oversight

Controls Needed over the Leasing of Land Acquired Under the Open-Space Land Program

Published by the Government Accountability Office on 1971-06-16.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  0 THE CONGRESS

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                                 LM095627




                 der The Open-Space


Department of Housing and
  Urban Development




BY THE CO TROLLER GENERAL
OF THE UNITED STATES
                       COMPTROLLER     GENERAL      OF   THE      UNITED   STATES
                                     WASHINGTON.     D.C.      205548




B-168174




To the     President        of the Senate    and the
Speaker      of the      House   of Representatives

       This is our report      on controls   needed    over the leasing     of
land acquired     under   the Open-Space     Land Program      administered
by the Department       of Housing    and Urban   Development.

       Our review  was made                 pursuant  to the Budget   and Account-
ing Act, l9Zl (31 U.S.C. 53),               and the Accounting    and Auditing   Act
of 1950 (31 U.S.C.  67).

          Copies    of this report    are          being sent to the Director,     Of-
fice   of Management          and Budget,           and to the Secretary    of Housing
and    Urban     Development.




                                                   Comptroller             General
                                                   of the United           States
I
I
I
 I
 I
 I                                                                      CONTROLS NEEDED OVER THE LEASING        OF LAND
 I
  I                                                                     ACQUIREDUNDERTHE OPEN-SPACELAND PROGRAM
  I                                                                     Department of Housing and Urban Development
  I
  I
                                                                        B-168174
   I
   I
   I
   I                           DIGEST
                               __----
   I
   I
    I
                               WHYTHE REVIEW WASMADE
   ;
   I
    I                                Under the Open-SpaceLand Program, .Federa? grants are provided to States
    I
    I
                                     and local public bodies (grantees) to acquire and/or develop land t0
    I                                help curb urban sprawl; to assist in preventing the spread of urban
    I                                blight;   to encourage economic urban development; to provide parks and
     I
     I                               recreational   areas; and to preserve conservation9 scenic, and historic
     I                               land areas.
     I
      I
      I                              The program is administered by the Department of Housing and Urban De-
      I                              velopment (HUD). As of June 30, 1970, Federal funds of about $370 mil-
      I
       I                             lion had been appropriated for the program. Of this amount, HUD
       I
       I
        I                                 --had obligated about $312 million     for the acquisition   and/or develop-
         I                                   ment of land and
         I
         I
         I                                --had disbursed   about $138 million   to the States   and to local     public
           I                                 bodies.
           I
           I
           I                         The General Accounting Office {GAO) noted during a survey that certain
           I
            I
                                     grantees were leasing land acquired under the program without obtaining
            I                        HUD!s approval, contrary to the requirements of the grant contracts.
            I
            I
                                     GAO therefore undertook a review of the program to determine the extent
            I                        of the1. leasing
                                     _-__.     _ ... /,II. activity.
             I
             I
             I
             I                 FINDING;S AND CONCLUSIOIVS
             I
             I
             I                       HUD had not established procedures for ensuring that grantees were ob-
             I
              1                      taining HUD's approval prior to leasing open-space land and had not de-
                 I                   veloped requirements or guidelines  relating to the use of revenues re-
                 I
                 I
                                     ceived by grantees from the leasing of open-space land,   (See ps 6.)
                 I
                 I
                 I
                                     HUD central office officials    advised GAO that, because there were rela-
                 I                   tively  few leasing agreements, revenues from leasing open-space land
                     I               would be insignificant   and thus would not warrant the issuance of spe-
                     I
                     I               cific  requirements or guidelines    for controlling the use of such funds
                     I               or for ensuring that they would be used for open-space purposes.       (See
                     I
                      I                 p* 93.)
                      I
                      I
                      I
                                     To determine whether the leasing        of open-space land without HUD's ap-
                      I              proval was a widespread practice,        GAO sent questionnaires  to 435
                       I
                         I
                         I     Tear Sheet
                         I
                          I                                                                 JUHE16,19T!
                          I
                          I
                          I
                          I
                           I
                                                                                        I
    grantees   that     responsfble for 899 individual
                       were                                open-space projects          I
    located in three I-ND regional office jurisdictions--Chicago,     Illinois;         1
    Philadelphia,  Pennsylvanja; and San Francisco3 California.                         I
    Of the 410 grantees responding to the questionnaires,  76 reported that             I
    they had entered into a total of 700 lease agreements.   (See pp. 6                 I
    and 7.)                                                                             I
                                                                                        I
    GAO's examination into 21 open-space projects,       involving 199 of the 700       i
    reported lease agreements, showed that, of the 199 lease agreements9 183,           I
    or about 92 percent, had not been approved by HUD. (See p. 7.) The
    revenues received by the grantees under the 199 lease agreements totaled
    about $714,000,   These funds were deposited into the grantee's general
    operating funds and were not specifically     set aside and utilized   for
    open-space land project activities,      (See p. 8.)


