oversight

Observations on the Department of Housing and Urban Development's Fiscal Year 2000 Performance Plan

Published by the Government Accountability Office on 1999-07-20.

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

United States General Accounting Office                                                           Resources, Community, and
Washington, D.C. 20548                                                                        Economic Development Division




                 B-282537

                 July 20, 1999

                 The Honorable Dick Armey
                 Majority Leader
                 House of Representatives

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

                 The Honorable Fred Thompson
                 Chairman, Committee on Governmental Affairs
                 United States Senate

                 Subject: Observations on the Department of Housing and Urban Development’s Fiscal Year
                 2000 Performance Plan

                 As you requested, we have reviewed and evaluated the fiscal year 2000 performance plans for
                 the 24 Chief Financial Officers (CFO) Act agencies that were submitted to Congress as
                 required by the Government Performance and Results Act of 1993 (Results Act). Enclosure I
                 to this letter provides our observations on the fiscal year 2000 performance plan for the
                 Department of Housing and Urban Development (HUD). Enclosure II lists management
                 challenges we and HUD’s Inspector General identified that face the agency and the applicable
                 goals and measures in the fiscal year 2000 annual performance plan.

                 Our objectives were to (1) assess the usefulness of HUD’s plan for decisionmaking and (2)
                 identify the degree of improvement that HUD’s fiscal year 2000 performance plan represents
                 over the fiscal year 1999 plan. Our observations were generally based on the requirements of
                 the Results Act, guidance to agencies from the Office of Management and Budget (OMB) for
                 developing the plan (OMB Circular A-11, Part 2), our previous reports and knowledge of
                 HUD’s operations and programs, and our observations on HUD’s fiscal year 1999
                 performance plan. Our summary report on the CFO Act agencies’ fiscal year 2000 plans
                 contains a complete discussion of our objectives, scope, and methodology.1


                 1
                  Managing for Results: Opportunities for Continued Improvements in Agencies’ Performance Plans (GAO/GGD/AIMD-99-215,
                 July 20, 1999).




                 Page 1                                                 GAO/RCED-99-208R HUD’s Fiscal Year 2000 Performance Plan
B-282537


As agreed, unless you announce the contents of this letter earlier, we plan no further
distribution until 30 days from the date of the letter. If you have any questions regarding this
report, please contact Nancy Simmons or me at (202) 512-7631. Key contributors to this
assignment were J Davis and Toné Radford.




Judy A. England-Joseph
Director, Housing and Community
  Development Issues

Enclosures - 2




Page 2                                       GAO/RCED-99-208R HUD’s Fiscal Year 2000 Performance Plan
Enclosure I

Observations on the Department of
Housing and Urban Development's
Performance Plan for Fiscal Year
2000
HUD’s fiscal year 2000 provides a general picture of intended performance across the
Department and a general discussion of the strategies and resources to achieve its strategic
      1
goals. Specifically, the plan appears to cover all of HUD’s program activities, links the
program activities to strategic goals and objectives, identifies outcome and output indicators
that generally are results oriented and measurable, discusses strategies for achieving the
objectives, and cites specific data sources related to each indicator. However, the plan
provides only limited confidence that the performance data will be credible. For example,
many of the indicators rely on data from external sources that HUD does not plan to verify,
and other indicators rely on systems that are new and that HUD says may need further testing
or may require that the indicators be recalibrated once the data are known. Figure 1
highlights the plan’s major strengths and key weaknesses.

Figure 1: Major Strengths and Key Weaknesses of Fiscal Year 2000 Performance Plan


Major Strengths
• Contains results-oriented goals and quantifiable measures
• Discusses strategies for achieving intended performance
• Identifies crosscutting activities
• Identifies specific data sources, as well as limitations or advantages of the data
• Discusses planned validation/verification of performance measures

Key Weaknesses
• Does not show how budgetary resources are allocated to achieving performance goals
• Provides limited confidence that the performance data will be credible
• Does not link its human resources to its strategic goals and objectives
• Does not describe planned coordination strategies

HUD’s fiscal year 2000 annual performance plan is an improvement over the previous plan
and is well on its way to addressing the weaknesses we identified in our assessment of HUD’s
                                          2
fiscal year 1999 annual performance plan. In reviewing the fiscal year 1999 plan, we
observed that the plan did not



1
 HUD’s fiscal year 2000 annual performance plan revised the terminology used in the Department’s previous plan in order to
conform to guidance from the Office of Management and Budget. Specifically, strategic goals and objectives in the fiscal year
2000 plan were called strategic objectives and performance goals, respectively, in the fiscal year 1999 plan. We use the current
terminology throughout this document.
2
 Results Act: Observations on the Department of Housing and Urban Development’s Fiscal Year 1999 Annual Performance Plan
(GAO/RCED-98-159R, June 5, 1998).




Page 3                                                      GAO/RCED-99-208R HUD’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of Housing and Urban Development's Performance Plan for Fiscal Year 2000




• cover all the program activities in HUD’s budget and that the consolidations and
aggregations of program activities were not clearly explained,
• fully discuss how HUD would coordinate with other agencies having related goals or define
its contributions to the crosscutting activities,
• fully discuss the strategies that HUD intended to pursue to achieve its performance goals,
• provide a complete discussion of the resources needed to achieve the performance goals,
and
• relate HUD’s information systems to specific indicators, discuss all of the systems from
which performance data would be extracted, or discuss the data’s limitations and their
possible effects on the performance indicators.

