An Overview of the Agency Financial Report 

The Department of Housing and Urban Development (HUD) has chosen to produce an Agency 

Financial Report (AFR) and Annual Performance Report (APR). HUD will include its fiscal 

year (FY) 2010 APR with its Congressional Budget Justification and will post it on the 

Department’s Web site at www.hud.gov by February 7, 2011. 

This report provides financial and summary performance information to the President, the 

Congress, and the American people. The report allows readers to assess HUD’s performance 

relative to its mission, priority goals and objectives, and stewardship of public resources. The 

AFR is divided into three sections: 

Section I – Management’s Discussion and Analysis (MD&A). This section provides an 

overview of HUD’s FY 2010 results, and includes the following categories: 

Mission, Organizations and Major Program Activities, and Strategic Plan; 

Priority Goals, including 3rd quarter FY 2010 year-to-date program results; and a look at 

the future; Transform the Way HUD Does Business; and the American Recovery and 

Reinvestment Act of 2009 (Recovery Act); 

Analysis of Financial Condition and Results for FY 2010; and

Management Assurances concerning compliance with laws and regulations. 

The MD&A is supported and supplemented by detailed information contained in the other two

sections of this report. In addition, the detailed performance information will be reported 

separately in the APR scheduled for release in February 2011. 

Section II – Financial Information. This section presents HUD’s consolidated financial 

statements and accompanying notes for FY 2010 and the independent auditor’s report on those 

financial statements. This section also contains Required Supplementary Stewardship 

Information, Required Supplementary Information, the Secretary’s Audit Resolution Report, and 

the Delinquent Debt Collection Report. 

Section III – Other Accompanying Information. This section presents other required or 

Agency deemed important information such as Improper Payments Information Act (IPIA) 

reporting and the HUD Office of Inspector General’s (OIG) independent assessment of the 

Department’s major management and performance challenges, as well as progress in addressing 

those challenges. 

Appendices – Appendix A contains a list of defined acronyms. Appendix B contains websites 

for the endnotes referenced within the document (numbered consecutively preceded by an “E”).
Page 1 

TABLE OF CONTENTS 

TABLE OF CONTENTS ........................................................................................................ 1 

MESSAGE FROM SECRETARY DONOVAN ........................................................................ 3 

SECTION I: MANAGEMENT’S DISCUSSION AND ANALYSIS ......................................... 6 

MISSION, ORGANIZATIONS AND MAJOR PROGRAM ACTIVITIES, AND STRATEGIC PLAN ..... 6 

ORGANIZATIONS AND MAJOR PROGRAM ACTIVITIES ...................................................... 6 

HUD’S ORGANIZATIONS AND REPORTING STRUCTURE ................................................. 11 

HUD’S STRATEGIC PLAN ................................................................................................. 12 

HUD’S STRATEGIC FRAMEWORK .................................................................................... 13 

FY 2010 PERFORMANCE OVERVIEW ..................................................................................... 14 

PRIORITY GOAL 1: FORECLOSURE PREVENTION ........................................................... 15 

PRIORITY GOAL 2: RENTAL ASSISTANCE ....................................................................... 20 

PRIORITY GOAL 3: VETERANS HOMELESSNESS ............................................................. 23 

PRIORITY GOAL 4: ENERGY AND GREEN RETROFITS .................................................... 27 

TRANSFORM THE WAY HUD DOES BUSINESS ................................................................. 31 

THE RECOVERY ACT ........................................................................................................ 35 

ANALYSIS OF FINANCIAL CONDITION AND RESULTS ............................................................ 35 

MANAGEMENT ASSURANCES.................................................................................................. 47

SECTION II: FINANCIAL INFORMATION ...................................................................... 51 

MESSAGE FROM THE CHIEF FINANCIAL OFFICER ................................................................ 51 

FINANCIAL STATEMENTS ....................................................................................................... 53 

NOTES TO FINANCIAL STATEMENTS ...................................................................................... 58 

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION .............................................. 114 

REQUIRED SUPPLEMENTARY INFORMATION ....................................................................... 121 

INDEPENDENT AUDITOR’S REPORT ..................................................................................... 130 

SECRETARY’S AUDIT RESOLUTION REPORT TO CONGRESS ............................................... 142 

DELINQUENT DEBT COLLECTION ........................................................................................ 145 

SECTION III: OTHER ACCOMPANYING INFORMATION ........................................... 147 

OFFICE OF INSPECTOR GENERAL’S MANAGEMENT AND

PERFORMANCE CHALLENGES ........................................................................................ 147 
HUD FY 2010 Agency Financial Report

Table of Contents

Page 2 

SUMMARY OF FINANCIAL STATEMENT AUDIT 

AND MANAGEMENT ASSURANCES .................................................................................. 167 

IMPROPER PAYMENT INFORMATION ACT REPORTING DETAILS ........................................ 169 

HUD ASSISTED HOUSING UNITS BY PROGRAM ................................................................... 178 

COMPLIANCE STATUS OF FINANCIAL MANAGEMENT SYSTEMS ......................................... 179 

APPENDIX

GLOSSARY OF ACRONYMS .................................................................................................... 180 

TABLE OF WEBSITES ............................................................................................................. 183 
Message from the Secretary

Page 3 

November 15, 2010 

I am honored to present the U.S. Department of 

Housing and Urban Development’s Agency Financial 

Report for Fiscal Year (FY) 2010, an alternative to the 

Performance and Accountability Report, in accordance 

with OMB Circular A-136. This report describes our 

financial results during a year of struggle for our Nation. 

Helping our families and our communities recover from 

this economic crisis has been, and continues to be, the 

focus of the Department’s efforts.

In HUD’s Strategic Plan for FY 2010 – 2015, our 

mission to create strong, sustainable, inclusive 

communities and quality, affordable homes for all is 

reflected in our five strategic goals, as explained early in 

this report. From there, we identified and designated four 

Priority Goals that are essential to achieving our mission for this and the coming fiscal years. 

Those goals and our results through June 30, 2010 (year-to-date through the third quarter) were

as follows: 

HUD assisted 1.55 million homeowners at risk of losing their homes due to foreclosure

and is on target to reach the goal to assist 3.1 million homeowners by the end of 

FY 2011; 

HUD served 5.30 million families, in meeting the growing need for affordable rental 

homes. HUD is on target to reach its Priority Goal that, by the end of FY 2011, HUD 

will serve a total of 5.46 million families, 207,000 more than in FY 2009; 

HUD and the Department of Veterans Affairs have worked to reduce the number of 

homeless veterans by 19,028. The two Departments are on target to reach our shared 

goal to reduce the number of homeless veterans to 59,000 by June 2012; and

HUD completed cost-effective energy and green retrofits of 19,199 public, assisted, and 

other HUD-supported affordable homes. We expect to meet our goal to complete

159,000 retrofits by the end of FY 2011. 

This report takes a high-level look at activities and results related to each of these goals. 

Details for these goals will be included in the Annual Performance Report published in 

February 2011. 

As part of HUD’s efforts to assure a stable and sustainable housing market and a healthy 

national economy, we have also taken steps to begin developing a comprehensive, balanced 

national housing policy that supports sustainable homeownership and affordable rental housing. 

By partnering with private and “Third Sector” actors from the philanthropic and nonprofit 

communities, by helping cities and suburbs share solutions at the regional level to tackle 

challenges like economic development, access to jobs, and traffic congestion – and by using data 
HUD FY 2009 Agency Financial Report 

Message from Secretary Donovan

Page 4 

to enhance performance and craft policy – we have begun to create a culture at HUD that 

rewards results and nurtures local innovation. 

This year, HUD endorsed 1,661,917 single family and 1,011 multifamily mortgages and 

provided rental assistance to 5.3 million residential units. As a result of HUD’s initiatives, and 

those of the Department of the Treasury and the private sector, since April 2009 families have 

received more than 3.5 million mortgage modifications – nearly triple the number of foreclosures 

that occurred during that time. 

At the center of many of these efforts has been the Federal Housing Administration (FHA). 

When the housing market began its slow collapse 3 years ago, FHA comprised only about 2 to 

3 percent of the housing market. But when private capital vanished at the end of 2008, it was the 

FHA that stepped in – insuring approximately 30 percent of purchases and 20 percent of 

refinances in the housing market. Since January 2009, the agency has helped nearly 3 million 

Americans either purchase a home, or refinance into more stable, affordable mortgages. In the 

same period, FHA helped more than a half million families at risk of foreclosure through 

760,000 loss mitigation actions. 

In November 2009, HUD reported to Congress that FHA’s secondary reserves had fallen 

below the required 2 percent level. The Administration has taken very seriously its 

responsibility to ensure that FHA is operating on sound financial footing while minimizing risk 

to taxpayers – announcing and implementing the most sweeping combination of reforms to FHA 

credit policy, risk management, lender enforcement, and consumer protections in its history. 

These reforms have strengthened FHA’s financial condition and minimized risk to taxpayers as it 

continues to fulfill the Department’s mission to serve communities nationwide. 

Through the Recovery Act, HUD has helped renovate more than 315,000 homes, with nearly 

3,000 developed – many to green standards with energy efficiency improvements, saving money 

for residents and owners alike. The Homeless Prevention and Rapid Re-Housing Program 

(HPRP) has prevented homelessness for well over a half million people. Just as importantly, as 

the U.S. Conference of Mayors reports, HPRP is fundamentally changing the way communities 

respond to homelessness at the local level, keeping people in their homes rather than waiting for 

them to become homeless, and quickly returning those who do fall into homelessness to the 

stable, permanent housing they need. As a result of all of these efforts, in the second quarter of 

this year, HUD Recovery Act recipients reported that more than 26,000 jobs have been created 

or saved – at such an important time for our economic recovery.

As we help our communities recover, we have also made a firm commitment to providing 

affordable rental housing. This year we proposed our Transforming Rental Assistance (TRA)

initiative, to simplify the way the Federal Government provides rental assistance to millions of 

our most vulnerable families – giving families more choice and responsibility. Through our 

Choice Neighborhoods initiative, we are building on proven public housing redevelopment 

strategies to transform neighborhoods of concentrated poverty into sustainable, mixed-income 

communities of opportunity and choice. In addition, through the $7 billion Neighborhood 

Stabilization Program, we are helping communities purchase and put 100,000 properties in the 

Nation’s hardest-hit markets back into productive use. To date, grantees report that more than 

36,000 of these properties are already either under construction or rehab. 
Message from Secretary Donovan 

Page 5 

HUD has played a significant role in disaster relief efforts – in states like California, Iowa, 

and Tennessee, and especially those along the Gulf Coast. Of the nearly 40,000 Gulf Coast 

families that remained on temporary government housing assistance when President Obama took 

office, 98 percent have moved into permanent housing. We have helped 99 percent of families 

who qualified for federal assistance receive it, have torn down barriers to put nearly $400 million 

in rebuilding dollars in the hands of low-income homeowners, and have reduced the number of 

blighted homes in the New Orleans metropolitan area by 14 percent since December 2008. At 

the same time, we are reforming the Housing Authority of New Orleans. All of the “Big Four” 

public housing complexes are under construction, with hundreds of families having returned to 

their homes, and we have provided more federally assisted housing in New Orleans than there 

was before the 2005 hurricanes – some 8,400 affordable homes since taking office. 

Indeed, as these efforts suggest, we have begun to change the way HUD does business, as 

described in detail in the section on Goal 5. We have become much more place-based in the way 

we collect data and make decisions – delegating decisionmaking to the field wherever possible, 

and thinking more holistically about how to best connect our work in communities nationwide to 

the availability of health services, transportation, employment, and educational facilities. 

Through our Transformation Initiative (TI), we are taking long-overdue steps to upgrade and 

modernize our Department – helping us replace computer programs written in the 1980s, build 

the capacity of communities, and demonstrate what works and what doesn’t. TI has also begun 

to provide us with the flexibility we need to create crosscutting initiatives. We are reforming our 

hiring process to ensure that we are employing, training, and retaining high quality talent for 

performing our work and have already reduced the average length of our hiring process by more 

than 8 weeks, to 79 days. We are creating upward mobility programs to provide opportunities 

for our dedicated HUD staff and are reviewing HUD rules and reports in order to simplify or 

eliminate them. HUD’s transformation is a long-term effort, and the activities started in 

FY 2010 are just the beginning, with much work to be done. 

Through all this, we continue to demonstrate our commitment to sound financial 

management, having obtained a “clean” opinion on our financial statements from independent 

auditors for the 11th consecutive year with no material weaknesses for the 3rd consecutive year. 

I can provide reasonable assurance that the performance data in this report is reliable and 

complete. Any data limitations are documented in the report. The Department’s financial 

management systems and controls provide reasonable assurance that the objectives of the Federal 

Managers’ Financial Integrity Act (FMFIA) are being met.

Together with other executive agencies, our Nation’s legislators, and many stakeholders in 

the housing community, we are reorienting HUD to meet the challenges of the 21st century – and 

seizing this unique moment in our history to build the strong, sustainable, inclusive communities 

America needs to succeed in the decades to come. 

Shaun Donovan 

Secretary
HUD FY 2010 Agency Financial Report 

Section I

Page 6

Management’s Discussion and Analysis

Mission, Organizations and Major Program Activities, 

and Strategic Plan 

HUD’s mission stems from a directive in the Housing Act of 1949 to create “a decent home and 

suitable living environment for every American family.” This founding mandate is the 

groundwork for which we continue to develop and preserve quality, healthy, and affordable 

homes. 

The core focus of HUD’s mission is one in which housing and communities result in a better 

quality of life and the fulfillment of the promise that America holds for all people. Moreover, it 

prioritizes responsible decisions about owning or renting that are financially appropriate for the 

individual or family. HUD is committed in its mission to serve its residents, partners, 

employees, and the communities. For its residents, HUD provides access to the opportunities 

that result from living in homes and neighborhoods that are safe, healthy, affordable, and 

inclusive. For its partners, HUD is committed to strengthening partnerships among federal, state, 

and local entities across the public, nonprofit, and private sectors to meet the housing and 

community development needs of this country. 

Success in delivering services to the nation’s residents and partners is dependent on HUD’s 

employees. Therefore, HUD’s focus will be to invoke a work environment that is mission 

driven, results oriented, innovative, and collaborative. 

Organizations and Major Program Activities

HUD accomplishes its mission through component organizations (outlined on the following 

pages) and offices that administer place-based programs that collaboratively seek to meet the 

mission of the Department. Place-based programs leverage investments by focusing resources in 

targeted places and drawing on the compounding effect of well-coordinated action. Effective 

place-based programs can influence how rural and metropolitan areas develop, how well they 

function as places to live, work, operate a business, preserve heritage, and more. A new 

vigorous effort is underway in collaborating with other Federal agencies to meld the 

Our Mission

Create strong, sustainable, inclusive communities 

and quality, affordable homes for all.
Management’s Discussion and Analysis

Mission, Organization, Major Program Activities, and Strategic Plan

Page 7

Department’s coordinated interests and strengths to pursue better results. Such policies can also 

streamline otherwise redundant and disconnected programs. 

As part of reinventing the Department and to better meet its mission, HUD established an Office 

of the Chief Operating Officer (OCOO) to provide leadership and a comprehensive strategy for 

HUD’s current operations of procurement, human resources, and information technology. The 

OCOO will provide a way to coordinate these interdependent functions in order to facilitate 

decision making and ensure accountability. Within the OCOO, a new Office of Disaster 

Management and National Security was also established to develop, coordinate, and implement 

HUD’s response to disasters, as well as lead the agency in its disaster and emergency 

preparedness, protective services, and intra- and interagency disaster recovery efforts. In 

addition, the Office of Sustainable Housing and Communities was created to support HUD’s 

energy efficiency and green building efforts, and administer HUD’s FY 2010 Sustainable 

Communities Initiative. This initiative promotes pedestrian-friendly, public transit-oriented, 

mixed-income and mixed-use communities in order to substantially reduce transportation costs, 

to create energy savings (by reducing vehicle-miles traveled), and enhance access to employment 

and educational opportunities. In FY 2010, the Office of Strategic Planning and Management 

(OSPM) was created to develop and implement the Strategic Plan, and to track agency 

performance against quantitative outcome goals and help drive the agency’s transformation 

effort. 

HUD’s programs are carried out through a network of regional offices and smaller field offices, 

as well as through grantees, contractors, and other business partners. A detailed map of HUD’s 

regional and field offices is located at HUD’s local offices.E1 HUD’s major organizations 

include: 

The Office of HousingE2 provides vital public services through its nationally administered 

programs. It oversees the Federal Housing Administration (FHA), the largest mortgage 

insurer in the world, as well as regulates housing industry business. Within the Office of 

Housing are six business areas:

Single Family HousingE3—HUD’s Single Family programs include mortgage 

insurance on loans to purchase new or existing homes, condominiums, 

manufactured housing, houses needing rehabilitation, and for reverse equity 

mortgages to elderly homeowners. In FY 2010, Single Family programs endorsed 

1,661,917 loans and carried nearly a $1 trillion of Insurance-In-Force.

Housing Counseling ProgramE4—HUD’s housing counseling program provided 

support and training to 2,743 counseling agencies, of which 2,252 were authorized 

to provide mortgage delinquency and default resolution counseling. In FY 2010, 

about half of the citizens participating in the program received foreclosure 

prevention counseling, and of those completing that counseling and for whom 

results are known, almost half received a mortgage modification and another 

15 percent entered into a forbearance agreement or repayment plan.
HUD FY 2010 Agency Financial Report 

Section I

Page 8

Multifamily HousingE5—HUD’s Multifamily programs provide mortgage insurance 

to HUD-approved lenders to facilitate the construction, substantial rehabilitation, 

purchase, and refinancing of multifamily housing projects and healthcare facilities. 

In FY 2010, HUD’s portfolio of insured Multifamily mortgages totaled 

12,519 mortgages that covered 1.5 million units. Multifamily’s Project-Based 

Rental Assistance (PBRA) program assists approximately 1.4 million low- and very 

low-income households in obtaining decent, safe, and sanitary housing in privately 

owned rental housing. 

Healthcare ProgramsE6—HUD’s healthcare programs consist of Section 242, which 

provides mortgage insurance for hospitals, and Section 232, which provides 

mortgage insurance for long-term care facilities. The healthcare and hospital 

portfolio contains 2,602 loans, of which 326 loans were added this year. 

Regulatory ProgramsE7—HUD’s Regulatory programs are designed to protect

homeowners and homebuyers, while regulating real estate transactions.

The Government National Mortgage AssociationE8 (Ginnie Mae) channels global capital 

into the U.S. housing market, providing liquidity and stability in support of affordable 

homeownership and rental housing at no cost to the U.S. Government. The Ginnie Mae 

guaranty ensures available funding, strong pricing and favorable spreads, which translate 

into lower interest rates to borrowers. In FY 2010, the Ginnie Mae program provided 

funding for $413 billion in funding for federal housing programs, financing 

approximately 99 percent of all government-insured or guaranteed mortgage loans. 

Ginnie Mae is ending the fiscal year with $1.05 trillion in Mortgage-Backed Securities 

(MBS) outstanding, this represents private market capital in use to finance housing for 

over 6.9 million households. 

The Office of Public and Indian HousingE9 (PIH) is responsible for administering and 

managing a range of programs for low-income families. The mission of PIH is to ensure 

safe, decent, and affordable housing for low-income families; create opportunities for 

residents’ self-sufficiency and economic independence; ensure fiscal integrity by all 

program participants; and support mixed income developments to replace distressed 

public housing. More than 4,100 PHAs provide affordable housing opportunities for 

3.2 million low-income families. In order to facilitate this mission, PIH has 11 major 

offices within Headquarters, 46 field offices, more than 1,500 staff, and six area offices 

for Native American programs. PIH administers a budget of more than $26 billion, 

which represents approximately 56 percent of HUD’s budget. Within the Office of 

Public and Indian Housing are two major business areas:

The Office of Public HousingE10 and Voucher E11 Programs provides affordable 

housing to 1.1 million households through the Low Rent Public Housing program, 

and 2.1 million households receive assistance through the Housing Choice Voucher 

program. 
Management’s Discussion and Analysis

Mission, Organization, Major Program Activities, and Strategic Plan

Page 9

The Office of Native American ProgramsE12 (ONAP) provides safe, decent, and 

affordable housing for low-income families through more than 550 tribes that 

administer its programs. Additionally, ONAP increases homeownership 

opportunities for American Indians, Alaska Natives, and Native Hawaiians through 

the Indian Housing Block Grant program, Indian Community Development Block 

Grant program, the Indian Housing Loan Guarantee Fund, as well as Native 

Hawaiian Loan Guarantee and the Native Hawaiian Housing Block Grant program. 

The Office of Community Planning and Development

E13 (CPD) provides funding to a 

broad array of state and local governments, non-profit and for-profit organizations to 

administer a wide range of housing, economic development, homeless assistance, 

infrastructure, disaster recovery, and other community development activities in urban 

and rural areas across the country. In partnership, CPD and its local funding recipients 

develop viable communities by providing decent housing, a suitable living environment, 

and expanded economic opportunities for low- and moderate-income persons. 

The Office of Fair Housing and Equal OpportunityE14 (FHEO) administers and enforces 

federal laws and establishes policies that ensure equal access to housing and housingrelated services in the United States. FHEO and its partners in the Fair Housing 

Assistance Program (FHAP) investigated 10,120 filed cases in FY 2010 including 

referrals from its partners in the Fair Housing Initiatives Program (FHIP). Of these FHIP 

referrals, 61 percent resulted in positive outcomes (conciliated, resolved, or charged) that 

benefitted the complainants. 

The Office of Healthy Homes and Lead Hazard Control

E15 (OHHLHC) seeks to eliminate 

lead-based paint hazards in America’s privately-owned and low-income housing and to 

lead the nation in addressing other housing-related health hazards that threaten vulnerable 

residents. In FY 2010, as a result of grants executed in prior years, the OHHLHC’s grant 

programs eliminated lead-based paint and other housing-related environmental health 

hazards in over 12,000 low-income housing units. In addition, the OHHLHC awarded 

67 new grants totaling $129.6 million to help communities address these hazards. 

The Office of Sustainable Housing and CommunitiesE16 helps provide communities with 

the support they need to ensure that housing, transportation, water, energy, and “green” 

building investments are working together to build strong, healthy, and inclusive 

neighborhoods. The Office also supports the Partnership for Sustainable Communities, 

an unprecedented collaboration between HUD, the Department of Transportation (DOT) 

and the U.S. Environmental Protection Agency (EPA) to coordinate federal resources in 

support of sustainable development and livable communities in the U.S. 

The Office of Strategic Planning and ManagementE17 oversees the development and 

implementation of the Department’s FY 2010 - 2015 Strategic Plan and is responsible for 

oversight of performance management. 

The Office of Policy Development and ResearchE18 (PD&R) is responsible for 

maintaining a repository of resources on housing needs, market conditions, and existing 
HUD FY 2010 Agency Financial Report 

Section I

Page 10

programs, as well as conducting research on priority housing and community 

development issues. The Office also provides objective program evaluation, data, and 

analysis to inform policy decisions and improve program results. 

The Center for Faith-Based and Neighborhood PartnershipsE19 plays a critical role in 

special event planning and execution, programs and projects that are cross-programmatic 

and at times inter-Departmental, and outreach to constituents for Secretarial priorities. 

The Center disseminates information of great timeliness and necessity for leaders of 

faith-based and secular neighborhood organizations addressing crises or emergencies in 

their community. For instance, regarding foreclosure prevention, the Center convened 

125 faith-based and non-profit leaders, in Atlanta to meet with Secretary Donovan about 

“Making Home Affordable” and FHA loss mitigation options, as well as First Look,

E20 a 

program to accelerate restoration of neighborhoods damaged by foreclosures.

The organization chart found on the following page reflects the principal lines of authority for 

the Department.
Management’s Discussion and Analysis

Mission, Organization, Major Program Activities, and Strategic Plan

Page 11
HUD FY 2010 Agency Financial Report 

Section I

Page 12

HUD’s Strategic Plan 

On May 5, 2010, HUD updated and published its Strategic PlanE21 to address the economic, 

financial, and community development issues confronting the nation. As a result, the 

Department created five overarching Strategic Goals that are guiding the transformation of HUD 

into a cutting edge, streamlined organization capable of implementing place-based policies; 

overseeing a balanced, comprehensive national housing policy that supports sustainable 

homeownership and affordable rental homes alike; and building the strong, inclusive 

communities necessary to make home the foundation of stability and opportunity. An 

introduction to these goals is provided below, followed by the Department’s Strategic 

Framework found on the following page. 

Goal 1: Strengthen The Nation’s Housing Market To Bolster The Economy And Protect 

Consumers E22 will focus on rebuilding the nation’s housing market and economy to ensure longterm stability and success. 

Goal 2: Meet The Need For Quality Affordable Rental HomesE23 discusses the need to balance 

support for sustainable homeownership with affordable homes, in order for housing markets to 

return to stability. 

Goal 3: Utilize Housing As A Platform For Improving Quality Of LifeE24 emphasizes the basis 

of stable housing as an ideal platform to deliver a wide variety of health and social services to 

improve the education, health, economic security, and safety of its residents. 

Goal 4: Build Inclusive And Sustainable Communities Free From DiscriminationE25 charts a 

course for HUD to catalyze economic development and job creation; promote energy efficiency 

and location efficiency in buildings; and facilitate disaster preparedness, recovery, and resiliency 

in healthy, affordable and diverse communities. 

Goal 5: Transform The Way HUD Does BusinessE26 is the foundation of the Department’s 

Strategic Goals and aims to transform HUD into a responsive partner to build capacity within the 

Department; improve performance management and accountability; decentralize decision 

making to empower staff; and simplify programs, rules, and regulations. 
Management’s Discussion and Analysis

Mission, Organization, Major Program Activities, and Strategic Plan

Page 13

HUD’s Strategic Framework 

 Goal 1.

Strengthen the Nation’s 

housing market to bolster the 

economy and protect 

consumers.

 Goal 2.

Meet the need for quality 

affordable rental homes.

 Goal 3.

Utilize housing as a platform 

for improving quality of life.

 Goal 4.

Build inclusive and 

sustainable communities free 

from discrimination.

1A. Stem the foreclosure crisis. 2A. End homelessness and

 substantially reduce the 

 number of families and

 individuals with severe 

 housing needs.

3A. Utilize HUD assistance to

 improve educational 

 outcomes and early learning

 development.

4A. Catalyze economic

 development and job 

 creation, while enhancing 

 and preserving community 

 assets.

1B. Protect and educate

 consumers when they buy, 

 refinance, or rent a home.

2B. Expand the supply of

 affordable rental homes 

 where most needed.

3B. Utilize HUD assistance to 

improve health outcomes.

4B. Promote energy-efficient

 buildings and location 

 efficient communities that 

 are healthy, affordable, and 

 diverse.

1C. Create financially 

 sustainable homeownership

 opportunities.

2C. Preserve the affordability

 and improve the quality of 

 federally assisted and 

 private unassisted 

 affordable rental homes.

3C. Utilize HUD assistance to

 increase economic security 

 and self-sufficiency.

4C. Ensure open, diverse, and

 equitable communities.

1D. Establish an accountable

 and sustainable housing 

 finance system.

2D. Expand families’ choices

 of affordable rental homes 

 located in a broad range of 

 communities.

3D. Utilize HUD assistance to 

 improve housing stability 

 through supportive services 

 for vulnerable populations, 

 including the elderly, people 

 with disabilities, homeless 

 people, and those individuals 

 and families at risk of 

 becoming homeless.

4D. Facilitate disaster

 preparedness, recovery, and 

 resiliency.

3E. Utilize HUD assistance to

 improve public safety.

4E. Build the capacity of local,

 state, and regional public 

 and private organizations.

5D. Culture change ─ Create a healthy, open, flexible work environment that reflects the values of HUD’s mission.

Goal 5.

Transform the way HUD does business.

Sub-Goals

HUD'S FY 2010-2015 STRATEGIC FRAMEWORK

Our Mission: Create Strong, Sustainable, Inclusive Communities and Quality, Affordable Homes For All

Sub-Goals

5A. Build capacity ─ Create a flexible and high performing learning organization with a motivated, skilled workforce.

5B. Focus on results ─ Create an empowered organization that is customer centered, place-based, collaborative, and responsive to

 employee and stakeholder feedback.

5C. Bureaucracy busting ─ Create flexible, modern rules and systems that promote responsiveness, openness, and transparency.
HUD FY 2010 Agency Financial Report 

Section I

Page 14

GOAL 1

Strengthen The Nation's Housing Market To Bolster The Economy And Protect Consumers

•Expenditure $3,674 million

•Staffing 619

•FY 2010 Appropriation $3,112 million

GOAL 2

Meet The Need For Quality Affordable Rental Homes 

•Expenditure $37,000 million

•Staffing 6,242

•FY 2010 Appropriation $31,346 million

GOAL 3

Utilize Housing As A Platform For Improving The Quality Of Life

•Expenditure $2,960 million

•Staffing 499

•FY 2010 Appropriation $2,508 million

GOAL 4

Build Inclusive And Sustainable Communities Free From Discrimination

•Expenditure $11,068 million

•Staffing 1,867

•FY 2010 Appropriation $9,377 million

GOAL 5 

Transform The Way HUD Does Business

•Expenditure $1,972 million

•Staffing 332

•FY 2010 Appropriation $1,671 million

FY 2010 Performance Overview 

Due to the timing of the publication of the Department’s Strategic Plan and a compressed 

timeframe to gather performance data on the new goals, FY 2010 is considered a transition year 

from the old Strategic Plan to the new. The results reported in this FY 2010 Agency Financial 

Report are through the end of the third quarter, June 30, 2010. Because the results reported are 

not for a full year, a trend comparison for the Department is not included in this report. 

Complete FY 2010 performance results and trend information will be reported in HUD’s Annual 

Performance Report that will be published in February 2011 . The transition also impacts the 

ability to provide net costs by the new strategic goals by any other means but estimation.

The actual net cost (dollars and staff) and FY 2010 appropriations are allocated to HUD’s 

strategic goals as reflected below:

Costs By Strategic Goal* and FY 2010 Appropriations  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* The expenditures reflected in the above chart represent prorated gross costs, less unassigned costs of $191 million, 

as reported on the Consolidated Statement of New Cost found in Section II of this report.
Management’s Discussion and Analysis

Priority Goal 1: Foreclosure Prevention

Page 15

Concurrent with the development of the strategic plan, the Administration initiated its own 

performance management improvement strategies, including having agencies establish, as part of 

their performance metrics, four priority performance goals that represent challenging, near-term 

performance improvements under existing legislative and budgetary authority. HUD’s four 

priority goals are: 

(1) Assist 3.1 million homeowners who are at risk of losing their homes to foreclosure; 

(2) Serve 207,000 more families with its rental assistance programs; 

(3) Reduce the number of homeless veterans to 59,000 by helping them move into 

permanent housing, jointly with the Department of Veterans’ Affairs (VA); and

(4) Enable the cost-effective green and energy retrofits of an estimated 159,000 HUDassisted and public housing units. 

The priority goals are discussed on the following pages. 

Priority Goal 1: Foreclosure Prevention 

Overview 

Over the past several years, the nation has experienced rapidly declining property values, lost 

home equity, increased foreclosures, and sharp blows to the financial system. A decade of the 

aggressive and sometimes abusive mortgage lending left many borrowers with debt they could 

not repay, financial institutions with mounting losses, and the economy in disarray. From their 

peak, home prices fell by more than 30 percent nationally, with even deeper declines occurring 

in the hardest hit communities. With sales of new and existing home falling rapidly, by 

December of 2008, the economy was losing nearly 700,000 jobs a month and the nation was 

caught in what would turn out to be the deepest and longest recession in memory. The near 

collapse of the housing and housing finance markets caused American families to lose over 

$6 trillion in housing wealth, damaged the integrity of neighborhoods, and threatened the 

financial viability of major financial institutions including the FHA. 

In response, as part of its FY 2010 – 2015 Strategic Plan,

E1 HUD established an aggressive goal 

to assist the mounting number of borrowers at risk of losing their homes to foreclosure, while at 

the same time restoring the ability of FHA to play its historical countercyclical role of promoting 

widespread access to mortgage capital to those families traditionally not well served by the 

private marketplace. Goal 1 seeks to “Strengthen the Nation’s Housing Market to Bolster the 

Economy and Protect Consumers.” To accomplish this goal, HUD will work with other federal 

agencies and private sector partners to stabilize the housing market in the short term, while 

implementing programs that protect consumers and prevent the crisis from happening again. 

Key components include: 
HUD FY 2010 Agency Financial Report 

Section I

Page 16

1) Assist 3.1 million homeowners who are at risk of losing their homes due to foreclosure 

by the end of FY 2011: 

400,000 homeowners will be assisted through FHA early delinquency 

intervention; 

300,000 homeowners will be assisted through FHA loss mitigation programs; 

2.4 million homeowners will be assisted through joint HUD/Treasury programs; 

and

Achieve a Consolidated Claim Workout (CCW) Ratio of 75 percent for FHA 

borrowers that receive loss mitigation assistance, and achieve a 6 month re-default 

rate of 20 percent or less for those receiving a CCW.

2) Restore FHA’s excess capital reserve ratio to the Congressionally mandated 2 percent 

level by 2014. 

Contributing Programs 

FHA Single Family Mortgage Insurance 

Since its inception in 1934, FHA has been assisting underserved, low- and moderate-income, and 

often first-time or minority homebuyers by insuring mortgages for single family homes. Not 

only does FHA provide opportunities to buy a home, it also has the tools to assist homeowners to 

stay in their home. To accomplish these activities, FHA must be financially strong, operate in an 

effective and efficient manner, and adhere to congressionally mandated capital reserve 

requirements. 

Housing Counseling Assistance

HUD’s housing counseling program helps consumers make well-informed decisions concerning 

home buying and mortgage finance. As the scope of the recent crisis grew, HUD’s housing 

counseling efforts were redirected toward foreclosure prevention. HUD provides grants to 

housing counseling agencies with which these organizations provide comprehensive advice and 

assistance to households in making appropriate housing choices. Services provided free of 

charge by HUD-approved housing counseling agencies include Homebuyer Education Programs, 

Mortgage Delinquency and Default Resolution Counseling, Predatory Lending Avoidance, 

Renters Assistance, and Services for Homeless.

Fair Lending Initiative

The Office of Fair Housing and Equal Opportunity (FHEO), in partnership with state and local 

fair housing agencies participating in the Fair Housing Assistance Program, enforce the fair 

lending provisions of the Fair Housing Act. These provisions provide protections when 

communities or neighborhoods are targeted for mortgage fraud or discrimination because of the 

personal characteristics of residents, including race, color, religion, national origin, sex, 

disability or familial status. FHEO does this directly and through the Fair Housing Initiatives 

Program, which provides some grants specifically to address discriminatory mortgage rescue 
Management’s Discussion and Analysis

Priority Goal 1: Foreclosure Prevention

Page 17

schemes. In addition to enforcement, FHEO provides education and outreach to homeowners on 

fair lending and foreclosure prevention. FHEO also ensures that mortgage rescue programs are 

available to all people regardless of race, 

color, religion, national origin, sex, 

disability or familial status.

Activities and Measures 

FHA has developed a comprehensive set of 

tools to support struggling homeowners, 

which are described below.

Loss Mitigation Programs 

This performance measure allows HUD to 

track progress toward achieving the goal of 

assisting 300,000 homeowners through 

FHA loss mitigation. FHA’s set of loss 

mitigation products includes special 

forbearance agreements, mortgage 

modifications, partial claims, pre-foreclosure sales, deeds-in-lieu (the borrower turns over the 

deed to the lender without going through the formal foreclosure process), and short sales. 

Consolidated Claim Workout (CCW) Ratio 

CCW combine FHA partial claims, loan modifications, and new Making Home AffordableE2

(MHA) modifications but exclude less affordable forbearance programs (an agreement between a 

lender and a borrower that allows the borrower to catch up and become current on his or her 

mortgage after experiencing a temporary setback). The CCW ratio presents this aggregation of 

claims types as a share of all FHA borrowers that become 30 days late and are at risk of 

foreclosure. Historically, the CCW ratio has been in the mid 60 percent range. HUD’s goal is to 

raise this ratio to 75 percent and is strongly encouraging lender partners to further deploy more 

affordable loss mitigation solutions to achieve this.

Re-default Rate 

This measure allows HUD to track progress toward achieving the goal of reducing the 6-month 

re-default rate to 20 percent or less for those homeowners receiving a CCW. Since most redefaults tend to occur in the first six months after the workout, the 6-month period was selected 

to allow measurement of goal performance within a given year. 

Early Delinquency Intervention

To achieve the goal of assisting 400,000 homeowners avoid foreclosure, FHA has developed a 

comprehensive set of tools to support struggling homeowners. Early delinquency intervention – 

the type of assistance most commonly offered by loan servicers to homeowners struggling to pay 

A borrower from Milwaukee, 

Wisconsin, in default due to 

unemployment, called the 

National Servicing Center 

(NSC) in December 2009. She 

was working part time and 

waiting for disability income. Her disabled son and 

elderly father also lived with her. The NSC 

representative explained the loss mitigation retention 

options to her. After reviewing her financial information 

and the financial information from her son and father, 

who were also contributing to the household income, the 

representative advised the mortgagor about how to 

submit her information to the lender for loss mitigation 

review. The NSC representative also contacted the 

lender on her behalf and faxed over the information she 

had provided. The lender reviewed the information and 

qualified the mortgagor for a partial claim, allowing her 

to keep her home and to continue to provide a place to 

live for her disabled son and elderly father.
HUD FY 2010 Agency Financial Report 

Section I

Page 18

their mortgages – includes cases where lenders and borrowers enter into formal forbearance 

agreements (non-incentive repayment plans). 

Joint HUD-Treasury Programs

Through these programs, 2.4 million homeowners will be assisted jointly by HUD and the 

Department of the Treasury through the MHA program which provides opportunities to modify 

or refinance mortgages to more affordable levels. In March 2010, the initial suite of MHA 

program offerings was expanded to include a new FHA refinance product designed to assist 

under water borrowers (borrowers owing more on their home mortgage than their property is 

worth) to avoid foreclosure. 

Restore FHA Excess Capital Reserve Ratio

As reported in the FY 2009 actuarial review, the severe decline in home prices, the sluggish 

performance of the economy, and the abusive behavior of some lending partners drove the 

excess capital reserve ratio to below the Congressionally mandated level of 2 percent. A strong 

FHA is critical to the recovery of the housing market and our economy at large, and FHA is 

working to better identify and manage risk, hold lenders to the highest standards of conduct and 

recoup losses from lenders who abuse the privilege of participating in FHA programs. In 

addition, FHA implemented a new mortgage insurance premium structure (put in place in 

September 2010) and revised underwriting standards to more properly price risk. Finally, the 

Department conducted servicer visits which involve a high level review of a servicer’s process 

from collections through foreclosure. 

Accomplishments 

As of June 30, 2010, and as shown in the program details below, HUD has assisted a total of 

1.55 million homeowners to avoid foreclosure, which is half of the two year goal of assisting 

3.1 million.

Loss Mitigation Programs

During the first three quarters of FY 2010 (through June 30, 2010), HUD assisted 133,099 new 

homeowners (44.0 percent of the Department’s two-year goal of assisting 300,000) with FHA 

loss mitigation initiatives. 

Consolidated Claim Workout (CCW) Ratio

Of those FHA borrowers that received loss mitigation assistance during FY 2010, the percentage 

that achieved a consolidated claim workout has increased slightly to 66.4 percent and is on target 

to reach 75 percent in FY 2011. 

Re-default Rate 

During the first three quarters of FY 2010 (through June 30, 2010), the percentage of six-month 

re-defaults decreased from 26.3 percent to 19.6 percent, meeting our goal.
Management’s Discussion and Analysis

Priority Goal 1: Foreclosure Prevention

Page 19

Early Delinquency Intervention

As of June 30, 2010, the Department had assisted an additional 121,955 homeowners with early 

delinquency interventions (nearly 30 percent of the Department’s two-year goal). HUD is about 

15 percent behind in this target due to a lender that had been improperly reporting certain 

forbearance loans. The problem was corrected and HUD expects to reach the FY 2011 goal.

Joint HUD-Treasury Programs

Since May 2009, MHA has assisted nearly 1.3 million homeowners, approximately 54 percent of 

HUD’s FY 2011 goal of assisting 2.4 million homeowners. 

Restore FHA Excess Capital Reserve Ratio

In FY 2010, 1,335 formerly FHA-approved mortgagees were removed for failing to meet the 

Department’s standards. These efforts have set the stage for HUD meeting its goal of restoring 

the FHA excess capital reserve ratio to 2 percent by 2014. 

Data Sources and Relevance

Performance data on loan mitigation and other foreclosure prevention programs come from 

metatables from the Single Family Data Warehouse (SFDW). Lenders involved in preventing 

foreclosures provide this data through a monitored interface process. There are also internal 

validation routines in the SFDW that provide a check on data validity. Data for the Treasury 

components of the Joint HUD-Treasury programs come from the Treasury’s Office of Financial 

Stability and its IR-2 Database. The information needed to assess progress on the excess capital 

reserve ratio goal is presented annually by the independently generated actuarial review of the 

FHA mortgage insurance funds. 

Challenges 

In the near term, FHA will continue to be a major player in stabilizing the mortgage market. A 

high rate of foreclosures could continue if high unemployment, low housing prices, and an 

unstable financial market persist. FHA and its private sector partners will continue to play an 

important role in combating the housing crisis and addressing homeownership issues. The 

Department’s signature initiativeE3 in this area seeks to promote sustainable homeownership, 

implement new mortgage insurance premiums and underwriting policies, and restore FHA’s 

capital reserve ratio to the Congressionally mandated 2 percent level by 2014. 

Looking to the Future 

Over time, HUD expects FHA’s role to diminish as private mortgage capital returns to the 

market place. Already, $1.02 trillion in aggregate home equity has been returned to the housing 

market since April 2009. Even so, FHA must continue to work to enhance program operations, 

properly price and manage the risk associated with its mortgage insurance activities, and 

continue to offer effective counseling for consumers seeking both FHA insured mortgages, as 

well as loans offered by a revitalized private mortgage market. 
HUD FY 2010 Agency Financial Report 

Section I

Page 20

Priority Goal 2: Rental Assistance 

Overview 

HUD’s rental assistance programs provide housing security to families who would otherwise 

face risk of instability or homelessness. The average income of such families ranges from about 

$9,400 to $13,600 per year.1 Overall, only one-quarter of families who would qualify for rental 

assistance based on their incomes actually receive such assistance.2 The Department’s budget 

for rental assistance in FY 2010 was approximately $34 billion or 72 percent of the total budget.

This Agency Priority Goal reflects HUD’s commitment to preserving and strengthening the 

nation’s portfolio of affordable rental housing. Through smart investments in affordable units 

funded under existing programs and through a signature initiative focused on streamlining and 

simplifying such programs, HUD expects to be able to serve 5.46 million families by the end of 

FY 2011, which is 207,000 more than in 2009. 

The major programs supporting this goal are described below. 

Contributing Programs 

Housing Choice Vouchers

The Office of Public and Indian Housing’s (PIH’s) Section 8 Housing Choice Voucher (HCV) 

program is the Federal government’s largest program generally recognized as a cost-effective 

means for assisting families, the elderly, and the disabled to afford decent, safe, and sanitary 

housing in the private rental market. The HCV program, administered through nearly 

2,450 public housing agencies, provides participants with the ability to seek rental housing of 

their choice, within certain rent parameters. The portability feature of the program enables 

families to move from one jurisdiction to another for reasons such as the pursuit of a job or other 

economic opportunity or to care for an aging or sick family member. The average income of an 

HCV household is approximately $13,100 annually; 18 percent of such households are 62 years 

of age or older, and 32 percent are non-elderly disabled.3

Project-Based Rental Assistance 

The Office of Housing’s Project-Based Rental Assistance (PBRA) program assists families to 

obtain decent, safe, and sanitary housing in privately owned rental housing that is made 

affordable through a subsidy payment to the owner that makes up the difference between the 

HUD-approved rent for the unit and the family’s income-based contribution toward rent. The 

average income of a household assisted through the PBRA program is $11,400 annually; 

 

1 Picture of Subsidized Households, 2008 (http://www.huduser.org/portal/picture2008/index.html). 2 The State of the Nation’s Housing 2010 (http://www.jchs.harvard.edu/son/index.htm). 3 PIC Resident Characteristics Report (http://hudatwork/po/p/systems/pic/picstats.cfm).
Management’s Discussion and Analysis

Priority Goal 2: Rental Assistance

Page 21

53 percent of PBRA-assisted households are 62 years of age or older, and 38 percent are nonelderly disabled.4

 

Public Housing

PIH’s Public Housing program is comparable to project-based housing in that HUD assistance is 

linked to particular housing units. These units are owned and operated by Public Housing 

Agencies (PHAs). In order to support the management and operations of public housing, 

Operating and Capital funds are provided to PHAs on an annual basis. PIH’s Public Housing 

Operating Fund assists PHAs in meeting public housing operating and management expenses for 

their public housing projects. The Public Housing Capital Fund, also administered by PIH, 

provides funds annually to approximately 3,150 PHAs for the development, financing, and 

modernization of the public housing stock (including energy and green retrofits) and for 

management improvements. The average income of a public housing resident is 

$13,600 annually; 31 percent of such residents are 62 years of age or older and 30 percent are 

non-elderly disabled.

Other Programs 

Other major HUD programs also promote decent safe affordable housing. The Community 

Development Block Grants (CDBG),

E1 HOME Investment Partnerships,E2 Housing 

Opportunities for Persons With HIV/AIDS, E3 Section 202,

E4 Section 811,E5 Multifamily 

Insurance,

E6 and Indian Housing Block GrantE7 programs also contribute to this goal by 

increasing the overall supply of affordable housing units. 

Accomplishments 

All Rental Assistance Programs 

For the first three quarters of FY 2010, the Department substantially met the goal to serve 

5,304,317 families by serving 5,276,043 families through all of its rental assistance programs. 

Tenant Based Rental Assistance (TBRA)

For the first three quarters of FY 2010, the Department substantially met the goal to serve 

2,158,244 families by serving 2,131,556 families. This measure is comprised of both HCV and 

Mainstream vouchers.

E8 In an effort to further assist PHAs so that they are able to more 

appropriately manage their funds, PIH developed a voucher stabilization forecasting tool and 

established a Shortfall Prevention Team to stabilize HCV funding utilization activity. In 

addition, PIH identified subject matter experts across the country and initiated extensive capacity 

building and training sessions to enable HUD staff to provide more targeted technical assistance 

to PHAs. 

 

4 The percentages of elderly and non-elderly disabled represent properties assisted under the Section 8 NC/SR 

program.
HUD FY 2010 Agency Financial Report 

Section I

Page 22

Project-Based Rental Assistance (PBRA) 

For the first three quarters of FY 2010, the Department exceeded the goal to serve 

1,169,900 families by 1.1 percent (or 12,441 families). The Office of Housing reserved and 

obligated the entire PBRA Recovery Act appropriation of $2 billion in FY 2009, helping to 

ensure the continued affordability of units assisted under some 6,300 contracts. In addition, 

99.3 percent of this appropriation has been spent as of September 30, 2010. 

Public Housing 

For FY 2010, performance results for this annual measure will be reported in the Annual 

Performance Report in February 2011. 

In an effort to assist PHAs with increasing Public Housing occupancy, PIH is developing a 

number of tools for both internal use and PHAs. One of the tools that will be used by Field 

Offices was piloted in 2010. Through enhanced guidance, data validation, technical assistance, 

monitoring, and oversight, PIH is working to ensure that public housing occupancy rates are 

high. Thus, the Department has identified actionable steps to retain the number of families 

served, and to continue to grow the potential to serve more families by modernizing and 

occupying units. 

