Housing and Community Development Issue Area Plan--Fiscal Years 1996-98

Published by the Government Accountability Office on 1997-08-01.

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

                    United   States General   Accounting   Office

GAO             3   Resources, Communi~, and Economic
                    Development Division

August   1997
                    Housing and community
                    Development Issue Area
                    Fiscal Years 1996-98
As the investigative arm of the Congress and the nation’s auditor, the
General Accounting Office is charged with following the federal dollar
wherever it goes. Reflecting stringent standards of objectivity and
independence, GAO'S audits, evaluations, and investigations promote a
more efficient and cost-effective government; expose fraud, waste, abuse,
and mismanagement in federal programs; help the Congress target budget
reductions; assess financial information management; and alert the
Congress to developing trends that may have significant fiscal or
budgetary consequences. In fuhilhng its responsibilities, GAO performs
original research and uses hundreds of databases or creates its own to
compile and analyze information.

To ensure that GAO'S resources are directed toward the most important
issues facing the Congress, each of GAO'S 33 issue areas develops a
strategic plan that describes its key issues and their significance; the
objectives and focus of its work, and the planned major job starts. Each
issue area relies heavily on input from congressional committees, agency
officials, and subject-matter experts in developing its strategic plan.

The Housing and Community Development Issue Area is responsible for
auditing federal services whose value totals over $1 trillion. The federal
government operates more than 300 programs, scattered among 28
agencies, that are med at providing decent, affordable housing and
healthy, vibrant communities. Created in 1965 and staffed with about
10,500 employees, the Department of Housing and Urban Development
(HUD) is the principal federal agency responsible for about 240 of the
programs and activities dealing w&h housing and community
development. Through its programs, HUDmakes housing affordable for
about 3.9 million low-income tenants; provides $5 billion annually to over
4,000 communities; insures or guarantees mortgage financing for millions
of homeowners through its $400 billion Federal Housing Administration          ‘
(FHA)programs; and guarantees through the Governmental National
Mortgage Assocation (GNMA), about $464 billion m mortgage-backed

In addition, services are provided through the Small Business
Administration’s (SEA) $33 bilhon business loan portfolio to many of the
nation’s 21 million small businesses; the Federal Emergency Management ’
Agency’s (FEMA)annual disaster assistance obligations of about $2 billion;
the Department of Veterans Affaus’ (VA) $174 billion in guarantees on
veterans’home loans; and the Department of Agriculture’s Rural Housing
Service’s (RHS) $32 billion portfolio of direct and guaranteed home loans to

Page 1                                                          GAO/LAP-97-9
rural residents. Finally, in the secondary markets, Freddie Mac and Fannie
Mae (government-sponsored enterprises for which HUD has oversight
responsibilities) have significant national housing missions and oversee
$1.3 trillion m securities and loans.

GAO'S work in the Housing and Community Development Issue Area assists
the Congress and federal agencies by assessing proposals to restructure
agencies and programs, analyzing options to reduce costs, and evaluating
the impact of those options on the delivery of services. Principal issues

*restructuring federal oversight of housing and community development
agencies to improve service delivery, eliminate duplication, and produce
long-term cost savings;

*reducing the federal government’s financial risk in its programs to
provide mortgage assistance;

*fostering self-sufficiency among low-income people while meeting
budgetary constraints;

l promoung the   economic   and social development of commumtles; and

*improving the cost-effectiveness of programs that promote small and
minority-owned business development.

In the pages that follow, we describe our key planned work on these
important issues during our 3-year planning period (fiscal years 1996
through 1998). This year’s update to the plan contains some shght changes
in emphasis to reflect current congressional interest and available
resources. Also, because unanticipated events may significantly affect
even the best of plans, our planning process allows for updating this plan
to respond quickly to emerging issues. If you have any questions or
suggestions about thrs plan, please call Stan J Cerwmskr, Associate
Director, or me at (202) 512-7631.