In contrast, the fiscal year 2000 annual performance plan

• includes tables listing the budget accounts and/or program activities that support each
objective and an appendix that summarizes the links for all of the strategic goals and
objectives;
• discusses HUD’s coordination with other agencies on the objectives, where applicable;
• discusses specific strategies for each objective;
• includes a resource allocation table that shows which strategic goals are supported by the
discretionary funding and staff resources in HUD’s budget accounts; and
• includes a data source, a statement of the data’s limitations or advantages, and a discussion
of the validation and verification efforts for each performance indicator.

In addition, the current plan explains the link between HUD’s objectives and HUD’s 2020
Management Reform Plan, which was implemented to address HUD’s major management
challenges, and includes a separate section that discusses HUD’s management, financial, and
quality assurance improvements.

However, the fiscal year 2000 annual performance plan could be further improved if it
showed the allocation of the budgetary resources needed to achieve specific performance
goals, more specifically discussed HUD’s strategies for coordinating with other agencies, and
eliminated inconsistencies within the plan and among the related budget documents. In
addition, HUD should increase its efforts to verify and validate data and continue to develop a
model for linking resource allocation to strategic goals and objectives.

HUD’s Performance Plan Provides a General Picture of Intended
Performance Across the Department
The goals and objectives in HUD’s fiscal year 2000 annual performance plan are generally
results oriented and measurable. The plan includes five strategic goals, four of which are
intended to summarize the basic intent of HUD’s major statutory authority. The fifth--to




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Enclosure I
Observations on the Department of Housing and Urban Development's Performance Plan for Fiscal Year 2000




restore public trust--is related to implementing HUD’s 2020 Management Reform Plan and
HUD’s major management challenges. The five goals are further divided into 13 strategic
objectives, under which HUD details 62 outcome indicators and 85 output indicators to
                                                       3
measure progress toward achieving the objectives. For example, the plan’s strategic
objective aimed at ensuring that America’s housing is safe and disaster resistant provides
detailed output and outcome indicators that describe the services delivered by the programs
and the intended results. However, some of the indicators are based on systems that are
under development, untested, or need additional components. For example, according to the
plan, the Department Grants Management System is under development and will not be
available until after fiscal year 2000. In addition, the plan reports that new resources are or
may be necessary to develop 22 of the indicators, but the plan does not discuss the effect on
the goals and objectives if the necessary resources are not made available. Trend and
baseline data are provided for many of the indicators; however, baselines for others will not
be established until fiscal year 2000 or later. For example, HUD includes an indicator to
reduce average residential energy consumption under its goal to increase the availability of
decent, safe, and affordable housing; however, the baseline will not be determined until 2002.

One of the strategic goals--to restore public trust--is related to HUD’s efforts to improve its
operations by implementing its 2020 Management Reform Plan, which is cited as a priority
management objective in the administration’s governmentwide performance plan. While the
performance plan does not specifically reference HUD’s four management challenges that we
           4
identified, the plan includes indicators related to three of the challenges: measuring
progress toward improving internal controls, addressing staffing issues, and improving data
systems. Additionally, for most strategic objectives, the plan discusses their linkage to HUD’s
2020 Management Reform Plan.

Most strategic objectives include a brief discussion of coordination with other federal
agencies, and the plan identifies 1 interagency indicator and 10 potential interagency
indicators. However, the plan does not discuss specific coordination strategies. For
example, under the objective to reduce discrimination in housing, the plan states that HUD is
coordinating with the Department of Agriculture on rural housing and with the Department of
Justice. However, the discussion of strategies does not mention rural housing or either
Department. Consequently, the plan does not clearly designate the strategies or activities



3
Throughout this document, we count each occurrence of an indicator, even if it was previously listed to support a different
objective. Nine indicators are used to support more than one objective.
4
We identified four management challenges at HUD: internal control weaknesses; poorly integrated, ineffective, and generally
unreliable information and financial management systems; organizational problems; and an insufficient mix of staff with the
proper skills. (See app. I for a full description of the management challenges.) See Major Management Challenges and Program
Risks: Department of Housing and Urban Development (GAO/OCG-99-8, Jan. 1999).




Page 5                                                     GAO/RCED-99-208R HUD’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of Housing and Urban Development's Performance Plan for Fiscal Year 2000




that will involve these Departments and does not explain how these coordination efforts will
contribute toward HUD’s role in decreasing discrimination.

HUD’s fiscal year 2000 performance plan is well on its way to addressing the weaknesses that
we identified in our assessment of the fiscal year 1999 performance plan. In reviewing the
fiscal year 1999 plan, we observed that many of HUD’s indicators did not provide quantifiable
measures that will allow for comparing the actual performance with projected performance
and determining whether HUD would be able to assess progress toward meeting its strategic
goals. The fiscal year 1999 plan also did not contain performance objectives or indicators for
HUD’s crosscutting programs and did not define the contributions of HUD’s programs and
funding to the crosscutting activities.