A significant contribution to supporting the modernization and increased occupancy of public 

housing units has come from the Public Housing Capital Funds provided through the Recovery 

Act. PIH obligated nearly the entire $4 billion appropriation of Recovery Act Public Housing 

Capital Funds in FY 2009, and 50.9 percent of these funds have already been spent as of 

September 30, 2010. To ensure sound stewardship of the $4 billion made available through the 

Recovery Act for both formula and competitive awards, PIH’s monitoring strategy included 

remote reviews for all grantees.

To date, more than 150,000 public housing units have been rehabilitated and a little over 

1,000 public housing units were built with Recovery Act Capital Fund awards. These funds have 

led to the creation over 10,000 jobs. Additionally, more than 257,000 public housing units are 

targeted for energy efficiency improvements, and of these, approximately 88,000 public units 

have already undergone energy efficiency improvements.

Data Sources and Relevance

The “All Rental Assistance Programs” measure has multiple data sources with estimates or 

FY 2009 baseline data used for some programs where data is not yet available. For the “TBRA” 

measure, HUD staff reviews the status data for consistency prior to quarterly reporting, which 

includes an opportunity for PHAs to correct any deficiencies. The “PBRA” measure has status 

data updated by Housing field staff and contractors and is generally considered as reliable. For 

the “Public Housing” measure, quarterly data is obtained from PIH’s Inventory Management 

System with known data anomalies filtered from the count provided. Capacity building and 
Management’s Discussion and Analysis

Priority Goal 3: Veterans Homelessness

Page 23

training is being provided to both HUD and PHA staff, as well as technical assistance to PHAs, 

in order to improve the data quality in this system. 

Challenges 

The capital needs of our Nation’s affordable, federally-assisted housing stock are substantial and 

urgent. The Public Housing program in particular has long wrestled with an old physical stock, 

and currently has a backlog of unmet capital repair and replacement needs in the range of 

$20 billion to $30 billion. It is far more costly to build new units than to preserve existing 

affordable housing. The absence of a viable preservation strategy has led to the loss of 

150,000 public housing units through demolition or sale over the last 15 years. To address these 

issues, HUD proposes to launch an ambitious, multi-year effort called the Transforming Rental 

Assistance (TRA) initiative (described below). 

Looking to the Future 

Going forward, the Department has several initiatives to address the critical need for quality 

affordable rental homes. A more in-depth look at additional future strategies can be found both 

in HUD’s FY 2010 – FY 2015 Strategic PlanE9 and in the FY 2011 Budget Summary.

E10

 

TRA is HUD’s signature transformation initiative. 

The Department proposes to begin this multiyear 

effort, which seeks to preserve existing units, 

streamline the Department’s rental assistance 

programs, and provide residents with the sort of 

mobility option that is currently available only to 

voucher program participants. Legislation has been 

submitted to Congress to authorize essential elements 

of the TRA initiative including long-term propertybased rental assistance contracts with a resident 

mobility feature, changes to existing law governing the 

project-basing of HCV assistance, streamlining the 

administration of rental assistance, standardizing 

various elements across rental assistance programs, 

and providing HUD with more effective enforcement 

tools.

Priority Goal 3: Veterans Homelessness 

Overview 

Despite recent inroads, homelessness continues to be a challenge for communities across the 

United States. While homelessness is unacceptable generally, perhaps nowhere is it more 

abhorrent than among Veterans of U.S. military service. Across the nation today, a large number 

TRA reflects HUD’s commitment to 

developing a reliable, long-term solution to 

preserve affordable housing, support 

affordable housing reinvestment and 

neighborhood revitalization efforts, and 

bring enhanced opportunity and choice to 

residents. More information on this 

initiative can be found online at 

www.hud.gov/tra. 
HUD FY 2010 Agency Financial Report 

Section I

Page 24

of Veterans live with the effects of post-traumatic stress disorder (PTSD), debilitating injuries, 

and other problems resulting from their experiences in armed combat, which are often 

compounded by a lack of family and social support networks. As a result, many of these

Veterans struggle with unemployment, poor health, disabling conditions, substance abuse, and/or 

criminal records, which all pose significant barriers to both obtaining and maintaining housing. 

Of the nearly 1.6 million people (or 1 in every 200 Americans) experiencing homelessness last 

year, more than 10 percent were Veterans.5

 

Eliminating Veterans’ homelessness in five years is one of the key tenants of the 

Administration’s Federal Strategy to Prevent and End HomelessnessE1 which calls for increased 

collaboration at a federal and local level, for both government and community providers. In 

support of this strategy, HUD’s programs have a target goal of assisting a yearly average of 

13,250 homeless Veterans to move into permanent housing. 

A subset of this effort is HUD’s joint Priority Goal with the Department of Veterans Affairs 

(VA). HUD is partnering with VA to jointly reduce the number of homeless Veterans to 

59,000 by June 2012. Without this joint venture, there would be an estimated 194,000 homeless 

Veterans by June 2012. This Priority Goal, which will serve as a catalyst for meeting the five 

year goal of ending Veteran’s homelessness, focuses on delivering permanent housing and

thereby improving the quality of life for homeless Veterans. 

The following major programs contribute to this priority goal. 

Contributing Programs 

HUD-VASH Vouchers

The 2008 Consolidated Appropriations Act (Public Law 110-161) enacted December 26, 2007, 

provided $75 million of funding for the HUD-VASH voucher program as authorized under 

section 8(o)(19) of the United States Housing Act of 1937. The HUD-VASH program combines 

HCV rental assistance for homeless veterans with case management and clinical services 

provided by the VA, (more details on HUD’s Section 8 program can be found in the narrative for 

Priority Goal 2). The HCV program aids very low-income families in obtaining decent, safe, and 

sanitary rental housing, and more specifically, the HUD-VASH Vouchers are tailored towards 

assisting Veterans. This is the third year HUD is supporting the housing and service needs of 

homeless Veterans across America through HUD-VASH. 

Special Needs Assistance Program (SNAPS) 

The SNAPS aim to reduce homelessness by providing resources to move families and 

individuals into permanent housing. Communities use SNAPS to provide supportive housing 

(including short-term housing) to all homeless sub-populations, as well as homeless Veterans. 

Approximately 11.1 percent of the sheltered homeless population consists of Veterans. 

 

5 The 5th Homeless Assessment Report, Executive Summary, p.iii.
Management’s Discussion and Analysis

Priority Goal 3: Veterans Homelessness

Page 25

The SNAPS programs offer Homeless Assistance Grants (HAG) and Housing Opportunities for 

Persons With HIV/AIDS (HOPWA). The goal of the HAG program is to help homeless families 

and individuals achieve the outcome of staying in permanent housing and obtaining selfsufficiency, thereby reducing the number of homeless and chronically homeless persons in the 

Nation. The HOPWA program assists persons with HIV/AIDS maintain stable housing as a base 

to access HIV treatment and other care. HOPWA is the only federal program dedicated to 

address the housing needs of persons living with HIV/AIDS and their families.

Accomplishments 

HUD-VASH Vouchers

During the first three quarters of FY 2010, PHAs participating in HUD-VASH issued 

11,161 vouchers and enabled 8,408 Veterans to rent units with HUD-VASH vouchers. 

Compared with the numbers achieved in FY 2009, participating PHAs issued 16 percent more 

vouchers and enabled 28 percent more Veterans to lease units in FY 2010. Since the inception of 

the HUD-VASH program in FY 2008, PHAs have assisted a total of 15,304 homeless Veterans

to become permanently housed. 

SNAPS

HUD grantees of the SNAPS programs report their performance outcomes to the Department on 

an annual basis through Annual Performance Reports. Preliminary data from the FY 2010 

Annual Performance Reports indicate that Homeless Assistance Grant permanent supportive 

housing programs are on track to serve over 3,000 homeless Veterans. Nearly 1,000 homeless 

Veterans are already reported as served with just 25 percent of the expected Annual Performance 

Reports entered into the reporting system thus far. 

Data Source and Relevance

The VA sends monthly field reports (VA Dashboard) to HUD. This data is reported quarterly. 

HUD reviews the data and converts it to a PHA-specific format. The data quality and accuracy 

is deemed high, due to the numerous levels of oversight by the VA (including senior staff at 

local, regional, and national levels), and HUD’s review of data for quality control purposes. In 

addition, the Annual Performance Report is submitted by all projects that receive funding. There 

are enhancements in progress by SNAPS to improve the database and the validations checks on 

the data. 

Challenges 

Veterans account for a larger portion of those experiencing homelessness compared to the 

overall population. Data from FY 2009 reflects that on any given night Veterans comprise 

11.8 percent of the homeless population but only 7.6 percent of the general population. Causes 

of homelessness among Veterans are similar to causes of homelessness among non-Veterans 

(interrelated economic, health, and personal factors as well as a shortage of affordable housing). 
HUD FY 2010 Agency Financial Report 

Section I

Page 26

Combat introduces additional factors from post-traumatic stress. Like other populations, the 

complexity of navigating systems makes it difficult for Veterans to get their needs met.

There are unique and robust programs and supports available for Veterans although for some, 

their lack of awareness about such programs or their ambivalence about seeking care may keep 

them from receiving these services. In some cases, their military discharge status or lack of 

records may create complications in obtaining services.

Looking to the Future 

In an effort to address these challenges, HUD will continue its joint partnership with the VA 

around the HUD-VASH program, discussed above. In addition, HUD has a created a signature 

initiative (Ending Homelessness By Preventing It), described below, to address the critical need 

for confronting homelessness, and HUD is an active partner in the implementation of the Federal 

Strategic Plan to Prevent and End Homelessness. 

Signature Transformation Initiative - Ending Homelessness by Preventing It 

In HUD’s 2011 budget request, the Department will partner with the Department of Health and 

Human Services (HHS) to link health and social services with housing vouchers in order to end 

homelessness for 4,000 chronically homeless households. In addition, HUD will partner with 

both HHS and the Department of Education (ED) to connect 6,000 homeless families and 

families at-risk of becoming homeless with housing vouchers, supportive services, and 

educational services for youth. By forging new partnerships through the two initiatives, HUD, 

HHS, and ED will model and encourage the development of new strategies at a local level for 

effectively combining mainstream federal programs in order to better serve homeless families 

and individuals, including unaccompanied homeless Veterans and those with families. 

HUD’s signature initiative will serve as the building block for making housing a platform for 

improving the quality of life for homeless persons, including Veterans. More detailed 

information regarding HUD’s future strategies for homelessness are located at HUD’s Strategic 

Plan (Goal 3),

E2 and HUD’s Budget Summary FY 2011.E3

Federal Strategic Plan to Prevent and End Homelessness 

HUD is also a principal partner in the Administration’s Federal Strategic Plan (FSP) to Prevent 

and End Homelessness, which is designed to spur increased collaboration at both a federal and 

local level, for both government and community providers. One of the key goals of the FSP is to 

end Veterans’ homelessness in five years by strategically aligning HUD and other federal 

resources targeted at homeless Veterans. This homeless Veterans component of the FSP will not 

only help individual Veterans escape homelessness, but it will also test models of local and 

federal collaboration on behalf of Veterans. It also presents an opportunity to look at crossagency savings. As part of the FSP, HUD and VA will be partnering with Public Housing 

Agencies to make better use of mainstream voucher and public housing units to serve homeless 

Veterans with families.
Management’s Discussion and Analysis

Priority Goal 4: Energy and Green Retrofits

Page 27

Priority Goal 4: Energy and Green Retrofits 

HUD’s fourth Priority Goal is to complete cost-effective energy and green retrofits of 

159,000 public, assisted, and other HUD-supported affordable homes by the end of FY 2011. 

The residential sector generates 20 percent of greenhouse gas emissions, 33 percent of electricity 

demand, and 22 percent of energy consumption in the U.S. With HUD itself annually funding 

energy costs exceeding $5 billion in public and assisted rental housing programs, the Department 

is providing federal leadership in taking action to reduce energy costs. HUD has committed to 

catalyzing a residential energy retrofit and new construction market in the affordable housing 

sector by making significant investments in energy efficiency measures in federally assisted 

housing developments. 

HUD is collaborating with the Department of Energy (DOE)E1 to support energy efficiency 

improvements totaling 1.1 million homes through FY 2011. Of this number, HUD, through 

several programs, will complete cost-effective energy 

retrofits of an estimated 126,000 HUD-assisted and 

public housing units. In addition to the joint energy 

retrofit goal with DOE, HUD will complete healthy 

and green improvements in 33,000 low-income 

housing units that will yield positive health outcomes 

for individuals and families, and have the potential to 

drastically and permanently change the way housing, 

energy, and health concerns are addressed in cities 

across our nation. 

The following outlines the Department’s activities 

addressing this goal.

Contributing Programs 

Programs Administered by the Office of Public and 

Indian Housing (PIH) 

PIH will utilize Recovery Act and regular 

appropriations, as well as third party financing through 

Energy Performance Contracts, to complete nearly 

74,000 cost-effective energy efficient retrofits and 

affordable green units through FY 2011. PIH provides 

financing for renovations of existing buildings with 

Energy Conservation Measures that include energy 

efficient lighting; new, more efficient heating and 

cooling systems; additional insulation; and upgraded 

windows and doors. PIH also supports new 

A new wave of energy efficient, green 

public housing is exemplified by (above) 

Maverick Gardens (Boston) that includes 

photovoltaic solar panels, a cogeneration 

system that produces both electricity and 

hot water, and is built to Energy Star for 

New Homes and Leadership in Energy and 

Environmental DesignE2 (LEED) standards. 

Below, High Point (Seattle) reduced energy 

bills by 20 percent ($371 for a 3–bedroom 

unit) and includes 35 “Breath Easy” homes 

to reduce the risk of childhood asthma. 
HUD FY 2010 Agency Financial Report 

Section I

Page 28

construction and substantial rehabilitation of existing housing built to Energy Star standards for 

New Homes, Enterprise Green Communities, LEED, or other green standards. 

Key PIH programs that support these improvements include: 

Capital FundE3 (Recovery Act). PIH awarded $3 billion in formula grants for capital 

improvements that included significant investments in energy improvements. In addition, PIH 

awarded $600 million in competitive grants to public housing authorities to either build new or 

rehabilitate existing housing to meet the Enterprise Green Communities standard, or to undertake 

comprehensive energy retrofits of existing housing. 

Native American Housing and Indian Community Development Block GrantsE4 (Recovery Act). 

PIH awarded competitive and formula grants to tribes to support new construction, acquisition, 

rehabilitation and infrastructure development activities, with strong incentives for energy 

efficiency and green building. 

HOPE VI Revitalization Grants (HOPE VI).

E5 HUD includes language in its annual Notice of 

Funding Availability (NOFA) that encourages the adoption of Energy Star for New Homes in 

HOPE VI projects, and provides additional points when rating and ranking HOPE VI proposals 

for projects that meet this standard, or a national green building standard that incorporates this 

standard. 

Operating Fund.

E6 PIH provides incentives for energy performance contracting in public 

housing. An energy performance contractE7 is an agreement with a third-party energy services 

company which performs an energy audit, arranges financing, oversees the installation of energy 

efficiency measures, and provides additional services, such as monitoring of energy use, training 

of maintenance staff, and resident education. 

Programs Administered by the Office of Multifamily Housing

Several multifamily housing programs are contributing to this priority goal: 

Green Retrofit ProgramE8 (Recovery Act). This program aims to reduce energy costs, cut water 

consumption, and improve indoor air quality. The program is designed to create or save 

thousands of green jobs in retrofitting 20,000 units in federally assisted multifamily 

developments with energy efficient technologies and green building products and practices. 

Mark to MarketE9 (M2M) Green Initiative. The Office of Housing will complete up to 

8,000 energy and green retrofits through the M2M program. By restructuring the underlying 

debt, the M2M program supports rents at reduced levels prevalent in the market on thousands of 

privately owned multifamily properties with federally insured mortgages. The Office of 

Affordable Housing Preservation administers the M2M program together with its Green 

Initiative to encourage, with modest incentives, owners and purchasers of affordable housing, 

multifamily properties to rehabilitate and operate their properties using sustainable Green 

Building principles.
Management’s Discussion and Analysis

Priority Goal 4: Energy and Green Retrofits

Page 29

Section 202 Supportive Housing for the ElderlyE10 and Section 811 Supportive Housing for 

Persons with Disabilities.

E11 The Office of Housing will continue to incentivize energy efficiency 

through the Sections 202 and 811 with up to 5,500 units with energy efficiency improvements 

expected to be completed through FY 2011. 

Programs administered by the Office of Healthy Homes and Lead Hazard Control (OHHLHC) 

The OHHLHC’sE12 Lead Hazard Control and Healthy Homes Grant Programs, the Green and 

Healthy Homes Initiative, and programmatic enforcement all achieve lead hazard control 

interventions and broader, healthy homes interventions in housing, including green 

improvements.

Programs Administered by the Office of Community Planning and Development 

Other contributing programs include homes built to the Energy Star for New Homes standard 

through the HOME,

E13 CDBG,E14

 and the Tax Credit Assistance (TCAP) ProgramE15 funded 

through the Recovery Act. The HOME and CDBG funded new home construction6 that met 

EPA’s Energy Star for New Homes. TCAP grants awarded by formula to state housing credit 

agencies facilitate the development of projects that received LIHTC.

HUD-DOE Multifamily Weatherization Partnership

In May 2009, HUD signed a Memorandum of Understanding with the DOE aimed at lowering 

barriers to the use of DOE Weatherization Assistance Program (WAP) funds in public and 

assisted multifamily housing. As a result, DOE issued a new rule in January 2010 that 

streamlined the WAP’s income eligibility determinations and procedural requirements applicable 

to public housing and other HUD-assisted multifamily housing properties. These enhancements 

and increased funding have resulted in increased participation and facilitated the start up of new 

and expanded multifamily energy efficiency programs in several states. [See 

www.hud.gov/recovery/weatherization.

E16

] 

Accomplishments 

HUD has made significant investments, both through the Recovery Act and its on-going 

programs, to further its commitment to energy efficiency and green building. The following 

accomplishments were reported through the third quarter of FY 2010. Significant numbers of 

additional units are in the pipeline and on track for completion by the end of FY 2011.

Public and Indian Housing Programs 

Public Housing will report on the results of this goal in the FY 2010 Annual Performance Report 

to be issued in February 2011. 

 

6 CDBG funds cannot generally fund new housing construction, unless these are through the exceptions provided in 

CFR 570.207.
HUD FY 2010 Agency Financial Report 

Section I

Page 30

Multifamily Housing Programs

Through the on-going M2M Green Initiative, green retrofits of 950 units of assisted multifamily 

housing were completed. Energy efficiency improvements were completed in 2,169 units of 

Section 202 housing for the elderly and Section 811 housing for persons with disabilities. 

Healthy Homes and Lead Hazard Control Programs 

Lead-based paint and other housing-related environmental health hazards were eliminated in 

12,216 low-income housing units. 

Community Planning and Development Program. 

CPD programs supported 3,864 homes meeting the Energy Star for New Homes standard, 

including 3,428 homes through the HOME program, 396 homes through the CDBG program, 

and 40 homes through the TCAP program. 

Data Sources and Relevance

With respect to verification and validation of data, HUD will upgrade data collection and 

reporting systems for programs to improve HUD’s capacity to collect more accurate data and 

report on energy efficient retrofitting activities. HUD is working to establish mechanisms to 

determine the cost effectiveness of energy retrofitting activities. As these are established, the 

agency will work to collect data and educate grantees and recipients to allow for more detailed 

and comprehensive energy data collection. Data collection will be facilitated by upgrades to 

HUD’s data systems to track grantee accomplishments in developing energy efficient housing. 

Challenges

HUD’s success on this goal depends upon effective execution by HUD partners and grantees. 

HUD is working with local housing authorities, local governments, and for-profit and non-profit 

housing developers and property owners to build their capacity to integrate energy efficiency and 

green building practices into their local programs. The Department is also working to increase 

coordination of HUD’s programs and reporting systems with those of federal, state, and local 

governments, including the Department of Energy’s Weatherization Assistance Program, Better 

Buildings Program, and other Recovery Act funded programs. 

Looking to the Future 

In addition to catalyzing a residential energy retrofit and new construction market with 

renovations to its own stock of older, federally-assisted affordable housing, HUD has established 

an Office of Sustainable Housing and CommunitiesE17 and an interagency Sustainable 

Communities InitiativeE18 to assist in these efforts. The Sustainable Communities Initiative is a 

partnership among HUD, the Department of Transportation, and EPA. The initiative aims to 

lower carbon emissions and household costs through competitive grant awards that support 

integrated housing, transportation programs, and environmental planning as well as through 

innovative land use, zoning, and affordable housing practices. 
Management’s Discussion and Analysis

Transform the Way HUD Does Business

Page 31

In addition, FHA will pilot $50 million in innovative, energy efficient retrofit financing for both 

single-family and multifamily housing in FY 2011 through the new Energy Innovation Fund. 

HUD will submit its updated Energy Action Plan to Congress as required under the Energy 

Policy Act of 2005. The plan will provide a roadmap for HUD to build on its FY 2010 and 

FY 2011 energy retrofit goals. Through these initiatives, HUD will serve as a model to help 

disseminate effective approaches to reduce green house gas emissions and improve the energy 

and location efficiency of the nation’s housing stock.

Transform the Way HUD Does Business 

Overview 

The Strategic Goal to Transform the Way HUD Does BusinessE1 works with and strengthens the 

other four programmatic goals, and aligns with the President’s priority on performance 

management.

To improve its capabilities, HUD initiated a transformational program to create:

A flexible and high performing learning organization with a motivated, skilled 

workforce; 

An empowered organization that is customer centered, place-based, collaborative, and 

responsive to employee and stakeholder feedback; 

Flexible, modern, rules and systems that promote responsiveness, openness, and 

transparency; and

A healthy, open, flexible work environment that reflects the values of HUD’s mission. 

Key elements of this goal are described below.

Areas and Results of Transformation 

Human Capital 

On February 3, 2010, Congress approved the reorganization of offices within the Department, 

including the establishment of the Office of the Chief Human Capital Officer (OCHCO) to 

replace the Office of Administration. Through this action, the core of OCHCO will include all 

services designed to foster partnering relationships with HUD’s Program Offices to improve 

their ability to attract, develop, and retain people, and knowledge in the accomplishment of the 

Department’s mission. The reorganization will create an infrastructure, which will streamline 

human capital functions and establish a customer service-oriented human resource organization. 

Since the reorganization, OCHCO: 

Cut hiring time in half:

HUD is below the 80-day goal set by the U.S. Office of Personnel Management 

(OPM) for agencies; and
HUD FY 2010 Agency Financial Report 

Section I

Page 32

HUD is now considered a model for government hiring reform. 

Initiated an automated human capital staffing and classification system;

Brought talent into the Department via selection of 99 Presidential Management Fellows 

and four summer interns to participate in the Student Ambassador program; 

Developed the following goals in the HUD Strategic Sustainability Plan:

Reduce the Department’s Greenhouse Gas (GHG) emissions in half by 2020 from 

sources owned or controlled by HUD; and

Reduce the carbon footprint of the HUD Headquarters buildings in half by the end 

of the Energy Savings Performance Contract (ESPC) project, anticipated to be late 

calendar year 2013. 

The ESPC project will provide 

approximately $34 million in major building 

system and equipment upgrades to: 

Meet or exceed mandated energy and 

water conservation goals; and

Improve indoor air quality. 

Delegation of Authority

As a part of a Place-Based Decision Making 

Initiative,

E2 HUD is simplifying rules, eliminating 

outdated processes, and streamlining decisionmaking. This initiative will improve response time 

and efficiency by delegating authority for place 

based decisions to the field. The Office of Field 

Policy and Management (See box at right) is playing 

a vital role in this initiative). For example, HUD has 

delegated to the field the authority to approve travel 

on non-contract carriers and hiring authority within 

Housing. So far, nine planned delegations have 

been made to improve HUD’s service to the public. 

HUD’s Transformation Initiative

The Transformation InitiativeE3 (TI), proposed and 

first funded in FY 2010, is aimed at enabling greater 

capacity and flexibility in responding to critical 

short- and long-term Departmental needs. 

Office of Field Policy and Management (OFPM)

OFPM provides management and oversight to 

HUD’s 80 field offices which contains over 

65 percent of HUD’s staff. Their focus in FY 2010 

has been on bringing more place-based authority to 

the field offices.

OFPM works on an on-going basis with local 

elected officials and other external partners on 

several initiatives including:

Field Transformation

Sustainable Communities

Recovery Act Place-Based 

Reporting/Monitoring

Foreclosure Prevention/Congressional 

Black Caucus/Making Home Affordable 

Events

Choice Neighborhoods

OFPM field staff coordinates and oversees formula 

and competitive grant announcements and events 

with Congressional representatives. OFPM actively 

participates in the Notice of Funds Availability 

Departmental clearance process providing valuable 

comments and recommendations which lead to a 

better grant delivery system.

Notably, through OFPM’s efforts 100 percent of 

Recovery Act funds were obligated and nearly 

$6.3 billion expended by September 30, 2010.

In the future, OFPM will delegate more program 

authorities to the local level, develop place-based 

solutions to local issues, and is responsible for local 

coordinating and delivery of disaster supplemental 

appropriations by maintaining an up-to-date grantee 

and client database.
Management’s Discussion and Analysis

Transform the Way HUD Does Business

Page 33

This Initiative will enable HUD to:

Have a predictable stream of funding for high quality research and evaluation; 

Design and execute a series of major research demonstrations to test new ideas for 

improving its programs and helping state and local governments develop more effective 

housing and community and economic development strategies; 

Deliver a new level of technical assistance and capacity building; and 

Develop next generation information technology systems. 

With respect to FHA, specific funding was provided in FY 2010 for FHA Transformation. This 

has enabled FHA to begin executing the highest priority initiatives identified in the 

comprehensive Office of Housing/FHA IT Strategy and Improvement Plan developed in 2009. 

This plan set the stage for FHA information system technology improvements for the future 

across multiple lines of business within FHA (e.g., Single Family, Multifamily, Healthcare 

Facilities). Current disparate systems and functions will be upgraded by leveraging modern 

capabilities of a Financial Industry Standard Platform, composed of commercially available 

products and services, to provide a Case Management foundation to FHA’s business processes. 

The resulting benefits will enable seamless processing of “FHA Cases” from initial data 

submission through endorsement and beyond. 

A primary and initial component of the FHA Transformation is the Risk and Fraud initiative, 

which is focused on identifying and correcting deficiencies in FHA’s systems, processes, and 

programs that create unnecessary risks to the stability of the Mutual Mortgage Insurance (MMI) 

fund. The initiatives comprised three contract vehicles which allow FHA to address emerging 

risk areas as identified by senior management that greatly enhances FHA’s capabilities related to 

fraud detection/prevention and risk mitigation by providing access to industry-leading tools and 

professional services. 

Specifically, the initiative consists of three functional areas covering Counterparty Risk 

Management Functionality, Analytical Consulting Services, and Consulting and Contracting 

Services for Loan-level File Review. These focused work streams improve FHA’s ability to 

address risk in the pre-loan endorsement and pre-claim phases of the loan-lifecycle, develop 

more advanced loan level decisioning in line with industry standards, and focus on improved risk 

management efforts in the post-loan endorsement phase. 

HUDStat

Critical to the TI, HUDStat is a system in development that will enable performance reporting 

with drill down capabilities by place, strategic goal, program, and reporting period. HUDStat 

supports the execution of the Strategic Plan and will optimize the public benefit of HUD’s multibillion dollar programs. HUDStat will be the process by which the leadership team will review 

progress toward achievement of the agency’s strategic goals. Meetings will be held monthly, 

with each meeting focusing on a different strategic goal, in rotation. The meetings will be 
HUD FY 2010 Agency Financial Report 

Section I

Page 34

attended by all affected HUD staff from headquarters and the field – and will utilize program 

financial and performance data and collective knowledge to highlight successes, as well as 

identify and resolve challenges. HUDStat provides the agency with a forum for collaborative 

problem solving among program, support, and field offices. 

HUD will measure success in the TI by its performance against the following criteria: 

improvement in performance management from HUDStat; employee ratings of opportunities to 

increase skills; partner ratings of HUD employees and decision-making; and advances in HUD’s 

ranking in the Partnership for Public Service’s report - Best Places to Work in the Federal 

Government. 

Challenges 

HUD’s overall “Best Places to Work” score in 2010 declined slightly from 2008, and HUD fell 

in the rankings as other agencies improved. Overall, the survey results and focus groups suggest 

that HUD must address fundamental issues to achieve its transformation and significantly 

improve its “Best Places” ranking. While there are a number of major initiatives underway at 

HUD to address these core issues, the Department has a long way to go.

Looking to the Future 

In addition to the efforts described above, HUD has established several initiatives to improve 

agency operations. 

Eliminate and Simplify HUD’s Rules and Reports Initiative:

E4

Reduce administrative burden on staff and partners; 

Use input from HUD partners to identify the most counterproductive rules; and

In addition, HUD’s Office of Congressional and Intergovernmental Relations is in 

the process of identifying reports that are redundant or unnecessary. 

Create Upward Mobility and Internal Placement Opportunities for HUD Staff Initiative:

E5

Increase institutional knowledge, workforce flexibility, and employee retention; 

Potentially lower the cost of personnel disputes; and 

Create a mobility program with lateral reassignments, rotations, and bridge 

positions to foster career advancement. 

Emerging Professionals Program

Support the development and career advancement of our staff members at the 

General Schedule grade 11 level and below; and 

Develop candidates to support the agency succession planning efforts and enhance 

employee career progression.
Management’s Discussion and Analysis

The Recovery Act

Page 35

HUD Ideas in Action

Facilitate direct communication between front-line staff and leadership; 

Capture ideas for improvement from all levels of the organization; and

Collect citizen input as HUD becomes more transparent and open.

The Recovery Act 

Overview 

The American Recovery and Reinvestment ActE1 (Recovery Act) provided $13.6 billion for 

projects and programs administered by HUD, of which nearly 75 percent was allocated via 

formula grants to state and local recipients on February 25, 2009 - only eight days after the 

President signed the Act into law. The remaining 25 percent of funds were awarded via 

competition, with 100 percent of grant and loan funds obligated, and nearly $6.3 billion (or 

46.7 percent) disbursed to grantees by September 30, 2010. Fifty percent of funds were 

disbursed within weeks after the end of the fiscal year, which is approximately one month ahead 

of Administration expectations. 

HUD’s Recovery Act funds are already being invested in programs that: (1) promote energy 

efficiency and create green jobs, (2) support assisted housing improvements and critical public 

projects in need of gap funding, and (3) promote stable communities and help families hardest hit 

by the economic crisis. As reported by Recovery Act recipients, since the inception of the Act 

these funds have led to over half a million people being served through homelessness prevention 

assistance, nearly 3,000 homes being developed, and over 315,000 units of housing being 

renovated, many of which have improved energy efficiency. In the second quarter of calendar 

year 2010, HUD Recovery Act recipients reported over 26,000 jobs saved or created. HUD has 

also completed two quarters of analysis on where its dollars are performing relative to a variety 

of indicators including geography, income, race, and poverty level.

More detailed information on funding allocations and on spending progress of the Recovery Act 

funds for HUD programs can be found at www.HUD.Gov/Recovery. 

Analysis of Financial Condition and Results 

As a reflection of HUD’s ongoing commitment to financial management excellence, the 

Department has received an unqualified opinion on our financial statements from HUD’s Office 

of Inspector General, for the 11th year in a row. To help the reader to understand the 

Department’s financial results, position, and condition, the following analysis addresses the 

relevance of particular balances and amounts as well as major changes in types and/or amounts 

of assets, liabilities, costs, revenues, obligations, and outlays. 

The principal financial statements have been prepared from the Department’s accounting records 

to report the financial position and results of HUD’s operations, pursuant to the requirements of 
HUD FY 2010 Agency Financial Report 

Section I

Page 36

31 U.S.C. 3515 (b). While the statements have been prepared from the books and records of the 

Department in accordance with generally accepted accounting principles for Federal entities and 

the formats prescribed by OMB, the statements are provided in addition to the financial reports 

used to monitor and control budgetary resources, which are prepared from the same books and 

records.

The statements should be read with the realization that they are for a component of the United 

States Government, a sovereign entity. 

This analysis provides a summary of HUD’s: 

Financial Data

Analysis of Financial Position

Analysis of Off-Balance Sheet Risk

Summarized Financial Data

(Dollars in Billions)

2010 2009

Total Assets $140.5 $143.3

Total Liabilities $45.4 $45.0

Net Position $95.0 $98.3 

FHA Insurance-In-Force $1,041.0 $817.1

Ginnie Mae Mortgage-Backed Securities Guarantees $1,046.0 $826.0 

Other HUD Program Commitments $64.8 $68.4
Management’s Discussion and Analysis

Analysis of Financial Condition and Results

Page 37

$123.1 $111.1 $125.0

$143.3 $140.5

$0

$20

$40

$60

$80

$100

$120

$140

$160

2006 2007 2008 2009 2010

Fiscal Year

Total Assets Trend

(Dollars in Billions)

Analysis of Financial Position 

Assets - Major Accounts 

Total Assets for FY 2010, as reported in the Consolidated Balance Sheets, are displayed in the 

graph below. Total Assets of $140.5 billion are comprised primarily of Fund Balance with 

Treasury of $115.9 billion and Loans Receivable & Related Foreclosed Property of $9.4 billion 

at September 30, 2010. 

Total Assets decreased $2.9 billion or two percent from $143.3 billion at September 30, 2009. 

The net decrease was due primarily to a decrease of $12.2 billion (sixty-one percent) in 

Intragovernmental Investments from $19.9 billion at September 30, 2009, which are offset by 

increases of $9.3 billion in Fund Balance with Treasury, Loans Receivable and Related 

Foreclosed Property, and Other Assets and Property, Plant & Equipment. 

The table below shows Total Assets for FY 2010 and the four preceding years. The changes and 

trends impacting Total Assets are discussed below. 

Fund Balance 

with Treasury, 

82.6%

Investments, 

5.6%

Accounts 

Receivable, 

0.2%

Loans 

Receivable & 

Related 

Foreclosed 

Property, 6.7%

Other Assets & 

Property, Plant 

& Equipment , 

4.9%

Composition of HUD Assets - FY10
HUD FY 2010 Agency Financial Report 

Section I

Page 38

Fund Balance with Treasury of $115.9 billion represents HUD’s aggregate amount of funds 

available to make authorized expenditures and pay liabilities. Fund Balance with Treasury

increased $2.3 billion due to an increase of $8.9 billion in funding for the FHA and an increase

of $1.4 billion in funding for Ginnie Mae, which are offset by decreases in funding for PIH of 

$3.1 billion, for CDBG of $2.6 billion, and for HOME of $1.0 billion. Funding for all other 

programs decreased by $1.3 billion. The increase is primarily due to the maturity and sale of 

FHA investments and the upward re-estimates in FHA financing accounts.

Investments of $7.9 billion consist primarily of investments by FHA’s Mutual Mortgage 

Insurance/Cooperative Management Housing Insurance Fund and by Ginnie Mae, in nonmarketable, intra-governmental, Treasury securities (i.e., investments not sold in public markets). 

FHA investments decreased by $6.5 billion, a sixty-one percent decrease since FY 2009, due to a 

$6.4 billion dollar decrease in the net value of federal non-marketable securities and a decrease 

of $0.6 billion of related interest receivable held in FHA’s MMI/CMHI Capital Reserve Fund. 

The decrease in the net value of the FHA investments is caused by the maturity and the sale of 

several large bonds. Ginnie Mae investments decreased by $5.7 billion, a sixty-two percent 

decrease from prior year, due to a $6.0 billion divestiture of U.S. government securities to fund 

loan buyouts. 

Accounts Receivable of $0.3 billion primarily consists of claims to cash from the public and state 

and local authorities for bond refunding, Ginnie Mae premiums, FHA insurance premiums, and 

Section 8 year-end settlements. A 100 percent allowance for loss is established for all delinquent 

debt 90 days and over. The Accounts Receivable increase of $0.2 billion is primarily due to an 

increase in Ginnie Mae’s accrued mortgage interest receivable resulting from a larger mortgage 

balance. 

Loans Receivable and Related Foreclosed Property of $9.4 billion are generated by FHA credit 

program receivables and by HUD’s support of construction and rehabilitation of low rent 

housing, principally for the elderly and disabled under the Section 202/811 program. The 

increase of $1.4 billion is primarily due to an increase in the gross value of Single-Family 

Foreclosed Property Held for Sale in the MMI financing account. 

Remaining Assets of $6.9 billion, comprising five percent of Total Assets, include fixed assets 

and other assets. The net change pertaining to the Remaining Assets balance was an increase by 

nearly 383 percent compared to the prior fiscal year, due primarily to a $5.3 billion increase in 

Ginnie Mae’s Remaining Assets. The increase is due to an increase in mortgage balance 

resulting from large loan buyout and advances.
Management’s Discussion and Analysis

Analysis of Financial Condition and Results

Page 39

Assets - Major Programs 

The chart below presents Total Assets for FY 2010 by major responsibility segment or program. 

Liabilities – Major Accounts 

Total Liabilities for FY 2010, as reported in the Consolidated Balance Sheets, are displayed in 

the chart below.

Total Liabilities of $45.4 billion consists primarily of loan guarantee liabilities of $35.0 billion 

(seventy-seven percent), debt in the amount of $5.1 billion (eleven percent), accounts payable of 

$1.0 billion (two percent), and remaining liabilities amounting to $4.2 billion (nine percent) at 

September 30, 2010. 

Total Liabilities increased $0.4 billion (one percent) from $45.0 billion at September 30, 2009, 

due primarily to an increase of $0.9 billion in Loan Guarantees. This increase is due primarily 

to an upward adjustment to FHA’s subsidy re-estimate and Ginnie Mae’s loss reserves related to 

default related expenses.

FHA, 35.4%

Ginnie Mae, 

12.1% Section 8, 

8.3%

CDBG, 

16.2%

Home, 4.7%

Operating 

Subsidies, 

1.0%

PIH, 6.7%

Housing for 

Elderly & 

Disabled, 

6.0%

All Other, 

9.6%

Assets by Responsibility Segments

Accounts 

Payable, 

2.3%

Debt, 11.2%

Loan 

Guarantees, 

77.2%

Remaining 

Liabilities, 

9.3%

Composition of HUD Liabilities
HUD FY 2010 Agency Financial Report 

Section I

Page 40

The chart below presents Total Liabilities for FY 2010 and the four preceding years. A 

discussion of the changes and trends impacting Total Liabilities is presented in the subsequent 

paragraphs. 

Loan Guarantees consist of the Liability for Loan Guarantees related to Credit Reform loans 

made after October 1, 1991 and the Loan Loss Reserve related to guaranteed loans made before 

October 1, 1991. The liability for Loan Guarantees and the loan Loss Reserve are both 

comprised of the present value of anticipated cash outflows for defaults such as claim payments, 

premium refunds, property expense for on-hand properties, and sales expense for sold properties, 

less anticipated cash inflows such as premium receipts, proceeds from property sales, and 

principal interest on Secretary-held notes. 

Debt includes Intragovernmental Debt of $4.8 billion and debt held by the public of $0.3 billion. 

The Intragovernmental Debt consists primarily of loans from the Treasury but also includes 

funds borrowed from the Federal Financing Bank by Public Housing Authorities and Tribally 

Designated Housing Entities to finance construction and rehabilitation of low rent housing. Debt 

Held by the Public consists of existing housing authority bonds and debentures issued in lieu of 

cash disbursements to the public at par by FHA to pay claims. The $0.5 billion decrease in debt 

(repayments exceed new borrowings) from $5.6 billion at September 30, 2009, was due to a 

$0.8 billion decrease in PIH debt. 

Accounts Payable consist primarily of pending grants payments. 

Remaining Liabilities of $4.2 billion consist primarily of Intragovernmental Liabilities, Federal 

Employee and Veteran Benefits, and Other Liabilities. The Remaining Liability balance 

remained the same as that of the prior fiscal year.

$17.3

$20.4

$30.5

$45.0 $45.4

$-

$10 

$20 

$30 

$40 

$50 

2006 2007 2008 2009 2010

Fiscal Year

Liabilities Trend

(Dollars in Billions)
Management’s Discussion and Analysis

Analysis of Financial Condition and Results

Page 41

Liabilities – Major Programs 

The chart below presents Total Liabilities for FY 2010 by responsibility segment.

Changes in Net Position 

Changes in Unexpended Appropriations, Net Cost of Operations, and Financing Sources

combine to determine the Net Position at the end of the year. The elements are further discussed 

below. Net Position as reported in the Statements of Changes in Net Position reflects a decrease

of $3.3 billion or three percent from the prior fiscal year. The net decrease in Net Position is 

primarily attributable to a $7.9 billion decrease in Unexpended Appropriations and a $4.6 billion 

increase in Cumulative Results of Operations. 

The combined effect of HUD’s Net Cost of Operations and Financing Sources resulted in a 

160 percent decrease in Change in Net Results of Operations of $4.6 billion during FY 2010. 

The significant year-to-year fluctuation shown in the chart below is due primarily to the annual 

re-estimation of long-term credit program costs and capital transfers of $0.8 billion related to the 

Department’s liquidating programs. 

FHA, 92.36%

Ginnie Mae, 

5.47%

Section 8, 

0.16% CDBG, Home, 

& Operating 

Subsidies, 

0.20%

PIH, 0.68%

Housing for 

Elderly & 

Disabled, 

0.03%

All Other, 

1.10%

Liabilities by Responsibility Segment
HUD FY 2010 Agency Financial Report 

Section I

Page 42

This chart presents HUD’s Net Results of Operations for FY 2010 and the four preceding years. 

Unexpended Appropriations: The decrease by ten percent from $77.9 billion in FY 2009 to 

$70.0 billion in FY 2010 represents the accumulation of appropriated funds not yet disbursed and 

can change as the Fund Balance with Treasury changes. 

Financing Sources: As shown in HUD’s Statement of Changes in Net Position, HUD’s 

financing sources for FY 2010 totaled $57.0 billion. This amount is comprised primarily of 

$57.1 billion in Appropriations Used, offset by approximately $0.2 billion in net transfers out. 

The transfers out consist of new FHA subsidy endorsements and credit subsidy upward reestimates.

Net Cost of Operations: As reported in the Consolidated Statements of Net Cost, Net Cost of 

Operations amounts to $52.5 billion for FY 2010, a decrease of $6.2 billion or ten percent from 

the prior fiscal year. Net Cost of Operations consists of total costs, including direct program and 

administrative costs, offset by program exchange revenues.

$1.4 

$3.2 

$8.2 $7.6 

$4.6 

$-

$2.0 

$4.0 

$6.0 

$8.0 

$10.0 

2006 2007 2008 2009 2010

Fiscal Year

Net Results of Operations for FY 2006 - 2010

(Dollars in Billions)
Management’s Discussion and Analysis

Analysis of Financial Condition and Results

Page 43

The chart below presents HUD’s Total Net Cost for FY 2010 by responsibility segment.

As shown in the chart, Cost of Operations was primarily a result of spending of $27.8 billion, or 

fifty-three percent of Net Cost, in support of the Section 8 program (administered jointly by the 

Housing, Community Planning and Development, and PIH programs). The current fiscal year 

change in Net Cost for the Section 8 programs was $2.5 billion, or ten percent, more than the 

prior fiscal year. FHA Net Cost decreased by $14.0 billion, due primarily to a $12.0 billion, or 

126 percent, decrease in gross costs due to a decrease in credit subsidy expense from the reestimate and a decrease in credit subsidy expense from current year endorsements in the MMI 

financing account. The remaining $2.0 billion, or thirty-six percent, decrease in gross costs is 

attributable to a decrease in bad debt expense in the General Insurance/Special Risk Insurance 

(GI/SRI) liquidating account and a decrease in subsidy expense in the GI/SRI financing account. 

Analysis of Off-Balance-Sheet Risk 

The financial risks of HUD’s credit activities are due primarily to managing FHA’s insurance of 

mortgage guarantees and Ginnie Mae’s guarantees of Mortgage-Backed Securities (MBS). 

Financial operations of these entities can be affected by large unanticipated losses from defaults 

by borrowers and issuers and by an inability to sell the underlying collateral for an amount 

sufficient to recover all costs incurred. 

Contractual and Administrative Commitments 

HUD’s Contractual Commitments of $65.0 billion in FY 2010 represents HUD’s commitment to 

provide funds in future periods under existing contracts for its grant, loan, and subsidy programs. 

$12.4

-$0.5

$3.7

$1.1

$25.3

$2.0

$4.5

$6.5

$3.8

-$1.5

-$0.5

$5.5

$1.1

$27.8

$2.9

$4.5

$7.1 $5.7

$(5.0)

$-

$5.0 

$10.0 

$15.0 

$20.0 

$25.0 

FHA Ginnie Mae PIH Housing Section 8 HOME Operating 

Subsidies

CDBG Other

Net Cost by Responsibility Segment - Fiscal Years 2009 and 2010

(Dollars in Billions) FY 2009

FY 2010
HUD FY 2010 Agency Financial Report 

Section I

Page 44

Administrative Commitments (reservations) of $2.2 billion relate to specific projects for which 

funds will be provided upon execution of the related contract. 

The chart below presents HUD’s Contractual Commitments for FY 2010 and the four preceding 

years. 

These commitments are primarily funded by a combination of unexpended appropriations and 

permanent indefinite appropriations, depending on the inception date of the contract. HUD 

draws on permanent indefinite budget authority to fund the current year’s portion of contracts 

entered into prior to FY 1988. Since FY 1988, HUD has been appropriated funds in advance for 

the entire contract term in the initial year, resulting in substantial increases and sustained 

balances in HUD’s unexpended appropriations. 

Total Commitments (contractual and administrative) decreased by $3.7 billion or five percent 

during FY 2010. The change is primarily attributable to a decrease of $3.1 billion in PIH 

commitments, a decrease of $1.0 billion in HOME program commitments, and a decrease of 

$1.9 billion in All Other Commitments, which are slightly offset by an increase in commitments 

of $3.2 billion for CDBG. 

The chart below presents HUD’s Section 8 Contractual Commitments for FY 2010 and the four 

preceding years. 

$72.3

$65.4

$57.6

$68.4 $64.9

$0

$25

$50

$75

$100

2006 2007 2008 2009 2010

Fiscal Year

Commitments Under HUD's Grants, 

Subsidy, and Loan Programs 

(Dollars in Billions)

$9.4 $9.5

$3.4 $0.8 $0.0

$7.6

$4.6

$8.3 $11.2 $11.2

$0

$5

$10

$15

$20

2006 2007 2008 2009 2010

Fiscal Year

Section 8 Commitments 

(Dollars in Billions)

Funded from Permanent Indefinite Appropriations

Funded from Unexpended Appropriations
Management’s Discussion and Analysis

Analysis of Financial Condition and Results

Page 45

To contain the costs of future Section 8 contract renewals, HUD began converting all expiring 

contracts to one-year terms during FY 1996. By changing to one-year contract terms, HUD 

effectively reduced the annual budget authority needed from Congress to fund the subsidies 

while still maintaining the same number of contracts outstanding. 

FHA Insurance-In-Force 

The chart below presents FHA’s Insurance-In-Force of $1,041 billion for FY 2010 and the four 

preceding years. This is an increase of $224 billion (or twenty-seven percent) from the FY 2009 

FHA Insurance-In-Force of $817 billion. FHA’s volume has grown significantly during the 

mortgage crisis as a result of constrained activity by private mortgage insurers and private 

lenders. 

Ginnie Mae Guarantees 

Ginnie Mae financial instruments with off-balance sheet risk include guarantees of MBS and 

commitments to guarantee. The securities are backed by pools of FHA and PIH insured, Rural 

Housing Service-insured, and Veterans Affairs-guaranteed mortgage loans. Ginnie Mae is 

exposed to credit loss in the event of non-performance by other parties to the financial 

instruments. The total amount of Ginnie Mae guaranteed securities outstanding at 

September 30, 2009 and 2010, was approximately $826 billion and $1,046 billion, respectively. 

