Report to the Ranking Minority

Member, Committee on Governmental

Affairs, U.S. Senate

United States General Accounting Office

GAO

July 2001 DEPARTMENT OF

HOUSING AND

URBAN

DEVELOPMENT

Status of Achieving

Key Outcomes and

Addressing Major

Management

Challenges

GAO-01-833
Page 1 GAO-01-833 HUD: Status of Achieving Key Outcomes

July 6, 2001

The Honorable Fred Thompson

Ranking Minority Member

Committee on Governmental Affairs

United States Senate

Dear Senator Thompson:

As you requested, we reviewed the Department of Housing and Urban

Development’s (HUD) fiscal year 2000 performance report and fiscal year

2002 performance plan required by the Government Performance and

Results Act of 1993 (GPRA) to assess the agency’s progress in achieving

selected key outcomes that you identified as important mission areas for

the agency.1 These are the same outcomes we addressed in our June 2000

report on the agency’s fiscal year 1999 performance report and fiscal year

2001 performance plan to provide a baseline by which to measure the

agency’s performance from year to year.2

 These selected key outcomes

are:

• increased homeownership;

• increased affordable, decent, and safe rental housing;

• improved community economic vitality and quality of life; and

• less fraud, waste, and error in HUD’s programs.

As agreed, using the selected key outcomes for HUD as a framework, we

(1) assessed the progress HUD has made in achieving these outcomes and

the strategies the agency has in place to achieve them; and (2) compared

HUD’s fiscal year 2000 performance report and fiscal year 2002

performance plan with the agency’s prior year performance report and

plan for these outcomes. Additionally, we agreed to analyze how HUD

addressed its major management challenges, including the

governmentwide high-risk areas of strategic human capital management

and information security, that we and HUD’s Office of Inspector General

 1

This report is one of a series of reports on the 24 Chief Financial Officers (CFO) Act

agencies’ fiscal year 2000 performance reports and fiscal year 2002 performance plans.

2

Observations on the Department of Housing and Urban Development’s Fiscal Year 1999

Performance Report and Fiscal Year 2001 Performance Plan (GAO/RCED-00-211R, June

30, 2000).

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-833 HUD: Status of Achieving Key Outcomes

(OIG) identified. Appendix I provides detailed information on how HUD

addressed these challenges. Appendix II contains HUD’s comments and

our response on a draft of our report.

Although HUD did not attain all of the goals pertaining to the selected key

outcomes in its fiscal year 2000 annual performance plan, the performance

report shows that HUD made some progress toward achieving the

outcomes. However, HUD’s progress varied for each outcome, and the

information presented in the performance report does not always provide

sufficient information for the reader to evaluate HUD’s contribution to

achieving the outcome. In general, HUD’s strategies for achieving these

outcomes appear to be clear and reasonable. Neither the performance

report nor the performance plan discusses strategic human capital

management or information technology issues as part of HUD’s strategies

to address the programmatic outcomes, although some information on

those issues is included as part of HUD’s efforts to address its

management challenges and to achieve its goal of ensuring public trust.

We identified management challenges that relate to two of these

outcomes.

Planned outcome: Increased homeownership. The report shows that

homeownership increased. However, the report does not clearly explain

how HUD’s programs contributed to the increases, given the external

factors discussed and the fact that HUD did not achieve some of its

programmatic goals related to homeownership. Although HUD provided

clear and reasonable strategies for achieving its goals, it generally did not

provide strategies for achieving unmet fiscal year 2000 goals.

Planned outcome: Increased affordable, decent, and safe rental housing.

HUD’s performance report shows that it made some progress toward the

outcome of increasing affordable, decent, and safe rental housing.

However, it was less successful in increasing the supply of affordable

housing relative to the number of people who need it most. We found one

measure for which the data in the report do not agree with data that have

been reported to us, a fact that reaffirms our concerns as discussed in

other reports about the reliability of performance data. The performance

report and plan generally discuss the strategies that affect achievement of

this outcome, although they do not discuss specific tools or risk

assessments that HUD will use to address some of the issues discussed.

Planned outcome: Improved community economic vitality and quality of

life. The performance report indicates that HUD made some progress

Results in Brief
Page 3 GAO-01-833 HUD: Status of Achieving Key Outcomes

toward achieving this outcome. However, we could not fully assess HUD’s

progress because the report indicates difficulties exist with constructing a

system to measure HUD’s contributions to achieving the outcome. HUD

reported that about half of the related measures were revised or deleted in

subsequent performance plans. The performance report generally

discusses the programs that support this outcome, rather than specific

strategies. The discussions of the performance measures for this outcome

acknowledge data reliability issues more clearly than such discussions

under some of the other outcomes.

Planned outcome: Less fraud, waste, and error in HUD programs. As we

reported last year, HUD does not have a goal to reduce fraud, waste, and

error in its programs; but it includes measures under its strategic goal of

ensuring public trust that would contribute to achieving this outcome.

HUD’s progress toward reducing fraud, waste, and error is not clear based

on the results reported for those selected measures, which indicate that

some of the goals were not met or data were not yet available. However,

this information may result in a somewhat more negative view of HUD’s

accomplishments related to this outcome than is warranted because the 1-

year assessment does not consider the progress HUD has made to address

its management deficiencies and its plans for future improvements. The

performance report provides reasonable strategies to improve HUD’s

operations, some of which are linked to specific performance measures,

but the report does not generally address plans for achieving unmet goals.

The discussion of strategies in the fiscal year 2002 performance plan is

somewhat better than the discussion of strategies for the other outcomes

because these strategies include more specific steps to be taken to achieve

the desired outcomes. However, strategies, goals, or measures that

specifically address fraud, waste, and errors, along with a risk assessment

process to identify the most vulnerable programs, would be useful in

future plans.

HUD has made improvements in its fiscal year 2000 performance report

and 2002 annual performance plan over prior years’ reports. The

performance report is in the new format HUD developed for its annual

performance plans beginning with fiscal year 2000. This improved the

report’s readability and clarity, although HUD’s progress in achieving some

measures is still not clearly articulated. HUD combined its fiscal year 2000

performance report with its fiscal year 2000 accountability report, which

consolidated a substantial amount of important information into one

document that also helps the reader understand the scope of HUD’s

activities. However, more needs to be done to improve the usefulness of

the performance report, such as including a more specific assessment of
Page 4 GAO-01-833 HUD: Status of Achieving Key Outcomes

the completeness and reliability of performance data. The fiscal year 2002

performance plan includes an expanded discussion of evaluations, more

information on the limitations and advantages of data, and information on

HUD’s human capital challenges. However, we noted that the discussion of

resources, coordination strategies, management challenges, and credibility

of performance data could still be improved.

The performance report and fiscal year 2002 performance plan do not

include specific goals or measures designed to resolve HUD’s management

challenges or the governmentwide management challenges, but they do

include numerous measures pertaining to those issues. Both the

performance report and performance plan state that the management

challenges are a high priority for the Secretary. Two of the outcomes

selected for this report relate to HUD’s management challenges.

HUD generally agreed with the information presented in our report.

Overall, HUD found the report to be balanced and useful for both

recognizing the significant progress that the Department has made and

pointing out areas where more progress is needed. However, HUD

identified some areas that it believed should be clarified. For example,

HUD disagreed with our statement that it generally did not provide

strategies for achieving its unmet homeownership goals because some of

the goals were not achieved for reasons beyond their control and some

information on prospective strategies that would address the issue was

discussed. We clarified the report, where appropriate, in response to

these comments.

GPRA is intended to shift the focus of government decisionmaking,

management, and accountability from activities and processes to the

results and outcomes achieved by federal programs. New and valuable

information on the plans, goals, and strategies of federal agencies has been

provided since federal agencies began implementing GPRA. Under GPRA,

annual performance plans are to clearly inform the Congress and the

public of (1) the annual performance goals for agencies’ major programs

and activities, (2) the measures that will be used to gauge performance,

(3) the strategies and resources required to achieve the performance goals,

and (4) the procedures that will be used to verify and validate

performance information. These annual plans, issued soon after

transmittal of the president’s budget, provide a direct linkage between an

agency’s longer term goals and mission and day-to-day activities.3

 Annual

 3

The fiscal year 2002 performance plan is the fourth of these annual plans under GPRA.

Background
Page 5 GAO-01-833 HUD: Status of Achieving Key Outcomes

performance reports are to subsequently report on the degree to which

performance goals were met. The issuance of the agencies’ performance

reports, due by March 31, represents a new and potentially more

substantive phase in the implementation of GPRA—the opportunity to

assess federal agencies’ actual performance for the prior fiscal year and to

consider what steps are needed to improve performance and reduce costs

in the future.4

HUD encourages homeownership by providing mortgage insurance

through its Federal Housing Administration (FHA) for about 7 million

homeowners who otherwise might not have qualified for loans, as well as

by managing about $508 billion in insured mortgages and $570 billion in

guarantees of mortgage-backed securities. It also makes housing

affordable for about 4 million low-income households by insuring loans for

multifamily rental housing and providing rental assistance. In addition, it

has helped to revitalize over 4,000 localities through community

development programs. To accomplish these missions, HUD relies on the

performance and integrity of thousands of mortgage lenders, contractors,

property owners, public housing agencies, communities, and others to

administer its programs.

This section discusses our analysis of HUD’s performance in achieving the

selected key outcomes and the strategies the agency has in place,

particularly in regard to strategic human capital planning and information

technology, for accomplishing these outcomes.5

 In discussing these

outcomes, we have also provided information drawn from our prior work

on the extent to which the agency provided assurance that the

performance information it is reporting is credible.

HUD’s performance report shows that progress was made toward the

outcome of increasing homeownership. For example, HUD reports that it

 4

The fiscal year 2000 performance report is the second of these annual reports under

GPRA.

5

Key elements of modern human capital management include strategic human capital

planning and organizational alignment; leadership continuity and succession planning;

acquiring and developing staffs whose size, skills, and deployment meet agency needs; and

creating results-oriented organizational cultures.