RECOMMENDATIONS
            OR SUGGESTIONS
    GAO informed HUD that certain grantees were not complying with the pro-
    visions of the open-space contracts relating  to the leasing of open-
    space land and had engaged in such activities  without obtaining prior
    HUD approval.

    GAOsuggested that HUD (1) establish   a system of periodic site inspec-
    tions of open-space projects to ensure that grantees obtain HUD's ap-
    proval prior to the leasing of open-space land, (2) establish guide-
    lines for the approval of grantee requests to lease open-space land to
    ensure that the proposed lease is compatible with the intent of the
    program and the timely development of the land for open-space uses,
    and (3) place restrictions  on the use of revenues received from the
    leasing of open-space land.   (See p. 15.)


AGENCY
     ACTIONSANDUNRESOLVED
                       ISSUES
   HUD infomled       GAO that instructions   had been issued to all   regional   ad-
   ministrators       requirl'ng:

      --That reviews and follow-'up reviews be made of certain grants awarded
         prior to January II) 1970, on which delays (in the acquisition and/or
         development of the land) were being experienced and that appropriate
         action be taken.

      --That compliance site inspections be scheduled for certain projects
         approved during fiscal years 1962 through 1968 and that appropriate
         action be taken on any contract violations disclosed,

      --That all grantees certify   to HUD that      the terms and conditions     of
         their open-space land grant contracts       are being met.
    . HUD also advised GAO that information  relative  to its approval of leases
      and the use of lease revenues would be included in a consolidated   pro-
      gram guide which was in process of being drafted.

       GAO believes that the actions taken or planned by HUD, if fully im-
       plemented, should result in improved administration of the Open-Space
       Land Program.


MATTERS
      FORCONSIDERATION
                    BY THECONGRESS
       No congressional action is suggested.  This report is being submitted
       to the Congress because of expressed congressional  interest in manage-
       ment of urban development programs by Federal, State, and local agencies.




Tear Sheet
                          ---COntentS
                                                                    Paw

DIGEST                                                               1

CHAPTER

   1       INTRODUCTION                                              4
               Open-Space Land Program requirements                  4
               Scope of review                                       5

   2       CONTROLSNEEDED OVER THE LEASING OF LAND
           ACQUIRED UNDER THE OPEN-SPACELAND PROGRAM                 6
              Leasing of land without required     HUD
                 approval                                            6
              Need to establish   guidelines   for use
                 of revenues from leasing open-space
                 land                                               13
              Conclusions   and agency actions                      14

APPENDIX

       I   Letter dated March 15, 1971, from the
             Assistant  Secretary for Community Develop-
             ment to the General Accounting Office                  19

  II       Principal   officials of the Department of
             Housing and Urban Development respon-
              sible for the administration  of activi-
              ties discussed in this report                         21

                             ABBREVIATIONS

GAO        General   Accounting         Office

HUD        Department   of Housing          and Urban Development
COMP~ROLSER
          G.ENERAL
                 'S                    CONTROLSNEEDEDOVER THE LEASING OF LAND
REPORT
     TO TilE:CONGRESS                  ACQUIREDUNDERTHE OPEN-SPACELAND PROGRAM
                                       Department of Housing and Urban Development
                                       B-168174


DIGEST
------

WHYTHEREVIEWWASMADE
    Under the Open-Space Land Program, Federal grants are provided to States
    and local public bodies (grantees) to acquire and/or develop land to
    help curb urban sprawl; to assist in preventing the spread of urban
    blight;   to encourage economic urban development; to provide parks and
    recreational   areas; and to preserve conservation, scenic, and historic
    land areas.

    The program is administered by the Department of Housing and Urban De-
    velopment (HUD). As of June 30, 1970, Federal funds of about $370 mil-
    lion had been appropriated for the program. Of this amount, HUD

         --had obligated about $312 million     for the acquisition   and/or develop-
            ment of land and

         --had disbursed   about $138 million   to the States   and to local   public
            bodies.

    The General Accounting Office (GAO) noted during a survey that certain
    grantees were leasing land acquired under the program without obtaining
    HUD's approval, contrary to the requirements of the grant contracts.
    GAO therefore undertook a review of the program to determine the extent
    of the leasing activity.


FINDINGSAND CONCLUSIONS
    HUD had not established procedures for ensuring that grantees were ob-
    taining HUD's approval prior to leasing open-space land and had not de-
    veloped requirements or guidelines  relating to the use of revenues re-
    ceived by grantees from the leasing of open-space land,    (See p# 6.)
    HUD central office officials     advised GAO that, because there were rela-
    tively   few leasing agreements9 revenues from leasing open-space land
    would be insignificant   and thus would not warrant the issuance of spe-
    cific   requirements or guidelines    for controlling the use of such funds
    or for ensuring that they would be used for open-space purposes.        (See
    p* 13.)