However, Ginnie Mae’s potential loss is considerably less because the FHA and Rural Housing 

Service insurance and Veterans Affairs guaranty serve to indemnify Ginnie Mae for most losses. 

Also, as a result of the structure of the security, Ginnie Mae bears no interest rate or liquidity 

risk.

During the mortgage closing period and prior to granting its guaranty, Ginnie Mae enters into 

commitments to guaranty MBS. The commitment ends when the MBS are issued or when the 

commitment period expires. Ginnie Mae’s risks related to outstanding commitments are much 

less than for outstanding securities due, in part, to Ginnie Mae’s ability to limit commitment 

$396 $400

$575

$817

$1,041

$0

$200

$400

$600

$800

$1,000

$1,200

2006 2007 2008 2009 2010

Fiscal Year

FHA Insurance-In-Force - As of September 30

(Dollars in Billions)
HUD FY 2010 Agency Financial Report 

Section I

Page 46

authority granted to individual issuers of MBS. Outstanding commitments as of 

September 30, 2010 and 2009 were $80.0 billion and $98.4 billion, respectively. 

The chart on the next page presents Ginnie Mae MBS for FY 2010 and the four preceding years. 

Generally, Ginnie Mae’s MBS pools are diversified among issuers and geographic areas. No 

significant geographic concentrations of credit risk exist; however, to a limited extent, securities 

are concentrated among issuers. In FY 2010 and 2009, Ginnie Mae issued a total of 

$184.3 billion and $79.6 billion, respectively, in its multi-class securities program. The 

estimated outstanding balance of multiclass securities in the total MBS securities balance at 

September 30, 2010 and 2009 were $489 billion and $350 billion, respectively. These securities 

do not subject Ginnie Mae to additional credit risk beyond that assumed under the MBS 

program. 

Multi-class securities include:

REMICs – Real Estate Mortgage Investment Conduits are a type of multiclass mortgagerelated security in which interest and principal payments from mortgages are structured 

into separately traded securities.

Stripped MBS – Stripped MBS are securities created by “stripping” or separating the 

principal and interest payments from the underlying pool of mortgages into two classes of 

securities, with each receiving a different proportion of the principal and interest 

payments. 

Platinums – A Ginnie Mae Platinum security is formed by combining Ginnie Mae MBS 

pools that have uniform coupons and original terms to maturity into a single certificate. 

$410 $428

$577

$826

$1,046

$0

$200

$400

$600

$800

$1,000

$1,200

2006 2007 2008 2009 2010

Fiscal Year

Ginnie Mae Mortgaged-Backed Securities 

Outstanding at FY End

(Dollars in Billions)
Management’s Discussion and Analysis

Management Assurances

Page 47

Management Assurances 

HUD is responsible for establishing, maintaining, and assessing internal controls to provide 

reasonable assurance that the internal control objectives of the Federal Managers’ Financial 

Integrity Act (FMFIA), 31 U.S.C. 3512 Sections 2 and 4, the Federal Financial Management 

Improvement Act (FFMIA), P.L. 104-208, and the Federal Information Security Management Act 

(FISMA) are met. 

The Federal Managers’ Financial Integrity Act (FMFIA) of 1982 and 

Federal Financial Management Improvement Act (FFMIA) of 1996 

The Federal Managers’ Financial Integrity Act of 1982 and the Office of Management and 

Budget (OMB) Circular A-123 Management’s Responsibility for Internal Control present the 

main internal control requirements for the Federal government. FMFIA specifies management’s 

responsibility for, and its role in, the assessment of accounting and administrative internal 

controls. FMFIA requires the agency head to annually assess and report on the effectiveness of 

internal controls that protect the integrity of federal programs and financial management systems 

and to report any instances of material weaknesses including the preparation of remediation 

plans. For FY 2010, no material weaknesses were identified.

In FY 2010, OMB Circular A-127, Financial Management Systems was substantially revised. 

The revised Circular introduced a simplified risk-based approach to determine FFMIA 

substantial compliance by targeting the agency’s most significant financial statement audit risks. 

In order for HUD’s financial management systems to be in substantial compliance with FFMIA, 

its systems must meet the three requirements as defined by Section 803(a) of FFMIA. These 

requirements are: (1) Federal Financial Management Systems requirements, (2) the applicable 

Federal Accounting Standards, and (3) U.S. Standard General Ledger at the transaction level. 

Based on the revisions to OMB Circular A-127, supplemental guidance was issued for 

consideration when determining compliance with FFMIA. It requires management to determine 

if system performance prevents the Agency from providing reliable and timely financial 

information. Generally, identified deficiencies for systems that do not prevent the agency from 

meeting its reporting requirements should not be considered as a part of FFMIA compliance 

determination. Additionally, for FFMIA compliance, it does not require that all systems be 

entirely automated, nor does it require ideal or state of the art system performance or system 

efficiency. However, the systems should routinely provide reliable financial information 

consistently, accurately, and uniformly. 

At the end of FY 2010, HUD determined that the Department is in compliance with FFMIA. 

HUD’s OIG auditors cited the Department for not substantially complying with the Act; 

however, HUD management disagrees with this audit finding, and asserts that our financial 
HUD FY 2010 Agency Financial Report 

Section I

Page 48

management systems satisfy OMB’s three-part requirement needed to report substantial 

compliance with FFMIA. 

HUD’s Integrated Financial Management Improvement Project (HIFMIP) 

HUD continues to strengthen and improve its financial management systems. The Department is 

currently engaged in the development of a major financial systems modernization project. 

HIFMIP establishes an enterprise vision to achieve a core financial management system as a 

resolution to the Department’s integration and modernization efforts. 

The HIFMIP contract was awarded on September 23, 2010. HIFMIP will replace the 

functionality of the HUD Central Accounting and Program System (HUDCAPS) with the 

Integrated Core Financial System (ICFS). The ICFS will replace HUD’s outdated legacy 

systems, provide timely, accurate, and reliable data, and improve efficiency by eliminating timeconsuming, manual processes. As part of the Secretary’s Transformation Initiative, the 

Department targets funding toward modernizing HUD’s Information Technology (IT) systems. 

During FY 2010, HUD began the process of reviewing and documenting its financial 

management systems interfaces. This process will continue in FY 2011 and will address future 

interfaces, manual processes, and security interfaces to be implemented.

At the end of FY 2010, HUD had three non-compliant financial systems: HUD Procurement 

System (HPS), Small Purchase System (SPS), and the Facilities Integrated Resources 

Management System (FIRMS). The two systems, HPS and SPS, were identified as noncompliant as part of HUD’s FY 2006 financial statement audit. HUD developed remediation 

plans to replace these systems with the HUD Integrated Acquisition Management System 

(HIAMS) to meet the agency’s procurement and business needs. A solicitation was issued in 

FY 2010, and HUD awarded a contract on September 30, 2010. While HIAMS is being 

developed, compensating controls are in place to mitigate noncompliance issues. FIRMS was 

identified as being non-compliant with FFMIA. In FY 2010, HUD made significant 

improvements in the areas of security and internal controls for FIRMS; however, internal control 

weaknesses still exist. 

Federal Information Security Management Act (FISMA) of 2002 

The Federal Information Security Management Act of 2002 requires each agency to generate: 

“...a comprehensive framework for ensuring the effectiveness of information security controls 

over information resources that support Federal operations and assets...” It assigns specific 

responsibilities to Federal agencies, the National Institute of Standards and Technology, and the 

Office of Management and Budget (OMB) in order to strengthen information system security. In 

particular, FISMA requires agency heads to implement policies and procedures to costeffectively reduce information technology security risks to an acceptable level and to annually 

report to OMB on the effectiveness of the agencies’ security programs.
Management’s Discussion and Analysis

Management Assurances

Page 49

HUD relies extensively on IT to carry out its operations, and the agency continues to improve its 

Information System Security Program. The implemented improvements during FY 2010 increase 

HUD’s ability to protect the availability, integrity, and confidentiality of information stored on 

its systems. Noted accomplishments include: 

Ensured all of HUD’s information systems maintained a current authorization to operate; 

Matured the vulnerability management program to cost effectively reduce security risks 

discovered on the Department’s technical infrastructure; 

Deployed an automated security management capability to improve visibility into the 

security posture of HUD’s IT systems; and 

Expanded the Department’s security awareness program.

In FY 2010, the OIG reports focused on HUD’s network security devices. Weaknesses 

discovered revolved around configuration management of the devices. HUD is developing 

corrective action plans to improve the configuration management of its network security devices 

consistent with the OIG’s recommendations. 
HUD FY 2010 Agency Financial Report 

Section I

Page 50

The Secretary’s Letter of Assurance 

FY 2010 Annual Assurance Statement 

The Department of Housing and Urban Development’s management is responsible for 

establishing and maintaining effective internal controls and financial management systems 

that meet the objectives of the Federal Managers’ Financial Integrity Act of 1982 (FMFIA), 

Sections 2 and 4. HUD conducted its assessment of the effectiveness of its internal control 

over the efficiency and effectiveness of operations and compliance with applicable laws and 

regulations in accordance with OMB Circular A-123, Management’s Responsibility for 

Internal Control. Based on the results of this evaluation, HUD can provide reasonable 

assurance that its internal control over the effectiveness and efficiency of operations and 

compliance with applicable laws and regulations, as of September 30, 2010, was operating 

effectively with no material weaknesses found in the design or operation of the internal 

controls. 

In addition, HUD conducted an assessment of the effectiveness of its internal control over 

financial reporting, which includes safeguarding of assets and compliance with applicable 

laws and regulations, in accordance with the requirements of Appendix A of 

OMB Circular A-123. Based on the results of this evaluation, HUD can provide reasonable 

assurance that its internal control over financial reporting, as of June 30, 2010, was operating 

effectively and that no material weaknesses were found in the design or operation of the 

internal control over financial reporting. 

In accordance with guidance established by the American Recovery and Reinvestment Act 

(Recovery Act) of 2009, HUD can provide reasonable assurance that all Recovery Act 

programs were managed effectively and efficiently, utilized reliable and accurate data to 

report achievement of program goals, and were in compliance with applicable laws and 

regulations. All HUD Recovery Act funds were awarded and distributed in a prompt, fair, 

and reasonable manner for the sole purpose designated in the Recovery Act. 

The Federal Financial Management Improvement Act of 1996 (FFMIA) requires federal 

agencies to implement and maintain financial management systems that are in substantial 

compliance with federal financial management systems requirements, federal accounting 

standards, and the United States Government Standard General Ledger at the transaction 

level. HUD hereby provides reasonable assurance that its financial management systems 

substantially comply with FFMIA for FY 2010. 

Shaun Donovan November 15, 2010 

Secretary
Financial Information 

Message From The Chief Financial Officer

Page 51

Message from the Chief Financial Officer 

November 15, 2010 

Today marks the 20th anniversary of the Chief Financial Officers 

Act, which launched a comprehensive reform of federal financial 

management to establish a Chief Financial Officer (CFO) leadership 

structure, require audited financial statements, and strengthen 

accountability reporting to improve the government’s financial 

management. When the Act was passed in 1990, HUD had a record 

of mediocre financial management with consistently poor audit 

opinions and numerous material weaknesses in internal controls.

The following problems highlight the challenges facing HUD at that 

time. In 1993, HUD had 36 material weaknesses, 98 non-complaint 

systems, and a disclaimer of opinion on its financial statements. In 

1994, the U.S. Government Accountability Office (GAO) attached 

the “high-risk” label to HUD’s programs. In FY 2000, HUD had an estimated $3.2 billion in 

improper payments. 

In the intervening years, the Department made substantial progress in moving from a high-risk to 

a high-performing organization. In 1998, eleven accounting offices were consolidated into one 

location and a new Risk Management Office was established. In FY 2000, HUD’s financial 

statements received an unqualified (clean) audit opinion. In 2007, following multi-year 

reductions in the risk of mortgage insurance programs and improper rental housing assistance

payments, HUD programs were all finally removed from GAO’s high-risk list. In FY 2010, 

HUD received its 11th consecutive clean audit opinion. The Department had no material 

weaknesses, only three non-compliant systems, and improper payments were 73 percent below 

the 2000 estimate.

This report along with HUD’s Annual Performance Report to be filed in February 2011 serve as 

the principal reports to the President, the Congress, and the American people on the 

Department’s stewardship of the public funds entrusted to it. The Department’s successes and 

challenges are measured by the outcomes captured in this report. 

While having no material weaknesses for the third consecutive year, HUD is progressing toward 

resolving 8 previously identified significant deficiencies, the status of which can be found later 

in the Auditor’s Report found in this section. Corrective action plans are being developed to 

address the one newly identified deficiency identified in this year’s audit. Additionally, the 

Department is in the process of developing corrective action plans to fully address the noncompliance with laws and regulations issues identified in the audit report. Actions already 

underway include the HUD Integrated Financial Management Improvement Project (HIFMIP), 

mentioned in the third bullet below that will play a major role in addressing the FFMIA noncompliance issue. FHA’s actions noted in Priority Goal 1 represent a long-term plan to address 

the non-compliance with the requirements of the Cranston-Gonzalez National Affordable 
HUD FY 2010 Agency Financial Report 

Section II

Page 52

Housing Act of 1990 to maintain the capital reserve ratio for FHA’s Mutual Mortgage Insurance 

Fund at a minimum of 2 percent. 

Overall, HUD’s favorable clean audit affirms our continued commitment to financial and 

management excellence. Other financial management accomplishments during FY 2010 include: 

Continued excellence in reporting noted by receiving the Certificate of Excellence in 

Accountability Reporting from the Association of Government Accountants for the 

fourth year in a row. This certificate recognizes the Department’s excellence in 

performance and accountability reporting in its FY 2009 Performance and 

Accountability Report. 

Completed a fifth assessment of the effectiveness of internal controls over financial 

reporting, in accordance with Appendix A of OMB Circular A-123, which is similar to

the Sarbanes-Oxley Act requirements for the private sector. Based on that evaluation, the 

Secretary was able to report reasonable assurance that the Department’s internal controls 

over financial reporting, as of June 30, 2010, were operating effectively and no material 

weaknesses were found in the design or operation of the internal controls over financial 

reporting. Nevertheless, opportunities for improved controls were identified and these 

enhancements have been initiated.

HUD launched HIFMIP, a financial systems modernization effort, to focus on its core 

financial system. This effort is consistent with HUD’s goal to create flexible, modern 

systems to promote responsiveness and transparency. 

Both FHA and Ginnie Mae continued to play vital roles in the mortgage marketplace. 

During the year, FHA insurance-in-force surpassed the $1 trillion mark, while Ginnie 

Mae reached that same milestone in guarantees of mortgage-backed securities.

While these accomplishments are truly noteworthy, much remains to be done to help the 

Department meet its goal of transforming the way HUD does business. With its accounting and 

internal controls side of the house now in order, HUD’s Office of the Chief Financial Officer 

(OCFO) is seeking to play an expanded role as a strategic business partner across the 

Department. An improved OCFO will have a strong technical foundation, but will also be 

strategic, able to work across the management team, get involved in operations, and act as a true 

business partner to HUD’s program offices. 

Excellence in financial management is attributable to the combined effort of management, 

employees, and business partners. Specifically, I want to recognize the staff of the Office of the 

Chief Financial Officer, the FHA Comptroller’s Office, Ginnie Mae’s Office of Finance, the 

Office of Inspector General, and other HUD program and administrative components involved in 

the stewardship of HUD’s funds. Their continued dedication and effort is essential in providing 

the budgetary, accounting, financial management systems, auditing, and performance 

management services necessary to support HUD’s mission. 

Douglas A. Criscitello
Financial Information 

Financial Statements

Page 53

Financial Statements 

Introduction 

The principal financial statements have been prepared to report the financial position and results 

of operations of HUD, pursuant to the requirements of 31 U.S.C. 3515(b). While the financial 

statements have been prepared from HUD’s books and records in accordance with formats 

prescribed by OMB, the statements are in addition to the financial reports used to monitor and 

control budgetary resources, which are prepared from the same books and records. 

The principal financial statements and notes should be read with the realization that they are for a 

component of the U.S. Government, a sovereign entity. 

The financial statements presented herein are:

The Consolidated Balance Sheet, as of September 30, 2010 and 2009, which presents those 

resources owned or managed by HUD that are available to provide future economic benefits 

(assets); amounts owed by HUD that will require payments from those resources or future 

resources (liabilities); and residual amounts retained by HUD comprising the difference (net 

position). 

The Consolidated Statement of Net Cost, which presents the net cost of HUD operations for 

the years ended September 30, 2010 and 2009. HUD’s net cost of operations includes the gross 

costs incurred by HUD less any exchange revenue earned from HUD activities.

The Consolidated Statement of Changes in Net Position, which presents the change in HUD’s 

net position resulting from the net cost of HUD operations, budgetary financing sources other 

than exchange revenues, and other financing sources for the years ended September 30, 2010 and 

2009. 

The Combined Statement of Budgetary Resources, which presents the budgetary resources 

available to HUD during FY 2010 and 2009, the status of these resources at September 30, 2010 

and 2009, and the outlay of budgetary resources for the years ended September 30, 2010 and 

2009. 

The Notes to the Financial Statements provide important disclosures and details related to 

information reported on the statements. 
HUD FY 2010 Agency Financial Report

Section II

Page 54

2010 2009

ASSETS

 Intragovernmental

 Fund Balance with Treasury (Note 4) $ 115,907 $ 113,641 

 Investments (Note 5) 7,721 19,912 

 Other Assets (Note 9) 39 14 

 Total Intragovernmental Assets 123,667 133,567 

 Investments (Note 5) 136 145 

 Accounts Receivable (Note 6) 322 129 

 Credit Program Receivables and Related Foreclosed Property (Note 7) 9,432 8,058 

 General Property Plant and Equipment (Note 8) 258 234 

 Other Assets (Note 9) 6,647 1,189 

TOTAL ASSETS $ 140,462 $ 143,322 

LIABILITIES

 Intragovernmental Liabilities

 Accounts Payable (Note 10) 6 7 

 Debt (Note 11) 4,775 5,083 

 Other Intragovernmental Liabilities (Note 14) 1,323 2,038 

 Total Intragovernmental Liabilities 6,104 7,128 

 Accounts Payable (Note 10) 1,050 974 

 Loan Guarantees (Note 7) 35,073 34,153 

 Debt Held by the Public (Note 11) 292 477 

 Federal Employee and Veterans’ Benefits (Note 12) 72 69 

 Loss Reserves (Note 13) 1,005 560 

 Other Governmental Liabilities (Note 14) 1,842 1,614 

TOTAL LIABILITIES $ 45,438 $ 44,975 

 Commmitments and Contingencies (Note 16)

NET POSITION

 Unexpended Appropriations - Earmarked Funds (Note 17) 6,817 11,720 

 Unexpended Appropriations 63,231 66,203 

 Cumulative Results of Operations - Earmarked Funds (Note 17) 15,220 14,634 

 Cumulative Results of Operations 9,756 5,790 

TOTAL NET POSITION 95,024 98,347 

TOTAL LIABILITIES AND NET POSITION $ 140,462 $ 143,322 

The accompanying notes are an integral part of these statements.

Department of Housing and Urban Development

Consolidated Balance Sheet

For the Period Ending September 2010 and 2009

(Dollars in Millions)
Financial Information 

Financial Statements

Page 55

2010 2009

COSTS

Federal Housing Administration

 Gross Cost (Note 19) $ 1,132 $ 14,689 

 Less: Earned Revenue (2,680) (2,266) 

 Net Program Costs (1,548) 12,423 

Government National Mortgage Association

 Gross Cost (Note 19) 822 148 

 Less: Earned Revenue (1,363) (658) 

 Net Program Costs (541) (510) 

Section 8

 Gross Cost (Note 19) 27,795 25,259 

 Less: Earned Revenue - - 

 Net Program Costs 27,795 25,259 

Community Development Block Grants

 Gross Cost (Note 19) 7,125 6,466 

 Less: Earned Revenue - - 

 Net Program Costs 7,125 6,466 

HOME

 Gross Cost (Note 19) 2,851 1,956 

 Less: Earned Revenue - - 

 Net Program Costs 2,851 1,956 

Operating Subsidies

 Gross Cost (Note 19) 4,515 4,540 

 Less: Earned Revenue - - 

 Net Program Costs 4,515 4,540 

PIH Public and Indian Housing Loans And Grants

 Gross Cost (Note 19) 5,481 3,678 

 Less: Earned Revenue - - 

 Net Program Costs 5,481 3,678 

Section 202 Housing for the Elderly and Disabled

 Gross Cost (Note 19) 1,361 1,379 

 Less: Earned Revenue (280) (309) 

 Net Program Costs 1,081 1,070 

All Other

 Gross Cost (Note 19) 5,592 3,630 

 Less: Earned Revenue (47) (37) 

 Net Program Costs 5,545 3,593 

Costs Not Assigned to Programs 191 182 

Consolidated

 Gross Cost (Note 19) 56,865 61,927 

 Less: Earned Revenue (4,370) (3,270) 

NET COST OF OPERATIONS $ 52,495 $ 58,657 

The accompanying notes are an integral part of these statements.

Department of Housing and Urban Development

Consolidated Statement of Net Cost

For the Period Ending September 2010 and 2009

(Dollars in Millions)
HUD FY 2010 Agency Financial Report

Section II

Page 56

EARMARKED 

FUNDS

ALL OTHER 

FUNDS

CONSOLIDATED 

TOTAL

EARMARKED 

FUNDS

ALL OTHER 

FUNDS

CONSOLIDATED 

TOTAL

CUMULATIVE RESULTS OF OPERATIONS:

 Beginning of Period $ 14,625 $ 5,799 $ 20,424 $ 14,089 $ 13,969 $ 28,058

 Adjustments:

 Changes in Accounting Principles - - - - - - 

 Corrections of Errors - - - - - - 

 Beginning Balances, As Adjusted 14,625 5,799 20,424 14,089 13,969 28,058

 BUDGETARY FINANCING SOURCES:

 Other Adjustments - 7 7 - - - 

 Appropriations Used 4,903 52,196 57,099 1,530 53,217 54,747

 Non-exchange Revenue - - - - - - 

 Donations/Forfeitures-Cash & Cash Equivalents - - - - - - 

 Transfers In/Out Without Reimbursement 9 (1,170) (1,161) 5 (2,066) (2,061) 

 Other - - - - - - 

 OTHER FINANCING SOURCES (NON-EXCHANGE):

 Donations and Forfeitures of Property - - - - - - 

 Transfers In/Out Without Reimbursement - 1,002 1,002 - (1,742) (1,742) 

 Imputed Financing 1 99 100 - 79 79

 Other - - - - - - 

 Total Financing Sources 4,913 52,134 57,047 1,535 49,488 51,023

 Net Cost of Operations (4,318) (48,177) (52,495) (990) (57,667) (58,657) 

 Net Change 595 3,957 4,552 545 (8,179) (7,634) 

CUMULATIVE RESULTS OF OPERATIONS $ 15,220 $ 9,756 $ 24,976 $ 14,634 $ 5,790 $ 20,424

UNEXPENDED APPROPRIATIONS:

 Beginning of Period $ 11,719 $ 66,204 $ 77,923 $ (376) $ 66,816 $ 66,440

 Adjustments:

 Changes in Accounting Principles - - - - - - 

 Corrections of Errors - - - - - - 

 Beginning Balances, As Adjusted 11,719 66,204 77,923 (376) 66,816 66,440

 BUDGETARY FINANCING SOURCES:

 Appropriations Received 1 49,819 49,820 13,626 53,863 67,489

 Appropriations Transfers In/Out - (82) (82) - (86) (86) 

 Other Adjustments (1) (514) (515) - (1,174) (1,174) 

 Appropriations Used (4,902) (52,196) (57,098) (1,530) (53,216) (54,746) 

 Total Budgetary Financing Sources (4,902) (2,973) (7,875) 12,096 (613) 11,483

UNEXPENDED APPROPRIATIONS 6,817 63,231 70,048 11,720 66,203 77,923

NET POSITION $ 22,037 $ 72,987 $ 95,024 $ 26,354 $ 71,993 $ 98,347

The accompanying notes are an integral part of these statements.

2010 2009

Department of Housing and Urban Development

Consolidated Statement of Changes in Net Position

For the Period Ending September 2010 and 2009 

(Dollars in Millions)
Financial Information 

Financial Statements

Page 57

Budgetary

NonBudgetary Credit 

Program Financing 

Accounts Budgetary

NonBudgetary Credit 

Program Financing 

Accounts

Budgetary Resources:

 Unobligated Balance, Brought Forward $ 40,344 $ 26,968 $ 53,378 $ 8,300 

 Recoveries of Prior Year Unpaid Obligations 896 70 1,010 10 

 Budget Authority

 Appropriation 49,842 7 67,492 - 

 Borrowing Authority 36 796 4 475 

 Contract Authority - - - - 

 Spending Authority from Offsetting Collections Earned

 Collected 8,808 28,213 5,171 31,266 

 Change in Receivable from Federal Sources (84) (3) (144) 1 

 Change in Unfilled Customer Orders

 Advance Received (11) - (11) - 

 W/O Advance from Federal Sources 18 (5) 5 3 

 Anticipated Rest of Year w/o Advance - - - - 

 Previously Unavailable - - - - 

 Expenditure Transfers from Trust Funds - - - - 

 Subtotal Budget Authority 58,609 29,008 72,517 31,745 

 Nonexpenditure Transfers, Net - - - - 

 Temporarily Not Available Per PL - - - - 

 Permanently Not Available (4,186) (449) (7,080) (883) 

Total Budgetary Resources $ 95,663 $ 55,597 $ 119,825 $ 39,172 

Status of Budgetary Resources:

 Obligations Incurred

 Direct 64,082 20,787 77,953 12,205 

 Reimbursable 8,017 - 1,528 - 

 Subtotal 72,099 20,787 79,481 12,205 

 Unobligated Balances 

 Apportioned 7,804 4,074 13,490 5,884 

 Exempt from Apportionment - - - - 

 Subtotal 7,804 4,074 13,490 5,884 

 Unobligated Balances Not Available 15,760 30,736 26,854 21,083 

Total Status of Budgetary Resources $ 95,663 $ 55,597 $ 119,825 $ 39,172 

Change in Obligated Balance:

 Obligated Balance, Net

 Unpaid Obligations, Brought Forward 68,751 1,464 57,120 1,595 

 Less: Uncollected Customer Payments from Federal Sources (141) (23) (279) (18) 

 Total Unpaid Obligated Balance, Net 68,610 1,441 56,841 1,577 

 Obligations Incurred, Net 72,099 20,787 79,481 12,205 

 Less: Gross Outlays (75,292) (20,290) (66,841) (12,326) 

 Obligated Balance Transferred, Net - - - - 

 Actual Transfers, Unpaid Obligations - - - - 

 Actual Transfers, Uncollected Customer Payments from Federal Sources - - - - 

 Total Unpaid Obligated Balance Transferred, Net - - - - 

 Less: Recoveries of Prior Year Unpaid Obligations, Actual (896) (70) (1,010) (10) 

 Change in Uncollected Customer Payments from Federal Sources 66 7 139 (5) 

 Obligated Balance, Net - End of Period

 Unpaid Obligations 64,662 1,891 68,751 1,464 

 Less: Uncollected Customer Payments from Federal Sources (74) (15) (141) (23) 

Total Obligated Balance, Net - End of Period 64,588 1,876 68,610 1,441 

Net Outlays 

 Gross Outlays 75,292 20,290 66,841 12,326 

 Less: Offsetting Collections (7,805) (28,213) (4,272) (31,266) 

 Less: Distributed Offsetting Receipts (1,718) - (1,141) - 

Net Outlays $ 65,769 $ (7,923) $ 61,428 $ (18,940) 

The accompanying notes are an integral part of these statements.

2010 2009

Department of Housing and Urban Development

Combined Statement of Budgetary Resources

For the Period Ending September 2010 and 2009

(Dollars in Millions)
HUD FY 2010 Agency Financial Report

Section II

Page 58

Notes to Financial Statements

September 30, 2010 and 2009

Note 1: Entity and Mission 

HUD was created in 1965 to (1) provide housing subsidies for low and moderate income 

families, (2) provide grants to states and communities for community development activities, 

(3) provide direct loans and capital advances for construction and rehabilitation of housing 

projects for the elderly and persons with disabilities, and (4) promote and enforce fair housing 

and equal housing opportunity. In addition, HUD insures mortgages for single family and 

multifamily dwellings; insures loans for home improvements and manufactured homes; and 

facilitates financing for the purchase or refinancing of millions of American homes. 

HUD’s major programs are as follows:

The Federal Housing AdministrationE1 (FHA) administers active mortgage insurance programs 

which are designed to make mortgage financing more accessible to the home-buying public and 

thereby to develop affordable housing. FHA insures private lenders against loss on mortgages 

which finance single family homes, multifamily projects, health care facilities, property 

improvements, and manufactured homes. 

The Government National Mortgage AssociationE2 (Ginnie Mae) guarantees the timely payment 

of principal and interest on mortgage-backed securities issued by approved private mortgage 

institutions and backed by pools of mortgages insured or guaranteed by FHA, the Rural Housing 

Service (RHS), the Department of Veterans Affairs (VA) and the HUD Office of Public and 

Indian Housing (PIH).

The Section 8 Rental AssistanceE3 programs assist low- and very low-income families in 

obtaining decent and safe rental housing. HUD makes up the difference between what a lowand very low-income family can afford and the approved rent for an adequate housing unit with 

the Housing Choice Voucher (HCV) Program funding cycle that started January 1, 2005 and 

ended December 31, 2005. 

Operating SubsidiesE4 are provided to PHAs and Tribally Designated Housing Entities (TDHEs) 

to help finance the operations and maintenance costs of their housing projects. 

The Community Development Block GrantE5 (CDBG) programs provide funds for metropolitan 

cities, urban counties, and other communities to use for neighborhood revitalization, economic 

development, and improved community facilities and services. Any remaining un-obligated 

balances shall remain available until expended. The United States Congress appropriated 

$17.5 billion in FY 2008 and $150 million in emergency supplemental appropriations in FY 

2005 for the “Community Development Fund” for emergency expenses to respond to the 

Hurricane Katrina relief efforts. Funds of $2.4 billion were disbursed in FY 2010 and 
Financial Information 

Notes to Financial Statements

Page 59

$2.2 billion was disbursed in FY 2009. Any remaining un-obligated balances shall remain 

available until expended. 

The Low Rent Public Housing GrantsE6 program provides grants to PHAs and TDHEs for 

construction and rehabilitation of low-rent housing. This program is a continuation of the Low 

Rent Public Housing Loan program which pays principal and interest on long-term loans made to 

PHAs and TDHEs for construction and rehabilitation of low-rent housing. 

The Section 202/811 Supportive Housing for the ElderlyE7 and Persons with DisabilitiesE8

programs, prior to fiscal 1992, provided 40 year loans to nonprofit organizations sponsoring 

rental housing for the elderly or disabled. During fiscal 1992, the program was converted to a 

grant program. The grant program provides capital for long-term supportive housing for the 

elderly (Section 202) and disabled (Section 811). 

The Home Investments PartnershipsE9 program provides grants to states, local governments, and 

Indian tribes to implement local housing strategies designed to increase home ownership and 

affordable housing opportunities for low- and very low-income families.

Other Programs not included above consist of other smaller programs which provide grant, 

subsidy funding, and direct loans to support other HUD objectives such as fair housing and equal 

opportunity, energy conservation, assistance for the homeless, rehabilitation of housing units, 

removal of lead hazards, and home ownership. The programs provide 11 percent of HUD’s 

consolidated revenues and financing sources for FY 2010 and 9 percent of HUD’s consolidated 

revenues and financing sources for FY 2009. 

Note 2: Summary of Significant Accounting Policies 

A. Basis of Consolidation

The Department’s FY 2010 financial statements do not include the accounts and transactions of 

two transfer appropriations, the Appalachian Regional Commission and the Department of 

Transportation Surface Transportation Projects. Some laws require departments (parent) to 

allocate budget authority to another department (child). Allocation means a delegation, 

authorized by law, by one department of its authority to obligate and outlay funds to another 

department. HUD, the child account, receives budget authority and then obligates and outlays 

sums of up to the amount included in the allocation. As required by OMB Circular A-136, 

financial activity is in the parent account which is also accountable for and maintains the 

responsibility for reporting while the child performs on behalf of the parent and controls how the 

funds are expended. Consequently, these balances are not included in HUD’s consolidated 

financial statements as specified by OMB Circular A-136.

B. Basis of Accounting

The Department’s FY 2010 financial statements include the accounts and transactions of Ginnie 

Mae, FHA, and its grant, subsidy and loan programs. 
HUD FY 2010 Agency Financial Report

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The financial statements are presented in accordance with the OMB Circular No. A-136, 

Financial Reporting Requirements, and in conformance with the Federal Accounting Standards 

Advisory Board’s (FASAB) Statements of Federal Financial Accounting Standards (SFFAS). 

The financial statements are presented on the accrual and budgetary bases of accounting. Under 

the accrual method, HUD recognizes revenues when earned, and expenses when a liability is 

incurred, without regard to receipt or payment of cash. Generally, procedures for HUD’s major 

grant and subsidy programs require recipients to request periodic disbursement concurrent with 

incurring eligible costs. Budgetary accounting facilitates compliance with legal requirements on 

the use of Federal funds. 

The Department’s disbursement policy permits grantees/recipients to request funds to meet 

immediate cash needs to reimburse themselves for eligible incurred expenses and eligible 

expenses expected to be received and paid within three days or as subsidies are payable in 

accordance with Cash Management Improvement Act of 1990. HUD’s disbursement of funds 

for these purposes are not considered advance payments, but are viewed as good cash 

management between the Department and the grantees. In the event that it is determined that the 

grantee/recipient did not disburse the funds within the three day time frame, interest earned must 

be returned to HUD and deposited into one of Treasury’s miscellaneous receipt accounts.

C. Use of Estimates

The preparation of the principal financial statements in conformity with generally accepted 

accounting principles (GAAP) requires management to make estimates and assumptions that 

affect the reported amounts of assets and liabilities, the disclosure of contingent assets and 

liabilities at the date of the financial statements, and the reported amounts of revenues and 

expenses during the reporting period. Actual results may differ from those estimates.

Amounts reported for net loans receivable and related foreclosed property and the loan guarantee 

liability represent the Department’s best estimates based on pertinent information available.

To estimate the allowance for subsidy (AFS) associated with loans receivable and related to 

foreclosed property and the Liability for Loan Guarantees (LLG), the Department uses cash flow 

model assumptions associated with the loan guarantees subject to the Federal Credit Reform Act 

of 1990 (FCRA), as described in Note 7, to estimate the cash flows associated with future loan 

performance. To make reasonable projections of future loan performance, the Department 

develops assumptions based on historical data, current and forecasted program and economic 

assumptions. 

Certain programs have higher risks due to increased chances of fraudulent activities perpetrated 

against the Department. The Department accounts for these risks through the assumptions used 

in the liabilities for loan guarantee estimates. HUD develops the assumptions based on historical 

performance and management’s judgments about future loan performance. 
Financial Information 

Notes to Financial Statements

Page 61

D. Credit Reform Accounting

The primary purpose of the Federal Credit Reform Act of 1990, which became effective on 

October 1, 1991, is to more accurately measure the cost of Federal credit programs and to place 

the cost of such credit programs on a basis equivalent with other Federal spending. OMB 

Circular No. A-11, Part 5, Federal Credit Programs defines Loan Guarantee as any guarantee, 

insurance or other pledge with respect to the payment of all or a part of the principal or interest 

on any debt obligation of a non-Federal borrower (Issuer) to a non-Federal lender (Investor). 

FHA practices Credit Reform accounting. In the opinion of Ginnie Mae management, and 

HUD’s General Counsel, the Federal Credit Reform Act does not apply to Ginnie Mae. 

Nevertheless, in consultation with the OMB, Ginnie Mae has adopted certain credit reform 

practices. 

The FCRA establishes the use of the program, financing, and general fund receipt accounts for 

loan guarantees committed and direct loans obligated after September 30, 1991 (Credit Reform). 

It also establishes the liquidating account for activity relating to any loan guarantees committed 

and direct loans obligated before October 1, 1991 (pre-Credit Reform). These accounts are 

classified as either budgetary or non-budgetary in the Combined Statements of Budgetary 

Resources. The budgetary accounts include the program, capital reserve and liquidating 

accounts. The non-budgetary accounts consist of the credit reform financing accounts. 

The program account is a budget account that receives and obligates appropriations to cover the 

subsidy cost of a direct loan or loan guarantee and disburses the subsidy cost to the financing 

account. The program account also receives appropriations for administrative expenses. The 

financing account is a non-budgetary account that records all of the cash flows resulting from 

Credit Reform direct loans or loan guarantees. It disburses loans, collects repayments and fees, 

makes claim payments, holds balances, borrows from U.S. Treasury, earns or pays interest, and 

receives the subsidy cost payment from the program account. 

The general fund receipt account is a budget account used for the receipt of amounts paid from 

the financing account when there are negative subsidies from the original estimate or a 

downward re-estimate. In most cases, the receipt account is a general fund receipt account and 

amounts are not earmarked for the credit program. They are available for appropriations only in 

the sense that all general fund receipts are available for appropriations. Any assets in this 

account are non-entity assets and are offset by intragovernmental liabilities. At the beginning of 

the following fiscal year, the fund balance in the general fund receipt account is transferred to the 

U.S. Treasury General Fund. The FHA general fund receipt accounts of the General Insurance 

(GI) and Special Risk Insurance (SRI) funds are in this category.

In order to resolve the different requirements between the FCRA and the National Affordable 

Housing Act of 1990 (NAHA), OMB instructed FHA to create the capital reserve account to 

retain the Mutual Mortgage Insurance/Cooperative Management Housing Insurance 

(MMI/CMHI) negative subsidy and subsequent downward re-estimates. Specifically, the NAHA 
HUD FY 2010 Agency Financial Report

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required that FHA’s MMI fund achieve a Capital Ratio of 2.0 percent by FY 2000. The Capital 

Ratio is defined as the ratio of economic net worth (current cash plus the present value of all 

future net cash flows) of the MMI fund to unamortized insurance in force (the unpaid balance of 

insured mortgages). Therefore, to ensure that the calculated Capital Ratio reflects the actual 

strength of the MMI fund, the resources of the capital reserve account, which are considered 

FHA assets, are included in the calculation of the MMI fund’s economic net worth. 

The liquidating account is a budget account that records all cash flows to and from FHA 

resulting from pre-Credit Reform direct loans or loan guarantees. Liquidating account 

collections in any year are available only for obligations incurred during that year or to repay 

debt. Unobligated balances remaining in the GI and SRI liquidating funds at year-end are 

transferred to the U.S. Treasury’s General Fund. Consequently, in the event that resources in the 

GI/SRI liquidating account are otherwise insufficient to cover the payments for obligations or 

commitments, the FCRA provides the GI/SRI liquidating account with permanent indefinite 

authority to cover any resource shortages. 

E. Operating Revenue and Financing Sources

HUD finances operations principally through appropriations, collection of premiums and fees on 

its FHA and Ginnie Mae programs, and interest income on its mortgage notes, loans, and 

investments portfolio. 

Appropriations for Grant and Subsidy Programs 

HUD receives both annual and multi-year appropriations, and recognizes those appropriations as 

revenue when related program expenses are incurred. Accordingly, HUD recognizes grantrelated revenue and related expenses as recipients perform under the contracts. HUD recognizes 

subsidy-related revenue and related expenses when the underlying assistance (e.g., provision of a 

Section 8 rental unit by a housing owner) is provided or upon disbursal of funds to PHAs. 

Ginnie Mae Fees

Fees received for Ginnie Mae’s guaranty of mortgage-backed securities are recognized as 

earned. Commitment fees represent income that Ginnie Mae earns for providing approved 

issuers with authority to pool mortgages into Ginnie Mae mortgage-backed securities. The 

authority Ginnie Mae provides issuers expires 12 months from issuance for single family issuers 

and 24 months from issuance for multifamily issuers. Ginnie Mae receives Commitment Fees as 

issuers request Commitment Authority and recognizes the Commitment Fees as earned as Issuers 

use their Commitment Authority, with the balance deferred until earned or expired, whichever 

occurs first. Fees from expired commitment Authority are not returned to issuers.

F. Appropriations and Moneys Received from Other HUD Programs

The National Housing Act of 1990, as amended, provides for appropriations from Congress to 

finance the operations of GI and SRI funds. For Credit Reform loan guarantees, appropriations 

to the GI and SRI funds are provided at the beginning of each fiscal year to cover estimated 
Financial Information 

Notes to Financial Statements

Page 63

losses on insured loans during the year. For pre-Credit Reform loan guarantees, FHA has 

permanent indefinite appropriation authority to finance any shortages of resources needed for 

operations. 

Monies received from other HUD programs, such as interest subsidies and rent supplements, are 

recorded as revenue for the liquidating accounts when services are rendered. Monies received 

for the financing accounts are recorded as additions to the Liability for Loan Guarantee or the 

Allowance for Subsidy when collected.

G. Investments

HUD limits its investments, principally comprised of investments by FHA’s MMI/CMHI Fund 

and by Ginnie Mae, to non-marketable market-based Treasury interest-bearing obligations (i.e., 

investments not sold in public markets). The market value and interest rates established for such 

investments are the same as those for similar Treasury issues, which are publicly marketed. 

HUD’s investment decisions are limited by Treasury policy which: (1) only allows investment 

in Treasury notes, bills, and bonds; and (2) prohibits HUD from engaging in practices that result 

in “windfall” gains and profits, such as security trading and full scale restructuring of portfolios, 

in order to take advantage of interest rate fluctuations. 

FHA’s normal policy is to hold investments in U.S. Government securities to maturity. 

However, in certain circumstances, FHA may have to liquidate its U.S. Government securities 

before maturity to finance claim payments. 

HUD reports investments in U.S. Government securities at amortized cost. Premiums or 

discounts are amortized into interest income over the term of the investment. HUD intends to 

hold investments to maturity, unless needed for operations. No provision is made to record 

unrealized gains or losses on these securities because, in the majority of cases, they are held to 

maturity.

In connection with an Accelerated Claims Disposition Demonstration program (the 

601 program), FHA transfers assigned mortgage notes to private sector entities in exchange for 

cash and equity interest. FHA uses the equity method of accounting to measure the value of its 

investments in these entities.

Multifamily Risk Sharing Debentures [Section 542(c)] is a program available to lenders where 

the lender shares the risk in a property by issuing debentures for the claim amount paid by FHA 

on defaulted insured loans. 

In connection with an Accelerated Claims Disposition Demonstration program (the 

601 program), FHA transfers assigned mortgage notes to private sector entities in exchange for 

cash and equity interest. FHA uses the equity method of accounting to measure the value of its 

investments in these entities. 
HUD FY 2010 Agency Financial Report

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Multifamily Risk Sharing Debentures [Section 542(c)] is a program available to lenders where 

the lender shares the risk in a property by issuing debentures for the claim amount paid by FHA 

on defaulted insured loans. 

H. Credit Program Receivables and Related Foreclosed Property

HUD finances mortgages and provides loans to support construction and rehabilitation of low 

rent housing, principally for the elderly and disabled under the Section 202/811 program. Prior 

to April 1996, mortgages were also assigned to HUD through FHA claims settlement (i.e., 

Mortgage Notes Assigned (MNAs). Single family mortgages were assigned to FHA when the 

mortgagor defaulted due to certain “temporary hardship” conditions beyond the control of the 

mortgagor, and when, in management’s judgment, it is likely that the mortgage could be brought 

current in the future. FHA’s loans receivable include MNAs, also described as Secretary-held 

notes, and purchase money mortgages (PMM) and notes related to partial claims. Under the 

requirements of the FCRA, PMM notes are considered to be direct loans while MNA notes are 

considered to be defaulted guaranteed loans. The PMM loans are generated from the sales on 

credit of FHA’s foreclosed properties to qualified non-profit organizations. The MNA notes are 

created when FHA pays the lenders for claims on defaulted guaranteed loans and takes 

assignment of the defaulted loans for direct collections. In addition, multifamily mortgages are 

assigned to FHA when lenders file mortgage insurance claims for defaulted notes. 

Credit program receivables for direct loan programs and defaulted guaranteed loans assigned for 

direct collection are valued differently based on the direct loan obligation or loan guarantee 

commitment date. These valuations are in accordance with the Federal Credit Reform Act of 

1990 and SFFAS No. 2, “Accounting for Direct Loans and Loan Guarantees,” as amended by 

SFFAS No. 18. Those obligated or committed on or after October 1, 1991 (post-Credit Reform) 

are valued at the net present value of expected cash flows from the related receivables.

Credit program receivables resulting from obligations or commitments prior to October 1, 1991 

(pre-Credit Reform) are recorded at the lower of cost or fair value (net realizable value). Fair 

value is estimated based on the prevailing market interest rates at the date of mortgage 

assignment. When fair value is less than cost, discounts are recorded and amortized to interest 

income over the remaining terms of the mortgages or upon sale of the mortgages. Interest is 

recognized as income when earned. However, when full collection of principal is considered 

doubtful, the accrual of interest income is suspended and receipts (both interest and principal) are 

recorded as collections of principal. Pre-Credit Reform loans are reported net of allowance for 

loss and any unamortized discount. The estimate for the allowance on credit program 

receivables is based on historical loss rates and recovery rates resulting from asset sales and 

property recovery rates, and net of cost of sales. 

Foreclosed property acquired as a result of defaults of loans obligated or loan guarantees 

committed on or after October 1, 1991, is valued at the net present value of the projected cash 

flows associated with the property. Foreclosed property acquired as a result in defaulted loans 
Financial Information 

Notes to Financial Statements

Page 65

obligated or loan guarantees committed prior to 1992 is valued at net realizable value. The 

estimate for the allowance for loss related to the net realizable value of foreclosed property is 

based on historical loss rates and recovery rates resulting from property sales, and net of cost of 

sales.

I. Borrowings

As further discussed in Note 11, several of HUD’s programs have the authority to borrow funds 

from the U.S. Treasury for program operations. These borrowings, representing unpaid principal 

balances and future accrued interest is reported as debt in HUD’s consolidated financial 

statements. The PIH Low Rent Public Housing Loan Program and the Housing for the Elderly 

or Handicapped fund were financed through borrowings from the Federal Financing Bank or the 

U.S. Treasury prior to the Department’s conversion of these programs to grant programs. The 

Department also borrowed funds from the private sector to assist in the construction and 

rehabilitation of low rent housing projects under the PIH Low Rent Public Housing Loan 

Program. Repayments of these long-term borrowings have terms up to 40 years. 

In accordance with Credit Reform accounting, FHA also borrows from the U.S. Treasury when 

cash is needed in its financing accounts. Usually, the need for cash arises when FHA has to 

transfer the negative credit subsidy amount related to new loan disbursements, and existing loan 

modifications from the financing accounts to the general fund receipts account (for cases in 

GI/SRI funds) or the liquidating account (for cases in MMI/CMHI funds). In some instances, 

borrowings are also needed to transfer the credit subsidy related to downward re-estimate from 

the GI/SRI financing account to the GI/SRI receipt account or when available cash is less than 

claim payments due.

J. Liability for Loan Guarantees

The potential future losses related to FHA’s central business of providing mortgage insurance are 

accounted for as Loan Guarantee Liability in the consolidated balance sheets. As required by 

SFFAS No. 2, the Loan Guarantee Liability includes the Credit Reform related Liabilities for 

Loan Guarantees (LLG) and the Loan Loss Reserve (LLR). 

The LLG and LLR are calculated as the present value of anticipated cash outflows for defaults, 

such as claim payments, premium refunds, property expense for on-hand properties and sale 

expense for sold properties, less anticipated cash inflows such as premium receipts, proceeds 

from asset sales and principal and interest on Secretary-held notes acquired from FHA’s claim 

settlements of defaulted mortgages or pursuant to Section 221 (g) (4) of the National Housing 

Act.

