the proposed bonus pools, the lack of adequate
performance measures and associated information systems leads us to
question the basis for awarding additional funding at this time.
While HUD officials believe that the details of awarding bonuses will
be worked out as the program is implemented, we believe that they are
overly optimistic, given the magnitude of the bonus pools and the
complexity of developing appropriate performance measures.
MATTER FOR CONGRESSIONAL
CONSIDERATION
---------------------------------------------------------- Chapter 0:6
We recommend that the Congress consider not appropriating the $845
million for HUD's proposed bonus pool funding until the Department
develops adequate performance measures and supporting information
systems to ensure that these funds are used effectively.
SELECTED GAO PRODUCTS
=========================================================== Appendix I
Housing and Urban Development: Limited Progress Made on HUD Reforms
(GAO/T-RCED-96-112, Mar. 27, 1996).
FHA Hospital Mortgage Insurance Program: Health Care Trends and
Portfolio Concentration Could Affect Program Stability
(GAO/HEHS-96-29, Feb. 27, 1996).
GPRA Performance Reports (GAO/GGD-96-66R, Feb. 14, 1996).
Homeownership: Mixed Results and High Costs Raise Concerns About
HUD's Mortgage Assignment Program (GAO/RCED-96-2, Oct. 18, 1995).
Multifamily Housing: Issues and Options to Consider in Revising
HUD's Low-Income Housing Preservation Program (GAO/T-RCED-96-29, Oct.
17, 1995).
Housing and Urban Development: Public and Assisted Housing Reform
(GAO/T-RCED-96-25, Oct. 13, 1995).
Block Grants: Issues in Designing Accountability Provisions
(GAO/AIMD-95-226, Sept. 1, 1995).
Property Disposition: Information on HUD's Acquisition and
Disposition of Single-Family Properties (GAO/RCED-95-144FS, July 24,
1995).
Housing and Urban Development: HUD's Reinvention Blueprint Raises
Budget Issues and Opportunities (GAO/T-RCED-95-196, July 13, 1995).
Public Housing: Converting to Housing Certificates Raises Major
Questions About Cost (GAO/RCED-95-195, June 20, 1995).
Government Restructuring: Identifying Potential Duplication in
Federal Missions and Approaches (GAO/T-AIMD-95-161, June 7, 1995).
HUD Management: FHA's Multifamily Loan Loss Reserves and Default
Prevention Efforts (GAO/RCED/AIMD-95-100, June 5, 1995). Program
Consolidation: Budgetary Implications and Other Issues
(GAO/T-AIMD-95-145, May 23, 1995).
Government Reorganization: Issues and Principles
(GAO/T-GGD/AIMD-95-166, May 17, 1995).
Managing for Results: Steps for Strengthening Federal Management
(GAO/T-GGD/AIMD-95-158, May 9, 1995).
Multiple Employment Training Programs: Most Federal Agencies Do Not
Know If Their Programs Are Working Effectively (GAO/HEHS-94-88,
Mar.2, 1994).
Multifamily Housing: Better Direction and Oversight by HUD Needed
for Properties Sold With Rent Restrictions (GAO/RCED-95-72, Mar. 22,
1995).
Block Grants: Characteristics, Experience, and Lessons
Learned(GAO/HEHS-95-74, Feb. 9, 1995).
High-Risk Series: Department of Housing and Urban Development
(GAO/HR-95-11, Feb. 1995).
Program Evaluation: Improving the Flow of Information to the
Congress (GAO/PEMD-95-1, Jan. 30, 1995).
Housing and Urban Development: Major Management and Budget Issues
(GAO/T-RCED-95-86, Jan. 19, 1995, and GAO/T-RCED-95-89, Jan. 24,
1995).
Federally Assisted Housing: Expanding HUD's Options for Dealing With
Physically Distressed Properties (GAO/T-RCED-95-38, Oct. 6, 1994).
Rural Development: Patchwork of Federal Programs Needs to Be
Reappraised (GAO/RCED-94-165, July 28, 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, and Video, GAO/RCED-94-01VR).
