oversight

Results Act: Observations on the Department of Housing and Urban Development's Draft Strategic Plan

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

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

      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Resources, Community, and
      Economic Development Division

      B-277585

      August 8, 1997

      The Honorable Richard K. Armey
      Majority Leader
      House of Representatives

      The Honorable John Kasich
      Chairman, Committee on the Budget
      House of Representatives

      The Honorable Dan Burton
      Chairman, Committee on Government Reform
        and Oversight
      House of Representatives

      The Honorable Bob Livingston
      Chairman, Committee on Appropriations
      House of Representatives

      Subject: Results Act: Observations on the Department of Housing and
      Urban Development’s Draft Strategic Plan

      On June 12, 1997, you asked us to review the draft strategic plans
      submitted by the Cabinet departments and selected major agencies for
      consultation with the Congress as required by the Government
      Performance and Results Act of 1993 (the Results Act). This report is our
      response to that request concerning the Department of Housing and Urban
      Development (HUD).

      HUD is at a critical juncture in its history. The Department has been the
      subject of sustained criticism for weaknesses in its management and
      oversight abilities that have made it vulnerable to fraud, waste, abuse, and
      mismanagement and have led to our designating it as a “high-risk” area. On
      June 26, 1997, HUD announced its HUD 2020 Management Reform Plan to
      address the ongoing operational, informational, and management
      concerns. HUD based much of its July 14, 1997, draft strategic plan on the
      proposals introduced in its management reform plan, which addresses
      many of our concerns and could help HUD’s attempts to resolve many of its
      problems.




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                     Specifically, you asked us to review HUD’s draft strategic plan and assess
Objectives, Scope,   (1) whether it fulfills the requirements of the Results Act and to provide
and Methodology      our views on its overall quality; (2) whether it reflects HUD’s key statutory
                     authorities; (3) whether it reflects interagency coordination for
                     crosscutting programs, activities, or functions that are similar or
                     complementary to those of other federal agencies; (4) whether it
                     addresses major management challenges that we had previously identified;
                     and (5) whether HUD has adequate data and information systems to provide
                     reliable information for measuring results.

                     We reviewed the July 14, 1997, draft strategic plan that HUD provided to
                     congressional committees. It is important to recognize that HUD’s final plan
                     is not due to the Congress and the Office of Management and Budget (OMB)
                     until September 30, 1997. Furthermore, the Results Act anticipated that
                     perfecting the process of developing a strategic plan may take several
                     planning cycles and that each agency’s strategic plan would continue to be
                     refined as future planning cycles occur. Thus, our comments reflect a
                     snapshot of HUD’s plan at this time. We recognize that this process is
                     dynamic and that HUD is continuing to revise the draft with input from OMB,
                     congressional staff, and other stakeholders.

                     Our overall assessment of HUD’s draft strategic plan was generally based
                     on our knowledge of HUD’s operations and programs, our numerous
                     reviews of the agency, and other information available at the time of our
                     assessment. Specifically, the criteria we used to determine whether HUD’s
                     draft strategic plan complied with the requirements of the Results Act
                     were the Results Act itself and OMB’s guidance on developing the plans.1 To
                     judge the overall quality of the draft plan and its components, we used our
                     May 1997 guidance for congressional review of the strategic plans
                     (GAO/GGD-10.1.16). To determine whether HUD’s draft plan contained
                     information on interagency coordination and addressed management
                     problems and whether the Department had adequate systems in place to
                     provide reliable information on performance, we relied on our general
                     knowledge of HUD’s operations and programs, the results of our previous
                     reports, the HUD Office of Inspector General’s (OIG) report on HUD’s fiscal
                     year 1996 financial statements, and HUD’s reporting under the Federal
                     Managers’ Financial Integrity Act (FMFIA) for fiscal year 1996. In
                     determining whether HUD’s draft plan reflects its major statutory
                     responsibilities, we coordinated our review with the Congressional
                     Research Service and reviewed material in HUD’s fiscal year 1998 budget

                     1
                      Circular A-11, Part 2: Preparation and Submission of Strategic Plans and Annual Performance Plans,
                     June 1997.



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             explanatory notes for an overview of the agency’s primary functions and
             activities. Because HUD’s draft strategic plan relied heavily upon its
             management reform plan, we also reviewed that plan to help ensure a
             complete assessment of HUD’s efforts. Our work was performed in July and
             August 1997. We obtained comments on a draft of this report from HUD,
             and its comments and our responses are incorporated in this report.