    To determine whether the leasing        of open-space land without HUD's ap-
    proval was a widespread practice,        GAO sent questionnaires  to 435
    grantees     that were responsible  for 899 individual      open-space projects
    located    in three HUB regional   office jurisdictions--Chicago5      Illinois;      .
    Philadelphia,    Pennsylvania;   and San Francjscos California.

    Of the 470 grantees responding to the questionnaires,  76 reported that
    they had entered into a total of 700 lease agreements.   (See pp. 6
    and 7.)

    GAO's examination into 21 open-space projects,       involving 199 of the 700
    reported lease agreements, showed that, of the 199 lease agreements, 183,
    or about 92 percent, had not been approved by HUD. (See p. 7.) The
    revenues received by the grantees under the 199 lease agreements totaled
    about $714,000. These funds were deposited into the grantee's general
    operating funds and were not specifically     set aside and utilized   for
    open-space land project activities.      (See p. 8.)


RECOMMENDATIONS
              OR SUGGESTIONS

    GAO informed HUD that certain grantees were not complying with the pro-
    visions of the open-space contracts relating  to the leasing of open-
    space land and had engaged in such activities  without obtaining prior
    HUD approval.

    GAO suggested that HUD (1) establish  a system of periodic site inspec-
    tions of open-space projects to ensure that grantees obtain HUD's ap-
    proval prior to the leasing of open-space land, (2) establish guide-
    lines for the approval of grantee requests to lease open-space land to
    ensure that the proposed lease is compatible with the intent of the
    program and the timely development of the land for open-space uses,
    and (3) place restrictions  on the use of revenues received from the
    leasing of open-space land.   (See p. 15.9


AGENCYACTIONS AND UNRESOLVEDISSUES

    HUD informed    GAO that instructions    had been issued to all      regional   ad-
    ministrators    requiring:

       --That reviews and follow-up reviews be made of certain grants awarded
          prior to January 1, 1970, on which delays (in the acquisition and/or
          development of the land) were being experienced and that appropriate
          action be taken.

       --That compliance site inspections  be scheduled for certain projects
          approved during fiscal years 1962 through 1968 and that appropriate
          action be taken on any contract violations  disclosed.

       --That all grantees certify   to HUD that     the terms and conditions       of
          their open-space land grant contracts      are being met,




                                         2
   HUD also advised GAO that information  relative  to its approval of leases
   and the use of lease revenues would be included in a consolidated   pro-
   gram guide which was in process of being drafted.

   GAO believes that the actions taken or planned by HUD, if fully im-
   plemented, should result in improved administration of the Open-Space
   Land Program.


MATTERS
      FORCONSIDERATION
                    BY THECONGRESS
   No congressional action is suggested.  This report is being submitted
   to the Congress because of expressed congressional  interest in manage-
   ment of urban development programs by Federal, State, and local agencies.




                                   3
                                    CHAPTER 1

                                 INTRODUCTION

           The Open-Space Land Program, administered      by the De-
     partment of Housing and Urban Development, was established
     under title   VII of the Housing Act of 1961, as amended
     (42 U.S.C. 1500>, and was designed to help curb urban
     sprawl; to assist in preventing     the spread of urban blight;
     to encourage economic urban development;      to provide parks
     and recreational   areas; and   to preserve  conservation,  sce-
     nic, and historic   land areas.

           The Secretary     of HUD is authorized--under          section 702
     of the act, which deals with the acquisition              of undeveloped
     or predominantly    undeveloped land, and under section 705 of
     the act, which relates         to the acquisition      of developed land
     in urban areas-- to provide financial           assistance    in the form
     of grants to States and to local public bodies to acquire
     and/or develop land for Open-Space Land Program purposes.
     Federal financial      participation    is not to exceed 50 percent
     of the total   project     cost of acquiring      and/or developing
     land under this program.

            As of June 30, 1970, Federal funds of about $370 mil-
     lion had been appropriated    for this program.   Of this
     amount, HUD had obligated   about $312 million  for specific
     projects   under sections 702 and 705 of the act and had dis-
     bursed about $138 million   to the States and to local public
     bodies.

     OPEN-SPACELAND PROGRAMREQUIREMENTS

            Applications for Federal financial  assistance          for ac-
'I   quiring   and/or developing land under this program           are initi-
     ated by States or local public bodies.

