Housing and Urban Development: Comments on HUD's Fiscal Year 1999 Budget
Request (Statement/Record, 03/25/98, GAO/T-RCED-98-137).

Pursuant to a congressional request, GAO discussed selected aspects of
the Department of Housing and Urban Development's (HUD) fiscal year (FY)
1999 budget request, focusing on: (1) actions HUD has taken or plans to
take to improve its budget estimates; (2) the reasonableness of HUD's
request for Section 8 tenant-based and moderate rehabilitation housing
assistance; (3) HUD's justification for its Section 8 project-based
amendment request; (4) HUD's request for funding to assist the homeless;
(5) HUD's request for $100 million to fund its new Regional Connections
Initiative (RCI); (6) HUD's capacity to manage its HOPE VI program; and
(7) the budgetary implications for public and assisted housing of
welfare reform.

GAO noted that: (1) HUD has recognized the need to improve its
budget-estimating process with better oversight and documentation, and
has started to modify its organizational structure to increase its
oversight of the staff responsible for formulating budget estimates; (2)
however, many of HUD's planned improvements--such as the Office of
Management and Budget's analysis of the program offices'
submissions--were not implemented in time to help ensure the accuracy of
HUD's FY 1999 budget estimate; (3) according to HUD officials, these
improvements will be in place to enhance the FY 2000 process; (4) while
HUD has significantly improved its budgeting for Section 8 tenant-based
and moderate rehabilitation contract renewals, HUD's request for $4.8
billion to renew and amend Section 8 tenant-based and moderate housing
contracts for FY 1999 could be overstated by as much as $691 million;
(5) because this excess budget authority exists, HUD will not be likely
to need the $70 million it has requested to amend Section 8 moderate
rehabilitation contracts; (6) HUD's budget request for $1.3 billion to
amend Section 8 project-based contracts--needed to cover shortfalls in
these long-term contracts--substantially exceeds the amounts that HUD's
analyses indicated are needed; (7) this figure exceeds the amount of
$463 million that HUD used in its budget request to offset its FY 1999
needs for funding to amend project-based contracts; (8) to help address
the needs of the nation's homeless, HUD has requested 34,000 new Section
8 vouchers; (9) if approved, the vouchers would help to address
congressional concern that a high proportion of funding for homeless
assistance has been spent in the past on supportive services instead of
on direct housing assistance; (10) however, HUD has not developed the
eligibility standards or other planning criteria that would facilitate
the program's implementation; (11) HUD's budget request for $100 million
for RCI does not provide enough detail to indicate whether this level of
funding is reasonable for the program; (12) HUD may not have the
capacity to properly manage +$550 million it is requesting for the HOPE
VI program and it will have to rely more on outside contractors to
oversee the program; (13) welfare reform may have a substantial future
impact on HUD's spending for assisted housing for low-income households;
and (14) estimating the impact may not be possible because the states'
differing welfare reform provisions produce different effects from state
to state and year to year.

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

 REPORTNUM:  T-RCED-98-137
     TITLE:  Housing and Urban Development: Comments on HUD's Fiscal 
             Year 1999 Budget Request
      DATE:  03/25/98
   SUBJECT:  Future budget projections
             Housing programs
             Budget authority
             Financial management
             Internal controls
             Low income housing
             Federal aid for housing
             Community development programs
             Unexpended budget balances
             Budget cuts
IDENTIFIER:  HUD Section 8 Moderate Rehabilitation Program
             HUD Section 8 Housing Assistance Program
             HUD Regional Connections Initiative
             Community Development Block Grant
             HUD Hope IV Program
             HUD Continuum of Care Program
             HUD Section 8 Voucher Program
             
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Cover
================================================================ COVER


Before the Subcommittee on VA, HUD, and Independent Agencies,
Committee on Appropriations, House of Representatives

Not to be
Released Before
10 a.m.  EST
Wednesday
March 25, 1998

HOUSING AND URBAN DEVELOPMENT -
COMMENTS ON HUD'S FISCAL YEAR 1999
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-98-137

GAO/RCED-98-137T


(385714)


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

  HUD -
  HOPEVI -
  FHA -
  CFO -
  CDBG -
  RCI -
  PHA -
  EZ -
  GPRA -
  HOME -

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to have the opportunity to comment on the Department
of Housing and Urban Development's (HUD) fiscal year 1999 budget
request.\1 HUD has proposed a fiscal year 1999 appropriation of
approximately $25 billion to support a variety of housing and
community development programs.  As you requested, we reviewed the
reasonableness of selected aspects of HUD's fiscal year 1999 budget
request.  Our statement today is based on our recently completed and
ongoing work and will discuss (1) actions HUD has taken or plans to
take to improve its budget estimates, (2) the reasonableness of HUD's
request for Section 8 tenant-based and moderate rehabilitation
housing assistance, (3) HUD's justification for its Section 8
project-based amendment request, (4) HUD's request for funding to
assist the homeless, (5) HUD's request for $100 million to fund its
new Regional Connections Initiative, (6) HUD's capacity to manage its
HOPE VI program, and (7) the budgetary implications for public and
assisted housing of welfare reform.  In appendices I and II, we also
list and describe program initiatives, enhancements, and funding
increases that HUD proposes in its fiscal year 1999 budget request. 
Appendix III contains the scope and methodology of our review. 

In summary, we found the following: 

ï¿½Recognizing the need to improve its budget-estimating process with
better oversight and documentation, HUD has started to modify its
organizational structure to increase its oversight of the staff
responsible for formulating budget estimates.  However, many of HUD's
planned improvements--such as the Office of Budget's analysis of the
program offices' submissions--were not implemented in time to help
ensure the accuracy of the Department's fiscal year 1999 budget
estimate.  According to HUD officials, these improvements will be in
place to enhance the fiscal year 2000 process. 

ï¿½While HUD has significantly improved its budgeting for Section 8
tenant-based and moderate rehabilitation contract renewals, HUD's
request for $4.8 billion to renew and amend Section 8 tenant-based
and moderate rehabilitation assisted housing contracts for fiscal
year 1999 could be overstated by as much as $691 million.\2 First,
HUD overstated its moderate rehabilitation renewal needs by about
$182 million.  Second, $439 million of excess budget authority in the
Section 8 moderate rehabilitation program could be used in place of
new budget authority to renew expiring housing assistance contracts. 
Finally, because this excess budget authority exists, HUD will not be
likely to need the $70 million it has requested to amend Section 8
moderate rehabilitation contracts. 