             Established in 1965, HUD is the principal federal agency responsible for
Background   programs dealing with housing, community development, and fair housing
             opportunities.2 Through its programs, HUD currently provides rental
             assistance to more than 4 million lower-income households, has insured
             mortgages for about 23 million homeowners, has helped revitalize over
             4,000 communities, and helps ensure that access to housing is equally
             available to all. HUD is responsible for the expenditures of significant
             amounts of tax dollars. The total budget outlays for HUD’s programs were
             just over $36 billion in fiscal year 1996, the vast majority of which was for
             assisted and public housing programs. HUD also is responsible for
             managing more than $426 billion in mortgage insurance, $497 billion in
             guarantees of mortgage-backed securities, and about $170 billion in prior
             years’ budget authority for which it has future financial commitments.

             The Results Act requires that an agency’s strategic plan contain the
             following six specific components: (1) a comprehensive mission statement
             covering its major functions and operations; (2) general goals and
             objectives, including outcome-related goals and objectives, for its major
             functions and operations; (3) a description of how its general goals and
             objectives will be achieved, including processes, skills and technology,
             and resources required; (4) a description of the relationship between the
             annual performance goals and the goals and objectives in the strategic
             plan; (5) an identification of the key external factors affecting the
             achievement of general goals and objectives; and (6) a description of how
             program evaluations were used in establishing the goals and objectives,
             with a schedule of future evaluations. OMB Circular A-11, Part 2, provides
             additional guidance and more detailed directions for preparing a strategic
             plan.

             According to HUD, its strategic planning process began in the fall of 1993,
             the same year that the Results Act was passed. Subsequently, HUD initiated
             a series of reinvention efforts to define its mission, develop the agency’s

             2
              For additional information on HUD, see The Department of Housing and Urban Development:
             Information on Its Role, Programs, and Issues (GAO/RCED-97-173R, July 21, 1997).



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                       priorities, and refine its performance measures. On June 26, 1997, HUD
                       announced a management reform plan that sought to realign HUD’s
                       programs and activities, increase accountability, and restore the public’s
                       trust.

                       HUD’s draft strategic plan is built around the following two missions that
                       reflect the concepts embodied in its management reform plan:
                       (1) “empower people and communities to improve themselves and
                       succeed in today’s time of transition” and (2) “restore the public trust by
                       achieving and demonstrating competence.” Its draft plan includes eight
                       strategic objectives that are intended to reflect HUD’s core business
                       functions:3

                   •   “empower communities to meet local needs;
                   •   “help communities and States establish a full continuum of housing and
                       services designed to assist homeless individuals and families achieve
                       permanent housing and self-sufficiency;
                   •   “increase access by families and individuals to affordable housing in
                       standard condition;
                   •   “reduce the isolation of low-income groups within a community or
                       geographical area;
                   •   “provide empowerment and self-sufficiency opportunities to support
                       low-income individuals and families as they make the transition from
                       dependency to work;
                   •   “provide economic opportunities for low- and moderate-income persons
                       through creation and retention of jobs;
                   •   “increase homeownership opportunities, especially in Central Cities,
                       through a variety of tools, such as expanding access to mortgage credit;
                       and
                   •   “promote equal housing opportunities for those protected by law.”

                       HUD’s draft strategic plan also discusses its interdependence on the
                       management reform plan and on legislative proposals, which generally
                       include consolidating or reforming many of its programs. HUD states that
                       its success depends on the success of all three components—the strategic
                       plan, the management reform plan, and the legislative proposals.


                       While the current draft strategic plan is a positive step toward developing
Results in Brief       a strategic plan, HUD needs to do additional work before its draft plan can

                       3
                        The Results Act requires that agencies establish “general goals and objectives,” which HUD calls
                       “strategic objectives.” Throughout the report, we use HUD’s terminology when discussing the
                       provisions of its draft strategic plan.



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fulfill the requirements of the Results Act. The plan is missing one of the
required components—a description of how program evaluations were
used in establishing the strategic objectives, including a schedule of future
evaluations. Also, HUD’s treatment of the other five required components is
often vague and does not yet fully comply with the Results Act or OMB’s
guidance. HUD’s two mission statements do not define the agency’s basic
purpose or focus on its core programs, and the mission statement that
focuses on restoring the public’s trust is not clearly supported by HUD’s
strategic objectives. While the strategic objectives cover the agency’s
major program activities, the statements do not clearly describe how HUD
will assess whether it is making progress toward achieving those
objectives. Also, the discussion of HUD’s strategies to achieve its objectives
and the relationship of annual performance goals to the strategic
objectives could be improved by discussing the resources needed to
achieve its objectives and the type of information needed for its
performance goals, as required by the Results Act. Furthermore, the draft
plan does not cover the time frames specified by the Results Act.