HUD improved its fiscal year 2000 plan by identifying outcome and output indicators, all but
three of which provide some quantifiable measure of performance and cite a specific data
source. Although some outcome indicators do not have output indicators associated with
them, each output indicator is linked to at least one outcome indicator. The plan cross-
references the nine indicators that support more than one objective. For example, an
indicator to create a total of 283,000 jobs supports two objectives—“poor and disadvantaged
families and individuals become self-sufficient” and “the number, quality, and accessibility
of jobs increase in low-income urban and rural communities”—that are under two separate
goals. The plan also provides baseline and trend data, if such data are available. If data are
not available, the plan discusses when the baselines are expected to be developed, as well as
other issues related to the data. For example, the output indicator to increase the share of
recipients of welfare-to-work vouchers who hold jobs at the time of annual recertification
states that the baseline for households receiving vouchers in fiscal year 2000 will be
determined in fiscal year 2001. The indicator notes that new resources will be needed to
enhance reporting capabilities in the system.

For most of the objectives, the fiscal year 2000 plan lists HUD’s coordination activities with
other federal agencies on specific programs; however, it does not discuss specific
coordination strategies. For example, under the objective to make America’s housing safe
and disaster resistant, the plan states that HUD and the Environmental Protection Agency
jointly chair a staff-level interagency task force on the prevention of lead-based paint
poisoning. However, the plan does not explain how this task force will contribute toward
achieving the objective. While not designating specific objectives or indicators for its
crosscutting programs, the plan does identify 10 of its indicators as “potential interagency
indicators” and one as an “interagency indicator.” For example, under the objective
“communities are safe,” one of HUD’s indicators shows that the share of households
reporting crime in the neighborhood will decline in 1999 and includes a parenthetical note
that this is a potential interagency indicator.




Page 6                                            GAO/RCED-99-208R HUD’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of Housing and Urban Development's Performance Plan for Fiscal Year 2000




HUD’s Performance Plan Provides a General Discussion of the
Strategies and Resources That the Department Will Use to
Achieve Its Goals
Each strategic objective includes a discussion of the strategies that HUD will pursue to
achieve the objective, and most include a discussion of the external factors that affect the
objective. Most of the strategies support the strategic goals and objectives, but there are
some inconsistencies. For example, for the objective aimed at helping homeless families and
individuals become self-sufficient, the strategies focus only on providing housing or services
for the homeless; consequently, it is not clear how these strategies will enable the homeless
to become self-sufficient. Each objective also includes a table showing the major program
activities and budget authority that support the objective. Each table helps to identify the
budget program activities that support the objective; however, each table does not break
down the specific budgetary resources that will be allocated to the objective so that the cost
of achieving that objective is apparent. For example, under 10 of the objectives, tables list
the total budget authority for the Community Development Block Grant program rather than
listing only the estimated portion associated with each objective. The fiscal year 2000 plan
includes (1) a resources allocation table that shows which strategic goals are supported by
the discretionary funding and staff resources in HUD’s budget accounts and (2) an appendix
containing a table that relates HUD’s budget accounts and/or program activities to specific
strategic objectives. Through these tables, the fiscal year 2000 plan generally covers all of
HUD’s program activities and links them to the strategic goals and objectives. Additionally,
the programs receiving mandatory funds are generally covered in narrative discussions.

However, because of inconsistencies in the information, some of the linkages are difficult to
follow. For example, the table under the objective that poor and disadvantaged families and
individuals become self-sufficient and develop assets does not list the homeless assistance
grants program or the credit subsidy portion of the America’s Private Investment Companies
program, both of which are linked to this objective in the appendix. Similarly, the fiscal year
2000 plan lists one of HUD’s new initiatives--a program to redevelop abandoned buildings--as
a strategy under the objective to reduce disparities in well being among neighborhoods and
within metropolitan areas but does not include that program in the table showing the
programs that support the objective. In addition, the program does not appear to be reflected
in any of the performance indicators for that objective or in the resource allocation table.
There are also inconsistencies between the plan and HUD’s budget justification. For
example, the annual performance plan links the Community Development Block Grant
program to all five strategic goals; however, in the congressional justification for the fiscal
year budget request, HUD links the program to only three strategic goals. To ensure that the
plan is clear and conveys how HUD’s funding will be allocated to achieve strategic goals and
objectives, HUD should ensure consistency within the plan and among the related budget
documents.




Page 7                                            GAO/RCED-99-208R HUD’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations on the Department of Housing and Urban Development's Performance Plan for Fiscal Year 2000




The fiscal year 2000 plan does not discuss how HUD would mitigate the negative effects of
the identified external factors for achieving the performance goals. For example, under the
goal to ensure that affordable rental housing is available for low-income households, HUD
identifies several external factors that may interfere with achieving the performance goal
(e.g., rises in unemployment, cost of developing and maintaining houses, and personal-
income-level changes). However, while HUD cannot control these factors, it could indicate
how it would modify its strategies to achieve the performance goal if these factors become an
issue. While the plan specifically refers to HUD’s efforts to develop a resources management
system, the system is not yet implemented.

HUD’s fiscal year 2000 performance plan indicates some degree of progress in addressing the
weaknesses that we identified in our assessment of the fiscal year 1999 performance plan. In
reviewing the fiscal year 1999 plan, we observed that it did not cover all of the program
activities, as required by the Results Act. For example, we noted that $1.5 billion of proposed
spending for “other” programs was not linked to any of the strategic goals. We also noted
that the plan did not discuss strategies that clearly describe how HUD would achieve its
performance goals. Several of the discussions appeared to be descriptions of programs
instead of specific actions to achieve the performance goals. In its fiscal year 1999 plan, HUD
recognized that it had no mechanism to link resources to performance goals. The plan also
did not discuss how information technology would be used to help achieve the performance
goals.