ï¿½HUD's budget request for $1.3 billion to amend Section 8
project-based contracts--needed to cover shortfalls in these
long-term contracts--substantially exceeds the amounts that HUD's
analyses indicated are needed.  According to HUD officials, part of
the excess amount reflects a policy decision by the Office of
Management and Budget and HUD to increase the Department's budget
request to help address long-term needs for funding to amend Section
8 project-based contracts in future years.  A second part of the
excess was identified in a February 1998 analysis by HUD showing that
contracts expiring in fiscal year 1998 have $2.6 billion in excess
balances that could be applied to meet the Department's fiscal year
1999 needs.  This figure substantially exceeds the amount of $463
million that HUD used in its budget request to offset its fiscal year
1999 needs for funding to amend project-based contracts. 

ï¿½To help address the needs of the nation's homeless, HUD has
requested 34,000 new Section 8 vouchers.  If approved, the vouchers
would help to address congressional concern that a high proportion of
funding for assistance for the homeless has been spent in the past on
supportive services instead of on direct housing assistance. 
However, HUD has not developed the eligibility standards or other
planning criteria for these new vouchers that would facilitate the
program's implementation. 

ï¿½HUD's budget request for $100 million for the Regional Connections
Initiative, a new set aside within the Community Development Block
Grant program to address key regional issues, does not provide enough
detail to indicate whether this level of funding is reasonable for
the program.  Moreover, a draft advisory report that HUD provided to
us as additional justification for the program does not recommend a
significant federal effort to address regional problems. 
Nevertheless, HUD officials believe the funding level is a manageable
set-aside.  Because of the work required to initiate a program like
this, we question whether the funds can be awarded in fiscal year
1999. 

ï¿½HUD may not have the capacity to properly manage $550 million it is
requesting for the Severely Distressed Public Housing (HOPE VI)
program.  As HUD downsizes the Department, it will have to rely less
on experienced staff and more on outside contractors to oversee the
program.  Since 1995, the number of HOPE VI projects has doubled, but
HUD's HOPE VI headquarters staff has decreased by one-third. 
Therefore, we question whether HUD has enough experienced people
remaining to perform the day-to-day management of the HOPE VI program
that is vital to protecting taxpayers' interests. 

ï¿½Welfare reform may have a substantial future impact on HUD's
spending for assisted housing for low-income households.  However,
estimating the impact may not be possible because the states'
differing welfare reform provisions produce different effects from
state to state and year to year. 


--------------------
\1 We also provided a statement for the record to the Senate
Committee on Appropriations on March 12, 1998.  While similar, this
statement provides additional information, such as a summary of
program initiatives, enhancements, and funding increases in
appendices I and II.  Housing and Urban Development:  Comments on
HUD's Fiscal Year 1999 Budget Request (GAO/T-RCED-98-123, Mar.  12,
1998). 

\2 The Section 8 housing assistance program, named for the revised
section 8 of the U.S.  Housing Act of 1937, was originally
established by the Housing and Community Development Act of 1974
(P.L.  93-383).  It includes tenant-based assistance for specific
households and project-based assistance for specific properties. 


   HUD'S FISCAL YEAR 1999 BUDGET
   AND PROGRAMS
---------------------------------------------------------- Chapter 0:1

Established in 1965, HUD is the principal federal agency responsible
for programs in four areas--housing assistance, community
development, housing finance, and regulatory issues affecting areas
such as lead-based paint abatement and fair housing.  To carry out
its many responsibilities, HUD was staffed by 9,885 employees as of
January 1998. 

ï¿½Housing Assistance:  HUD provides (1) public housing assistance
through allocations to public housing authorities and (2)
private-market housing assistance through rental subsidies for
properties, referred to as project-based assistance, or for tenants,
known as tenant-based assistance.  In contrast to entitlement
programs, which provide benefits to all who qualify, the benefits of
HUD's housing assistance programs are limited by budgetary
constraints to only about one-fourth of those who are eligible. 

ï¿½Community Development:  Primarily through grants to states, large
metropolitan areas called entitlement areas, small cities, towns, and
counties, HUD provides funds for local economic development, housing
development, and assistance to the homeless.  The funding for some
programs, such as those for the homeless, may also be distributed
directly to nonprofit groups and organizations. 

ï¿½Housing Finance:  The Federal Housing Administration (FHA) insures
lenders--including mortgage banks, commercial banks, savings banks,
and savings and loan associations--against losses on mortgages for
single-family properties, multifamily properties, and other
facilities.  The Government National Mortgage Association, a
government-owned corporation within HUD, guarantees investors the
timely payment of principal and interest on securities issued by
lenders of FHA-insured and VA- and Rural Housing Service-guaranteed
loans. 

ï¿½Regulatory Issues:  HUD is responsible for regulating interstate
land sales, home mortgage settlement services, manufactured housing,
lead-based paint abatement, and home mortgage disclosures.  HUD also
supports fair housing programs and is partially responsible for
enforcing federal fair housing laws. 

HUD's programs are supported through annual appropriations
(discretionary budget authority) that are subject to discretionary
spending limits under the Budget Enforcement Act, as amended.  For
fiscal year 1999, HUD has requested about $25 billion in
discretionary budget authority, which, in combination with available
budget authority from prior years, will help support about $33.2
billion in outlays.\3 This request represents a 4-percent increase in
budget authority and a negligible increase in estimated outlays over
fiscal year 1998. 

HUD's fiscal year 1999 budget summary states that the Department's
budget request did not include new programs or bureaucracies. 
However, as shown in appendix I, HUD's request includes at least 22
new "initiatives" or "program enhancements." The Congress has
questioned whether HUD should implement new initiatives before
management reforms are in place, particularly in light of the
Department's ongoing efforts to downsize and reorganize.  In
addition, HUD proposes funding increases for virtually all program
areas.  Appendix II summarizes the proposed increases to existing
programs in fiscal year 1999 programs. 


--------------------
\3 Budget authority is the authority provided by federal law to incur
obligations that will result in outlays.  Appropriations are the most
common means of providing budget authority.  Outlays are the measure
of federal spending and are payments to liquidate obligations. 


   HUD PLANS MANAGEMENT REFORMS TO
   IMPROVE BUDGET ESTIMATES
---------------------------------------------------------- Chapter 0:2

As we reported in February 1998, accurate budget estimates are
essential for federal agencies to meet their fiscal responsibilities
because such estimates facilitate sound policy decisions and
effective funding trade-offs.\4 Unfortunately, for years HUD had
difficulty submitting accurate budget estimates.  Recognizing the
need to improve its budget process with better oversight and
documentation, HUD has developed and begun implementing corrective
actions. 

HUD recently placed all departmental budget operations under the
Office of the Chief Financial Officer (CFO) to ensure that budgeting
is integrated with financial management oversight.  In the past,
HUD's budget operations have been fragmented and disjointed,
preventing clear accountability and necessary coordination.  This
problem was the result of the CFO's inability to link budgeting with
strategic planning and financial management, according to HUD's
Management Reform Plan.  As another improvement, HUD is hiring a
chief financial officer for all program divisions to mirror the
operations of the Department's Office of the CFO.  Previously, the
program division's budget director and comptroller reported to a
deputy assistant secretary.  Under the new structure, the division's
budget director and comptroller will report to the division's CFO,
who will coordinate with the agency's CFO and the division's program
staff to ensure adequate oversight. 

