oversight

Budget Issues: Effects of the Fiscal Year 1990 Sequester at HUD

Published by the Government Accountability Office on 1990-08-10.

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

     I
         I
                     United   States   General   Accounting   Office
                     Fact Sheet for the Chairman,
GAO                  Committee on Budget, House of
                     Representatives


August   1990
                     BUDGETISSUES
                     Effects of the F’iscal
                     Year 1990 Sequester at
                     HUD




                                                     RELEASED
                     RESTRICTJZD --Not     to be lleleased outside the
                     General Accounting OEeice unless apecifhUy
                     approved by the Office of Congressional
                     Relations.

                                   .,_- --
 GAO/RCED-94%217FS
      C’nited States

GAO   General Accounting Office
      Washington, d.C. 20548

      Resources, Community,   and
      Economic Development    Division
      B-240580
      August     10,   1990
      The Honorable  Leon E. Panetta
      Chairman,  Committee on Budget
      House of Representatives
       Dear Mr.     Chairman:
       Your January 2, 1990, letter            requested    that we study the
       effects    of the fiscal       year 1990 sequester       under the Balanced
       Budget and Emergency Deficit            Control   Act of 1985, as
       amended.      You specifically        asked that we examine the extent
       to which the sequester          has (1) reduced the program resources
       of selected      agencies    and (2) affected      their   abilities   to
       perform their      program missions.         This fact sheet, which
       provides    that information        for the Department       of Housing and
       Urban Development         (HUD), is one in a series        of case studies
       responding     to your request.
       The Balanced Budget and Emergency Deficit                    Control      Act of
       1985, as amended, establishes             deficit     targets     to lead to a
       balanced     unified     budget by 1993.         The act requires          automatic
       reductions       in budgetary     resources       (a sequester)        if the
       annual targets         cannot be reached through the legislative
       process.       In fiscal     year 1990, the targeted           deficit       level of
       $100 billion       was not met.       Consequently,        in December 1989,
       the President        issued a sequester        order to reduce fiscal             year
       1990 outlays       by $5.7 billion.         HUD's sequesterable            budget
       authority      for fiscal     year 1990 totaled         $14.9 billion          in
       appropriations         and $1.2 billion      in loan and other spending
       authority.
       In summary, the fiscal             year 1990 sequester        reduced HUD's
       budgetary       resources      by a total      of $175.3 million.       HUD
       officials       stated that,       in general,       the sequester's    impact
       varied     by program activity,           but they found it difficult          to
       isolate      the sequester's         impact from the impact of other
       budget reductions          that affected         HUD. In the view of HUD's
       Director,       Office    of Budget, the agency's          Salaries   and
       Expenses account --which             lost 259 staff-years--and        the
       Assisted       Housing account --which           lost 1,141 housing units--
       were the two areas affected               most by the sequester.         However,
       even with the sequester              and other budget reductions,         HUD's
       total     authorized      staff-years       and planned subsidized       housing
       units     actually     increased       in fiscal     year 1990 from fiscal
       year 1989 levels.
B-240580


fiscal    year 1990.       overall,   the sequester,  the funding
reduction     due to the war on drugs, and higher than
anticipated     staff-year      costs reduced HUD's staff-years     for
fiscal    year 1990 to 12,997.          However, this figure  was still
24 staff-years       more than the agency had in fiscal       year 1989.
In Housing-- the other area HUD's Budget Director                   felt  was
significantly       affected--the     $101.6 million       sequester     reduced
the number of subsidized          rental    housing units      planned for
fiscal     year 1990 by 1,141.        This was the only program area
where HUD could specifically             quantify   the sequester's
impact.       However, even with the sequester,            the funding
reduction      due to the war on drugs, and other budgetary
reductions,      the number of subsidized          rental    housing units
HUD plans to fund in fiscal           year 1990 is about 8,000 more
units    than were actually       funded in fiscal        year 1989.
For other program areas, HUD officials                were able to provide
only general    statements        regarding     the sequester's       impact.
For example, the $38.4 million              reduction    in HUD's Community
Development    Block Grant program is expected to limit                  the
amount of each grant.          However, HUD could not quantify               the
effects   of the sequester          on grant recipients       because they
have wide discretion         in determining        the actual    use of their
funds.   According     to HUD officials,           the sequester     had little
or no impact on other program activities.                  HUD officials
also stated that with the exception                of renewals    for
expiring   subsidized      rental     housing contracts,       the sequester
affected   only activities         planned for fiscal       year 1990 and,
to date, has not reduced ongoing program activities.


As agreed with your office,            we studied   the effects     of the
fiscal     year 1990 sequester       at five agencies.        You specified
the Department         of Health and Human Services         and the Internal
Revenue Service,          and, with the concurrence        of your office,
we selected       the Department     of Education,      the Environmental
Protection      Agency, and HUD. We believe           that these agencies
provide      a cross section      of large and small agencies        and a
broad range of programs that affect              the public.      HUD was
specifically        selected   because of its grant and loan
programs.
To determine   the extent to which the sequester         reduced HUD's
resources,   we reviewed HUD's appropriation       act for fiscal
year 1990 and the act's   conference   report:     the Office    of
Management and Budget's    (OMB) sequester     guidance;     and OMB's
3
                              CONTENTS
                                                                             Pase
LETTER                                                                         1
SECTION
       1   BACKGROUNDINFORMATION ON BUDGET SEQUESTER
             ANDHUD                                                            8
               The Budget Sequester  Process                                   8
               HUD's Program Funding for Fiscal Year
               1990                                                            9
           IMPLEMENTATION OF SEQUESTER AT HUD                                 13
               Sequester of HUD's Budget Accounts                             13
               Sequester Amounts Vary by Account                              19
           THE SEQUESTER'S IMPACT ON HUD'S STAFF-YEARS
             AND PROGRAMOPERATIONS                                            20
               Impact of Sequester    on HUD's Staff-Years                    21
               Impact of Sequester    on HUD's Program
                 Operations                                                   26
               Impact of Sequester    on Activities      Under
                 HUD's Direct    Loan and Other Accounts                      30
               Comparison of HUD's Obligational
                 Authority   for Three Fiscal      Years                      31
APPENDIX
       I   Sequestrat    ion Under Continuing            Reso lution          33
  II       Major   Contributors       to This     Fact    Sheet               35
TABLE
  1.1      HUD Budget Accounts Subject      to the Sequester
           and Their Appropriations     or Other Budget
           Authority   for Fiscal   Year 1990, Before
           Section   517 Reduction   and the Sequester                        10
  2.1      HUD Budget    Accounts Subject   to Section                 517
           Reduction,    the Sequester,   and Other
           Adjustments     in Fiscal  Year 1990                               14
  3.1      Effects    of Section   517 Reduction,   the
           Sequester,    and Other Adjustments     on
           HUD's Staff-Years     for Fiscal    Year 1990                      22
  3.2      HUD's Total Obligational             Authority     for      12
           Sequestered   Appropriation           Accounts,
           Fiscal   Years 1988, 1989,           and 1990                      32

                                  5
        Because certain       rules apply to sequestration       under Continuing
resolution       and because most appropriation         acts affecting   federal
agencies      had not been enacted by the October 15, 1989,
sequestration       deadline,     the sequester   percentage    actually   taken
varied     greatly   from 1.4 percent.        Such was the case at HUD, whose
appropriation       act was passed in November 1989.          These rules are
discussed      in greater     detail  in appendix    I.
HUD'S PROGRAMFUNDING FOR FISCAL YEAR 1990
         HUD is the federal         agency principally        responsible         for programs
concerned with meeting the nation's                housing needs, developing                 and
preserving        communities     throughout    the country,        and providing          equal
housing opportunities            for all individuals.           In carrying         out these
responsibilities,           HUD administers     a variety       of programs,         including
the following:         Federal Housing Administration              (FHA) mortgage
insurance       programs to help individuals             become home owners and to
facilitate        the construction       and rehabilitation         of rental        housing
units;     rental     assistance     programs to help low-income               individuals
and families         who cannot otherwise       afford      to obtain      decent housing;
programs to fund efforts             to combat discrimination            in housing and to
further      fair    housing practices;      programs to aid in developing                   and
preserving        communities      and neighborhoods        as viable      living      and
working      areas for low- and moderate-income               individuals;          and
programs to research            and study ways to improve the efficiency,
effectiveness,         and equity      of HUD programs.
      Funding for these programs is provided              through various      budget
accounts,   including     appropriation     accounts,     direct-     and guaranteed-
loan accounts,      and other revenue accounts.           Our review of HUD's
budget accounts      in the fiscal      year 1991 budget identified         24
separate   HUD accounts that contained          budgetary      resources   subject    to
the sequester.        (See table    1.1.)