HUD records its loan loss reserves for its mortgage insurance programs operated through FHA. 

FHA loss reserves are recorded for the net present value of estimated future cash flows 

associated with FHA-insured mortgage loans endorsed before FY 1992. 
HUD FY 2010 Agency Financial Report

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K. Full Cost Reporting

Beginning in FY 1998, SFFAS No. 4, Managerial Cost Accounting Concepts and Standards for 

the Federal Government, required that full costing of program outputs be included in Federal 

agency financial statements. Full cost reporting includes direct, indirect, and inter-entity costs. 

For purposes of the consolidated department financial statements, HUD identified each 

responsible segment’s share of the program costs or resources provided by HUD or other Federal 

agencies.

L. Accrued Unfunded Leave and Federal Employees Compensation Act 

(FECA) Liabilities

Annual leave and compensatory time are accrued as earned and the liability is reduced as leave is 

taken. The liability at year-end reflects cumulative leave earned but not taken, priced at current 

wage rates. Earned leave deferred to future periods is to be funded by future appropriations. To 

the extent that current or prior year appropriations are not available to fund annual leave earned 

but not taken, funding will be obtained from future financing sources. Sick leave and other types 

of leave are expensed as taken.

M. Retirement Plans

The majority of HUD’s employees participate in either the Civil Service Retirement System 

(CSRS) or the Federal Employees Retirement System (FERS). FERS went into effect pursuant 

to Public Law 99-335 on January 1, 1987. Most employees hired after December 31, 1983, are 

automatically covered by FERS and Social Security. Employees hired before January 1, 1984, 

can elect to either join FERS and Social Security or remain in CSRS. HUD expenses its 

contributions to the retirement plans. 

A primary feature of FERS is that it offers a savings plan whereby HUD automatically 

contributes one percent of pay and matches any employee contribution up to five percent of an 

individual’s basic pay. Under CSRS, employees can contribute up to $16,500 of their pay to the 

savings plan, but there is no corresponding matching by HUD. Although HUD funds a portion 

of the benefits under FERS relating to its employees and makes the necessary withholdings from 

them, it has no liability for future payments to employees under these plans, nor does it report 

CSRS or FERS assets, accumulated plan benefits, or unfunded liabilities applicable to its 

employees’ retirement plans. 

N. Loss Reserves

HUD records loss reserves for its mortgage insurance programs operated through FHA and its 

financial guaranty programs operated by Ginnie Mae. FHA loss reserves are recorded for the net 

present value of estimated future cash flows associated with FHA-insured mortgage loans 

endorsed before FY 1992. Ginnie Mae establishes reserves for actual and probable defaults of 

issuers of Ginnie Mae-guaranteed mortgage-backed securities; such reserves are based on 
Financial Information 

Notes to Financial Statements

Page 67

management’s judgment about historical claim and loss information and current and projected 

economic factors.

O. Financial Accounting Standards Board Interpretation No. 45, Guarantor’s 

Accounting and Disclosure Requirements for Guarantees

The Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 45 (FIN 45), 

Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect 

Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107, 

and Rescission of FASB Interpretation No. 34, in November 2002. FIN 45 clarifies the 

requirements of FASB Statement No. 5, Accounting for Contingencies, relating to the 

guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees that 

upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the 

obligation it assumes under the guarantee. We have computed the fair value of our guarantee 

based on the life of the mortgage-backed securities and their underlying loans. Based on this 

evaluation we have disclosed an asset and liability of $1,103.8 million as of September 30, 2010, 

and $902.5 million as of September 30, 2009 categorized as other assets and other liabilities, see 

Note A. There is no impact on the net financial position of Ginnie Mae due to FIN 45. 

P. Mortgage Servicing Rights

Mortgage servicing rights (MSR) represent Ginnie Mae’s right to service mortgage loans in 

mortgage-backed securities, obtained from issuers upon default. We record MSR as a 

component of “Other Assets” in our consolidated Balance Sheet when the present value of the 

estimated compensation for mortgage servicing activities exceeds adequate compensation for 

such servicing activities. Ginnie Mae considers adequate compensation to be the amount of 

compensation that would be required by a substitute master sub-servicer should one be required. 

Market information is used to determine adequate compensation for these services. Ginnie Mae 

receives a weighted average servicing fee of approximately 40 basis points annually on the 

remaining outstanding principal balances of the loans. The servicing fees are collected from the 

monthly payments made by the borrowers. 

Ginnie Mae initially recognized an MSR at amortized cost during FY 2009 and subsequently to 

account for the MSR at fair value in FY 2010. Ginnie Mae measures its MSRs fair value and 

changes to their fair values. Ginnie Mae estimates the fair value of MSRs using a valuation 

model that calculates the present value of estimated future net servicing income. This is 

accomplished through a valuation approach that factors in prepayment risk and consists of 

projecting servicing cash flows under multiple interest rate scenarios and discounting these cash 

flows using risk-adjusted discount rates (see Note 9 for more information about our estimates of 

the fair value of MSRs using a valuation model). 

Q. Subsequent Events

HUD management has evaluated subsequent events through November 5, 2010, the date through 

which the financial statements were made available.
HUD FY 2010 Agency Financial Report

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As of October 31, 2010, Ginnie Mae has repurchased approximately $499 million of loans out of 

Single Family defaulted MBS pools. Ginnie Mae management has determined that the 

repurchase will not have a material adverse effect on the financial position of Ginnie Mae.

Note 3: Entity and Non-Entity Assets 

Non-entity assets consist of assets that belong to other entities but are included in the 

Department’s consolidated financial statements and are offset by various liabilities to accurately 

reflect HUD’s net position. The Department’s non-entity assets principally consist of: (1) U.S. 

deposit of negative credit subsidy in the GI/SRI general fund receipt account, (2) escrow monies 

collected by FHA that are either deposited at the U.S Treasury, Minority-Owned banks or 

invested in U.S. Treasury securities, and (3) cash remittances from Section 8 bond refundings 

deposited in the General Fund of the Treasury. 

HUD’s assets as of September 30, 2010 and 2009 were as follows (dollars in millions): 

Description

Entity Non-Entity Total Entity Non-Entity Total

Intragovernmental

 Fund Balance with Treasury (Note 4) $ 115,112 $ 795 $ 115,907 $ 113,360 $ 281 $ 113,641

 Investments (Note 5) 7,721 - 7,721 19,908 4 19,912

 Other Assets (Note 9) 39 - 39 14 - 14

Total Intragovernmental Assets $ 122,872 $ 795 $ 123,667 $ 133,282 $ 285 $ 133,567

 Investments (Note 5) 136 - 136 145 - 145

 Accounts Receivable (net) (Note 6) 278 44 322 74 55 129

 Loan Receivables and Related Foreclosed Property (net) (Note 7) 9,432 - 9,432 8,058 - 8,058

 General Property, Plant, and Equipment (net) (Note 8) 258 - 258 234 - 234

 Other Assets (Note 9) 6,577 70 6,647 1,097 92 1,189

Total Assets $ 139,553 $ 909 140,462$ $ 142,890 $ 432 $143,322

2010 2009

Note 4: Fund Balance with the U.S. Treasury 

The U.S. Treasury, which, in effect, maintains HUD’s bank accounts, processes substantially all 

of HUD’s receipts and disbursements. HUD’s fund balances with the U.S. Treasury as of 

September 30, 2010 and 2009 were as follows (dollars in millions): 

Description 2010 2009

Revolving Funds $ 39,149 $ 35,006

Appropriated Funds 70,357 78,390

Trust Funds 5,389 6

Other 1,012 239

Total - Fund Balance $ 115,907 113,641$ 

The Department’s Fund Balance with Treasury includes receipt accounts established under 

current Federal Credit Reform legislation and cash collections deposited in restricted accounts 

that cannot be used by HUD for its programmatic needs. These designated funds established by 

the Department of Treasury are classified as suspense and/or deposit funds and consist of 
Financial Information 

Notes to Financial Statements

Page 69

accounts receivable balances due from the public. A Statement of Budgetary Resources is not 

prepared for these funds since any cash remittances received by the Department are not defined 

as a budgetary resource.

In addition to fund balance, contract and investment authority are also a part of HUD’s funding 

sources. Contract authority permits an agency to incur obligations in advance of an 

appropriation, offsetting collections, or receipts to make outlays to liquidate the obligations. 

HUD has permanent indefinite contract authority. Since federal securities are considered the 

equivalent of cash for budget purposes, investments in them are treated as a change in the mix of 

assets held, rather than as a purchase of assets. 

A primary reason for the increase in HUD’s fund balance with Treasury is appropriations 

received under the American Recovery and Reinvestment Act of 2009 offset by $6 billion in 

expenditure by Ginnie Mae to buyout delinquent mortgage-backed securities. HUD’s fund 

balances with U.S. Treasury as reflected in the entity’s general ledger as of September 30, 2010 

and 2009 were as follows (dollars in millions): 
HUD FY 2010 Agency Financial Report

Section II

Page 70

Status of Resources - 2010

Description

Unobligated 

Available

Unobligated 

Unavailable

Obligated 

Not Yet 

Disbursed

Unfilled 

Customer 

Orders

Status of 

Total 

Resources Fund Balance

Other 

Authority

Total 

Resources

FHA 4,577$ $ 35,329 2,663$ (24)$ 42,545$ $ 38,461 4,086$ 42,547$ 

Ginnie Mae 2 9,838 378 (23) 10,195 6,650 3,544 10,194 

Section 8 Rental Assistance 441 11,156 8 - 11,605 11,600 5 11,605 

CDBG 1,903 20,764 117 - 22,784 22,783 - 22,783 

HOME 244 6,300 20 - 6,564 6,564 - 6,564 

Operating Subsidies 6 1,336 5 - 1,347 1,346 - 1,346 

PIH Loans and Grants 215 9,130 82 - 9,427 9,427 - 9,427 

Section 202/811 1,234 3,916 115 - 5,265 5,266 - 5,266 

Section 235/236 35 3,013 279 - 3,327 1,289 2,038 3,327 

All Other 3,221 7,897 703 11,779 (42) 11,779 11,779 - 

Total 11,878$ $ 46,496 66,553$ 124,838$ (89)$ $ 115,165 124,838$ 9,673$ 

Status of Resources Covered by Fund Balance

Description

Unobligated 

Available

Unobligated 

Unavailable

Obligated 

Not Yet 

Disbursed

Unfilled 

Customer 

Orders

Fund 

Balance

NonBudgetary: 

Suspense, 

Deposit and 

Receipt 

Accounts

Total Fund 

Balance

FHA 4,577$ $ 31,243 2,663$ (24)$ 38,459 $ 39,078$ 619

Ginnie Mae 2 6,294 378 (24) 6,650 6,650 -

Section 8 Rental Assistance 433 11,167 - - 11,600 11,610 10

CDBG 1,903 20,763 117 - 22,783 22,783 -

HOME 244 6,300 20 - 6,564 6,564 -

Operating Subsidies 6 1,336 5 - 1,347 1,347 -

PIH Loans and Grants 215 9,130 82 - 9,427 9,427 -

Section 202/811 1,235 3,916 115 - 5,266 5,266 -

Section 235/236 - 1,286 3 - 1,289 1,289 -

All Other 3,221 7,897 703 11,780 (41) 11,893 113

Total 11,836$ $ 38,582 64,836$ 115,165$ (89)$ $ 115,907$ 742

Status of Resources Covered by Other Authority

Description

Unobligated 

Available

Unobligated 

Unavailable

Obligated 

Not Yet 

Disbursed

Unfilled 

Customer 

Orders

Permanent 

Indefinite 

Authority

Investment 

Authority

Borrowing 

Authority

FHA -$ 4,086 $ -$ -$ -$ $ 4,086 -$ 

Ginnie Mae - 3,544 - - - 3,544 - 

Section 8 Rental Assistance 8 (11) 8 - 5 - - 

PIH Loans and Grants - - - - - - - 

Section 202/811 - - - - - - - 

Section 235/236 34 1,728 276 - - 2,038 - 

All Other - - - - - - - 

Total 7,914 42$ $ 1,717$ -$ 5$ $ 9,668 -$ 

Status of Receipt Account Balances

Description

Fund 

Balance

FHA 619$ 

Section 8 Rental Assistance 10 

All Other 113 

Total 742$ 
Financial Information 

Notes to Financial Statements

Page 71

Status of Resources - 2009

Description

Unobligated 

Available

Unobligated 

Unavailable

Obligated 

Not Yet 

Disbursed

Unfilled 

Customer 

Orders

Status of 

Total 

Resources Fund Balance

Other 

Authority

Total 

Resources

FHA 6,450$ $ 31,749 2,304$ (89)$ 40,414$ $ 29,947 10,467$ 40,414$ 

Ginnie Mae 1 14,332 176 (46) 14,463 5,254 9,209 14,463 

Section 8 Rental Assistance 427 11,965 154 - 12,546 11,668 878 12,546 

CDBG 7,971 17,348 15 - 25,334 25,334 - 25,334 

HOME 288 7,282 5 - 7,575 7,575 - 7,575 

Operating Subsidies 4 1,185 1 - 1,190 1,190 - 1,190 

PIH Loans and Grants 264 12,250 33 - 12,547 12,479 68 12,547 

Section 202/811 916 4,432 101 - 5,449 5,449 - 5,449 

Section 235/236 12 3,567 874 - 4,453 1,099 3,354 4,453 

All Other 3,041 9,706 673 13,391 (29) 13,388 13,391 3 

Total 19,374$ $ 47,937 70,215$ 137,362$ (164)$ $ 113,383 137,362$ 23,979$ 

Status of Resources Covered by Fund Balance

Description

Unobligated 

Available

Unobligated 

Unavailable

Obligated 

Not Yet 

Disbursed

Unfilled 

Customer 

Orders

Fund 

Balance

NonBudgetary: 

Suspense, 

Deposit and 

Receipt 

Accounts

Total Fund 

Balance

FHA 6,450$ $ 21,282 2,304$ (89)$ 29,947 $ 30,130$ 183

Ginnie Mae 1 5,123 176 (46) 5,254 5,254 -

Section 8 Rental Assistance 418 11,208 42 - 11,668 11,684 16

CDBG 7,971 17,348 15 - 25,334 25,334 -

HOME 288 7,282 5 - 7,575 7,575 -

Operating Subsidies 4 1,185 1 - 1,190 1,190 -

PIH Loans and Grants 264 12,182 33 - 12,479 12,479 -

Section 202/811 916 4,432 101 - 5,449 5,449 -

Section 235/236 3 1,096 - - 1,099 1,099 -

All Other 3,038 9,706 673 13,388 (29) 13,447 59

Total 19,353$ $ 27,275 66,919$ 113,383$ (164)$ $ 113,641$ 258

Status of Resources Covered by Other Authority

Description

Unobligated 

Available

Unobligated 

Unavailable

Obligated 

Not Yet 

Disbursed

Unfilled 

Customer 

Orders

Permanent 

Indefinite 

Authority

Investment 

Authority

Borrowing 

Authority

FHA -$ 10,467 $ -$ -$ -$ 10,467 $ -$ 

Ginnie Mae - 9,209 - - - 9,209 - 

Section 8 Rental Assistance 9 112 757 - 878 - - 

PIH Loans and Grants - 68 - - 68 - - 

Section 202/811 - - - - - - - 

Section 235/236 9 874 2,471 - 3,354 - - 

All Other 3 - - - - - 3 

Total 20,662 21$ $ 3,296$ 4,300$ -$ $ 19,676 3$ 

Status of Receipt Account Balances

Description

Fund 

Balance

FHA 183$ 

Section 8 Rental Assistance 16 

All Other 59 

Total 258$ 
HUD FY 2010 Agency Financial Report

Section II

Page 72

An immaterial difference exists between HUD’s recorded Fund Balances with the U.S. Treasury 

and the U.S. Department of Treasury’s records. It is the Department’s practice to adjust its 

records to agree with Treasury’s balances at the end of the fiscal year. The adjustments are 

reversed at the beginning of the following fiscal year. 

Note 5: Investments 

The U.S. Government securities are non-marketable intra-governmental securities. Interest rates 

are established by the U.S. Treasury and during FY 2010 ranged from 0.63 percent to 3.38 

percent. During FY 2009 interest rates ranged from 0.63 percent to 7.25 percent. The amortized 

cost and estimated market value of investments in debt securities as of September 30, 2010 and 

2009 were as follows (dollars in millions): 

Cost

Amortized 

(Premium)/ 

Discount, Net

Accrued

Interest

Net

Investments

Market 

Value

FY 2010 $ 7,647 $ 30 $ 43 $ 7,721 $ 8,858

FY 2009 $ 19,725 $ 61 $ 126 $ 19,912 $ 21,225

Investments in Private-Sector Entities 

These investments in private-sector entities are the result of FHA’s participation in the 

Accelerated Claims Disposition Demonstration program and Risk Sharing Debentures as 

discussed in Note 2G. The following table presents financial data on FHA’s investments in 

Section 601 and Risk Sharing Debentures as of September 30, 2010 and 2009 (dollars in 

millions):

The fiscal year for the Section 601 Program investments is from December 1, 2008 to 

December 31, 2009. The condensed audited financial statements reported $51 million in assets, 

$51 million in liabilities and partner’s capital, and $1.5 million in net loss for these investments.

Beginning 

Balance

New 

Acquisitions

Share of 

Earnings 

or Losses

Return of 

Investment Redeemed

Ending 

Balance

2010

601 Program $ 12 $ - - $ $ (3) $ 9 - $ 

Risk Sharing Debentures 133 38 - - (44) 127

Total $ 145 $ 38 $ - $ (3) $ (44) $ 136

2009

601 Program $ 18 $ - $ (5) $ (2) $ - $ 11

Risk Sharing Debentures 30 138 - - (34) 134

Total $ 48 $ 138 $ (5) $ (2) $ (34) $ 145
Financial Information 

Notes to Financial Statements

Page 73

Note 6: Accounts Receivable (Net) 

The Department’s accounts receivable represents Section 8 year-end settlements, claims to cash 

from the public and state and local authorities for bond refundings, sustained audit findings, FHA 

insurance premiums and foreclosed property proceeds. A 100 percent allowance for loss is 

established for all delinquent accounts 90 days and over. 

Section 8 Settlements 

Prior to January 1, 2005, the Housing Choice Voucher (HCV) Program’s Section 8 subsidies 

were disbursed based on estimated amounts due under the contracts. At the end of each year, the 

actual amount due under the contracts was determined. The excess of subsidies paid to PHAs 

during the year over the actual amount due was reflected as an accounts receivable in the balance 

sheet. These receivable amounts were “collected” by offsetting such amounts with subsidies due 

to the PHAs in subsequent periods. On January 1, 2005, Congress changed the basis of the 

program funding from a “unit-based” process with program variables that affected the total 

annual Federal funding need, to a “budget-based” process that limits the Federal funding to 

PHAs to a fixed amount. Under this “budget-based” process, HUD records an expense for the 

HCV Program when each monthly allocation of program funds is added to the PHAs letter-ofcredit for drawdown and the PHA records a corresponding revenue on its books. A year-end 

settlement process to determine actual amounts due is no longer applicable. 

Bond Refundings 

Many of the Section 8 projects constructed in the late 1970s and early 1980s were financed with 

tax exempt bonds with maturities ranging from 20 to 40 years. The related Section 8 contracts 

provided that the subsidies would be based on the difference between what tenants could pay 

pursuant to a formula, and the total operating costs of the Section 8 project, including debt 

service. The high interest rates during the construction period resulted in high subsidies. When 

interest rates came down in the 1980s, HUD was interested in getting the bonds refunded. One 

method used to account for the savings when bonds are refunded (PHAs sell a new series of 

bonds at a lower interest rate, to liquidate the original bonds), is to continue to pay the original 

amount of the bond debt service to a trustee. The amounts paid in excess of the lower 

“refunded” debt service and any related financing costs, are considered savings. One-half of 

these savings are provided to the PHA, the remaining one-half is returned to HUD. As of 

September 30, 2010 and 2009, HUD was due $39 million and $52 million, respectively. 

Section 236 Excess Rental Income 

Upon Housing and OCFO’s review of Excess Rental Income (ERI), $13 million represents 

Excess Rental Income receivables as of September 30, 2010. Multifamily Housing has approved 

repayment plans for some of these receivables.

The Excess Rental Income receivable account represents the difference between the amounts that 

projects reported to HUD’s Lockbox as owing (in use prior to August 2008) and the actual 
HUD FY 2010 Agency Financial Report

Section II

Page 74

amount collected. On a monthly basis, projects financed under Section 236 of the National 

Housing Act must report the amount of rent collected in excess of basic rents and remit those 

funds to the Department. 

Unless written authorization is given by the Department to retain the excess rental income, the 

difference must be remitted to HUD. Generally, the individual amounts owing under Excess 

Rental Income receivables represents monthly reports remitted without payment. 

In the review process of Excess Rental Income receivables, it was noted that these receivables 

(although immaterial in value) were not reported in prior year financial statements. In addition, 

an allowance for loss was not established for the delinquent Excess Rental Income receivables 

concluding that Excess Rental Income receivables are composed of delinquent accounts over 

90 days.

Other Receivables 

Other receivables include sustained audit findings, refunds of overpayment, FHA insurance 

premiums and foreclosed property proceeds due from the public. 

The following shows accounts receivable as reflected in the Balance Sheet as of 

September 30, 2010 and 2009 (dollars in millions): 

Note 7: Direct Loans and Loan Guarantees, Non-Federal Borrowers 

HUD reports direct loan obligations or loan guarantee commitments made prior to FY 1992 and 

the resulting direct loans or defaulted guaranteed loans, net of allowance for estimated 

uncollectible loans or estimated losses.

Direct loan obligations or loan guarantee commitments made after FY 1991, and the resulting 

direct loans or defaulted guaranteed loans, are governed by the Federal Credit Reform Act of 

1990 and are recorded as the net present value of the associated cash flows (i.e., interest rate 

2010 2009

Description

Gross 

Accounts 

Receivable

Allowance 

for Loss Total, Net

Gross 

Accounts 

Receivable

Allowance 

for Loss Total, Net

Public

 Section 8 Settlements $ 73 $ (61) $ 12 $ 73 $ (62) $ 11

 Bond Refundings 43 (4) 39 55 (4) 51

 Section 236 Excess Rental Income 13 - 13 - - - 

 Other Receivables:

 FHA 122 (106) 16 98 (82) 16

 Ginnie Mae 363 (127) 236 45 - 45

 Other Receivables 9 (3) 6 9 (3) 6

Total Assets $ 623 $ (301) $ 322 $ 280 $ (151) $ 129
Financial Information 

Notes to Financial Statements

Page 75

differential, interest subsidies, estimated delinquencies and defaults, fee offsets, and other cash 

flows). 

The FHA ensures Home Equity Conversion Mortgages (HECM), also known as reverse 

mortgages. These loans are used by senior homeowners age 62 and older to convert the equity in 

their home into monthly streams of income and/or a line of credit to be repaid when they no 

longer occupy the home. Unlike ordinary home equity loans, a HUD reverse mortgage does not 

require repayment as long as the home is the borrower’s principal residence. 

The FHA also administers the HOPE for Homeowners (H4H) program. The program was 

established by Congress to help those at risk of default and foreclosure refinance into more 

affordable, sustainable loans. 

The following is an analysis of loan receivables, loan guarantees, liability for loan guarantees, 

and the nature and amounts of the subsidy costs associated with the loans and loan guarantees for 

FY 2010 and FY 2009: 

A. List of HUD’s Direct Loan and/or Guarantee Programs: 

1. FHA

a) MMI/CMHI Direct Loan Program

b) GI/SRI Direct Loan Program

c) MMI/CMHI Loan Guarantee Program

d) GI/SRI Loan Guarantee Program

e) H4H Loan Guarantee Program

f) HECM Program

2. Ginnie Mae

3. Housing for the Elderly and Disabled 

4. Low Rent Public Housing Loan Fund 

5. All Other

a) Revolving Fund 

b) Flexible Subsidy

c) CDBG, Section 108(b) 

d) Indian Housing Loan Guarantee Fund 

e) Loan Guarantee Recovery Fund 

f) Native Hawaiian Housing Loan Guarantee Fund

g) Title VI Indian Housing Loan Guarantee Fund 

h) Green Retrofit Direct Loan Program
HUD FY 2010 Agency Financial Report

Section II

Page 76

B. Direct Loans Obligated Pre-1992 (Allowance for Loss Method) (dollars in 

millions): 

Direct Loan Programs

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Loan Losses

Foreclosed 

Property

Value of 

Assets Related 

to Direct 

Loans, Net

FHA

 a) MMI/CHMI Direct Loan Program $ - $ - $ (5) $ - $ (5)

 b) GI/SRI Direct Loan Program 20 10 (11) - 19

Housing for the Elderly and Disabled 3,187 33 (12) 3 3,211

Low Rent Public Housing Loans - - - - -

All Other

 a) CPD Revolving Fund 5 - (5) 1 1

 b) Flexible Subsidy Fund 583 11 (520) - 74

Total $ 3,795 $ 54 $ (553) $ 4 $ 3,300

2010

Direct Loan Programs

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Loan Losses

Foreclosed 

Property

Value of 

Assets Related 

to Direct 

Loans, Net

FHA

 a) MMI/CHMI Direct Loan Program $ - $ 1 $ (4) $ - $ (3)

 b) GI/SRI Direct Loan Program 13 4 (9) - 8

Housing for the Elderly and Disabled 3,506 38 (13) 1 3,532

Low Rent Public Housing Loans 1 1 - - 2

All Other

 a) CPD Revolving Fund 5 (1) (5) 1 -

 b) Flexible Subsidy Fund 609 11 (543) - 77

Total $ 4,134 $ 54 $ (574) $ 2 $ 3,616

2009

C. Direct Loans Obligated Post-1991 (dollars in millions):

Direct Loan Programs

Loans 

Receivable, 

Gross

Interest 

Receivable

Foreclosed 

Property

Allowance for 

Subsidy Cost 

(Present 

Value)

Value of 

Assets 

Related to 

Direct Loans

All Other

 a) Green Retrofit Program $ 56 $ - $ - $ (46) $ 10

Total $ 56 $ - $ - $ (46) $ 10

2010
Financial Information 

Notes to Financial Statements

Page 77

Direct Loan Programs

Loans 

Receivable, 

Gross

Interest 

Receivable

Foreclosed 

Property

Allowance for 

Subsidy Cost 

(Present 

Value)

Value of 

Assets 

Related to 

Direct Loans

All Other

 a) Green Retrofit Program $ - $ - $ - $ - $ -

Total $ - $ - $ - $ - $ -

2009

D. Total Amount of Direct Loans Disbursed (Post-1991) (dollars in millions):

Direct Loan Programs Current Year Prior Year

All Other

 a) Green Retrofit Program $ 56 $ -

Total $ 56 $ -

E. Subsidy Expense for Direct Loans by Program and Component (dollars in 

millions): 

E1. Subsidy Expense for New Direct Loans Disbursed (dollars in millions): 

Direct Loan Programs

Interest 

Differential Defaults

Fees and Other 

Collections Other Total

All Other

 a) Green Retrofit Program $ 23 $ 24 $ - $ (1) $ 46

Total $ 23 $ 24 $ - $ (1) $ 46

Direct Loan Programs

Interest 

Differential Defaults

Fees and Other 

Collections Other Total

All Other

 a) Green Retrofit Program $ - $ - $ - $ - $ -

Total $ - $ - $ - $ - $ -

2010

2009
HUD FY 2010 Agency Financial Report

Section II

Page 78

E2. Modifications and Re-estimates (dollars in millions): 

Direct Loan Programs

Total 

Modifications

Interest Rate 

Re-estimates

Technical 

Re-stimates

Total 

Re-estimates

All Other

 a) Green Retrofit Program $ - $ - $ - $ -

Total $ - $ - $ - $ -

Direct Loan Programs

Total 

Modifications

Interest Rate 

Re-estimates

Technical 

Re-stimates

Total 

Re-estimates

All Other

a) Green Retrofit Program $ - $ - $ - $ -

Total $ - $ - $ - $ -

2010

2009

 

E3. Total Direct Loan Subsidy Expense (dollars in millions): 

Direct Loan Programs Current Year Prior Year

All Other

a) Green Retrofit Program $ 46 $ -

Total $ 46 $ -

 

F. Subsidy Rates for Direct Loans by Program and Component (dollars in 

millions): 

Budget Subsidy Rates for Direct Loans for the Current Year’s Cohorts (dollars in millions):

Direct Loan Programs

Interest 

Differential Defaults

Fees and Other 

Collections Other Total

All Other

 a) Green Retrofit Program 40.96% 42.66% 0.00% -1.32% 82.30%
Financial Information 

Notes to Financial Statements

Page 79

G. Schedule for Reconciling Subsidy Cost Allowance Balances (Post-1991 

Direct Loans) (dollars in millions):

Beginning Balance, Changes, and Ending Balance FY 2010 FY 2009

Beginning balance of the subsidy cost allowance $ - $ -

Add: subsidy expense for direct loans disbursed

during the reporting years by component: - -

 a) Interest rate differential costs 23 -

 b) Default costs (net of recoveries) 24 -

 c) Fees and other collections - -

 d) Other subsidy costs (1) -

Total of the above subsidy expense components 46 -

Adjustments:

 a) Loan modifications - -

 b) Fees received - -

 c) Foreclosed properties acquired - -

 d) Loans written off - -

 e) Subsidy allowance amortization - -

 f) Other - -

Ending balance of the subsidy cost allowance before re-estimates 46 -

Add or subtract subsidy re-estimates by component:

 a) Interest rate re-estimate - -

 b) Technical/default re-estimate - -

Total of the above re-estimate components - -

Ending balance of the subsidy cost allowance $ 46 $ -

H. Defaulted Guaranteed Loans from Pre-1992 Guarantees (Allowance for 

Loss Method) (dollars in millions): 

Defaulted 

Guaranteed 

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for Loan 

and Interest Losses

Foreclosed 

Property, 

Net

Value of Assets 

Related to 

Defaulted 

Guaranteed Loans 

Receivable, Net

FHA

 a) MMI/CMHI Funds $ 16 $ - $ (8) $ 16 $ 24

 b) GI/SRI Funds, Excluding HECM 2,578 214 (1,831) 2 963 

 c) GI/SRI Funds, HECM 4 1 (1) 2 6

Total $ 2,598 $ 215 $ (1,840) $ 20 $ 993

2010
HUD FY 2010 Agency Financial Report

Section II

Page 80

Defaulted 

Guaranteed 

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for Loan 

and Interest Losses

Foreclosed 

Property, 

Net

Value of Assets 

Related to 

Defaulted 

Guaranteed Loans 

Receivable, Net

FHA

 a) MMI/CMHI Funds $ 19 $ 3 $ (12) $ 16 $ 26

 b) GI/SRI Funds, Excluding HECM 2,677 202 (2,168) 2 713 

 c) GI/SRI Funds, HECM 4 2 (1) 2 7

Total $ 2,700 $ 207 $ (2,181) $ 20 $ 746

2009

I. Defaulted Guaranteed Loans from Post-1991 Guarantees (dollars in millions):

Defaulted 

Guaranteed 

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Subsidy Cost 

(Present 

Value)

Foreclosed 

Property, 

Gross

Value of Assets 

Related to 

Defaulted 

Guaranteed Loans 

Receivable, Net

FHA

 a) MMI/CMHI Funds $ 728 $ - $ (4,282) $ 6,833 $ 3,279 

 b) GI/SRI Funds, Excluding HECM 680 2 (594) 379 467 

 c) GI/SRI Funds, HECM 1,103 524 (288) 44 1,383 

All Other - - - - - 

Total $ 2,511 $ 526 $ (5,164) $ 7,256 $ 5,129

2010

Defaulted 

Guaranteed 

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Subsidy Cost 

(Present 

Value)

Foreclosed 

Property, 

Gross

Value of Assets 

Related to 

Defaulted 

Guaranteed Loans 

Receivable, Net

FHA

 a) MMI/CMHI Funds $ 560 $ - $ (3,165) $ 4,875 $ 2,270 

 b) GI/SRI Funds, Excluding HECM 625 - (478) 281 428 

 c) GI/SRI Funds, HECM 772 418 (223) 31 998 

All Other - - - - - 

Total $ 1,957 $ 418 $ (3,866) $ 5,187 $ 3,696

2009

2010 2009

Total Credit Program Receivables and Related Foreclosed Property, Net $ 9,432 $8,058
Financial Information 

Notes to Financial Statements

Page 81

J. Guaranteed Loans Outstanding (dollars in millions):

J1. Guaranteed Loans Outstanding (dollars in millions):

Loan Guarantee Programs

Outstanding 

Principal, 

Guaranteed Loans, 

Face Value

Amount of Outstanding 

Principal Guaranteed

FHA Programs

 a) MMI/CMHI Funds $ 925,436 $ 878,611

 b) GI/SRI Funds 99,640 89,322

 c) H4H Progam 24 24

All Other 4,073 4,068

 Total $ 1,029,173 $ 972,025

2010

Loan Guarantee Programs

Outstanding 

Principal, 

Guaranteed Loans, 

Face Value

Amount of Outstanding 

Principal Guaranteed

FHA Programs

 a) MMI/CMHI Funds $ 711,827 $ 674,638

 b) GI/SRI Funds 92,361 82,603

 c) H4H Progam 4 4

All Other 3,531 3,526

 Total $ 807,723 $ 760,771

2009

J2. Home Equity Conversion Mortgage Loans Outstanding (dollars in millions):

Loan Guarantee Programs

2010 Current Year 

Endorsements

Current Outstanding 

Balance

Maximun Potential 

Liability

FHA Programs $ 21,023 $ 73,257 $ 118,794

Loan Guarantee Programs

2009 Prior Year 

Endorsements

Current Outstanding 

Balance

Maximun Potential 

Liability

FHA Programs $ 30,080 $ 59,877 $ 102,500

 Home Equity Conversion Mortgage Loans Outstanding:

Cumulative

Cumulative
HUD FY 2010 Agency Financial Report

Section II

Page 82

J3. New Guaranteed Loans Disbursed (dollars in millions):

Loan Guarantee Programs

Outstanding Principal, 

Guaranteed Loans, Face Value

Amount of Outstanding 

Principal Guaranteed

FHA Programs

 a) MMI/CMHI Funds $ 296,486 $ 293,778

 b) GI/SRI Funds 14,991 14,939

 c) H4H Program 20 20

All Other 725 725

 Total $ 312,222 $ 309,462

2010

Loan Guarantee Programs

Outstanding Principal, 

Guaranteed Loans, Face Value

Amount of Outstanding 

Principal Guaranteed

FHA Programs

 a) MMI/CMHI Funds $ 330,385 $ 328,097

 b) GI/SRI Funds 6,942 6,922

 c) H4H Program 4 4

All Other 607 606

 Total $ 337,938 $ 335,629

2009

K. Liability for Loan Guarantees (Estimated Future Default Claims, Pre1992) (dollars in millions):

Loan Guarantee Programs

Liabilities for Losses on 

Pre-1992 Guarantees, 

Estimated Future Default 

Claims

Liabilities for Loan 

Guarantees for Post1991 Guarantees 

(Present Value)

Total 

Liabilities 

For Loan 

Guarantees

FHA Programs $ 136 $ 33,886 $ 34,022

All Other - 131 131

 Total $ 136 $ 34,017 $ 34,153

2009

Loan Guarantee Programs

Liabilities for Losses on 

Pre-1992 Guarantees, 

Estimated Future Default 

Claims

Liabilities for Loan 

Guarantees for Post1991 Guarantees 

(Present Value)

Total 

Liabilities 

For Loan 

Guarantees

FHA Programs $ 53 $ 34,905 $ 34,958

All Other - 115 115

 Total $ 53 $ 35,020 $ 35,073

2010
Financial Information 

Notes to Financial Statements

Page 83

L. Subsidy Expense for Post-1991 Guarantees:

L1. Subsidy Expense for Current Year Loan Guarantees (dollars in millions):

Loan Guarantee Programs

Endorsement 

Amount

Default 

Component

Fees 

Component

Other 

Component

Subsidy 

Amount

FHA

 a) MMI/CMHI Funds, Excluding HECM $ 296,486 $ 9,603 $ (15,525) $ 3,376 $ (2,546)

 b) MMI/CMHI Funds, HECM 21,023 1,079 (1,184) - (106)

 c) GI/SRI Funds 14,991 438 (868) 1 (428)

 d) H4H Program 20 4 (1) - 4

All Other - - - - 10

Total $ 332,520 $ 11,124 $ (17,578) $ 3,377 $ (3,066)

2010

L2. Subsidy Expense for Prior Year Loan Guarantees (dollars in millions):

Loan Guarantee Programs

Endorsement 

Amount

Default 

Component

Fees 

Component

Other 

Component

Subsidy 

Amount

FHA

 a) MMI/CMHI Funds, Excluding HECM $ 330,384 $ 9,991 $ (13,639) $ 3,496 $ (151)

 b) MMI/CMHI Funds, HECM 30,080 1,043 (1,457) - (414)

 c) GI/SRI Funds 6,942 203 (350) 1 (146)

 d) H4H Program 4 1 - - 1

All Other - 16 - - 16

Total $ 367,410 $ 11,254 $ (15,446) $ 3,497 $ (694)

2009

L3. Modification and Re-estimates (dollars in millions):

Loan Guarantee Programs

Total 

Modifications

Interest Rate 

Re-estimates

Technical 

Re-estimates

Total 

Re-estimates

FHA

 a) MMI/CMHI Funds $ - $ - $ (2,160) $ (2,160)

 b) GI/SRI Funds (5) - 3,195 3,190

All Other - - (24) (24)

Total $ (5) $ - $ 1,011 $ 1,006

2010
HUD FY 2010 Agency Financial Report

Section II

Page 84

Loan Guarantee Programs

Total 

Modifications

Interest Rate 

Re-estimates

Technical 

Re-estimates

Total 

Re-estimates

FHA

 a) MMI/CMHI Funds $ (362) $ - $ 7,274 $ 6,912

 b) GI/SRI Funds (6) - 3,138 3,132

All Other - - (15) (15)

Total $ (368) $ - $ 10,397 $ 10,029

2009

L4. Total Loan Guarantee Subsidy Expense (dollars in millions): 

Loan Guarantee Programs Current Year Prior Year

FHA

 a) MMI/CMHI Funds $ (4,812) $ 6,347

 b) GI/SRI Funds 2,762 2,986

 c) H4H Program 3 1

All Other $ (14) $ 1

Total $ (2,061) $ 9,335

M. Subsidy Rates for Loan Guarantees by Programs and Component:

Budget Subsidy Rates for Loans Guarantee for FY 2010

Loan Guarantee Program Default

Fees and Other 

Collections Other Total

FHA Programs

 MMI/CMHI

 Single Family - Forward (4/5/2010 - Present) 3.23% -5.50% 1.14% -1.13%

 Single Family - Forward (10/1/2009 - 4/4/2010) 3.22% -4.97% 1.13% -0.62%

 Single Family - HECM 5.11% -5.61% 0.00% -0.50%

 Multi Family - Section 213 (4/5/2010 - Present) 3.23% -5.50% 1.14% -1.13%

 Multi Family - Section 213 (10/1/2009 - 4/4/2010) 3.22% -4.96% 1.12% -0.62%

 GI/SRI

 Multifamily

 Section 221(d)(4) 4.23% -5.86% 0.00% -1.63%

 Section 207/223(f) 1.45% -5.32% 0.00% -3.87%

 Section 223(a)(7) 1.45% -5.32% 0.00% -3.87%

 Section 232 3.67% -5.96% 0.00% -2.29%

 Section 242 1.55% -5.83% 0.00% -4.28%

 H4H

 Single Family - Section 257 (10/1/2009 - 12/31/2009) 24.26% -1.91% 0.37% 22.72%

 Single Family - Section 257 (1/1/2010 - Present) 22.26% -5.89% 0.54% 16.91%

All Other Programs

 CDBG, Section 108(b) 2.40% 2.40%

 Loan Guarantee Recovery 50.00% 50.00%

 Indian Housing 1.68% -1.00% 0.68%

 Native Hawaiian Housing 3.52% -1.00% 2.52%

 Title VI Indian Housing 11.18% 11.18%
Financial Information 

Notes to Financial Statements

Page 85

The subsidy rates above pertain only to FY 2010 cohorts. These rates cannot be applied to the 

guarantees of loans disbursed during the current reporting year to yield the subsidy expense. The 

subsidy expense for new loan guarantees reported in the current year could result from 

disbursements of loans from both current year cohorts and prior year(s) cohort. The subsidy 

expense reported in the current year also includes modifications re-estimates.

N. Schedule for Reconciling Loan Guarantee Liability Balances (Post-1991 

Loan Guarantees) (dollars in millions):

Beginning Balance, Changes, and Ending Balance FY 2010 FY 2009

Beginning balance of the loan guarantee liability $ 34,153 $ 19,613 

Add: subsidy expense for guaranteed loans 

disbursed during the reporting years by component: 

 (a) Interest supplement costs - -

 (b) Default costs (net of recoveries) 11,134 11,254 

 (c) Fees and other collections (17,577) (15,446)

 (d) Othe subsidy costs 3,377 3,497 

 Total of the above subsidy expense components $ (3,066) $ (695)

Adjustments:

 (a) Loan guarantee modifications - (367)

 (b) Fees Received 10,083 8,771 

 (c) Interest supplemental paid - -

 (d) Foreclosed property and loans acquired 6,815 3,909 

 (e) Claim payments to lenders (16,487) (10,487)

 (f) Interest accumulation on the liability balance 1,351 1,086 

 (g) Other 15 113 

Ending balance of the subsidy cost allowance before re-estimates $ 32,864 $ 21,943 

Add or Subtract subsidy re-estimates by component:

 (a) Interest rate re-estimate - -

 (b) Technical/default re-estimate (1,602) 6,670 

 (c) Adjustment of prior years credit subsity re-estimates 3,811 5,540 

 Total of the above re-estimate components 2,209 12,210 

Ending balance of the subsidy cost allowance $ 35,073 $ 34,153 

O. Administrative Expense (dollars in millions):

FY 2010 FY 2009

Loan Guarantee Program

FHA $ 581 $ 585

All Other - -

Total $ 581 $ 585
HUD FY 2010 Agency Financial Report

Section II

Page 86

Note 8: General Property, Plant, and Equipment (Net) 

General property, plant, and equipment consists of furniture, fixtures, equipment and data 

processing software used in providing goods and services that have an estimated useful life of 

two or more years. Purchases of $100,000 or more are recorded as an asset and depreciated over 

their estimated useful life on a straight-line basis with no salvage value. Capitalized replacement 

and improvement costs are depreciated over the remaining useful life of the replaced or 

improved asset. Generally, the Department’s assets are depreciated over a 4-year period, unless 

it can be demonstrated that the estimated useful life is significantly greater than 4 years.

The following shows general property, plant, and equipment as of September 30, 2010 and 2009, 

(dollars in millions): 

Description FY 2010 FY 2009

Cost

Accumulated 

Depreciation and 

Amortization

Book 

Value Cost

Accumulated 

Depreciation and 

Amortization

Book 

Value

Equipment $ 1 $ (1) $ - $ 23 $ (22) $ 1

Leasehold Improvements - - - - - -

Internal Use Software 159 (106) 53 152 (84) 68

Internal Use Software in Development 205 - 205 165 - 165

Total Assets $ 365 $ (107) $ 258 $ 340 $ (106) $ 234

Note 9: Other Assets 

The following shows HUD’s Other Assets as of September 30, 2010 (dollars in millions): 

Description FHA

Ginnie 

Mae All Other Total

Intragovernmental Assets:

 Other Assets $ 5 $ - $ 34 $ 39

Total Intragovernmental Assets 5 - 34 39

 Mortgagor Reserves for Replacement - Cash $ 70 - - 70 

 Financial Accounting Standards Board Interpretation No 45 - 1,104 - 1,104 

 Mortgage Loans Held for Investment, net - 4,443 - 4,443

 Mortgage Loans Held for Sale, net - - - -

 Advances Against Defaulted Mortgage-Backed Security Pools, net - 842 - 842

 Properties Held for Sale, net - 42 - 42

 Mortgage Servicing Rights - 138 - 138

 Other Assets 6 - 2 8

Total $ 81 $ 6,569 $ 36 $ 6,686

Mortgage Loans Held for Investment, Net 

Ginnie Mae owns secured single family mortgage loans which fall under FHA’s Title 1 program. 

Ginnie Mae classifies these loans as held for investment and reports the loans at the unpaid 

principal balance outstanding, net of unamortized premiums and discounts, other cost basis 
Financial Information 

Notes to Financial Statements

Page 87

adjustments, and an allowance for loan losses. Advances against defaulted mortgage-backed 

security (MBS) pools represent payments made to fulfill Ginnie Mae’s guarantee of timely 

principal and interest payments to MBS security holders. Such advances are reported not of an 

allowance for doubtful recoveries to the extent management believes they will not be recovered. 

Properties that are undergoing the foreclosure process and being conveyed to the insuring agency 

of the mortgage are reported under the advance category as Ginnie Mae is awaiting repayment of 

the receivable. 

During FY 2010, Ginnie Mae brought out $4.5 billion in mortgages loans primarily from the 

single family defaulted portfolio. In addition, following guidelines outlined in the Ginnie Mae 

mortgage-backed securities guide, a large number of loans were repurchased out of pools due to 

delinquencies of greater than 120 days categorized as mortgages held of investment. In addition, 

Ginnie Mae’s net advance balance increased by approximately $722 million in FY 2010 

compared to FY 2009 as a result of the repurchase of these loans. 

Mortgage Servicing Rights

FASB Accounting Standards Codification (ASC) 860, Servicing Assets and Liabilities (formerly 

SFAS 156, Accounting for Servicing Financial Assets: an Amendment of SFAS 140) provides 

guidance over the accounting for the right to service a financial asset. ASC 860-50-25-1 states 

that an entity shall recognize and initially measure at fair value, if practicable, a servicing asset 

or servicing liability each time it undertakes an obligation to service a financial asset by entering 

into a servicing contract in (among other situations) an acquisition or assumption of a servicing 

obligation that does not relate to financial assets of the servicer or its consolidated affiliates.

During FY 2010, Ginnie Mae assumed the servicing rights on a $27.5 billion in combined 

servicing portfolio of two large defaulted Ginnie Mae MBS issuers. The servicing rights were 

assumed with no consideration transferred and the loans related to the assumed servicing rights 

are currently serviced by one of the Ginnie Mae master sub-servicers. Upon Ginnie Mae’s 

assumption of the servicing rights from these issuers, Ginnie Mae initially recognized the MSR 

at zero, in accordance with ASC 860-10-35-7, since it was determined that the fair value could 

not be determined due to the close proximity to the end of FY 2009. The close proximity to year 

end in addition to reliance on third parties did not allow sufficient time to retrieve pertinent 

information to determine the fair value of the potential servicing asset. 
HUD FY 2010 Agency Financial Report

Section II

Page 88

The following table displays the fair value of the MSR for fiscal year ended September 30, 2010 

(dollars in millions):

Description MSR

Balance, October 1, 2009 $ -

Additions/Sales -

Issuer defaulted August 4, 2009 129

Issuer defaulted December 17, 2009 9

Impact of customer payments -

Other changes in market value -

$ 138

Ginnie Mae uses a valuation model that calculates the present value of estimated future net 

servicing income to determine the fair value of MSRs, which factors in prepayment risk. This 

approach consists of projecting servicing cash flows under multiple interest rate scenarios and 

discounting these cash flows using risk-adjusted discount rates. The economic assumptions used 

in the valuation of MSRs include weighted-average lives and prepayment rates of the MSRs. We 

rely on this valuation model as a basis for the MSR amount recorded in our financial statements. 

This model involves significant number of assumptions and has limitations. 