In addition to organizational changes, the Office of the CFO plans to
develop budget estimating policies and procedures that build in
enough time for adequate coordination, oversight, and communication. 
However, HUD did not implement many of the changes in time to help
ensure the accuracy of the Department's fiscal year 1999 budget
estimate.  According to HUD's Director of the Office of Budget, time
constraints prevented his office from performing analytical reviews
of the program offices' submissions.  He said that his office was
limited to reviewing the fiscal year 1999 budget estimates for
numerical accuracy and could not always question the estimates'
reasonableness or underlying basis.  He believes that the planned
improvements should be operational in time for HUD's fiscal year 2000
budget submission. 


--------------------
\4 Section 8 Tenant-Based Assistance:  Opportunities to Improve HUD's
Financial Management (GAO/RCED-98-47, Feb.  20, 1998). 


   HUD'S REQUEST FOR SECTION 8
   TENANT-BASED AND MODERATE
   REHABILITATION ASSISTANCE COULD
   BE REDUCED
---------------------------------------------------------- Chapter 0:3

HUD has significantly improved its budgeting for Section 8
tenant-based and moderate rehabilitation contract renewals by
omitting duplicative contingency allowances and accounting for excess
budget authority in the Section 8 certificate and voucher programs.\5

Specifically, in contrast to the Department's Section 8 tenant-based
contract renewal request for fiscal year 1998, HUD's request for
fiscal year 1999 does not appear to contain duplicative contingency
factors.  Instead, HUD's improved budget estimate for fiscal year
1999 is based on actual expenditure data for fiscal year 1996
adjusted for inflation.  In addition, HUD will use $3.7 billion of
excess budget authority recaptured from the Section 8 tenant-based
program to offset the cost of contract renewals in fiscal year 1999. 

Nevertheless, we found that HUD's request for $4.8 billion to renew
and amend Section 8 tenant-based and moderate rehabilitation
contracts may be overstated by as much as $691 million. 
Specifically, we found that

ï¿½$182 million for Section 8 moderate rehabilitation contract renewals
was erroneously included in HUD's budget request;

ï¿½$439 million in excess budget authority exists in HUD's moderate
rehabilitation program; and

ï¿½ $70 million that HUD requested for moderate rehabilitation
amendments may not be needed because excess budget authority exists
in the moderate rehabilitation program. 

Although HUD has improved its budget-estimating process, we believe
that the Department has overestimated its need for Section 8
tenant-based contract renewal funding for three reasons.  First, HUD
inadvertently overstated its request for Section 8 moderate
rehabilitation contract renewal funding by about $182 million.  While
HUD requested funding for 46,962 units, it later determined that only
14,598 units would expire in fiscal year 1999.  HUD officials
explained that they used inaccurate formulas to originally estimate
the Department's fiscal year 1999 moderate rehabilitation contract
renewal needs. 

Second, we believe HUD has overestimated its contract renewal funding
needs because $439 million in excess budget authority in the moderate
rehabilitation program could be used to renew expiring contracts in
lieu of requesting new budget authority.  As shown in table 1, HUD
determined in January 1998 that the gross excess budget authority in
the Section 8 moderate rehabilitation program was about $814 million. 
Of that amount, the Department estimates that it will need $191
million to meet funding shortfalls in the program and $184 million to
cover contingencies, such as decreases in tenants' incomes or
unexpected rent increases.  (HUD officials believe, however, that the
Department needs statutory authority from the Congress to use excess
budget authority to cover some of these funding shortfalls.) The
remaining $439 million is the budget authority that HUD considers to
be in excess of the Section 8 moderate rehabilitation program's
needs. 



                                Table 1
                
                Excess Budget Authority in the Section 8
                    Moderate Rehabilitation Program

                         (Dollars in millions)

----------------------------------------  ----------------------------
Gross excess budget authority as of 1/                            $814
 15/98
Less excess budget authority needed to                           (191)
 fund shortfalls
Less reserve for contingencies                                   (184)
Excess budget authority                                           $439
----------------------------------------------------------------------
Source:  HUD's Office of Public and Indian Housing. 

According to HUD officials, the Department has not yet decided
whether to recapture this budget authority or if so, how much it
would recapture.  Although HUD did not complete its analysis of
excess budget authority in the moderate rehabilitation program in
time to include this amount in its initial budget submission for
fiscal year 1999, we believe enough time remains before the
Department's appropriations bill is referred to a House-Senate
conference committee for HUD to revise its fiscal year 1999 request
to reflect the $439 million in excess budget authority available to
reduce the cost of renewing contracts. 

Third, HUD's January 1998 analysis also shows that a request for $70
million to amend Section 8 moderate rehabilitation contracts may not
be needed.  Generally, amending contracts refers to changing specific
housing assistance contracts to add more funding.  According to HUD
officials, the $70 million was included in the budget as a
placeholder until the Department completed its analysis of excess
budget authority in the moderate rehabilitation program.  As noted
above, HUD's analysis shows that sufficient excess funding exists in
the program to cover both program shortfalls and unexpected costs and
still have $439 million remaining in excess budget authority.  This
means that a separate funding request for $70 million is unnecessary. 
If the Congress grants HUD the authority it believes it needs to use
excess budget authority to cover funding shortfalls in the program,
Department officials told us that they would not need this $70
million to amend Section 8 moderate rehabilitation contracts. 


--------------------
\5 For the tenant-based program, HUD contracts with state and local
housing agencies to manage the program's certificates and vouchers,
which assist 1.4 million households.  These agencies make payments to
private-sector landlords to subsidize the rents of certificate and
voucher holders. 


   HUD'S REQUEST FOR FUNDING TO
   AMEND SECTION 8 PROJECT-BASED
   CONTRACTS IS OVERSTATED
---------------------------------------------------------- Chapter 0:4

According to HUD's budget request, the total amount of funding needed
to amend Section 8 project-based contracts for fiscal year 1999 is
$1.7 billion.  Amending contracts generally refers to changing
specific housing assistance contracts to add more funding.  HUD's
request also shows that this amount can be reduced by over $400
million to a net $1.3 billion when HUD recaptures excess balances
that remain on expired housing assistance contracts and uses these
amounts to offset current needs for funding to amend other
contracts.\6 However, for the two reasons discussed below, we believe
that the request substantially exceeds the amounts needed.  HUD, in
fact, may have enough potential recapture amounts to more than offset
the entire amount of funding needed to amend contracts in fiscal year
1999. 