Among the improvements in the fiscal year 2000 plan are expanded discussions of strategies
to more clearly explain HUD’s efforts to achieve the objectives. The fiscal year 2000 plan also
includes (1) an appendix containing a table that shows the linkages among program activities,
goals, and objectives and (2) tables that show the program activities that support each
objective. These tables help to identify the budget program activities that support the
objectives, although they do not break down the specific budgetary resources that will be
allocated to each objective so that the cost of achieving that objective is apparent.

The plan also has a section on management, financial, and quality assurance improvements
that specifically discusses resource allocation. Like the fiscal year 1999 performance plan,
the fiscal year 2000 plan states that HUD is consulting with the National Academy of Public
Administration to develop a model for linking resource allocation to strategic goals and
objectives. The plan also includes information on HUD’s efforts to address human capital
issues. For example, one objective is to empower HUD’s workforce and partners and make
them accountable for results. This objective includes three performance indicators: (1) to
measure HUD’s employee satisfaction, (2) to increase overall workforce’s diversity, and (3) to
increase the representation of women and minorities “at and above the GS-13 level.”

While there is no specific discussion of how information technology will be used to improve
performance or help achieve the first four strategic goals, two of the objectives discuss new




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Enclosure I
Observations on the Department of Housing and Urban Development's Performance Plan for Fiscal Year 2000




information systems in the section on the linkage to HUD’s 2020 Management Reform Plan.
The fiscal year 2000 plan also discusses the use of information technology to help achieve the
fifth performance goal—to restore public trust. A separate section of the plan discusses
HUD’s efforts to improve the integrity of information systems, the quality of data, and the
integration of systems.

HUD’s Performance Plan Provides Limited Confidence That the
Department’s Performance Information Will Be Credible
The performance plan includes comments on HUD’s data sources, the limitations and
advantages of the data, and validation and verification efforts for each indicator. The plan
also includes a separate section discussing HUD’s overall data validation and verification
efforts. Many of the indicators are based on external data, especially Census data, for which
the plan notes that additional verification is unnecessary. However, some of the indicators
are based on data that will be obtained from entities such as associations, other government
agencies, or HUD grantees and that, with one exception, will not be independently validated
or verified. Also, several of the indicators are from systems that are new and, as stated in the
plan, may need further testing. For example, the plan states that further testing is needed for
the systems supporting indicators that are based on the new Public Housing Assessment
System and the Section 8 Management Assessment Program. Furthermore, some of the data
may be unavailable for use as performance measures for fiscal year 2000. For example, the
plan notes that new resources are or may be needed for 22 of the indicators and that systems
are under development, untested, or need additional components for other indicators. For
example, according to the plan, the Department Grants Management System is under
development and will not be available until after fiscal year 2000. In addition, the
measurement of other indicators relies on the decennial census and the American
Community Survey, from which data will not be available until 2002 and 2005, respectively.
The need for further testing and the uncertainty about the availability of data do not provide
confidence that the indicators will be measurable.

While the plan discusses data limitations for each indicator, actions to mitigate the limitations
are not addressed. For example, the plan includes an indicator that the share of families that
receive Section 8 assistance and live in census tracts with low poverty rates will increase by 1
percent. The limitations note that the data source suffers from poor reporting by some
housing authorities and that some data will be not be available until 2003 and later.
However, there is no explanation of the validity of the measure, given the limitations.
Additionally, several of the indicators report that validation and verification will be
accomplished by monitoring by field offices; however, we and HUD’s Office of Inspector
General have reported on weaknesses in HUD’s monitoring activities. The plan does not
explain whether the monitoring issues have been or will be resolved.




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Enclosure I
Observations on the Department of Housing and Urban Development's Performance Plan for Fiscal Year 2000




The fiscal year 2000 performance plan indicates some degree of progress in addressing the
weakness that we identified in our assessment of HUD’s fiscal year 1999 performance plan as
it relates to providing full confidence that HUD’s performance information will be credible.
In reviewing the fiscal year 1999 plan, we observed that the plan did not relate the
information systems discussed in one section of the plan to specific indicators and did not
address all of the systems from which performance data would be extracted. For example,
while the plan associated 14 indicators with the four grant programs that are supported by
the Integrated Disbursement and Information System, it did not specify the source of the data
to measure those indicators. We also noted that some performance indicators appeared to
rely on sources of data that were not discussed in the verification and validation section of
the annual performance plan. We noted that for some of the goals, HUD had not yet
determined what information to use to measure whether the goals had been achieved;
therefore, HUD could not describe verification and validation procedures. For example, one
goal included a note that the data to establish the baselines may come from a survey
contracted by HUD. There was no discussion of how HUD would ensure the reliability of the
performance data. Finally, HUD could have noted which indicators had been verified by
audits of its financial statements.

HUD’s fiscal year 2000 plan addresses many of the concerns that we raised in reviewing the
fiscal year 1999 plan. With some additional information, the new plan could be more useful.
Under each indicator, HUD discusses the data source, limitations and advantages, and related
validation and verification efforts. The plan also includes a separate validation and
verification section that summarizes the data quality controls for HUD’s major systems. The
plan acknowledges the known weaknesses in the data and the difficulties that HUD faces in
reporting on the indicators. For example, some of the indicators are based on data that are
compiled every other year, every 5 years, or every 10 years. The plan also indicates those
measures for which additional resources are needed to develop them and those that may need
to be recalibrated after the data are available.