                                              9
17. Nonprofit Sponsor Assistance Fund
       Directloanlirnitation                                                 s1,ooo
18. Government National Mortgage As%ciation--
    Guarantees of Mortgage-Backed Securities
       Guaranteedl0anlimitati0n                                         [83,000,000 b
       Other authority                                                         5,616 J
19. Rehabilitation      Loan Fund
       Dire&loans                                                             85,212
       Other authority                                                        43,103f
2O.Fcental HousingAssistanceF'urd                                             60,000
21. Interstate Iand Sales                                                        600
22. Manufactur& H0ms Inspection ard                                            7,320
    Monitoring Program
23. Housing for the Elderly and Handicapped
       Direct loan limitation                                                480,106
24. Federal Housing Administration Fund
       Direct loan limitation                                                  88,600
       Guaranteedlcanlhitation                                           [75,000,000 b
       Other authority                                                        403.8624
Total--Accmnts    with loan and other spending
authority                                                                Q,&U&U
aIncludes $50 million    in additional   appropriations   frrrm Fublic Law 101-164.
himitations     on the principal amounts of guaranteed 10arLSaIEIXJtindludedillthe
totals.     Thoughsequesterablemsourms,      they-~=T----represent
only contirgent liabilities     of the United States.
% additional     amount of $397,298,000 was to be derived by transfer       fzm the m
Fur-id.
dAn additional   amount of $6,584,000 was t0 be derived by trarrSfer      fraa the FHA
Fund.
%eGov ernmfmt National Mortgage Associaticm~s Emagmmt and Liquidating
Functions FUnd, a sepamtebudgetaccxxmt,   cxmtributed $100,000 0fthi.s~.
Tbetwoacccun tsareconsolidatedinthistable       foramvenienw.
fAccordingtotheChief,    ComunityL&velqmrk,      -,=dDqualW-=W
Branch, Office of FUdget, thebdLanceofatherbx'@&authority              intheamuXkas
of May 1990 totaled $47,688,000.
gFor transfer    to the Salaries and Expmses aczunt am3tb Office of lhqstor
General account. The FHAFundalsoxeceiveda                $350,093,OOO~iatiaIt0
liquidatehsses      fmmprevimsyears.     93liSamxprtiStiindludediIlthetotdlS.




                                                   11
                                     SECTION 2
                        IMPLEMENTATION OF SEOUESTER AT HUD
         The 1.4-percent      sequester   ordered by the President        in December
1989 reduced HUD's budget authority              for fiscal   year 1990 by $175.3
million.      It was achieved by reducing           12 HUD appropriation     accounts
by $173.1 million         and 6 other HUD accounts        for loan and other
spending authority         by $2.2 million.        Because HUD's fiscal     year 1990
appropriation       act was not enacted by October 15, 1989, the
sequestration       deadline,     and because of the method used to
calculate     the sequester       under such conditions,      HUD's final    budget
authority     for fiscal      year 1990 was reduced by only 1.18 percent.
SEOUESTER OF HUD'S BUDGET ACCOUNTS
        Twenty-four       of HUD's budget accounts were sequesterable                   in
fiscal     year 1990.        HUD's initial       spending authority         for fiscal      year
1990 totaled         $14.9 billion     in appropriations           and $1.2 billion       in
loan and other spending authority.                   Section     517 of HUD's
appropriation         act for fiscal       year 1990 reduced HUD's $14.9 billion
appropriation         by $230.1 million        and its $1.2 billion           loan and
other spending authority             by $15.1 million         to fund the government's
war on drugs.           The sequester      resulted     in an additional         $175.3
million      reduction.       Nearly 99 percent        of the sequester--$173.1
million--involved          reductions      in HUD's appropriation           for fiscal      year
1990.      The remaining        1 percent--$2.2       million--represented
reductions       in HUD% loan and other spending authority.                       In total,
18 accounts        lost funds-- 12 accounts with appropriations                   and 6
accounts with loan and other spending authority.                          (See table 2.1.)




                                              13
kccunts         with       loan     and other              spendlnq         authority

17.    Nonprofit           Sponsor         Assistance             Fund
         Dlrw.3   loan I imltatlon                                                      Sl.000                                     $17                      $14          1.29                            0                   11,069
18.    Governmsnt    National    !4Otigage
       AssocIatlo”-G”arantws              of
       Mol-tgage-aecked        securltles
         Guaranteed        loan I imltatio”                                 ~83,OOO,ooO1                              11.286.5001                              0                0                        o       tal,n3,5oor
          Other a”thorityh                                                         5.616                                               0                     78          1.39                            0                    5.538
19.    RehabIIItatio”               Loan       Fund
         0lrect       loans                                                             85,212                                         0              1,193              I .40                           0                   84,019
          Other authority                                                               43,103                                         0                    178          0.41                             0                  42,925
20.    Rental     Harsing   Assistance                      Fund                        m,o@J                                          0                    100          1.17                             0                  59,300
21.    Interstate       Land Sakh                                                          600                                         0                      0          1.33                             0                      592
22.    Manufactured      Hale I”spectI0”                                                 7.320                                          0                    I2          0.16                             0                   7,3cB
       and Monitoring       Programi
23.    Housing     for the Elderly      and
       Handicapped
         Olrect    loan I imitation                                                 4ao.106                                    7,442                           0                 0                        0               472,664
24.    Federal    Hcuslng  AdmInistratIon
       Fund
         Cther           authority                                                  403,862                                    6,260                           0                 0             -5,556                     592,050
         Direct            loan Ilmltatlon                                           00,600                                    1,373                           0                 0                        0                07,227
           Guaranteed             loan      I lmltatlon                      I75,OOO,wO1                              ~1.162.5001                    --        0                 0                0               t73.837.5001

Total--Accounts               w Ith        loan      and other                 51,175,5l9                                    115,092k                $22                 _0.19                S-u                  II .152,692
spendlng         authority

*ata         represents           sequester           anwnt         relative            to         initial            budget        authority         minus            Section         517 reduction               and transfers.

konslsts           of     rosclsslons              plus      $14 milllon            transfer                   to     SalarIes           and Expanses              account.

Clncludes          a IS0 milllo”                  addltlonal            appropriation                    for        ensrgency            anti-drug          fundlng         from        Public         Law 101-164.

dLlnltatlons              on the         prlnclpal           anuunts        of     guaranteed                       loans,     though        sequesterable                 resources,             are     not       included           in the      totals
for budget              authority          because           a loan guarantee     represents     only a contingent  I iabl I I+V of the                                                               United   States.    %&Ion                      517
raductlons,              asscclatad           with         loan guarantee     authority,     have also been deleted     fran the totals                                                                to avoid distortion.

%JO        has trsdltlonally                  treated           transfers          to        Its       Salwies               and Expenses            and Offlca             of        Inspector          General          accounts          as
offsettIng         WI lectlons.                    Althargh   these              accounts’  ful I sequester     had been taken against   the portlon of the accounts
dfflmd          fm   apprcpriations,                     FHA carried              out a simulated    sequester,    reducing  the “et anxwnts  sent by 1.4 percent.                                                                                 The
 FHA transfers,              related          Section           517 reduction,                     and slmulatsd                   sequester         Arab lned            are        shown    under       FHA, other                authority.

 flncludes         S98,COO          in sequester                associated          with            combined             offsetting             coIIsctlons.

 9CanbIned   OffsettIng                    colledlons              of    S5,616,000     from the GW       acccunt,    S600,OCO from                                                   the    Interstate             Land Sales            acccunt,
 and $881,000     from             the      Manufactured                Home InspectIon      and Mcnltorlng     Program account.


 hThaSO amXnts               and related               sequesters            are        Included               in the         transfer          to   the     Salarles                and Expenses              account.

 ‘This    account  sent 1881,000  to the                                Salaries             and Expanses                    account.           Thls ankwnt consisted                         of 1669,000   plus a related
 sequester     Of s12,OeO.   An addltional                                  198.000           sequester                 was aderad              In this  account,   but                      apparently   was not taken.

 JThese        funds       were     sent      to     the       SalarIes          and Expenses                       accwnt         and the       Offlce           of     Inspector           General           account.             (SW     note     d.)
 The 15,552,OOO    represents   the simulated    sequester    carried    cut                                                          by FM.           It      is not           included          In the        total         for     sequestered
 authority   because    it was not ordered    by the President’s      report.

 kA” additional     Section   517 reduction                                of $2,451,232.000                            was associated               with         the     guaranteed              loan        I imitation,            bringing       the
 total  for section     517 reductions      to                            $2,696.435,000.