            Applications    are approved by the HUD regional   offices,
     and, upon approval,       grantees are required  to enter into spe-
     cific   contracts   with HUD.     The contracts set forth the gen-
     era1 conditions     and terms of the Open-Space Land Program
     grants.
       Contract provisions       relating     to the use of land ac-
quired under the program state that grantees              (1) must re-
tain the land permanently          for the purposes outlined        in the
approved applications        or (2) must obtain the written           ap-
proval of the Secretary         of HUD before leasing,       selling,     or
transferring      any land acquired under the program,
       HUD guidelines     provide that,       in the event that the
land is not immediately        utilized     for the purposes outlined
in the approved application,            the grantee may lease the land
on a short-term      basis.    Such leasing generally        occurs when
certain     delays are expected in the development of the land.
In May 1966 the Secretary          delegated this approval authority
to the Assistant      Secretary      for Metropolitan   Planning and
Development.       We have been advised by HUD officials            that
each request from a State or local public body for approval
to lease land is reviewed and evaluated on a case-by-case
basis.
        Under the provisions    of the grant contracts,      the ap-
proval of a request to lease land is contingent            upon the
grantee's    submitting    documentation    to demonstrate   that
(1) under the proposed lease the land will be used for pur-
poses consistent      with those stated in the HUD-approved ap-
plication    for the acquisition      of the land and (2) the lease
agreement will contain adequate controls          for ensuring that
the land will be preserved for Open-Space Land Program
uses.
SCOPE OF REVIEW
     Our review of this program was directed    primarily     to-
ward determining  the extent of the leasing activity      being
conducted by the grantees and included an evaluation       of
HUD's policies,  procedures, and practices   for monitoring
the uses made of the land acquired under the program.
        Our review was made at HUD's central      office   in Wash-
ington,    D.C., and at regional    offices in Chicago, Philadel-
phia, and San Francisco.       We mailed questionnaires      to 435
public bodies having responsibilities       for 899 open-space
projects    in three HUD regional    office jurisdictions.      The
questionnaire     was designed to determine whether the land
acquired under the program had been leased, sold, or trans-
ferred.     We also reviewed,    in detail, 21 open-space proj-
ects and made site visits      to these projects,


                                      5
                                 CHAPTER 2

            CONTROLSNEEDED OVER THE LEASING OF LAND
            -I_
           ACQUIRED UNDER THE OPEN-SPACELAND PROGRAM
           --
        Our review showed that certain      grantees        were not com-
plying with the terms and conditions         of the        HUD grant con-
tracts    which related    to the leasing of land          acquired under
the Open-Space Land Program.         We found that         grantees had
leased land without obtaining        HUD's approval,          contrary   to
the requirements      of the grant contracts,and           that other
grantees had leased land for periods beyond                those approved
by HUD. HUD had not developed requirements                 or guidelines
relating    to the use of revenues received by             grantees from
the leasing of open-space land.

       Details      on these matters       are presented   in the following
sections.

LEASING OF LAND WITHOUT REQUIRED HUD APPROVAL

        HUD guidelines provide that grantees may lease--for
specific    periods of time-- open-space land that is not to be
utilized    in the near future  for the purposes outlined   in
the approved grant applications.       The grant contracts  pro-
vide, however, that prior approval of such leasing must be
obtained from the Secretary     of HUD.

       During a survey we conducted at the HUD regional            of-
fice level,   we noted that land acquired under this program
had been leased without         the knowledge or approval of the
Secretary,    To determine whether this practice          was wide-
spread, we mailed questionnaires          to 435 grantees in three
HUD regional   office    jurisdictions,     which requested informa-
tion relative    to their     leasing activities.      These grantees
were responsible      for 899 individual      open-space projects.
The number of open-space projects          managed by each grantee
ranged from one to 23-- an average of two projects           for each
grantee.

         Grantees    in HUD"s Chicago, Philadelphia,    and San Fran-
 cisco    regions    were chosen to receive questionnaires    because


                                       6
of the significant    amount of Federal funds that had been
awarded to grantees in these regions.        As of June 30, 1968,
about 68 percent of the total    number of open-space projects
that had been approved by HUD after inception         of the pro-
gram were in these three regions.       At that date, the three
regions had awarded and obligated      funds totaling    about
$143 million    for open-space grants.

     Following    is a summary of the results we obtained from
our questionnaire    survey of grantees in the three regions.

                         Number of grantees              Number of
               Receiving                   Reporting        lease
     HUD       question-                     lease      agreeklents
    region      naires       Responding    agreements    reported

Chicago            222           213           3.5          505
Philadelphia       140           124           18            62
San Fran-
  cisco              73           73           -23          --133
     Total         --435         410           76            700
                                                            --
                                                            ---
        To determine whether the 76 grantees had obtained HUD's
approval prior to entering        into the lease agreements, we
discussed the results        of our questionnaire    survey with HUD
officials     in each of the three regions.        These officials
stated that, although the documentation           or records for as-
certaining      the specific   number of grantees that might have
requested and obtained HUD's approval were not readily
available     because of a recent departmental       reorganization,
they were of the view that very few of the grantees had re-
quested such approval.

       To determine whether grantees involved       in leasing had,
in fact,    requested and obtained HUD approval,      we selected
for further     review 21 projects     representing 199 of the 700
reported    lease agreements,      Also our review was directed
toward determining     the purposes for which the land was
leased and the disposition       of the lease revenues by the
grantees.