While HUD’s fiscal year 2000 plan does not specifically address HUD’s efforts to deal with
the year 2000 (Y2K) computer vulnerabilities, the plan includes a statement that HUD has
completed critical work with respect to data reliability. In a separate report, HUD advised the
Office of Management and Budget that 55 of its 56 mission-critical systems were compliant
with Y2K date-computing requirements as of February 1999. However, in a March 1999
report, HUD’s Office of Inspector General included the need to reduce the risk of Y2K




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Enclosure I
Observations on the Department of Housing and Urban Development's Performance Plan for Fiscal Year 2000




failures as one component of a reportable condition on HUD’s system security and other
controls.5

Audits of HUD’s financial statements provide a means of data verification, and the plan notes
that some performance indicators will be verified through annual audits of HUD’s financial
statements. For example, the plan includes an indicator that Ginnie Mae will continue to
secure at least 95 percent of the single-family Federal Housing Administration and
Department of Veterans Affairs loans, which can be verified through the audits. However,
HUD’s plan could have noted additional indicators that are or could be verified through
HUD’s financial statement audit, such as indicators showing increases in the net recovery on
real estate sales.

Other Observations on HUD’s Implementation of Performance-
Based Management
To measure progress in achieving its strategic goals, HUD initiated a business and operating
planning process beginning with fiscal year 1999. Each program and field office developed a
business and operating plan to identify the contributions that it could make to achieve HUD’s
goals. However, the business and operating plans for fiscal year 1999 were built around six
strategic goals that differ from the goals in HUD’s fiscal year 1999 annual performance plan,
as well as those in its strategic plan and fiscal year 2000 annual performance plan. None of
these plans specifically address how the changes in the strategic goals and objectives will
affect the data collection for performance indicators or HUD’s ability to achieve and report
on different goals for similar time periods. HUD officials told us that although they did not
revise the fiscal year 1999 annual performance plan to reflect the changes in the business and
operating plans, a cross-reference between the two plans would be available. While it is
expected that an agency’s goals will be refined over time, we are concerned that having
different strategic goals and objectives covering the same fiscal year may complicate HUD’s
ability to implement sound performance management into its daily operations. Such
differences may result in confusion in resource allocation, tracking the related indicators, and
assessing and reporting on progress toward achieving the goals.

Beginning in 1994, we identified issues related to information and management systems as
one of HUD’s four major management challenges. Specifically, we have reported that poorly
integrated, ineffective, and generally unreliable information and management systems do not
meet the needs of program managers and has weakened their ability to provide management


5
U.S. Department of Housing and Urban Development Audit of Fiscal Year 1998 Financial Statements, HUD Office of Inspector
General (99-FO-177-0003, Mar. 29, 1999).




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Enclosure I
Observations on the Department of Housing and Urban Development's Performance Plan for Fiscal Year 2000




control over housing and community development programs. HUD has continued to work on
its financial management systems and reiterates the Department’s efforts in the fiscal year
2000 annual performance plan. In our 1999 accountability series report, we noted that while
HUD has made progress in addressing its systems weaknesses, it will continue to be
adversely affected by inadequate systems and information until its efforts are successfully
completed. We stated that HUD needs to strengthen the management and oversight of its
efforts to integrate financial systems, including its information technology investment
decisions. In addition, HUD needs to continue its efforts to bring nonconforming systems
into conformance with the requirements of the Federal Managers’ Financial Integrity Act. As
part of this process, HUD needs to ensure that its assessments of systems to determine
conformance are well documented and verified. Finally, HUD needs to eliminate the material
internal control weaknesses related to its systems.

Agency Comments
We provided HUD with a draft of this report for review and comment. In its written
comments, HUD generally agreed with the report and stated that the Department was pleased
that our report reflected the substantial progress that it had made in developing the annual
performance plan. HUD stated that our report captured the annual performance plan’s major
improvements and said that the Department is committed to taking specific actions to
improve in the areas we identified.

While generally agreeing with this report, HUD commented that our observations on its data
systems seemed to reflect “where the Department has been rather than where the
Department is now, and where the Department is heading.” Specifically, HUD stated that its
plan includes data sources that HUD does not plan to verify, such as the fiscal year 2000
Census data and the American Community Survey, which HUD does not believe are
necessary to validate. We agree that HUD does not need to independently verify or validate
these sources. However, HUD’s fiscal year 2000 plan relies extensively on other external data
sources that should be verified and validated in order to offer confidence that the data
sources will provide meaningful information on performance. HUD also commented that the
new Departmental Grants Management Systems will result in significant improvement in data
related to performance measurement. However, as we recently reported, HUD plans to base
this new system on the Integrated Disbursement and Information System, which is fraught
with major design flaws.6 Consequently, until the new system is operational, we must reserve
judgment on whether it will provide the information that HUD is projecting. We recognize
that HUD has improved its presentation of information on data sources, the limitations and


6
Community Development: Weak Management Controls Compromise Integrity of Four HUD Grant Programs (GAO/RCED-99-98,
Apr. 27, 1999).




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Enclosure I
Observations on the Department of Housing and Urban Development's Performance Plan for Fiscal Year 2000




advantages of those sources, and validation and verification efforts. However, we remain
concerned about HUD’s performance information because of the extent to which the goals
and indicators rely on data that will not be validated or verified, systems that do not yet exist,
or information that will not be available for several years.