Assessment of HUD’s

Progress and

Strategies in

Accomplishing

Selected Key

Outcomes

Increased Homeownership
Page 6 GAO-01-833 HUD: Status of Achieving Key Outcomes

exceeded its goals in fiscal year 2000 for increasing the national

homeownership rate to 67.7 percent (compared with the target of 67.5

percent), homeownership in central cities to 51.9 percent (compared with

the target of 51.0 percent),6

 and the homeownership rate among families

with incomes below the area median to 52.2 percent (compared with the

target of 52 percent). However, HUD’s contribution to the achievement of

those goals is not clear because (1) HUD’s discussion of external factors

that affect homeownership in its annual performance and strategic plans

said that HUD has limited control of homeownership rates, and (2) HUD

did not achieve its goals for some of its programs that support

homeownership. The report does not explain why HUD believes it

contributed significantly to the overall increase in homeownership, even

though it did not meet its programmatic goals.

In discussing the external factors, the report noted that the record

homeownership rate depended in large part on the overall economy,

including low interest rates. This statement is consistent with others HUD

has made that it is not a dominant player in the homeownership market

and has limited impact on whether some national goals are met, including

the homeownership goal. Nevertheless, the report, also states that HUD’s

programs contributed significantly to the achievement of the increases in

homeownership; how this contribution is distinct from the significant

external factors that affect achievement of this goal remains unexplained.

HUD did not achieve some of its specific programmatic goals. For

example, the report cites the Federal Housing Administration (FHA),

Government National Mortgage Association (Ginnie Mae), Community

Development Block Grant (CDBG), and HOME Investment Partnership

Grant programs as supporting HUD’s homeownership objectives, but HUD

did not achieve its goals related to those programs.7

 For example, HUD

reported that FHA did not meet its planned goal of processing 1.26 million

single-family mortgage endorsements; actual performance was 921,283.

 6

Central cities are those cities within larger metropolitan areas that meet certain population

and employment characteristics established by the Bureau of the Census.

7

FHA insures single-family and multifamily mortgages; Ginnie Mae guarantees the payment

of principal and interest to investors of privately issued securities backed by pools of

federally insured loans; CDBG funds local community development programs for housing

and economic development needs; and HOME Investment Partnership program provides

assistance to renters and first-time homebuyers, builds state and local capacity to carry out

affordable housing programs, and expands the capacity of nonprofit organizations to

develop and manage housing.
Page 7 GAO-01-833 HUD: Status of Achieving Key Outcomes

Furthermore, Ginnie Mae did not achieve its goal to securitize 95 percent

of single-family FHA and Veterans Administration loans; actual

performance was 86.2 percent of eligible loans. The report does not

attempt to explain the connection between these results, which were less

than expected, and the reported increase in the overall homeownership

rates.

HUD’s reasons for not achieving some of its goals are inadequate. For

example, the reasons given for not meeting some goals appear to conflict

with those cited for achieving other homeownership goals. That is, HUD

states that part of the reason for not achieving the projected number of

endorsements is higher interest rates that reduced demand for FHAinsured loans; lower interest rates were given as a reason for meeting the

national homeownership goals stated above. Although this apparent

discrepancy may be related to the timing of the analyses or

methodological issues, the presentation of the information appears

inconsistent, and this inconsistency is not explained.

Other data necessary to evaluate HUD’s contributions toward achieving

the outcome are not currently part of the report. For example, the report

says that the homeownership goal was met, but it does not mention the

specific numeric target of 2.8 million new homeowners since 1998 that the

fiscal year 2000 performance plan said was needed to achieve an increase

in the national homeownership goal or how HUD’s 2.2 million mortgage

endorsements processed since fiscal year 1998 relate to that target. The

report also does not present information on factors that negatively affect

homeownership, such as defaults or foreclosures, that would help evaluate

whether home purchasers are able to retain the homes they buy using

HUD’s programs and therefore the extent to which HUD’s programs

contribute to increasing homeownership. The report did not make an

overall assessment of the impact of its fiscal year 2000 performance on

fiscal year 2001 performance; however, it shows that HUD revised some

goals for fiscal year 2001 on the basis of its fiscal year 2000 performance.

In the performance report, HUD discusses the programs that support its

overall homeownership objective but does not discuss its strategies, plans,

actions, or time frames for achieving its unmet goals for fiscal year 2000.

The fiscal year 2002 performance plan discusses strategies to increase

homeownership that are clear and reasonable and generally describe the

intended result. The performance plan also includes strategies that HUD

will pursue to help ensure home retention and encourage responsible

homeownership, which are important to sustaining homeownership levels,
Page 8 GAO-01-833 HUD: Status of Achieving Key Outcomes

although no specific goals or measures were established related to those

initiatives.

Neither the performance report nor the performance plan discussed

strategic human capital management or information technology issues as

part of HUD’s strategies to address the specific outcome. The performance

plan lists various evaluations and research related to the strategic goal to

increase the availability of affordable housing, but it does not specifically

discuss how those evaluations will be used to identify or improve

strategies in the future. This outcome is related to one of HUD’s

management challenges, and additional information is discussed under the

section on management challenges in this report and in appendix I.

HUD’s performance report indicates that it made some progress toward

the outcome of increasing affordable, decent, and safe rental housing.

However, the report shows that HUD was less successful in demonstrating

that it was able to increase the supply of affordable housing relative to the

number of people who need it most. The report shows that in fiscal year

2000 HUD was most successful in achieving the output goals that show the

units inspected or properties developed. For example, HUD met its goals

to (1) increase the share of units that meet physical and financial

standards by 1 percent (83 and 85 percent for public housing and

multifamily development respectively, exceeding the fiscal year 1999 level

of 62.5 and 77.3 percent); (2) develop properties for elderly and disabled

households (completing initial closings for 278 properties, exceeding the

goal of 226);8

 and (3) process multifamily mortgages (endorsing 579

mortgages exceeding the goal of 400). HUD was less successful in

demonstrating results that show how its actions increased the overall

quantity of affordable and decent housing compared with the number of

low-income households. For example, HUD has five outcome measures

related to improving the ratio of affordable units to low-income people,

but HUD was either unsuccessful in meeting the targets or does not yet

have the data to show the results for the measures. HUD said in the report

that the physical quality of rental housing has improved greatly, but it also

said that housing has become less affordable overall, particularly for poor

households. HUD states that for extremely low-income households, the

 8

However, in the fiscal year 2000 performance plan as issued, this measure was to bring 200

Section 202 (elderly) projects to initial closing. No information was provided on why the

change was made and whether HUD would have achieved its original goal to process 200

Section 202 projects.

Increased Affordable,

Decent, and Safe Rental

Housing
Page 9 GAO-01-833 HUD: Status of Achieving Key Outcomes

need for affordable rental housing has actually increased. The

explanations given for not meeting the goals varied but were generally

reasonable given the significant external factors that also affect

achievement of this outcome. For example, two factors that HUD cited

were grantees’ changing priorities and rent increases exceeding inflation

due to the strong economy.

The reliability of HUD’s data is generally not discussed for any outcome in

the performance report; a footnote indicates that data issues are discussed

in the annual performance plan. In the introduction to the report, HUD

acknowledges that the performance data collection systems and controls

over data quality remain areas that needs attention. While we recognize

that performance data quality is an area that HUD is addressing, this

information does not yet increase our confidence regarding the reliability

of the performance data, as discussed in previous reports.9

 We also

identified one example where the performance data cited in the report

might not be accurate, based on our work in the rental assistance area.

The preliminary results of our ongoing work with the Office of Multifamily

Housing Assistance Restructuring (OMHAR) indicates that HUD may not

have achieved the results it reported for the mark-to-market program in

fiscal year 2000. The mark-to-market program, administered by OMHAR,

seeks to retain affordable rental housing and reduce Section 8 assistance

costs by reducing excessive rental subsidies paid to assisted properties

and restructuring their mortgages where appropriate.10 Under a measure

that “seventy-five percent of multifamily mortgages restructured under the

Mark to Market program are closed within 12 months of PAE

[participating administrative entities] acceptance for restructuring,” HUD

reports that during fiscal year 2000 OMHAR exceeded the target by

completing deals on 494 properties, or 82.7 percent of the 597 properties

eligible for restructuring under the program. However, our analysis of data

provided by HUD indicates that OMHAR completed only four mortgage

 9

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);

Observations on the Department of Housing and Urban Development’s Fiscal Year 2000

Performance Plan (GAO/RCED-99-208R, July 20, 1999); and GAO/RCED-00-211R, June 30,

2000.

10HUD contracts with private property owners to provide housing rental assistance, called

Section 8 project-based assistance, on behalf of eligible low-income households. HUD also

provides Section 8 vouchers, through public housing agencies and other state and local

designated entities, that enable low-income families to seek housing in the private housing

market in the neighborhoods of their choice.
Page 10 GAO-01-833 HUD: Status of Achieving Key Outcomes

restructurings during fiscal year 2000. Two of these mortgage

restructurings were completed within 12 months of acceptance by the

participating administrative entities for restructuring.11 OMHAR may be

including rent restructurings (deals in which it reduces property rents to

market levels but does not carry out a mortgage restructuring) and rent

comparability reviews (activities in which OMHAR determines whether

current property rents are above or below market) as part of the totals it is

reporting.

The performance report includes an overall discussion of the general

strategies, programs, and external factors that affect HUD’s efforts to

ensure that affordable rental housing is available for low-income

households; but it does not discuss strategies, plans, or timeframes for

achieving the specific unmet goals for fiscal year 2000. The report

discusses evaluations that HUD has done to improve utilization of Section

8 housing vouchers, accuracy of rent determinations for assisted

households, and accuracy of subsidy amounts paid for assisted

households. However, the information would have been more useful if

HUD specifically discussed how the results of the evaluations would be

used to identify or improve strategies for achieving the goals in the future.

HUD reports that the studies indicate that (1) further attention by

management is necessary to better utilize Section 8 housing vouchers; and

(2) HUD continues to pay excess rental subsidies, partly because tenant

income is underreported and partly because of errors made by public

housing agencies, owners, and agents responsible for program

administration.