First, while HUD's analysis dated April 1997 estimates the need for
$1.2 billion to amend Section 8 project-based contracts during fiscal
year 1999, an additional $500 million was added to the request as a
result of a policy decision.  The April 1997 analysis was derived
from HUD's Budget Forecast System used to estimate Section 8
amendment needs for budgeting purposes.  HUD prepared the analysis
using a methodology referred to as "leveling," under which HUD
spreads funding shortfalls over the remaining term of the contract
rather than beginning in the year the contract is projected to run
out of money.  For example, for a contract costing $1 million a year
with 10 years remaining and $9 million available, the $1 million
shortfall would be spread in $100,000 increments over the next 10
years, rather than being identified as a shortfall of $1 million in
the tenth year.  Leveling allows the Department to request a
consistent annual amount to fund amendments and to avoid requesting
large amounts in later years.  Contrary to HUD's budget request, the
April 1997 analysis shows a total amendment need of $1.2 billion in
fiscal year 1999--about $500 million less than the $1.7 million
identified in the request.  HUD officials said that the $500 million
requested above the analytically derived amount reflects a policy
decision by the Office of Management and Budget and HUD to augment
the request because of the long-term funding need for amendments. 

Second, a more recent analysis of HUD's Section 8 project-based
amendment needs, dated February 1998, estimates that the amounts of
recapture funds to become available in the next several years are
substantially higher than those reflected in the budget.  HUD
prepared this analysis at our request to address problems that we
identified in HUD's previous analyses of its Section 8 amendment
needs.  Among other things, we found that the previous analyses did
not include Section 8 project-based funding that HUD received in its
fiscal year 1997 appropriation and erroneously excluded about 1,800
Section 8 contracts.  Most importantly, the February 1998 analysis
projects that $2.6 billion in recaptures will become available in
fiscal year 1998, compared with the earlier estimate of $463 million
in recapture amounts that HUD used to offset the 1999 budget request. 

We are currently reviewing this analysis as part of the work we have
under way examining HUD's unexpended Section 8 project-based
balances.\7 Our preliminary results indicate that HUD's amendment
needs may be substantially less than HUD estimated in formulating its
fiscal year 1999 budget request.  We plan to issue our report in July
1998. 


--------------------
\6 The project-based contracts were entered into beginning in the
1970s and 1980s, typically for 15-, 20-, or 40-year periods.  While
the funds provided for these long-term contracts have exceeded actual
needs in some instances, they have been insufficient in other
instances to make rental assistance payments through the terms of the
contracts.  Beginning in the early 1990s, the Department started
requesting funds to amend contracts with insufficient funding. 

\7 This review is required by the emergency supplemental
appropriations law enacted in June 1997 (P.L.  105-18). 


   A NEW HUD INITIATIVE WOULD
   INCREASE DIRECT HOUSING
   ASSISTANCE FOR THE HOMELESS
---------------------------------------------------------- Chapter 0:5

For fiscal year 1999, HUD is requesting $958 million to fund its
ongoing programs for the homeless and $192 million for 34,000 new
Section 8 vouchers for homeless individuals or families.  If
approved, the vouchers would help to address congressional concern
that a high proportion of funding for assistance for the homeless has
been spent in the past on supportive services instead of on direct
housing assistance.  However, HUD has not developed the eligibility
standards or other planning criteria for these new vouchers that
would facilitate the program's implementation. 


      HALF OF HUD'S FISCAL YEAR
      1996 FUNDING FOR COMPETITIVE
      GRANTS TO ASSIST THE
      HOMELESS WAS SPENT ON
      SUPPORTIVE SERVICES
-------------------------------------------------------- Chapter 0:5.1

Members of Congress have expressed concern about the proportion of
HUD's funding for the homeless that is used for supportive services
compared to housing assistance.  A House bill introduced in 1997
proposed placing a cap on the percentage of total funding that
grantees can use to provide services for the homeless.\8 In fiscal
year 1996, the latest year for which HUD has detailed information on
the allocation of its homeless assistance funds, 51 percent of the
competitive funding HUD awarded to grantees was spent on supportive
services as opposed to direct housing assistance.  Table 2 shows the
breakdown between services and housing for three of HUD's competitive
homeless assistance programs.\9



                                Table 2
                
                 Proportion of Grants for the Homeless
                Spent on Supportive Services Rather than
                  Assisted Housing in Fiscal Year 1996

                         (Dollars in millions)

                                                      Percentage spent
                                                                    on
                                       Total funds          supportive
Program                                    awarded            services
------------------------------  ------------------  ------------------
Single Room Occupancy                        $47.8                   0
Shelter Plus Care                             88.7                   0
Supportive Housing                           576.6                  63
Total                                       $713.1                  51
----------------------------------------------------------------------
Source:  HUD's Office of Community Planning and Development. 

HUD officials explained that they award the grants on the basis of
the level of demand from grant applicants, and grantees have
requested higher amounts for services than for housing.  They also
speculated that organizations may have difficulty obtaining needed
services through other agencies and therefore may be using HUD's
resources to fill the gap.  HUD officials further commented that
funding this need is consistent with the agency's Continuum of Care
approach that seeks to end homelessness by bringing together all
parts of the community to provide a coordinated system of care for
homeless men, women, and children.  In commenting on a draft of this
testimony, the Department said that in all instances it encourages
housing as the end result. 


--------------------
\8 The Chairman of the Subcommittee on Housing and Community
Opportunity, House Banking and Financial Services Committee, proposed
H.R.  217 in June 1997, which was designed to alter the composition
and delivery of HUD's McKinney Act funding. 

\9 HUD's Homeless Assistance Grants program consolidates the
activities of HUD's six McKinney homeless assistance programs
(Supportive Housing, Single Room Occupancy, Shelter Plus Care,
Emergency Shelter Grants, Safe Haven, and Rural Homeless Housing
Assistance) and the Innovative Homeless Initiatives Demonstration
program.  Table 2 includes only competitive-based grants that were
funded in fiscal year 1996. 


      INITIATIVE WOULD PROVIDE
      ADDITIONAL HOUSING BUT MIGHT
      BENEFIT FROM MORE DETAILED
      PLANNING
-------------------------------------------------------- Chapter 0:5.2

With its fiscal year 1999 budget request for $192 million to fund
34,000 new Section 8 vouchers for homeless individuals or families,
HUD proposes to increase the amount of funding for direct housing
assistance.  These vouchers would be used to assist families that
have achieved a sufficient level of independence to move to permanent
housing that is linked to services.  The vouchers are intended for
homeless individuals and families who would otherwise have the
greatest difficulty securing permanent housing resources, as
determined through the approved Continuum of Care approach. 