In its comments, HUD also questioned our observation that the plan does not discuss specific
coordination strategies. HUD noted that it has more substantial interagency efforts than are
recognized by our report and that it could provide extensive comments and documentation of
interagency cooperation on the one example we cited. As stated earlier in this report, HUD’s
fiscal year 2000 plan does not describe planned coordination strategies. We expanded our
discussion of this topic in the report in order to clarify how the plan could be improved.

Finally, on the basis of other comments from HUD, we clarified our observations, where
appropriate.




Page 13                                           GAO/RCED-99-208R HUD’s Fiscal Year 2000 Performance Plan
Enclosure II

Management Challenges


Table II.1 shows the management challenges that we noted in our January 1999 performance
and accountability report on HUD and that HUD’s Office of Inspector General noted in its
March 1999 financial audit report.1 The table also lists performance goals, strategies and
indicators that are related to each management challenge.

Table II.1: Management Challenges
Management challenges identified by GAO                        Applicable goals and measures in the Fiscal
                                                               Year 2000 Annual Performance Plan
Internal control weaknesses have included a lack of            Under the strategic objective that HUD’s workforce
staff and resources to manage and monitor HUD’s real           and partners are empowered, capable, and
estate inventory, an inadequate early warning system to        accountable for results, the plan includes the
prevent losses through defaults in its insurance               following two indicators related to ensuring that
programs, inadequate controls over a rental assistance         subsidies are based on tenants’ correct income:
program, inadequate automated systems to provide
reliable data, and an inadequate management control            • The share of tenant-based Section 8 assistance
system.                                                        managed by housing authorities that score highly for
                                                               income verification increases by 5 percentage
                                                               points.
                                                               • The share of households for which rent
                                                               determinations are correct increases by 3
                                                               percentage points for public housing and for project-
                                                               based Section 8 housing by 2001.

                                                               The plan includes a total of nine indicators under
                                                               three strategic objectives that would require the
                                                               monitoring of multifamily projects:

                                                               • Strategic objective 5.1--HUD’s workforce and
                                                               partners are empowered, capable, and accountable
                                                               for results--has five outcome or output indicators.
                                                               • Strategic objective 1.3--America’s housing is safe
                                                               and disaster resistant--has three outcome or output
                                                               indicators.
                                                               • Strategic objective 1.2--affordable rental housing is
                                                               available for low-income households--has one output
                                                               indicator.

                                                               Strategic objective 1.1--homeownership is
                                                               increased--has one output indicator related to loss
                                                               prevention, which is the share of Federal Housing
                                                               Administration mortgage defaults resolved by loss
                                                               mitigation alternatives to foreclosure increases by 2
                                                               percentage points.

                                                               Most of the objectives throughout the plan include a


1
 Major Management Challenges and Program Risks: Department of Housing and Urban Development (GAO/OCG-99-8, Jan. 1999)
and U.S. Department of Housing and Urban Development Audit of Fiscal Year 1998 Financial Statements, Office of Inspector
General (99-FO-177-0003, Mar. 29, 1999).




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Enclosure II
Management Challenges




Management challenges identified by GAO                  Applicable goals and measures in the Fiscal
                                                         Year 2000 Annual Performance Plan
                                                         discussion of the linkage to HUD’s 2020
                                                         Management Reform Plan, some of which explain
                                                         how achieving the objectives will result in greater
                                                         program accountability. The plan also includes a
                                                         separate section that discusses HUD’s crosscutting
                                                         management, financial, and quality assurance
                                                         strategies. This section states the resulting
                                                         improvements promised to make HUD’s planning,
                                                         financial controls, and program tracking more
                                                         consistent, efficient, and reliable. HUD states that it
                                                         has taken two important steps to enhance internal
                                                         controls and monitoring: it cataloged all material
                                                         weaknesses and management deficiencies and
                                                         began a series of bimonthly meetings to resolve
                                                         problems and established a Risk Management Unit
                                                         to help assess risk and avoid future problems.

                                                         Additionally, some of the plan’s indicators relate to
                                                         ensuring that HUD’s programs are operating as
                                                         intended. For example, under the objective that
                                                         “HUD’s workforce and partners are empowered,
                                                         capable and accountable for results,” the plan has
                                                         indicators that state the following:

                                                         • The share of public housing units managed by
                                                         troubled housing authorities decreases by 5
                                                         percentage points.
                                                         • The share of public housing units and assisted
                                                         multifamily units that meet HUD-established
                                                         standards increases by 1 percentage point.
                                                         • Office of Housing field staff review a statistically
                                                         valid sample of transactions in each of seven
                                                         categories for compliance with data quality
                                                         standards.
                                                         • HUD contractors are being held increasingly
                                                         accountable through the use of performance-based
                                                         contracting methods, as shown by a 25-percent
                                                         increase in annual obligations of active performance-
                                                         based contracts.
HUD has had poorly integrated, ineffective, and          Within the objective 5.1--HUD’s workforce and
generally unreliable information and financial           partners are empowered, capable, and accountable
management systems that have not met the needs of        for results--the plan includes the following indicator
program managers and have weakened their ability to      that specifically addresses systems issues:
provide management control over housing and              • HUD’s automated data systems are rated highly for
community development programs. While HUD has            usefulness, ease of use, and reliability.
made some progress, it will continue to be adversely
affected by inadequate systems and information until     Additionally, in the section on the management,
these efforts are completed.                             financial, and quality assurance improvements, HUD
                                                         discusses its project to achieve better systems
                                                         integration. The project is intended to
                                                         • reduce the number of systems,
                                                         • manage data quality,