The fiscal year 2002 annual performance plan discusses HUD’s strategy to

strengthen its existing programs and improve usage of Section 8 housing

vouchers and public housing capital funds. The specific strategies HUD

outlines in the plan support these objectives and the measures related to

the outcome, although they do not discuss specific tools or risk

assessments that HUD will use to implement the strategies and achieve the

objectives. The performance plan refers to HUD’s coordination with other

 11A participating administrative entity is an entity OMHAR has contracted with to carry out

property restructurings under mark-to-market on behalf of the federal government. As of

May 7, 2001, OMHAR had contracts with 35 participating administrative entities, including

26 public agencies (such as state and local housing finance agencies) and 9 nonpublic

entities. Among other things, the responsibilities of the participating administrative entities

include determining appropriate rent levels, restructuring mortgage loans, underwriting

new or modified loans, and managing the closing process.
Page 11 GAO-01-833 HUD: Status of Achieving Key Outcomes

federal agencies to increase affordable rental housing. However, HUD

does not discuss specific coordination activities or other agencies’ specific

contributions to HUD’s goals. Neither the performance report nor the

fiscal year 2002 performance plan discusses human capital and

information technology as strategies to achieve this outcome. This

outcome is related to one of HUD’s management challenges, and

additional information is provided under the section on management

challenges in this report and in appendix I.

HUD’s performance report indicates that the Department made some

progress toward achieving this outcome. For example, HUD reports that it

met its goals of increasing jobs and reducing poverty in cities, increasing

capital in underserved neighborhoods,12 reclaiming brownfields

(contaminated commercial and industrial land), reducing crime, and

targeting grant funds to the most needy. HUD also noted a decrease in the

number of “doubly burdened” cities during fiscal year 2000.13 The number

of cities that were experiencing both a population loss and a high poverty

rate declined from 1 in 7 in 1999 to 1 in 8 in 2000. However, the report also

shows problems with the performance measures and data collected for

specific programs that make it difficult for the reader to determine what

HUD contributed to the achievement of the goals. HUD reports it does not

have data for one performance measure and thus could not report results;

two performance measures were related to programs that were never

authorized, and HUD did not report results. Even for one measure that

HUD achieved, the report notes that the measure was not a reliable

indicator of progress because it fluctuates from year to year. HUD reports

that half of the selected measures related to this outcome were revised or

deleted in future performance plans. Some of the reasons given include

that the measures were revised or deleted to eliminate comparisons

between cities and suburbs or to improve performance measurement, such

as to track performance over a 3-year period to obtain a more reliable

indicator of progress. Additionally, HUD’s discussion of external factors

notes the significant challenges it faces with this outcome. For example,

 12HUD defines an underserved neighborhood in metropolitan areas as census tracts with

either a minority population of at least 30 percent and median family income below 120

percent of the metropolitan area median or median family income at or below 90 percent of

the area median income regardless of minority population percentage.

13The report defines a “doubly burdened” city as one that experiences unemployment rates

that are 50 percent above the national average accompanied by either a population loss of 5

percent since 1980 or poverty rates of 20 percent or higher.

Improved Community

Economic Vitality And

Quality of Life
Page 12 GAO-01-833 HUD: Status of Achieving Key Outcomes

the economic issues mitigating against this outcome, such as mismatches

in the location of jobs and available workers, concentrations of poverty,

and grantees’ discretionary use of block grants (they may choose to use

the funds in other ways that may not contribute to specific HUD

objectives), may affect the results that HUD is able to achieve. The report

does not discuss how those problems will be mitigated.

For this outcome, the discussion of the measures more clearly

acknowledges data reliability issues and show HUD’s efforts to address

them. This may be a result of a report from the OIG in March 2001 that

identified several weaknesses in performance data from HUD’s community

development programs, among others, which support much of HUD’s

effort to improve community economic vitality and quality of life.14 For

example, the OIG reported that projections and estimates were used to

formulate program performance measurements rather than actual grantee

accomplishments.

In discussing the strategies that support this outcome, the performance

report discusses the contributions of some of HUD’s major programs, such

as CDBG, Empowerment Zones/Enterprise Communities, FHA, and the

Public Housing Drug Elimination Grant Program. As previously discussed,

however, it does not address whether and how unmet goals will be

achieved. As noted, this may be because about half of the measures will be

significantly revised or deleted in future years. The fiscal year 2002

performance plan discusses various strategies to promote relationships

with communities, other federal agencies, industry groups, and nonprofit

organizations to achieve this outcome, but it does not describe specific

tools or means of doing this. For example, the plan includes some

strategies that state HUD will encourage communities to address

economic issues. The plan does not describe how HUD will do this, even

though it notes that HUD’s direct impact on specific and measurable

results is somewhat limited. Neither the performance report nor the fiscal

year 2002 performance plan discusses human capital and information

technology as strategies to achieve this outcome. The plan does not

discuss the use of evaluations to identify or improve strategies for

achieving future goals.

 14Review of HUD’s Internal Controls over Fiscal Year 1999 Annual Performance Data,

Office of Inspector General (2001-FO-0004, Mar. 28, 2001).
Page 13 GAO-01-833 HUD: Status of Achieving Key Outcomes

As we reported last year, HUD’s strategic and annual performance plans

do not contain strategic goals or objectives for reducing fraud, waste, and

error in HUD programs.15 However, HUD has a strategic goal to “ensure

public trust” to improve its operations and address its management

challenges. Under this strategic goal, HUD includes performance measures

to achieve more accurate subsidy payments, better data, and better quality

housing, thereby reducing fraud, waste, and error. HUD’s progress toward

meeting the outcome of less fraud, waste and error during fiscal year 2000

is not clear based on the results for these measures. The performance

report shows that HUD met its targets for some significant measures, such

as increasing the share of assisted housing units that met HUD housing

standards, the number of grantees reviewed, and the reporting of tenant

information in a data system. However, the report also shows that HUD

did not achieve its goals for other measures, such as setting baselines for

reducing the share of public housing and Section 8 units managed by

troubled housing authorities, reviewing single-family appraisals, and

developing a data quality plan. This information may result in a somewhat

more negative view of HUD’s accomplishments in reducing fraud, waste,

and error than is warranted because the 1-year assessment does not

consider the progress that HUD has made in recent years to overcome

some of its long-term management deficiencies, and its plans for future

improvements.

The performance report generally provides reasonable explanations of

why some goals were not met and how they would be revised in the future.

For example, although we report that HUD did not meet several

performance measures based on the targets set in the fiscal year 2000

performance plan, HUD reports that it considers the targets “substantially

met” because the performance was very close to the target. HUD reported

that it “substantially” met the targets for determining the number of public

housing units managed by troubled housing authorities, determining the

number of multifamily properties with substandard financial management,

and matching tenant income data to tax and Social Security records. The

report states that these were one-time measures to track the

implementation of specific processes designed to improve HUD

operations. Because implementation was successful, HUD states that

these measures would not be reported on in the future. Additionally, the

plan states that some of the measures were dependent upon two of HUD’s

assessment activities that were delayed, one of which was delayed at the

 15GAO/RCED-00-211R, June 30, 2000.

Less Fraud, Waste, and

Error in HUD’s Programs
Page 14 GAO-01-833 HUD: Status of Achieving Key Outcomes

request of the Congress. The report noted that over half of the

performance measures used in fiscal year 2000 would be significantly

revised or deleted in 2001 or 2002.

The performance report discusses strategies to achieve HUD’s goal of

ensuring public trust and links some of those strategies to the achievement

of specific performance measures related to this outcome. It does not,

however, specifically address plans and time frames for achieving unmet

goals. As stated above, several of the unmet measures were one-time

measures to track implementation of systems or processes. A substantial

number of others will be revised in future years on the basis of

performance or data issues, so there would be no need to discuss

strategies for achieving these goals. The performance report includes

some human capital and information technology strategies under its

discussion of external factors that affect achievement of its efforts to

restore public trust. The report notes that HUD will continue

implementing a resource estimation and allocation process to aid in

managing workload, improve risk-based monitoring techniques, continue

to push for simplification of rental subsidy program requirements, and

work with HUD managers to ensure that systems requirements and data

quality controls are properly established.

The discussion of strategies contained in the 2002 performance plan

related to this outcome are somewhat better than those for the other

outcomes because they discuss more specific steps to be taken. They also

include some actions the Department plans to take if public housing

authorities, lenders, or others do not comply with policy. However, we

noted that the plan could be improved by including strategies, goals, or

measures that would specifically address the prevention and detection of

fraud, waste, and errors in HUD programs. This would also include a risk

assessment process to identify the most vulnerable programs and institute

internal controls to prevent and detect occurrences.16 The performance

plan’s strategies also address some of HUD’s human capital issues, such as

training employees, completing its resources estimation and allocation

process, developing a long-term staffing strategy to deal with expected

retirements, and continuing to develop a performance-based appraisal

 16For examples and case illustrations of information that federal agencies should consider

when developing strategies and planning and implementing actions that will help prevent

and detect fraud and errors, refer to GAO’s exposure draft, Strategies to Manage Improper

Payments: Learning from Public and Private Sector Organizations (GAO-01-703G, May

2001).
Page 15 GAO-01-833 HUD: Status of Achieving Key Outcomes

process. However, the plan does not include measures to determine the

effectiveness of those strategies. The strategies also include efforts to

improve HUD’s information technology, such as improving equipment for

higher productivity, improving data quality, and increasing citizen access

to information through electronic means such as HUD’s Web site. Both we

and the OIG have raised concerns about HUD’s strategic human capital

management and information technology issues, and additional

information is provided under the section on management challenges in

this report and in appendix I. The annual performance plan lists a number

of significant evaluations planned or currently under way pertaining to the

goal of ensuring public trust, such as an evaluation of aspects of HUD’s

2020 management reform and efforts to improve the quality of assisted

housing. The studies will be useful for evaluating HUD’s overall progress

in improving its operations and customer service.

For the selected key outcomes, this section describes major improvements

or remaining weaknesses in HUD’s (1) fiscal year 2000 performance report

in comparison with its fiscal year 1999 report, and (2) fiscal year 2002

performance plan in comparison with its fiscal year 2001 plan. It also

discusses the degree to which the agency’s fiscal year 2000 report and

fiscal year 2002 plan address concerns and recommendations by the

Congress, GAO, the OIG, and others.