     Our review showed that the grantees had not submitted
183, or about 92 percent,  of the 199 lease agreements to

                                  7
HUD for its review and approval.             Under the 199 agreements,
the grantees had leased the land for a variety             of purposes
including     commercial,     residential,    and grazing and other
agricultural      uses,    Our review of the lease agreements
showed that the grantees,          for the most part, had leased the
land for purposes which, in our opinion,             would not have ad-
versely    affected     the ultimate     use of the land for the pur-
poses outlined      in the HUD-approved grant applications.

       We believe,     however, that, in a number of instances,
the leasing of the land may have resulted        in delaying the
ultimate     development of the land for such purposes as parks
and recreational       areas which were outlined   in the grant
applications      approved by HUD.

        At the time of our field     review, the granteesP revenues
under the 199 lease agreements amounted to about $714,000.
These funds were deposited into the general operating         funds
of the States or the local public bodies and were not spe-
cifically     set aside and utilized     for open-space land proj-
ect activities.

      Presented below are several examples of leasing activ-
ities  being conducted by grantees on land acquired under
the Open-Space Land Program.

Grantee A

     During the period 1967 through 1969, this grantee--a
     regional     park district--     applied for and received ap-
     proval from HUD to acquire about 2,000 acres of land
     to be used for the development of a regional           park.
     HUD grants for the acquisition           of this land amounted
     to about $545,000.           The HUD-approved grant applications
     stated that the regional          park would be used by the gen-
     eral public for hiking,          camping, swimming, and related
     recreational     activities.

     Our review showed that the grantee, without HUDss ap-
     proval,  had leased the entire parcel. of land to a pri-
     vate livestock   company for animal grazing.     Officials
     of the grantee advised us that HUD's approval to lease
     this land had not been requested because of an over-
     sight on the part of park district    officials.     They

                                   8
     advised us also that they did not plan to request HUD"s
     approval of the lease agreement and that they would
     continue to lease the land for grazing purposes,

     Revenue received by the grantee under the lease agree-
     ment during the period December 1, 1967, to April     30,
     1970, amounted to approximately  $35,350.   At the time
     of our review, the grantee was receiving   about $15,000
     a year under th e leasing agreement with the livestock
     company.

Grantee   B

     In May 1966 HUD awarded to this grantee--a     county--an
     $85,623 grant for acquiring   about 1 acre of land to be
     developed for park and recreational   purposes.     The
     land, located within  an urban renewal area, was acquired
     by the county from the local redevelopment     authority.

     The county received approval from HUD to lease the
     land--as  a public parking lot--during the period Au-
     gust 1, 1966, through March 31, 1967.

     In March 1967 the county requested HUD's approval of an
     extension    of the lease through September 1967.  In ad-
     vising the county that the requested 6-month extension
     had been approved, the HUD Assistant    Regional Adminis-
     trator   stated that:

              "Because of the need to proceed with the
              designated open-space use ***, we will not
              be able to grant any further  extensions.   It
              is anticipated  that at the end of this exten-
              sion the land will be employed for its ap-
              proved open-space use."

     In August 1967 the county requested HUD's approval of
     an extension     of the lease for an additional  6-month
     period through March 1968 and stated that (1) it was
     unable to begin the development of the land for its
     approved purpose and (2) there was a lack of public
     parking facilities     in the general area of the open-
     space site.


                                  9
    County officials  told us that they had not been ad-
    vised by HUD as to whether approval of the second ex-
    tension was granted.     The county nevertheless    extended
    the lease-- on a month-to-month    basis--from   October
    1967 through September 1969. The county initiated         the
    development of the park in March 1970.

    We were unable to determine why HUD had not acted upon
    the granteeis    second request for extension of the
    leasing arrangement.       Certain information    in the proj-
    ect files,    however, showed that the HUD regional        office
    had been directed     by the central   office  to advise the
    grantee that a formal request for an extension          of the
    lease must be submitted      to the Assistant    Secretary    for
    Metropolitan    Planning and Development and that no fur-
    ther extensions    would be granted to the county after
    March 1968.

    The county received lease revenues of about $57,000
    during the period August 1966 through September 1969.

Grantee C
    During the period 1963 through 1965, HUD approved sev-
    eral applications     of the grantee--a   multicounty  park
    board--for     the acquisition of a total   of 3,690 acres
    of land which, according to the granteess requests,          were
    to be used for park, recreational,       conservation,  his-
    toric,    and scenic purposes.    HUD grants for the acqui-
    sition    of this land amounted to about $1.1 million.

    Our review showed that the grantee entered into a num-
    ber of agreements between March 1, 1964, and March 1,
    1966, for the lease of about 1,848 of the 3,690 acres
    for agricultural  purposes. These lease agreements,
    which were renewable on a year-to-year  basis, were ap-
    proved by HUD.