                                                                                                                              15
--   The Salaries     and Expenses account funds salaries       and costs
     associated    with administering     HUD program areas,    including
     Housing,   Community Planning      and Development,   Fair Housing
     and Equal Opportunity,       Departmental   Management, Field Legal
     Services,    and Field Direction     and Operational   Support.
--   The Office       of Inspector       General account funds salaries     and
     costs associated        with agency-wide      audits and investigative
     functions      to identify       and correct  management and
     administrative        deficiencies.
--   The Annual Contributions          for      Assisted   Housing account
     provides    rental    subsidies     to     housing projects      and
     individuals     for the purpose          of providing    elderly,
     handicapped,       and low-income        individuals    with decent and
     sanitary    housing.
--   The Congregate         Services    Program account provides          grants to
     public     housing agencies        and others to provide        meals and
     housekeeping        and other     services   to eligible     elderly      and
     handicapped       individuals      to prevent   their    placement      in
     institutions.
--   The Moderate Rehabilitation--        Single Room Occupancy account
     provides    rental     subsidies  to owners of multi-unit        housing
     structures     to defray the cost of moderately        rehabilitating
     single-room      units   for occupancy by homeless individuals.
--   The Assistance    for the Renewal of Expiring         Section    8
     Subsidy Contracts     account provides    funds to renew expiring
     Section   8 vouchers   and certificates     providing     rental
     subsidies   to low-income    individuals.
--   The Payments for Operation       of Low-Income Housing Projects
     account provides    operating    subsidies    to public   and Indian
     housing authorities     to assist    in operating     and maintaining
     public  and Indian   housing projects,      including    activities   to
     control  drugs.
--   The Community Development      Grants account provides       grants to
     cities    and urban counties   on an entitlement      basis and to
     states    for distribution   to small communities      on a non-
     entitlement    basis to fund local      community development
     programs that promote economic development           and provide
     decent housing and a suitable       living   environment.
--   The Emergency Shelter          Grants account provides          grants    to
     states,      cities,   and urban counties         for renovating,
     rehabilitating,        or converting      buildings     for use as
     emergency shelters         for the homeless,         and for activities
     associated        with operating    shelters      and preventing
     homelessness.
                                       17
SEOUESTER AMOUNTS VARY BY ACCOUNT
       As discussed           in greater      detail      in appendix      I, the Balanced
Budget Act's         provisions       for calculating          a sequester        when an
agency's       appropriation        act has not been enacted can result                       in a
sequester        amount being reduced or eliminated                   completely         depending
on the actual         appropriation          or other authority           an account receives
after    the sequester          becomes effective.             Because of these provisions
and because HUD's appropriation                   act for fiscal          year 1990 was not
enacted until         November 1989--         the    sequester      became     effective        in
October 1989       --HUD's      overall      appropriation        sequester       rate    was     1.18
percent      rather     than 1.4 percent.             The   sequester      rates      for   the     12
accounts       funded through         appropriations         were less than 1.4 percent
because,       even after       the Section       517 reduction         due to the war on
drugs,     the actual         appropriations         for these accounts were greater
than the baseline             on which the sequesters             were calculated.
Overall,       the rates of reduction              for the 12 sequestered               accounts
varied     from a low of 0.05 percent                  for the account that funds
renewals       of expiring        Section     8 housing subsidy contracts                 to a high
of 1.36 percent           for (1) the account that funds salaries,                        training,
rents,     and other personal             costs and non-personal             costs and (2) the
account that provides              operating      subsidies        for low-income         housing
projects.         As mentioned        earlier      in this section,          three accounts
appropriated         funds for fiscal           year 1990 were not sequestered                    at all
because their          entire     sequester      amounts were achieved              through       the
appropriations          process.        Another account was not sequestered
because no baseline             was available          from which to calculate              the
sequester.         The fact that these accounts were not sequestered                                also
contributed        to HUD's lower overall                sequester     rate of 1.18 percent.




                                                  19
       After    the sequester    and the funding      reduction      for the
government's       war on drugs, HUD's total       obligational        authority      for
the 12 sequestered       appropriation     accounts was 5.1 percent              less    in
fiscal    year 1990 than in fiscal        year 1989.       However, this reduction
occurred     primarily   because of a $3.7 billion          decline     in unobligated
balances     in HUD's Annual Contributions         for Assisted       Housing account
for fiscal      year 1990.    Thus, in total,      HUD's obligational            authority
for fiscal      year 1990 actually     increased     for seven accounts and
decreased      for only two accounts.        (The remaining       three accounts
were new in fiscal       year 1990.)


        HUD's Salaries       and Expenses account--which           funds salaries,
training,     rents,     and other personal        and non-personal      services     for
all HUD program and administrative               offices    except the Office       of
Inspector     General      (OIG) --lost    259 staff-years      because of the
sequester.       This account also lost 443 staff-years                because of the
reduction     in funds due to the war on drugs and higher                  than
anticipated      staff-year       costs in fiscal      year 1990.      OIG, funded
through     a separate      account,    lost a total      of 35 staff-years       as a
result    of the sequester,          the reduction     due to the war on drugs, and
the federal      pay raise      in fiscal    year 1990.
Impact of Salaries     and Expenses
Account on Staff-Years
        The sequester       reduced HUD's Salaries            and Expenses account by a
total    of $4.654 million--        $4.556 million         from directly      appropriated
budget authority         and $0.98 million        from funds received          from GNMA
and other sources.           Another $5.461 million            was taken from the funds
received     from FHA, making the total             reduction     in the Salaries        and
Expenses account $10.115 million.                 HUD distributed         this reduction
by taking      $7.1 million      from personal        services     (salaries     and related
expenses)      and the remaining        $3 million       from non-personal        services
 (e.g.,   travel,    training,      contracts,      and supplies).
        In its fiscal         year 1990 appropriation,          HUD initially      received
a total     of 13,620 staff-years           for all its activities,           excluding
those under OIG.             The $7.1 million       sequester    of personal      services
reduced this        figure     by a total     of 259 staff-years        in 12 program
areas.      The account lost an additional               203 staff-years       because of
the funding       reduction       due to the war on drugs and another              240
staff-years       because of higher         staff-year      costs for fiscal       year 1990
than HUD had assumed in its budget.                    (See table 3.1.)        A $14
million     transfer       from the Annual Contributions            for Assisted      Housing
account restored           98 staff-years      in the Housing area.