HUD revised its performance report for fiscal year 2000 consistent with

the new format developed for its annual performance plans beginning in

fiscal year 2000, which included revised goals, objectives, and many new

measures. This improved the linkage to the annual performance plan and,

therefore, the readability and clarity in presentation of the fiscal year 2000

performance report, compared with the fiscal year 1999 report. HUD

combined the performance report with its fiscal year 2000 annual

accountability report, which consolidated a substantial amount of

important information on HUD’s operations and activities into one

document. The report summarizes HUD accomplishments for each

strategic goal and includes discussions of the major programs and the

most significant performance measures, general strategies, and external

Comparison of HUD’s

Fiscal Year 2000

Performance Report

and Fiscal Year 2002

Performance Plan

With the Prior Year

Report and Plan for

Selected Key

Outcomes

Comparison of

Performance Reports for

Fiscal Years 1999 and 2000
Page 16 GAO-01-833 HUD: Status of Achieving Key Outcomes

factors that affect the achievement of the strategic goals. The report also

includes a summary of the management problems identified by the OIG

and HUD’s response to each of the remaining concerns; however, the

report includes only a limited discussion of the current management

challenges we identified. In our opinion, the performance report could be

further improved if it included a discussion of resource issues, an overall

assessment of HUD’s progress toward achieving its strategic goals for the

fiscal year, and a more specific assessment of the completeness and

reliability of performance data.

The performance report did not provide an overall assessment of HUD’s

progress toward achieving its strategic goals and objectives for fiscal year

2000. The report shows that HUD did not achieve many of the results

expected, but no assessment was made on the significance of not

achieving the desired results to the overall achievement of the strategic

goals. As discussed above, where targets were not met, usually no

explanation was provided of what or whether anything could be done to

meet those goals in the future. For example, even in cases where the rise

of interest rates or other economic factors were given as reasons for not

achieving the desired results, a more comprehensive assessment would

have been useful to either identify any other underlying problems or

demonstrate that the result was reasonable given the influence of external

factors. In general, some insight into what kinds of problems were

experienced would be useful to the Congress and other decisionmakers as

they consider HUD’s budget and other requests.

Although the performance report made some additional improvements in

discussing data issues, more needs to be done to improve the usefulness of

the performance information. The Reports Consolidation Act of 2000

requires that the GPRA performance report contain an assessment of the

completeness and reliability of performance data.17 In the introduction to

the performance report, HUD states that it needs to focus on improving

performance data collection systems and controls over data quality,

particularly in the formula and discretionary grant programs. However, the

report does not provide an overall assessment of the performance data.

The HUD OIG reviewed a sample of the performance data reported in 1999

and found problems with its reliability.18 We noted examples where the

 17Reports Consolidation Act of 2000, Public Law 106-531, Nov. 22, 2000.

18Review of HUD’s Internal Controls over Fiscal Year 1999 Annual Performance Data,

Office of Inspector General (2001-FO-0004, Mar. 28, 2001).
Page 17 GAO-01-833 HUD: Status of Achieving Key Outcomes

fiscal year 2000 performance report seemed to address the concerns raised

by the OIG. For example, the report articulates performance measures for

which the results are “snapshots” rather than performance for the

complete fiscal year, and are estimates rather than actual performance.

However, we identified discrepancies in other information in the report,

suggesting that more work remains to be done. For example, as in the

OMHAR example discussed above, the data in the report do not agree with

other data HUD provided to us. We identified other performance measures

in the report where the methodology for charting progress changed or a

baseline that was supposed to have been set was not, but no information

was provided on why such changes were made or why they were

significant.

The fiscal year 2002 performance plan continues to improve over the 2001

performance plan. HUD revised its fiscal year 2002 performance plan to

reflect the updated strategic plan for fiscal years 2000 to 2006, adding one

new strategic objective and revising several others to cover the

Department’s activities more fully. The plan also includes additional

information on the Department’s resources, expands the discussion of

evaluations, creates a new type of measure that will be used for

monitoring purposes only,19 and includes information on actions to

address HUD’s human capital challenges. For example, the plan refers to

research being done on the outcomes in areas of concentrated CDBG

investment that will be used to shape the performance measures. The plan

also adds a measure that will track implementation of HUD’s resource

estimation and allocation process. However, we noted that the discussion

of how resources were linked to the achievement of performance goals,

the credibility of performance data, and the coordination strategies could

be improved. Additionally, goals or measures for HUD’s management

challenges would be useful for tracking HUD’s progress toward resolving

those specific issues.

In its performance plan, HUD includes a table for each strategic goal that

shows the programs, budget authority, and staff levels that HUD estimates

 19HUD established a small number of “monitors” of certain measures. According to HUD,

monitors measure and report results that the department deems important for achieving

strategic goals and objectives like other indicators. Unlike other indicators, however,

monitors will not have performance goals attached because the results are nearly entirely

controlled by external factors or by the discretionary decisions of the Department’s

partners.

Comparison of

Performance Plans for

Fiscal Years 2001 and 2002
Page 18 GAO-01-833 HUD: Status of Achieving Key Outcomes

generally support the achievement of that goal. Although this table is a

step toward showing how budgetary and human resources relate to

achieving goals, the information becomes somewhat confusing because

HUD also includes a second table for the underlying strategic objectives

that conflicts with the first table. For example, one table shows that HUD

allocated $1.585 billion of CDBG funds to the overall strategic goal of

increasing the availability of decent, safe, and affordable housing in fiscal

year 2002. A table for an underlying objective to increase homeownership

shows that an estimated $4.802 billion of CDBG funds is allocated to

achieve the homeownership objective in fiscal year 2002. Hence, it seems

that the underlying objective requires a larger portion of the budget than

the primary strategic goal that it supports. A footnote for this table

indicates that allocations at the underlying objective level are not

currently available; but the table would have been clearer if HUD either

used the estimated allocations by program that were in the first table, or

left out the information completely until better estimates can be

developed.

As discussed above, HUD has made it a priority to address the reliability of

its performance data. Although the plan continues to improve the

discussion of limitations to the performance data and discusses HUD’s

plans to improve its data quality, data credibility is an area we will

continue to monitor. HUD also notes that it has plans to review concerns

about performance measure data in response to a recommendation by the

National Academy of Public Administration. In a July 1999 study of HUD’s

compliance with GPRA, the Academy recommended that HUD develop a

plan that outlines a clear, departmentwide data quality goal with minimally

acceptable data quality standards for key elements, such as timeliness,

reliability, and accuracy.20 The Academy noted that the HUD’s quality

assurance approach did not have data quality standards, a plan for

verifying data quality, or assigned roles and responsibilities for those

involved in the quality work.

We have previously discussed with HUD the usefulness of including goals

and performance measures in the performance planning documents that

show HUD’s progress toward resolving its management challenges. The

2002 annual performance plan takes steps toward this by adding measures

 20GPRA in HUD: Changes for the Better, A Report by the National Academy of Public

Administration for Congress and the Department of Housing and Urban Development, July

1999.
Page 19 GAO-01-833 HUD: Status of Achieving Key Outcomes

and strategies that address some aspects of the management challenges,

but goals or measures that focus on the specific challenges that we and the

OIG have identified would be useful. For example, we have identified

HUD’s single-family insurance program and rental assistance programs as

high risk. Measures designed to address HUD’s progress on the issues

related to the challenges, such as monitoring lenders, overseeing

appraisers, managing single-family properties, or reducing excess subsidy

payments, would be useful in assessing HUD’s progress toward resolving

the management challenges.21

The one area in which HUD appears to have weakened since the 2001

performance plan is in its coordination with other federal agencies. The

2002 performance plan does not discuss some coordination activity that

was in the 2001 report. For example, under the objective to increase

homeownership, HUD does not mention its coordination with the

Department of Agriculture’s (USDA) or the Veterans Administration’s

housing programs. Also, we reported on the overlap between USDA’s

Rural Housing Service and FHA’s single and multifamily programs and

suggested that Congress consider requiring the two agencies to examine

the benefits and costs of merging those programs.22 In its response to our

report, HUD disagreed with the suggestion to merge the single family

programs but said opportunities to improve delivery of rural housing

services should be explored. These activities are not discussed in the

performance plan. Additionally, some indicators that were previously

identified as potential interagency indicators are not so designated in the

2002 performance plan. The plan does not provide information on HUD’s

reason for dropping these items or discuss the impact, if any, on HUD’s

achievement of its goals. We have also reported on the importance of

 21We have issued several reports related to HUD’s management challenges that include

open recommendations HUD has not yet resolved. See our correspondence to the

Secretary on Status of GAO’s Recommendations to the Department of Housing and Urban

Development (GAO-01-741R, May 11, 2001). These reports include: Single-Family

Housing: Stronger Oversight of FHA Lenders Could Reduce HUD’s Insurance Risk

(GAO/RCED-00-112, Apr. 28, 2000); Single-Family Housing: Stronger Measures Needed to

Encourage Better Performance by Management and Marketing Contractors

(GAO/RCED-00-117, May 12, 2000); Mortgage Financing: FHA’s Fund has Grown, but

Options for Drawing on the Fund Have Uncertain Outcomes (GAO-01-460, Feb. 28, 2001);

Public Housing: HUD Needs Better Information on Housing Agencies’ Management

Performance (GAO-01-94, Nov. 9, 2000); and Benefit and Loan Programs: Improved Data

Sharing Could Enhance Program Integrity (GAO/HEHS-00-119, Sept. 13, 2000).

22Rural Housing: Options for Optimizing the Federal Role in Rural Housing

Development (GAO/RCED-00-241, Sept.15, 2000).
Page 20 GAO-01-833 HUD: Status of Achieving Key Outcomes

interagency coordination on community growth issues and that

opportunities exist for federal agencies to improve their coordination.23 We

reported that the large number of federal programs that fund economic

development activities and the large number of federal agencies that

administer the programs can reduce communities’ flexibility in pursuing

reinvestment projects. HUD’s programs were among those most frequently

mentioned as helpful to community revitalization, but the plan makes

limited mention of HUD’s coordination activity with other agencies on

these interagency issues. In general, even where coordination activity is

discussed, the plan does not discuss the specific contribution of other

agencies to the achievement of HUD’s goals.

We have identified two governmentwide high-risk areas: strategic human

capital management and information security.24 Regarding human capital,

we found that the fiscal year 2000 performance report does not explain

HUD’s progress in resolving human capital challenges. However, it does

provide information on the steps HUD is taking to implement a resources

estimation and allocation process and develop a framework to begin

addressing human capital issues. We found that HUD’s fiscal year 2002

annual performance plan does not include specific goals or measures to

address strategic human capital management; however, it has three

performance measures pertaining to human capital issues. These three

measures are that (1) HUD employees are more satisfied with the

Department’s performance and work environment, (2) HUD will

implement the new resource estimation and allocation process, and (3)

HUD will improve the diversity of the workforce. With respect to

information security, the agency’s performance report discusses the status

of a new Enterprise Security Program that the Chief Information Officer is

creating. The report states that this program will provide adequate security

measures and safeguards to protect information resources from

unauthorized access, use, modification, and disclosure. Although the

performance report does not specifically address this high-risk area, it

states that during fiscal year 2000, HUD developed policies, wrote a

handbook, and created a training program for a Critical Infrastructure

Assurance program. We found that HUD’s performance plan does not have

 23Community Development: Local Growth Issues – Federal Opportunities and Challenges

(GAO/RCED-00-178, Sept. 6, 2000).