Public Housing: Information on Backlogged Modernization Funds
(GAO/RCED-94-217FS, July 15, 1994).
Homelessness: McKinney Act Programs Provide Assistance but Are Not
Designed to Be the Solution (GAO/RCED-94-37, May 31, 1994).
SUMMARY OF MAJOR PROPOSALS AND
BUDGET REQUESTS
========================================================== Appendix II
Blueprint II FY 1997 Budget Request
------------------ ----------------------------- -----------------------------
Community Grantees will use their The budget proposes $4.6
Development Block formula funds for the present billion for the CDBG fund in
Grants Fund wide range of activities 1997. In addition, $300
(CDBG)\a eligible under CDBG, but two million is requested for a
new features added-- second round of Empowerment
performance measures and Zone/Enterprise Communities
benchmarks, and a bonus pool. grants ($200 million) and a
The bonus pool will be competitive Economic
devoted exclusively to job Development Challenge Grant
creation and economic ($100 million) for high-
revitalization efforts. performing jurisdictions.
HOME Fund\b Grantees will use their The budget proposes a total
formula funds to expand the of $1.55 billion for HOME in
supply of affordable housing. 1997, including $1.4 billion
The fund will require grant for the HOME Fund and $135
recipients to set their own million for the HOME Fund
performance measures and Challenge Grant for
benchmarks. Ten percent of Homeownership Zones. The
the fund will be set aside as Budget also proposes to use
a bonus pool to create large $15 million of funds provided
tracts of homeownership in for the HOME Fund for Housing
communities. Counseling.
Homeless The HAF will allow grantees The budget proposes $1.12
Assistance Fund to shape a comprehensive, billion for the HAF in 1997.
(HAF)\c flexible, coordinated Of this total, $1.01 billion
"continuum of care" approach will be for a consolidated
to solving rather than needs-based homeless
institutionalizing assistance program, and the
homelessness. Ten percent of remaining $110 million will
the fund will be set aside as be for the Homeless/
a bonus pool. Innovations Challenge Grant.
Public Housing HUD will re-propose The budget proposes $2.9
Operating Fund\d consolidating several billion for the Operating
programs (i.e., drug Fund, an increase of $100
elimination grant, service million over the anticipated
coordinators) into one $2.8 billion for fiscal year
Operating Fund by FY 1998. 1996.
All existing eligible uses
under these funds, plus
expanded anti-crime
activities, will be permitted
under the Operating Fund.
Public Housing HUD will re-propose The budget proposes an
Capital Fund\e consolidating a series of appropriation of $3.2 billion
separate programs into one for the Capital Fund in 1997.
Capital Fund by FY 1998. This Two-hundred million will be
new Fund will largely be made available for Indian
modeled after the current housing construction. The
modernization program. budget assumes that $500
Eligible activities will million will be made
include those currently available in a separate
eligible under modernization account for a Capital Bonus
programs, under programs for Fund. The budget does not
distressed public housing allocate a specific dollar
developments, and under the amount to be used for the
development and Family Campus of Learners
Investment Center Programs. initiative. However, PHA's
HUD will set aside 10 percent are encourage to use capital
of the Capital Fund as a funds to advance this
bonus pool. HUD plans to jump endeavor.
start the Campus of Learners
initiatives in fiscal year
1996 by requiring all
applications for
redevelopment under the
public housing capital
programs to build in
educational, technological,
and job linkages. PHA's will
need to build viable
partnerships with local
educational and job placement
institutions to be eligible
for funding.
Housing HUD will re-propose The budget is requesting an
Certificate Fund\f consolidating the existing appropriation of $290 million
voucher and certificate funds for fiscal year 1997 for the
into one performance-based Certificate Fund for 50,000
Certificate Fund. The incremental units, of which
Certificate Fund will be 30,000 units will be used to
HUD's principal tool for help families make a
addressing what HUD considers transition to work (25,000
the primary source of severe units) and help homeless
housing problems in the mothers with children obtain
nation: lagging household housing (5,000 units). The
incomes and high housing additional 20,000 units will
costs. be used for tenant protection
to support families in FHA-
insured assisted housing
projects directly affected by
prepayment, disposition or
restructuring.