HUD’s draft strategic plan generally reflects consideration of the key
statutes authorizing the Department’s programs. The Results Act does not
require a statement of an agency’s major statutory responsibilities, but HUD
describes the major programs that it believes will enable it to fulfill its
various strategic objectives. This information helps stakeholders
understand the complexity and the diversity of HUD’s activities.

Although the draft strategic plan discusses HUD’s consultation process and
recognizes its many community partnerships, the draft plan does not yet
reflect whether HUD coordinated with other federal agencies. Furthermore,
the draft plan does not identify programs and activities that are
crosscutting or similar to those of other federal agencies. For example,
although the draft plan repeatedly refers to the importance of welfare
reform to HUD’s goals, it does not reflect coordination with the Department
of Health and Human Services, the primary federal agency responsible for
welfare reform activities.

HUD’s draft strategic plan acknowledges that significant management
challenges face the agency and broadly describes how these problems will
be addressed. However, HUD could improve the draft strategic plan by
more fully integrating the management reform plan with the strategic plan,
providing specific information about how the strategic plan addresses
financial reporting and material internal control weaknesses identified by




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                               HUD’s OIG, and addressing HUD’s efforts to integrate its financial and
                               management information systems.

                               HUD’s capacity to provide reliable information on the achievement of its
                               strategic objectives is uncertain because the draft strategic plan has not
                               yet been developed sufficiently to identify the types and sources of data
                               needed to evaluate its progress toward achieving HUD’s objectives.
                               However, the plan identifies some annual performance goals for which
                               obtaining reliable data could be difficult because of weaknesses with HUD’s
                               current financial and management information systems.


                               Although HUD’s draft strategic plan includes five of the six components
HUD’s Draft Strategic          required by the Results Act, HUD needs to do additional work before its
Plan Does Not Yet              plan can meet the act’s requirements. HUD’s draft plan does not fully
Fulfill the                    address several issues and contains no information on one component—a
                               description of how program evaluations were used to prepare the strategic
Requirements of the            plan, including a schedule of future evaluations. Additionally, the time
Results Act                    frame covered by the draft plan (fiscal years 1999 to 2003) does not meet
                               the Results Act’s requirement that a strategic plan should cover the 5 years
                               following the fiscal year in which it is submitted. Because the strategic
                               plan is required no later than September 30, 1997, it should include at least
                               fiscal year 1998. In providing comments, HUD officials said that they had
                               used various program evaluations to develop the information discussed in
                               the draft plan and agreed to incorporate this information in the next
                               version of the draft. They also agreed to change the time frame covered by
                               the plan.


Overall Quality of the Draft   Overall, HUD’s draft strategic plan does not yet meet the requirements of
Strategic Plan                 the Results Act and could be improved by more completely describing its
                               efforts to develop the strategic plan and its long-term vision. Our specific
                               observations on the five required components included in HUD’s draft
                               strategic plan as well as observations on the consultation process are
                               discussed in the following sections.


Mission Statement              HUD’s “twin missions” of empowering people and communities and
                               restoring the public’s trust do not meet the Results Act’s requirement that
                               an agency’s comprehensive mission statement cover its major program
                               functions and operations. HUD’s mission statement needs to provide a clear
                               vision of why the Department exists, what it does to meet its mission, and



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                           the strategic objectives that it feels are critical to performing that mission
                           effectively.

                           HUD’s mission statement that focuses on empowering communities and
                           people is very broad, does not identify HUD’s unique contribution toward
                           achieving its mission, and does not include the mechanisms by which it
                           can accomplish its mission. The mission statement that focuses on
                           restoring the public’s trust reflects the goals of HUD’s management reform
                           plan, rather than defining HUD’s major program functions and operations.
                           Although we recognize the importance of the management reform plan to
                           HUD, the reform initiatives in that plan should be seen as the means by
                           which the Department intends to more effectively achieve its statutory
                           mission.

                           HUD  may want to consider revising its mission statement to capture its
                           core programmatic goals, such as increasing the supply of affordable
                           housing and opportunities for homeownership, reducing homelessness,
                           fighting for fair housing, and promoting jobs and economic development in
                           communities.