24Major Management Challenges and Program Risks: A Governmentwide Perspective

(GAO-01-241, Jan. 2001).

HUD’s Efforts to

Address its Major

Management

Challenges Identified

by GAO
Page 21 GAO-01-833 HUD: Status of Achieving Key Outcomes

goals and measures associated with information security, although we

have had open recommendations on this issue since 1994.25

In January 2001, we reported on three long-standing, major management

challenges facing HUD.26 We concluded that continued improvements were

needed to reduce HUD’s single-family insurance risk and to ensure that

HUD’s rental housing assistance programs are used effectively and

efficiently. We designated these two programs as high-risk areas for HUD.

We also reported that HUD needs to resolve its information and financial

management systems and human capital issues. In reviewing HUD’s fiscal

year 2000 annual performance report, we found that the report does not

provide goals or measures for addressing the management challenges we

identified, but it does state that the high-risk areas are a top priority for the

Secretary. The report also includes some measures that relate to the issues

we have raised in the single-family, rental assistance, and financial

management systems and human capital areas. For example, the report

has measures to increase the use of loss mitigation tools to reduce the

number of foreclosures (which reduces FHA’s insurance costs) and to

increase the net recovery on sales of single-family real estate owned.

However, the report does not include goals or measures related to other

aspects of the single-family program that we have been concerned about,

such as lender oversight. Two of these management challenges are related

to outcomes discussed in this report (increased homeownership and

increased affordable, decent, and safe rental housing).

HUD’s fiscal year 2002 performance plan does not contain goals and

measures to resolve the three management challenges we identified;

however, the plan contains some measures related to aspects of the singlefamily, rental assistance, and information and financial management and

human capital issues. For example, for the rental assistance management

challenge, the public trust strategic goal includes measures to increase the

share of assisted housing units that meet physical and financial standards

and to improve tenant income verification. The performance plan also

includes a separate section under its public trust strategic goal that

discusses HUD’s management challenges. The section discusses the

management challenges identified by us and states that addressing the

 25HUD Information Resources: Strategic Focus and Improved Management Needed

(GAO/AIMD-94-34, Apr. 14, 1994).

26Major Management Challenges and Program Risks: Department of Housing and Urban

Development (GAO-01-248, Jan. 2001).
Page 22 GAO-01-833 HUD: Status of Achieving Key Outcomes

long-standing management challenges is a top priority for the Secretary in

fiscal year 2002. It also discusses HUD’s recent progress and the activities

planned or being implemented that are expected to yield future

improvements. The plan notes that the Department has corrective action

plans to address the management challenges identified by us. It also states

that HUD will use the performance measures established for its strategic

goal of ensuring public trust to track the results of its management

improvements and identify where further improvements are needed,

although it does not identify those measures. However, as discussed

above, strategies, goals, or measures specific to resolving the management

challenges would improve the plan. See appendix I for a summary of the

major management challenges and related measures.

HUD prepared a performance report that is much improved from last year

and made additional improvements to its fiscal year 2002 performance

plan. Generally, the documents are understandable and well organized.

However, HUD did not achieve all of the performance measures for the

four key outcomes. For some performance measures that were achieved,

specifically for the homeownership outcome, the report did not clearly

explain how HUD’s programs contributed to achieving its goals, given the

significant external factors discussed. The report would be more useful to

Congress and other decisionmakers if it more clearly articulated HUD’s

overall progress toward achieving its goals, including identifying the

specific contributions it makes distinct from external factors or other

contributors. HUD has continued to revise and improve the performance

plan; but the quality of strategies for achieving goals varied by outcome

and generally did not include strategies to mitigate the external factors,

resource information was somewhat confusing, and some coordination

discussions from prior years were eliminated. The performance plan

would benefit from further discussion of HUD’s strategies for achieving

the goals; the estimated resources needed to achieve the goals; and

coordination with external partners, specifically other federal agencies.

Although the plan and report discuss HUD’s management challenges and

contain some performance measures that pertain to those challenges,

developing specific performance measures and strategies would serve to

focus HUD’s efforts to improve its management and ensure accountability

in its programs. The performance plan would be more useful if it included

goals, measures, and strategies to address HUD’s management challenges

and its efforts to reduce fraud, waste, and error, along with a risk

assessment process to identify the programs most vulnerable to fraud,

waste, and error. Finally, the report includes statements about HUD’s

plans and efforts to improve the accuracy of its data. To increase

Conclusions
Page 23 GAO-01-833 HUD: Status of Achieving Key Outcomes

confidence that the results HUD reported accurately and fairly represent

its achievements and to fully comply with the Reports Consolidation Act,

the performance report should contain a specific assessment of the

completeness and reliability of HUD’s performance data.

We recommend that the Secretary of Housing and Urban Development

consider the following improvements to future performance plans and

reports:

• Include sufficient information in the performance report to evaluate

HUD’s accomplishments, including an overall assessment of HUD’s

progress toward achieving its goals, identification of HUD’s specific

contributions to achieving the goals, and determination of the

contributions of other entities to HUD’s goals.

• Continue improving the performance plan by better estimating the

resources necessary to achieve the goals, articulating strategies to achieve

the goals and mitigate the problems encountered, and further discussing

coordination strategies with other federal agencies.

• Include sufficient goals, measures, and strategies to demonstrate HUD’s

efforts and progress in addressing its management challenges. In support

of HUD’s efforts to continue improving its management, future

performance plans would benefit from the inclusion of goals, measures, or

strategies to assess the prevention and detection of fraud, waste, and

error, as well as a risk assessment process to identify the most vulnerable

programs.

• Include an assessment of the completeness and reliability of performance

data that clearly articulates the implications of relying on that data to

evaluate HUD’s achievements.

As agreed, our evaluation was generally based on the requirements of

GPRA; the Reports Consolidation Act of 2000; guidance to agencies from

the Office of Management and Budget (OMB) for developing performance

plans and reports (OMB Circular A-11, Part 2); previous reports and

evaluations by us and others; our knowledge of HUD’s operations and

programs; our identification of best practices concerning performance

planning and reporting; and our observations on HUD’s other GPRArelated efforts. We also discussed our review with the HUD’s OIG and

obtained written comments from HUD. The agency outcomes that were

used as the basis for our review were identified by the Ranking Minority

Member of the Senate Committee on Governmental Affairs as important

mission areas for the agency, and three of the four reflect the outcomes for

HUD’s major programs or activities. The major management challenges

Recommendations for

Executive Action

Scope and

Methodology
Page 24 GAO-01-833 HUD: Status of Achieving Key Outcomes

confronting HUD, including the governmentwide high-risk areas of

strategic human capital management and information security, were

identified by us in our January 2001 Performance and Accountability

Series and High-Risk Update. HUD’s OIG identified its top management

challenges in December 2000. We did not independently verify the

information contained in the performance report and plan, although we

did draw from our other work for assessing the validity, reliability, and

timeliness of HUD’s performance data. We conducted our review from

April 2001 through June 2001 in accordance with generally accepted

government auditing standards.

We provided HUD a draft copy of this report for review and comment.

HUD generally agreed with the information presented in our report.

Overall, HUD found the report to be balanced and useful for both

recognizing the significant progress that the Department has made and

pointing out areas where more progress is needed. In general, HUD

concurred with the need for further analysis of the Department’s role in

meeting specific performance indicators, as well as larger strategic

objectives and goals, specifically in the homeownership area, and with the

need to develop more representative performance measures, without

necessarily increasing the total number of indicators. While agreeing with

most of the report, HUD identified some areas that it believed should be

clarified. For example, HUD disagreed with our statement that it generally

did not provide strategies for achieving its unmet homeownership goals

because some of the goals were not achieved for reasons beyond their

control and some information on prospective strategies that would

address the issue was discussed. We clarified the report to address most

of the issues that were raised by HUD. In addition, we incorporated

HUD’s technical comments where appropriate. HUD’s comments and our

detailed responses are in appendix II.

As arranged with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days after the

date of this letter. At that time, we will send copies to appropriate

congressional committees; the Secretary, Department of Housing and

Urban Development; and the Director, Office of Management and Budget.

Copies will also be made available to others upon request.

Agency Comments
Page 25 GAO-01-833 HUD: Status of Achieving Key Outcomes

If you or your staff have any questions, please call me at (202) 512-7631.

Key contributors to this report were Shirley L. Abel, Steven L. Cohen,

Jeannie B. Davis, Mark H. Egger, David G. Gill, Danielle P. Hollomon,

Bonnie J. McEwan, Sally S. Moino, John T. McGrail, and Kirk D. Menard.

Sincerely yours,

Stanley J. Czerwinski

Director, Physical Infrastructure Issues
Appendix I: Observations on the Department

of Housing and Urban Development’s Efforts

to Address Its Major Management Challenges

Page 26 GAO-01-833 HUD: Status of Achieving Key Outcomes

The following table identifies the major management challenges

confronting the Department of Housing and Urban Development (HUD),

which includes the governmentwide high-risk areas of human capital and

information security. The first column lists the management challenges

that we and/or HUD’s Office of Inspector General (OIG) have identified.

The second column discusses the progress, as discussed in its fiscal year

2000 performance report, HUD made in resolving its challenges. The third

column discusses the extent to which HUD’s fiscal year 2002 performance

plan includes performance goals and measures to address the challenges

that we and HUD’s OIG identified. We found that HUD’s performance

report discusses the management challenges identified by the OIG, as

authorized by the Reports Consolidation Act, but does not specifically

discuss the agency’s progress in resolving the management challenges we

identified in January 2001, other than to note that they were a high priority

for HUD management. Of the agency’s 15 management challenges, its

performance plan had measures that were directly related to 10 of the

challenges, had measures that were indirectly applicable to 2 challenges,

and had no goals or measures related to 3 other challenges.

