United States Government Accountability Office

Washington, DC 20548 

March 16, 2005 

The Honorable Christopher H. Smith 

House of Representatives 

Subject: Veterans Affairs Homeless Programs: Implementation of the Transitional 

 Housing Loan Guarantee Program 

In 1998, Congress passed the Veterans Programs Enhancement Act, which authorized 

the Department of Veterans Affairs (VA) to establish a new loan guarantee program 

for the construction or rehabilitation of multifamily transitional housing projects 

specifically designed to provide housing for homeless veterans. The program is 

intended to increase the amount of housing available, as well as provide other 

services to encourage addiction recovery and reestablish work and social 

relationships. You asked us to examine why no multifamily housing projects are 

operational, given that the loan guarantee program was authorized over 6 years ago. 

Specifically, you asked us to provide information on (1) actions VA has taken to 

implement the Transitional Housing Loan Guarantee Program and (2) issues that 

have affected program implementation. 

To provide this information, we reviewed documentation for the Transitional Housing 

Loan Guarantee Program; the Federal Credit Reform Act of 1990 and other applicable 

criteria, such as Office of Management and Budget (OMB) circulars and a Federal 

Accounting Standards Advisory Board technical release; OMB’s role in federal credit 

programs; and our past reports on housing for homeless veterans and other federal 

credit programs. We also interviewed the program development contractor and VA 

and OMB officials to obtain their views on program development and any issues that 

may have impacted implementation. Our work was performed from September 2004 

through March 2005 in accordance with generally accepted government auditing 

standards. 

In summary, we found that since enactment of the legislation authorizing the loan 

program in 1998, VA has drafted regulations; designed the program, including 

working with program contractors to develop the loan terms and supporting 

infrastructure for processing and administering the loans; and consulted with OMB 

and sponsors (potential loan recipients) to conceive the initial housing projects. 

Program implementation has been affected by the challenges associated with 

creating VA’s first transitional housing loan guarantee program for homeless 

veterans, deciding on program financing and structure including whether VA or the 

Department of Housing and Urban Development should manage the program, 

replacing the initial program development contractor, and addressing delays 

 GAO-05-311R VA Transitional Housing 
associated with project-specific, local issues such as historical preservation and 

obtaining land parcels. Enclosure I contains briefing slides on our findings. 

We provided a draft of this report to VA for comment. In its written comments, VA 

concurred with the report’s findings. VA also provided technical comments, which 

we incorporated. (See encl. II for a copy of VA’s comments.) 

- - - - - 

We are sending copies of this report to the Chairman and Ranking Minority Member, 

House Committee on Veterans’ Affairs; the Chairman and Ranking Minority Member, 

Senate Committee on Veterans’ Affairs; and the Secretary of Veterans Affairs. We will 

also make copies available to others upon request. In addition, the report will be 

available at no charge on GAO’s Web site at http://www.gao.gov. If you or your staff 

have any questions about this report, please contact me at (202) 512-7101 or Michael 

T. Blair, Jr., Assistant Director, at (404) 679-1944. Aditi Shah Archer and Michael 

Tropauer made key contributions to this report. 

Sincerely yours, 

Cynthia A. Bascetta 

Director, Health Care—Veterans’ 

 Health and Benefits Issues 

Enclosures - 2 

2 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I

VA Homeless Programs: Implementation of the 

Transitional Housing Loan Guarantee Program

Briefing slides for the staff of

The Honorable Christopher H. Smith

House of Representatives

March 16, 2005

3 GAO-05-311R VA Transitional Housing 
Enclosure I Enclosure I 

2

VA Homeless Programs: Implementation of the 

Transitional Housing Loan Guarantee Program

• Introduction

• Key Questions

• Methodology

• Results in Brief

• Background

• GAO Findings

4 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

3

Introduction

• Public Law 105-368 authorized the Department of Veterans 

Affairs (VA) to establish a new loan guarantee program for 

the construction or rehabilitation of multifamily transitional 

housing projects specifically designed to provide housing for 

homeless veterans. The program is intended to increase the 

amount of housing available as well as provide other services 

to encourage addiction recovery and reestablish work and 

social relationships. We were asked to provide information 

about the implementation of the program, which was 

authorized over 6 years ago.

5 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

4

Key Questions

• We were asked to provide information on the following 

questions:

(1) What actions has VA taken to implement the Transitional 

Housing Loan Guarantee Program?

(2) What issues have affected program implementation?

6 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

5

Methodology

• We reviewed documentation for 

• the Transitional Housing Loan Guarantee Program;

• the Federal Credit Reform Act of 1990 and other 

applicable criteria, such as Office of Management and 

Budget (OMB) circulars and a Federal Accounting 

Standards Advisory Board technical release;

• OMB’s role in federal credit programs; and

• past GAO reports on housing for homeless veterans and 

other federal credit programs. 

7 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

6

Methodology (continued)

• We interviewed 

• the program development contractor and

• VA and OMB officials to obtain their views on program

development and any issues that may have impacted 

implementation.