                                            21
        As shown in table 3.1, other factors                   also affected      the number
of staff-years        allocated       to program activities.             HUD--as encouraged
in the conference           report    accompanying       its appropriation        act for
fiscal    year 1990--allocated             98 staff-years        to its. Housing area,
leaving      the other program areas to absorb their                    own reductions      in
staff-years       plus the Housing area's             portion      of the fiscal     year
1990 pay raise.           HUD also reprogrammed            $3.2 million       for 80 Staff-
years,     from the non-personal            services     portion     of the Salaries      and
Expenses account to the personal                  services     portion     of three program
areas--Community          Planning      and Development,         Administration      and Staff
Services,       and Field Administration.               Overall,     the 12,998 total
staff-years       authorized       for fiscal      year 1990 after         the sequester,
the reduction        due to the war on drugs, and other adjustments
represented       an increase       of 24 staff-years          over HUD's comparable
12,974 actual        staff-years        for fiscal      year 1989.
       According      to the Director,       HUD Office   of Budget, the staff-
year reductions         from the sequester      had a significant     impact on
HUD's Salaries        and Expenses account because the account           was
already     underbudgeted      for the staff     on board, it had to absorb the
fiscal    year 1990 federal        pay raise,    and the account funds the
agency's     rent,    a fixed cost over which HUD has little           control.     As
a result,      according     to this official,      HUD has had to continue     its
hiring    freeze and severely        curtail    equipment    and other purchases.
        As discussions   with specific        HUD program officials                 for   the   12
program areas showed, the reduction             in staff-years        had       a
significant      impact on some program activities,             but only         a minimal
impact or no impact on others.           The following        summarizes           the views
of program officials      on their    ability     to fulfill       their        programs'
missions    as a result   of the staff-year         reductions.
       Housing:      The staff--predominantly             located     in HUD regional     and
field   offices--     supports    HUD's single-       and multi-family         housing
programs.       The Chief,     Personnel      Branch, Housing Office           of Financial
Management, had difficultly            isolating       the specific       impact on
Housing activities          of the 125 staff-years            lost as a result      of the
sequester.        According    to this official,          regional      management will
assign staff       to the priority       activities       to ensure that they are
fully   staffed.       However, less pressing            activities,      such as
reviewing     public    housing authority          budgets,       may get less attention.
        Public     and Indian Housing:        The staff,        among Public         and Indian
Housing program activities,            provides       technical     assistance,         monitors
the use of program funds, and oversees maintenance                        activities.          The
Director,       Budget Division,     Public      and Indian      Housing,      could not be
specific       about the impact of the sequester's               staff-year        reductions.
However, he said that the overall                loss of 52 staff-years              (from
1,402 to 1,350 staff-years)            as a result        of the sequester,
reductions       due to the war on drugs, and the transfer                   of functional
responsibilities--        when divided     among HUD's 10 regions--would                   have
the same impact as normal staff              attrition.         That is, slightly           less
                                              23
total    reduction       of 16 staff-years)   had a negligible     effect       on
Departmental       Management activities      because (1) several       Special
assistant      positions     were already   vacant and that helped to offset
the staff-year         loss and (2) the expected workload       increase        from the
Fair Housing Act Amendments of 1988 has not yet materialized,
thereby     reducing      the staff-years   needed for administrative           law
judges.
       Office      of General Counsel:         The staff     has overall
responsibility         for providing     legal advice,       opinions,     and services
to all HUD programs.           According     to the Assistant        General Counsel
for General Law and the Director,               Administrative       Services   Staff,
Office    of General Counsel,         the net reduction         of 10 staff-years
 (from 248 to 238) caused by the sequester                  and other reductions        most
severely      affected     the Office    of Equal Opportunity          and
Administrative         Law by contributing       to the increase        in the backlog
of housing discrimination            cases being handled by this office.
         Field Lesal Services:          The staff,        which includes        HUD's
regional      counsels     and other regional          and field     attorneys,      handles
all litigations          and legal matters         in HUD's regional         and field
offices.       The Assistant       General Counsel,         Field and Management
Operations,       could not isolate         the specific       impact of the staff-
years lost as a result           of the sequester.            However, according          to
this official,         the Field Legal Services            area was already
understaffed,        and the total      reduction        of 22 staff-years        (from 299
to 277) as a result          of the sequester          and other reductions          will
worsen this situation           when the increased          workload      from the Fair
Housing Act Amendments of 1988 begins to materialize.                            She said
that the staff-year          reductions       will   force Field Legal Services'
staff     to concentrate       on high-priority         work, such as litigations,
and complete       as time permits        lower-priority         work, such as
affirmative       action    cases.
       Administration        and Staff      Services,    and Field Administration:
The staff      in these two areas perform all of HUD's administrative
functions--accounting,            personnel,     procurement,      and budget.
According      to the Director,        Administrative        Expenses Division,      Office
of Budget, there was a great deal of concern that the 153 staff-
years lost as a result            of the sequester,        the reduction       due to the
war on drugs, higher than planned staff-year                    costs in fiscal      year
1990, and the transfer            of staff-years       (but exclusive      of other
adjustments)       would severely        disrupt    the timeliness      and quality     of
HUD's accounting        activities.         Consequently,      63 of the 80 staff-
years gained from the reprogramming                 of funds within      the Salaries
and Expenses account were allocated                 to accounting     activities     in
these two areas --38 to Field Administration                   and 25 to
Administration        and Staff      Services.
       Field Direction     and Overational          Suvvort:   The staff   manages
and directs    regional    and field   office        programs and provides
technical    support    in economic market          analysis  and labor relations.
                                             25
Community Planning       and Development,     Policy    Development   and
Research,   Fair Housing and Equal Opportunity,            and Policy
Development    and Research.      The following      summarizes the views                       of
program officials      regarding   the sequester's       impact on these
programs'   operations     planned for fiscal       year 1990.
Housinq
         Four of the sequestered  accounts--Annual      Contributions     for
Assisted     Housing,  Congregate Services     Program, Assistance    for
Expiring     Section  8 Subsidy Contracts,     and Payments for Operation                            of
Low-Income Housing Projects--provide         funds for Housing program
activities.
       HUD's Annual Contributions          for Assisted    Housing account
received     an $8.1 billion     appropriation,      which included     funding    for
91,117 new and replacement          housing units     for elderly,     handicapped,
and low-income      individuals.       Funding the war on drugs reduced the
appropriation     by $125.8 million:         the sequester     reduced the
appropriation     by another     $101.6 million.        According    to HUD's Office
of Budget, the sequester         affected      1,141 housing units     as follows:
      --   104 fewer    units    will   be constructed               for      public    and Indian
           housing;
      --   107 fewer units will         be constructed               for      elderly    and
           handicapped  housing:
      --   344 fewer rental        subsidy     vouchers       will          be issued     to low-
           income tenants:
      --   466 fewer    rental      subsidy    certificates                will   be issued    for
           low-income     families:
      --   75 fewer units will    be assisted    in HUD- or FHA-insured
           housing projects   experiencing    financial  difficulties:
      --   40 fewer units will     be provided   rental assistance     in
           properties  foreclosed     by HUD that are sold to private
           individuals   and repaired    for use as low-income     housing;
           and
      --   5 fewer rental       housing units will      be converted from HUD's
           terminated     Section    23 assistance    program to its current
           Section    8 rental    assistance    program.
         According   to an official      in HUD's Office      of Budget and another
official      from the Housing's    Budget Division,        the reductions   in
fiscal     year 1990 will   not have an immediate          impact because the
funds are only reserved         or set-aside     in fiscal     year 1990.
Nevertheless,      the sequester    will    have an impact in the future,       when
these funds will       not be available      for 1,141 housing units       and
                                              27
janitorial     services,   building  maintenance,              and possibly        funding    for
utilities     provided   by the housing projects.
Communitv     Plannins      and Develovment
       Three of the sequestered       accounts --Community      Development
Grants,    Emergency Shelter   Grants,     and the Transitional       and
Supportive    Housing Demonstration       Program--provide      funds for
community development      and activities      for the homeless.
         Funding the war on drugs reduced the nearly                         $3 billion
appropriation          for Community Development                 Grants by $46.5 million.
The sequester         cut an additional             $38.4 million.          According     to the
Director,        Budget Division,            Community Planning          and Development,
while the sequester             reduced the overall              amount of funds that can be
awarded through            Community Development              Block Grants in fiscal          year
1990, other factors             also affected           the size of these grants.             These
factors      included       increases        in the number of cities             and counties
eligible       for block grants            in fiscal       year 1990 and changes in an
eligible       city's      or county's         overall     ranking     in relation      to other
eligible       recipients.         While the sequester              represented      a 1.30-
percent     reduction         in funds for Community Development                   Block Grants,
he said that individual                recipient        awards may decline         10 percent
from last year because of these other factors.                              According     to the
Director,        Program Budget Development                  Division,     and other officials
from HUD's Office             of Budget, grant recipients                have wide discretion
in determining           the actual        use of their         funds for community and
economic development              activities,          which further       adds to the
difficulty         in quantifying          the effects        of the sequester.
        Funding the war on drugs reduced the $75 million               appropriation
for Emergency Shelter          Grants by $1.2 million.       The sequester       cut an
additional      $674,000 from the appropriation.           According    to the
Director,     Budget Division,         Community Planning   and Development,        HUD
anticipates       no reductions      in the number of emergency shelter
grants     awarded due to the sequester          and other reductions,      but each
applicant     will   receive    slightly    less funding.
        Funding the war on drugs reduced the $130 million
appropriation        for the Transitional         and Supportive      Housing
Demonstration        Program by $2.0 million:           the sequester      reduced it an
additional       $1.2 million.       According      to the Director,       Operation
Section,     Office     of Special     Needs Assessment,         the sequester     was not
applied     against     the program's       Permanent Housing component--which
provides     long-term      housing    for the disabled        homeless--because      of a
statutory      requirement      that this component be funded at a minimum of
$15 million       each year.       The Transitional        Housing component--which
funds innovative          housing approaches        to move homeless people into
independent       housing--bore      the entire       sequester;    consequently,
according      to this official,         fewer grants were made in fiscal            year
1990.

                                               29
will    have virtually      no effect   on assistance     to financially       troubled
FHA housing projects         because HUD expects to collect           over $60
million     in excess rents.       Moreover,    according    to this official,        the
account to which these rents are eventually               transferred     before they
are used to assist        the troubled    projects     has a very large balance--
$100 million--      because the funds are not being used to the degree
that HUD had anticipated.
      Also according       to this official,     the $14,000 sequester      of the
Nonprofit   Sponsor Assistance         Fund has not affected    HUD's ability     to
make loans for planning         housing projects    for elderly   and
handicapped   individuals.        No groups have been unable to get these
loans because of insufficient           funds, he said.
COMPARISON OF HUD'S OBLIGATIONAL
AUTHORITY FOR THREE FISCAL YEARS
        HUD's total       obligational        authority      for the 12 sequestered
appropriation         accounts declined          overall     by about $2.5 billion
between fiscal         years 1989 and 1990.              However, the sequester         and the
funding      reduction       due to the war on drugs represented               only a small
portion      of the overall        5.1-percent        reduction    in the accounts'       total
obligational         authority      for fiscal      year 1990.       The principal      cause
for the decline          was a reduction         in the obligational        authority     of
HUD's Annual Contributions                for Assisted       Housing account,       caused by
a decrease in unobligated               balances.        Overall,    HUD's total
obligational         authority      increased      for 7 of the 12 accounts           and
decreased        for only 2 of the accounts between fiscal                  years 1989 and
1990.      (See table        3.2.)     The three remaining         accounts were new
accounts       in fiscal       year 1990.




                                             31
APPENDIX I                                                                        APPENDIX I

                  SEOUESTRATION UNDER CONTINUING RESOLUTION
       Certain     rules apply when appropriations                 have not been enacted
by October 15, the sequestration                  deadline.       The law requires       that
an assumed appropriation              level,    called    the baseline,        be used for
making the sequester           computation.          That level,      in most cases, is
the total      appropriation        of the previous         year adjusted       upward for
pay raises      and price      inflation      estimates,        as specified      in the act.
If the final       appropriation         enacted is less than the baseline,                the
decrease is counted toward,               or "credited        to," the sequestration
requirement.         Depending upon the degree of the decrease,                     the
sequestered      amount and percentage              may be reduced or totally
eliminated.        If the final         appropriation       is larger      than the assumed
level,    the increase       is protected         from sequestration.           In this case,
the sequestered         amount does not change, but the effective                     sequester
percentage      goes down.
        In fiscal       year 1990, most federal          agencies had not received
their     appropriations        and were operating        under continuing       resolution
on October 15, 1989.             Consequently,       they were subject        to the
crediting      rules described         above when their       appropriations       were
enacted.       The three examples shown in table               I.1 illustrate       how
increases      in actual      appropriations        are protected     from sequestration
and decreases         are credited      to the sequestration        requirement.         The
examples use the 1.4-percent               sequester     rate ordered for nondefense
programs in fiscal           year 1990 and a $100,000 assumed appropriation.
Example A shows the effect              on the sequester       amount and rate when
the actual       appropriation       is greater      than the assumed level.
Example B shows the effect              when the actual       appropriation      is less
than the assumed appropriation               level but greater        than the assumed
appropriation         level minus the sequester            amount.    Example C shows
the effect       when the actual        appropriation       is less than the assumed
appropriation         level minus the sequester            amount.