However, unlike the Department's fiscal year 1999 budget request for
50,000 new welfare-to-work vouchers, HUD's request for new vouchers
for the homeless does not describe the criteria that would be used to
distribute the vouchers.  For example, under HUD's welfare-to-work
voucher proposal, any housing agency requesting permission to
distribute vouchers must (1) prepare a plan that includes the
criteria to be used to select the recipients and (2) describe the
proposed strategy for counseling tenants, providing assistance in
seeking housing, and reaching out to landlords.  Furthermore, the
agency must determine that obtaining tenant-based housing assistance
is critical for the applicant to obtain or retain employment and that
the applicant is not already receiving tenant-based assistance.  If
HUD developed similar requirements for the recipients of vouchers for
the homeless, the program's implementation could likely begin shortly
after the funding is received, strengthening the program's
efficiency. 

We believe that the lack of planning raises concerns about how
quickly and effectively this program can be implemented.  According
to HUD, however, the program can be administered through its
Continuum of Care grant process as well as through public housing
authorities that are experienced in administering the Section 8
voucher program.  Nevertheless, further details by HUD on how such a
program will work would be useful in any debate on expanding the
housing assistance provided to the homeless. 


   KEY REPORT UNDERLYING HUD'S
   REGIONAL CONNECTIONS INITIATIVE
   DOES NOT RECOMMEND A
   SIGNIFICANT FEDERAL EFFORT
---------------------------------------------------------- Chapter 0:6

HUD's fiscal year 1999 budget proposal includes $100 million for a
new Community Development Block Grant (CDBG) set-aside--the Regional
Connections Initiative (RCI).  RCI is intended to help states and
localities develop and implement strategic plans that address key
regional issues facing the nation's metropolitan and rural
communities.  HUD is planning to award grants under the program to
states and localities on a competitive basis.  HUD's interest in
developing a program designed to encourage and facilitate efforts to
address regional issues seems justified in light of the Department's
mission. 

However, given that RCI is a new initiative, HUD's budget
justification does not provide enough detail to determine whether
$100 million is a reasonable funding level.  Moreover, the key study
(still in draft form) underlying this new initiative does not
recommend a significant federal effort to address regional problems
because little support for such an effort exists at the local and
state levels at this time.  In addition, the study concluded that in
the future, emerging regional efforts could raise questions about the
appropriate federal role.  According to HUD officials, the RCI
funding level was a judgment call and was considered a manageable
set-aside under the CDBG program. 

In addition, HUD officials believe that the $100 million requested
for RCI will be awarded in fiscal year 1999.  However, several tasks
need to be accomplished before these funds are committed, including
selecting an RCI advisory board of community development experts,
writing regulations for the program, developing a notice of funding
availability, allowing applicants time to prepare their proposals,
reviewing submitted applications, and deciding which applicants will
receive RCI funds.  To accomplish these tasks, HUD expects to use
expertise from outside the Department to help design and review the
RCI grant program in time to allow funds to be awarded in fiscal year
1999.  Because of the tasks and coordination necessary, however, we
question whether such an ambitious schedule is workable for this
initiative. 


   HUD MAY NOT HAVE THE CAPACITY
   TO EFFECTIVELY MANAGE THE HOPE
   VI PROGRAM
---------------------------------------------------------- Chapter 0:7

HUD is requesting $550 million for fiscal year 1999, primarily in the
form of grants to public housing agencies, to fund the Severely
Distressed Public Housing (HOPE VI) program.  This appropriation will
increase HUD's total investment in the program to over $3.7 billion
since the program's inception in 1993.  Our ongoing review of this
program shows that some HOPE VI sites have made a great deal of
progress towards revitalizing distressed public housing
neighborhoods, while other sites have run into difficulties planning
redevelopment work.  Such difficulties were not unexpected because
some of the most troubled housing agencies have been dealing with
relocation, demolition, mixed finance, and other complicated social
and financial issues.  In all cases, the process of trying to
fundamentally change the way the nation deals with public housing is
complex. 

Because of significant staffing reductions since 1995, we question
whether HUD currently has the capacity to properly manage the HOPE VI
program.  HUD is currently managing the program "by audit," with
teams of auditors from HUD's Office of Inspector General reviewing
HOPE VI funding sites.  As of March 17, 1998, HUD had 10 headquarters
staff, including two grant managers, to deal with 81 grants in 55
cities.  These figures reflect a reduction from the 15 headquarters
staff, including six grant managers, overseeing 39 grants that
totaled over $1.5 billion in 1995. 

In 1997, HUD hired outside contractors to help develop management
systems for overseeing the program.  HUD has also begun hiring
private "expediters" to help PHAs understand and complete the HOPE VI
process and has begun assigning some site oversight responsibilities
to the remaining HUD field offices.  But HUD still maintains
responsibility for overseeing the day-to-day operations of this
complex program.  We question whether HUD has enough experienced
people left to perform the daily management functions that are
intrinsic to protecting taxpayers' interests. 


   WHILE POTENTIALLY SIGNIFICANT,
   THE IMPACT OF WELFARE REFORM ON
   HUD'S FUTURE-YEAR BUDGETS MAY
   NOT BE PREDICTABLE
---------------------------------------------------------- Chapter 0:8

As welfare reform is implemented throughout the nation, it could have
implications for HUD's budgets in future years.  HUD estimates that
one-third of the households receiving rental assistance from HUD
depend on cash welfare assistance for some or all of their income. 
Under welfare reform, cash assistance programs became time-limited,
work-dependent, and generally less available.  Because residents pay
a portion of their income for rent, any reduction in cash assistance
without a commensurate increase in wage income would result in
reduced rental payments from tenants.  Managers at most of the 18
public housing agencies we visited while conducting our ongoing work
expressed concern about barriers their residents face in finding
employment within their states' time limits.  Under the program's
existing regulations, reductions in tenants' rental payments would
increase the size of the payments that HUD makes to housing agencies
and private landlords on behalf of low-income tenants to make up the
difference between the tenants' rental payments and the housing
units' operating cost or rent. 

While welfare reform may have a significant impact on HUD's budgets
in future years, measuring the potential impact may not be possible. 
One reason is that the impact of welfare reform will vary from state
to state and from year to year because states have differing welfare
reform provisions, making the development of national estimates of
the impact of welfare reform on HUD nearly impossible.  In
Massachusetts, for example, recipients will begin to hit the state's
time limits for cash assistance in December 1998, while in Minnesota,
recipients will not reach the time limits until July 2002.  A second
reason is that conclusions drawn about welfare reform's impact on
recipients generally may not apply to those who also receive housing
assistance because evidence suggests that welfare recipients
receiving housing assistance may have greater difficulty finding and
retaining employment than other welfare recipients.  Furthermore, HUD
does not collect the detailed data on recipients' education, work,
and welfare histories needed to assess likely outcomes for its
tenants.  Finally, while the general health of the economy is a major
factor in the recent decline in welfare caseloads, the future course
of the economy cannot be predicted with any certainty. 