    The grantee,    however, without requesting    HUD approval,
    subsequently    entered into agreements for the lease of
    15 homes that    were located on the open-space land,        We
    noted that a    number of these homes had been leased
    several times    and that,   at the time of our field   review,
    11 of the 15    homes were still   being leased,
     An official  of the grantee informed us that, prior      to
     our review, the grantee was not aware that the require-
     ment for obtaining    leasing approval from HUD included
     residential  dwellings.     He stated that, in the future,
     HUD approval would be requested for all lease agree-
     ments.

      From March 1964 through May 1970, the grantee received
      revenues of about $91,300 from the agricultural  leases
      and about $60,000 from the residential  leases.

Grantee   D

     In September 1964 HUD approved the application          of this
     grantee--a    State-- to acquire 1,711 acres of land to be
     developed as a park which would provide areas for pic-
     nicking,    bathing,  boating,  and other recreational-type
     activities.      HUD's grant for the acquisition     of this
     land amounted to about $954,900.

     At the time of acquisition,          23 residential      dwellings
     were located on the land and 12 were being leased.
     Subsequent to the acquisition           of the land, the grantee,
     without   the approval of HUD, extended nine of the 12
     leases and entered into 26 additional             leases of land
     for residential,       agricultural,     and commercial purposes.
     The first    lease agreements by the grantee were entered
     into in November 1964--2 months after HUD approved the
     granteels    application      to acquire the land.        As of Sep-
     tember 30, 1970, 25 lease agreements--l8              residential
     and seven agricultural--were          in effect.

     The seven agricultural    leases which were in effect   as
     of September 30, 1970, covered 603 of the 1,711 acres
     of open-space land.    Information   was not readily
     available  to enable us to ascertain    the area of land
     that was leased for residential    purposes.

     Grantee officials      told us that they were not aware of
     the requirement     that HUD must approve the leasing of
     land that was acquired under this program.        These offi-
     cials informed us that they planned to notify       HUD of
     the existing    leases-- 25 at the time that our fieldwork
     was completed--and       that, in the future, HUD's approval

                                    11
           would be requested before extending existing   Pease
           agreements or entering  into new lease agreements.

           From the inception of leasing activities  in November
           1964 through September 30, 1970, the State received
           leasing revenues of about $103,650.



            In our opinion,   the above examples indicate      a need for
     HUD to establish    controls     to ensure that grantees partici-
     pating in the Open-Space Land Program, as a minimum, are
     complying with the terms of their grant contracts          which re-
     quire that grantees,     prior to leasing any land acquired un-
     der the program, obtain HUD's approval.         We believe that
     such controls    should provide for adequate monitoring        to de-
     termine,   on a continuing      basis, that the grantees are ad-
     hering to the contract       requirements.

           We noted that in May 1967 HUD's Office of Audit di-
     rected its regional  audit managers to make a review of the
.:   Open-Space Land Program.   This review resulted  in six re-
.I   ports which were issued to each of the regional   administra-
     tors in six of HUD's seven regions.

            One of the reports      cited two projects   for which the
     lease of open-space land had been approved by a HUD regional
     director    instead of having been referred       to the HUD central
     office   for approval.       The review, however, did not identify
     any cases where the grantees had entered into lease agree-
     ments without     requesting    HUD's prior approval,

           We were advised by HUD Office of Audit officials  that
     this program review was the only review that the office    had
     made of the Open-Space Land Program and that additional
     work had not been planned on the program during the period
     ending June 1971.




                                      12
NEED T8 ESTABLISH GUIDELINES FOR USE
OF REVENUESFROMLEASING OPEN-SPACELAND

       Prior to the initiation         of .our review, HUD had not es-
tablished      any requirements      or guidelines    for grantees to
follow regarding       the use of revenues from the leasing of
land acquired under the Open-Space Land Program.                 HUD central
office    officials    informed us that, because there were rela-
tively    few leasing agreements, any revenues from the leas-
ing of land would be insignificant             and thus would not war-
rant the issuance of specific           requirements     or guidelines   for
controlling       the use of such funds or for ensuring that they
would be used for open-space purposes,              such as developing
parks or providing        recreational     areas.

      Although HUD had not established           requirements     or guide-
lines relating     to the use of lease revenues,            the Assistant
Secretary   for Metropolitan      Planning and Development pointed
out,  in  correspondence     to a  JXJD regional     office    in January
1970, that HUD was in favor of using such revenues for the
development of open-space land.           During our review of spe-
cific   open-space projects,      however, we noted that HUD, in
approving the leasing agreements for several grantees,                  had
not advised the grantees that lease revenues should be used
for the development of open-space land.

       We discussed the above matters with HUD officials         of
the three regions included in our review.        These officials
stated that,    in their opinion,   HUD should issue specific
instructions    to grantees requiring   that leasing revenues
be used for open-space activities,      such as the acquisition,
development,    or maintenance of open-space land.

      Pm August 1970 HUD adopted guidelines   for issuance to
future applicants  for open-space grants which provided that
HUD's approval of grantees'   requests to lease open-space
land be subject to such restrictions    on the use of the lease
revenues as HUD deemed appropriate.     The guidelines  provided,
in effect,   that:

      1. Where'the entire   amount of the grant had been dis-
         bursed, HUD could require    the grantee to pay an
         amount of the lease revenues equal to HUD's pro-
         portionate  investment  in the leased land.