Appendix I: Observations on the Department

of Housing and Urban Development’s Efforts

to Address Its Major Management Challenges
Appendix I: Observations on the Department

of Housing and Urban Development’s Efforts

to Address Its Major Management Challenges

Page 27 GAO-01-833 HUD: Status of Achieving Key Outcomes

Table 1: Major Management Challenges

Major management challenge

Progress in resolving major management

challenges as discussed in the fiscal year

2000 performance report

Applicable goals and measures in the

fiscal year 2002 performance plan

GAO-designated governmentwide

high risk

Strategic Human Capital Management:

GAO has identified shortcomings at

multiple agencies involving key

elements of modern human capital

management, including strategic

human capital planning and

organizational alignment; leadership

continuity and succession planning;

acquiring and developing staffs whose

size, skills, and deployment meet

agency needs; and creating resultsoriented organizational cultures.

The report does not specifically discuss this

governmentwide management challenge.

However, in the context of its strategic goal to

“Ensure Public Trust,” the report discusses

HUD’s resource estimation and allocation

process (REAP), which will establish a baseline

for estimating resources and making staff

allocations. HUD has experienced some delays

with this process, but completion is expected by

December 2001. The report includes a goal that

HUD’s workforce and partners are empowered,

capable, and accountable for results, which

includes measures of employee satisfaction and

capabilities, overall workforce diversity, and the

number of women and minority employees at

and above the GS-13 level. HUD reported that

employee satisfaction improved, and the

representation of women and minorities at GS13 and above exceeded the goal; however, HUD

did not achieve its diversity targets.

The performance plan does not include

specific goals or measures to address

the human capital issues identified by

GAO. However, the plan includes three

measures related to HUD’s human

capital activities:

• HUD employees will become more

satisfied with the Department’s

performance and work environment.

• The REAP initiative will be fully

implemented and will establish a

baseline for estimating resource

requirements and prioritizing staffing

allocations by program and office

• HUD continues to improve the

workforce to reflect the nation’s

diversity by increasing the

representation of underrepresented

groups by 0.3 percentage point.

Information Security: Our January 2001

high-risk update noted that the

agencies’ and governmentwide efforts

to strengthen information security have

gained momentum and expanded.

Nevertheless, recent audits continue to

show federal computer systems are

riddled with weaknesses that make

them highly vulnerable to computerbased attacks and place a broad range

of critical operations and assets at risk

of fraud, misuse, and disruption.

The report does not specifically discuss this

governmentwide management challenge.

However, the report states that as part of the

financial management systems activities led by

HUD’s Chief Information Officer during fiscal

year 2000, HUD initiated a Critical Infrastructure

Protection support effort, developed an

enterprise security architecture strategy, and

developed an Enterprise Security Remediation

Program Plan. The report states that the

program is intended to provide safeguards to

protect from unauthorized access, use,

modification, and disclosure. However, the report

also notes that as of the end of fiscal year 2000,

there were management concerns and material

nonconformance that carried over from fiscal

year 1999 in departmental financial management

systems. In particular, according to the

independent auditor’s report, there were

weaknesses related to the need to improve

(1) controls over HUD’s computing environment,

(2) administration of personnel security

operations, (3) reliability and security of critical

financial systems. In addition, on October 31,

2000, the OIG issued a report entitled HUD

Entity-wide Security Program, which stated that

HUD’s security program needs significant

The performance plan does not include

specific goals or measures to address

the information security high-risk area.
Appendix I: Observations on the Department

of Housing and Urban Development’s Efforts

to Address Its Major Management Challenges

Page 28 GAO-01-833 HUD: Status of Achieving Key Outcomes

Major management challenge

Progress in resolving major management

challenges as discussed in the fiscal year

2000 performance report

Applicable goals and measures in the

fiscal year 2002 performance plan

improvement and that HUD has not placed the

appropriate emphasis on information systems

security. Specifically, the report noted that risks

are not adequately assessed or managed;

security plans are either not documented or not

kept current; incident tracking, reporting, and

response capability needs improvement; an

effective training and awareness program is not

in place; and HUD’s Critical Infrastructure

Protection Plan is inadequate and out of date.

We have reported open recommendations on

computer security at HUD since 1994.

GAO-designated major management

challenge

Continued improvements needed to

reduce HUD’s single-family mortgage

insurance risk: To reduce financial

risks, HUD’s FHA needs to continue to

improve its management over home

mortgage loans made by private

lenders that it insures against nearly all

losses. While FHA has accumulated

capital reserves of about $16.6 billion

on insured home loans valued at about

$454 billion, we estimate that FHA lost

about $1.9 billion during fiscal year

2000 on the sale of foreclosed loans

that it had insured. We reported that

HUD has opportunities to strengthen

FHA’s management and internal

controls that include strengthening the

loan origination process; promoting

better monitoring of lenders,

appraisers, and property management

and marketing contractors; and

ensuring that sufficient staff with the

right skills are available to carry out

FHA’s home loan mission.

The report includes a paragraph on HUD’s highrisk issues and states that these issues are

among the highest priorities. The report does not

include goals or measures to resolve HUD’s

management challenges. However, the report

includes four measures that directly relate to

issues raised by GAO. HUD has two measures

to assist in managing losses that may be

experienced in HUD’s single-family programs.

For the measure to increase returns on real

estate owned, HUD did not achieve the expected

amount of return. For another measure, to

increase the use of alternatives to foreclosure

(and thereby reduce losses to the insurance

fund), HUD reported that it substantially

exceeded the goal. The report also includes a

measure to hold appraisers accountable for

high-quality appraisals by having HUD

electronically review single-family appraisals

submitted for endorsement. HUD did not achieve

the numeric goal for reviewing appraisals; but it

reports that this was a one-time effort to

implement the system, and as such HUD

considered it successful. The report also

includes a measure that FHA’s insurance fund

will meet the mandated reserve levels. HUD

reports meeting this goal.

The performance plan does not include

specific goals or measures to resolve the

single-family high-risk area identified by

GAO. However, the plan includes four

related measures, two of which are

directly related, on issues GAO has

raised about reducing HUD’s singlefamily insurance risk:

• The share of FHA mortgage defaults

resolved by loss mitigation

alternatives to foreclosure increases

by 2 percentage points to 38.1

percent.

• The FHA Mutual Mortgage Insurance

Fund meets congressionally

mandated capital reserve targets.

• The net recovery of FHA real estate

owned sales increases by 1

percentage point to 64.8 percent.

• The share of FHA single-family

appraisals determined to be

unacceptable is reduced.

Continued improvements needed to

ensure HUD’s rental housing

assistance programs are used

effectively and efficiently: Because

HUD is able to serve fewer than half of

the households who are eligible for

assisted housing, it is essential that it

ensure that these programs are used

efficiently and effectively to maximize

the number of households that can be

assisted. Significant opportunities still

The report includes a paragraph on HUD’s highrisk issues, but it does not include specific goals,

measures, or strategies to resolve the rental

assistance management challenge. However,

the report includes 19 measures that directly

relate to the issues associated with this

management challenge – improving the quality

of housing and ensuring that accurate benefits

are paid only to eligible persons. HUD reported it

did not meet 11 of the stated goals, or the results

were unclear; set baselines for 3 measures; and

The performance plan does not include

specific goals or measures to resolve the

rental assistance high-risk area.

However, the plan includes 23

measures, some of which are directly

related, on various aspects of ensuring

that quality housing is provided to

eligible households that pay the correct

amount of rent. For example:

• Among units occupied by low-income

households, the share containing
Appendix I: Observations on the Department

of Housing and Urban Development’s Efforts

to Address Its Major Management Challenges

Page 29 GAO-01-833 HUD: Status of Achieving Key Outcomes

Major management challenge

Progress in resolving major management

challenges as discussed in the fiscal year

2000 performance report

Applicable goals and measures in the

fiscal year 2002 performance plan

exist to reduce excess subsidy

payments estimated to total over $3

billion for the last 4 years by ensuring

that only eligible families occupy units

and that they pay the correct rents;

ensure that providers of rental housing

maintain housing that is decent, safe,

sanitary and in good condition; and be

certain that HUD has the capital

resources and controls needed to

detect and address problems that exist

in its rental housing assistance

programs.

met 5 of the performance targets. threats to health and safety decreases

by 0.2 percentage points to 5.5

percent by 2003.

• The share of units that meet HUDestablished physical standards

increases by 3 percentage points to

73.9 percent of public housing units

and 89.5 percent of assisted

multifamily units.

• The share of HUD-assisted properties

observed with exigent health and

safety or fire safety deficiencies

decreases by 1.0 percentage point for

public housing and by 0.6 percentage

point for assisted multifamily housing.

• As part of the effort to eliminate

100,000 units of the worst public

housing, demolish 13,000 units during

fiscal year 2002.

• The share of tenant-based Section 8

units managed by troubled housing

agencies decreases by 5 percentage

points.

• The share of households for which

rent determinations are correct

increases by 15 percent from fiscal

year 2000 levels for public housing,

project-based Section 8 and tenantbased Section 8 by fiscal year 2003.

Resolution needed for information and

financial management systems and

human capital issues: HUD has

determined that its financial

management systems do not meet all

of its needs and has plans under

development to address this issue. We

reported that HUD must continue to

focus on improving its information

technology management processes to

help ensure success in systems

initiatives across the Department. HUD

must also resolve a number of human

capital issues, such as adjusting

workload to consider implementation of

the new centers, complete actions to

measure workload, and staff its

programs adequately.

The report includes a paragraph on HUD’s highrisk issues, but it does not include specific goals,

measures, or strategies to resolve the

information systems and human capital

management challenge. However, the report

includes measures that address certain aspects

of these issues. It describes systems measures

to highly rate automated systems, develop a

Performance Data Quality Assurance Plan, and

ensure that each program office has an

approved data quality plan. HUD reports that

during fiscal year 2000, it was necessary to

modify these goals, and the performance

expected was generally not achieved. For

example, HUD decided to focus on missioncritical data systems, rather than on program

offices. As a result, the program offices do not

have approved data quality plans. The report

states that the quality assurance planning

process was not sufficiently refined to warrant

independent assessment, and the Department

instead decided to independently assess the

The performance plan does not include

specific goals or measures to address

the information and financial

management systems and human

capital management challenge.

However, the plan includes five

measures related to these issues:

• HUD employees become more

satisfied with the Department’s

performance and work environment.

• The REAP initiative will be fully

implemented and will establish a

baseline for estimating resource

requirements and prioritizing staffing

allocations by program and office.