   CONCLUSION
---------------------------------------------------------- Chapter 0:9

While we believe that HUD is generally moving toward more supportable
budget estimates, the Department continues to overestimate its budget
needs.  For instance, despite improvements to its budget-estimating
process for Section 8 tenant-based assistance, HUD's fiscal year 1999
request for Section 8 tenant-based and moderate rehabilitation
contract renewals and amendments could be overstated by as much as
$691 million.  Furthermore, in the Section 8 project-based program,
HUD's budget estimate is not consistent with its analysis of
amendment needs.  As HUD continues to refine its analyses in these
areas, it will have the opportunity to amend its budget estimate
before the Congress votes on its appropriation bill in the fall.  In
addition, we found that for some initiatives--such as vouchers for
the homeless and the Regional Connections Initiative--to be effective
in fiscal year 1999, HUD may need to complete appropriate and perhaps
ambitious planning.  Finally, because the HOPE VI workload has
doubled since 1995 and the program's staffing has decreased by
one-third, we question whether HUD currently has the capacity to
manage the $550 million it is requesting for HOPE VI. 


   MATTERS FOR CONGRESSIONAL
   CONSIDERATION
--------------------------------------------------------- Chapter 0:10

The Congress may wish to consider reducing HUD's request for Section
8 tenant-based and moderate rehabilitation contract renewals and
amendments to account for (1) $182 million by which HUD overstated
its moderate rehabilitation renewal needs, (2) $439 million of excess
budget authority in the Section 8 moderate rehabilitation program
that could offset new budget authority to renew expiring housing
assistance contracts, and (3) $70 million HUD requested to fund
amendments to Section 8 moderate rehabilitation contracts that may be
offset by this excess budget authority. 

In addition, the Congress may wish to consider reducing HUD's request
for funding to amend Section 8 project-based contracts because (1)
$500 million is in excess of the funds that HUD identified as
actually needed for fiscal year 1999 and (2) current analyses
indicate that recapture amounts are likely to be substantially higher
than those identified in HUD's budget request.  Finally, before
appropriating $192 million for vouchers for the homeless and $100
million for HUD's Regional Connections Initiative, the Congress may
wish to seek assurances from HUD that these programs will be ready to
effectively commit funds. 


   AGENCY COMMENTS
--------------------------------------------------------- Chapter 0:11

We provided a draft of this statement to HUD for its review and
comment.  HUD did not provide us with comments on our conclusion that
the Department's budget estimate for its Section 8 tenant-based and
moderate rehabilitation contract renewals and amendments could be
overstated.  The Department also did not comment on our conclusion
that its request for funding for project-based contract amendments is
overstated.  However, the Department did provide comments on several
issues, including its request for new Section 8 vouchers for the
homeless, its Regional Connections Initiative, and its HOPE VI
program.  In response to our concerns about the planning accomplished
for the first two of these programs, HUD said that it expects housing
authorities to compete for and administer the vouchers for the
homeless.  And for the Regional Connections Initiative, HUD said that
it recognizes that a limited number of localities and states are
ready and willing to participate in this effort, but that the $100
million proposed funding will still accommodate a meaningful
initiative.  We made appropriate changes in the statement to reflect
HUD's concerns; however, we continue to believe that the quality of
planning for these new efforts will be critical to their
effectiveness in fiscal year 1999. 

In its comments regarding our concern about current staffing of the
HOPE VI program, HUD recognizes that staffing is indeed lower now
than it had been in the past, but stated that the Department plans to
provide additional staff in the future for that program to enable it
to adequately oversee all of the grants made to date. 

Finally, HUD believes that our listing of initiatives and program
enhancements in appendix I implies that new staff will be needed to
administer these efforts.  HUD stated that these initiatives, instead
of being new programs, are expansions of existing programs and
embellishments on well-functioning programs and, as such, will not
need new staff.  While we do not know whether new staff will be
needed for these initiatives, we do believe that a number of
them--such as the vouchers for the homeless and the Regional
Connections Initiative--are new and will impose some additional
burden on HUD. 


NEW INITIATIVES AND PROGRAM
ENHANCEMENTS IN HUD'S FISCAL YEAR
1999 BUDGET REQUEST
=========================================================== Appendix I

                                  (Dollars in millions)

                                    Budget authority
-----------------------------------------------------------------------------------------
Initiative or program
enhancement                        Fiscal year 1998 enacted      Fiscal year 1999 request
-----------------------------  ----------------------------  ----------------------------
Public and Indian Housing
-----------------------------------------------------------------------------------------
Incremental rental assistance                            $0                           $60
Administrative fee bonus                                  0                         [9]\a
Regional Opportunity                                      0                            20
 Counseling
Incremental welfare-to-work                               0                           283
 vouchers
Tenant-protections                                        0                           130
 administrative reserve
HOPE VI environmental review                              0                             0
 process expansion

Community Planning and Development
-----------------------------------------------------------------------------------------
Regional Connections                                      0                           100
 Initiative
Community Empowerment Fund                          [137]\b                           400
Incremental vouchers for the                              0                            50
 elderly
HOME Loan Guarantee Program                               0                            11
Incremental vouchers for the                              0                           192
 homeless
Consolidation of housing for                            839                           283
 the elderly and disabled
 into the HOME program
Homeownership Zones                                       0                            25
Homeownership empowerment                                 0                             0
 vouchers

Housing Programs
-----------------------------------------------------------------------------------------
Increased FHA loan limits                                 0                             0

Policy Development and Research
-----------------------------------------------------------------------------------------
Technology Advancement                                    0                            10
 Partnerships

Office of Lead-Based Paint and Poisoning Prevention
-----------------------------------------------------------------------------------------
Healthy Homes Initiative                                  0                            25

Fair Housing and Equal Opportunity
-----------------------------------------------------------------------------------------
Fair Housing Rights                                       0                          0-19
 Educational Campaign
Adjustments
Single-Family Property                                    0                         (527)
 Disposition reform\
Mark-to-market equity sharing                             0                          (50)

Mandatory Programs
-----------------------------------------------------------------------------------------
Empowerment Zones                                         0                           150

Management and Administration
-----------------------------------------------------------------------------------------
Provision to use up to 1                                  0                            15
 percent of program
 appropriations for
 evaluation, monitoring and
 data collection
-----------------------------------------------------------------------------------------
\a The $9 million is a set-aside within the $60 million for
incremental assistance. 

\b The Community Empowerment Fund's predecessor, the Economic
Development Initiative, was funded as a $37 million set-aside within
the Community Development Block Grant Fund in fiscal year 1998.  The
remaining $100 million was earmarked for Special Purpose Grants. 

Source:  GAO analysis of HUD's fiscal year 1999 budget request. 


   PUBLIC AND INDIAN HOUSING
--------------------------------------------------------- Appendix I:1

ï¿½Incremental rental assistance:  HUD is requesting $60 million to
provide 10,655 new certificates and vouchers.  This assistance will
be used for various Section 8 programs, including the family
unification, portability reimbursement, and witness relocation
programs and the settlement of litigation.  HUD intends to set aside
$9 million of the $60 million to fund a new administrative fee bonus,
which will reduce the number of incremental units it can provide. 