Strategic Objectives       The Results Act requires that an agency’s strategic plan contain objectives
                           for its major functions and operations. HUD’s draft strategic plan provides
                           eight strategic objectives for accomplishing its mission, and they generally
                           cover the Department’s major functions and operations, as required by the
                           Results Act. However, given that HUD’s draft plan does not discuss the
                           relationship between the objectives and annual performance goals and
                           does not include the program evaluation section, it is not clear how HUD
                           will assess its progress in achieving its objectives. For example:

                       •   The first strategic objective—to empower communities to meet local
                           needs—does not clearly describe how HUD can empower communities,
                           what local needs HUD can help communities meet through its array of core
                           programs, or how the results will be measured.
                       •   The third strategic objective—to increase access by families and
                           individuals to affordable housing in standard condition—does not clearly
                           define how HUD will measure its success in expanding access to housing.
                           This objective also does not (1) realistically reflect the problems related to
                           the escalating costs of renewing Section 8 contracts, which will soon
                           account for half of HUD’s discretionary budget authority, or (2) explain the
                           impact of the planned demolition of public housing on HUD’s ability to
                           provide more housing in the near future.



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                           •   The fifth strategic objective is to provide empowerment and
                               self-sufficiency opportunities to support low-income persons making the
                               transition from dependency to work, and the sixth strategic objective is to
                               create and retain jobs for low- and moderate-income persons. Measuring
                               the results of HUD’s programs for achieving these objectives, as stated, will
                               be difficult because of the myriad federal programs and public and private
                               efforts at the state and community levels that provide similar services.

                               Furthermore, it is not clear how HUD’s strategic objectives support
                               implementing the mission that focuses on restoring the public’s trust.

                               HUD could improve its draft strategic plan by (1) phrasing the strategic
                               objectives to more readily allow for assessment of whether they are being
                               achieved and (2) clarifying how these objectives support HUD’s mission to
                               restore the public’s trust.


Strategies for Achieving       HUD’s draft strategic plan lacks an adequate description of how its strategic
the Strategic Objectives       objectives will be achieved; HUD discusses only the operational process or
                               programs it intends to use to achieve them. Furthermore, those
                               discussions omit references to some of the major issues facing HUD, such
                               as the problems related to the Federal Housing Administration’s (FHA)
                               insuring multifamily rental units where HUD pays high subsidies to
                               landlords, the financial risk is high, and the units are in poor physical
                               condition.

                               Additionally, HUD’s discussion of its strategies to achieve its strategic
                               objectives does not describe, as required by the Results Act, the resources,
                               such as staff, capital, and technologies, that are needed to achieve those
                               objectives. While the introduction to the draft plan states that it includes
                               “an analysis of the required resources” for each of the plan’s eight strategic
                               objectives, HUD does not discuss the resources required. A related footnote
                               states only that HUD is working on linking its budget and performance
                               measures.

                               HUD’s  draft strategic plan also does not include several elements specified
                               in OMB Circular A-11, Part 2. The draft plan does not include (1) schedules
                               for initiating or completing significant actions, including underlying
                               assumptions or projections; (2) projections of the funding and the staff
                               that will be available over the time frame covered by the strategic plan;
                               and (3) an outline of the processes for communicating the goals and




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                           objectives throughout the agency and for assigning accountability to
                           managers and staff for achieving the strategic plan’s objectives.

                           HUD’s  draft strategic plan could be improved if it included a full discussion
                           of the items required by the Results Act and included in OMB’s guidance.
                           HUD’s draft plan states that the Department cannot fulfill its empowerment
                           mission if it fails to protect the public’s trust, build competence and
                           excellence from within, and restore the confidence and faith of the
                           American public. Because of the significance of the management reform
                           initiatives to achieving its mission, HUD may wish to consider incorporating
                           the management reform plan as part of its strategies to achieve its
                           strategic objectives.


Relationship Between       The Results Act requires an agency’s strategic plan to describe how the
Annual Performance Goals   annual performance goals relate to the strategic objectives. While an
and HUD’s Strategic        agency’s strategic plan is not required to identify specific performance
                           goals, OMB’s guidance states that the plan should describe (1) the type, the
Objectives                 nature, and the scope of the performance goals; (2) the relationship
                           between the performance goals and the strategic objectives; and (3) the
                           relevance and use of the performance goals in helping to determine an
                           agency’s achievement of its strategic objectives.

                           HUD’s  draft strategic plan provides limited examples of annual
                           performance goals under each of its eight strategic objectives, but it does
                           not describe the relationship between them, as required by the Results
                           Act. The draft plan also does not provide the more detailed information,
                           suggested by OMB, which would allow for a complete analysis of this
                           relationship. Without such a description, evaluating whether HUD’s
                           performance goals are reasonable and will allow HUD to assess its progress
                           toward meeting its strategic objectives is difficult. For example, under the
                           third strategic objective—increasing access to housing—it is unclear how
                           demolishing units or removing and replacing nonviable stock will help HUD
                           achieve its objective, especially in an environment of decreasing resources
                           in which funds for replacement housing may not be available. It is also
                           unclear how reducing the number of troubled public housing authorities
                           will increase access to affordable housing.