• HUD continues to improve the

workforce to reflect the nation’s

diversity by increasing the

representation of underrepresented

groups by 0.3 percentage point.

• HUD automated data systems are

rated highly for usefulness, ease of
Appendix I: Observations on the Department

of Housing and Urban Development’s Efforts

to Address Its Major Management Challenges

Page 30 GAO-01-833 HUD: Status of Achieving Key Outcomes

Major management challenge

Progress in resolving major management

challenges as discussed in the fiscal year

2000 performance report

Applicable goals and measures in the

fiscal year 2002 performance plan

usability, usefulness, and life-cycle costs of HUD

data systems, rather than track user perceptions

of quality. Also, under a discussion of its

financial management accountability, HUD

reports on progress made in improving its

financial management systems. For human

capital issues, the report states that HUD’s

employee responses to the National Partnership

for Reinventing Government survey improved,

and the representation of women and minorities

at GS-13 and above exceeded the goal;

however, HUD did not achieve its diversity

targets.

use, and reliability.

• During fiscal year 2002, eight missioncritical data systems will be assessed

(for data quality) and those systems

will be certified that critical data

elements conform to the program’s

business rules by the end of fiscal

year 2003.

OIG-designated major management

challenges

HUD 2020 Management Reforms: The

OIG reports that many aspects of the

plan are far from completion and that

some of the critical aspects of the plan,

such as staffing and financial

management systems, are still under

development. The OIG cites a HUD

sponsored study which noted that the

transition is happening slowly and there

is a pervasive tension between

centralized control and local

empowerment. Moreover, since HUD

has never performed an adequate cost

benefit analysis, there is no assurance

that changes being implemented will

fundamentally improve the financial

and program operations of the

Department.

As required by the Reports Consolidation Act,

the report included a summary of the OIG’s

assessment of the management challenges

facing HUD. It also included HUD’s response to

each of those issues, which states that progress

has been made and some improvements were

realized. However, HUD notes that further efforts

are needed to institutionalize those changes and

ensure consistency in operations. The report

does not include goals or measures that directly

relate to assessment of the effectiveness of the

2020 Management Reform plan or the financial

management and staffing issues raised by the

OIG. However, the report includes a strategic

goal to “ensure public trust in HUD” that includes

measures for certain aspects of the reforms,

such as for measuring the activities of the new

centers, as discussed below.

The performance plan does not include

specific goals or measures to address

this management challenge identified by

the OIG. However, the plan includes a

strategic goal to “ensure public trust”

with an objective that HUD and its

partners effectively deliver results to

customers. The plan states that this

objective articulates the Department’s

continued efforts to address its

management challenges and to make

HUD a high-performing agency, which

were the general purposes of the 2020

Management Reform Plan.

Financial Management Systems: The

OIG has reported concerns about

HUD’s efforts to improve and integrate

its financial management systems,

including integrating FHA’s general

ledger into HUD’s departmentwide

systems. Most recently, the OIG was

concerned about HUD’s decision to

restart its efforts to integrate its

systems with a $1.45 million purchase

of software licenses because the

Department had not performed

adequate study and analysis before

making this procurement decision.

The OIG recommended that HUD

delay development efforts for the

purchased software package until

adequate systems development

HUD states that it established a core standard

general ledger that is inefficiently integrated with

HUD’s accounting and business processes. To

overcome these inefficiencies and continue

improving its systems, the Chief Financial Officer

has developed a new financial management

systems vision that is currently under review.

The report does not include goals or measures

that directly relate to the OIG’s concerns about

HUD’s integrated financial management systems

and FHA’s general ledger. We do not consider

the performance measure to “obtain clean audit

opinions” to relate to the information and

financial management systems aspect of the

management challenge. This is because a clean

audit opinion is not an indication of adequate

data systems. In HUD’s consolidated financial

statement audit, the OIG reported that HUD

The performance plan does not include

specific include goals or measures to

address this management challenge.

However, the plan includes one measure

that indirectly relates to the management

challenge:

• During FY 2002, eight mission-critical

data systems will be assessed (for

data quality) and those systems will

be certified by the end of fiscal year

2003.
Appendix I: Observations on the Department

of Housing and Urban Development’s Efforts

to Address Its Major Management Challenges

Page 31 GAO-01-833 HUD: Status of Achieving Key Outcomes

Major management challenge

Progress in resolving major management

challenges as discussed in the fiscal year

2000 performance report

Applicable goals and measures in the

fiscal year 2002 performance plan

studies and analysis are conducted

and the Enterprise Architect Plan is

issued and considered.

remains noncompliant with Federal Financial

Management Improvement Act requirements for

federal financial management systems and

Standard General Ledger at the transaction

level.

Real Estate Assessment Center

(REAC): The OIG reports that HUD is

placing heavy reliance on its new

REAC, which consolidated physical

and financial assessments into one

organization. The OIG notes that the

property inspections are costing

millions of dollars annually, information

systems to support this operation are

costly, industry participants have raised

serious questions about the reliability of

the assessments, and there are

concerns that the results of the

assessments are not being used

effectively.

HUD states that it is retooling some aspects of

REAC’s assessment systems to better ensure

the quality and consistency of assessments. The

report does not directly address the OIG’s stated

concerns about the costs of REAC’s work and

use of the information obtained. However, the

report includes six measures that relate to the

implementation of some of REAC’s assessment

activities. HUD reports it set the baseline for one

performance measure, as planned. For five other

performance measures, HUD did not achieve the

specific targets set; however, it states the goals

were “substantially met” and implementation was

successful. The report states that the five

measures will no longer be reported.

The performance plan does not include

specific goals or measures to address

this management challenge.

Departmental Enforcement Center

(DEC): The vision for the DEC was to

combine non-civil rights compliance

enforcement actions for all of HUD’s

program offices into one organization.

However, the Center has not been

working to capacity. Nearly all the

focus has been on multifamily

programs and HUD has not given the

DEC critical delegation authority crucial

to tougher enforcement actions.

Without this authority, the Center may

never realize the independence or

autonomy planned. The OIG believes

that the Department needs to be more

aggressive in taking administrative

actions and that the DEC needs to be

fully operational.

The report does not include specific goals or

measure related to this management challenge.

HUD states that the DEC’s resources have been

targeted to the most egregious cases of

compliance deficiencies in the program areas

with the highest risk. The report states that other

programs are viewed as lower risk. HUD states it

is pursuing improved performance measurement

and reporting to hold program partners

accountable.

The performance plan includes one

measure directly related to the

management challenge:

• The DEC will improve management

by multifamily housing partners by

reducing the multifamily cases in the

DEC as of September 30, 2001, by 80

percent, by closing 75 percent of all

cases received in FY 2002 that have

been in the DEC for 180 days and by

completing all cases received in FY

2002 and closed in FY 2002 in an

average of 180 days.

Troubled Agency Recovery Centers

(TARCs): The OIG found that the

TARCs were working at less than 10

percent of their planned capacity, due

to delays in implementation of an

assessment system and no clear

direction from headquarters on data or

procedures to assist field staff in

determining whether a housing

authority should be designated as

“troubled” and forwarded to the TARCs

for servicing.

HUD states that delays in implementing the new

Public Housing Assessment System (PHAS) rule

have delayed full deployment of the TARCs. The

report does not include goals or measures that

directly relate to the capacity of the TARCs, but

the report includes five measures related to the

identification and management of troubled public

housing authorities. According to the

performance report, HUD did not achieve any of

these measures during fiscal year 2000.

The performance plan includes one

measure directly related to the

management challenge:

• The number of public housing units

managed by troubled housing

agencies that are assigned to a TARC

as of October 1, 2001, decreases by

15 percent by September 30, 2002.
Appendix I: Observations on the Department

of Housing and Urban Development’s Efforts

to Address Its Major Management Challenges

Page 32 GAO-01-833 HUD: Status of Achieving Key Outcomes

Major management challenge

Progress in resolving major management

challenges as discussed in the fiscal year

2000 performance report

Applicable goals and measures in the

fiscal year 2002 performance plan

Use of Staff Resources: The OIG

reported that HUD still lacks the

capability to support resource

allocation. HUD’s implementation of its

new REAP process is currently behind

schedule. The OIG also stated that

even if the studies are completed in a

fair and unbiased manner, they will not

address how the information will be

used in determining staff allocations or

adjustments. The OIG remains

concerned whether the results will be

used to better utilize staff resources

and notes that budget limitations may

further limit HUD’s ability to properly redistribute its resources if needed.

HUD states that it has developed a “Succession

Planning” document that in combination with its

REAP study will provide the basis for a

Workforce Plan that will enable HUD to address

its human capital needs. The report does not

include goals or measures that directly relate to

the resource estimation and allocation issues

raised by the OIG.

The performance plan contains one

measure directly related to the issue

raised by the OIG in the staff resources

management challenge:

• The REAP initiative will be fully

implemented and will establish a

baseline for estimating resource

requirements and prioritizing staffing

allocations by program and office.

FHA Single-Family Loan Origination

Practices: Procedures and practices

pertaining to HUD’s single-family loan

origination program have undergone

considerable change, particularly in the

last 5 years. Changes have included

significant changes in loan underwriting

requirements, transfer of loan

production and program monitoring

from HUD staff to contractors. The

OIG has reported on problems in

FHA’s reviews of lender underwriting,

property appraisals, monitoring of

lenders, oversight of pre-endorsement

contractors, and the accuracy of

information in the automated tracking

system.

HUD states that it has accepted improvements

made by both GAO and the OIG to reduce risk in

its single-family insurance program. HUD states

it is proposing a change to the National Housing

Act to confirm its authority to terminate a lender’s

approval to originate mortgages when the lender

have a high level of early defaults. HUD states

that an improved control structure is in place, but

the remaining challenge is to ensure operational

consistency and apply appropriate sanctions.

The report does not include goals or measures

that directly relate to the lender monitoring

issues associated with this management

challenge.

The performance plan does not include

specific goals or measures to address

this management challenge. However,

the plan has one measure related to the

management challenge:

• The share of FHA single-family

appraisals determined to be

unacceptable is reduced.

Single-Family Section 203(k) Program:

An OIG audit of this program found

investors and nonprofit borrowers

abusing the program. The program as

designed encouraged risky property

deals, land sale and refinance

schemes, overstated property

appraisals, and phony or inflated fees.