Key economic assumptions used in determining the fair value of MSRs are as follows (dollars in 

thousands): 

Description

Issuer Defaulted 

August 4, 2009

Issuer Defaulted 

December 17, 2009

Valuation at period end:

 Fair value (thousands) $ 128,500 $ 9,200

 Weighted-average life (years) 2.77 2.80

Prepayment rates assumptions:

 Rate assumption 29.92% 29.43%

 Impact on fair value of a 10% adverse change (8,400) (600)

 Impact on fair value of a 20% adverse change (15,800) (1,100)

Discount rate assumptions:

 Rate assumption 12.51% 12.50%

 Impact on fair value of a 10% adverse change (3,400) (200)

 Impact on fair value of a 20% adverse change (6,700) (500)
Financial Information 

Notes to Financial Statements

Page 89

The following shows HUD’s Other Assets as of September 30, 2009 (dollars in millions): 

Description FHA Ginnie Mae Total

Intragovernmental Assets:

 Other Assets $ 14 $ - $ 14

Total Intragovernmental Assets 14 - 14

 Mortgagor Reserves for Replacement - Cash $ 92 - 92 

 Financial Accounting Standards Board Interpretation No 45 - 902 902 

 Mortgage Loans Held for Investment, net - - 

 Mortgage Loans Held for Sale, net - 32 32 

 Advances Against Defaulted Mortgage-Backed Security Pools, net - 120 120 

 Properties Held for Sale, net - 5 5 

 Mortgage Servicing Rights - - - 

 Other Assets 37 1 38

Total $ 143 $ 1,060 $ 1,203

Note 10: Liabilities Covered and Not Covered by Budgetary 

Resources 

The following shows HUD’s liabilities as of September 30, 2010 and 2009 (dollars in millions): 

Description 2010 2009

Covered Not-Covered Total Covered Not-Covered Total

Intragovernmental

 Accounts Payable $ 6 $ 6 - $ $ 7 $ - 7 $ 

 Debt 4,775 - 4,775 5,083 - 5,083

 Other Intragovernmental Liabilities 1,305 18 1,323 2,021 17 2,038

Total Intragovernmental Liabilities $ 6,086 $ 18 $ 6,104 $ 7,111 $ 17 $ 7,128

 Accounts Payable 1,050 - 1,050 974 - 974

 Liabilities for Loan Guarantees 35,073 - 35,073 34,153 - 34,153

 Debt 292 - 292 477 - 477

 Federal Employee and Veterans' Benefits - 72 72 - 69 69

 Loss Reserves 1,005 - 1,005 560 - 560

 Other Liabilities 1,750 92 1,842 1,534 80 1,614

Total Liabilities $ 45,256 $ 182 $ 45,438 $ 44,809 $ 166 $ 44,975

HUD’s other governmental liabilities principally consists of Ginnie Mae’s compliance with 

FASB Interpretation No. 45, FHA’s special receipt account and the Department’s payroll costs. 

Further disclosures of HUD’s other liabilities are also found in Note 14. 

Note 11: Debt 

Several HUD programs have the authority to borrow funds from the U.S. Treasury for program 

operations. Additionally, the National Housing Act authorizes FHA, in certain cases, to issue 
HUD FY 2010 Agency Financial Report

Section II

Page 90

debentures in lieu of cash to pay claims. Also, PHAs and TDHEs borrowed funds from the 

private sector and from the Federal Financing Bank (FFB) to finance construction and 

rehabilitation of low rent housing. HUD is repaying these borrowings on behalf of the PHAs and 

TDHEs.

The following shows HUD borrowings, and borrowings by PHAs/TDHEs for which HUD is 

responsible for repayment, as of September 30, 2010 (dollars in millions): 

Description

Beginning 

Balance

Net 

Borrowings

Ending 

Balance

Agency Debt:

 Held by Government Accounts $ - $ - $ -

 Held by the Public 477 (185) 292

 Total Agency Debt $ 477 $ (185) $ 292

Other Debt:

 Debt to the U.S. Treasury $ 4,425 $ 350 $ 4,775

Total Debt $ 4,902 $ 165 $ 5,067

Classification of Debt:

 Intragovernmental Debt $ 4,775

 Debt held by the Public 292

Total Debt $ 5,067

The following shows HUD borrowings, and borrowings by PHAs/TDHEs for which HUD is 

responsible for repayment, as of September 30, 2009 (dollars in millions): 

Description

Beginning 

Balance

Net 

Borrowings

Ending 

Balance

Agency Debt:

 Held by Government Accounts $ 775 $ (117) $ 658 

 Held by the Public 729 (252) 477

 Total Agency Debt $ 1,504 $ (369) $ 1,135

Other Debt:

 Debt to the U.S. Treasury $ 4,832 $ (407) $ 4,425

Total Debt $ 6,336 $ (776) $ 5,560

Classification of Debt:

 Intragovernmental Debt $ 5,083

 Debt held by the Public 477

Total Debt $ 5,560
Financial Information 

Notes to Financial Statements

Page 91

Interest paid on borrowings as of September 30, 2010 and 2009 was $315 million and 

$374 million respectively. The purpose of these borrowings is discussed in the following 

paragraphs. 

Borrowings from the U.S. Treasury 

HUD is authorized to borrow from the U.S. Treasury to finance Housing for Elderly and 

Disabled loans. The Treasury borrowings typically have a 15-year term, but may be repaid prior 

to maturity at HUD’s discretion. However, such borrowings must be repaid in the sequence in 

which they were borrowed from Treasury. The interest rates on the borrowings are based on 

Treasury’s 30-year bond yield at the time the notes are issued. Interest is payable on April 30 

and October 31. Interest rates ranged from 10.67 percent to 16.18 percent during FY 2007. All 

Treasury borrowings were paid in full during FY 2007. 

In FY 2010 and FY 2009, FHA borrowed $790 million and $470 million, respectively, from the 

U.S. Treasury. The borrowings were needed when FHA initially determined negative credit 

subsidy amounts related to new loan disbursements or to existing loan modifications. In some 

instances, borrowings were needed where available cash was less than claim payments due or 

downward subsidy-estimates. All borrowings were made by FHA’s financing accounts. 

Negative subsidies were generated primarily by the MMI/CMHI Fund financing account; 

downward re-estimates have occurred from activity of the FHA’s loan guarantee financing 

accounts. These borrowings carried interest rates ranging from 1.68 percent to 7.59 percent 

during FY 2010 and from 3.71 percent to 7.34 percent during FY 2009. 

Borrowings from the Federal Financing Bank (FFB) and the Public 

During the 1960s, 1970s, and 1980s, PHAs obtained loans from the private sector and from the 

FFB to finance development and rehabilitation of low rent housing projects. HUD is repaying 

these borrowings on behalf of the PHAs, through the Low Rent Public Housing program. For 

borrowings from the Public, interest is payable throughout the year. Interest rates range from

3.25 percent to 6.0 percent during both FY 2010 and FY 2009. The borrowings from the FFB 

and the private sector have terms up to 40 years. FFB interest is payable annually on 

November 1. Interest rates range from 10.67 percent to 16.18 percent during both FY 2010 and 

FY 2009. 

Before July 1, 1986, the FFB purchased notes issued by units of general local government and 

guaranteed by HUD under Section 108. These notes had various maturities and carried interest 

rates that were one-eighth of one percent above rates on comparable Treasury obligations. The 

FFB held substantially all outstanding notes, and no note purchased by the FFB has ever been 

declared in default. In March of FY 2010, HUD repaid all FFB borrowings for the Low Rent 

Public Housing program and realized a loss of $154 million as a result of HUD’s unamortized 

premium at the time of sale to FFB. The loss was offset by $48 million in interest savings based 

on an average yearly interest rate of 15 percent over a ten year period.
HUD FY 2010 Agency Financial Report

Section II

Page 92

Debentures Issued To Claimants 

The National Housing Act authorizes FHA, in certain cases, to issue debentures in lieu of cash to 

settle claims. FHA-issued debentures bear interest at rates established by the U.S. Treasury. 

Interest rates related to the outstanding debentures ranged from 4.00 percent to 13.375 percent in 

FY 2010 and 4.00 percent to 12.88 percent in FY 2009. Debentures may be redeemed by lenders 

prior to maturity to pay mortgage insurance premiums to FHA, or they may be called with the 

approval of the Secretary of the U. S. Treasury. 

Note 12: Federal Employee and Veterans’ Benefits 

HUD is a non-administering agency, therefore relies on cost factors and other actuarial 

projections provided by the Department of Labor (DOL) and Office of Personnel Management 

(OPM). HUD’s imputed costs consist of two components, pension and health care benefits. 

During FY 2010, HUD recorded imputed costs of $100 million which consisted of $55 million 

for pension and $45 million for health care benefits. During FY 2009, HUD recorded imputed 

costs of $79 million which consisted of $36 million for pension and $43 million for health care 

benefits. These amounts are reported by OPM and charged to expense with a corresponding 

amount considered as an imputed financing source in the Statement of Changes in Net Position. 

HUD also accrues the portion of the estimated liability for disability benefits assigned to the 

agency under the Federal Employee Compensation Act (FECA), administered and determined by 

the DOL. The liability, based on the net present value of estimated future payments based on a 

study conducted by DOL, was $72 million as of September 30, 2010, and $69 million as of 

September 30, 2009. Future payments on this liability are to be funded by future financing 

sources.

In addition to the imputed costs of $79 million noted above, HUD recorded benefit expenses 

totaling $161 million for 2010 and $155 million for FY 2009. 

Note 13: Loss Reserves 

For FY 2010 and FY 2009, Ginnie Mae established loss reserves of $1,004.9 million and 

$560 million, respectively, which represents probable defaults by issuers of mortgage-backed 

securities, through a provision charged to operations. The reserve is relieved as losses are 

realized from the disposal of the defaulted issuers’ portfolios. Ginnie Mae recovers part of its 

losses through servicing fees on the performing portion of the portfolios and the sale of servicing 

rights which transfers to Ginnie Mae upon the default of the issuer. Ginnie Mae management 

believes that its reserve is adequate to cover probable losses from defaults by issuers of Ginnie 

Mae guaranteed mortgage-backed securities.

Ginnie Mae incurs losses when insurance and guarantees do not cover expenses that result from 

issuer defaults. Such expenses include: (1) unrecoverable losses on individual mortgage 

defaults because of coverage limitations on mortgage insurance or guarantees, (2) ineligible 
Financial Information 

Notes to Financial Statements

Page 93

mortgages included in defaulted Ginnie Mae pools, (3) improper use of proceeds by an issuer, 

and (4) non-reimbursable administrative expenses and costs incurred to service and liquidate 

portfolios of defaulted issuers. 

Note 14: Other Liabilities 

The following shows HUD’s Other Liabilities as of September 30, 2010 (dollars in millions): 

Description Non-Current Current Total

Intragovernmental Liabilities

 FHA Special Receipt Account Liability $ - $ 1,165 $ 1,165

 Unfunded FECA Liability 18 - 18

 Employer Contributions and Payroll Taxes - 8 8

 Miscellaneous Receipts Payable to Treasury - 121 121

 Advances to Federal Agencies - 11 11

Total Intragovernmental Liabilities $ 18 $ 1,305 $ 1,323

Other Liabilities

 FHA Other Liabilities $ - $ 307 $ 307

 FHA Escrow Funds Related to Mortgage Notes - 119 119

 Ginnie Mae Deferred Income - 114 114

 Deferred Credits - 20 20

 Deposit Funds - 26 26

 Accrued Unfunded Annual Leave 83 - 83

 Accrued Funded Payroll Benefits - 60 60

 Contingent Liability 9 9

 Other - FIN 45 - 1,104 1,104

Total Other Liabilities $ 110 $ 3,055 $ 3,165

Special Receipt Account Liability 

The special receipt account liability is created from negative subsidy endorsements and 

downward credit subsidy in the GI/SRI special receipt account. 
HUD FY 2010 Agency Financial Report

Section II

Page 94

The following shows HUD’s Other Liabilities as of September 30, 2009 (dollars in millions): 

Description Non-Current Current Total

Intragovernmental Liabilities

 FHA Special Receipt Account Liability $ - $ 1,914 $ 1,914

 Unfunded FECA Liability 17 - 17

 Employer Contributions and Payroll Taxes - 7 7

 Miscellaneous Receipts Payable to Treasury - 89 89

 Advances to Federal Agencies - 11 11

Total Intragovernmental Liabilities $ 17 $ 2,021 $ 2,038

Other Liabilities

 FHA Other Liabilities $ - $ 300 $ 300

 FHA Escrow Funds Related to Mortgage Notes - 115 115

 Ginnie Mae Deferred Income - 114 114

 Deferred Credits - 15 15

 Deposit Funds - 32 32

 Accrued Unfunded Annual Leave 80 - 80

 Accrued Funded Payroll Benefits - 55 55

 Other - FIN 45 - 903 903

Total Other Liabilities $ 97 $ 3,555 $ 3,652

Note 15: Financial Instruments with Off-Balance Sheet Risk 

Some of HUD’s programs, principally those operated through FHA and Ginnie Mae, enter into 

financial arrangements with off-balance sheet risk in the normal course of their operations. 

A. FHA Mortgage Insurance 

Unamortized insurance in force outstanding for FHA’s mortgage insurance programs as of 

September 30, 2010 and 2009 was $1,025 billion and $804 billion, respectively, as disclosed in 

Note 7E. The maximum claim amount (MCA) outstanding for FHA’s reverse mortgage 

insurance program (HECM) as of September 30, 2010 and 2009 was $119 billion and 

$103 billion respectively as disclosed in Note 7E. 

B. Ginnie Mae Mortgage-Backed Securities 

Ginnie Mae financial instruments with off-balance sheet risk include guarantees of MortgageBacked Securities (MBS) and commitments to guarantee MBS. The securities are backed by 

pools of FHA-insured, RD-insured, and VA-guaranteed mortgage loans. Ginnie Mae is exposed 

to credit loss in the event of non-performance by other parties to the financial instruments. The 

total amount of Ginnie Mae guaranteed securities outstanding at September 30, 2010 and 2009, 

was approximately $1,046.2 billion and $826.0 billion, respectively. However, Ginnie Mae’s 

potential loss is considerably less because the FHA and RD insurance and VA guaranty serve to 

indemnify Ginnie Mae for most losses. Also, as a result of the structure of the security, Ginnie 

Mae bears no interest rate or liquidity risk. 
Financial Information 

Notes to Financial Statements

Page 95

During the mortgage closing period and prior to granting its guaranty, Ginnie Mae enters into 

commitments to guarantee MBS. The commitment ends when the MBS are issued or when the 

commitment period expires. Ginnie Mae’s risks related to outstanding commitments are much 

less than for outstanding securities due, in part, to Ginnie Mae’s ability to limit commitment 

authority granted to individual issuers of MBS. Outstanding commitments as of 

September 30, 2010 and 2009 were $80.0 billion and $98.4 billion, respectively. Generally, 

Ginnie Mae’s MBS pools are diversified among issuers and geographic areas. No significant 

geographic concentrations of credit risk exist; however, to a limited extent, securities are 

concentrated among issuers.

In FY 2010 and FY 2009, Ginnie Mae issued a total of $184.3 billion and $79.9 billion 

respectively in its REMIC multi-class securities program. The estimated outstanding balance for 

the complete multi-class securities program (REMICs, Platinum’s, etc.) at September 30, 2010 

and 2009, were $489 billion and $350 billion, respectively. These guaranteed securities do not 

subject Ginnie Mae to additional credit risk beyond that assumed under the MBS program. 

C. Section 108 Loan Guarantees 

Under HUD’s Loan Guarantee (Section 108) program, recipients of the CDBG Entitlement 

Grant program funds may pledge future grant funds as collateral for loans guaranteed by HUD 

(these loans were provided from private lenders since July 1, 1986). Section 108 provides 

entitlement communities with a source of financing for projects that are too large to be financed 

from annual grants. The amount of loan guarantees outstanding as of September 30, 2010 and 

2009 was $2.2 billion and $2.2 billion, respectively. HUD’s management believes its exposure 

in providing these loan guarantees is limited, since loan repayments can be offset from future 

CDBG Entitlement Program Funds and, if necessary, other funds provided to the recipient by 

HUD. HUD has never had a loss under this program since its inception in 1974. 

Note 16: Contingencies 

Lawsuits and Other 

HUD is party to a number of claims and tort actions related to lawsuits brought against it 

concerning the implementation or operation of its various programs. The potential loss related to 

an ongoing case related be HUD’s assisted housing programs is probable at this time and as a 

result, the Department has recorded a contingent liability of $8.6 million in its financial 

statements. The Department also estimates other cases where the expected outcome totaling 

$7 million is reasonably possible but not probable and therefore no contingent liability was 

recorded in HUD’s financial statements. Other ongoing suits cannot be reasonably determined at 

this time and in the opinion of management and general counsel, the ultimate resolution of 

pending litigation will not have a material effect on the Department’s financial statements.
HUD FY 2010 Agency Financial Report

Section II

Page 96

Note 17: Earmarked Funds 

Earmarked funds are financed by specifically identified revenues and are required by statute to 

be used for designated activities or purposes. 

Ginnie Mae 

Ginnie Mae is a self-financed government corporation and receives funds from general tax 

revenues for salaries and expenses. Program operations are financed by a variety of fees, such as 

guaranty, commitment, new issuer, handling, and transfer servicing fees, which are only to be 

used for Ginnie Mae’s legislatively authorized mission. In FY 2010, Congress authorized Ginnie 

Mae to use $11.1 million for payroll and payroll related expenses. 

Rental Housing Assistance Fund 

The Housing and Urban Development Act of 1968 authorized the Secretary to establish a 

revolving fund into which rental collections in excess of the established basic rents for units in 

section 236 subsidized projects would be deposited. The Housing and Community Development 

Amendment of 1978 authorized the Secretary, subject to approval in appropriation acts, to 

transfer excess rent collections received after 1978 to the Troubled Projects Operating Subsidy 

program, renamed the Flexible Subsidy Fund. Prior to that time, collections were used for 

paying tax and utility increases in Section 236 projects. The Housing and Community 

Development Act of 1980 amended the 1978 Amendment by authorizing the transfer of excess 

rent collections regardless of when collected. 

All uncommitted balances of excess rental charges from the Rental Housing Assistance Fund as 

of June 30, 2005, and any collections made during FY 2005 and all subsequent fiscal years, shall 

be transferred to the Flexible Subsidy Fund, as authorized by Section 236(g) of the National 

Housing Act, as amended. 

Flexible Subsidy 

The Flexible Subsidy Fund assists financially troubled subsidized projects under certain FHA 

authorities. The subsidies are intended to prevent potential losses to the FHA fund resulting 

from project insolvency and to preserve these projects as a viable source of housing for low and 

moderate-income tenants. Priority was given with Federal insurance-in-force and then to those 

with mortgages that had been assigned to the Department.

American Recovery and Reinvestment Act Programs (Recovery Act) 

The Recovery Act includes $13.6 billion for 17 programs at HUD which are distributed across 

three themes that align with the broader Recovery goals. HUD’s overriding goal is job creation 

and preservation through: 

1. Promoting energy efficiency and creating green jobs; 

2. Unlocking the credit markets and supporting shovel-ready projects; and
Financial Information 

Notes to Financial Statements

Page 97

3. Mitigating the effects of the economic crisis and preventing community decline. 

Manufactured Housing Fees Trust Fund 

The National Manufactured Housing Construction and Safety Standards Act of 1974, as 

amended by the Manufactured Housing Improvement Act of 2000, authorizes development and 

enforcement of appropriate standards for the construction, design, and performance of 

manufactured homes to assure their quality, durability, affordability, and safety. 

Fees are charged to the manufacturers for each manufactured home transportable section 

produced and will be used to fund the costs of all authorized activities necessary for the 

consensus committee (HUD) and its agents to carry out all aspects of the manufactured housing 

legislation. The fee receipts are permanently appropriated and have helped finance a portion of 

the direct administrative expenses incurred in program operations. Activities are initially 

financed via transfer from the Manufactured Housing General Fund. 
HUD FY 2010 Agency Financial Report

Section II

Page 98

The following shows earmarked funds activity as of September 30, 2010 (dollars in millions): 

Ginnie 

Mae

Rental 

Housing 

Assistance

Flexible 

Subsidy

Recovery 

Act Funds

Manufactued 

Housing Fees 

Trust Fund Eliminations

Total 

Earmarked 

Funds

Balance Sheet

Fund Balance w/Treasury $ 6,650 $ 3 $ 164 $ 7,226 $ 12 $ - $ 14,055

Investments 3,572 - - - - - 3,572

Accounts Receivable 236 13 - - - - 249

Loans Receivable - - 74 10 - - 84

General Property, Plant and Equipment 36 - - - - - 36

Other 6,569 - - - - - 6,569

Total Assets $ 17,063 $ 16 $ 238 $ 7,236 $ 12 $ - $ 24,565

Accounts Payable $ 261 $ - - $ $ 43 $ - $ - $ 304

Loss Reserves 1,005 - - - - - 1,005

Other Liabilities 1,219 - - - - - 1,219

 Total Liabilities $ 2,485 $ - - $ $ 43 $ - $ - $ 2,528

Unexpended Appropriations $ - $ - $ (376) $ 7,193 $ - $ - $ 6,817

Cumulative Results of Operations 14,578 16 614 - 12 - 15,220

 Total Net Position $ 14,578 $ 16 $ 238 $ 7,193 $ 12 $ - $ 22,037

Total Liabilities and Net Position $ 17,063 $ 16 $ 238 $ 7,236 $ 12 $ - $ 24,565

Statement of Net Cost For the Period Ended

Gross Costs $ 822 $ 3 $ (22) $ 4,903 $ 6 $ (3) $ 5,709

Less Earned Revenues (1,363) (16) (11) (1) (3) 3 (1,391)

Net Costs $ (541) $ (13) $ (33) $ 4,902 $ 3 $ - $ 4,318

Statement of Changes in Net Position for the Period Ended

Net Position Beginning of Period $ 14,036 $ 3 $ 204 $ 12,095 $ 6 $ - $ 26,344

Appropriations Received - - - - - - -

Transfers In/Out Without Reimbursement - - - - 9 9 - 

Imputed Costs - - - - - - -

Transfers In/Out Without Reimbursement 1 - - - - 1 - 

Net Cost of Operations 541 13 34 (4,902) (3) - (4,317)

Change in Net Position $ 542 $ 13 $ 34 $ (4,902) $ 6 $ - $ (4,307)

Net Position End of Period $ 14,578 $ 16 $ 238 $ 7,193 $ 12 $ - $ 22,037
Financial Information 

Notes to Financial Statements

Page 99

The following shows earmarked funds activity as of September 30, 2009 (dollars in millions): 

Ginnie 

Mae

Rental 

Housing 

Assistance

Flexible 

Subsidy

Recovery 

Act Funds

Manufactued 

Housing Fees 

Trust Fund Eliminations

Total 

Earmarked 

Funds

Balance Sheet

Fund Balance w/Treasury $ 5,254 $ 3 $ 128 $ 12,100 $ 6 $ 10 $ 17,501

Investments 9,277 - - - - - 9,277

Accounts Receivable 45 - - - - - 45

Loans Receivable - - 76 - - - 76

General Property, Plant and Equipment 40 - - - - - 40

Other 1,059 - - - - - 1,059

Total Assets $ 15,675 $ 3 $ 204 $ 12,100 $ 6 $ 10 $ 27,998

Accounts Payable $ 58 $ - - $ 7 $ $ - $ - $ 65

Loss Reserves 560 - - - - - 560

Other Liabilities 1,019 - - - - - 1,019

 Total Liabilities $ 1,637 $ - - $ 7 $ $ - $ - $ 1,644

Unexpended Appropriations $ - $ 3 $ (376) $ 12,093 $ - $ - $ 11,720

Cumulative Results of Operations 14,038 - 580 - 6 10 14,634

 Total Net Position $ 14,038 $ 3 $ 204 $ 12,093 $ 6 $ 10 $ 26,354

Total Liabilities and Net Position $ 15,675 $ 3 $ 204 $ 12,100 $ 6 $ 10 $ 27,998

Statement of Net Cost For the Period Ended

Gross Costs $ 136 $ 4 $ (12) $ 1,532 $ 6 $ - $ 1,666

Less Earned Revenues (657) (3) (13) - (3) - (676)

Net Costs $ (521) $ 1 $ (25) $ 1,532 $ 3 $ - $ 990

Statement of Changes in Net Position for the Period Ended

Net Position Beginning of Period $ 13,527 $ 4 $ 179 $ - $ 3 $ - $ 13,713

Appropriations Received - - - 13,625 - - 13,625

Transfers In/Out Without Reimbursement (10) - - - 6 10 6

Net Cost of Operations 521 (1) 25 (1,532) (3) - (990)

Change in Net Position $ 511 $ (1) $ 25 $ 12,093 $ 3 $ 10 $ 12,641

Net Position End of Period $ 14,038 $ 3 $ 204 $ 12,093 $ 6 $ 10 $ 26,354

Note 18: Intragovernmental Costs and Exchange Revenue 

The data below shows HUD’s intragovernmental costs and earned revenue separately from 

activity with the public. Intragovernmental transactions are exchange transactions made between 

two reporting entities within the Federal government. Intragovernmental costs are identified by 

the source of the goods and services; both the buyer and seller are Federal entities. Also note 

that there may be instances where the revenue may be classified as non-Federal if the goods or 

services are subsequently sold to the public. Public activity involves exchange transactions 

between the reporting entity and a non-Federal entity.
HUD FY 2010 Agency Financial Report

Section II

Page 100

The following shows HUD’s intragovernmental costs and exchange revenue (dollars in 

millions):

2010

Federal 

Housing 

Administration Ginnie Mae

Section 8 

Rental 

Assistance

Community 

Development 

Block Grants HOME

Operating 

Subsidies

Public and 

Indian Housing 

Loans and 

Grants

Housing for 

the Elderly 

and Disabled All Other Consolidating

Intragovernmental

 Costs $ 305 $ 2 $ 92 $ 22 $ 12 $ 23 $ 64 $ 35 $ 234 $ 789 

Public Costs 826 820 27,703 7,103 2,839 4,492 5,417 1,326 5,359 55,885 

 Subtotal Costs $ 1,131 $ 822 $ 27,795 $ 7,125 $ 2,851 $ 4,515 $ 5,481 $ 1,361 $ 5,593 $ 56,674 

Unassigned Costs $ 191 $ 191 

Total Costs $ 56,865 

Intragovernmental

 Earned Revenue $ (2,547) $ (483) $ - $ - $ - $ - $ - $ - $ (20) $ (3,050)

Public Earned Revenue (132) (880) - - - - - (280) (28) (1,320)

 Total Earned Revenue (2,679) (1,363) - - - - - (280) (48) (4,370)

Net Cost of Operations $ (1,548) $ (541) $ 27,795 $ 7,125 $ 2,851 $ 4,515 $ 5,481 $ 1,081 $ 5,736 $ 52,495 

2009

Federal 

Housing 

Administration Ginnie Mae

Section 8 

Rental 

Assistance

Community 

Development 

Block Grants HOME

Operating 

Subsidies

Public and 

Indian Housing 

Loans and 

Grants

Housing for 

the Elderly 

and Disabled All Other Consolidating

Intragovernmental

 Costs $ 303 $ 2 $ 87 $ 23 $ 12 $ 20 $ 111 $ 33 $ 241 $ 832 

Public Costs 14,386 146 25,172 6,443 1,944 4,520 3,567 1,346 3,389 60,913 

 Subtotal Costs $ 14,689 $ 148 $ 25,259 $ 6,466 $ 1,956 $ 4,540 $ 3,678 $ 1,379 $ 3,630 $ 61,745 

Unassigned Costs $ 182 $ 182 

Total Costs $ 61,927 

Intragovernmental

 Earned Revenue $ (2,148) $ (109) $ - $ - $ - $ - $ - $ - $ (21) $ (2,278)

Public Earned Revenue (118) (549) - - - - - (309) (16) (992)

 Total Earned Revenue (2,266) (658) - - - - - (309) (37) (3,270)

Net Cost of Operations $ 12,423 $ (510) $ 25,259 $ 6,466 $ 1,956 $ 4,540 $ 3,678 $ 1,070 $ 3,775 $ 58,657 
Financial Information 

Notes to Financial Statements

Page 101

Note 19: Total Cost and Earned Revenue by Budget Functional 

Classification 

The following shows HUD’s total cost and earned revenue by budget functional classification for 

FY 2010 (dollars in millions): 

Budget Functional Classification Gross Cost Earned Revenue Net Cost

Intragovernmental:

 Commerce and Housing Credit $ 3 $ - $ 3

 Community and Regional Development 33 (6) 27

 Income Security 444 (3) 441

 Other Multiple Functions $ 3 $ (11) $ (8)

 Total Intragovernmental 483 (20) 463

With the Public:

 Commerce and Housing Credit $ 2,022 $ (4,326) $ (2,304)

 Community and Regional Development 7,371 - 7,371

 Income Security 46,211 (24) 46,187

 Administration of Justice 51 - 51

 Other Multiple Functions 536 - 536

 Total with the Public $ 56,191 $ (4,350) $ 51,841

Not Assigned to Programs:

 Income Security 191 - 191

 Total with the Public $ 191 $ - $ 191

TOTAL:

 Commerce and Housing Credit $ 2,025 $ (4,326) $ (2,301)

 Community and Regional Development 7,404 (6) 7,398

 Income Security 46,846 (27) 46,819

 Administration of Justice 51 - 51

 Other Multiple Functions 539 (11) 528

TOTAL: $ 56,865 $ (4,370) $ 52,495
HUD FY 2010 Agency Financial Report

Section II

Page 102

The following shows HUD’s total cost and earned revenue by budget functional classification for 

FY 2009 (dollars in millions): 

Budget Functional Classification Gross Cost Earned Revenue Net Cost

Intragovernmental:

 Commerce and Housing Credit $ 2 $ - $ 2

 Community and Regional Development 43 (7) 36

 Income Security 482 (2) 480

 Other Multiple Functions $ (1) $ (13) $ (14)

 Total Intragovernmental 526 (22) 504

With the Public:

 Commerce and Housing Credit $ 14,858 $ (3,236) $ 11,622

 Community and Regional Development 6,688 - 6,688

 Income Security 39,080 (12) 39,068

 Administration of Justice 46 - 46

 Other Multiple Functions 547 - 547

 Total with the Public $ 61,219 $ (3,248) $ 57,971

Not Assigned to Programs:

 Income Security 182 - 182

 Total with the Public $ 182 $ - $ 182

TOTAL:

 Commerce and Housing Credit $ 14,860 $ (3,236) $ 11,624

 Community and Regional Development 6,731 (7) 6,724

 Income Security 39,744 (14) 39,730

 Administration of Justice 46 - 46

 Other Multiple Functions 546 (13) 533

TOTAL: $ 61,927 $ (3,270) $ 58,657

Note 20: Net Costs of HUD’s Cross-Cutting Programs 

This note provides a categorization of net costs for two of HUD’s major program areas whose 

costs were incurred across multiple programs. Section 8 costs are incurred to assist low- and 

very low- income families in obtaining decent and safe rental housing. In addition, costs 

incurred under the Other major program represent HUD’s smaller programs. These programs 

provide assistance to support other HUD objectives such as fair housing and equal opportunity, 

energy conservation, homeless assistance, housing unit rehabilitation, and home ownership. 

The following table shows the Department’s cross-cutting costs among its major program areas 

(dollars in millions):
Financial Information 

Notes to Financial Statements

Page 103

Fiscal Year 2010

HUD's Cross-Cutting Programs

Public and 

Indian 

Housing Housing

Community 

Planning and 

Development Other Consolidated

Section 8:

Intragovernmental Gross Costs 47$ 45$ $ - -$ $ 92

Intragovernmental Earned Revenues - - - - $ -

Intragovernmental Net Costs 47$ 45$ $ - -$ $ 92

Gross Costs with the Public 18,365$ 9,279$ $ 59 -$ 27,703 $ 

Earned Revenues -

Net Costs with the Public 18,365$ 9,279$ $ 59 27,703 -$ $ 

Net Program Costs 18,412$ 9,324$ $ 59 27,795 -$ $ 

CDBG

Intragovernmental Gross Costs -$ -$ $ 22 -$ $ 22

Intragovernmental Earned Revenues - - - - $ -

Intragovernmental Net Costs -$ -$ $ 22 -$ $ 22

Gross Costs with the Public 75$ -$ $ 7,024 4$ $ 7,103

Earned Revenues - - - - $ -

Net Costs with the Public 75$ -$ $ 7,024 4$ $ 7,103

Net Program Costs 75$ -$ $ 7,046 4$ $ 7,125

HOME

Intragovernmental Gross Costs -$ -$ $ 12 -$ $ 12

Intragovernmental Earned Revenues - - - - $ -

Intragovernmental Net Costs -$ -$ $ 12 -$ $ 12

Gross Costs with the Public -$ 16$ $ 2,823 -$ $ 2,839

Earned Revenues - - - - $ -

Net Costs with the Public -$ 16$ $ 2,823 -$ $ 2,839

Net Program Costs -$ 16$ $ 2,835 -$ $ 2,851

Other:

Intragovernmental Gross Costs 63$ 168$ $ 55 (52)$ $ 234

Intragovernmental Earned Revenues (2) 2 (4) (16) $ (20)

Intragovernmental Net Costs 61$ 170$ $ 51 (68)$ $ 214

Gross Costs with the Public 387$ 743$ $ 4,166 63$ $ 5,359

Earned Revenues - (6) - (22) $ (28)

Net Costs with the Public 387$ 737$ $ 4,166 41$ $ 5,331

Costs Not Assigned to Programs 64$ 94$ $ 33 -$ $ 191

Net Program Costs 512$ 1,001$ $ 4,250 (27)$ $ 5,736
HUD FY 2010 Agency Financial Report

Section II

Page 104

The following table shows the cross-cutting of HUD’s major program areas that incur costs that 

cross multiple program areas for FY 2009 (dollars in millions): 

Fiscal Year 2009

HUD's Cross-Cutting Programs

Public and 

Indian 

Housing Housing

Community 

Planning and 

Development Other Consolidated

Section 8:

Intragovernmental Gross Costs 42$ 44$ $ - -$ $ 86

Intragovernmental Earned Revenues - - - - $ -

Intragovernmental Net Costs 42$ 44$ $ - -$ $ 86

Gross Costs with the Public 16,286$ 8,837$ $ 50 -$ 25,173 $ 

Earned Revenues -

Net Costs with the Public 16,286$ 8,837$ $ 50 25,173 -$ $ 

Net Program Costs 16,328$ 8,881$ $ 50 25,259 -$ $ 

CDBG

Intragovernmental Gross Costs -$ -$ $ 21 2$ $ 23

Intragovernmental Earned Revenues - - - - $ -

Intragovernmental Net Costs -$ -$ $ 21 2$ $ 23

Gross Costs with the Public 75$ -$ $ 6,356 12$ $ 6,443

Earned Revenues - - - - $ -

Net Costs with the Public 75$ -$ $ 6,356 12$ $ 6,443

Net Program Costs 75$ -$ $ 6,377 14$ $ 6,466

HOME

Intragovernmental Gross Costs -$ -$ $ 11 1$ $ 12

Intragovernmental Earned Revenues - - - - $ -

Intragovernmental Net Costs -$ -$ $ 11 1$ $ 12

Gross Costs with the Public -$ 45$ $ 1,899 -$ $ 1,944

Earned Revenues - - - - $ -

Net Costs with the Public -$ 45$ $ 1,899 -$ $ 1,944

Net Program Costs -$ 45$ $ 1,910 1$ $ 1,956

Low Rent Public Hsg Loans

Intragovernmental Gross Costs 109$ -$ $ - 2$ $ 111

Intragovernmental Earned Revenues - - - - $ -

Intragovernmental Net Costs 109$ -$ $ - 2$ $ 111

Gross Costs with the Public 3,567$ -$ $ - -$ $ 3,567

Earned Revenues - - - - $ -

Net Costs with the Public 3,567$ -$ $ - -$ $ 3,567

Net Program Costs 3,676$ -$ $ - 2$ $ 3,678

Other:

Intragovernmental Gross Costs 56$ 162$ $ 46 (23)$ $ 241

Intragovernmental Earned Revenues (2) (4) (1) (14) $ (21)

Intragovernmental Net Costs 54$ 158$ $ 45 (37)$ $ 220

Gross Costs with the Public 526$ 698$ $ 2,163 2$ $ 3,389

Earned Revenues - (16) - - $ (16)

Net Costs with the Public 526$ 682$ $ 2,163 2$ $ 3,373

Costs Not Assigned to Programs 63$ 89$ $ 30 -$ $ 182

Net Program Costs 643$ 929$ $ 2,238 (35)$ $ 3,775
Financial Information 

Notes to Financial Statements

Page 105

Note 21: FHA Net Costs 

FHA organizes its operations into two overall program types: MMI/CMHI and GI/SRI. These 

program types are composed of four major funds. The MMI, FHA’s largest fund, provides basic 

Single Family mortgage insurance and is a mutual insurance fund, whereby mortgagors, upon 

non-claim termination of their mortgages, share surplus premiums paid into the MMI fund that 

are not required for operating expenses and losses or to build equity. The CMHI, another mutual 

fund, provides mortgage insurance for management-type cooperatives. The GI provides a large 

number of specialized mortgage insurance activities, including insurance of loans for property 

improvements, cooperatives, condominiums, housing for the elderly, land development, group 

practice medical facilities and nonprofit hospitals. The SRI provides mortgage insurance on 

behalf of mortgagors eligible for interest reduction payments who otherwise would not be 

eligible for mortgage insurance. The H4H program was established by HUD as an additional 

mortgage program designed to keep borrowers in their home. 

The following table shows Net Cost detail for the Federal Housing Administration (dollars in 

millions):

GI/SRI 

Program

MMI/CMHI 

Program

H4H 

Program Total

GI/SRI 

Program

MMI/CMHI 

Program

H4H 

Program Total

Costs

Intragovernmental Gross Costs $ 144 $ 159 $ 2 $ 305 $ 131 $ 167 $ 5 $ 303

Intragovernmental Earned Revenues (412) (2,134) - (2,546) (392) (1,756) - (2,148)

Intragovernmental Net Costs $ (268) $ (1,975) $ 2 $ (2,241) $ (261) $ (1,589) $ 5 $ (1,845)

Gross Costs with the Public $ 3,359 $ (2,543) $ 10 $ 826 $ 5,302 $ 9,072 $ 12 $ 14,386

Earned Revenues (70) (63) - (133) (71) (47) - (118)

Net Costs with the Public $ 3,289 $ (2,606) $ 10 $ 693 $ 5,231 $ 9,025 $ 12 $ 14,268

Net Program Costs $ 3,021 $ (4,581) $ 12 $ (1,548) $ 4,970 $ 7,436 $ 17 $ 12,423

Fiscal Year 2010 Fiscal Year 2009

Note 22: Commitments under HUD’s Grant, Subsidy, and Loan 

Programs 

A. Contractual Commitments 

HUD has entered into extensive long-term commitments that consist of legally binding 

agreements to provide grants, subsidies, or loans. Commitments become liabilities when all 

actions required for payment under an agreement have occurred. The mechanism for funding 

subsidy commitments generally differs depending on whether the agreements were entered into 

before or after 1988. 

Prior to fiscal 1988, HUD’s subsidy programs, primarily the Section 8 program and the Section 

235/236 programs, operated under contract authority. Each year, Congress provided HUD the 

authority to enter into multiyear contracts within annual and total contract limitation ceilings. 
HUD FY 2010 Agency Financial Report

Section II

Page 106

HUD then drew on and continues to draw on permanent indefinite appropriations to fund the 

current year’s portion of those multiyear contracts. Because of the duration of these contracts 

(up to 40 years), significant authority exists to draw on the permanent indefinite appropriations. 

Beginning in FY 1988, the Section 8 and the Section 235/236 programs began operating under 

multiyear budget authority whereby the Congress appropriates the funds “up-front” for the entire 

contract term in the initial year.

As shown on the next page, appropriations to fund a substantial portion of these commitments 

will be provided through permanent indefinite authority. These commitments relate primarily to 

the Section 8 program, and the Section 235/236 rental assistance and interest reduction programs 

and further explained below. 

HUD’s commitment balances are based on the amount of unliquidated obligations recorded in 

HUD’s accounting records with no provision for changes in future eligibility, and thus are equal 

to the maximum amounts available under existing agreements and contracts. Unexpended 

appropriations and cumulative results of operations shown in the Consolidated Balance Sheet 

comprise funds in the U.S. Treasury available to fund existing commitments that were provided 

through “up-front” appropriations, and also include permanent indefinite appropriations received 

in excess of amounts used to fund the pre-1988 subsidy contracts and offsetting collections. 

FHA enters into long-term contracts for both program and administrative services. FHA funds 

these contractual obligations through appropriations, permanent indefinite authority, and 

offsetting collections. The appropriated funds are primarily used to support administrative 

contract expenses, while the permanent indefinite authority and the offsetting collections are 

used for program services. 

The following shows HUD’s obligations and contractual commitments under its grant, subsidy, 

and loan programs as of September 30, 2010 (dollars in millions): 

Programs

 Unexpended

Appropriations 

 Permanent

Indefinite 

 Investment 

Authority 

 Offsetting 

Collections 

 FHA $ 146 $ - $ 267 $ 1,181 $ 1,594

 Section 8 Rental Assistance 11,166 (11) - - 11,155 

 Community Development Block Grants 20,729 - - - 20,729

 HOME Partnership Investment Program 6,285 - - - 6,285

Operating Subsidies 1,333 - - - 1,333

 Low Rent Public Housing Grants and Loans 9,104 - - - 9,104

Housing for Elderly and Disabled 3,914 - - - 3,914

Section 235/236 1,286 1,727 - - 3,013

All Other 7,757 - - - 7,757

Total $ 61,720 $ 1,716 $ 267 $ 1,181 $ 64,884

 Undelivered Orders - 

Obligations, Unpaid 

Undelivered Orders
Financial Information 

Notes to Financial Statements

Page 107

Of the total Section 8 Rental Assistance contractual commitments as of September 30, 2010, 

$9.2 billion relates to project-based commitments, and $2.0 billion relates to tenant-based 

commitments.

PIH’s review of $164 million of obligations related to the PIH Direct Loan Program is ongoing. 

As of September 30, 2010, PIH concluded that $71 million in outstanding obligations reported in 

HUD’s financial statements be recaptured. As recommended, the outstanding balances have 

been de-obligated in HUD’s general ledgers and are reported as a recapture in the Statement of 

Budgetary Resources for FY 2010. Of the recaptured amount, $21 million is offset as other 

authority withdrawn and the remaining balance of $50 million is shown as an unobligated 

balance not available to HUD. The excess resource of $50 million reflected as cash in HUD’s 

balance sheet and the corresponding equity associated with these unobligated balances will be 

reduced by $51 million as a result of the negative warrant processed by the Department of 

Treasury in FY 2011. PIH’s analysis of these unliquidated obligations has no impact on the 

Statement of Net Cost.

The following shows HUD’s obligations and contractual commitments under its grant, subsidy, 

and loan programs as of September 30, 2009 (dollars in millions): 

Programs

 Unexpended

Appropriations 

 Permanent

Indefinite 

 Investment 

Authority 

 Offsetting 

Collections 

 FHA $ 153 $ - $ 276 $ 685 $ 1,114

 Section 8 Rental Assistance 11,206 757 - - $ 11,963 

 Community Development Block Grants 17,326 - - - $ 17,326

 HOME Partnership Investment Program 7,271 - - - $ 7,271

Operating Subsidies 1,023 - - - $ 1,023

 Low Rent Public Housing Grants and Loans 12,078 67 - - $ 12,145

Housing for Elderly and Disabled 4,430 - - - $ 4,430

Section 235/236 1,096 2,471 - - $ 3,567

All Other 9,584 - - - $ 9,584

Total $ 64,167 $ 3,295 $ 276 $ 685 $ 68,423

 Undelivered Orders - 

Obligations, Unpaid 

 Undelivered Orders 

Of the total Section 8 Rental Assistance contractual commitments as of September 30, 2009, 

$6.9 billion relates to project-based commitments, and $4.7 billion relates to tenant-based 

commitments. With the exception of the Housing for the Elderly and Disabled and Low Rent 

Public Housing Loan Programs (which have been converted to grant programs), 

Section 235/236, and a portion of “all other” programs, HUD management expects all of the 

above programs to continue to incur new commitments under authority granted by Congress in 

future years. However, estimated future commitments under such new authority are not included 

in the amounts above. 
HUD FY 2010 Agency Financial Report

Section II

Page 108

B. Administrative Commitments 

In addition to the above contractual commitments, HUD has entered into administrative 

commitments which are reservations of funds for specific projects (including those for which a 

contract has not yet been executed) to obligate all or part of those funds. Administrative 

commitments become contractual commitments upon contract execution.

The following shows HUD’s administrative commitments as of September 30, 2010 (dollars in 

millions):

Programs

 Unexpended 

Appropriations 

 Permanent 

Indefinite 

Appropriations 

 Offsetting 

Collections 

 Total 

Reservations 

Section 8 Rental Assistance $ 101 $ 6 $ - $ 107

Community Development Block Grants 841 - - 841

HOME Partnership Investment Program 240 - - 240

Low Rent Public Housing Grants and Loans 55 - - 55

Housing for Elderly and Disabled 381 - - 381

Section 235/236 - 4 - 4

All Other 594 - - 594

Total $ 2,212 $ 10 $ - $ 2,222

Reservations

The following chart shows HUD’s administrative commitments as of September 30, 2009 

(dollars in millions):

Programs

 Unexpended 

Appropriations 

 Permanent 

Indefinite 

Appropriations 

 Offsetting 

Collections 

 Total 

Reservations 

Section 8 Rental Assistance Project-Based $ 107 $ 6 $ - $ 113

Community Development Block Grants 1,058 - - 1,058

HOME Partnership Investment Program 270 - - 270

Low Rent Public Housing Grants and Loans 139 - - 139

Housing for Elderly and Disabled 180 - - 180

Section 235/236 - 4 - 4

All Other 661 - - 661

Total $ 2,415 $ 10 $ - $ 2,425

Reservations
Financial Information 

Notes to Financial Statements

Page 109

Note 23: Effects of Hurricanes 

Multifamily Hurricane Cost 

Ginnie Mae guarantees to advance payments of principal and interest on Mortgage-Backed 

Securities (MBS) when the issuer of the pooled mortgages behind the MBS’s defaults. Ginnie 

Mae files the claims for loans defaulted within the defaulted issuer’s portfolio to FHA, VA, or 

RHS. Ginnie Mae has not incurred any losses due to date and does not expect any material 

future losses.

The effects of Hurricanes Katrina, Rita, and Wilma in 2005 and Hurricanes Ike and Gustav in 

2008 resulted in increased funding for the Department for assisting in meeting housing needs of 

those displaced by the disaster. In FY 2008, HUD also received additional disaster funding for 

the Mid West.

The following shows the status of budgetary resources information for HUD’s programs funded 

to support disaster relief as of September 30, 2010 (dollars in millions): 

CDBG

Tenant-Based

Rental

Assistance Total

Budgetary Resources

Unobligated Balance, beginning of period $ 5,118 $ - $ 5,118

Recoveries - 1 1

Budget Authority - - -

Spending Authority from Offsetting Collections - - -

Permanently Not Available, Recissions - - -

Total Budgetary Resources $ 5,118 $ 1 $ 5,119

Status of Budgetary Resources

Obligations Incurred $ 4,305 $ 1 $ 4,306

Unobligated Balance, available 813 - 813

Unobligated Balance, not available - - -

Total Status of Budgetary Resources $ 5,118 $ 1 $ 5,119

Change in Obligated Balance

Obligated Balance, net beginning of period $ 8,097 $ 23 $ 8,120

Obligations Incurred 4,305 1 4,306

Gross Outlays (2,417) (3) (2,420)

Recoveries - (1) (1)

Obligated Balance, net end of period $ 9,985 $ 20 $ 10,005

Net Outlays $ 2,417 $ 3 $ 2,420
HUD FY 2010 Agency Financial Report

Section II

Page 110

The data below displays cumulative activity for the four largest state recipients of HUD disaster 

assistance since the inception of the program. The obligations incurred and gross outlays shown 

above represent fiscal year activity (dollars are in millions).