                           We also noticed an inconsistency in HUD’s discussion of its annual
                           performance goals. The third strategic objective states that one of HUD’s
                           annual performance goals is to improve the average scores in HUD’s Public
                           Housing Management Assessment Program. However, the discussion



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                       under this same objective indicates HUD intends to replace that program
                       with a better assessment method. In providing comments on this report,
                       HUD officials said that they were committed to the Public Housing
                       Management Assessment Program and the plan should have indicated that
                       HUD is looking at ways to improve that program.


                       To meet the requirements of the Results Act, HUD needs to ensure that its
                       strategic plan discusses the linkage between the annual performance goals
                       and the strategic objectives and that those goals logically support the
                       strategic objectives.


Key External Factors   HUD’s  draft strategic plan only partially meets the requirement of the
                       Results Act and the guidance provided by OMB to describe key factors that
                       are external to an agency and beyond its control that could significantly
                       affect the achievement of its objectives. OMB Circular A-11 states that a
                       strategic plan should describe each key external factor, indicate its link
                       with a particular strategic objective, and describe how the achievement of
                       the objective could be affected by the factor. HUD briefly discusses the
                       external factors in its draft strategic plan without linking them to specific
                       strategic objectives. Additionally, while the draft plan discusses a few
                       external factors—such as HUD’s limited control over numerical goals and
                       outputs of local, community-based plans; and conditions in the financial
                       markets, where high interest rates can affect the feasibility of
                       homeownership—other important external factors are not discussed. For
                       example, the draft plan does not discuss the role that tax policy plays in
                       influencing housing markets and HUD’s own programs and that,
                       consequently, might have an impact on the achievement of strategic
                       objective seven—increase homeownership opportunities, especially in
                       cities. Also, there is no discussion of how cities’ fiscal problems, which
                       lead to lower-quality schools and other services, could adversely affect
                       HUD’s efforts to achieve this strategic objective.


                       Furthermore, although both HUD’s draft strategic plan and the management
                       reform plan refer to proposed legislative changes, the draft plan does not
                       discuss the impact on the strategic plan or on HUD’s programs if the
                       proposals are not enacted.


Other Observations     The draft strategic plan describes HUD’s strategic planning process as being
                       based on the development of the Secretary’s priorities, from which the
                       Department develops its program management plans that include annual



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                         performance goals. The draft plan also states that this process has resulted
                         in greater management accountability. We note that HUD did not solicit and
                         consider its stakeholders’ views and suggestions during the development
                         of its draft strategic plan. HUD’s draft plan indicates that HUD is just now in
                         the process of sharing its completed draft plan with the various
                         organizations and agencies that may be interested. Additionally, the draft
                         plan indicates limited meetings with the Congress in which process issues
                         were discussed, rather than mission and goals.

                         HUD’s final strategic plan needs to take full advantage of the consultation
                         process that provides the opportunity for HUD and the Congress to evaluate
                         the continuing appropriateness of HUD’s mission, goals, and strategies. This
                         is particularly important given that (1) HUD is pursuing a major
                         management realignment while it is developing its strategic plan, (2) the
                         Congress is considering legislative proposals that would overhaul HUD’s
                         programs and activities, and (3) some of HUD’s eight strategic objectives
                         may overlap those of other agencies. In providing comments on this
                         report, HUD officials said that the revised plan would include a more
                         in-depth discussion of their consultation process.


                         HUD’s draft strategic plan generally reflects the key statutes authorizing
HUD’s Draft Strategic    HUD’s programs. The Results Act does not require a statement of the major
Plan Generally           statutory responsibilities, but within each section HUD describes the major
Reflects Key Statutory   programs it believes will help it fulfill its various strategic objectives. This
                         information will help stakeholders understand the complexity and
Authorities              diversity of HUD’s activities.

                         Various HUD housing programs are described in the discussion under
                         strategic objective three. HUD describes programs that it will use to expand
                         rental and homeownership opportunities, including Housing Opportunities
                         for People Everywhere (HOPE) VI, the HOME Investment Partnerships,
                         Community Development Block Grants, FHA multifamily insurance,
                         Sections 202 and 811 (which provide housing for the elderly and disabled),
                         and Housing Opportunities for Persons With AIDS.