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Enclosure II
Management Challenges




Management challenges identified by GAO                      Applicable goals and measures in the Fiscal
                                                             Year 2000 Annual Performance Plan
                                                             • evaluate independent contractor validation, and
                                                             • refine empowerment information systems.
HUD has had organizational problems, such as                 None. While the plan does not include specific
overlapping and ill-defined responsibilities and             indicators or goals related to completing the
authorities between its headquarters and field               organizational changes, HUD’s strategic goal 5,
organization and a fundamental lack of management            “restore public trust in HUD,” is directly related to
accountability and responsibility. Under HUD’s 2020          HUD’s 2020 Management Reform Plan. The
Management Reform Plan initiatives, many                     Management Reform Plan is intended, among other
organizational changes are under way, some of which          things, to correct the management deficiencies that
involve a transfer of responsibilities. The effectiveness    we and others have identified. The Management
of these organizational changes cannot be determined         Reform Plan includes separating service from
until they are completed.                                    compliance functions, reorganizing the field offices,
                                                             and consolidating processes and functions within
                                                             and across program areas into specialized centers.
                                                             In the various discussions throughout the annual
                                                             performance plan, HUD addresses organizational
                                                             issues. For example, under objective 1.1,
                                                             “increasing homeownership,” the plan narrative
                                                             refers to the creation of the four new homeownership
                                                             centers that take advantage of economies of scale
                                                             and allow better, more efficient use of technology.
                                                             Under objective 4.1, “increasing the number, quality,
                                                             and accessibility of jobs in low-income urban and
                                                             rural communities,” the plan refers to the newly hired
                                                             community builders who will work to revitalize
                                                             communities. Under objective 1.2, “affordable rental
                                                             housing is available for low-income households, “the
                                                             plan refers to the creation of the Section 8 Financial
                                                             Processing Center and the Special Applications
                                                             Center, which will increase staff effectiveness and
                                                             program accountability.
An insufficient mix of staff with the proper skills has      Under its Strategic Goal 5, “restore public trust in
hampered the effective monitoring and oversight of           HUD, “ and its objective 5.1 on empowering HUD’s
HUD’s programs and the timely updating of procedures.        workforce and partners, the plan includes the three
Because staffing reforms are still in transition, the        following indicators related to HUD’s employees:
effectiveness of HUD’s changes in correcting staff           • HUD employees are more satisfied and more
deficiencies cannot be determined.                           capable and perceive the organization to be more
                                                             effective.
                                                             • HUD increases the overall workforce’s diversity by
                                                             raising the representation of underrepresented
                                                             groups, as shown by increasing the share of
                                                             Hispanics by 0.5 percentage point to 7.1 percent of
                                                             employees.
                                                             • Among HUD’s women and minority employees, the
                                                             representation at and above the GS-13 level
                                                             increases by 1 percentage point to 33 percent.

                                                             Additionally, in discussing the linkages to HUD’s
                                                             2020 Management Reform Plan, the plan also refers
                                                             to staffing issues. For example, under objective 2.1,
                                                             “housing discrimination is reduced,” the plan says
                                                             that the Office of Fair Housing and Equal




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Enclosure II
Management Challenges




Management challenges identified by GAO                   Applicable goals and measures in the Fiscal
                                                          Year 2000 Annual Performance Plan
                                                          Opportunity has cross-trained staff. Specifically, that
                                                          office has consolidated existing organizations and
                                                          employees and contracted, where appropriate, with
                                                          outside investigators, auditors, and attorneys.
                                                          Community builders are being trained in fair housing
                                                          laws, issues surrounding Section 8 recipients, and
                                                          opportunities to promote fair housing.

                                                          Under objective 4.1, “increasing the number, quality,
                                                          and accessibility of jobs, “ the plan states that HUD
                                                          has hired and transferred hundreds of front-line
                                                          problem solvers--the community builders--to work
                                                          with communities. Under objective 1.2, “making
                                                          affordable rental housing available for low-income
                                                          households,“ the plan notes that the specialized
                                                          centers have increased the staff’s effectiveness and
                                                          staff have been specifically trained for evaluating
                                                          and processing applications.
Government-wide high risk issues identified by
GAO
Year 2000 problem                                         None. However, the plan has an indicator stating
                                                          that automated data systems are rated highly for
                                                          usefulness, ease of use, and reliability. The plan
                                                          provides background and context for the indicator,
                                                          which states that HUD has completed critical work
                                                          with respect to reliability by ensuring that all systems
                                                          are free of the Y2K bug.
Information security                                      None.



Other management challenges identified by HUD’s
Office of Inspector General
The following eight material weaknesses in HUD’s          The plan does not specifically address HUD’s
internal controls, identified in the 1998 consolidated    internal control material weaknesses; however, it
audit, relate to the need to                              discusses some of the issues in the narrative and
                                                          includes some goals and indicators that relate to
                                                          some of the weaknesses.