ï¿½Administrative fee bonus:  HUD is requesting $9 million to provide
administrative fee bonuses to housing agencies that reduce the
concentration of poor families through the use of portable
tenant-based assistance.  According to HUD, the bonus will encourage
housing agencies to make additional efforts to reach out to landlords
in low-poverty areas. 

ï¿½Regional Opportunity Counseling:  HUD is requesting $20 million in
new funding for Regional Opportunity Counseling--an evolution of the
Section 8 Counseling Program last funded in fiscal year 1995.  The
purpose of regional opportunity counseling is to reduce
concentrations of poverty by providing funds to collaboratives
consisting of housing agencies and nonprofit counseling agencies. 
HUD intends to use the $20 million to help an estimated 13,000
families in 10 to 20 metropolitan areas.  We did not assess HUD's
estimate. 

ï¿½Incremental welfare-to-work vouchers:  HUD is requesting $283
million to provide 50,000 new welfare-to-work vouchers.  HUD intends
to use these vouchers to assist welfare recipients who need housing
assistance to obtain or maintain employment as they move from welfare
to work. 

ï¿½Tenant-protections administrative reserve:  HUD is requesting $130
million to accommodate the more aggressive enforcement activities of
the Department, including the cost of relocating affected families,
and to address the potential need to modify current assistance
payment standards and eligibility to avoid undue hardship or
displacement of currently assisted families.  Tenant-protection
set-asides are used, in part, to support eligible families who,
through no fault of their own, are affected by HUD's management of
its inventory of multifamily properties. 

ï¿½HOPE VI environmental review process expansion:  HUD is requesting
authorization through the appropriations bill to extend 24 C.F.R. 
part 58 of the environmental review process to the HOPE VI program. 
The HOPE VI program is currently subject to 24 C.F.R.  part 50, which
requires that HUD staff conduct the environmental reviews.  All of
the other public housing programs are governed by part 58, which
authorizes the Department to have local governments prepare the
environmental reviews subject to HUD's concurrence. 


   COMMUNITY PLANNING AND
   DEVELOPMENT
--------------------------------------------------------- Appendix I:2

ï¿½Regional Connections Initiative:  HUD is requesting $100 million for
a new Community Development Block Grant set-aside--the Regional
Connections Initiative (RCI).  RCI is intended to help states and
localities develop and implement strategic plans that address key
regional issues facing the nation's metropolitan and rural
communities. 

ï¿½Community Empowerment Fund:  HUD is requesting $400 million for a
Community Empowerment Fund, an enhancement of its existing Economic
Development Initiative and Section 108 Loan Guarantee program.  HUD
describes this fund as a creative financing tool that will combine
local control, private sector capital, and federal loan guarantees to
rebuild distressed urban and rural communities.  According to HUD's
budget documents, the $400 million requested will leverage an
estimated $2 billion in private-sector loans over time and will
support an estimated 280,000 jobs when projects are completed.  The
private sector loans will be supported by HUD's Section 108 Loan
Guarantee Program. 

ï¿½HOME Loan Guarantee Program:  HUD is requesting $11 million to
establish a new HOME Loan Guarantee Program.  This loan guarantee
feature will permit participating jurisdictions to leverage up to
five times their current HOME allocation in private-sector funding to
finance large-scale development and other activities.  According to
HUD, the funding will support $100 million in new loan guarantees. 

ï¿½Consolidation of housing for the elderly and disabled into the HOME
program:  HUD is proposing to shift the administration of housing for
the elderly and disabled from HUD to state and local governments
through the HOME program and, at the same time, cut funding for the
elderly and disabled by $556 million.  HUD maintains that shifting
the Section 202 and Section 811 programs for the elderly and disabled
into the HOME program will allow the Department to further
consolidate its program structure and provide substantial
opportunities for state and local participating jurisdictions to
leverage additional resources for housing the elderly and disabled. 

ï¿½Incremental vouchers for the elderly:  HUD is requesting $50 million
to provide 8,800 new Section 8 vouchers for the elderly.  HUD
proposes to use these vouchers to replace direct grant funding, which
HUD believes will allow the Department to serve a greater number of
elderly households with more limited resources. 

ï¿½Incremental vouchers for the homeless:  HUD is requesting $192
million to provide 34,000 new Section 8 vouchers for homeless
individuals and families.  These vouchers will be used to assist
families who become sufficiently independent to move to permanent
housing that is linked to services. 

ï¿½Homeownership Zones:  HUD is requesting $25 million to fund a new
round of five to seven homeownership zones to enable cities to
undertake large-scale single-family developments in inner-city
neighborhoods.  HUD maintains that the $25 million in grant funds
will create about 1,500 new homeowners.  We did not assess HUD's
estimate. 

ï¿½Homeownership empowerment vouchers:  HUD is proposing to allow
families to use Section 8 assistance as "empowerment vouchers" to
become first-time homebuyers; the current Section 8 program does not
allow subsidies to be used to pay a mortgage.  Under HUD's proposal,
a family must have income from employment and must make a
contribution toward its own down payment. 


   HOUSING PROGRAMS
--------------------------------------------------------- Appendix I:3

ï¿½Increased FHA loan limits:  HUD is proposing to raise the home
mortgage insurance limits used by FHA.  In particular, HUD proposes
to replace over 250 separate loan limits, ranging from $86,317 to
$170,362, with a single, nationwide limit of $227,150.  According to
HUD, the higher ceiling (1) could enable about 3 million more
families to qualify for FHA mortgages over the next 5 years and (2)
will provide FHA with an increase in revenue of more than $200
million per year through the insurance premiums and fees associated
with new mortgage business.  We did not evaluate HUD's estimates. 


   POLICY DEVELOPMENT AND RESEARCH
--------------------------------------------------------- Appendix I:4

ï¿½Technology Advancement Partnerships:  HUD is requesting $10 million
to fund a public/private partnership designed to accelerate the
creation and use of advanced technologies in order to significantly
improve the quality, durability, environmental efficiency, and
affordability of tomorrow's homes.  HUD has been selected to lead
this effort, which will join together key federal agencies, such as
HUD and the Environmental Protection Agency, and leaders from the
home building and product manufacturing industries. 


   OFFICE OF LEAD-BASED PAINT AND
   POISONING PREVENTION
--------------------------------------------------------- Appendix I:5

ï¿½Healthy Homes Initiative:  HUD's fiscal year 1999 budget request
includes $25 million to address housing-related childhood diseases
and injuries.  In 1999, HUD plans to, among other things, demonstrate
and test new housing maintenance techniques, fund home inspections,
and assess renovation and construction methods. 