                         Similarly, HUD’s community development programs are discussed under
                         strategic objectives five and six. HUD describes the following programs:
                         Empowerment Zones and Enterprise Communities; Economic
                         Development and Supportive Services grants, including Bridges to Work
                         and the Neighborhood Networks; Tenant Opportunity Program; Public
                         Housing Drug Elimination; Community Development Block Grants;



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                            Youthbuild; Section 108 Loan Guarantee Program; and Economic
                            Development Initiatives grants. HUD also mentions Section 3 of the
                            Housing and Urban Development Act of 1968, as amended by the Housing
                            Act of 1992, which requires that economic opportunities generated by
                            financial assistance from HUD shall, to the greatest extent feasible, be given
                            to low- and very low-income persons.


                            Although the draft strategic plan discusses HUD’s consultation process and
HUD’s Strategic Plan        recognizes HUD’s community partnerships, the draft plan does not clearly
Does Not Yet Indicate       indicate whether HUD coordinated with other federal agencies in
Significant                 developing its plan. Specifically, the draft plan does not identify
                            crosscutting programs or those that may duplicate programs administered
Interagency                 by other federal agencies. Most significantly, although both the draft
Coordination                strategic plan and the management reform plan make specific references
                            to the importance of HUD’s participation in welfare reform and plans to
                            implement the Personal Responsibility and Work Opportunity
                            Reconciliation Act of 1996, the draft strategic plan provides no evidence
                            that HUD has coordinated with the Department of Health and Human
                            Services.

                            The draft strategic plan lists HUD’s extensive partnerships with various
                            community organizations and working groups and it specifically mentions
                            HUD’s relationship with other federal agencies in three areas: (1) HUD’s
                            coordination with the Department of Transportation on a welfare-to-work
                            transportation proposal that is tied to a HUD demonstration program
                            operating in five cities, (2) HUD’s partnerships with the Environmental
                            Protection Agency and the Department of the Treasury on the
                            redevelopment of urban toxic sites, and (3) HUD’s responsibility for
                            monitoring government-sponsored enterprises’ compliance with
                            fair-lending laws and establishing goals for the enterprises’ purchase of
                            mortgages in urban, rural, and underserved areas. However, the strategic
                            plan does not clearly indicate whether coordination has occurred in other
                            areas. For example:

                        •   The second strategic objective seeks to help communities and states
                            establish a full continuum of housing and services to assist the homeless,
                            which would include such services as immediate shelter and transitional
                            housing with appropriate supportive services, such as job training and
                            placement, child care, and health services. To ensure the most effective
                            use of resources, these efforts should be coordinated with the
                            Departments of Labor and Health and Human Services.



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                        •   The fifth and sixth strategic objectives, which seek to empower families
                            and individuals via economic development opportunities and to support
                            the welfare reform initiatives, do not indicate coordination with the
                            Departments of Labor or Health and Human Services.
                        •   The eighth strategic objective seeks to promote equal housing opportunity
                            under the law and specifically states that HUD proposes to double the
                            number of housing discrimination cases sent to the Department of Justice
                            for prosecution over the next 4 years. The draft strategic plan does not
                            indicate coordination with the Department of Justice on this objective,
                            although it would seem to directly affect Justice’s workload.

                            In providing comments on this report, HUD officials indicated that they
                            have coordinated with some federal agencies, including the Department of
                            Health and Human Services, and that the coordination will be included in
                            the final strategic plan.


                            In recent years, we and others have reported on the major management
Draft Strategic Plan        problems that HUD faces in carrying out its mission. HUD’s draft strategic
Addresses Some              plan acknowledges some of the management problems it faces and
Management                  broadly describes how these problems will be addressed. However, HUD
                            could improve the draft plan by more fully integrating its management
Challenges, but More        reform plan into its draft strategic plan; by providing specific information
Information Is Needed       about how the strategic plan addresses financial reporting and material
                            internal control weaknesses identified by HUD’s OIG; and by addressing
                            HUD’s efforts to integrate its information and financial management
                            systems, including how these efforts and strategies support the
                            achievement and the measurement of HUD’s strategic objectives.