• complete improvements to its financial management       For example, under its strategic objective 5.1, “that
systems,                                                  HUD’s workforce and partners are empowered,
                                                          capable, and accountable for results,” the plan has
                                                          one indicator that HUD’s data will be highly rated,
                                                          which relates to completing improvements to
                                                          financial management systems. Also the plan states
                                                          that HUD is working to improve its financial
                                                          management systems.

• successfully complete planned organizational            While not including specific goals or indicators for
changes,                                                  completing planned organizational changes, most of
                                                          the objectives include a discussion of the linkage to
                                                          HUD’s 2020 Management Reform Plan.




Page 17                                            GAO/RCED-99-208R HUD’s Fiscal Year 2000 Performance Plan
Enclosure II
Management Challenges




Other management challenges identified by HUD’s
Office of Inspector General


• ensure that subsidies are based on tenants’ correct        Under the strategic objective that HUD’s workforce
income,                                                      and partners are empowered, capable, and
                                                             accountable for results, the plan includes the
                                                             following two indicators related to ensuring that
                                                             subsidies are based on tenants’ correct income:
                                                             • The share of tenant-based Section 8 assistance
                                                             managed by housing authorities that score highly for
                                                             income verification increases by 5 percentage
                                                             points.
                                                             • The share of households for which rent
                                                             determinations are correct increases by 3
                                                             percentage points for public housing and for project-
                                                             based Section 8 housing by 2001.

• improve multifamily project monitoring,                    The plan includes a total of nine indicators under the
                                                             following three strategic objectives that would
                                                             require the monitoring of multifamily projects:
                                                             • Strategic objective 5.1—HUD’s work force and
                                                             partners are empowered, capable, and accountable
                                                             for results--has five outcome or output indicators.
                                                             • Strategic objective 1.3--America’s housing is safe
                                                             and disaster resistant--has three outcome indicators.
                                                             • Strategic objective 1.2--affordable rental housing is
                                                             available for low-income households--has one output
                                                             indicator.

• address Federal Housing Administration staff and           None.
administrative resource issues,

• continue to place more emphasis on early warning           Strategic objective 1.1, “homeownership is
and loss prevention for the Federal Housing                  increased,” has one output indicator related to loss
Administration’s insured mortgages,                          prevention, which is the share of Federal Housing
                                                             Administration mortgage defaults resolved by loss
                                                             mitigation alternatives to foreclosure increases by 2
                                                             percentage points.

• improve the Federal Housing Administration’s federal       None.
basis and budgetary accounting, and

• improve the Federal Housing Administration’s               None.
information technology systems to support business
processes more effectively.
Additionally, the audit report included the following 12     The plan includes the following objectives and
reportable conditions related to the need to                 indicators that relate to three of the reportable
                                                             conditions:

• continue efforts to improve HUD’s management               None.
control program;

• refine performance measures to effectively implement       None.




Page 18                                               GAO/RCED-99-208R HUD’s Fiscal Year 2000 Performance Plan
Enclosure II
Management Challenges




Other management challenges identified by HUD’s
Office of Inspector General
results management;

• improve controls over project-based subsidy               None.
payments;

• continue efforts to improve oversight of housing          There are 25 output or outcome indicators under the
authorities;                                                following five strategic objectives that relate to
                                                            monitoring of public housing.
                                                            • Affordable rental housing is available for low-
                                                            income households.
                                                            • America’s housing is safe and disaster resistant.
                                                            • Low-income people are not isolated geographically
                                                            in America.
                                                            • Poor and disadvantaged families and individuals
                                                            become self-sufficient and develop assets.
                                                            • HUD’s work force and partners are empowered,
                                                            capable, and accountable for results.

• fully implement the Office of Community Planning and      None.
Development’s strategy for overseeing grantees;


• improve general system security and other controls,       None. However, the plan has an indicator stating
including year 2000 preparations;                           that automated data systems are rated highly for
                                                            usefulness, ease of use, and reliability. The plan
                                                            provides background and context for the indicator,
                                                            which states that HUD has completed critical work
                                                            with respect to reliability by ensuring that all systems
                                                            are free of the Y2K bug.

• overhaul security procedures for access to systems;       None.
• improve access controls for critical systems, including   None.
HUD’s payment systems;

• improve processes for reviewing obligation balances;      None.

• continue actions to quickly resolve the Federal           None.
Housing Administration’s Secretary-held multifamily
mortgage notes and minimize additional mortgage note
assignments;

• sufficiently monitor and account for the Federal          Under the strategic objective to increase
Housing Administration’s single-family property             homeownership, the plan includes the following two
inventory; and                                              output indicators related to monitoring the single-
                                                            family inventory:
                                                            • The share of Federal Housing Administration
                                                            mortgage defaults resolved by loss mitigation
                                                            alternatives to foreclosure increases by 2
                                                            percentage points.
                                                            • The net recovery of the Federal Housing
                                                            Administration’s real-estate-owned sales increases
                                                            by 2 percentage points to 62.7 percent.




Page 19                                              GAO/RCED-99-208R HUD’s Fiscal Year 2000 Performance Plan
Enclosure II
Management Challenges




Other management challenges identified by HUD’s
Office of Inspector General

• enhance the design and operation of general and           None.
application controls for the Federal Housing
Administration’s information systems.
The audit report disclosed the following two instances of   None.
noncompliance with applicable laws and regulations:
• The Department has not complied with the Federal
Financial Management Improvement Act.
• The Federal Housing Administration’s single-family
premium system does not generate the required core-
specific cash flow data.




(385789)




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