                                      13
           2, Where the       entire  amount of the grant had not been
              disbursed,       HUD could require   that lease revenues in
              an amount       equal to HUD@s proportionate    investment in
              the leased       land be applied against the undisbursed
              portion    of    the grant.

     These guidelines,      however, did not provide any instructions
     to the grantees     requiring   that leasing revenues be used for
     the acquisition,     development,    or maintenance of open-space
     land.

           Because of the significant     amounts of revenues that
     grantees have been receiving     from the leasing of open-space
     land (see pa S>, we believe that HUD should develop and
     implement measures to ensure that the funds received by
     grantees from the leasing of land acquired under the Open-
     Space Land Program are used for open-space activities,        such
     as the development of parks and recreational       areas.
I!   CONCLUSIONSAND AGENCYACTIONS

il        Our review showed --contrary  to the expressed views of
     HUD officials --that  there was a considerable  amount of leas-
4    ing activity  under the Open-Space Land Program.    Our review
     showed also:

          --That HUD had not established       procedures,  including
             periodic  site inspections,    for monitoring   open-space
             projects,  and that,   as a result,    HUD was unaware
             of the magnitude of the leasing activities        or of the
             number of grantees who had engaged in such activities
             without HUD's approval.

          --That grantees under the program had not         complied with
             the terms of their grant contracts  which       required
             that the grantees obtain HUD's approval        prior   to enter-
             ing into lease agreements involving  land       acquired
             under the program,

          --That the revenues that the grantees included in our
             review received from the leasing of land and resi-
             dences, in our opinion, were significant.



                                        14
        --That HUD had not provided grantees with guidelines
           relating to the use of revenues received from the
           leasing of land acquired under the program.

      In a letter    dated July 31, 1970, we informed HUD that
our review had shown that grantees had not complied with
the contract    provisions   relating   to the leasing of open-space
land and had engaged in leasing activities           without obtaining
HUD's approval.      We suggested that J!RJD(1) establish        a system
of periodic    site inspections     of open-space projects     to ensure
that grantees obtain HUD's approval prior           to the leasing
of open-space land, (2) establish        guidelines     for the approval
cf grantee requests to lease open-space land to ensure that
the proposed lease is compatible with the intent of the pro-
gram and the timely development of the land for open-space
uses, and (3) place restrictions        on the use of revenues re-
ceived from the leasing of open-space land.

       In a letter   dated August 21, 1970, the Assistant        Secre-
tary for Metropolitan       Planning and Development1 advised us
that HUD, for the past several years, had taken a number of
measures to increase postapproval          management of the Qpen-
Space Land Program and that, within          the next several months,
additional    procedures would be established         to provide for
more effective     monitoring    of projects    approved under the
program,

     The Assistant   Secretary   advised us also that HUD was
examining into the most effective      and responsive   measures
that could be taken regarding      the disposition   of the Fed-
eral Government's  interest    in revenues from leasing open-
space land and the interim     uses of the land by the grantees.

        In a letter  dated March 15, 1971 (see app. I>, the As-
sistant    Secretary  for Community Development,   in commenting
on our draft report,      stated that, although the Department
had not attempted to investigate       or resolve any of the


1
    Effective   March 1, 1971, the responsibility    for the adminis-
    tration   of the Open-Space Land Program was transferred    from
    the Office   of Metropolitan   Planning and Development to the
    newly established    Office  of Community Development.


                                   15
     specific  cases identified in the report,   steps were being
     taken by the Department to examine into alI Open--Spac,e Land
     Program grants in a manner similar   to that which we followed
     in our review.

            The Assistant     Secretary  advised us that instructions
     issued on December 16, 1970, required         that HUD regional      ad-
     ministrators      (1) make reviews and follow-up      reviews of all
     even-numbered grants awarded prior to January 1, 1970, on
:I   which delays were being experienced         in the acquisition      and/or
     development of the land for the purposes outlined            in the
     approved grant applications        and take appropriate     action and
     (2) schedule compliance site inspections          of all odd-numbered
     projects     approved during fiscal    years 1962 through 1968 and
     take appropriate      action on all contract    violations    disclosed
     during the site inspections.

            In addition,     the Assistant     Secretary    stated that a
     memorandum, dated January 6, 1971, to all I-IUD regional             ad-
     ministrators     contained instructions        for making contract    com-
     pliance reviews and required          that a certification     be obtained
     from each grantee regarding         its compliance with the terms
     and conditions      of the grant contract.

            The Assistant Secretary stated also that information
     relative   to HUD's approval of leases and the use of lease
     revenues would be included in a consolidated   program guide
     which was in the process of being drafted.