                                             33
APPENDIX II                                                APPENDIX II

                   MAJOR CONTRIBUTORS TO THIS FACT SHEET
RESOURCES, COMMUNITY, AND ECONOMIC DEVELOPMENT DIVISION,
WASHINGTON. D.C.
James R. Yeager, Assistant        Director
Stanley  P. Ritchick,    Evaluator-in-Charge
Donald J. Sangirardi,      Evaluator
Sharon E. Butler,     Reports Analyst
ACCOUNTING AND FINANCIAL         MANAGEMENTDIVISION,
WASHINGTON, D.C.
Edith A. Pyles, Assistant      Director
Barbara A. Bovbjerg,   Project      Manager
OFFICE OF GENERAL COUNSEL, WASHINGTON, D.C.
Margie     T. Armen,   Senior   Attorney




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                                           35
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APPENDIX I                                                                         APPENDIX I

Table 1.1:        Illustration      of Calculation         of Sesuester        Amounts     Under
Continuins       Resolution
                                              Calculation       of seauester        amount
Cateaorv                                  Examvle      A      Examvle      B       Examvle         C
Assumed appropriation                       $100,000           $100,000             $100,000
   (baseline)
Sequester      amount                            1,400             1,400                   1,400
   (projected)
Post-sequester                                98,600              98,600                  98,600
  base


Actual     appropriation                     110,000              99,000                  98,000
Actual     sequester       amount                1,400                  400                        0
Sequester      rate                                  1.3                0.4                        0
  (actual)
Net appropriation                           $108,600             $98,600                 $98,000




                                            34
Table            3.2:                 HUD's               Total           Obliqational                          Authority                       for         12       Sequestered                  Appropriation                          Accounts,
Fiscal             Years                   1988,            1989.              and         1990

Dollars                  in         Thousands

                                                                                                            Total              obliqational                          authority                                         Percent                 chanqe


Account                                                                                               FY      1988                            FY         1989                    FY     1990                          1988-89                  1989-90


Annual             Contributions                                   for                     544,130,501                              142,568,197                        $39,884,657                                       -3.5                      -6.3
Assisted                  Housinga

Congregate                          Services                  Program                                       7,422                                   8,796                             6,435                              18.5                     -26.8


Moderate                  Rehabilitation--                                                                               0                                      0                 [73,1851b                                          0                        0
Single             Room               Occupancy

Assistance                           for       the          Renewal                  of                                                                                                                                              0                        0
Expiring                  Section                     8     Subsidy
Contracts

Payments                      for          Operation                     of                      1.515.000                                1,705,508                         1,815,239                                     12.6                          6.4
Low-Income                           Housing                Projects

Community                       Development                          Grants                      3,109,155                                3,173,920                         3,206,939                                          2.1                      1.0


Emergency                       Shelter                   Grants                                           58,002                                46,802                            73,698                              -19.3                          57.5


Transitional                                and       Supportive                                       144,366                                 117,898                            129,997                              -18.3                          10.3
Housing                 Demonstration                                Program

Research                      and          Technology                                                      18,918                                18,162                            21,153                                -4.0                         16.5


Fair            Housing                     Activities                                                       7,036                                 IO.941                             18.674                              55.5                        70.7


Salaries                      and           Expenses                                                   671,300                                 727,056                            769,765=                                     8.3                      5.9


Office             of               Inspector                  General                       _                            0                                      0                130,6951c                                    -     0                  -     0


Total                                                                                       549.653,!85                             $48.372.325                         545.900.557<                                           2A
                                                                                                                                                                                                                               -                      -5.1

Note:             Figures                      in      brackets                  are          not          included                      in    totals.


'Figures                      do       not           include                  amounts                for       debt                forgiveness.

bThe            Moderate                      Rehabilitation                              --Single                  Room            Occupancy                    account              and      the    Assistance                         for      the
Renewal                  of          Expiring                  Section                8 Subsidy      Contracts                                     account      were     separated      from      the                                      Annual
Contributions                               for            Assisted                  Housing    account        in                              fiscal      year     1990.       We have     included                                          these
two    accounts'                              funding       for                  fiscal     year                      1990    in the                       Annual           Con     t ributions                 for         Assisted
Housing       account                            to   enable                     comparison                         with   previous                         years'           au     t hority.

 CThe           Office                 of           Inspector                  General                 account                     was        separated                 from          t he     Salaries               and          Expenses
 account                  in         fiscal                year           1990.               We       have              included                  the      account's                   funding           for         fiscal               year             1990
 in       the       Salaries                         and          Expenses                  account                 to        enable               comparison                    wi t h previous                  years'                 authority.




                                                                                                                              32
Fair     Housins   and Equal     Ovvortunitv
       Funding the war on drugs reduced the $12.8 million
appropriation       for the Fair Housing Activities           account by $198,000;
the sequester       reduced it an additional        $145,000.      According    to the
Acting    Director,      Management Systems and Services          Division,    Fair
Housing and Equal Opportunity,            the reduction     will   have little
impact on the grants to states            and others    for addressing
discrimination        in housing    for two reasons.       First,    the sequester
amount is small--l.15         percent.      Second, the program area's funding
is multi-year,        and in fiscal     year 1990 approximately         $6.2 million
in unobligated        funds was carried      over from fiscal      year 1989, which
more than offset         the sequester.
Policv     Develovment     and Research
       HUD's $21 million     appropriation     for the Research and
Technology     account was reduced by $325,000 because of the war                         on
drugs and by $249,000 because of the sequester.               According     to            the
Director,    Division   of Budget, Contracts,      and Program Control,
Policy    Development   and Research,      none of the research      contracts               and
studies    HUD planned for fiscal        year 1990 would be eliminated,                   but
the scope of some contracts        might be slightly     altered,     though              not
enough to materially      affect   the work.
IMPACT OF SEOUESTER ON ACTIVITIES UNDER
HUD'S DIRECT LOAN AND OTHER ACCOUNTS
        Three of the sequestered           accounts--the       Rehabilitation     Loan
Fund, the Rental Housing Assistance                Fund, and the Nonprofit
Sponsor Assistance          Fund--provide      HUD with funds to (1) make and
service     direct     loans to rehabilitate         residential      and commercial
properties,        (2) provide    money to plan housing projects              for the
elderly     and the handicapped,          and (3) to assist       financially     troubled
FHA housing projects.
        According       to the Chief,       Community Development,           Research,     and
Equal Opportunity            Branch, Office     of Budget, the $1,371,000
sequester       of the Rehabilitation          Loan Fund had a very limited
impact on HUD's ability              to provide    and service        direct    loans to
rehabilitate         residential       and commercial     properties.          The portion     of
the sequester          applicable      to the direct    loans--$1,193,000--is            very
small in terms of the $85.2 million                  in direct      loan authority
available       to HUD, this official          said.    Furthermore,         as of May 1990,
the fund's        estimated      program resources      totaled       $132.9 million,
leaving      $47.7 million         in the fund to service         direct     loans.     As a
result,      the sequestered         amount, $178,000,       will     have virtually       no
impact on loan servicing.
      According     to a Budget Analyst in the Program Budget
Development     Division,  Office of Budget, the $700,000 sequester  of
excess housing rents in the Rental Housing Assistance      Fund account
                                               30
rental    subsidies.       With the sequester,    the reduction     due to the war
on drugs, and other adjustments            (e.g., the transfer     and
reprogramming        of funds) made to the Annual Contributions          for
Assisted    Housing account,       the account's    budget authority     totaled
about $8.75 billion         for fiscal   year 1990, compared with about $6.96
billion    for fiscal      year 1989.    HUD estimates    that with the funding
in fiscal     year 1990, it will       be able to fund 98,116 new and
replacement      housing units,      compared with 90,127 units      actually
funded in fiscal        year 1989.
       Funding the war on drugs reduced the $6 million                  appropriation
for HUD's Congregate        Services    Program by $93,000.          The sequester
cut an additional       $78,000.      According    to the Chief,       Program Branch,
Housing Budget Division,          if,  as a result      of the sequester         and the
reduction    due to the war on drugs, sufficient              funding     is not
available    to renew all the expiring          contracts,      HUD may reduce the
length    of some contract      renewals     and may not renew others at all.
It should be noted that HUD has not requested                 any funds for the
Congregate     Services   Program for fiscal         year 1991, but BUD does
plan to fund alternative          demonstration      projects    through     its
Homeownership      and Opportunity       for People Everywhere         program.
       Funding the war on drugs reduced the $1.1 billion
appropriation         for HUD's Assistance             for the Renewal of Expiring
Section     8 Subsidy Contracts            account by $16.9 million.               The
sequester      cut the appropriations             another       $561,000--a     reduction    of
about 0.05 percent.              According     to the Chief,          Program Branch,
Housing Budget Division,               HUD has not completed            work to determine
how many contracts           will    expire by October 1991 and, consequently,
is not certain          how much funding         will     be required      to renew these
contracts.         However, according          to the Director,           Program Budget
Development        Division,      and other officials             from HUD's Office       of
Budget,     it is HUD's policy           that no Section            8 subsidy contracts      will
be allowed       to expire       because individuals            that currently      have
subsidized       housing would lose their                subsidies.       As a result,     HUD
will   renew all expiring            contracts        and, if funding        in this account
is not sufficient,           will    transfer     funds to this account from other
sources.       If such actions          are taken,        these other programs will          be
affected      by the sequester.
         HUD's $1.8 billion        appropriation       for the Payments for
Operation      of Low-Income Housing Projects              account was reduced by
$27.8 million        to fund the war on drugs.             The sequester     cut the
appropriation        an additional        $24.8 million.       The effects     of both of
these reductions         were, for the most part,           offset   by a $50 million
additional       appropriation      under Public       Law 101-164 for emergency
anti-drug      funding.       According     to the Director,       Budget Division,
Public     and Indian      Housing,     the effects      of the sequester      and the
reduction      due to the war on drugs were unclear                because HUD had not
yet received       all the requests         for operating      subsidy   assistance.
Any cut in the operating             subsidies    for housing projects,         this
official      said, will      reduce services       for the tenants,       such as
                                               28
The Assistant        Deputy Under Secretary                for Field Coordination         was not
able to specifically              identify      the impact of the sequester's             staff-
year reductions          on HUD's Field Direction              and Operational       Support
activities.         However, he stated that this area iS already
understaffed        and that the total             reduction    of 39 staff-years         (from
533 to 494) from the sequester                    and other reductions        will   reduce the
number of economists              and labor relations          specialists      in the
regional       and field      offices.         He said that these reductions,             in
turn,     will   mean    that     HUD   will    not   always   have   an   economic   market
analysis       of the housing needs for a particular                    area when
considering        housing project           funding     or be able to provide         all the
assistance       that housing project              authorities      may need in terms of
wage rates and other labor relations.
Impact   of OIG Account         Seauester
on Staff-Years
       Fiscal  year 1990 marked the first         time   that OIG's salaries  and
other personal     and non-personal     expenses were funded separately
from HUD's Salaries     and Expenses account.           OIG supervises  and
coordinates    audits  and investigations       of HUD programs to promote
economy and efficiency      and prevent     fraud,     waste, and mismanagement.
       For fiscal       year 1990, the OIG account received               525 staff-
years --35 more staff-years             than requested        in the President's      budget
to the Congress.          According       to the Deputy Inspector         General,
however,      absorbing     the sequester,        the reduction      due to the war on
drugs, and the pay raise in fiscal                  year 1990 wiped out this
increase      and left    OIG with virtually           the same staffing     level     it had
in fiscal       year 1989.       He told us that OIG's Office            of Audits    bore
the brunt of the staff-year               reductions.       Because of these
reductions       and a mandate from the Congress and the HUD Secretary
that OIG emphasize certain              audits,     such as of HUD's mortgage
program,      OIG deferred       other audits       planned for fiscal      year 1990
until    fiscal     year 1991.       The Deputy Inspector          General also told us
that the staff-year           reductions      prevented     OIG from providing       all the
assistance       the Department       of Justice       requested    for work involving
HUD's housing programs.
       According     to the Deputy Inspector        General,    in addition      to
reducing    staff-years,      the sequester      and other funding     reductions
forced OIG to cancel three training             courses because travel         funds
were not available.         Furthermore,     OIG had underbudgeted         for its
automated     data processing       services  for fiscal     year 1990 by about
$300,000;     consequently,      the sequester--    although    it was only
$18,000 --exacerbated       this situation.
IMPACT OF SEOUESTER ON
HUD'S PROGRAMOPERATIONS
         The 10 remaining    sequestered           appropriation   accounts    at HUD
funded     activities   in the following            program areas:     Housing,
                                              26
time would     be spent     on providing      various    technical      and management
assistance     to Public     and Indian      Housing    Authorities.
       m:        The staff        reviews applications          for the guarantee        of
mortgage-backed         securities,       oversees the portfolio           of securities
acquired    through       defaults      by issuers,    and monitors        active    issuers
of securities,        among other activities.              The sequester        reduced
GNMA's total       staff-years         by 1, from 61 to 60 staff-years.                GNMA
experienced      no other staff-year           reductions.         According      to GNMA's
Assistant     Controller,         GNMA is understaffed;           consequently,      even the
loss of 1 staff-year             has hurt its ability         to develop a system to
monitor    private      institutions       issuing    securities.
       Communitv Plannina       and Develovment:        The staff  awards and
oversees grants provided         for community and economic development.
According    to the Director,       Budget Division,      Community Planning     and
Development,      HUD's monitoring     of the Community Development        Block
Grants is very important         to ensure that these grants are properly
spent and yet is the area most affected              by the sequester.     He said
that the Community Planning          and Development      area is already
understaffed      and that the 23 staff-years         lost as a result    of the
sequester    will   further   reduce the average time HUD spends
monitoring     the activities      of each grantee.
        Policv     Development       and Research:      The staff   performs   in-house
studies      and manages contracted          work designed     to improve the
efficiency,        effectiveness,       and equity     of HUD programs.      According
to the Director,           Division    of Budget, contracts,       and Program
Control,      Policy     Development      and Research,     the net loss of 8 staff-
years (from 145 to 137 staff-years)                 caused by the sequester        and
other staff-year           reductions     has had no noticeable      impact on Policy
Development        and Research activities.            Despite the overall     staff-
year reductions,           Policy    Development    and Research received      virtually
the same number of staff-years               in fiscal    year 1990 as it did in
fiscal      year 1989.
       Fair Housins and Eoual Opportunity:               The staff    investigates
housing discrimination          complaints.      According     to the Acting
Director,    Management System and Services             Division,    Fair Housing and
Equal Opportunity,        the 15 staff-years        lost as a result       of the
sequester     (of a total    reduction      of 55 staff-years)       would have
little    impact on this area because of the substantial                 increase  in
resources    it received      in fiscal     year 1989 to handle the increased
housing discrimination          workload    generated    by the Fair Housing Act
Amendments of 1988.
       Departmental    Manaqement:        The staff    supports       the Secretary       of
HUD in carrying      out his responsibilities          to the President           and the
Congress in areas including          intergovernmental         relations,        minority
and small business      contracting,       and administrative           judicial
appeals.     According   to the Administrative           Officer,       Office    of the
Secretary,    the 3 staff-years        lost because of the sequester                (of a
                                             24
Table      3.1:          Effects         of    Section            517 Reduction,                   the     Sequester,                and Mher                   Adjustments               on HUD’s          Staff-Years            for     Fiscal
Year      1990