   FAIR HOUSING AND EQUAL
   OPPORTUNITY
--------------------------------------------------------- Appendix I:6

ï¿½Fair Housing Rights Educational Campaign:  HUD is proposing to use
up to $19 million of the $29 million it is requesting for the Fair
Housing Initiatives Program to fund a Fair Housing Rights Educational
Campaign designed to inform Americans about their legal rights and
responsibilities under the Fair Housing Act and to provide them with
assistance when confronted by illegal discrimination. 


   ADJUSTMENTS
--------------------------------------------------------- Appendix I:7

ï¿½Single-family property disposition reform:  HUD is proposing
legislative reform for its single-family property disposition program
that would produce savings of $527 million in fiscal year 1999. 
Under the proposal, HUD would pay lenders' claims earlier, thereby
paying less in accrued interest, and sell the mortgage notes to third
parties for specialized servicing. 

ï¿½Mark-to-market equity sharing:  HUD is proposing a $50-million
reduction to its budget request to reflect mark-to-market equity
sharing savings.  HUD is proposing to repeal sections 513(b)(7)(g)
and 517(d) of the Multifamily Assisted Housing Reform and
Affordability Act of 1997.  Section 513(b)(7)(g) prohibits any
private entity from sharing, participating in, or otherwise
benefiting from any equity created, received, or restructured as a
result of a portfolio restructuring agreement.  Section 517(d)
prohibits the Secretary from participating in any equity-sharing or
profit-sharing arrangement.  We did not evaluate HUD's savings
proposal. 


   MANDATORY PROGRAMS
--------------------------------------------------------- Appendix I:8

ï¿½Empowerment Zones:  HUD is requesting $150 million--the first of 10
equal installments for a total of $1.5 billion--as a mandatory
expenditure under the authority of title XX of the Social Security
Act for urban empowerment zones (EZ).  Each of the 15 new EZs
authorized under the Taxpayer Relief Act of 1997 would receive up to
$100 million under this proposal.  Among other things, the Taxpayer
Relief Act extended the EZ initiative that was established under the
Omnibus Budget Reconciliation Act of 1993 by increasing the number of
EZs and providing tax incentives for use by businesses in the new
EZs.  However, the 1997 act did not provide grants for the new EZs. 
According to HUD budget officials, the administration is drafting
legislation that would designate Social Service Block Grant funds as
the source of funding for the new EZs. 


   MANAGEMENT AND ADMINISTRATION
--------------------------------------------------------- Appendix I:9

ï¿½Provision to use up to 1 percent of program appropriations for
evaluation, monitoring, and data collection:  HUD's fiscal year 1999
budget request includes a provision for the Department to transfer up
to 1 percent of the amount appropriated in most program accounts to
the "Departmental Salaries and Expenses" account.  HUD intends to use
this funding to (1) evaluate and monitor programs and (2) collect and
maintain data related to the Government Performance and Results Act
(GPRA).  HUD currently estimates that it will need $15 million to
meet the requirements of GPRA. 


INCREASES IN EXISTING PROGRAMS
INCLUDED IN HUD'S FISCAL YEAR 1999
BUDGET REQUEST
========================================================== Appendix II

                                  (Dollars in millions)

                                                    Budget authority
                               ----------------------------------------------------------
                                 Fiscal year 1998    Fiscal year 1999
Program/Initiative                        enacted             request            Increase
-----------------------------  ------------------  ------------------  ------------------
Public and Indian Housing
Section 8 amendments                         $850              $1,337                $487
Tenant protections/                           303                 373                  70
 replacement certificates
Public Housing Capital Fund                 2,500               2,550                  50
Indian Housing Loan Guarantee                   5                   6                   1
 Fund program account
Indian Housing Loan Guarantee                [62]                [69]                 [7]
 Fund limitation

Community Planning and Development
-----------------------------------------------------------------------------------------
Community Development Block                 4,674               4,725                51\a
 Grant Fund
Brownfields Redevelopment                      25                  50                  25
 Program
HOME Investment Partnerships                1,500               1,550                  50
 Program
Homeless Assistance Grants                    823                 958                 135
Housing Opportunities for                     204                 225                  21
 Persons With AIDS
Youthbuild                                 [35]\b                  45                  45

Housing Programs
-----------------------------------------------------------------------------------------
Housing Counseling Assistance              [20]\c              [25]\c               [5]\c
FHA Mutual Mortgage Insurance                 338                 529                 191
 and Cooperative Management
 Housing Insurance Funds
 program account
FHA General Insurance and                     222                 315                  93
 Special Risk Insurance Funds
 program account
 administrative expenses
FHA General Insurance and                [17,400]            [18,100]               [700]
 Special Risk Insurance Funds
 mortgage insurance
 limitation

Government National Mortgage Association
-----------------------------------------------------------------------------------------
Mortgage-Backed Securities              [130,000]           [150,000]            [20,000]
 Guarantee limitation

Policy Development and Research
-----------------------------------------------------------------------------------------
Research and technology                        37                  40                   3

Office of Lead-Based Paint and Poisoning Prevention
-----------------------------------------------------------------------------------------
Lead-based paint hazard                    [60]\b                  85                  85
 reduction

Fair Housing and Equal Opportunity
-----------------------------------------------------------------------------------------
Fair Housing Assistance                        15                  23                   8
 Program
Fair Housing Initiatives                       15                  29                  14
 Program
Total increase                                                                      1,329
-----------------------------------------------------------------------------------------
Note:  Bracketed amounts are not included in the total. 

\a According to HUD, this $51 million proposed increase in Community
Development Block Grant funding, when combined with reduced
set-asides in the program, would effectively increase the program's
funding by $238 million in fiscal year 1999. 

\b These programs were set-asides within the Community Development
Block Grant Program in fiscal year 1998. 

\c Housing Counseling Assistance is funded as a set-aside within the
HOME program. 

Source:  GAO's analysis of HUD's fiscal year 1999 budget request. 


OBJECTIVE, SCOPE, AND METHODOLOGY
========================================================= Appendix III

The Chairman and Ranking Minority Member of the Subcommittee on VA,
HUD, and Independent Agencies, House Committee on Appropriations,
requested that we assess the reasonableness of selected aspects of
HUD's fiscal year 1999 budget request.  To accomplish this task, we
reviewed HUD's February 1998 Congressional Justifications for 1999
Estimates.  We also interviewed appropriate officials in HUD's
Offices of the Chief Financial Officer, Public and Indian Housing,
Housing, and Community Planning and Development to obtain more
information on planned uses for funding requested.  When available,
we reviewed this additional information.  Finally, we based portions
of this statement on our recently issued report on HUD's financial
management of its Section 8 tenant-based program as well as on our
current work focusing on HUD's financial management of the Section 8
moderate rehabilitation and project-based programs, the HOPE VI
program, and the impact of welfare reform on public and assisted
housing. 

We conducted our work in February and March 1998 in accordance with
generally accepted government auditing standards. 


*** End of document. ***