HUD states that it will consider eliminating one

part of the program because it is a high-risk area

that is not critical to the achievement of HUD’s

core mission. The report includes one measure

to increase the number of single-family

properties using the program by 4 percentage

points. HUD did not achieve the goal, attributing

the failure to increased interest mortgage rates

and the weakening of the housing market.

However, HUD also noted that tightening

program procedures to reduce programmatic

abuses reduced market acceptance of the

program, and it is reviewing options about the

future direction of the program.

The performance plan does not include

specific goals or measures to address

the issues associated with this

management challenge; however, it

contains one measure indirectly related

to the management challenge:

• Maintain the number of single-family

properties rehabilitated under Section

203(k).

Single-Family Property Disposition

Program: An OIG audit of HUD’s

management and marketing

contractors found the contractors did

not maximize the return to the

HUD states that it is considering

recommendations made by GAO and the OIG to

make further improvements in the program. The

report includes one measure on increasing the

recovery of single-family properties; however,

The performance plan includes one

measure directly related to this

challenge:

• The net recovery of FHA real estate

owned sales increases by 1
Appendix I: Observations on the Department

of Housing and Urban Development’s Efforts

to Address Its Major Management Challenges

Page 33 GAO-01-833 HUD: Status of Achieving Key Outcomes

Major management challenge

Progress in resolving major management

challenges as discussed in the fiscal year

2000 performance report

Applicable goals and measures in the

fiscal year 2002 performance plan

mortgage insurance fund or maintain

properties in a manner that

strengthened neighborhoods and

communities. The OIG found problems

with all seven contracts reviewed and

noted that outsourcing of the

disposition program resulted in reduced

returns to the insurance fund of about

$188 million. These losses were

attributed to poor sales performance

and substantially increased costs.

HUD did not achieve its expected performance

due to programs that removed properties from

inventory more quickly but that also reduced the

sales price.

percentage point to 64.8 percent.

Section 8 Program Administration: The

OIG reported that HUD is not

adequately administering the Section 8

Rental Assistance program. HUD

continued to experience problems in

accounting and budgeting funds, pay

excessive subsidies, provide

inadequate monitoring of contract

administrators, inadequately oversee

its own Section 8 portfolio, and have

difficulty in timely identifying unneeded

excess funds remaining on expired

project-based Section 8 contracts.

HUD states that it recognizes that this is a

material management control weakness, and it is

developing a comprehensive corrective action

plan. The report included five measures for fiscal

year 2000 that relate to some aspects of the

Section 8 issues raised by the OIG, such as

improving accuracy of Section 8 subsidies. HUD

did not achieve its goal to set the baselines in

fiscal year 2000 for four of the measures as

planned primarily due to delays in implementing

SEMAP, but it states that baselines will be set in

fiscal year 2002. For the fifth measure, HUD did

not achieve its goal to increase the accuracy of

rent determinations during fiscal year 2000

because the baseline was not set until fiscal year

2000, rather than during 1999 as planned.

The performance plan does not include

specific goals or measures to address

this management challenge, but it does

include measures on improving

management of Section 8 and ensuring

that accurate subsidies are paid:

• Utilization of Housing Choice

Vouchers increases by 2 percentage

points from the fiscal year 2000 level

to 94 percent.

• By helping housing agencies issue

rental vouchers in timely fashion,

HUD decreases the share of the

program administered by housing

agencies with substandard lease-up

rates by 10 percent.

• The household-weighted average

SEMAP score increases.

• The share of tenant-based Section 8

units managed by housing agencies

that score highly for determination of

rent reasonableness increases.

• The share of households for which

rent determinations are correct

increases by 15 percent from FY 2000

levels for public housing, projectbased Section 8 and tenant-based

Section 8 by FY 2003.
Appendix II: Comments from the Department

of Housing and Urban Development

Page 34 GAO-01-833 HUD: Status of Achieving Key Outcomes

Appendix II: Comments from the Department

of Housing and Urban Development

Note: GAO comments

supplementing those in

the report text appear at

the end of this appendix.
Appendix II: Comments from the Department

of Housing and Urban Development

Page 35 GAO-01-833 HUD: Status of Achieving Key Outcomes

See comment 1.
Appendix II: Comments from the Department

of Housing and Urban Development

Page 36 GAO-01-833 HUD: Status of Achieving Key Outcomes

See comment 2.

See comment 4.

See comment 3.
Appendix II: Comments from the Department

of Housing and Urban Development

Page 37 GAO-01-833 HUD: Status of Achieving Key Outcomes

See comment 7.

See comment 6.

See comment 5.
Appendix II: Comments from the Department

of Housing and Urban Development

Page 38 GAO-01-833 HUD: Status of Achieving Key Outcomes

See comment 9.

See comment 8.
Appendix II: Comments from

the Department of Housing and

Urban Development

Page 39 GAO-01-833 HUD: Status of Achieving Key Outcomes

The following are GAO’s comments on the Department of Housing and

Urban Development’s letter dated June 21, 2001.

1. To address HUD’s concerns that our statements about strategic human

capital management and information technology strategies appear

contradictory, we clarified the report to emphasize that strategic

human capital management and information technology were not

discussed as strategies related to the programmatic outcomes selected

for this review. However, we recognize they are discussed as part of

HUD’s efforts to address its management challenges and achieve its

goal of ensuring public trust as shown in other parts of the

performance report.

2. We believe the report recognizes that HUD has included strategies and

performance measures that address aspects of reducing fraud, waste,

and error in its programs, and our analysis of HUD’s progress included

most of the measures HUD cites in its letter. Our intent was not to say

that HUD did not have such measures but that our analysis indicated

that the results did not present a clear picture of HUD’s progress

toward achieving this outcome. Our analysis of the selected measures,

including most of those mentioned in HUD’s comments, showed that

for all but five, HUD set baselines, modified the measure, did not

achieve the results expected, or will not set baselines until fiscal year

2002 so that performance related to those measures can not yet be

assessed. We clarified the report to emphasize that HUD’s progress

toward reducing fraud, waste, and error is not clear based on the

results reported as of fiscal year 2000. However, as stated in our

report, we believe that the strategies, goals, and measures, (and

therefore the plan) could be improved by specifically including a focus

on preventing and detecting fraud and errors. Additionally, this would

be in line with our requester’s interest in seeing an outcome related to

reducing fraud, waste, and error in HUD programs. This report

contains a reference to our exposure draft on this subject; we have

agreed to discuss with HUD ways of developing goals and measures

that more specifically measure HUD's progress in reducing fraud,

waste, and error in future performance plans.

3. We recognize that in some places the performance report notes where

unmet measures would be revised or deleted, or other actions would

be taken in the future, although we did not specifically list all of those

situations. However, there are also places where unmet goals provide

the opportunity to evaluate HUD’s performance and future actions,

GAO’s Comments
Appendix II: Comments from

the Department of Housing and

Urban Development

Page 40 GAO-01-833 HUD: Status of Achieving Key Outcomes

particularly where significant external factors affect its ability to

achieve its goals as planned. These external factors do not release

HUD from the responsibility to develop strategies to mitigate the

extent of those external factors or to determine whether or how the

goals and measures should be revised to compensate for those factors.

In fact, the extensive external factors the Department faces (also see

comment 4) in trying to achieve its goals make it especially important

that HUD have these strategies to address its unmet goals, and

evaluations may be useful for that purpose. This comment specifically

refers to our observation about the homeownership outcome for which

HUD notes the external factors are particularly complex.

4. We agree that the issue of determining the impact of an agency’s role

in achieving goals for which there are many external partners and

economic influences is complex. We have agreed to discuss this issue

with HUD, and we also encourage the Department to consult with

OMB and the Congress on the most appropriate strategies and means

for the Department to measure the impact of its programs. (See also

comment 3.)

5. We appreciate the Department’s concerns about accurately portraying

data reliability issues, and we clarified the discussion to (1) emphasize

that HUD also recognizes that more work remains to be done in this

area, and (2) this is one example of our concerns. However, we did

not change the example because the performance report does not

explain the substantial difference between what the measure says it

will achieve and the results reported. The report is written in such a

way that only those familiar with this program would detect the

discrepancy and understand the possible reason for the difference.

Until we are assured that the performance reports show results based

on accurate data for all the key outcomes and that the results

presented are a fair representation of HUD’s activities, we will

continue to report concerns about the reliability of the performance

data.

6. We clarified the report, where appropriate, to make it clear in the

examples cited that we are not saying that HUD did not achieve

specific numeric goals but that HUD did not achieve its goals to set

baselines in fiscal year 2000 as planned. For the purposes of our

analyses, we considered a goal to set a baseline by the same criteria as

other measures that were to achieve a specific numeric target. We

believe this is an important issue because until baselines are set, HUD

cannot measure its progress toward achieving its goals.
Appendix II: Comments from

the Department of Housing and

Urban Development

Page 41 GAO-01-833 HUD: Status of Achieving Key Outcomes

7. The intent of our observation was not necessarily to recommend that

HUD develop more measures but develop goals and measures that

focus more on resolving the specific management challenges. We

clarified the report to emphasize that the goal is to develop measures

that effectively address the specific management challenges. We have

agreed to consult with HUD on possible ways of developing goals and

strategies that reflect the management challenges; but we also suggest

that HUD consult with the Congress and OMB on this issue,

particularly since OMB’s Circular A-11 requires goals that address

agency management challenges. Such goals, according to OMB, often

will be expressed as milestone events for specific remedial steps.

8. We clarified our report to note that the performance report includes

measures that relate to aspects of HUD’s 2020 Management Reform,

such as for the new centers, but it generally does not include goals that

relate to the specific issues raised by the OIG.

9. Our observation on HUD’s performance measure to obtain clean audit

opinions was included in the report to explain why we did not include

this measure in our analysis of HUD’s efforts to address its

management challenge related to financial systems. Although we do

not consider it a measure that helps evaluate HUD’s progress toward

improving its systems or addressing it management challenges, this

should not be construed as a criticism of HUD’s decision to include the

measure in its GPRA documents, if it finds the measure useful.

Achievement of a clean audit opinion is an important milestone;

however, until HUD addresses the Inspector General’s concerns about

HUD's integrated financial management systems and FHA’s general

ledger, it will not be in a position to provide reliable, timely

information on a day-to-day basis to support ongoing management and

accountability.

(391016)

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