                                                                                                                                                        Number       of     staff-years


                                                                                                                                                                               Pay
                                                                                      Section     517                                         Repricina                     raise           Transfer    and                         Other
Proqram         area                                            Authorized              reduction                      Sequester                 changes -a               FY 1990         reproqramninqb                   adjustmantsC                  Tota I ’


Hcus ing                                                               6,540                             -100                    -125                    -131                                                  98*                       295             6,576


Public       and        Indian       Housing                           1,402                              -21                     -28                           0                                                0                         -3            1,350


Government              Nat i ona I                                           61                                0                   -1                          0                                                0                           0                  60
Mortgage            Association

Community             Planning           and                           1,116                              -17                      -23                    -24                   -21                            16                          58             1,106
Development

PO I icy     Deve lopment                and                                 145                              -2                    -3                      -3                   -3                              0                           3                  137
Research

Fair       Housing            and Equal                                      751                          -12                      -15                    -15                   -14                              0                          -1                  696
Opportunity

Departmental                  Management                                     147                              -2                    -3                      -3                   -3                              0                          -5                  131


Office         of     General        Counsel                                 248                              -4                    -5                      -5                   -5                              0                              9               238


Field       Legal         Services                                           299                              -5                    -6                      -6                    -5                             0                              0               277


Administratlve                   and Staff                              I.182                              -18                     -23                     -24                  -21                             25                       -356                   765
Services

Field       Direction              and                                       533                              -8                   -10                     -11                  -10                                  0                           0              494
Operational               Support

 Field      Administration                                                   -913                          -14                                                                                                                                  0               -884

 Subtotal--Salaries                      and Expenses                  13,336                            -203                    -259                     -240                  -98                            178                               0       12,7li
 Working            Capital        Fundf                                     284                                   0                     0                       0                    0                              0                           0              28

 Tota Id                                                                                                                                                                                                                                                 12,99:
                                                                       13,620                            -2                      -259
                                                                                                                                   -                                            -98                            178
                                                                                                                                                                                                               =                            =0

 aStaff-year              reductions            due to            higher       staff-year                costs            than     HUD had anticipated                           in       its   budget         for       fiscal     Year         1990.

 bStaff-year              change         due to         the       reprogramsing               of     $3.2              million       from          non-personal                services          to    personal             services.


 cNet      staff-year              changes          resulting              from     the      realignsent                    of    functions               within          HUD--transfer               of     activities            concerning             the
 homeless,              international                affairs,          drug       policy,           and mortgage                    insurance              and accounting.


 dCoIumns            and rows        may not            add to         subtotals             or     totals               because         of       rounding.


 eStaff-years                 restored         to     Housing          by     a 114 million                   transfer              from          the     Annual           Contributions              for      Assisted           Housing            account.

 fStaff        salaries            funded           under        the   Working            Capital          Fund.