Obligations Outlays Unliquidated

Louisiana $ 14,158 $ 10,458 $ 3,700

Mississippi 5,534 3,686 1,848

Texas 3,696 641 3,055

Florida 366 179 187

Other States 2,096 886 1,210

Total $ 25,850 $ 15,850 $ 10,000

The following table shows the status of budgetary resources information for HUD’s programs 

funded to support disaster relief as of September 30, 2009 (dollars in millions): 

CDBG

Tenant-Based 

Rental 

Assistance

Prevention of 

Resident 

Displacement Total

Budgetary Resources

Unobligated Balance, beginning of period $ 2,000 $ - $ 1 $ 2,001

Recoveries - 4 - 4

Budget Authority - - - -

Spending Authority from Offsetting Collections - - (1) (1)

Permanently Not Available, Recissions - - - -

Total Budgetary Resources $ 2,000 $ 4 $ - $ 2,004

Status of Budgetary Resources

Obligations Incurred $ 1,000 $ 4 $ - $ 1,004

Unobligated Balance, available 1,000 - - 1,000

Unobligated Balance, not available - - - -

Total Status of Budgetary Resources $ 2,000 $ 4 $ - $ 2,004

Change in Obligated Balance

Obligated Balance, net beginning of period $ 7,115 $ 34 $ - $ 7,149

Obligations Incurred 1,000 4 - 1,004

Gross Outlays (2,264) (11) - (2,275)

Recoveries - (4) - (4)

Obligated Balance, net end of period $ 5,851 $ 23 $ - $ 5,874

Net Outlays $ 2,264 $ 11 $ 1 $ 2,276
Financial Information 

Notes to Financial Statements

Page 111

The data below displays cumulative activity for the four largest state recipients of HUD disaster 

assistance since the inception of the program. The obligations incurred and gross outlays shown 

above represent fiscal year activity (dollars in millions).

Obligations Outlays Unliquidated

Louisiana $ 12,600 $ 9,148 $ 3,452

Mississippi 5,525 3,035 2,490

Texas 638 372 266

Florida 285 146 139

Total $ 19,048 $ 12,701 $ 6,347

Note 24: Apportionment Categories of Obligations Incurred 

Budgetary resources are usually distributed in an account or fund by specific time periods, 

activities, projects, objects, or a combination of these categories. Resources apportioned by 

fiscal quarters are classified as Category A apportionments. Apportionments by any other 

category would be classified as Category B apportionments. 

HUD’s categories of obligations incurred were as follows (dollars in millions):

Category A Category B Total

2010

Direct $ 907 $ 83,962 $ 84,869

Reimbursable - 8,017 8,017

Total $ 907 $ 91,979 $ 92,886

2009

Direct $ 1,863 $ 88,295 $ 90,158

Reimbursable - 1,528 1,528

Total $ 1,863 $ 89,823 $ 91,686

Note 25: Explanation of Differences between the Statement of 

Budgetary Resources and the Budget of the United States 

Government 

The President’s Budget containing actual FY 2010 data is not available for comparison to the 

Statement of Budgetary Resources. Actual FY 2010 data will be available in the Appendix to 

the Budget of the United States Government, FY 2012. 

For FY 2009, an analysis to compare HUD’s Statement of Budgetary Resources to the 

President’s Budget of the United States was performed to identify any differences. 
HUD FY 2010 Agency Financial Report

Section II

Page 112

The following shows the difference between Budgetary Resources reported in the Statement of 

Budgetary Resources and the President’s Budget for FY 2009 (dollars in millions): 

Budgetary 

Resources

Obligations 

Incurred

Distributed 

Offsetting 

Receipts

Net 

Outlays

Combined Statement of Budgetary Resources $ 158,997 $ 91,686 $ (1,141) $ 43,629

Difference #1 - Resources related to HUD's expired accounts

 not reported in the President's Budget (494) (22) - - 

Difference #2 - Rounding (22) (10) 1 1

Difference #3 - Negative subsidy reported by GNMA as an offsetting

 receipt is reported as a negative outlay in the President's Budget - - 888 (888)

Difference #4 - FY 2009 activity not included in the President's Budget related to the

 General Fund receipts account - - 10 -

United States Budget 158,481$ $ 91,654 $ (242) $ 42,742
Financial Information 

Notes to Financial Statements

Page 113

Note 26: Reconciliation of Net Cost of Operations to Budget 

This note (formerly the Statement of Financing) links the proprietary data to the budgetary data. 

Most transactions are recorded in both proprietary and budgetary accounts. However, because 

different accounting bases are used for budgetary and proprietary accounting, some transactions 

may appear in only one set of accounts. The Reconciliation of Net Cost of Operations to Budget 

is as follows for the periods ending September 30, 2010 and 2009 (in millions).

2010 2009

Budgetary Resources Obligated

Obligations Incurred $ 92,886 $ 91,686 

Spending Authority from Offsetting Collections and Recoveries (36,908) (36,424)

Obligations Net of Offsetting Collections $ 55,978 $ 55,262 

Offsetting Receipts (1,718) (1,141)

Net Obligations $ 54,260 $ 54,121 

Other Resources

Transfers In/Out Without Reimbursement $ 1,002 $ (1,742)

Imputed Financing from Costs Absorbed by Others 100 79 

Other Resources 7 (139)

Net Other Resources Used to Finance Activities $ 1,109 $ (1,802)

Total Resources Used to Finance Activities $ 55,369 $ 52,319 

Resources Used to Finance Items Not Part of the Net Cost of Operations

Change in Budgetary Resources Obligated for Goods/Services/Benefits $ (670) $ (11,394)

Services Ordered but Not Yet Provided 3,998 - 

Credit Program Resources not Included in Net Cost (Surplus) of Operations 30,771 32,147 

Resources that Finance the Acquisition of Assets or Liquidation of Liabilities (5,299) - 

Other Changes to Net Obligated Resources Not Affecting Net Cost of Operations (32,493) (28,262)

Total Resources Used to Finance Items Not Part of Net Cost of Operations $ (3,693) $ (7,509)

Total Resources Used to Finance the Net Cost of Operations $ 51,676 $ 44,810 

Components of Net Cost of Operations Not Requiring/Generating 

Resources in the Current Period

Upward/Downward Re-estimates of Credit Subsidy Expense $ 2,289 $ 12,252 

Increase in Exchange Revenue Receivable from the Public (358) (311)

Change in Loan Loss Reserve (84) (49)

Revaluation of Assets or Liabilities (138) - 

Changes in Bad Debt Expenses Related to Credit Reform Receivables (349) 1,431 

Reduction of Credit Subsidy Expense from Guarantee Endorsements and (3,100) (1,084)

Other 2,559 1,608 

Total Components of Net Cost of Operations Not Requiring/Generating Resources 

in the Current Period $ 819 $ 13,847

Net Cost of Operations $ 52,495 $ 58,657 
HUD FY 2010 Agency Financial Report

Section II

Page 114

Required Supplementary Stewardship Information 

Introduction 

This narrative provides information on resources utilized by HUD that do not meet the criteria 

for information required to be reported or audited in HUD’s financial statements but are, 

nonetheless, important to understand investments made by HUD for the benefit of the Nation. 

The stewardship objective requires that HUD also report on the broad outcomes of its actions 

associated with these resources. Such reporting will provide information that will help the reader 

to better assess the impact of HUD’s operations and activities.

HUD’s stewardship reporting responsibilities extend to the investments made by a number of 

HUD programs in Non-Federal Physical Property, Human Capital, and Research and 

Development. Due to the relative immateriality of the amounts and in the application of the 

related administrative costs, most of the investments reported reflect direct program costs only. 

The investments addressed in this narrative are attributable to programs administered through the 

following organizations: 

Community Planning and Development (CPD), 

Public and Indian Housing (PIH), 

Policy Development and Research (PD&R), and

Healthy Homes and Lead Hazard Control (OHHLHC). 

Overview of HUD’s Major Programs 

CPD seeks to develop viable communities by promoting integrated approaches that provide 

decent housing, a suitable living environment, and expanded economic opportunities for lowand moderate-income persons. HUD makes stewardship investments through the following CPD 

programs: 

Community Development Block Grants (CDBG) are awarded to state and local 

communities, which use these funds to support a wide variety of community development 

activities within their jurisdiction. These activities are designed to benefit low- and 

moderate-income persons, aid in the prevention of slums and blight, and meet other 

urgent community development needs. State and local communities use the funds as they 

deem necessary, as long as the use of these funds meet at least one of these objectives. A 

portion of the funds supports the acquisition or rehabilitation of property owned by state 

and local governments, while other funds help to provide employment and job training to 

low- and moderate-income persons. 

Disaster Recovery Assistance is a CDBG program that helps state and local 

governments recover from major natural disasters. A portion of these funds can be used 

to acquire, rehabilitate, construct, or demolish physical property. 
Financial Information 

Required Supplementary Stewardship Information

Page 115

The HOME Investment Partnerships Program (HOME) provides formula grants to 

states and localities (used often in partnership with local nonprofit groups) to fund a wide 

range of activities that build, buy, and/or rehabilitate affordable housing for low-income 

persons. 

Homeless – Supportive Housing Program (SHP) provides grants for new construction, 

acquisition, rehabilitation or leasing of buildings to provide transitional or permanent 

housing, as well as supportive services to homeless individuals and families. 

Neighborhood Stabilization Program (NSP) stabilizes communities that have suffered 

from foreclosures and abandonment. Through the purchase and redevelopment of 

foreclosed and abandoned homes and residential properties, the goal of the program is 

being realized.

Housing Opportunities for People With HIV/AIDS (HOPWA) provides education and 

employment assistance to assist families and individuals who are living with the 

challenges of HIV/AIDS and risks of homelessness. Resources are used to assist 

beneficiaries to obtain permanent housing results, as well as to address short-term and 

transitional housing needs. 

The Youthbuild program, which assists young individuals to obtain education, skills, and 

experience, was transferred to the Department of Labor in September 2006 but is reported 

here to show prior year results. 

Emergency Shelter Grants (ESG) provide formula funding to local units of government 

to improve the number and quality of emergency and transitional shelters for homeless 

individuals and families.

PIH ensures safe, decent, and affordable housing, creates opportunities for residents’ selfsufficiency and economic independence, and assures the fiscal integrity of all program 

participants. HUD makes stewardship investments through the following PIH programs:

The Public Housing Capital Fund provides grants to PHAs to improve the physical 

conditions and to upgrade the management and operation of existing public housing.

HOPE VI Revitalization Grants (HOPE VI) provide support for the improvement of 

the living environment of public housing residents in distressed public housing units. 

Some investments support the acquisition, construction or rehabilitation of property 

owned by the PHA, state or local governments, while others help to provide education 

and job training to residents of the communities targeted for rehabilitation.

Indian Housing Block Grants (IHBG) provide funds needed to allow tribal housing 

organizations to maintain existing units and to begin development of new units to meet 

their critical long-term housing needs. 

Indian Community Development Block Grants (ICDBG) provide funds to Indian 

organizations to develop viable communities, including decent housing, a suitable living 
HUD FY 2010 Agency Financial Report

Section II

Page 116

environment, and economic opportunities, principally for low and moderate-income 

recipients.

The Native Hawaiian Housing Block Grant (NHHBG) program provides an annual 

block grant to the Department of Hawaiian Home Lands (DHHL) for a range of 

affordable housing activities to benefit low-income Native Hawaiians eligible to reside 

on the Hawaiian home lands. The DHHL has the authority under the NHHBG program 

to develop new and innovative affordable housing initiatives and programs based on local 

needs, including down payment and other mortgage assistance programs, transitional 

housing, domestic abuse shelters, and revolving loan funds. 

PD&R’s stewardship responsibilities include maintaining current information to monitor housing 

needs and housing market conditions, and to support and conduct research on priority housing 

and community development issues. 

In prior years HUD made stewardship investments through the Community Development Work 

Study and the Partnership for Advancing Technology in Housing (PATH) program, as described 

below. 

Community Development Work Study: Colleges and universities throughout the 

United Sates have used this program to offer financial aid and work experience to 

students enrolled in a full-time graduate program in community development or a closely 

related field such as urban planning, public policy, or public administration. This 

program is not currently funded, but it is reported to reflect prior year activity. 

Partnership for Advancing Technology in Housing (PATH). PATH is a 

public/private sector initiative which seeks to expand the development and utilization of 

new technologies in order to make American homes stronger, safer, and more durable; 

more energy efficient and environmentally friendly; easier to maintain and less costly to 

operate; and more comfortable and exciting to live in. PATH links key agencies in the 

federal government with leaders from the home building, product manufacturing, 

insurance, financial, and regulatory communities in a unique partnership focused on 

technological innovation in the American housing industry. This program is not 

currently funded, but it is reported to reflect prior year activity.

The OHHLHC program seeks to eliminate childhood lead poisoning caused by lead-based paint 

hazards and to address other childhood diseases and injuries, such as asthma, unintentional 

injury, and carbon monoxide poisoning, caused by substandard housing conditions. 

The Lead Technical Assistance Division, in support of the Departmental Lead Hazard 

Control program, establishes and coordinates lead-based paint regulations and policy, and 

supports compliance assistance and enforcement. These programs also support technical 

assistance and the conduct of technical studies and demonstrations to identify innovative 

methods to create lead-safe housing at reduced cost. In addition, these programs are 
Financial Information 

Required Supplementary Stewardship Information

Page 117

designed to increase the awareness of lead professionals, parents, building owners, 

housing and public health professionals, and others with respect to lead-based paint and 

related property-based health issues.

Lead Hazard Control Grants help state and local governments and private 

organizations and firms control lead-based paint hazards in low-income, privately owned 

rental, and owner-occupied housing. The grants build program and local capacity. The 

grants also generate training and employment opportunities as well as contracts for lowincome residents and businesses in targeted areas.

RSSI Reporting – HUD’s Major Programs 

Non-Federal Physical Property 

Investment in Non-Federal Physical Property: Non-Federal physical property investments 

support the purchase, construction, or major renovation of physical property owned by state and 

local governments. These investments support HUD’s strategic goals to increase the availability 

of decent, safe, and affordable housing and to strengthen communities. Through these 

investments, HUD serves to improve the quality of life and economic vitality. The table below 

summarizes material program investments in Non-Federal Physical Property.

Investments in Non-Federal Physical Property

Fiscal Year 2006 – 2010 

(Dollars in millions)

Program 2006 2007 2008 2009 2010

CPD

 CDBG $1,170 $1,262 $1,284 $1,180 $1,083

 Disaster Grants $299 $120 $169 $144 $358

 HOME $30 $38 $54 $18 $36

 SHP – Homeless $24 $21 $17 $14 $20

 NSP1 N/A N/A N/A N/A $10

PIH

 ICDBG $68 $58 $56 $61 $62

 NHHBG $8 $8 $9 $10 $13

 IHBG2 $320 $260 $266 $296 $188

 HOPE VI $72 $95 $97 $104 $114

 PH Capital Fund3 $2,074 $2,117 $2,005 $2,310 $3,783

TOTAL $4,065 $3,979 $3,957 $4,137 $5,667

Notes: 1Neighborhood Stabilization Program was reported for the first time in FY 2010.

2Historical amounts were updated to reflect corrections made since the last report.

3Current and historical amounts were derived from data in the Line Of Credit Control System and 

differ from prior year reports.
HUD FY 2010 Agency Financial Report

Section II

Page 118

Human Capital 

Investment in Human Capital: Human Capital investments support education and training 

programs that are intended to increase or maintain national economic productive capacity. These 

investments support HUD’s strategic goals, which are to promote self-sufficiency and asset 

development of families and individuals; improve community quality of life and economic 

vitality; and ensure public trust in HUD. The table on the next page summarizes material 

program investments in Human Capital, for fiscal years 2006 through 2010. 

Investments in Human Capital

Fiscal Year 2006 – 2010 

(Dollars in millions)

Program 2006 2007 2008 2009 2010

CPD

 CDBG $4 $23 $32 $29 $28

 SHP - Homeless $2 $41 $18 $16 $28

 HOPWA1 N/A N/A N/A $3 $2

 Youthbuild2 $22 $23 $19 – –

 ESG – – – – $2

PIH

 HOPE VI $6 $8 $8 $9 $10

 NHHBG – – – – $1

 IHBG $2 $1 $1 $1 $1

PD&R

 CDWS3 $3 $2 – – –

TOTAL $39 $98 $78 $58 $72

Notes:

1FY 2009 was the first year of reporting HOPWA’s investment in human capital in the RSSI.

2Youthbuild was transferred to the Department of Labor. The history is reported for the sake of 

consistency.

3Congress has not funded the CDWS since 2005. Only outlays are being reported as grantees 

request reimbursement of costs.

Results of Human Capital Investments: The table on the next page presents the results 

(number of people trained) of human capital investments made by HUD’s CPD, PIH, PD&R, 

and OHHLHC programs:
Financial Information 

Required Supplementary Stewardship Information

Page 119

Results of Investments in Human Capital

Number of People Trained

Fiscal Year 2006 – 2010 

Program 2006 2007 2008 2009 2010

CPD 

 CDBG 79,833 52,277 60,498 47,578 97,349

 SHP - Homeless1 N/A 17.0% 22.8% 21.9% 21.6%

 HOPWA2 N/A N/A N/A 6,540 4,604

 Youthbuild3 3,929 3,103 2,987 N/A N/A

PIH 

 ICDBG4 N/A N/A N/A 15 –

 NHHBG4 N/A N/A N/A 160 210

 IHBG4 N/A N/A N/A 485 1,474

 Hope VI (see table below)

OHHLHC 

 Lead Technical Assistance5 0 0 400 1,200 –

TOTAL 83,762 55,380 63,885 55,978 103,637

Notes:

1SHP results are expressed in terms of percentage of persons exiting the programs having 

employment income. Prior years’ information is continually being updated as grantees submit 

project level data.

2FY 2009 was the first year of reporting HOPWA’s investment in human capital in the RSSI.

3Youthbuild was transferred to the Department of Labor. The history is reported for the sake of 

consistency.

4Amounts for ICDBG, NHHBG, and IHBG were not reported prior to FY 2009. 5Congress did not fund the Lead Technical Assistance program in FY 2010. FY 2008 and 

FY 2009 funding was $0.2 million.

HOPE VI Results of Investments in Human Capital: Since the inception of the HOPE VI 

program in FY 1993, the program has made significant investments in Human Capital related 

initiatives (i.e., education and training). The following table presents HOPE VI’s key cumulative 

performance information for FY 2009 and FY 2010, since the program’s inception.– 

Key Results of HOPE VI Program Activities

Fiscal Years 2009 and 2010

HOPE VI Service

2009 

Enrolled

2009 

Completed

% 

Completed

2010 

Enrolled

2010 

Completed

% 

Completed

Employment Preparation, 

Placement, & Retention1

 

75,991 

 

24,888 33%

 

78,818 

 

26,077 33%

Job Skills Training Programs

 

31,079 

 

16,490 53%

 

31,932 

 

16,936 53%

High School Equivalent Education

 

16,453 

 

4,760 29%

 

17,036 

 

4,989 29%

Entrepreneurship Training

 

3,496 

 

1,505 43%

 

3,528 

 

1,534 43%

Homeownership Counseling

 

15,259 

 

6,506 43%

 

15,727 

 

6,752 43%

Note:

1

Completion data are not applicable, since all who enroll are considered recipients of the training.
HUD FY 2010 Agency Financial Report

Section II

Page 120

Research and Development 

Investments in Research and Development: Research and development investments support 

(a) the search for new knowledge and/or (b) the refinement and application of knowledge or 

ideas, pertaining to development of new or improved products or processes. Research and 

development investments are intended to increase economic productive capacity or yield other 

future benefits. As such, these investments support HUD’s strategic goals, which are to increase 

the availability of decent, safe, and affordable housing in America’s communities; and ensure 

public trust in HUD. 

The following table summarizes HUD’s research and development investments. 

Investments in Research and Development

Fiscal Year 2006 – 2010 

(Dollars in millions)

Program 2006 2007 2008 2009 2010

PIH

 IHBG $1 – – $1 –

PD&R 

 PATH1 $8 $5 $2 $1 –

OHHLHC

 Lead Hazard Control $11 $5 $4 $3 $5

TOTAL $20 $10 $6 $5 $5

Note:

1. PATH data for prior years has been updated. The program has not received a new 

appropriation since FY 2007.

Results of Investments in Research and Development: In support of HUD’s lead hazard 

control initiatives, the OHHLHC program has conducted various studies. As indicated in the 

following table, such studies have contributed to an overall reduction in the per-housing unit cost 

of lead hazard evaluation and control efforts. These studies have also lead to the identification of 

the prevalence of related hazards.

Per-Housing Unit Cost of Lead Hazard Evaluation and Control 

Fiscal Year 2006 – 2010 

Program 2006 2007 2008 2009 2010

OHHLHC

Lead Hazard 

Control $4,926 $4,900 $5,570 $5,554 $5,901

TOTAL $4,926 $4,900 $5,570 $5,554 $5,901
Financial Information 

Required Supplementary Information

Page 121

Required Supplementary Information 

Introduction 

Presented on the following pages are additional disaggregated financial statements broken out by 

HUD’s major lines of business (i.e., responsibility segments) to supplement the financial 

statements shown earlier in this section. 
HUD FY 2010 Agency Financial Report

Section II

Page 122

Federal Housing 

Administration

Government 

National 

Mortgage 

Association

Section 8 Rental 

Assistance

Community 

Development 

Block Grants HOME

Operating 

Subsidies

Public and 

Indian Housing 

Loans and 

Grants

Housing for the 

Elderly and 

Disabled All Other Consolidating

ASSETS Intragovernmental Fund Balance with Treasury (Note 4) 39,078 $ 6,650 $ 11,610 $ 22,783 $ 6,564 $ 1,346 $ 9,427 $ 5,266 $ 13,182 $ 115,907 $ 

 Investments (Note 5) 4,150 3,572 - - - - - - - 7,721

 Other Assets (Note 9) 5 - - 2 1 - 1 - 31 39

 Total Intragovernmental Assets 43,233 10,222 11,610 22,784 6,564 1,346 9,428 5,266 13,213 123,667

 Investments (Note 5) 136 - - - - - - - - 136

 Accounts Receivable (Note 6) 16 236 51 - - - - - 19 322

 Credit Program Receivables and Related Foreclosed Property (Note 7) 6,136 - - - - - - 3,211 85 9,432

 General Property Plant and Equipment (Note 8) - 36 - - - - - - 222 258

 Other Assets (Note 9) 76 6,569 - - - - - - 1 6,647

TOTAL ASSETS 49,597 $ 17,063 $ 11,660 $ 22,784 $ 6,565 $ 1,346 $ 9,428 $ 8,477 $ 13,541 $ 140,462 $ LIABILITIES Intragovernmental Liabilities Accounts Payable (Note 10) - - - 3 - - - - 4 6

 Debt (Note 11) 4,749 - - - - - - - 26 4,775

 Other Intragovernmental Liabilities (Note 14) 1,165 - 51 2 1 2 1 1 99 1,323

 Total Intragovernmental Liabilities 5,914 - 51 5 1 2 1 1 130 6,104

 Accounts Payable (Note 10) 647 261 4 32 15 5 22 3 61 1,050 Loan Guarantees (Note 7) 34,958 - - - - - - - 115 35,073

 Debt Held by the Public (Note 11) 10 - - - - - 282 - - 292

 Federal Employee and Veterans’ Benefits (Note 12) - - 6 6 2 5 1 1 51 72

 Loss Reserves (Note 13) - 1,005 - - - - - - - 1,005

 Other Governmental Liabilities (Note 14) 427 1,219 12 8 4 8 4 7 154 1,842

TOTAL LIABILITIES 41,956 $ 2,486 $ 72 $ 51 $ 22 $ 19 $ 309 $ 12 $ 502 $ 45,438 $ NET POSITION Unexpended Appropriations - Earmarked Funds (Note 17) - - 15 2,457 1,220 - 2,171 - 955 6,817

 Unexpended Appropriations 880 - 11,574 20,276 5,322 1,327 7,233 5,253 11,366 63,231

 Cumulative Results of Operations - Earmarked Funds (Note 17) - 14,578 - - - - - - 642 15,220

 Cumulative Results of Operations 6,761 - - - - - (285) 3,212 68 9,756

TOTAL NET POSITION 7,641 14,578 11,588 22,733 6,542 1,327 9,118 8,465 13,031 95,024

TOTAL LIABILITIES AND NET POSITION 49,597 $ 17,063 $ 11,660 $ 22,784 $ 6,565 $ 1,346 $ 9,428 $ 8,477 $ 13,531 $ 140,462 $ Figures may not add to totals because of rounding.

Department of Housing and Urban Development

Consolidating Balance Sheet

For the Period Ending September 2010 

(Dollars in Millions)
Financial Information 

Required Supplementary Information

Page 123

 

Federal Housing 

Administration

Government 

National 

Mortgage 

Association

Section 8 Rental 

Assistance

Community 

Development 

Block Grants HOME

Operating 

Subsidies

Public and 

Indian Housing 

Loans and 

Grants

Housing for the 

Elderly and 

Disabled All Other Consolidating

ASSETS Intragovernmental Fund Balance with Treasury (Note 4) 30,130 $ 5,254 $ 11,684 $ 25,334 $ 7,575 $ 1,190 $ 12,479 $ 5,449 $ 14,547 $ 113,641 $ 

 Investments (Note 5) 10,635 9,277 - - - - - - - 19,912

 Other Assets (Note 9) 16 - 1 - 1 2 1 - (6) 14

 Total Intragovernmental Assets 40,781 14,531 11,685 25,334 7,575 1,191 12,480 5,449 14,540 133,567

 Investments (Note 5) 145 - - - - - - - - 145

 Accounts Receivable (Note 6) 16 45 61 - - - - - 6 129

 Credit Program Receivables and Related Foreclosed Property (Note 7) 4,446 - - - - - 1 3,532 77 8,058

 General Property Plant and Equipment (Note 8) - 40 - - - - - - 195 234

 Other Assets (Note 9) 128 1,059 - - - - - - 1 1,189

TOTAL ASSETS 45,517 $ 15,674 $ 11,746 $ 25,334 $ 7,576 $ 1,191 $ 12,481 $ 8,982 $ 14,820 $ 143,322 $ LIABILITIES Intragovernmental Liabilities Accounts Payable (Note 10) - - - 3 - - - - 4 7

 Debt (Note 11) 4,420 - - - - - 658 - 5 5,083

 Other Intragovernmental Liabilities (Note 14) 1,913 - 69 2 1 2 1 1 48 2,038

 Total Intragovernmental Liabilities 6,333 - 69 5 1 2 659 1 58 7,128

 Accounts Payable (Note 10) 639 58 5 20 12 164 26 3 47 974

 Loan Guarantees (Note 7) 34,022 - - - - - - - 131 34,153

 Debt Held by the Public (Note 11) 14 - - - - - 463 - - 477

 Federal Employee and Veterans’ Benefits (Note 12) - - 6 6 2 5 1 1 47 69

 Loss Reserves (Note 13) - 560 - - - - - - - 560

 Other Governmental Liabilities (Note 14) 416 1,020 12 8 4 8 4 7 138 1,614

TOTAL LIABILITIES 41,424 $ 1,638 $ 92 $ 39 $ 19 $ 178 $ 1,153 $ 11 $ 421 $ 44,975 $ NET POSITION Unexpended Appropriations - Earmarked Funds (Note 18) - - 773 2,963 2,248 - 4,201 - 1,535 11,720

 Unexpended Appropriations 832 - 10,881 22,333 5,308 1,013 8,176 5,428 12,232 66,203

 Cumulative Results of Operations - Earmarked Funds (Note 18) - 14,035 - - - - - - 599 14,634

 Cumulative Results of Operations 3,261 1 - - - - (1,050) 3,543 35 5,790

TOTAL NET POSITION 4,093 14,036 11,654 25,295 7,556 1,013 11,328 8,971 14,401 98,347

TOTAL LIABILITIES AND NET POSITION 45,517 $ 15,674 $ 11,746 $ 25,334 $ 7,576 $ 1,191 $ 12,481 $ 8,982 $ 14,820 $ 143,322 $ Figures may not add to totals because of rounding.

Department of Housing and Urban Development

Consolidating Balance Sheet

For the Period Ending September 2009 

(Dollars in Millions)
HUD FY 2010 Agency Financial Report

Section II

Page 124

 

 

 

Federal 

Housing 

Administration

Government 

National 

Mortgage 

Association

Section 8 

Rental 

Assistance

Community 

Development Block Grants HOME

Operating 

Subsidies

Public and 

Indian Housing 

Loans and 

Grants

Housing for the 

Elderly and 

Disabled All Other Consolidating

Net Position - Beginning of Period Earmarked Funds - $ 14,036 $ - $ - $ - $ - $ - $ - $ 589 $ 14,625 $ 

 All Other Funds 3,261 - - - - - (1,050) 3,543 45 5,799

Beginning Balances 3,261 14,036 - - - - (1,050) 3,543 633 20,424

AdjustmentsChanges in Accounting Principles Earmarked Funds - - - - - - - - - - 

 All Other Funds - - - - - - - - - - 

Corrections of Errors Earmarked Funds - - - - - - - - - - 

 All Other Funds - - - - - - - - - - 

Beginning Balances, As Adjusted Earmarked Funds - 14,036 - - - - - - 589 14,625

 All Other Funds 3,261 - - - - - (1,050) 3,543 45 5,799

Total Beginning Balances, As Adjusted 3,261 14,036 - - - - (1,050) 3,543 633 20,424

Budgetary Financing SourcesOther Adjustments (Rescissions, etc) Earmarked Funds - - - - - - - - - - 

 All Other Funds 7 - - - - - - - - 7

Appropriations Used Earmarked Funds - - 758 505 1,028 - 2,031 - 581 4,903

 All Other Funds 981 - 26,801 6,548 1,786 4,445 4,105 1,289 6,241 52,196

Non-exchange Revenue Earmarked Funds - - - - - - - - - - 

 All Other Funds - - - - - - - - - - 

Donations/Forfeitures-Cash and Cash Equivalents Earmarked Funds - - - - - - - - - - 

 All Other Funds - - - - - - - - - - 

Transfers In/Out Without Reimbursement Earmarked Funds - - - - - - - - 9 9

 All Other Funds (559) - - - - - - (602) (9) (1,170) 

Other Budgetary Financing Sources Earmarked Funds - - - - - - - - - - 

 All Other Funds - - 236 71 37 70 109 62 (585) - 

Other Financing Sources:Donations and Forfeitures of Property Earmarked Funds - - - - - - - - - - 

 All Other Funds - - - - - - - - - - 

Transfers In/Out Without Reimbursement Earmarked Funds - - - - - - - - - - 

 All Other Funds 1,504 - - - - - - - (502) 1,002

Imputed Financing From Costs Absorbed From Others Earmarked Funds - 1 - - - - - - - 1

 All Other Funds 19 - - - - - - - 80 99

Other Earmarked Funds - - - - - - - - - - 

 All Other Funds - - - - - - - - - - 

Total Financing Sources Earmarked Funds - 1 758 505 1,028 - 2,031 - 590 4,913

 All Other Funds 1,952 - 27,037 6,620 1,823 4,515 4,214 750 5,223 52,134

Total Financing Sources 1,952 1 27,795 7,125 2,851 4,515 6,245 750 5,813 57,047

Net Cost of Operations Earmarked Funds - 541 (758) (505) (1,028) - (2,031) - (537) (4,318) 

 All Other Funds 1,548 - (27,037) (6,620) (1,823) (4,515) (3,450) (1,081) (5,200) (48,177) 

Net Change Earmarked Funds - 541 - - - - - - 54 595

 All Other Funds 3,500 - - - - - 765 (332) 24 3,957

Total All Funds Earmarked Funds - 14,578 - - - - - - 642 15,220

 All Other Funds 6,761 - - - - - (285) 3,212 68 9,756

Total All Funds 6,761 $ 14,578 $ - $ - $ - $ - $ (285) $ 3,212 $ 710 $ 24,976 $ 

Cumulative Results of Operations

Department of Housing and Urban Development

Consolidating Statement of Changes in Net Position

For the Period Ending September 2010 

(Dollars in Millions)
Financial Information 

Required Supplementary Information

Page 125

 Federal Housing Administration Government National Mortgage Association Section 8 Rental Assistance Community Development Block Grants HOME Operating Subsidies Public and Indian Housing Loans and Grants Housing for the Elderly and Disabled All Other Consolidating Net Position - Beginning of Period Earmarked Funds - $ - $ 773 $ 2,963 $ 2,248 $ - $ 4,201 $ - $ 1,534 $ 11,719 $ All Other Funds 832 - 10,881 22,333 5,308 1,013 8,176 5,428 12,232 66,204 Beginning Balances 832 - 11,654 25,295 7,556 1,013 12,378 5,428 13,767 77,923 Adjustments

Changes in Accounting Principles Earmarked Funds - - - - - - - - - -  All Other Funds - - - - - - - - - - Corrections of Errors Earmarked Funds - - - - - - - - - - 

 All Other Funds - - - - - - - - - - 

Beginning Balances, As Adjusted Earmarked Funds - - 773 2,963 2,248 - 4,201 - 1,534 11,719

 All Other Funds 832 - 10,881 22,333 5,308 1,013 8,176 5,428 12,232 66,204

Total Beginning Balances, As Adjusted 832 - 11,654 25,295 7,556 1,013 12,378 5,428 13,767 77,923

Budgetary Financing SourcesAppropriations Received Earmarked Funds - 1 - - - - - - - 1

 All Other Funds 1,231 - 27,769 4,550 1,825 4,775 3,198 1,125 5,346 49,819

Appropriations Transfers In/Out Earmarked Funds - - - - - - - - - - 

 All Other Funds (155) - (100) (45) (18) (15) (25) (11) 285 (82) 

Other Adjustments (Rescissions, etc) Earmarked Funds - (1) - - - - - - - (1) 

 All Other Funds (48) - (175) (14) (7) - (11) - (259) (514) 

Appropriations Used Earmarked Funds - - (758) (505) (1,028) - (2,031) - (580) (4,902) 

 All Other Funds (981) - (26,801) (6,548) (1,786) (4,445) (4,105) (1,288) (6,241) (52,196) 

Other Financing Sources:Total Financing Sources Earmarked Funds - - (758) (505) (1,028) - (2,031) - (580) (4,902) 

 All Other Funds 47 - 693 (2,057) 14 314 (943) (175) (866) (2,973) 

Total Financing Sources 47 - (65) (2,562) (1,014) 314 (2,974) (175) (1,446) (7,875) 

Net Change Earmarked Funds - - 15 2,457 1,220 - 2,171 - 954 6,817

 All Other Funds 880 - 11,574 20,276 5,322 1,327 7,233 5,253 11,366 63,231

Total Unexpended Appropriations 880 - 11,589 22,733 6,542 1,327 9,404 5,253 12,320 70,048

Total All Funds Earmarked Funds - 14,578 15 2,457 1,220 - 2,171 - 1,596 22,037

 All Other Funds 7,641 - 11,574 20,276 5,322 1,327 6,948 8,465 11,442 72,995

Net Position 7,641 $ 14,578 $ 11,589 $ 22,733 $ 6,542 $ 1,327 $ 9,119 $ 8,465 $ 13,038 $ 95,032 $ 

Figures may not add to totals because of rounding.

(Dollars in Millions)

Unexpended Appropriations

Department of Housing and Urban Development

Consolidating Statement of Changes in Net Position

For the Period Ending September 2010 
HUD FY 2010 Agency Financial Report

Section II

Page 126

 

 

 

Federal 

Housing 

Administration

Government 

National 

Mortgage 

Association

Section 8 

Rental 

Assistance

Community 

Development Block Grants HOME

Operating 

Subsidies

Public and 

Indian Housing 

Loans and 

Grants

Housing for the 

Elderly and 

Disabled All Other Consolidating

Net Position - Beginning of Period Earmarked Funds - $ 13,527 $ - $ - $ - $ - $ - $ - $ 563 $ 14,089 $  All Other Funds 10,347 - - - - - (1,365) 4,954 34 13,969Beginning Balances 10,347 13,527 - - - - (1,365) 4,954 597 28,058AdjustmentsChanges in Accounting Principles Earmarked Funds - - - - - - - - - -  All Other Funds - - - - - - - - - - Corrections of Errors Earmarked Funds - - - - - - - - - -  All Other Funds - - - - - - - - - - Beginning Balances, As Adjusted Earmarked Funds - 13,527 - - - - - - 563 14,089 All Other Funds 10,347 - - - - - (1,365) 4,954 34 13,969Total Beginning Balances, As Adjusted 10,347 13,527 - - - - (1,365) 4,954 597 28,058Budgetary Financing SourcesOther Adjustments (Rescissions, etc) Earmarked Funds - - - - - - - - - - 

 All Other Funds - - - - - - - - - - Appropriations Used Earmarked Funds - - 1,227 7 2 - 286 - 7 1,530 All Other Funds 6,929 - 23,804 6,390 1,919 4,475 3,603 1,308 4,788 53,217

Non-exchange Revenue Earmarked Funds - - - - - - - - - - 

 All Other Funds - - - - - - - - - - Donations/Forfeitures-Cash and Cash Equivalents Earmarked Funds - - - - - - - - - -  All Other Funds - - - - - - - - - - Transfers In/Out Without Reimbursement Earmarked Funds - - - - - - - 5 5 All Other Funds (347) 10 - - - - - (1,713) (15) (2,066) Other Budgetary Financing Sources Earmarked Funds - - - - - - - - - - 

 All Other Funds - - 227 69 35 66 105 63 (564) - Other Financing Sources:Donations and Forfeitures of Property Earmarked Funds - - - - - - - - - -  All Other Funds - - - - - - - - - - Transfers In/Out Without Reimbursement Earmarked Funds - - - - - - - - -  All Other Funds (1,260) - - - - - - - (482) (1,742) 

Imputed Financing From Costs Absorbed From Others Earmarked Funds - - - - - - - - - -  All Other Funds 15 1 - - - - - - 63 79Other Earmarked Funds - - - - - - - - - -  All Other Funds - - - - - - - - - - Total Financing Sources Earmarked Funds - 1,227 7 2 - 286 - 13 1,535 All Other Funds 5,337 10 24,031 6,458 1,954 4,540 3,708 (341) 3,791 49,488Total Financing Sources 5,337 10 25,259 6,466 1,956 4,540 3,994 (341) 3,803 51,023Net Cost of Operations Earmarked Funds - 518 (1,227) (7) (2) - (286) - 13 (990)  All Other Funds (12,423) (10) (24,031) (6,458) (1,954) (4,540) (3,392) (1,070) (3,789) (57,667) Net Change Earmarked Funds - 518 - - - - - - 27 545 All Other Funds (7,086) 1 - - - - 315 (1,411) 2 (8,179) Total All Funds Earmarked Funds - 14,035 - - - - - - 599 14,634

 All Other Funds 3,261 1 - - - - (1,050) 3,543 35 5,790Total All Funds 3,261 $ 14,036 $ - $ - $ - $ - $ (1,050) $ 3,543 $ 635 $ 20,424 $ 

Cumulative Results of Operations

Department of Housing and Urban Development

Consolidating Statement of Changes in Net Position

For the Period Ending September 2009 

(Dollars in Millions)
Financial Information 

Required Supplementary Information

Page 127

 

 

 Federal Housing Administration Government National Mortgage Association Section 8 Rental Assistance Community Development Block Grants HOME Operating Subsidies Public and Indian Housing Loans and Grants Housing for the Elderly and Disabled All Other Consolidating Net Position - Beginning of Period Earmarked Funds - $ - $ - $ - $ - $ - $ - $ - $ (376) $ (376) $ All Other Funds 411 - 8,849 24,838 5,414 1,035 8,201 5,865 12,203 66,816 Beginning Balances 411 - 8,849 24,838 5,414 1,035 8,201 5,865 11,827 66,440 Adjustments

Changes in Accounting Principles Earmarked Funds - - - - - - - - - -  All Other Funds - - - - - - - - - - Corrections of Errors Earmarked Funds - - - - - - - - - -  All Other Funds - - - - - - - - - - Beginning Balances, As Adjusted Earmarked Funds - - - - - - - - (376) (376)  All Other Funds 411 - 8,849 24,838 5,414 1,035 8,201 5,865 12,203 66,816Total Beginning Balances, As Adjusted 411 - 8,849 24,838 5,414 1,035 8,201 5,865 11,827 66,440Budgetary Financing SourcesAppropriations Received Earmarked Funds - - - 3,000 2,250 - 4,510 - 3,866 13,626 All Other Funds 7,554 - 26,605 3,900 1,825 4,455 3,593 1,015 4,916 53,863Appropriations Transfers In/Out Earmarked Funds - - 2,000 (30) - - (23) - (1,947) -  All Other Funds (145) - (18) (3) (4) - (15) (3) 102 (86) Other Adjustments (Rescissions, etc) Earmarked Funds - - - - - - - - - -  All Other Funds (58) - (751) (12) (7) (3) - (141) (201) (1,174) Appropriations Used

 Earmarked Funds - - (1,227) (7) (2) - (286) - (7) (1,530)  All Other Funds (6,929) - (23,804) (6,390) (1,919) (4,474) (3,603) (1,308) (4,788) (53,216) Other Financing Sources:Total Financing Sources Earmarked Funds - - 773 2,963 2,248 - 4,201 - 1,911 12,096 All Other Funds 422 - 2,031 (2,505) (105) (22) (25) (437) 29 (613) Total Financing Sources 422 - 2,804 457 2,143 (22) 4,177 (437) 1,939 11,483Net Change Earmarked Funds - - 773 2,963 2,248 - 4,201 - 1,535 11,720 All Other Funds 832 - 10,881 22,333 5,308 1,013 8,176 5,428 12,232 66,203Total Unexpended Appropriations 832 $ - $ 11,654 $ 25,295 $ 7,556 $ 1,013 $ 12,378 $ 5,428 $ 13,767 $ 77,923 $ Total All Funds Earmarked Funds - 14,035 773 2,963 2,248 - 4,201 - 2,134 26,354 All Other Funds 4,093 2 10,881 22,333 5,308 1,013 7,127 8,971 12,266 71,993Net Position 4,093 $ 14,036 $ 11,654 $ 25,295 $ 7,556 $ 1,013 $ 11,328 $ 8,971 $ 14,400 $ 98,347 $ Figures may not add to totals because of rounding.

Unexpended Appropriations

Department of Housing and Urban Development

Consolidating Statement of Changes in Net Position

For the Period Ending September 2009 

(Dollars in Millions)
HUD FY 2010 Agency Financial Report

Section II

Page 128

 

Federal 

Housing 

Administration

Government 

National 

Mortgage 

Association

Section 8 

Rental 

Assistance

Community 

Development Block Grants HOME

Operating 

Subsidies

Public and 

Indian Housing 

Loans & 

Grants

Housing for the 

Elderly and 

Disabled All Other

Budgetary 

Total

Federal 

Housing 

Administration 

Non Budgetary

Other 

NonBudgetary 

Credit Program 

Accounts 

Total 

NonBudgetary 

Credit Program 

Financing 

Accounts Total 

Budgetary Resources: Unobligated Balance, Brought Forward 11,401 $ 14,334 $ 581 $ 7,986 $ 293 $ 4 $ 297 $ 1,018 $ 4,431 $ 40,344 $ 26,799 $ 169 $ 26,968 $ 67,312 $ 

 Recoveries of Prior Year Unpaid Obligations 58 - 312 15 29 1 152 25 305 896 70 - 70 966

Budget Authority Appropriation 1,231 12 27,769 4,550 1,825 4,775 3,198 1,125 5,358 49,842 7 - 7 49,849

 Borrowing Authority 10 - - - - - - - 26 36 791 5 796 832

 Contract Authority - - - - - - - - - - - - - - Spending Authority from Offsetting Collections Earned Collected 3,970 3,535 - - - - 589 592 122 8,808 28,185 28 28,213 37,021

 Change in Receivable from Fed Sources (62) (23) - - - - - - - (84) (3) - (3) (87)  Change in Unfilled Customer Orders Advanced Received - - - - - - - - (11) (11) - - - (11)  W/O Advance from Federal Sources - - - - - - - - 18 18 (1) (4) (5) 13

 Anticipated for Rest of Year w/o Advance - - - - - - - - - - - - - -  Previously Unavailable - - - - - - - - - - - - - -  Expenditure Transfers from Trust Funds - - - - - - - - - - - - - -  Subtotal 5,149 3,525 27,769 4,550 1,825 4,775 3,787 1,717 5,513 58,609 28,978 30 29,008 87,617

 Non Expenditure Transfers, Net (72) - (100) (45) (18) (15) (25) (11) 286 - - - - -  Temporarily Not Available Per PL - - - - - - - - - - - - - -  Permanently not available (261) (1) (1,049) (14) (7) - (666) (601) (1,587) (4,186) (449) - (449) (4,635) 

Total Budgetary Resources 16,274 $ 17,858 $ 27,512 $ 12,492 $ 2,122 $ 4,765 $ 3,544 $ 2,148 $ 8,948 $ 95,663 $ 55,398 $ 198 $ 55,597 $ 151,260 $ 

Status of Budgetary Resources: Obligations Incurred Direct 11,017 10 27,064 10,472 1,857 4,754 3,247 799 4,861 64,082 20,749 38 20,787 84,869

 Reimbursable - 8,008 - - - - - - 9 8,017 - - - 8,017 Subtotal 11,017 8,018 27,064 10,472 1,857 4,754 3,247 799 4,871 72,099 20,749 38 20,787 92,886

 Unobligated Balances  Apportioned 513 2 441 1,903 244 6 215 1,234 3,246 7,804 4,064 10 4,074 11,878

 Exempt from Apportionment - - - - - - - - - - - - - -  Subtotal 513 2 441 1,903 244 6 215 1,234 3,246 7,804 4,064 10 4,074 11,878

 Unobligated Balances Not Available 4,744 9,838 8 117 20 5 82 115 832 15,760 30,585 151 30,736 46,496

Total Status of Budgetary Resources 16,274 $ 17,858 $ 27,512 $ 12,492 $ 2,122 $ 4,765 $ 3,544 $ 2,148 $ 8,948 $ 95,663 $ 55,398 $ 198 $ 55,597 $ 151,260 $ 

Change in Obligated Balance Obligated Balance, Net Unpaid Obligations, Brought Forward 840 176 11,965 17,348 7,282 1,185 12,250 4,432 13,272 68,751 1,464 - 1,464 70,215

 Less: Uncollected Customer Payments from Federal Sources (85) (46) - - - - - - (9) (141) (4) (19) (23) (164)  Total Unpaid Obligated Balance, Net 755 130 11,965 17,348 7,282 1,185 12,250 4,432 13,263 68,610 1,460 (19) 1,441 70,051

 Obligations Incurred, Net 11,017 8,018 27,064 10,472 1,857 4,754 3,247 799 4,871 72,099 20,749 38 20,787 92,886

 Less: Gross Outlays (11,027) (7,816) (27,561) (7,043) (2,811) (4,603) (6,215) (1,289) (6,928) (75,292) (20,252) (38) (20,290) (95,582)  Obligated Balance Transferred, Net - - - - - - - - - - - - - -  Actual Transfers, Unpaid Obligations - - - - - - - - - - - - - -  Actual Transfers, Uncollected Customer Payments from Federal Sources - - - - - - - - - - - - - - 

 Total Unpaid Obligated Balance Transferred, Net - - - - - - - - - - - - - - 

 Less: Recoveries of Prior Year Unpaid Obligations, Actual (58) - (312) (15) (29) (1) (152) (25) (305) (896) (70) - (70) (966)  Change in Uncollected Customer Payments from Federal Sources 61 23 - - - - - - (18) 66 4 4 7 73

 Obligated Balance, Net - End of Period Unpaid Obligations 772 378 11,156 20,763 6,300 1,336 9,131 3,916 10,910 64,662 1,891 - 1,891 66,553

 Less: Uncollected Customer Payments from Federal Sources (24) (23) - - - - - - (27) (74) - (15) (15) (89)  Total Obligated Balance, Net - End of Period 748 355 11,156 20,763 6,300 1,336 9,131 3,916 10,883 64,588 1,891 (15) 1,876 66,464

Net Outlays  Gross Outlays 11,027 7,816 27,561 7,043 2,811 4,603 6,215 1,289 6,928 75,292 20,252 38 20,290 95,582

 Less: Offsetting Collections (3,970) (2,543) - - - - (589) (592) (111) (7,805) (28,185) (28) (28,213) (36,018)  Less: Distributed Offsetting Receipts (619) (993) (10) - - - - - (97) (1,718) - - - (1,718)  Net Outlays 6,438 $ 4,280 $ 27,551 $ 7,043 $ 2,811 $ 4,603 $ 5,626 $ 697 $ 6,720 $ 65,769 $ (7,933) $ 10 $ (7,923) $ 57,846 $ 

Figures may not add to totals because of rounding.