                            In 1994, we designated HUD as a high-risk area because of four
                            long-standing, agencywide deficiencies: weak internal controls, inadequate
                            information and financial management systems, an ineffective
                            organizational structure, and an insufficient mix of staff with the proper
                            skills. In February 1997, we reported that HUD had formulated approaches
                            and initiated actions to address these deficiencies. However, we also
                            reported that HUD’s efforts were far from reaching fruition; that HUD’s
                            programs continued to pose a high risk to the government in terms of their
                            vulnerability to waste, fraud, abuse, and mismanagement; and that HUD and
                            the Congress would need to work together to successfully eliminate these
                            deficiencies.4


                            4
                             High-Risk Series: Department of Housing and Urban Development (GAO/HR-97-12, Feb. 1997).



                            Page 13                                        GAO/RCED-97-224R HUD’s Draft Strategic Plan
B-277585




HUD’s  draft strategic plan acknowledges the significant management
challenges the Department faces and indicates that they will largely be
addressed through its management reform plan and the mission statement
that focuses on restoring the public’s trust. The draft strategic plan
summarizes the management reform plan and links each strategic
objective to the management reform plan by including in the discussion of
each objective a listing of applicable sections of the management reform
plan. However, OMB’s circular states that agencies should provide details in
their strategic plans when the achievement of goals is predicated on a
significant change in resources, in technological levels or capacities, or in
the mode or functioning of the processes. HUD’s proposed management
reforms are calling for changes similar to those discussed in OMB’s circular.
Specifically, the management reform plan includes reducing the number of
programs and/or activities from over 300 to about 70; reducing staffing
levels from about 10,600 as of the beginning of fiscal year 1997, to 7,500 by
the end of fiscal year 2000; retraining the majority of staff; reorganizing the
81 field offices; modernizing and integrating the financial and management
information systems; developing and strengthening internal controls; and
increasing program monitoring and measurement. To be consistent with
OMB’s guidance, HUD should more fully integrate the management reform
plan into the strategic plan by (1) describing the relationship of the
specific changes planned to each strategic objective; (2) indicating the
impact that the change, or lack thereof, would have on reaching each
strategic objective; (3) providing timetables for implementing the changes;
(4) estimating the resources needed to bring about the changes; and
(5) describing the legislation required to implement the changes.

In April 1997, HUD’s OIG issued a qualified opinion on the Department’s
fiscal year 1996 consolidated financial statements.5 One qualification
related to HUD’s inability to accurately estimate excess subsidies being
paid under its rental assistance programs and to comply with generally
accepted federal accounting standards for reporting loans and loan
guarantees.6 The report also identified seven material internal control
weaknesses, including HUD’s failure to have a control structure in place to
help ensure that $19 billion in rental subsidies are based upon tenants’
correct income; HUD’s failure to adequately monitor multifamily projects;
FHA’s lack of sufficient staff and administrative resources needed to
mitigate multifamily housing losses and properly manage troubled assets;
and HUD’s lack of an adequate system to determine staff needs. HUD’s draft

5
U.S. Department of Housing and Urban Development Audit of Fiscal Year 1996 Financial Statements,
Office of Audit, HUD, Office of Inspector General (97-FO-177-003, Apr. 10, 1997).
6
 These standards essentially mirror the Federal Credit Reform Act of 1990.



Page 14                                           GAO/RCED-97-224R HUD’s Draft Strategic Plan
                              B-277585




                              strategic plan does not clearly address these financial reporting and
                              material internal control weaknesses.

                              Finally, HUD—like many federal agencies—faces a major challenge in
                              managing information resources to ensure that information technology
                              tools and resources are aligned to support the accomplishment of its
                              mission. Neither the draft strategic plan nor the management reform plan
                              address (1) HUD’s current efforts, ongoing since 1991, to integrate its
                              management information systems; (2) HUD’s current strategies for
                              managing information technology; or (3) how these efforts and strategies
                              support the achievement and measurement of HUD’s strategic objectives.
                              HUD’s information technology strategy should contain information on how
                              the agency plans to comply with the Clinger-Cohen Act of 1996. This act
                              calls for agencies to implement a framework of modern technology
                              management based on practices followed by leading private-sector and
                              public-sector organizations that have successfully used technology to
                              dramatically improve their performance and meet their strategic goals.