• Our work was performed from September 2004 through 

March 2005 in accordance with generally accepted 

government auditing standards.

8 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

7

Results in Brief

• VA committed conditionally to guaranteeing three loans in

2003 and one in 2004.

1

However, as of February 1, 2005, no

project sponsors had received these loans from the lender—

the Federal Financing Bank. Since enactment of the loan

program in 1998, VA has

• drafted regulations; 

• designed the program, which included working with

program contractors to develop the loan terms and 

supporting infrastructure for processing and administering 

the loans; and 

• consulted with OMB and sponsors to conceive the initial

housing projects.

1 VA’s commitment is dependent on the sponsor meeting a number of conditions such as purchasing land and obtaining local

government approval for the project’s design plan.

9 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

8

Results in Brief (continued)

• Program implementation has been affected by challenges 

associated with 

• creating VA’s first transitional housing loan guarantee 

program for homeless veterans; 

• deciding on program financing and structure; 

• replacing the initial program development contractor; and

• addressing delays associated with project-specific, local 

issues such as preserving historical properties and 

obtaining land.

10 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

9

Background: Homeless Veterans

• An estimated one-third of the adult homeless population has 

served in the armed forces. In fiscal year 2003

• VA’s total costs associated with the treatment of about 

100,000 homeless veterans using VA health care 

services was about $1.2 billion and 

• VA provided over 11,000 beds for homeless veterans 

nationwide. 

11 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

10

Background: Transitional Housing

• VA has three programs that offer transitional housing and 

rehabilitative services.2

• The Transitional Housing Loan Guarantee Program is an 

additional program intended to increase the amount of 

housing available, as well as provide other services to 

encourage addiction recovery and reestablish work and 

social relationships. 

• The program is to guarantee up to 15 loans with a maximum 

aggregate value of $100 million.

2 The Compensated Work-Therapy/Transitional Residence Program, Homeless Providers Grant and Per Diem Program, 

and Domiciliary Care for Homeless Veterans Program.

12 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

11

Background: Transitional Housing 

(continued)

• In fiscal year 2000, the Congress appropriated about 

$48 million to VA, which is presently held in VA’s Housing 

Program Account.3

This subsidy will be available for VA, the 

guarantor, to repay the lender—the Federal Financing 

Bank—in the event that the project sponsors default on the 

loans.

• Since fiscal year 2000, the Congress has authorized VA to 

use funds from its general operating expenses and medical 

care appropriations for program administration. 

3 Pub. L. No. 106-74, Oct. 20, 1999.

13 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

12

Question 1: VA Actions to Implement the 

Program

a On the basis of the Secretary’s decision to place a hold on the program, VA ordered the program contractor to stop work in July 2002; work resumed in October 2002. 

b While VA has committed to guaranteeing loans for these housing projects, its commitment is dependent on the sponsor meeting a number of conditions, such as

purchasing land and obtaining local government approval for the project’s design plan. The conditions had not been met as of February 1, 2005, and no sponsors have

received loans from the lender. 

14 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

13

Question 2: Issues Affecting Program 

Implementation

• The program is new to the federal government. 

Consequently, there is no financial model or historical data, 

which would have facilitated 

• identifying a lender and project sponsors,

• developing the program structure, and 

• forecasting financial risk to the federal government.

• Although the authorizing legislation was enacted in fiscal year 

1999, VA did not initiate implementation until after funding for

the loan program was provided in fiscal year 2000. 

15 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

14

Question 2: Issues Affecting Program 

Implementation (continued)

• The Secretary’s belief that VA should not expend resources 

to implement the program accounted for program delays.

• The Secretary placed a hold on program development in 

July 2002, indicating that the Department of Housing and 

Urban Development should assume management of the 

program. 

• In October 2002, the Secretary, after discussions with the 

leadership of the House Committee on Veterans’ Affairs, 

reconsidered and proceeded with VA management of the 

program soon after appointing a new lead program 

manager in September 2002.

16 GAO-05-311R VA Transitional Housing
Enclosure I Enclosure I 

15

• VA did not find the initial program contractor’s work satisfactory. 

Additional time (February-April 2002) was necessary to 

• conduct a quality review of work performed by the program 

contractor to identify areas of work that VA could continue to 

use and

• select a replacement contractor to continue program

development. 

• Individual project startup has proven to be time-consuming. For 

example, the Vietnam Veterans of San Diego housing project—

which received a conditional loan guarantee commitment from VA 

in 2003—cannot begin construction until local government approval 

for the design plan is obtained. 

Question 2: Issues Affecting Program 

Implementation (continued) 

17 GAO-05-311R VA Transitional Housing
Enclosure II Enclosure II

(290417) 

18 GAO-05-311R VA Transitional Housing 
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost 

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To 

have GAO e-mail you a list of newly posted products every afternoon, go 

to www.gao.gov and select “Subscribe to Updates.” 

The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to: 

U.S. Government Accountability Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548 

Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800 

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

PRINTED ON RECYCLED PAPER