Department of Housing and Urban Development

Combining Statement of Budgetary Resources

For the Period Ending September 2010 

(Dollars in Millions)
Financial Information 

Required Supplementary Information

Page 129

 

Federal 

Housing 

Administration

Government 

National 

Mortgage 

Association

Section 8 Rental 

Assistance

Community 

Development Block Grants HOME

Operating 

Subsidies

Public and 

Indian 

Housing Loans 

& Grants

Housing for 

the Elderly and 

Disabled All Other Budgetary Total

Federal Housing 

Administration 

Non Budgetary

Other 

NonBudgetary 

Credit 

Program 

Accounts 

Total 

NonBudgetary 

Credit Program 

Financing 

Accounts Total 

Budgetary Resources: Unobligated Balance, Brought Forward 19,547 $ 13,973 $ 615 $ 9,215 $ 379 $ 2 $ 239 $ 2,102 $ 7,306 $ 53,378 $ 8,148 $ 152 $ 8,300 $ 61,678 $ 

 Recoveries of Prior Year Unpaid Obligations 26 - 346 8 11 1 31 99 489 1,010 10 - 10 1,020

Budget Authority Appropriation 7,554 - 26,605 6,900 4,075 4,455 8,103 1,015 8,785 67,492 - - - 67,492

 Borrowing Authority - - - - - - 1 - 3 4 470 5 475 479

 Contract Authority - - - - - - - - - - - - - - 

Spending Authority from Offsetting Collections Earned Collected 2,363 1,889 - - - - 106 749 64 5,171 31,233 34 31,266 36,438

 Change in Receivable from Fed Sources (152) 9 - - - - - - - (144) 1 - 1 (144) 

 Change in Unfilled Customer Orders Advanced Received - - - - - - - (11) (11) - - - (11) 

 W/O Advance from Federal Sources - - - - - - - - 5 5 1 3 3 8

 Anticipated for Rest of Year w/o Advance - - - - - - - - - - - - - - 

 Previously Unavailable - - - - - - - - - - - - - 

 Expenditure Transfers from Trust Funds - - - - - - - - - - - - - 

 Subtotal 9,765 1,898 26,605 6,900 4,075 4,455 8,210 1,764 8,845 72,517 31,705 42 31,745 104,263

 Non Expenditure Transfers, Net (58) (1) 1,982 (33) (4) - (37) (3) (1,845) - - - - - 

 Temporarily Not Available Per PL - - - - - - - - - - - - - - 

 Permanently not available (364) - (3,284) (12) (7) (2) (609) (1,854) (949) (7,080) (883) - (883) (7,963) 

Total Budgetary Resources 28,916 $ 15,870 $ 26,265 $ 16,077 $ 4,454 $ 4,456 $ 7,834 $ 2,108 $ 13,845 $ 119,825 $ 38,979 $ 194 $ 39,172 $ 158,998 $ 

Status of Budgetary Resources: Obligations Incurred Direct 17,515 8 25,684 8,092 4,161 4,451 7,537 1,090 9,414 77,953 12,180 25 12,205 90,158

 Reimbursable 1,528 - - - - - - - 1,528 - - - 1,528

 Subtotal 17,515 1,536 25,684 8,092 4,161 4,451 7,537 1,090 9,414 79,481 12,180 25 12,205 91,686

 Unobligated Balances  Apportioned 575 1 427 7,970 288 4 264 916 3,044 13,490 5,875 9 5,884 19,374

 Exempt from Apportionment - - - - - - - - - - - - - 

 Subtotal 575 1 427 7,970 288 4 264 916 3,044 13,490 5,875 9 5,884 19,374

 Unobligated Balances Not Available 10,826 14,332 154 15 5 1 33 101 1,387 26,854 20,924 159 21,083 47,937

Total Status of Budgetary Resources 28,916 $ 15,870 $ 26,265 $ 16,077 $ 4,454 $ 4,456 $ 7,834 $ 2,108 $ 13,845 $ 119,825 $ 38,979 $ 194 $ 39,172 $ 158,998 $ 

Change in Obligated Balance Obligated Balance, Net Unpaid Obligations, Brought Forward 863 131 11,663 15,671 5,047 1,184 8,638 4,759 9,165 57,120 1,595 - 1,595 58,716

 Less: Uncollected Customer Payments from Federal Sources (238) (37) - - - - - - (5) (279) (2) (16) (18) (297) 

 Total Unpaid Obligated Balance, Net 626 95 11,663 15,671 5,047 1,184 8,638 4,759 9,160 56,841 1,593 (16) 1,577 58,418

 Obligations Incurred, Net 17,515 1,536 25,684 8,092 4,161 4,451 7,537 1,090 9,414 79,481 12,180 25 12,205 91,686

 Less: Gross Outlays (17,512) (1,492) (25,035) (6,407) (1,915) (4,449) (3,895) (1,318) (4,818) (66,841) (12,302) (25) (12,326) (79,168) 

 Obligated Balance Transferred, Net - - - - - - - - - - - - - 

 Actual Transfers, Unpaid Obligations - - - - - - - - - - - - - 

 Actual Transfers, Uncollected Customer Payments from Federal Sources - - - - - - - - - - - - - 

 Total Unpaid Obligated Balance Transferred, Net - - - - - - - - - - - - - - 

 Less: Recoveries of Prior Year Unpaid Obligations, Actual (26) - (346) (8) (11) (1) (31) (99) (489) (1,010) (10) - (10) (1,020) 

 Change in Uncollected Customer Payments from Federal Sources 152 (9) - - - - - - (5) 139 (1) (3) (5) 134

 Obligated Balance, Net - End of Period Unpaid Obligations 840 176 11,965 17,348 7,282 1,185 12,250 4,432 13,272 68,751 1,464 - 1,464 70,214

 Less: Uncollected Customer Payments from Federal Sources (85) (46) - - - - - - (9) (141) (4) (19) (23) (163) 

 Total Obligated Balance, Net - End of Period 755 130 11,965 17,348 7,282 1,185 12,250 4,432 13,263 68,610 1,460 (19) 1,441 70,051

Net Outlays  Gross Outlays 17,512 1,492 25,035 6,407 1,915 4,449 3,895 1,318 4,818 66,841 12,302 25 12,326 79,167

 Less: Offsetting Collections (2,363) (1,001) - - - - (106) (749) (53) (4,272) (31,233) (34) (31,266) (35,538)  Less: Distributed Offsetting Receipts (183) (888) (16) - - - - - (54) (1,141) - - - (1,141) 

 Net Outlays 14,966 $ (397) $ 25,018 $ 6,407 $ 1,915 $ 4,449 $ 3,789 $ 569 $ 4,711 $ 61,428 $ (18,931) $ (9) $ (18,940) $ 42,488 $ 

Figures may not add to totals because of rounding.

Department of Housing and Urban Development

Combining Statement of Budgetary Resources

For the Period Ending September 2009 

(Dollars in Millions)
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Independent Auditor’s Report 
Financial Information 

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Secretary’s Audit Resolution Report to Congress 

This information on the Department of Housing and Urban Development’s audit resolution and 

follow-up covers the period October 1, 2009, through September 30, 2010. It is required by 

Section 106 of the Inspector General Act Amendments (Public law 100-504), and provides 

information on the status of audit recommendations with management decisions, but no final 

action. The report also furnishes statistics on the total number of audit report and dollar value of 

disallowed costs and recommendations of funds that could be put to better use for FY 2010. 

Audit Resolution Highlights

Overall the Department achieved 1,030 approved management decisions and successfully 

implemented 1,083 recommendations. The Department also made good progress in reducing its 

inventory of significantly overdue final actions, which are those recommendations which could 

potentially be significantly overdue on September 30, 2010. This inventory was successfully 

addressed, and the Department resolved 109 recommendations in this category, which was a 

reduction of 75 percent. 

Summary of Management Decisions on Audit Recommendations 

Opening Inventory Requiring Decisions 4851

New Audit Recommendations Requiring Decisions 891 

Management Decisions Already Made (1,030)

Audit Recommendations Still Requiring Decisions 346 

Recommendations Beyond Statutory Resolution Period 62 

1

The opening inventory was decreased from 486 to 485 due to a duplicate entry that was corrected. 2

This reporting period ended with 346 recommendations without management decisions. Of these, 

 6 recommendations (2 audits) are over 6 months old.
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Summary of Recommendations with Management Decision and No Final 

Action 

Opening Inventory – Final Actions Pending 1,248 

Management Decisions Made During Report Period 1,030

Sub-Total Final Actions Pending 2,278 

Final Action Taken (1,083)1 

Audit Recommendations Reopened During Period (Without Final 

Actions) 0 

Total Audit Recommendations Still Requiring Final Actions 1,1952 

1

Final Action was taken on a total of 1083 recommendations (273 audits of which 178 had final actions 

 taken, thus closing the audits). The number of recommendations where a management decision and final

 action were concurrent was 161 in 73 audits. 

2

The Department had 99 audit reports with 188 recommendations under a current repayment agreement. 

 These recommendations are considered open and count in the audit inventory until final repayment is made. 
HUD FY 2010 Agency Financial Report

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Management Report on Final Action on Audits with Disallowed Costs 

Audit Reports

Number of 

Audit Reports

Questioned 

Costs

A. Audit Reports with management decisions on which

 final action had not been taken at the beginning of the 

 period. 271 $ 640,056,1611 

B. Audit Reports on which management decisions were made during the period. 85 $ 165,121,536 

C. Total audit reports pending final action during period

 (total of A and B) 356 $ 805,177,697 

D. Audit Reports on which final action was taken during

 the period

 1. Recoveries 902 $ 81,218,968

 (a) Collections and offsets 81 $ 67,257,555

 (b) Property 1 $ 915,487

 (c) Other 22 $ 13,045,926

 2. Write-offs 63 $ 157,263,290

 3. Total of 1 and 2 1113 $ 238,482,258

E. Audit Reports needing final action at the end of the 

 period (subtract D3 from C) 2454 $ 566,695,439 

F. Open Recommendations (with disallowed costs): (501)5 $(444,540,903)

1

The opening balance was increased due to retroactive adjustments. 

2

Audit Reports are duplicated in D.1.(a), D.1.(b) and D.1.(c);thus the total is reduced by 14. 

3

Audit Reports are duplicated in both D.1 and D.2; thus the total is reduced by 42. 4

Litigation, legislation, or investigation is pending for 26 audit reports with costs totaling $68,910,846.

5

The figures in brackets represent data at the recommendation level as compared to the report level. 

Please note that the Inspector General Act requires reporting at the audit report level versus the 

individual recommendation level. At the audit report level, total disallowed costs in the report 

are reported as open until all recommendations in a report are closed. 
Financial Information 

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Management Report on Final Action on Audits with Recommendations That 

Funds Be Put To Better Use 

Audit Reports

Number of

Audit 

Reports

Funds to be put 

to Better Use

A. Audit Reports with management decisions on which

 final action had not been taken at the beginning of the 

 period. 181 $ 3,689,967,620 

B. Audit Reports on which management decisions were 

made during the period. 66 $ 888,640,319 

C. Total audit reports pending final action during period 

(total of A and B) 247 $ 4,578,607,939 

D. Audit Reports on which final action was taken during 

the period 

 1. Value of Audit Reports implemented (completed) 73 $ 1,590,975,732

 2. Value of Audit Reports that management concluded

 should not or could not be implemented 23 $ 45,558,134 

 3. Total of 1 and 2 841 $ 1,636,533,866

E. Audit Reports needing final action at the end of the 

period (subtract D3 from C) 1632 $ 2,942,074,073 

F. Open recommendations (with funds put to better use) (104)3 $ (575,747,789)

1 Audit Reports are duplicated in both D.1 and D.2; thus the total is reduced by 12. 

2 Litigation, legislation, or investigation is pending for 19 audit reports with costs totaling $41,715,615. 

3 The figures in brackets represent data at the recommendation level as compared to the report level.

Please note that the Inspector General Act requires reporting at the audit report level versus the 

individual recommendation level. At the audit report level, total funds put to better use in the 

report are reported as open until all recommendations in a report are closed. 

Delinquent Debt Collection 

*The above totals reflect FY 2010 data from the Third Quarter Treasury Report on Receivables Due from the 

Public (Fourth Quarter data was not available in time for incorporation into this report). The vast majority of 

these totals are comprised of debts from Housing programs, and less than one percent of delinquent debt originates 

from all other HUD programs. The Housing Financial Operations Center in Albany, New York, administers 

delinquent, eligible debts that HUD refers to the Department of the Treasury, Financial Management Service 

(FMS).
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HUD’s Financial Operations Center (Center) continues to maximize collections on delinquent 

FHA debts using all available collection tools, and to maintain systems and processes that assure 

full compliance with the Debt Collection Improvement Act of 1996 (DCIA). 

During FY 2010, the Center submitted $32.5 million of new delinquent debts to the Treasury 

Offset Program (TOP). At the end of FY 2010, a total of 12,312 debtors, representing 

$157.7 million in debt owed, were eligible for offset. Offset collections for HUD debts during 

FY 2010 totaled $9.5 million. Also during FY 2010, $22 million of new delinquent debts were 

referred to Treasury’s FMS, Debt Management Services for cross-servicing. At the end of 

FY 2010, a total of 3,904 HUD debts amounting to $70.4 million were at cross-servicing.

During 2010, the Center mailed 6,934 “Notices of Intent” (NOI) letters to delinquent debtors to 

advise them that their debts were past due. These notices provide debtors with the right to 

establish repayment plans or appeal the enforceability of debts through the HUD Office of 

Appeals, or for federal employees, through an Administrative Law Judge. Debtors who fail to 

make payment arrangements or exercise their appeal rights are referred to FMS and are subjected 

to various collection actions. 

A total of 4,747 NOI letters were sent to aged account debtors informing them of Treasury’s new 

policy which stipulates that there is no longer a statute of limitations for TOP. This action 

resulted in a significant volume of debtor inquiries, complaints, and appeals that were addressed 

by HUD promptly and successfully. 

The Center continues to efficiently handle accounts where the debtor has filed bankruptcy by 

using the U.S. Court’s Public Access to Court Electronic Records system. This system offers 

inexpensive, fast, and comprehensive bankruptcy case information on active and recently closed 

cases.

HUD has used administrative wage garnishment (AWG) via the cross-servicing program since 

2002. During FY 2010, FMS reported $1.7 million in AWG collections for HUD debt with 

439 active garnishment orders in place at the end of the fiscal year. The Albany Center collected 

an additional $2 million via its direct administrative wage garnishment program. 

Additional HUD debt collection initiatives during FY 2010 included: (1) a draft update to 

HUD’s claims collection regulations, issuance of IRS Form 1099-C to 3,206 debtors to report the 

termination of collection action on debts totaling $45.3 million; (2) continued use of the 

Electronic On-line Solutions for Complete and Accurate Reporting System to respond to 

942 consumer disputes that were filed with credit bureaus regarding HUD’s credit reporting of 

delinquent debts; and (3) a response within three days to all 136 requests for documents or 

information from FMS to support their cross-servicing efforts.
Other Accompanying Information 

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Other Accompanying Information 

The complete Office of Inspector General memorandum is located online at 

http://www.hud.gov/offices/cfo/reports/pdfs/2010mpc.pdf, and is extracted and segmented on the following pages, along 

with additional management updates on progress addressing each challenge
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Office of Inspector General’s Management and 

Performance Challenges 

HUD Management’s Perspective 

The Department’s management and the OIG have worked in a close, collaborative manner 

during the past year, recognizing the challenges facing the Department and the country. 

Management agrees with the OIG’s assessment of major challenges facing the Department. 

Following each of the OIG’s narrative of the challenges (displayed in shading), management has 

provided updates concerning the Departmental progress in addressing each challenge. 

Challenge: Single-family programs 

FHA’s single-family mortgage insurance programs enable millions of first-time borrowers 

and minority, low-income, elderly, and other underserved households to realize the benefits 

of home ownership. HUD manages a growing portfolio of more than $873 billion in singlefamily insured mortgages. Effective management of this portfolio represents a continuing 

challenge for the Department.

HUD has sustained significant losses in its single-family program and is taking on additional 

risk. The number of FHA mortgages has risen dramatically. The increased mortgage 

endorsement volume is accompanied by increases in defaults, claims, and loss mitigation. 

FHA’s Mutual Mortgage Insurance (MMI) fund has fallen below the legally required 

2 percent capitalization ratio. Recent legislation gave the HUD Secretary more flexibility 

regarding premiums charged for mortgage insurance. As a result, HUD decided to raise the 

annual premium and lower the upfront premium to aid in returning the MMI fund to 

congressionally mandated levels without disruption to the marketplace. 

FHA plays a major role in supporting the housing market. The current degree of FHA 

predominance in the market is unparalleled. It is clear that the Department is committed to 

positioning FHA as rapidly as possible to deal with the changing dynamics. For the first 

time, FHA has imposed a minimum credit score to be eligible for FHA financing and set 

loan-to-value ceilings dependent on credit scoring. We have expressed concerns that the 

credit score threshold HUD will use is traditionally considered subprime territory in the 

conventional marketplace. HUD also moved to strengthen its lender population by 

increasing its net worth requirements (minimum of $l million). Further, after 

December 31, 2010, loan correspondents (also referred to as sponsored third-party 

originators) must establish a sponsorship relationship with an FHA-approved mortgage 

lender to continue participating in FHA programs. 

By law, HUD has to pay the claim on a defaulted FHA-insured mortgage but can go back to 

the lender and recover the losses incurred if it finds that the loan was ineligible for insurance. 

OIG has noted in past audits HUD’s unnecessary exposure when paying claims on loans that 
Other Accompanying Information 

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were never qualified for insurance. In the current year, we conducted Operation Watchdog, 

an initiative that involved reviewing the underwriting of 284 mortgages underwritten by 

15 direct endorsement lenders. HUD had paid claims on these loans that resulted or are 

likely to result in actual losses in excess of $11 million. Our review showed that 

140 (49 percent) of the loans reviewed, a large and unacceptable percentage, never should 

have been insured. 

FHA has introduced new loss mitigation programs. HUD and the Department of the 

Treasury announced enhancements to the existing Making Home Affordable Program, a 

refinance program that provides homeowners that owe more on their mortgage than the value 

of their home opportunities to refinance into an affordable FHA loan. Further, recent 

legislation provided up to $50,000 to homeowners on their mortgage principal, interest, 

mortgage insurance, taxes, and hazard insurance for up to 24 months. Eligible homeowners 

are those that have become unemployed/underemployed. The assistance will be worked 

through a variety of State and nonprofit entities and will offer a declining balance, deferred 

payment, zero interest, nonrecourse bridge loan, which HUD will write off if the homeowner 

stays current on the mortgage for 5 years. Setting up and monitoring this program in the time 

Congress has allotted will be a challenge.

We remain concerned that increases in demand to the FHA program are having collateral

implications for the integrity of the Ginnie Mae mortgage-backed securities program 

including the potential for increases in fraud in that program. HUD needs to consider the 

downstream risks to investors and financial institutions eventual securitization of a large 

proportion of FHA’s insured mortgages. Ginnie Mae securities are the only mortgagebacked securities to carry the full faith and credit guaranty of the United States. If an issuer 

fails to make the required pass-through payment of principal and interest to investors, Ginnie 

Mae is required to assume responsibility for it. Typically, Ginnie Mae defaults the issuers 

and assumes control of the issuers’ mortgage-backed security pools. Like FHA, Ginnie Mae 

has seen an augmentation in its market share (it has even in some recent months surpassed 

both Fannie Mae and Freddie Mac) and guaranteed $412 billion in outstanding mortgagebacked securities during fiscal year 2010 and now has $1 trillion in outstanding mortgagebacked securities.

The Department’s Progress 

Single Family Programs 

FHA shares OIG’s concerns regarding the prudent management of its expanded insurance 

portfolio and is working to ensure that, as it continues to play a vital role in a volatile economy, 

it does so in a responsible fashion. As a result, FHA is acting to reduce risks and losses to the 

Mutual Mortgage Insurance (MMI) fund throughout the life cycle of the FHA lending process. 

In establishing revised credit score requirements for FHA loans, HUD endeavored to balance the 

need to protect the MMI capital reserve account, while at the same time preserving the historical 
HUD FY 2010 Agency Financial Report 

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role of FHA in providing home financing vehicles during periods of economic volatility. The 

credit score thresholds established by HUD were selected after a careful analysis of FHA 

mortgage performance data. HUD believes that the newly implemented credit score 

requirements achieve the appropriate balance necessary to permit FHA to continue providing 

access to homeownership opportunities while effectively managing risk to its insurance funds. 

FHA has taken a number of other measures to reduce or eliminate risks to its insurance funds as 

well. As part of HUD’s proposed rule issued July 15, 2010, HUD intends to strengthen its credit 

policy by reducing the allowable seller concessions permitted in an FHA transaction from six to 

three percent. Allowing sellers to contribute up to six percent of a home’s sales price to offset a 

buyer’s costs exposes the FHA to excess risk by potentially driving up the cost of the home 

beyond its appraised value. Reducing seller concessions to three percent will bring FHA into 

conformity with industry standards. Additionally, HUD intends to tighten underwriting 

standards for manually underwritten loans. These transactions have resulted in high mortgage 

insurance claim rates and present an unacceptable risk of loss. Together, these two measures 

will significantly reduce inappropriate risks and unnecessary losses connected with the 

origination of loans submitted for FHA insurance. 

HUD also issued a proposed rule on October 8, 2010, to strengthen FHA’s lender 

indemnification and insurance process. For those lenders with special authority to insure 

mortgage loans on FHA’s behalf, HUD seeks to force indemnification for ‘serious and material’ 

violations of FHA origination requirements such that the mortgage never should have been 

endorsed by the mortgagee in the first place. Specifically, these lenders may be required to 

indemnify HUD if they failed to: (1) verify and analyze the creditworthiness, income, and/or 

employment of the borrower; (2) verify the source of assets brought by the borrower for payment 

of the required down payment and/or closing costs; (3) address property deficiencies identified 

in the appraisal affecting the health and safety of the occupants or the structural integrity of the 

property; or (4) ensure that the property appraisal satisfies FHA appraisal requirements. HUD 

may seek indemnification irrespective of whether the violation caused the mortgage default. The 

proposed rule will also require those mortgagees with delegated lender insurance authority to 

continually maintain an acceptable claim and default rate, both to gain this special lender status 

as well as to preserve it. HUD proposes that all new unconditional direct endorsement lenders 

who have the authority to self-insure mortgages must demonstrate a default and claim rate at or 

below 150 percent for the previous two years. These measures will ensure that lenders granted 

special authority to insure loans on FHA’s behalf perform appropriately, and if they do not, will 

grant FHA the requisite authority to recover losses. 

Along with these policy enhancements, FHA has begun the implementation of system changes 

which will facilitate lender and loan risk management. Under the FHA Transformation Initiative, 

FHA has begun a multi-year effort to modernize the technology infrastructure and applications 

for the origination and underwriting of FHA loans, the approval and recertification of FHA’s 

lender partners, and the monitoring of those business partners. Under the FHA Risk and Fraud 
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Initiative, FHA has initiated contracts to enable more effective mitigation of credit risk and 

mortgage fraud utilizing cutting-edge analytical methodologies and IT solutions. These tools 

will help FHA to identify lender and loan-level weaknesses and respond faster to conditions 

affecting FHA’s programs and insurance portfolio. 

These improvements to FHA’s policies and processes are components of a comprehensive effort 

by FHA to identify and eliminate potential areas of risk in its operations. FHA is confident that 

its work to improve its counterparty risk management capabilities and enhance its program 

requirements will significantly improve the performance of the FHA portfolio, and will permit 

the restoration of the Department’s capital reserve fund to Congressionally mandated levels. 

Ginnie Mae Risk Management

Ginnie Mae has continued to enhance its risk management processes in response to the 

substantially increased volumes in its programs. Ginnie Mae’s loan matching program is one of 

the most important processes Ginnie Mae uses to mitigate the risk of fraud. This process 

involves a monthly review of every loan in the Ginnie Mae portfolio; during FY 2010, Ginnie 

Mae made further improvements to this process to focus Ginnie Mae’s resources on potentially 

higher risk loans and higher risk issues. Ginnie Mae has taken additional steps to increase its 

oversight of issuers by reallocating existing staff to the Office of the Chief Risk Officer. Ginnie 

Mae is also in the process of adding additional staff in the Office of Mortgage-Backed Securities, 

both Account Executives and Monitoring staff, to increase oversight of its issuers. 

Ginnie Mae is once again increasing the net worth requirements of its issuers, and continues to 

subject all new issuers to a one-year probationary period, which commences upon the first 

issuance of a Ginnie Mae MBS or upon the acquisition of a Ginnie Mae servicing portfolio. 

During this time, Ginnie Mae closely evaluates performance metrics, including loan-level 

insurance statistics and delinquency levels. Early payment defaults, staffing levels, and other 

operational and financial issues also are monitored. An onsite review is conducted within six 

months of approval and all findings must be cleared within a given timeframe.

Additionally, Ginnie Mae has expanded its capacity to review all its issuers from both an 

operational and financial perspective and taken steps to further mitigate exposure to fraud and 

abuse. Much of this effort is supported by Ginnie Mae’s use of flexible staffing through 

contractors. In addition to the onsite reviews conducted for new issuers, existing issuers are 

reviewed onsite as necessary through regular monitoring of their financial statements, loan 

origination characteristics, and other performance measures. The Ginnie Mae Portfolio Analysis 

Database System (GPADS) helps track counterparty risk using portfolio statistics and comparing 

issuers with broader peer group activity. Ginnie Mae also is working more closely than ever 

with FHA, VA, and the Department of Agriculture’s Rural Development on sharing loan data to 

detect and address fraud and other issues. One example of these efforts is an enhancement to the 

insurance matching program, which verifies the government insurance status of underlying 
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mortgages that allows for the more timely identification and follow-up of loans lacking 

appropriate insurance documentation. 

Challenge: Oversight of Recovery Act funds 

Congress allocated $13.6 billion in funding to HUD programs under the Recovery Act. This 

allocation added significant funding to the Public Housing Capital Fund, Community 

Development Block Grants, Neighborhood Stabilization Program, Homelessness Prevention 

and Rapid Re-Housing Program, and other HUD programs to modernize and “green” the 

public and assisted housing inventory, support the low-income housing tax credit market, 

stabilize neighborhoods hit by foreclosures, and prevent homelessness. Carrying out the 

goals of the Recovery Act, while dealing with the influx of mortgages and refinancing, and 

conducting its normal operations is a significant challenge. 

In general, the Recovery Act directs HUD to ensure that the $13.6 billion is awarded and 

distributed in a prompt, fair, and reasonable manner; that the recipients’ use of funds is 

transparent to the public; that the funds are used for only authorized activities; that recipients 

avoid unnecessary delays and cost overruns; and that program goals are achieved, including 

specific program outcomes and improved results on broader economic indicators. This 

oversight role is a challenge. Further, HUD must assist all of its recipients in reporting their 

use of funds on the Recovery Act Web site. HUD also has to ensure that the data the 

recipients report are accurate. This type of reporting is unprecedented. 

During the last two fiscal years we started and completed 88 audits and reviews of Recovery 

Act-related activities. These audits and reviews addressed the administrative capacity of 

selected Recovery Act grantees to meet their responsibilities to properly administer these 

funds. We also assessed HUD’s efforts to assess the risks associated with Recovery Act 

funding along with the Department’s plan to mitigate those risks.

Capacity issues of Recovery Act funding recipients will challenge HUD. For example, HUD

decided to provide Recovery Act public housing capital funding to authorities it deemed 

“troubled.” Currently, there are 174 troubled authorities that received allocations totaling 

$350 million in Recovery Act funds, and members of Congress have raised concerns about 

public housing authorities’ ability to effectively administer Recovery Act funding. HUD 

developed a troubled public housing agency (PHA) Recovery Act strategy in which it 

assigned each troubled PHA a risk level of low, medium, or high. HUD has plans to provide 

technical assistance, monitoring, and oversight based on these risk levels. During the fiscal 

year, we reviewed the capacity of 19 authorities, noting that 11 had significant capacity 

issues. HUD’s oversight of the $4 billion in capital funds is a challenge. By March 2010, the 

PHAs were required to obligate these funds, and they must spend the funds within the next 

2 fiscal years, in addition to administering their normal capital fund programs. 

The Recovery Act added $2 billion to the Neighborhood Stabilization Program that Congress 

created as part of the Housing and Economic Recovery Act of 2008, and recent legislation 
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added another $1 billion. HUD administers the now nearly $7 billion program to redevelop 

abandoned and foreclosed-upon homes. The Recovery Act also added $3.5 billion to 

community planning and development programs for block grant activities and homelessness 

prevention. HUD must oversee the expenditure of these funds in the next 2 years. We 

looked at 28 grantees and subgrantees receiving Recovery Act funds and reported to HUD 

that 12 had the capacity to handle the increased funding, while 13 needed improvements and 

3 lacked capacity.

The Department’s Progress 

The Recovery Act provided $13.6 billion for projects and programs administered by HUD. 

Given the Recovery Act’s cross-cutting and aggressive scope and timeframe, the Secretary and 

OSPM view the Recovery Act as an opportunity to lay the groundwork for future transformation 

at HUD. The agency has already begun to put in place several groundbreaking accountability 

measures and initiatives. 

Response to Capacity Concerns

As outlined in the HUD Recovery Act program plans published in May 2009 and revised in 

May 2010, HUD programs have hired additional staff in both headquarters and regional/field 

offices with necessary experience and skill sets to complete the work of the Recovery Act. 

Programs have also met the challenge of Recovery Act implementation by shifting internal 

workloads for operational efficiency, training internal staff on Recovery Act functions, and 

delaying other non-critical activities. 

The OIG has issued reports on capacity reviews conducted on Recovery Act grantees. In cases 

where the report identifies concerns, the program has responded to the OIG with plans to address 

the concerns, and program staff members work with the recipients to address and resolve the 

identified concerns. Some, but not all programs have set-aside Recovery Act administrative 

funds for travel purposes to support monitoring, through which staff members travel on-site and 

work directly with grantees if necessary. It is also important to note that there has been a 

significant review of the Recovery Act activities at HUD, and specifically PIH, performed by 

GAO. GAO conducted 16 reviews and found substantial compliance with the Recovery Act 

provisions and also found that HUD programs were well controlled and reporting on a timely 

basis. HUD management believes that the capacity issues are not a universal concern.

In support of ensuring PHA capacity in the obligation and expenditure of Recovery Act funds, 

PIH implemented a standardized process for both the troubled and non-troubled PHAs that 

focused on comprehensive and substantive reviews for grant initiation activities, use of funds, 

environmental compliance, procurement, and grant performance. To date, 3,829 reviews have 

been completed for both formula and competitive awards. This includes 100 percent of initial 

formula grantees receiving a remote review, and on-site reviews for all 174 troubled agencies. In 

addition, all of the 376 competitive grants received remote reviews. As a result of this review 
HUD FY 2010 Agency Financial Report 

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process, PIH was able to identify potential issues early on and provide guidance and technical 

assistance to grantees. 

Additionally, PIH worked closely with grantees to ensure transparency through a high level of 

recipient reporting. PIH has managed some of the highest levels of recipient reporting within the 

Department and across all Federal Agencies. Each reporting period, PIH has exceeded 

95 percent reporting, maintaining over 99 percent of grantee reporting in the previous four 

reporting quarters

Monitoring of Expenditures and Intended Uses 

HUD has established additional internal management controls to create a greater level of 

accountability for performance. The Recovery Act team prepares dashboard reports for 

distribution to the Secretary, Deputy Secretary, and senior leadership team that include financial 

performance measures and targets, core activities data (e.g., housing units rehabilitated, housing 

units developed, and people served by homelessness prevention assistance), and issues or risks. 

OSPM and the Senior Program Manager for Economic Recovery provide regular briefings to the 

Secretary and Deputy Secretary, with updates on progress based on performance metrics of 

obligation by HUD, obligation by grantees, disbursement, core activities funded (e.g., units 

rehabilitated, units developed, people served), and pressing policy concerns. Performance 

measure targets and milestones that are missed, or that are in jeopardy of being missed, will be 

accompanied by an explanation of the reasons why, including any issues affecting progress and 

the specific plan for their resolution or mitigation. The report also identifies specific grantees 

with performance issues and summarizes the actions being taken to address them. 

In 2010, the Deputy Secretary completed a groundbreaking place-based reporting effort focused

on tracking and managing disbursements by geographic region, which has served as a pilot for 

longer-term department-wide implementation beyond the Recovery Act. This place-based 

reporting included examination of expenditures by recipients, barriers to spending, and follow-up 

actions by Regional and Field Offices. 

Finally, the Senior Program Manager for Economic Recovery continues to meet on a monthly 

basis with the OIG to discuss issues of priority concern, including ongoing and recently issued 

audits. In FY 2010, the Recovery Act program management team received a favorable audit 

report from the OIG on its Recovery Act recipient reporting processes, as described below. The 

Recovery Act program management team also reviews program-related and grantee-related 

audits regularly. 

Recipient Reporting, Analysis, and Transparency 

A recent OIG audit of Recovery Act recipient reporting found that the overall quality assurance 

process completed by the HUD Recovery Act team for recipient reporting has been successful. 

In particular, the OIG found that: “The Recovery Team’s accomplishments as of the 

March 31, 2010, reporting period are as follows: (1) developed policies and procedures for 
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validating recipient reporting; (2) completed several rounds of validation checks of recipient 

data; (3) successfully assisted approximately 99 percent of the prime recipients (4,849 of 4,911) 

to meet report requirements; and (4) met with the OIG on a monthly basis to discuss Recovery 

Act activities.” In the third calendar quarter of 2010, HUD recipients maintained a high 

percentage of reporting compliance, at 97 percent. 

In addition to making quarterly reports into www.FederalReporting.gov, HUD Recovery Act

recipients are also required to submit reports directly to the agency on core activities funded by 

the Recovery Act. The Department has identified a rigorous set of performance measures that 

quantify progress of each of the Recovery Act programs toward goals of: (1) promoting energy 

efficiency and creating green jobs, (2) unlocking the credit markets and supporting critical public 

projects, and (3) mitigating the effects of the economic crisis and preventing community decline. 

As reported by Recovery Act recipients in July 2010, since the inception of the Act, these funds 

have led to over half a million people being served through homelessness prevention assistance, 

nearly 3,000 homes being developed, and over 315,000 units of housing being renovated, many 

of which have improved energy efficiency. In the second quarter of calendar year 2010, HUD 

Recovery Act recipients reported over 26,000 jobs saved or created. HUD has also completed 

two quarters of analysis on where its dollars are performing geographically, relative to a variety 

of indicators including geography, income, race, and poverty level.

Consistent with OMB reporting requirements, HUD has posted weekly financial reports on 

www.hud.gov/recovery since March 1, 2009. Furthermore, the HUD Recovery Act website 

provides a range of information to ensure that transparency objectives are met, including placebased (e.g., state-based) updates on Recovery Act expenditure and core activities funded by 

Recovery Act programs. HUD also provides success stories regarding the impact of Recovery 

Act grants. 

Challenge: Human capital management 

For many years, one of the Department’s major challenges has been to effectively manage its 

limited staff to accomplish its primary mission. HUD lacks a valid basis for assessing its 

human resource needs and allocating staff within program offices, as evidenced in OIG’s 

September 2008 audit pertaining to HUD’s management of human resources. 

The current administration announced a “human capital transformation,” noting that the 

2008 Federal Human Capital Survey ranked HUD 24th out of the 30 large agencies in the 

“Best Places to Work in the Federal Government” report (HUD has since moved to last in the 

2010 rankings). The Department contracted with the National Academy of Public 

Administration (NAPA) to consult on this problem. NAPA noted that HUD did not engage 

in any short- or long-term planning to determine staffing needs. It noted the absence of a 

clear workforce planning strategy, which is impeding the Department’s efforts to address its 

workforce needs in a strategic, systematic manner.

NAPA recommended that the Department establish an intra-agency team of senior officials, 
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including the Chief Financial Officer, Chief Human Capital Officer, and 

administrative/budget officials from major program offices, to assess the causes of its erratic 

resource management practices and develop a more timely and predictable staffing process. 

NAPA recommended that this team lay the groundwork for creating ongoing, agency wide 

workforce analysis and planning that is tied to HUD’s strategic plan and enhances longer 

range capability to recruit and sustain a high quality workforce.

The Department’s Progress 

An additional study was conducted entitled “Health Check” in order to move from the NAPA 

report to an action plan. Some recommendations from the NAPA report and the “Health Check” 

study are already being implemented while others are being assessed.

The transformation of the Office of the Chief Human Capital Officer (OCHCO) resulted in 

elevation of performance management, recruitment, and planning efforts. Workforce and 

succession planning have been identified as critical, and a workforce succession planner has been 

recruited to lead this effort. The OCHCO is implementing a new Staffing and Classification 

system. This system will enhance workforce analysis while reducing the number of human 

resource systems currently being utilized. It will also provide new tools to streamline and 

enhance the recruitment, on boarding (the process of helping new employees become productive 

members of an organization), and retention of workforce. While implementation is being led by 

OCHCO; OCFO, OCIO, OSPM, and others have been involved with defining the needs and 

capabilities of the new system.

With the release of the “2010 Employee Viewpoint Survey (EVS)” (an annual survey of 

employees to assess employee satisfaction, as well as leadership and management practices that 

contribute to agency performance) results; OCHCO assigned its analysis and interpretation to the 

Office of Policy, Planning, and Training and established a Departmental EVS Task Team to 

assist with planning and implementing an action plan to improve agency performance in this 

area. Working in cooperation with OSPM and engaging the Office of Personnel Management 

(OPM) in EVS analysis and action planning workshops, the Department submitted a “2010 EVS 

Action Plan” to OPM and OMB on September 13, 2010, consisting of three key areas: 

performance management, learning and development, and strategic communication. 

Additional EVS Task Teams have been established for each program office leading to the 

creation and implementation of program office action plans. Representatives of program office

task teams are working together on developing these action plans as well as department-wide 

implementation measures. An executive level task team has been established to interpret the 

EVS results and determine actions while working with OCHCO to provide implementation 

assistance and accountability.

Immediate changes related to employee development and engagement can be seen in the 

approach to course development with task teams consisting of members from the planned 
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audience. New program selection will include a diverse team of participants from across the 

Department. This includes occupations, grades, and other race and national origin 

demographics. 

Looking Ahead to FY 2011 and Beyond 

HUD is extremely committed and active in transforming the way it does business. Several 

actions are currently underway or planned for the future. Current actions include the reestablishment of the Human Capital Council, the creation of a Training Council, the 

development of a Strategic Communication Plan (led by the Office of Public Affairs, OCHCO, 

and OSPM), and the creation of Project Management Offices throughout HUD starting with the 

OCHCO.

The highest priority has been given to improved communication throughout the Department. 

Efforts include modifying the Supervisory training programs to include a communication course. 

Meetings between OCHCO and Public Affairs are on-going to developing a strategic 

communication plan as an essential part of the Secretary’s Agenda. Town hall meetings are 

being scheduled and web sites are being redesigned to promote participation from all HUD 

employees through HUD’s internal web site. 

Challenge: Financial Management Systems 

Since fiscal year 1991, OIG has annually reported on the lack of an integrated financial 

management system, including the need to enhance FHA’s management controls over its 

portfolio of integrated insurance and financial systems. During the past several years, HUD 

has made progress by partially implementing new core financial systems at FHA and Ginnie 

Mae and addressing most of the previous weaknesses that OIG identified. These 

improvements enabled OIG to reclassify the weakness in financial management system 

requirements from a material weakness to a significant deficiency.

The contract to modernize HUD’s financial management systems, the HUD Integrated 

Financial Management Improvement Project (HIFMIP), was awarded on 

September 23, 2010. The original scope of HIFMIP was to encompass all of HUD’s 

financial systems, including those supporting FHA and Ginnie Mae. However, the inclusion 

of the FHA and Ginnie Mae portions has been put on hold as a result of review by the Office 

of Management and Budget. HIFMIP was launched in fiscal year 2003 and was to have 

begun implementation of HUD’s core financial system in fiscal year 2006. With the recent 

award of the contract, HUD anticipates implementation of phase one of the project in time to 

have all of the fiscal year 2012 financial data within the new system. We continue to note 

the following weaknesses with HUD’s financial management systems:

HUD’s ability to prepare financial statements and other financial information requires 

extensive compensating procedures. 

HUD has limited availability of information to assist management in effectively 
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managing operations on an ongoing basis.

FHA’s business increased dramatically as a result of the mortgage crisis and now accounts 

for 30 percent of the market share. The shortcomings of the current information technology 

(IT) systems and the lack of systems capabilities and automation in critical areas of the 

business are challenging FHA’s ability to respond to changes in the market and implement 

needed changes to its business processes. The recent changes in the economy and the 

housing market and explosive growth in FHA’s single-family insurance program have 

exacerbated these issues and brought the need to move FHA IT modernization initiatives to 

the forefront. Critical maintenance had been deferred, and old technology and fragmented 

architecture are inefficient and expensive to maintain. In August 2009, FHA completed the 

IT Strategy and Improvement Plan, which identifies FHA’s priorities for IT transformation. 

The plan identifies 25 solution initiatives to address specific FHA lines of business needs. 

Initiatives are prioritized with the top five being single-family related. The plan also calls for 

FHA to create a program management office to facilitate coordination and communication 

and track and report progress, provide support to managers, and support organizational 

change management activities. Its ultimate goal is to focus leadership effort and resources 

needed for a successful transformation initiative. HUD has since awarded four contracts 

under this initiative.

Another IT concern is the ability to replace the antiquated infrastructure on which HUD and 

FHA applications reside in a timely manner. Workloads have dramatically increased and are

processing on systems that are 15 to 30 years old, resulting in performance, flexibility, and

interface issues. The use of aging hardware and software can result in poor performance and 

high maintenance costs. If the IT infrastructure is not modernized, it will become 

increasingly difficult to maintain operations, make legislative system modifications, and 

develop or maintain required interfaces to other IT systems, leaving the system environment 

at risk.

During 2009, HUD unsuccessfully attempted to move certain applications off the antiquated 

Unisys mainframe onto a modern platform. Computer processing utilization reached the 

critical rate of 80-90 percent during 2009, which necessitated an upgrade in the processing 

power of the existing mainframe in May 2009. The upgrade brought the utilization rate 

down to 60-70 percent. HUD performed another upgrade in June 2010, bringing the 

utilization rate down further to 35-40 percent. During August 2010, HUD replaced the old 

Unisys mainframe with the latest model with newer technology. In addition, HUD replaced 

the antiquated tape drives that were attached to the old Unisys mainframe with virtual tape 

systems to increase performance.

We continue to report weaknesses in internal controls and security regarding HUD’s general 

data processing operations and specific applications. The effect of these weaknesses is that 

HUD cannot be reasonably assured that system information will remain confidential, 
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safeguarded, and available to those who need it without interruption.

As part of our annual IT security review mandated by the Federal Information Security

Management Act, we found that HUD had not completed all requirements for systems 

containing personally identifiable information, including categorization and inventory of 

such systems. Also HUD had not implemented two factor authentications on all enterprise 

remote access solutions.

The Department’s Progress 

HUD has strategically planned for and delivered a modernized infrastructure that facilitates the 

provisioning of services and allows scalability and agility in meeting on-demand business 

requirements, improved quality of service, and increased cost efficiencies. HUD’s data center 

environment represents the success of these efforts through the implemented upgrade to the 

antiquated Unisys platform that represented a significant barrier to FHA business expansion. 

With the delivery of the Unisys Dorado 780, capacity has been significantly expanded and 

maintenance costs lowered. Furthermore, this infrastructure enhancement was designed to 

anticipate future capacity requirements and was implemented in a timely manner to ensure 

enhanced performance availability to meet increased programmatic requirements.

As HUD moves forward with its mission and strategic goals, the oversight and management of 

the infrastructure will continue to implement strategies and procedures for timely, cost-effective 

acquisition, use, and reallocation of infrastructure resources to provide quality service to HUD. 

Future plans continue to focus on an agile enterprise that embraces industry best practices, IT 

mandates, and performance-based management, with significant milestones for the following: 

Implementing end-to-end processes, enterprise identity management, real-time 

transactions, and integrated systems; 

Continuing to eliminate costly proprietary systems; 

Easing access to data when-needed, where-needed; and

Migrating rigid business processes to highly leveraged and flexible service oriented 

systems.

Progress towards these milestones will enable HUD to continue moving towards an agile high 

leverage/high speed organization. 

Challenge: Public and assisted housing program administration

HUD provides housing assistance funds under various grant and subsidy programs to 

multifamily project owners (both nonprofit and for profit) and PHAs. These intermediaries, 

in turn, provide housing assistance to benefit primarily low-income households. The Office 

of Public and Indian Housing provides funding for rent subsidies through its public housing 

operating subsidies and tenant-based Section 8 rental assistance programs. These programs 

are administered by about 4,100 PHAs, which are to provide housing to low-income families 

or make assistance payments to private owners that lease their rental units to assisted 
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families. In fiscal year 2010, the PHAs assisted 3.2 million low income households.

HUD has a challenge of ensuring that adequate funding is available to support the Housing 

Choice Voucher program. In fiscal year 2009, approximately 180 PHAs reported shortfalls in 

voucher funding. Several factors contributed to the shortfalls. First, the funding Congress 

provided to renew vouchers for calendar year 2009 was several hundred million dollars less 

than the amount for which agencies were eligible. Second, tenant incomes declined-most 

likely due to recent job losses caused by the recession-driving up voucher costs in many 

regions of the country and worsening the financial crunch. Third, the average cost of a 

voucher increased more than 5 percent in fiscal year 2009, despite weakening in most rental 

housing markets. Early in fiscal year 2010, Congress provided HUD $200 million in 

advance funding to assist PHAs experiencing shortfalls. In total, 182 PHAs received 

$77 million in additional funding. As a proactive measure, HUD established the shortfall 

prevention team to ensure that assisted families would not be terminated from the Housing 

Choice Voucher program. HUD provided technical assistance to these PHAs in identifying 

cost-saving measures to maximize the funding utilization and prevent termination of families 

receiving rental assistance.

The Office of Housing administers a variety of assisted housing programs including parts of 

the Section 8 program and the Sections 202 and 811 programs. The subsidies provided 

through these programs are called “project-based” subsidies because they are tied to 

particular properties. Therefore, tenants who move from such properties may lose their 

rental assistance. For this fiscal year, HUD requested $8 billion for Section 8 project-based 

rental assistance.

HUD has made improvements in the area of erroneous payments, but more are needed. To 

continue its efforts in the reduction, it needs to enhance its disclosures of administrative 

errors made by intermediaries in performance reports, improve its methodology 

documentation, and enhance oversight of controls over monitoring of improper payments. 