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\a The Community Development Block Grant Fund will comprise the CDBG
and Economic Development Challenge Grant.
\b The HOME Fund comprises the Home Investment Partnership Program
(HOME), and the HOME Fund Challenge Grant.
\c The Homeless Assistance Fund will consolidate HUD's six McKinney
homeless assistance programs-Shelter Plus Care, Supportive Housing,
Emergency Shelter Grants, Section 8 Moderate Rehabilitation (Single
Room Occupancy), Rural Homeless Grants, and Safe Havens, as well as
the Innovative Homeless Initiatives Demonstration Program. It will
also include the Homeless/Innovations Challenge Grant.
\d The Public Housing Operating Fund will consolidate the Public and
Indian Housing Operating Subsidies.
\e The Public Housing Capital Fund will consolidate the Public
Housing Modernization, Public and Indian Housing Development, Major
Reconstruction of Obsolete Public Housing (MROP) Projects,
amendments, lease adjustments, and Family Investment Centers.
\f The Housing Certificate Fund consolidates the Section 8
Certificates, Section 8 Vouchers, Section 8 Contract Renewals,
Section 8 Family Unification, Section 8 for Persons with
Disabilities, Section 8 for Persons with AIDS, Section 8 for
Homeless, Section 8 Opt-Outs, Section 8 Counseling, Section 8 Pension
Fund Certificates, Section 8 Veterans Affairs Supportive Housing,
Section 8 Headquarters, Reserve, Lease Adjustments, and Family
Self-Sufficiency Coordinators programs.
PROPOSED REQUESTS FOR AND BASIS
FOR AWARDS IN HUD'S BONUS POOLS\A
========================================================= Appendix III
Reques
t Bonus Allocation and
Fund/ (total fund Bonus allowable uses for
account ) title fund Basis for award bonus funds
-------- ------ --------- ------ -------------------- ---------------------
Public $3.2 Capital $500 Public Housing The bonus fund will
Housing billio Bonus millio Authorities (PHAs) be split among
Capital n Fund n need to have scores elegible PHAs based
Fund of 90 or higher on the Caital Fund
under Public Housing formula, and bonus
Management funds may be used for
Assessment Program any uses elegible
(PHMAP) and under the Capital
undertaken Fund.
substantive efforts
to link residents
with educational,
self-sufficiency
intitiatives, or
"Campus of Learners"
activity.
CDBG $4.9 Economic $100 Any CDBG grantee Funds are to address
Fund billio Developme millio that meets program brownfields, generate
n nt n requirements, meets economic
Challenge or exceeds revitalization in
Grant performance measures distressed
and benchmarks communities, link
included in its people in these
Consolidated Plan, communities to jobs.
and demonstrates
that it has expended
grant funds on a
timely basis.
Awards given on a
competitive basis to
high performing
jurisdictions that
propose innovative
economic
revitalization and
job creation
strategies using a
combination of their
own resources,
private capital, and
federal program
incentives.
HOME $1.55 HOME Fund $135 Bonus funding is a Funds will be used to
Fund billio Challenge millio "challenge grant" create Homeownership
n Grant n awarded on a Zones to support
competitive basis to state/local efforts
high-performing to develop
jurisdiction that homeownership
propose creative, opportunities in
cost-effective targeted areas.
homeownership Families earning up
strategies using a to 115 percent of the
combination of their median income could
own resources, be assisted.
private capital, and
federal program
incentives.
$1.12 Homeless/ $110 Competitive basis to Bonus funding is to
Homeless billio Innovatio millio high-performing address the stated
Assistan n ns n jurisdictions that national priorities.
ce Fund Challenge address national
Fund priorities such as
homeless persons
with multiple
diagnoses,
particularly mental
illness and/or drug/
alcohol addictions
Jurisdications need
to propose creative
strategies using a
combination of their
own resources,
private capital, and
federal program.
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\a Congressional Justification for 1997 Estimates, HUD, Part 1, April
1996.
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