                              To measure progress in achieving its strategic objectives, HUD needs
HUD’s Capacity to             reliable data. HUD’s draft strategic plan has not yet been developed
Provide Reliable              sufficiently to identify the types and the sources of the data needed to
Information on the            evaluate HUD’s progress in achieving its strategic objectives. However, the
                              draft plan identifies some annual performance goals for which obtaining
Achievement of Its            reliable and accurate data could be difficult because of weaknesses in
Strategic Objectives Is       HUD’s current financial and management information systems. For
                              example:
Uncertain
                          •   The April 1997 report by HUD’s OIG on the Department’s consolidated
                              financial statements for fiscal year 1996 cited as material internal control
                              weaknesses both HUD’s efforts to improve its systems and FHA’s accounting
                              and financial management systems. The report stated that while HUD has
                              been improving its financial management systems, delays have occurred in
                              improving some these systems and some of FHA’s systems either do not
                              provide needed management information or do not provide reliable
                              information. Also, in our 1996 telephone survey, a third or more of the HUD
                              field directors interviewed rated the following areas of information
                              systems as fair to poor: the accuracy of the data, the ease of generating




                              Page 15                              GAO/RCED-97-224R HUD’s Draft Strategic Plan
                      B-277585




                      reports, and the usefulness of the information systems that support
                      monitoring and other program management activities.7
                  •   HUD’s self-assessment reporting under the Federal Managers’ Financial
                      Integrity Act continues to state that most of its systems do not comply
                      with FMFIA. In its fiscal year 1996 accountability report, which included the
                      assessment of compliance with FMFIA, HUD stated that 85 of its systems did
                      not comply with FMFIA.8 According to HUD’s information as of
                      November 1996, HUD had a total of 98 systems and subsystems classified as
                      either financial or mixed (providing both financial and program
                      information).9

                      Once HUD develops its final annual performance goals, it will need to
                      determine whether system modifications or new systems are needed to
                      capture and provide the essential management and measurement
                      information. Such information is needed to measure compliance with the
                      Results Act and to comply with the Chief Financial Officers Act of 1990,
                      which requires the development of cost information to enable the
                      systematic measurement of performance and the integration of program,
                      accounting, and budget systems.


                      We provided HUD with a draft of this report for review and comment. We
Agency Comments       met with HUD’s Deputy Chief Financial Officer for Finance; the Director,
                      Office of Internal Control and Audit Resolution; and other HUD officials,
                      who said that HUD generally agreed with our observations and will
                      consider the changes we suggested as it moves forward in completing the
                      strategic plan. They emphasized that the strategic planning process is an
                      iterative one and that they expect that the strategic plan will continue to
                      improve.

                      HUD  officials expressed two principal concerns with our draft report. First,
                      they disagreed with our assessment of the mission statements and stated
                      that these statements are consistent with the management reform plan and
                      reflect HUD’s direction. We continue to believe that the mission statement
                      in HUD’s strategic plan should reflect HUD’s major program functions and

                      7
                        HUD: Field Directors’ Views on Recent Management Initiatives (GAO/RCED-97-34, Feb. 12, 1997). We
                      surveyed 155 persons serving as Directors of Single-Family Housing, Directors of Multifamily Housing,
                      Directors of Community Planning and Development, and Directors of Public Housing in the 40 largest
                      HUD field offices in terms of staff.
                      8
                       U.S. Department of Housing and Urban Development Accountability Report Fiscal Year 1996
                      (Washington, D.C.: Mar. 1997).
                      9
                       The actual number of systems in HUD’s inventory may vary, depending on how the systems and
                      subsystems are counted.



                      Page 16                                          GAO/RCED-97-224R HUD’s Draft Strategic Plan
           B-277585




           operations, as required by the Results Act, rather than restate the goals of
           HUD’s management reform plan. Second, HUD disagreed with our
           assessment that its capacity to provide reliable assessment data is
           uncertain. HUD officials stated that the Department has had problems with
           its data integrity but is addressing them. They added that their March 1997
           accountability report noted that significant improvements have been made
           in some systems. While we agree that the report noted some
           improvements, it also stated that most of the agency’s systems do not
           comply with FMFIA. Nonetheless, we clarified the discussion of HUD’s
           actions in connection with assessment data in our report. HUD officials also
           provided some technical comments that have been incorporated into the
           report as appropriate.


           As arranged with your offices, unless you publicly announce its contents
           earlier, we plan no further distribution of this letter for 30 days. At that
           time, we will send copies of this report to the Ranking Minority Members
           of your Committees; the Chairmen and Ranking Minority Members of
           other Committees that have jurisdiction over HUD’s activities; the Secretary
           of Housing and Urban Development; and the Director, Office of
           Management and Budget. Copies will be made available to others on
           request.

           Major contributors to this product are Nancy Boardman, J. Davis, Larry
           Goldsmith, John McGrail, and Nancy Simmons. Please call me at
           (202) 512-7631 if you or your staffs have any questions concerning this
           report.




           Stanley J. Czerwinski
           Associate Director, Housing and Community
             Development Issues




(385689)   Page 17                              GAO/RCED-97-224R HUD’s Draft Strategic Plan
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