Judy A. England-Joseph
Housing and Community Development Issues
Page 2                                                           GAO/UP-97-9

     Table I: Key Issues
     Table II: Planned
     Major Work


:“I-TableI: Key Issues

    Issue                                                                 Significance
    Housing and community development agency management:                  The current focus on agency restructuring has affected HUD, SBA,
    How can federal housing and communrty development agencres            and other agencies involved In housrng and communrty
    be restructured to better achreve intended goals, Improve             development assistance These agencies are proposlng to
    service delivery, eliminate duplication, and produce long-term cost   restructure their organizations and are developrng strategies for
    savings?                                                              measuring their performance and options to improve the delivery
                                                                          of federal services with significant cost savings GAO has
                                                                          designated HUD as a hrgh-risk area because of long-standing
                                                                          deficiencies in management, accounting, and information systems

    Mortgage financing: How can the federal government mrnimize           FHA, VA, and RHS underwrite mortgage credit to purchase
    frnancral risks In mortgage assistance programs while meeting         resrdentral and rental properties that are riskier than purchases
    affordable housing needs?                                             made in the conventional market These programs support nearly
                                                                          $500 billron In outstanding mortgage loans In addition, HUD’s
                                                                          GNMA guarantees timely payment to Investors on $464 brlllon of
                                                                          securities backed by these mortgages These four agencies need
                                                                          to continue to limit their losses, improve delivery of home
                                                                          mortgage and rental housing assistance, and improve oversight

    Low-income housing: How can federal low-income housing                Although real outlays for federal low-income housing assistance
    programs meet budgetary constraints while effectively serving         have tnpled since 1977, only one-thrrd of eligrble households
    low-income people and promotrng self-sufficiency?                     receive such assistance Due to budget constrarnts, funds for
                                                                          low-income housing assrstance are not lrkely to increase
                                                                          substantially Therefore, polrcymakers must find more
                                                                          cost-effective methods to house low-Income people, including
                                                                          better ways for federal houslng programs to encourage
                                                                          self-suffrcrency among residents and to apply best management
                                                                          practices among housing providers

    Community development: What roles do HUD and other federal            Over a dozen federal agencies provide community development
    agencies play in promoting the economic and social viability of       assistance The Congress continues to debate whether to
    communities and their residents and what types of performance         consolidate some of these programs into performance-based
    measures do these agencies use7                                       funds or block grants to improve their effectiveness and efficiency
                                                                          Consolidation must also factor in safeguards agatnst duplicate
                                                                          federal programs, the capability of states and localltres to meet
                                                                          communtty needs, and performance measures that ensure
                                                                          appropriate and effective use of funds
     Small and minority-owned business development: Do exrstrng           Although several SBA programs are directed at establishing or
    programs meet clearly defined goals, what benefits have been          preserving small and mrnority-owned businesses, only about 7
    accrued, and what are the most cost-effective ways to deliver         percent of all small business lending IS backed by SBA Federal
    services to these businesses7                                         purchasing requirements annually direct brllrons of dollars to
                                                                          support small business development

                                                   Page 4                                                                         GAO/UP-9’7-9
                                                 Table I: Key Issues


Objectives                                                                Focus of work
*Analyze the effects of agencres’ restructunng      proposals             l Agencies’and congressronal rernventron proposals affecting
                                                                          housrng and communrty development programs, Including the
*Assess the alternatrves to restructure FHA                               impact on customers and the potential savings

*Monitor agencles’ efforts to clanfy mrssrons, set goals, and             l Implrcatrons    of proposed changes to FHA’s role and operations
measure performance toward those goals
                                                                          *Agencies’ actions to implement         the Government    Performance
4dentify and recommend     spending   reductions     to decrease the      and Results Act
federal deficit
                                                                          l Potential savings In HUD’s budget
aMonitor HUD’s actions to correct long-standing       Department-wide
management deficiencies                                                   *HUD’s tnrtratives to correct long-term management           defrciencres
                                                                          and improve contracting practices
*Analyze changes to mortgage financing and related programs to            *Reducing losses and exposure through better management
reduce the federal government’s exposure to losses                        and reserve requirements

*Evaluate ways to improve controls over insured single-famrly             *Reducing losses and improving controls over FHA home
home improvement and rehabrlrtatron loans                                 improvement and rehabilitation loans