                                                                                                                                             22
                                      SECTION 3
                          THE SEOUESTER'S IMPACT ON HUD'S
                         STAFF-YEARS AND PROGRAMOPERATIONS
         HUD officials     found it difficult               to isolate     the sequester's
impact because the Congress reduced HUD's appropriations                             for fiscal
year 1990 by $230.1 million               --$57.0     million     more than the amount
sequestered--       to fund the war on drugs.l                 According      to HUD
officials,       with the exception            of funding      for the renewal of
expiring     subsidized       rental     housing contracts,            the sequester     to date
has affected        only activities          planned for fiscal           year 1990.     In
addition,     the sequester's           full     impact on some program activities
will     not be known until          the end of the fiscal             year, when all
funding     decisions     will    be completed.
        Although       HUD officials          could not be specific,               they
characterized          the impact of the sequester                  in general        terms.
According       to these officials,              the impacts varied           by program:          some
programs were significantly                   affected      because the loss of funds
reduced staff-years             authorized         for fiscal       year 1990 and limited
planned program operations:                   others were affected             only minimally         or
not at all.          In HUD's view, the agency's                   Salaries      and Expenses
account,      which was already              underbudgeted         and had to absorb the
federal      pay raise       for fiscal        year 1990, was one area seriously
affected:       it lost 259 staff-years,                  which resulted         in HUD
continuing        its hiring         freeze and curtailing             its spending           for
equipment,        furniture,         and other non-personal              items.       According     to
HUD officials,           other impacts from the staff-year                     reductions
included       (1) less time spent monitoring                    recipients        of HUD's
community development                grants,      (2) a greater        backlog       of housing
discrimination           cases in the Office              of General Counsel,             and (3)
cutbacks      in Field Legal Services'                  investigations         of affirmative
action     complaints.          The sequester           also directly        affected         some
program operations.                In Housing-- the other area HUD's Budget
Director      felt     was significantly             affected--the         sequester        reduced by
1,141 the number of rental                   housing units         HUD had planned to fund in
fiscal     year 1990 for elderly,                handicapped,         and low-income
individuals.           For other programs,              such as HUD's community
development         grants,     the impact of reduced funding                    could only be
described       by general         statements,        such as smaller-sized               grants to
recipients.          Still,      for other programs,             such as loans to
rehabilitate         residential         and commercial          properties,         officials
indicated       that the sequester             had little        or no impact because the
reductions        were small         or the carryover           of funds from the previous
fiscal     year was large.


lThe net reduction     due to the war on drugs was only $180.1 million.
This occurred    because Public  Law 101-164 appropriated       $50 million
in additional    funds to the Payments for Operation      of Low-Income
Housing Projects     account to carry out anti-drug    efforts.
                                                 20
--   The Transitional        and Supportive     Housing Demonstration
     Program account assists          states,   cities,      and urban areas in
     developing     (1) innovative       approaches     for providing   housing
     and support      services   to move homeless people into
     independent      housing and (2) permanent,           long-term  housing
     with support      services    for the disabled        homeless.
--   The Research and Technology      account funds contracts    and
     grants    for research  programs to improve the efficiency,
     effectiveness,     and equity  of HUD programs and to identify
     methods to achieve cost reductions.
--   The Fair Housing Activities          account provides   funds to
     states    and public     and private   agencies  to prevent   and
     eliminate    discrimination       in housing.
--   The Rehabilitation        Loan Fund account provides        funds   to
     communities      for direct     loans to individuals    for
     rehabilitating       commercial     and residential  properties.
--   The Nonprofit         Sponsor Assistance    Fund account provides
     interest-free         loans to nonprofit    groups to plan housing
     projects      for   the elderly   and the   handicapped.
--   The Rental Housing Assistance            Fund account,     a revolving
     fund into which rental        collections     that exceed the basic
     rates for units      in Section     236 subsidized      housing projects
     are deposited,     provides    funds to another        account    (the
     Flexible    Subsidy account),       which is used to assist
     financially    troubled     FHA housing projects.
--   The Government National       Mortgage Association--Guarantee           of
     Mortgage-Backed   Securities      account guarantees       securities
     issued by private   financial      institutions       and backed by
     mortgages   of FHA, the Department          of Veterans   Affairs,    and
     the Farmers Home Administration.
--   The Interstate       Land Sales account provides    funds, collected
     through     fees charged land developers,      for administering
     federal     requirements   regarding   the sale of lands in any
     subdivision       of 100 or more lots.
--   The Manufactured     Home Inspection      and Monitoring     Program
     account provides      funds, collected     through    fees charged
     manufactured   home producers,       to cover the cost of
     inspecting   manufactured     homes to ensure their        compliance
     with federal    construction,     design,    and performance
     standards.



                                     18
        As shown in table      2.1, funding       adjustments   other than the
sequester    and funding     reductions       due to the war on drugs were made
in two of the sequestered           accounts.      The Annual Contributions       for
Assisted    Housing account was reduced an additional               $564 million,
$14 million     of which was transferred           to HUD's Salaries    and Expenses
account to support       additional      staffing     in the Housing area and to
partially    offset   the federal       pay raise.       The remainder  of the
reduction    resulted    from the rescission          of budget and contract
authority.
Seouester    of Anorooriation       Accounts
       Sixteen      of HUD's appropriation         accounts were subject         to the
sequester.        Of the 16 accounts,        12 were sequestered.          Three
accounts-- Housing Counseling            Assistance,     Urban Homesteading,          and
Rental Rehabilitation           Grants --were not sequestered         because the
entire    reductions      under the sequester         were achieved through         the
appropriations        process.      The remaining      account--Supplemental
Assistance       for Facilities      to Assist     the Homeless--was       not
sequestered       because, according       to a Senior Budget Analyst            in HUD's
Office    of Budget, that account did not exist                as an appropriation
account in fiscal         year 1989 and, thus, no base existed               from which
to calculate        a sequester.       In addition     to having appropriations,
the Community Development Grants account also had guaranteed                          loan
authority      for fiscal      year 1990 that was not sequestered              because the
reduction      in authority      that would have been attained           through
sequestration        was achieved through the legislative             process.
Sequester    of Loan and Other        Soendino    Authority
       In addition      to reducing  the 12 appropriation        accounts,     the
sequester      also reduced the loan and other spending authority                 for 6
other HUD accounts.          For one of these accounts--Government
National     Mortgage Association-Guarantees         of Mortgage-Backed
Securities--      HUD's budget authority     for staffing      and other
administrative       costs was sequestered,     but the account's         authority
to guarantee       mortgage loans was not sequestered          because the
reduction      that would have been attained       through     sequestration       was
achieved     through the legislative      process.      Overall,    the sequester
reduced HUD's loan and other spending authority                by 0.19 percent.
Activities     Funded by Sequestered        Accounts
      The 18 sequestered    accounts    funded a variety   of activities         in
HUD's administrative     and management areas and in the following
program areas: Housing,     Community Planning      and Development,       Public
and Indian   Housing,  Fair Housing and Equal Opportunity,         and
Research and Technology.      Descriptions     of the 18 accounts      follow.




                                           16
,ao,e       2.1:          HUD Accounts                 Sub.ject        to     Section       517 Reduction,            the     Sequester,        and Other             Adjustments               in Fiscal           Year   1990


Dollars           in Thousands

                                                                                         Initial                                                                                                              Final
                                                                                          budget       Section              517              sequester                             Wher                     budget
Proqram                                                                               authoritY              reduct         ion           --Amount       Ratea         adjustments                      authority


Accounts           with      appropriations




I.       Housing          Counseling                 Assistance                   I         3,500             I              54      I               0           0         5              0         I          3,446
2.       Annual         Contributions                   for                           8,115,222                   125,787                101.580          1.27             -564,mb                      7,323,626
         Assisted         Housing
3.       Congregate           Services    Program                                           6,000                        93                     70        I .32                           0                   5,829
4        Assistance            for the Renewal    of                                  1,091,978                     16,925                     561        0.05                            0             I ,074,492
         Expiring           Section    8 Subsidy
         Contracts

Public           and     Indian          Housing

5.       Payments           for         Operation             of                      1 ,845,6OOc                   27,832                 24,737          1.36                           0             I ,793,031
          Low-Income              Housing            Projects


Community              Planning               and Development


6.        Community          Develqment                  Grants                       3,000,000                     46,500                 30,436          1.30                             0           2,915,064
            Guaranteed   loan                      limitation                           l144,0001                   l2,2321                          0            0                         0             cl41 ,7681d
7.        Urban Homesteading                                                               13,200                        205                         0            0                         0                12,995
8.        Errsrgency          Shelter            Grants                                    75,000                     1,162                    674        0.91                              0                 73,164
9.        Moderate          Rehabilitation--Single                                         75,000                     1,162                    653        0.88                              0                 73 185
          Room Occupancy
10.       Rental Rehabilitation                          Grants                           130,000                     2,015                          0            0                         0               127,985
Il.       Transitional                  and Supportive                                    130,000                     2,015                 1,160          0.91                             0               126.825
          Housing    Demonstration                        Program
12.       Supplemental     Assistance                        for                           11,000                           170                      0            0                         0                 10,830
          Facilities              to      Assist        the        Homeless

Policy           Development                  and Research


 13.      Research          and Technology                                                 21,000                           325                249         1.20                             0                 20,426


Fair       Housing          and Equal                Opportunity


 14.      Fair     Housing              Activities                                         12.753                           198                 145        1.15                             0                 12,410


Manaqement                and Administration

 IS.      Salaries          and Expenses
              Appropr        i at ion                                                     341,252                     5,289                 4 556          1 36                    14,000                   345,407
              Transfere                                                                 [397.2781                   [6,1581                15,559lf                                t7.09719                1392,6581
 16.      Offlce     of Inspector                     General
              Appropriation                                                                24,481                           379                 307        1.27                             0                 23,795
              Transfere                                                                     16.5841                      [1021                 E.!L-                           -            0                 16,391 I

Total--Accounts                        with     appropriations                   $14,895,986                      6230,111               $173,136          1.18            S-550,229               113,942,510
                                                                                                                   -                      -x


                                                                                                                    14
         We should point out, however, that in addition                      to the
sequesterable        budget authority          shown in table       1.1, 16 of these
accounts had unobligated              balances     brought    forward     from previous
years and/or offsetting             collections.        These funds were available
for obligation          in fiscal     year 1990, but were not sequesterable.
HUD also had 11 additional               active    budget accounts with no
sequesterable        resources.        One account contains          a permanent,
indefinite       appropriation,        while another has borrowing             authority.
Six of the accounts           operate almost exclusively             on offsetting
collections.         Of the three remaining            accounts,     two showed no
activity       in fiscal     year 1990 and one account,            the Nehemiah Housing
Opportunity       Grants,      is included       in the total     for the Annual
Contributions         for Assisted       Housing account listed           in table     1.1.
Further      resources     held by FHA and the Government National                  Mortgage
Association        (GNMA) in the form of United States securities                      are not
included       in table    1.1.     If all these additional            funds had been
considered,       the overall       rate of sequester         reduction      would have
been much less.
        Section    2 and 3 of this fact sheet discuss   the extent to which
the sequester       reduced HUD's appropriations   and other spending
authority      for fiscal   year 1990 and the impact of these reductions
on HUD's programs.