           In view of the actions taken or planned by HUD relating
     to correcting   the weaknesses noted during our review, we are
     not making any specific      recommendations.     We believe that
     these actions,    if fully   implemented,   should result   in im-
     proved administration      of the Open-Space Land Program.

           As part of our continuing    review of HUB programs, how-
     ever, we plan, at a later    date, to examine into the actions
     taken to improve the management of the Open-Space Land
     Program.




                                        16
APPENDIXES




  17
                                                                                                  APPENDIX I



                            DEPAWTMEblT   OF     XOUSIN      (3   AND        URBAN   DEVELOPMEN

                                               WASHINGTON,        0.    C.   20410




                                                                                                      ,t.J REPLY   REFER   TO:
FFICE     OF THE ASSISTANT    SECRETARY
    FOR   COMMUNlTY    DEVELOPMENT




              a Mr. B. E. Birkle
                Assistant  Director
                Civil Division
                General Accounting        Office
                Washington, D, C.         20%8
                   Gear Mr . Birkle* 0

                   Secretary Romney has asked me to thank you for furnishing him a
                   copy of your draft report to the Congress titled  Veed to
                   Establish Controls Over the Leasing of Land Acquired Under the
                   Open Space Land Program."

                  We have reviewed the draft and have no substantive   suggestions to
                  make on it at this time.    The report is generally accurate from
                  our perspective,  although we have not attempted to investigate    or
                  resolve any of the specific   cases identified in the study.    As
                  indicated in the study, we are taking steps to examine all such
                  grants along a line similar to that taken by your staff.

                   Following is a summary of progress to date on implementing procedures
                   discussed in Assistant      Secretary Jackson's letter       to you of
                   August 1970. On December 16, 1970, Assistant            Secretary Jackson
                   sent a memorandum to all Regional Administrators            concerning program
                   goals for 1971. Included in this memorandum were instructions              to:
                   review and follow-up     on all even numbered grants made prior to
                   January 1, 1970, which are experiencing          delays and to take any
                   further appropriate     action, and schedule contract compliance site C
                   inspections   for all odd numbered Title VII projects approved during
                   Fiscal Years 1962-68 and to take appropriate           action on any contract
                   violations   disclosed.     On January 6, 1971, Assistant        Secretary
                   Jackson sent to all Regional Administrators           a memorandum providing
                   procedures for contract compliance reviews and advance copies of
                   the questionnaire     and certification    form.     Further action on this
                   form has been temporarily       halted pending official      OMB review and
                   clearance of the questionnaire.         Such authorization     is expected
                   shortly.    A site inspection      form for use by field staff has been



                                                                  19
APPENDIXI

corr@?te d. The question of leases and revenues received from such
leases w-i.11 be handled in the consolidated open space program guide
which is now in the process of being drafted.

We very much appreciate the fine cooperation of the GAO staff   assigned
to this study.  The stuc@ has been helpful to us.

                                Sincerely   yours,

                                              x33-.          $c-
                                Floyd H. Hyde
                                Assistant Secretary




                                    20
                                                                      APPENDIX II


                                   PRINCIPAL OFFICIALS OF

               THE DEPARTMENTOF HOUSING AND URBAN DEVELOPMENT

              RESPONSIBLE FOR THE ADMINISTRATION OF ACTIVITIES

                                 DISCUSSED IN THIS REPORT

                                                           Tenure of office
                                                           From            -To
SECRETARY, DEPARTMENTOF HQUSING
  AND URBAN DEVELOPMENT(note a):
    Robert C. Weaver                                    Feb,   1961    Dec. 1968
    Robert C. Wood                                      Jan.   1969    Jan.    1969
    George 65. Romney                                   Jan.   1969    Present

ASSISTANT SECRETARYFOR METROPQL-
  ITAN PLANNING AND DEVELOPMEXT:
    Charles Haar                                        July   1967    Jan.      1969
    Samuel C. Jackson                                   Feb.   1969    Feb.      1971

ASSISTANT SECRETARYFOR RENEWAL
  AND HOUSING ASSISTANCE (note b):
    Don Humme%                                          July   1966    Feb.      1969
    Howard J, Wharton (acting)                          Feb.   1969    Mar.      1969
    Lawrence M. Cox                                     Mar,   1969    Feb.      1970

ASSISTANT SECRETARYFOR COMMUNITY
  DEVELOPMENT(note c>:
    Floyd H. Hyde                                       Mar.   1971    Present

aFormerly                the Administrator,   Housing    and Home Finance Agency.

bResponsibility    for section 705 of the Housing Act of 1961,
 acquisition    of developed land, was transferred to the Assis-
 tant Secretary    for Metropolitan Planning and Development in
 February 1970.

'Effective   March 1, 1971, responsibility  for the administra-
  tion of the Open-Space Land Program was transferred   from
  the Office of Metropolitan   Planning and Development to the
  newly established  Office of Community Development.

IJ.S   GAO,   Wash.,   D.C.

                                              21