*Assess FHA’s capacrty to meet credit gaps in the multrfamrly             *Reducing      credit gaps through changes in FHA programs
housing market
                                                                          *Reducing losses through improved lender approval and
*Recommend ways to strengthen HUD programs             armed at           oversrght procedures
approving and monitoring mortgage lenders
*Identify ways to better manage and malntain urban and rural              *Improvements        in the federal oversight, regulatory framework,
federally assisted public housing and multifamily properties              and budgeting       practices of assisted and public housing

*Evaluate ways to improve the cost-effectiveness       of housing         aCost rmplrcatrons of project- and tenant-based          housing
assistance and its delivery mechanisms                                    assistance

*Evaluate options to reinvent houstng assistance       delivery systems   *Proposed reforms to improve delivery of housing assistance
and encourage self-sufficiency                                            and promote self-sufficiency

*Identify potential impacts of welfare reform on public housing           *Cost and operattonal rmplicatrons of welfare reform for housing
authorities and their tenants                                             authorities
*Identify options to integrate social, economic,     and housing          *Integration     of social, economic,   and housrng programs
programs to maximize delivery of services
                                                                          *Performance indicators used to assess implementation and
*Identify performance rndicators used to rate community and               results of local, state, and/or federal community and economic
economic development programs and recommend other                         development programs
Indicators to Improve oversight of these programs

*Identify the most cost-effective ways to assist small and                *Cost-effectiveness      of current ways to deliver program services
mrnonty-owned businesses and recommend cost-savings

                                                   Page 5                                                                              GAO/LAP-9’7~9
Issue                      Planned major job starts
Housing and community      OReview HUD’s management reforms and their effectiveness in addressing long-standing deficiencies
development agency         *Assess FHA’s mission and how well its operations provide affordable housing
management                 *Assess HUD, SBA, and FEMA’s progress in implementing the Government Performance and Results
                           *Analyze HUD’s fiscal year 1999 budget request.
                           *Evaluate HUD’s contracting policies and practices and contract admmistration *
Mortgage financing         *Evaluate the efficiency of HUD’s property management and disposition activities
                           *Assess whether FHA’s home rehabilitation loan program IS financially self-sufficient
                           *Assess housing price variations and their impact on the current 2-percent reserve that the
                           single-family insurance program requires
                           *Assess FHA’s controls over the use made by borrowers of Title I home improvement loan proceeds *
                           aAnalyze credit gaps for financing affordable multifamily housing and the extent that FHA programs
                           could be targeted to address these gaps
                           *Assess FHA’s procedures for certifying and monitonng mortgage lenders and for sanctioning
                           problem lenders
Low-income   housing       *Assess the adequacy of HUD’s 20-year-old performance funding system that provides $2 8 billion in
                           operating subsidies to public housing *
                           *Evaluate HUD’s $2 5 billion Competitive Grant Program to modernize and rehabilitate public housing
                           *Assess whether HUD and RHS are performing adequate oversight to ensure that replacement
                           reserves are sufficiently funded to meet the long-term capital needs of Section 202 and Section 515
                           *Assess the Implications of various poky alternatives to reducing Section 8 budgetary authority and
                           *Evaluate the cost implications of HUD’s Section 8 program and whether the program can be
                           improved *
                           *Assess HUD’s efforts to deliver housing assistance to the elderly with low and very low income *
                           aAssess the results of HUD’s multifamily housing portfolio reengineenng program
                           l Evaluate HUD’s efforts to administer  and coordinate programs to help assisted housing tenants
                           achieve economic indeoendence and self-sufflciencv
                           *Assess the potential ripact of welfare reform on public housing authorities and therr tenants *
Community    development   *Examine community development-related     programs at 28 federal agencies to identify performance
                           measures and potential opportunities for consolidation
                           *Assess whether the effects of the many governmentwide community development programs can be
                           usefully measured
                           *Monitor Implementation of and expansion plans for the empowerment zone program
Small and minority-owned   *Identify major factors contributing to the costs (credit subsidies) of SBA’s largest loan guaranty
business develooment       Droarams
                                         *On-going assignment

                                         Page 6                                                                          GAMAP-97-9
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