                                             12
Table 1.1: RUDBudcetAccountsSubiecttotheSeauesterard            Their
c
Appro riations or 0th                                                fore             ion 517
Reduction and the Seauester
                                                    Initial   k&get       authority
Accounts with amxopriations                            1-1
Housinq
1. Housing Counseling Assistance                                      $       3,500
2. Annual Contributions for AssistedHousing                               8,115,222
3. CongregateSemicesPraqram                                                   6,000
4. Assistance for the Renewal ofE@.rirq                                   1,091,978
   Section 8 Subsidy Contracts
PublicandIndianHcusing
5.   Payments for Operation of Lcw-Inccme                                 1,845,600a
     Housing Projects
Comunitv Plannins and Development
6.  ComunityDevelogmmtGrants                                              3,000,000
      Guaranteed loan limitation                                           [144,00O]b
7. UrbanHcmes~dirq                                                            13,200
8. Esnergency Shelter Grants                                                  75,000
9. Mcderate Rehabilitation-Single    RocanWcupatq                             75,000
10. Rental Rehabilitation   Grants                                           130,000
11. Transitional  and Supportive Housing                                     130,000
    Dmmstration     Program
12. Supplemental Assistance for Facilities to                                 11,000
    Assist the Homeless
Police Develoment and Resemch
13. Research and Technolcqy                                                   21,000
Fair Housim and Ecual Cpqxxtmity
14. Fair Housing Activities                                                   12,753
Manammnt and Administration
15. Salaries and Expemes                                                      341,252c
16. Office of Inspector General                                                24,481d
Total--Accounts   with appropriations




                                              10
                                   SECTION 1
                            BACKGROUNDINFORMATION ON
                            BUDGET SEOUESTER AND HUD
         In late 1989, the Department          of Housing and Urban Development
(HUD) and other federal         agencies were subjected            to a budget
sequester      under the Balanced Budget and Emergency Deficit                 Control
Act of 1985, as amended.           As required       by the act, across-the-board
reductions      were ordered in agencies'           budgetary     resources   for fiscal
year 1990 to reduce the overall             federal    budget deficit       by $5.7
billion.       Twenty-four    of HUD's budget accounts contained
sequesterable       budgetary   resources      in fiscal      year 1990.     HUD's
sequesterable       budget authority      for fiscal      year 1990 totaled       $14.9
billion     in appropriations      and $1.2 billion         in loan and other
spending authority.
THE BUDGET SEOUESTER PROCESS
         The Balanced Budget and Emergency Deficit                Control    Act of 1985,
as amended, establishes           deficit      targets   to lead to a balanced
budget by fiscal        year 1993.        Each year, the Office        of Management
and Budget (OMB) is required              to submit an initial       report     on August
25 and a final       report    on October 15 projecting           the fiscal     year
deficit.      If OMB projects         a deficit      in excess of the target       amount
plus $10 billion,         the President        must issue a sequester        order to
reduce budgetary        resources      sufficiently      to reach the target       deficit
level.      The dollar      amount to be sequestered          must be divided      evenly
between defense and nondefense                accounts.     Before fiscal     year 1990,
sequestration      had been implemented             only once, in fiscal      year 1986,
when defense and nondefense              budgets were reduced by 4.9 percent
and 4.3 percent,        respectively.
         The act set the deficit       target    for fiscal    year 1990 at $100
billion.        OMB's August 1989 report        estimated   a $116.2 billion
deficit,       exceeding    the target   by $16.2 billion;      OMB's October 1989
report     slightly     reduced the overall      estimate,   to $116.1 billion.
Both reports        would have required       a sequester   of 4.3 percent      in
defense accounts          and 5.3 percent     in all other accounts     subject    to
sequestration.          Sequestration    of this magnitude,      however, was never
fully     implemented      because the Congress passed the Omnibus Budget
Reconciliation         Act of 1989.
       The 1989 Reconciliation          Act, approved on December 19, 1989,
reduced the mandatory         sequester     amount to 130/365 of the original
$16.1 billion       requirement.      This change effectively      reduced the
sequester     requirement     to $5.7 billion,     or 1.5 percent     in defense
accounts    and 1.4 percent       in nondefense    programs.    OMB responded to
this legislation        with its    "Revised Final Sequester       Report,l'
published     on December 27, 1989, and backdated           to October 15, which
sequestered      the lower amount.


                                           8
     I.1   Illustration of Calculation    of Sequester
           Amounts Under Continuing    Resolution        34


FHA        Federal  Housing Administration
FY         fiscal  year
GNMA       Government National Mortgage Association
HUD        Department of Housing and Urban Development
OIG        Office of Inspector  General
           Office of Management and Budget




                              6
B-240580


reports   and the President's      sequester    orders for fiscal       year
1990.    We also reviewed HUD's portion         of the fiscal      year
1991 budget submitted      to the Congress to identify          the
specific   budget accounts affected        by the sequester.        We
discussed   the sequester's      implementation     with the Director
and other officials     of HUD's Office       of Budget and obtained
data from HUD showing how the sequester            was allocated
across each account's      program activities.
To identify         the sequester's        impact on HUD's program
operations,         we discussed       the sequester        with the Director,
Office      of Budget, and 19 other HUD budget and program
officials.          As agreed with your office,               we did not verify      or
validate        the statements       HUD officials        made regarding    the
impacts of the sequester.                 We also reviewed HUD's Operating
Plan for fiscal           year 1990 and its budget justification                 for
fiscal      year 1991 to supplement             these interviews.        To
determine         changes in HUD's funding            levels,    we compared HUD's
total      obligational       authority      for the sequestered
appropriation           accounts   in fiscal       year 1990 with their        levels
in fiscal         years 1988 and 1989.
We performed    our work from March through June 1990.    We
discussed   the contents    of this fact sheet with HUD
officials,    who generally   agreed with its content.  Their
comments have been incorporated      where appropriate.
As agreed with your office,          unless you publicly        release     the
contents     of this report    earlier,     we will   not distribute        the
report    until   30 days from the date of this letter.               At that
time, we will       send copies of this fact sheet to the
Secretary,      HUD: the Director,       OMB; the Director,
Congressional      Budget Office:       and other interested       parties.
We will    also make copies available          to others on request.
If you have any questions   about this                fact sheet, please
contact me on (202) 275-5525.      Major              contributors    to this
fact sheet are listed   in appendix II                of this report.
Sincerely     yours,




John M. Ols, Jr.
Director,   Housing and Community
   Development   Issues
4
B-240580


HUD'S IMPLEMENTATION OF THE SEOUESTER
The sequester       resulted   in    a $175.3 million    reduction   in
HUD's spending authority            for fiscal    year 1990.    It was
achieved     through    a $173.1     million   reduction   in
appropriations        and a $2.2     million   reduction   in loan and
other spending authority.
The sequester        rate varied       by budget account,        from a low of
0.05 percent       for the renewal of expiring             Section    8 housing
subsidy     contracts     to a high of 1.36 percent            for (1) agency
salaries,     training,      rents,      and other administrative         costs
and (2) operating         subsidies       for low-income     housing projects.
These variations         were due to provisions          in the Balanced
Budget Act that apply when an agency's                 appropriations       are
not enacted by the October 15 sequestration                    deadline.      HUD's
appropriation        act for fiscal         year 1990 was enacted in
November 1989.          As a result,       HUD's overall     appropriation      was
reduced by 1.18 percent             instead     of 1.4 percent,      and its loan
and other spending authority                was reduced by 0.19 percent.
IMPACT OF SEQUESTER ON
HUD'S PROGRAMMISSION
HUD officials        had difficulty        isolating     the effects      of the
sequester     from other fiscal           year 1990 budget reductions.
For example,       the Congress reduced HUD's original                $14.9
billion     appropriation       by $230.1 million          primarily    to fund
the government's         war on drugs.          This figure      was $57.0
million    more than the sequestered               amount.     In addition,     the
sequester's      full    impact on certain           HUD programs will      not be
known until      all funding        decisions      are completed.
In general,     according      to HUD officials,      the sequester's
impact varied      by program,     depending     on (1) the size of the
sequester:     (2) the existing      staffing     and/or funding      level   of
the program:      (3) the impact of other budgetary           actions,      such
as the federal       pay raise and changes in staff-year            costs;
and (4) external        factors,   such as increases      in the number of
eligible    grant recipients.
According      to the Director,       Office  of Budget, HUD's Salaries
and Expenses account --which           funds salaries,      training,
travel     and other personal        and non-personal      services--was
significantly        affected    by the sequester      because it was
already      underfunded      and also had to absorb the cost of the
federal      pay raise in fiscal       year 1990.      Specifically,     the
account lost 259 of the 13,620 staff-years                 authorized    for
2