HUD has increased its focus on the electronic monitoring of its intermediaries. In the past, 

HUD has performed comprehensive onsite monitoring reviews to increase detection of 

intermediaries’ lack of compliance or errors in complying with the program regulations. We 

noted that HUD did not prepare its required fiscal year 2010 management plan. As a result, 

at the headquarters level, HUD did not develop formal plans to establish performance and 

onsite comprehensive monitoring review goals. The lack of management plans hampered 

efforts to track and provide oversight of the field offices that are responsible for developing 

risk assessments and determining which PHAs to review.
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The Department’s Progress 

Program Transformation 

HUD has proposed legislative program simplification for its rental assistance programs. This 

legislation will initiate a multi-year effort to streamline its rental assistance programs via the 

Transforming Rental Assistance (TRA) initiative – a multi-year, $350 million proposal. TRA 

will modernize HUD’s rental assistance programs so that they are easier for families to access, 

less costly to operate, and easier to administer at the local level. [More information on this 

initiative can be found online at www.hud.gov/tra.] 

Ensuring Adequate Funding

PIH has taken a number of steps in support of ensuring adequate funding for the Housing Choice 

Voucher program. During FY 2010, PIH initiated a joint effort with PD&R to determine 

reasonable methods for accurately capturing TBRA funding changes; these efforts will result in 

PIH being able to apply the most appropriate method in putting forth future budget requests 

which more closely predict true program need, including but not limited to, calculation of the 

Annual Adjustment Factor. 

A substantial aspect of providing technical support to PHAs facing shortfalls in 2009 and 2010 

focused on the need for determining amounts and sources of funds available to support program 

costs; in particular, the PHAs’ Net Restricted Assets (NRA) became a focus of PIH activity. 

During 2010, PIH initiated an NRA reconciliation process on its top 500 funded PHAs for the 

funding years of 2005 through 2009. In addition, the Voucher Management System (PHAs’ 

reporting mechanism for HCV leasing and expenses) was updated to include new fields which 

now collect data on PHA-reported NRA levels, Unrestricted Net Assets (UNA), cash resources, 

and vouchers issued but not under lease. These new fields provide much-needed information to 

the PHAs and PIH staff in assessing not only current status of agencies but also in providing 

technical assistance on utilization of funds more broadly. A Shortfall Prevention Team was also 

established to stabilize HCV funding utilization activity. Taken together, these accomplishments 

facilitate a more stabilized and balanced approach to voucher utilization with an emphasis on 

assisting PHAs to estimate approaching funding and leasing outcomes. 

Improper Payments 

HUD has been a federal government leader in reducing improper payments having reduced 

improper payments from an estimated $3.43 billion in FY 2000 to $925 million in FY 2009 (a 

73 percent reduction). HUD has achieved this success principally through the use of the 

Enterprise Income Verification (EIV) System. The EIV System makes integrated income data 

available from one source for PHAs and multifamily property owners to improve income 

verification during initial intake and income reexaminations. This system continues to facilitate 

HUD’s progress with improper payment reduction. For FY 2009, rental assistance improper 

payments decreased 3 percent. Use of the Enterprise Income Verification (EIV) system is now 
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mandatory for PHAs and owners and management agents (O/As). Housing continues to make 

improvements in the area of reducing erroneous payments by providing O/As with current and 

updated guidance on program requirements. In July 2010, Housing issued a revised and 

expanded Notice on EIV and will soon issue Change 4 to Handbook 4350.3 REV-1, Occupancy 

Requirements of Subsidized Multifamily Housing Programs, that will include an entire chapter 

devoted to EIV. PIH issued notices in January, March, and May 2010, to provide PHAs with 

guidance on reducing improper payments on behalf of individuals who have not complied with 

the mandatory social security number disclosure requirement and deceased program 

beneficiaries, as well as mandated and effective use of HUD’s EIV system to reduce 

administrative and improper payment errors. 

The Office of Housing also continues to monitor program administrators in regard to improper 

payments through its annual on-site management and occupancy reviews (MORs) for the 

majority of its Multifamily portfolio. In addition, contract administrators have been reporting, 

through an interim error tracking log, any MOR findings resulting in over- and/or under-payment 

of subsidy. The reporting of this information began in early FY 2009 and is used for the 

purposes of targeting training at those areas where most of the errors are occurring. It is also

used to inform OMB that not only is the Department continuing to monitor its program 

administrators, but it is also increasing its efforts to ensure that subsidy payments are being 

calculated correctly.

Enhanced EIV System Functionality

During FY 2010, PIH implemented the Debts Owed to PHAs and Terminations module within 

the EIV system. PHAs are now required to report outstanding debts owed and/or program noncompliance of former program beneficiaries to alert other PHAs of this adverse information to 

prevent future payments from being made on behalf of individuals who have not fulfilled their 

financial responsibilities under a PIH rental housing assistance program and/or individuals who 

have demonstrated their inability to comply with program requirements. PIH’s EIV Debts Owed 

to PHAs and Termination module will help to prevent improper payments before they occur. It 

should be noted that this initiative was initiated and implemented prior to the issuance of the 

November 2009, Executive Order 13520 – Reducing Improper Payments and the June 18, 2010, 

Presidential Memorandum - Enhancing Payment Accuracy Through a “Do Not Pay List.” PIH 

continues to aggressively and proactively develop and implement initiatives to ensure that 

limited Federal dollars serve as many eligible families and increase accessibility of PIH rental 

housing assistance programs by its intended program beneficiaries.

Improper Payments Team 

During the second quarter of FY 2010, PIH created the Improper Payments Team, which is 

devised of program analysts who carry out ongoing monitoring, improper payment recovery, 

training and technical assistance activities, along with identifying and eliminating the highest 

improper payments within PIH rental housing assistance programs. This team’s efforts directed 
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to the reduction of improper payments are designed to protect access to PIH rental assistance 

program by their intended program beneficiaries. As a result of the Improper Payments Team’s 

efforts in FY 2010, PIH reported the following success as of Fiscal Year End 2010: 

1. Increased Public and Indian Housing Information Center (PIC) reporting rate to 

95 percent from 84 percent; 

2. Increased EIV System access rate to 98 percent from 96 percent; 

3. Decreased improper payments on behalf of deceased program beneficiaries by 

56 percent; 

4. Decreased the number of egregious tenant under reporting of income cases by 56 percent; 

and

5. Decreased the number of program beneficiaries with invalid SSNs by 69 percent. 

Monitoring 

During this transition year (the new FY 2010 – 2015 Strategic Plan was published on 

May 5, 2010), rental assistance programs operated off of the previous year’s management plan 

goals. In FY 2010, all PHAs were monitored through a remote review. PIH also conducted 

810 on-site reviews for all troubled PHAs and a sample of non-troubled PHAs. The remote 

reviews focused on four main components: grant initiation, environmental compliance, 

procurement, and grant administration. The follow-up/on-site review checklist follows-up on the 

same four components examined in the remote review and also includes a review of the contract 

administration of the procurements related to the use of Recovery Act funds. 

In an effort to not only ensure that the program funds are expended properly, but to also identify 

improper financial decisions and practices, PIH has partnered with the Real Estate Assessment 

Center Quality Assurance Division to conduct forensic audits of high risk PHAs. This proactive 

approach will allow PIH to identify poor financial management practices and provide the 

necessary technical assistance so that PHAs will be practicing accepted and effective financial 

management.

PIH also conducted 395 quality assurance/quality control (QA/QC) reviews of all troubled PHAs 

and a random sample of 223 of the non-troubled PHAs. QA/QC reviews consisted of a 

headquarters review of all necessary documents used by the field office in completing the remote 

and onsite reviews. In addition, PIH conducted quick-look reviews of all Recovery Act formula 

grant obligating documents for PHAs that were less than 90 percent obligated by 

February 26, 2010. 

Housing continues to make monitoring of its Multifamily portfolio a top priority to ensure that 

program administrators are in compliance with HUD’s regulations and program requirements. 

The majority of Multifamily’s properties receive an on-site management and occupancy review 
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(MOR) annually. In FY 2010, 17,741 MORs were conducted, which represents an increase of 

131 over the 17,610 MORs that were conducted in FY 2009. 

Challenge: Administering programs directed toward victims of natural 

disasters 

In efforts to reduce the physical, human, and economic toll of future disasters, HUD is 

encouraging States to undertake activities and long-term strategies that focus on reducing 

damages from future natural disasters. To accomplish this goal, HUD has awarded 

$312 million in Disaster Recovery Enhancement Fund (DREF) monies to support the longterm recovery following dozens of natural disasters in 2008. Since these States previously 

received Community Development Block Grant funds for disasters, 13 States were eligible to 

receive the DREF funds to target disaster mitigation.

Over the past several years, HUD has allocated more than $29.4 billion to various States 

through its Community Development Block Grant program. These active disaster grants 

nationwide have $23 billion in obligations and $18 billion in disbursements. Regarding the 

$19.6 billion in funds provided to Gulf Coast States for Hurricane Katrina, $15 billion or 

76.3 percent of the funds had been disbursed through September 30, 2010. 

As Gulf Coast communities work to recover from Hurricane Katrina, other communities

throughout the United States are feeling the effects of natural disasters as well. In addition to 

the DREF funds, Congress appropriated $100 million to assist the communities affected by 

the disasters that occurred in the spring of 2010. Supplemental appropriations were enacted 

on July 29, 2010, to provide additional funds for disaster relief; long-term recovery; and 

restoration of infrastructure, housing, and economic revitalization in areas affected by severe 

storms and flooding from March through May 2010 for which the President declared a major 

disaster.

As a result of its continuing role in addressing natural disasters, HUD faces significant 

management challenges as identified by our 2010 audit work. In a recent audit, we reported 

that more than $18.7 million in questioned costs was incurred because one State did not 

follow Federal and State requirements. The State was not ready to handle the many 

differences in contracting with disaster funds and was thereby ill-prepared to meet the 

challenges created by the natural disaster. In efforts to reduce the physical, human, and 

economic toll of future disasters, HUD has a unique challenge of encouraging States to 

undertake long-term strategies that focus on mitigating the impact of future natural disasters. 

The challenge for HUD is to facilitate disaster preparedness by improving the long-term 

recovery process and ensuring that a comprehensive community development plan is in place. 

Further, HUD will have continuing challenges in preventing duplication of benefits from the 

many Federal disaster programs, along with balancing timeliness of fund distribution versus 

the need for accountability and controls in disaster programs.
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The Department’s Progress 

Long-Term Strategies to Mitigate the Impact of Future Natural Disasters

To administer the Disaster Recovery Enhancement Fund (DREF), the Department identified four 

specific activities that could qualify a grantee for additional funds: 

Development and adoption of a forward-thinking land-use plan that will guide use of 

long-term recovery efforts and subsequent land-use decisions throughout the community 

and reduces existing or future development in disaster-risk areas; 

Floodplain or critical fire or seismic hazard area buyouts programs under an optional 

relocation plan that includes incentives so that families and private sector employers 

move out of areas at severe risk for a future disaster; 

Individual Mitigation Measures (IMM) to improve residential properties and make them 

less prone to damage. If such activities are incorporated into the grantee’s rehabilitation 

or new construction programs generally, the cost increment attributed to IMM will be the 

amount considered for the additional allocation, not the total construction amount budget; 

and 

Implementation of modern disaster resistant building codes, including, but not limited to, 

training on new standards and code enforcement. 

To receive a DREF award, eligible activities had to be budgeted by the grantee (either in its hardcopy Action Plan, or in its Disaster Recovery Grant Reporting (DRGR) system Action Plan) by 

June 30, 2010. In addition, each grantee also had to demonstrate that it still had unmet disaster 

recovery needs. 

Duplication of benefits

Funds awarded via the DREF are subject to all of the requirements imposed by the appropriation 

law and the above referenced Federal Register notices. In particular, 74 FR 7244 (published 

February 13, 2009) states: 

10. Duplication of benefits. In general, 42 U.S.C. 5155 (section 312 of the Robert T. 

Stafford Disaster Assistance and Emergency Relief Act, as amended) prohibits any 

person, business concern, or other entity from receiving financial assistance with respect 

to any part of a loss resulting from a major disaster as to which he has received financial 

assistance under any other program or from insurance or any other source. The 

Second 2008 Act stipulates that funds may not be used for activities reimbursable by or 

for which funds have been made available by FEMA or by the Army Corps of Engineers. 

Code of Federal Regulation 74 FR 7244 also requires each grantee’s Action Plan to describe, 

“Monitoring standards and procedures that are sufficient to ensure program requirements, 

including non-duplication of benefits, are met and that provide for continual quality assurance, 

investigation, and internal audit functions with responsible staff reporting independently to the 

Governor of the state or, at a minimum, to the chief officer of the governing body of any 
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designated administering entity...” Furthermore, each grantee must outline, “a description of the 

steps [it] will take to avoid or mitigate occurrences of fraud, abuse, and mismanagement, 

especially with respect to accounting, procurement, and accountability, with a description of how 

[it] will provide for increasing the capacity for implementation and compliance of local 

government grant recipients, subrecipients, subgrantees, contractors, and any other entity 

responsible for administering activities...”

The Department will continue monitoring grants to ensure all funds, including the DREF awards, 

meet the above requirements. Additionally, the Department will publish a notice in the Federal 

register in early 2011 to clarify the requirements of the duplication of benefits guidance and issue 

tailored technical assistance to grantees that are launching new disaster recovery-funded 

programs. 

Timely of Distribution of Funds

HUD implemented several internal controls to ensure that disaster recovery funds are accurately 

disbursed in a timely manner. Specifically, HUD placed additional controls on the Line of Credit 

Control System (LOCCS), including restricting all unbudgeted balances, providing for line-item 

budgets instead of an undifferentiated grant, and including warning flags for draws over $5 million 

and over $25 million. The flags can only be removed, allowing drawdown completion, after a CPD 

manager reviews and accepts accompanying documentation. Additionally, HUD’s Disaster Recovery 

Grant Reporting (DRGR) system was integrated with LOCCS on January 5, 2009. 

Technical Assistance

Grantees receiving disaster funds face unprecedented rebuilding tasks and are often not equipped 

to address them with their standard operating procedures. To that end, grantees receiving 

disaster recovery funds are required to identify their proposed recovery activities in an Action 

Plan. HUD reviews and accepts the Action Plan, but also informs the grantee about technical 

assistance, training, and other resources that may be available to assist in the establishment of 

specific disaster recovery activities. Moreover, HUD will monitor DREF funds as part of the 

disaster recovery risk analysis and monitoring actions. 

Neighborhood Stabilization Program (NSP) 

NSP was authorized by the Housing and Economic Recovery Act of 2008 (HERA), which 

provided $3.92 billion in funding for the initial NSP effort (NSP1). NSP is intended to assist the 

nation’s communities in addressing the effects of abandoned and foreclosed properties, a 

problem that has increased significantly as a result of the recent economic recession and 

problems in the housing market. HERA established an 18 month use period for the NSP1 funds 

which, for most grantees, expired in the 45 days preceding September 30, 2010. Through a 

significant technical assistance effort, CPD was able to assist NSP1 grantees in obligating 

99.7 percent of NSP1 funds by grantee deadlines and disbursing approximately 42 percent of 

funds in that same period. This level of achievement was attributable to an exceptional level of 
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dedication on the part of grantee and CPD staff as well as CPD’s implementation approach to 

NSP1.

In FY 2010, CPD also completed the competition for $2 billion in NSP2 funding provided by the 

Recovery Act. On January 14, 2010, Secretary Donovan announced 56 awards under NSP2 and 

CPD has been working with this unique collection of local government, state government, and 

non-profit grantees to launch these programs. The $50 million in NSP2 funds, reserved for the 

NSP technical assistance effort, made a substantial impact on NSP1 performance and is also 

being use to aid NSP2 grantees in advancing their efforts. It should be noted that the OIG 

thoroughly reviewed the NSP2 competition process and issued an audit report with no findings 

or concerns. As a result, many processes and controls instituted in the NSP2 competition are 

being incorporated in other competitions throughout the Department. 

In July, 2010, Congress has appropriated an additional $1 billion for NSP3, and CPD allocated 

those funds to 283 grantees on September 8, 2010. HUD has already issued guidance to those 

grantees on NSP3 program requirements and will support NSP3 with an additional $20 million in 

technical assistance funds.

Summary of Financial Statement Audit and 

Management Assurances 

For FY 2010, no material internal control weaknesses were identified for the Department. The 

following tables provide a summary of financial audit findings with regard to audit opinion and 

management assurances. The first table is a summary of the results of the independent audit of 

HUD’s consolidated financial statements, as well as information reported by HUD’s auditors in 

connection with the FY 2010 Financial Statement Audit. 

Summary of Financial Statement Audit 

Audit Opinion Unqualified

Restatement No

Material Weaknesses Beginning 

Balance New Resolved Consolidated Ending 

Balance

None /Name of material 

Weakness 0 0 0 0 0 

Total Material Weaknesses 0 0 0 0 0 

The following table is a summary of management assurances related to the effectiveness of 

internal control over HUD’s financial reporting and operations, and its conformance with 

financial management system requirements under Sections 2 and 4, respectively, of the Federal 

Managers’ Financial Integrity Act (FMFIA). The last portion of this table is a summary of 

HUD’s compliance with the Federal Financial Management Improvement Act (FFMIA).
HUD FY 2010 Agency Financial Report 

Section III 

Page 168

Summary of Management Assurances 

Effectiveness of Internal Control over Financial Reporting (FMFIA § 2) 

Statement of Assurance Unqualified

Material Weaknesses Beginning 

Balance 

New Resolved Consolidated Reassessed Ending 

Balance 

None/Name of material 

Weakness

0 0 0 0 0 0

Total Material Weaknesses 0 0 0 0 0 0

Effectiveness of Internal Control over Operations (FMFIA § 2) 

Statement of Assurance Unqualified

Material Weaknesses Beginning 

Balance 

New Resolved Consolidated Reassessed Ending 

Balance

None/Name of material 

Weakness

0 0 0 0 0 0

Total Material Weaknesses 0 0 0 0 0 0

Conformance with Financial Management System Requirements (FMFIA § 4) 

Statement of Assurance Systems conform to financial management system requirements.

Non-Conformances Beginning 

Balance 

New Resolved Consolidated Reassessed Ending 

Balance 

None/name of nonconformance

0 0 0 0 0 0

Total non-conformances 0 0 0 0 0 0

Compliance with Federal Financial Management Improvement Act (FFMIA) 

Agency Auditor 

Overall Substantial Compliance Yes No

1. System Requirements Yes*

2. Accounting Standards Yes

3. USSGL at Transaction Level Yes

*Represents Management’s opinion.
Other Accompanying Information 

Improper Payments Information Act Reporting Details

Page 169

Improper Payments Information Act Reporting 

Details 

The Requirements 

Under the Improper Payments Information Act (IPIA) of 2002 (Public Law 107-300) and OMB 

implementing guidance in Appendix C of Circular No. A-123, agencies are to assess all 

programs and activities they administer and identify those that may be susceptible to significant 

improper payments. Where the risk of improper payments is assessed as potentially significant, 

agencies are required to estimate the annual amount of improper payments and report the 

estimates in their annual report (Performance and Accountability Report or AFR) to OMB, along 

with plans to reduce improper payments. The statute defines a “significant” level of improper 

payments as annual improper payments exceeding a $10 million dollar threshold. 

An “improper payment” is any payment that should not have been made or that was made in an 

incorrect amount under statutory, contractual, administrative, or other legally applicable 

requirements. Incorrect amounts consist of overpayments and underpayments (including 

inappropriate denials of payment or service). Improper payments include: 

Any payment that was made to an ineligible recipient or for an ineligible service; 

Duplicate payments; 

Payments for services not received;

Payments that do not account for applicable discounts; and 

Payments for which there is insufficient or lack of documentation to determine whether it 

was proper. 

In addition to identifying substantive errors that might warrant repayment, HUD’s statistical 

sampling of support for payments also identified “process” errors that increase the risk of 

substantive payment errors, which are included in HUD’s improper payment estimate. 

HUD’s Commitment

The Secretary designated the Chief Financial Officer as the lead official for directing and 

overseeing HUD actions to address improper payment issues and bring HUD into compliance 

with requirements of the IPIA and OMB implementing guidance. The OCFO implemented the 

IPIA requirements and continues to address improper payment issues. HUD’s plans, goals, and 

results for identifying and reducing improper payments are tracked and reported in the annual 

AFR. Additionally, managers are held accountable for achieving improper payment reduction 

targets via goals established for their program.

On November 20, 2009, the President signed Executive Order (EO) 13520: Reducing Improper 

Payments. The EO will reduce improper payments by boosting transparency, holding agencies 
HUD FY 2010 Agency Financial Report 

Section III 

Page 170

accountable for reducing improper payments, examining the creation of incentives for states and 

other entities to reduce improper payments, and increasing penalties for contractors who fail to 

timely disclose improper payments. HUD is in compliance with all of the requirements under 

the EO and the OMB implementing guidance in OMB Circular No. A-123, Part III of 

Appendix C. As such, HUD has established and reported supplemental measures for reducing 

improper payments in its designated high-priority program (Rental Housing Assistance 

Program). HUD has also submitted an Accountable Official Annual Report to the Inspector 

General detailing HUD’s methodology for identifying and measuring improper payments in the 

high priority program, plans for meeting reduction targets, and plans for ensuring that initiatives 

undertaken pursuant to EO do not unduly burden program access and participation by eligible 

beneficiaries.

HUD’s Process 

The HUD process for complying with the IPIA consists of four steps: 

1) Conduct an initial survey of all program and administrative activities for potential 

indicators of significant improper payments. The first annual assessment was conducted in 

FY 2004, based on the $52.9 billion in payments made during FY 2003 in support of over 

200 programs and administrative activities.

2) Perform a detailed risk assessment of program activities identified in the first step with 

annual expenditures in excess of $40 million1. HUD identified 10 activities, representing 

57 percent of all payments, as potentially “at risk” of a significant improper payment level 

during this initial assessment.

3) Independent reviewers test a statistical sample of payments in program activities 

determined to be susceptible to a significant improper payment level. Statistical sampling 

and analysis found that only 5 of the 10 activities actually had a significant improper 

payment problem. 

4) Establish, execute, and monitor corrective action plans for reducing improper payments in 

the programs identified as at-risk.

Summary of HUD Results to Date 

Prior to enactment of the IPIA, OMB requested agency input on improper payments in select 

programs, including the CDBG Entitlement and State and Small Cities Programs. These CDBG 

programs were identified through statistical sampling in HUD’s initial annual risk assessments to 

be at low risk of improper payments and to not warrant reporting. OMB subsequently revised its 

 

1

 The OCFO determined that programs with expenditures of less than $40 million would not be included in the risk 

assessment. OMB Circular A-123, Appendix C, Part 1, defines “significant erroneous payments” as annual 

erroneous payments in the program exceeding both 2.5 percent of program payments and $10 million. Based on 

the OCFO’s analysis of the programs and their funds control activities, OCFO concluded that no program was 

susceptible to having an error rate in excess of 25 percent (i.e., 25 percent of $40 million = $10 million). 
Other Accompanying Information 

Improper Payments Information Act Reporting Details

Page 171

guidance to clarify that agencies should continue to report on programs until they could 

document a minimum of two consecutive years in which improper payments are less than 

$10 million annually, after which they could submit to OMB a request for relief from annual 

reporting.

HUD’s two-year analysis determined that the CDBG Programs were below the annual 

$10 million threshold for required reporting, and on March 14, 2007, OMB approved HUD’s 

request for relief from annual improper payment reporting for those programs. HUD will 

continue to conduct an annual assessment of the CDBG programs and provide results annually to 

OMB by March 31. 

Corrective actions were developed and completed for two of the five remaining areas identified 

as having a significant level of improper payments, the Single Family Acquired Asset 

Management System and the Public Housing Capital Fund. These two areas were subsequently 

removed from the improper payments reporting requirement, leaving three high-risk program 

areas:

Public Housing, 

Section 8 Housing Choice Vouchers (HCVs) and Moderate Rehabilitation, and 

Owner-administered Project-based Assistance Programs (Section 8, Section 202, 

Section 811). 

These programs are collectively referred to as HUD’s rental housing assistance programs. HUD 

has reduced the combined baseline gross improper rental housing assistance payment estimates 

of $3.43 billion2

 to $925 million in Fiscal Year 2009, a reduction of 73 percent.

Results of Annual Risk Assessment Update and Continued Payment 

Testing 

The FY 2010 risk assessment update was based on payment and other relevant activity that 

occurred during FY 2009. An inventory of over 200 distinct program and administrative 

payment activities was identified from all of HUD’s financial management systems in FY 2009, 

with total payments of $79.2 billion. The payment universe consisted of the following general 

distribution: 

 

2 This figure combines the FY 2000 baseline estimate of $3.22 billion for two types of improper payments (program 

administrator and tenant income reporting errors), with the FY 2005 baseline estimate of $214 million, based on 

FY 2003 expenditures for the third type of improper payment (billing errors).
HUD FY 2010 Agency Financial Report 

Section III 

Page 172

HUD’s risk assessment update in FY 2010 did not identify any new activities as being at-risk of 

a significant improper payment level. Programs that previously tested below the improper 

payment threshold established by the IPIA were removed from HUD’s at-risk inventory and are 

not subject to re-testing unless there is significant change in the nature of the activity, HUD’s 

internal control structure, or operating environment. 

Rental Housing Assistance Programs 

HUD’s Rental Housing Assistance Programs had previously been assessed as being at high risk 

of significant improper payment levels – and continue to be reported as such – with 

corresponding error measurement methodologies, corrective action plans, and error reduction 

goals described below. These programs constituted over $30 billion, or 38 percent, of HUD’s 

total payments in FY 2009. 

Prior to enactment of the IPIA, HUD had already established the Rental Housing Integrity 

Improvement Project in FY 2001 to reduce an acknowledged improper payment problem in its 

rental assistance programs. This project is directed by the responsible HUD program offices, 

with oversight by the OCFO and statistical sampling3 support from the Office of Policy 

Development and Research. HUD’s Rental Housing Assistance Programs are administered by 

over 26,000 PHAs and multifamily housing owners or management agents on HUD’s behalf. In 

 

3 HUD’s methodology for statistical sampling in FY 2009 was to select 600 projects that were considered to be nationally 

representative of the 26,000 PHAs and multifamily housing owners or management agents that administer rental housing 

assistance on HUD’s behalf. Projects were selected with probabilities proportional to size. Projects having a size 

exceeding the sampling interval were selected for eight, twelve, or more households in the project and were counted as 

more than one project for purposes of determining the sampling size. Projects were allocated approximately equally 

among the three assisted program types, and four households were randomly selected from each project, for a total of 

2,404 households with representation from among the three program areas. Some large projects were selected multiple 

times, so that the study sample included 540 distinct projects in 56 geographic areas across the United States and Puerto 

Rico. The sample is designed to obtain a 95 percent likelihood that estimated aggregate national rent errors for all 

programs are within two percentage points of the true population rent calculation error, assuming an error of ten percent 

of the total rents (based on OMB criteria). Previous studies determined that a tenant sample size of 2,400 will yield an 

acceptable precision for estimates of the total average error.

37.9%

37.6%

22.0%

2.5%

HUD's $79.2 Billion Payment Universe

Rental Assistance (37.9%) FHA (37.6%)

Other Activities Over $40M (22.0%) Other Activities Under $40M (2.5%)
Other Accompanying Information 

Improper Payments Information Act Reporting Details

Page 173

general, beneficiaries pay 30 percent of their adjusted income as rent, and HUD payments cover 

the remainder of the rental cost (or the operating cost, in the case of public housing). 

There are three major components of potential errors and improper payments in these complex 

programs: 

1) Program administrator error – the program administrator’s failure to properly apply 

income exclusions and deductions and correctly determine income, rent, and subsidy 

levels;

2) Tenant income reporting error – the tenant beneficiary’s failure to properly disclose all 

income sources and amounts upon which subsidies are determined; and 

3) Billing error – errors in the billing and payment of subsidies due between HUD and third 

party program administrators and/or housing providers. 

From FY 2000 through FY 2009, HUD reduced the gross improper payments for the first two of 

these three categories of error from $3.22 billion to $868 million, a reduction of 73 percent. A 

baseline measurement for the third component, billing error, was completed in FY 2005, based 

on FY 2003 expenditures, and was estimated to be $214 million. The FY 2008 billing error was 

estimated to be $59 million. In FY 2010, a billing study, based on FY 2009 expenditures was 

conducted for the Owner-administered Project-based Assistance Programs. The billing error was 

$57 million. The following chart provides a summary for all three error components for 

FY 2009 as compared to FY 2008 and the baseline year (FY 2000). Actual results are not 

presented for FY 2010 because HUD reports on prior year data (i.e. FY 2010 studies are 

conducted on FY 2009 data). 
HUD FY 2010 Agency Financial Report 

Section III 

Page 174

Administration/

Error Type

2009

 Subsidy

OverPayments* 

2009 

Subsidy

UnderPayments* 

2009

Net 

Erroneous 

Payments* 

2009

Gross 

Erroneous 

Payments* 

2008

Gross 

Erroneous 

Payments* 

2000

Gross Erroneous 

Payments* 

Administrator Error - - - - - $602,557

Income Reporting 

Error - - - - - $294,000

Billing Error - - - - - Not available

Subtotal: - - - - - $896,557 

Administrator Error $268,791 $171,497 $97,294 $440,288 $400,248 $1,096,535

Income Reporting 

Error $121,477 - $121,477 $121,477 $232,557 $418,000

Billing Error** - - - - - Not available

Subtotal: $390,268 $171,497 $218,771 $561,765 $632,805 $1,514,535

Administrator Error $268,791 $171,497 $97,294 $440,288 $400,248 $1,699,092

Income Reporting 

Error $121,477 - $121,477 $121,477 $232,557 $712,000

Billing Error - - - - - Not available

PHA Subtotal: $390,268 $171,497 $218,771 $561,765 $632,805 $2,411,092

Administrator Error $122,667 $86,788 $35,880 $209,455 $191,724 $539,160

Income Reporting 

Error $96,326 - $96,326 $96,326 $138,143 $266,000

Billing Error $21,000 $36,000 ($15,000) $57,000 ** $59,000 Not available

Project Based 

Subtotal: $239,993 $122,788 $117,206 $362,781 $388,867 $805,160 

Administrator Error $391,458 $258,285 $133,174 $649,743 $591,972 $2,238,252

Income Reporting 

Error $217,803 - $217,803 $217,803 $370,700 $978,000 

Billing Error $21,000 $36,000 ($15,000) $57,000 ** $59,000 Not available

GRAND Total: $630,261 $294,285 $335,977 $924,546 $1,021,672 $3,216,252 

TOTAL 

PROGRAM 

PAYMENTS $30,015,109 $29,035,284 $18,800,000 

IMPROPER 

PAYMENT RATE 3.1% 3.5% 17.1%

Total Improper Payments

 * Dollars in Thousands

IMPROPER RENTAL ASSISTANCE PAYMENTS

 Public Housing

Section 8 Voucher

Total PHA Administered

Total Project Based/Owner Administered

** Billing error estimate is derived from the baseline established in FY 2005 for Owner Administrators.
Other Accompanying Information 

Improper Payments Information Act Reporting Details

Page 175

Error Type Baseline 

Estimates*

FY 2009 

Estimates*

Percent 

Reduction

Administrator Error ** $2.238 $0.650 71%

Income Reporting Error ** $0.978 $0.218 78%

Billing Error ** $0.214 $0.057 73%

Total $3.430 $0.925 73%

 * Dollars in Billions

Percent Reductions in Improper Payments

** Administrator and Income Reporting Error Estimates are from FY 2000;

 the Billing Error Estimate is from FY 2005.

Corrective Actions Taken to Reduce Improper Payments 

The overall reduction in improper payments for HUD’s three major types of Rental Housing 

Assistance Programs over the past eight years has been primarily attributed to HUD’s efforts to 

work with its housing industry partners through enhanced program guidance, training, oversight, 

and enforcement. Collectively, these efforts have had a positive impact on the program 

administrators’ ability to reduce their errors in the calculation of income, rent, and subsidies. 

Although the administrator error increased in FY 2009, the findings were on par with the 

findings from FY 2004 through FY 2008, within the statistical margin of error, and do not 

represent statistically significant differences. The Department also has found a direct correlation

in the reduction of improper payments to the number of monitoring reviews of PHAs and the 

number of management and occupancy reviews at multifamily housing properties. HUD also 

uses the Enterprise Income Verification (EIV) system to reduce the level of improper payments. 

The EIV system makes integrated income data available from one source for PHAs and 

multifamily property owners to improve income verification during income reexaminations. 

Increased availability and use of the EIV system by PHAs, owners, management agents, and 

contract administrators for HUD’s Rental Assistance programs also have a direct correlation to 

the reduction of improper payments associated with income reporting errors. Effective 

January 31, 2010, PHAs, owners, management agents, and contract administrators were 

mandated to use HUD’s EIV system to reduce administrative and improper payment errors. 

More recently, program structure changes have reduced the opportunities for improper payments 

in two of HUD’s Rental Housing Assistance Programs. In HUD’s Public Housing program, 

significant program structure changes were implemented to improve the efficient use of funding 

in the Public Housing Operating Fund. These structure changes effectively eliminated all three 

previously reported types of improper payments due to Administrator, Income Reporting, and 

Billing errors for that program. It should be noted that PHAs could still make Administrator 

errors, and tenants could still not report or under-report their income. However, in the new 

structure, the effect of these errors would be borne by the PHA and HUD’s subsidy payment 
HUD FY 2010 Agency Financial Report 

Section III 

Page 176

would remain unchanged. Nonetheless, HUD retains program oversight responsibility to ensure 

the proper performance and benefits of the program, and will continue to focus on effective 

measures to reduce performance errors by PHAs. These changes were implemented in the 

second quarter of FY 2007 (i.e., error reductions affecting HUD were realized for three-quarters 

of the year). In addition, the establishment of a budget based funding methodology was 

implemented for the HCV Program in FY 2005 to eliminate the opportunity for billing errors in 

that program. 

HUD’s Improper Payment Reduction Forecast 

HUD will continue to take aggressive steps to address the causes of improper rental housing 

assistance payments to ensure that the right benefits go to the right people. Based on the above 

results for the three types of rental housing assistance errors, as well as plans to address known 

causes and levels of improper payments, HUD provides the statistical results for FY 2009 and 

the outlook for improper payment percentages on a combined program basis from FY 2010 – 

FY 2012, as follows: 

During FY 2008, the improper payment rate remained steady at 3.5 percent (as in FY 2007), thus 

missing HUD’s FY 2008 goal by one-tenth of one percent. An increase in income reporting 

errors caused HUD to miss its goal. The improper payment rate for FY 2009 was 3.1 percent, 

thus exceeding HUD’s FY 2009 goal of 3.3 percent. Actions taken to reduce improper payments 

included full implementation and the mandatory use of the EIV system, the efficient use of 

funding in the Public Housing Operating Fund, the establishment of a budget based funding 

methodology in the HCV Program, and providing technical assistance and training to minimize 

errors. To continue to meet future goals, PHAs and Multifamily Housing owners must continue 

to be diligent in the mandatory use of the EIV system to further reduce income reporting errors. 

HUD’s corrective action plans will include addressing this issue during the Management and 

Occupancy Reviews and Rental Integrity Monitoring Reviews. Therefore, HUD believes that 

the goals for FY 2010 and beyond are realistic and achievable. In addition, program 

simplification, via revised legislation, could lend to further significant improper payment 

reductions for HUD’s Rental Housing Assistance Programs. 

Activity

FY2008 

Payments

FY2008 

IP

FY2008 

IP% 

Goal/Actual

FY2009 

Payments

FY2009 

IP

FY2009 

IP% 

Goal/Actual

FY2010 

IP% Goal

FY2011 

IP% Goal

FY2012 

IP% Goal

Rental 

Assistance $29.035 $1.022 3.4/3.5 $30.015 $0.925 3.3/3.1 3.0 3.0 3.0

$33,000 $33,000 $33,000

Note: The annual Improper Payments calculation is based on prior year data. Accordingly, the FY 2010, FY 2011,

 and FY 2012 results will be reported in the FY 2011, FY 2012, and FY 2013 PARs respectively.

Rental Assistance Improper Payment Reduction Outlook

FY2010 – FY2012

(Dollars shown in billions)

Estimated Payments
Other Accompanying Information 

Improper Payments Information Act Reporting Details

Page 177

Further information on HUD’s efforts to reduce improper rental housing assistance payments is 

provided in the Annual Performance Plan to be issued in FY 2011. 

Recovery Auditing Activity 

Under the requirements of the IPIA, recovery audits of each program and activity of an agency 

that expends more than $1 million or more annually shall be conducted if performing such audits 

would be cost-effective. The IPIA significantly increases agency payment recapture efforts by 

expanding the scope of recovery audits to all programs and activities (e.g., grants, loans, benefit, 

and contract outlays), and lowering the threshold for conducting payment recapture audits from 

$500 million in annual outlays to $1 million in annual outlays. HUD, with contractor assistance, 

previously performed a detailed recovery auditing review. The review disclosed two contracts 

with potential recoveries. However, HUD’s Contracting Officer and Government Technical 

Representative validated these payments as proper. 

The current internal controls present in HUD’s contract payment and contract close-out process 

are adequate to reduce the risks of overpayments. HUD continues to focus on strengthening its 

funds control processes, increasing training classes for Government Technical Representatives 

and Government Technical Monitors, and further improving the contract close-out process. 

Therefore, HUD concluded that a recovery auditing program would not be beneficial and is not 

warranted. However, as required by the IPIA, HUD will submit a payment recapture audit plan 

to OMB in November 2010, and will re-assess the cost effectiveness of recovery auditing. The 

plan will demonstrate how HUD is prioritizing payment recapture activities to maximize 

recoveries, and describe how HUD is leveraging and exploring new processes and/or 

technologies in these efforts. 
HUD FY 2010 Agency Financial Report 

Section III 

Page 178

2007 2008 2009 2010 a/

Section 8 Low Income Rental Assistance Program: 

Tenant-based assistance: b/ 1,988,365 2,050,285 2,104,490 2,116,718

Project-based assistance c/ 1,183,884 1,196,747 1,198,519 1,202,660

Sub-total 3,172,249 3,247,032 3,303,009 3,319,378

Public Housing Program d/ 1,155,377 1,140,294 1,128,891 1,124,009

Sub-total 4,327,626 4,387,326 4,431,900 4,443,387

Housing for the Elderly Sec. 202 116,297 123,653 132,305 134,235

Housing for the Disabled Sec. 811 24,464 26,438 27,257 28,000

Tenant-based 811 b/ 13,995 14,189 14,099 13,980

Sub-total 154,756 164,280 173,661 176,215

Other Assistance Programs

Homeownership Assistance Program (Section 235) 4,758 4,302 3,557 3,912

Rental Housing Assistance Program (Section 236) 204,389 190,463 178,659 171,756

Rent Supplement 10,555 9,843 9,293 9,082

Sub-total 219,702 204,608 191,509 184,750

Total, Public and Assisted Housing 4,702,084 4,756,214 4,797,070 4,804,352

HOME Tenant-Based Assistance 18,172 25,381 18,763 10,132

HOME Rental Units Completed 28,039 23,170 19,098 12,936

HOME Homebuyer Units Completed 34,985 26,790 23,711 18,325

HOME Existing Homeowners Completed 11,221 10,847 9,737 5,656

Sub-total 92,417 86,188 71,309 47,049

CDBG Households (homeownership assistance) e/ 6,919 4,521 2,441 4,845

CDBG Households (owner-occupied rehabilitation) e/ 117,830 121,158 103,926 84,734

Self-Help Homeownership Opportunity Program New Homebuyers 1,887 1,927 1,809 889

Housing Opportunities for Person With AIDS Households f/ 24,895 20,803 23,862 20,576

Indian Housing Block Grant Households g/ 6,212 6,486 7,757 4,324

Rural Housing & Economic Development e/ 784 1,210 1,789 544

Native Hawaiian Homeland Block Grant Households 23 65 95 49

ADDI (American Dream Downpayment Initiative) 6,094 4,209 2,162 410

Sub-total 164,644 160,379 143,841 116,371

Total of CDBG, HOME, Self-Help Homeownership Opportunity Program, 

Housing Opportunities for Persons With AIDS, Indian Housing Block Grant, 

Rural, Title VI Native Hawaiian Homeland Block Grant, Households Served 257,061 246,567 215,150 163,420

GRAND TOTAL h/ 4,959,145 5,002,781 5,012,220 4,967,772

NA-Not Available

g/ As of October 19, 2010, pre FY 2010 figures have been revised from those reported in the Performance and Accountability Report due to 

subsequent adjustments in the database.

h/ Totals reflect the same program as in previous years and are not identical to the programs included on Performance.gov and HUD's 

Priority Performance goals for Rental Housing.

b/ Figures represent HUD's estimate of funded units. Unit Months Leased (UML) count is drawn from Voucher Management System 

(VMS) and include Veterans Affairs Supportive Housing Program (VASH). Moving to Work Program (MTW) units under Annual 

Contributions Contracts (ACC) are assumed to be at 100 percent utilization and are drawn from HUD's Central Accounting and Program 

System (HUDCAPS). Annual data is through June 30th (year-to-date through the third quarter) of each year. This method of data 

collection has been the same logic employed for Priority Goal/HUDSTAT reporting.

a/ Fiscal years 2007-2009 represent 4th quarter data (year-to-date through September 30th), unless otherwise noted. Fiscal year 2010 data 

reflects 3rd quarter data (year-to-date through June 30th), unless otherwise noted.

d/ The calculation used for the Performance Accountability Report (FY 2007-2009) and Annual Financial Report (FY 2010) is based on 

Eligible Unit Months (EUMs), which is the basic unit for the Operating Fund formula. This figure represents units that were eligible for 

operating subsidy during Calendar Year 2010. In addition, most formula elements are paid based on Per Unit Month (PUM) in accordance 

with the formula regulation.

e/ Provides data through September 30th (year-to-date through the 4th quarter) rather than through June 30th (year-to-date through the 

3rd quarter), which reflects actual data collection schedule.

f/ Housing Opportunities for Persons with HIV/AIDS (HOPWA) unit figures updated to include only permanent housing units.

c/ FY 2007 data is not available for Community Planning and Development units.

HUD Assisted Housing Units by Program 
Other Accompanying Information 

Compliance Status of Financial Management Systems

Page 179

Compliance Status of Financial Management Systems 

As of September 30, 2010

Total Systems: 42 Total Compliant Systems: 39 Total Non-compliant Systems: 3

COMPLIANT SYSTEMS – 39 

Office of Chief Financial Officer (14)

A21 Loan Accounting System (LAS)

A39 HUD Consolidated Financial Statement 

System (HCFSS)

A67 Line of Credit Control System (LOCCS)

A75 HUD Central Accounting and Program 

System (HUDCAPS) **

A75I Personnel Services Cost Reporting Subsystem 

(PSCRS) ***

A75R Financial Data Mart (FDM) ***

A91 Consolidated Cost and FTE Files (CCFF)

A96 Program Accounting System (PAS)

D08 Bond Payment System (BONDMAPPER)

D61 EZBudget Budget Formulation System (EZB) 

D65A Section 8 Budget Outlay Support System 

(BOSS)

D91A Total Estimation and Allocation Mechanism– 

Resource Estimation and Allocation 

Process (TEAM-REAP)

H18 Integrated Automated Travel System (IATS)

P221 Electronic Travel System Interface (eTravel)

A100 HUD Integrated Core Financial System 

(ICFS) *

Office of Chief Human Capital Officer (1)

P162 HUD Integrated Human Resources Training 

System (HIHRTS)

Office of Chief Procurement Officer 

P273 HUD Integrated Acquisition Management 

System (HIAMS) *

Community Planning and Development (3)

C04 Integrated Disbursement & Information 

System (IDIS)

C38 Electronic Special Needs Assistance Program 

(eSNAPS)

C08A Disaster Recovery Grant Reporting System 

(DRGR)

NON COMPLIANT SYSTEMS – 3 

Office of Chief Procurement Officer (3)

A35 HUD Procurement System (HPS)

P035 Small Purchase System (SPS)

D67A Facilities Integrated Resources Management 

System (FIRMS)

Public and Indian Housing (2)

P113 Inventory Management System (IMS)

P232 Subsidy and Grants Info System (SAGIS)

Office of Housing (18)

A43 Single Family Insurance System (SFIS)

A43C Single Family Insurance Claims Subsystem 

(CLAIMS)

A80B Single Family Premium Collection SystemPeriodic (SFPCS-P)

A80D Distributive Shares and Refund Subsystem 

(DSRS)

A80H Single Family Mortgage Asset Recovery 

Technology System (SMART)

A80N Single Family Mortgage Notes (SFMN)

A80R Single Family Premium Collection SystemUpfront (SFPCS-U)

A80S Single Family Acquired Asset Management 

System (SAMS)

D64A Single Family Housing Enterprise Data 

Warehouse (SFHEDW)

F12 Home Equity Conversion Mortgages (HECM)

F17 Computerized Home Underwriting 

Management System (CHUMS)

F42D Single Family Default Monitoring Subsystem 

(SFDMS)****

F51 Institution Master File (IMF)

F71 Debt Collection & Assets Management 

System – Title 1 Notes (DCAMS)

F72 Title I Insurance and Claims (TIIS)

F87 Tenant Rental Assistance Certification 

System (TRACS)

P013 FHA Subsidiary Ledger (FHA-SL)**

P057 Multifamily Delinquency and Default 

Reporting System (MDDR)  

Ginnie Mae (1)

P237 Ginnie Mae Financial & Accounting System 

(GFAS)** 

* In development; these systems are not included in the 

total inventory count of 42.

** Core Financial System

*** These systems were not reported as a Financial 

Management System before FY 2010. However, 

they are not newly implemented systems.

**** During FY 2009, the Office of Housing reported 

these systems as non financial. However, they 

need to be validated by independent reviews.
HUD FY 2010 Agency Financial Report 

Appendices

Page 180

Appendices 

Appendix A: Glossary of Acronyms 

AFR Agency Financial Report

APR Annual Performance Report

CDBG Community Development Block Grant 

CFO Chief Financial Officer

CMHI Cooperative Management Housing Insurance 

CPD Office of Community Planning and Development 

DOE U.S. Department of Energy

DOL U.S. Department of Labor 

DOT U.S. Department of Transportation 

DREF Disaster Recovery Enhancement Fund

ED U.S. Department of Education 

EVS Employee Viewpoint Survey 

EIV Enterprise Income Verification System

EPA U.S. Environmental Protection Agency 

EO Executive Order 

Fannie Mae Federal National Mortgage Association

FFMIA Federal Financial Management Improvement Act (Pub. L. No. 104-208) 

FHA Federal Housing Administration

FHEO Office of Fair Housing and Equal Opportunity 

FMFIA Federal Managers’ Financial Integrity Act (Pub. L. No. 97-255) 

FMS Department of the Treasury Financial Management Service

Freddie Mac Federal Home Loan Mortgage Corporation 

FSP Federal Strategic Plan to Prevent and End Homelessness 

FY Fiscal Year

GI General Insurance Fund 

Ginnie Mae Government National Mortgage Association 
Appendices

Acronyms and Websites

Page 181

GPRA Government Performance and Results Act (Pub. L. No. 103.62) 

HCV Housing Choice Voucher 

HHS U.S. Department of Health & Human Services 

HIFMIP HUD Integrated Financial Management Improvement Project

HUD U.S. Department of Housing and Urban Development 

IPIA Improper Payments Information Act of 2002 (Pub. L. No. 107-300) 

IT Information Technology 

MBS Mortgage-Backed Securities

MHA Making Home Affordable Program 

MD&A Management’s Discussion and Analysis 

MMI Mutual Mortgage Insurance Fund 

NAPA National Academy of Public Administration 

NSP Neighborhood Stabilization Program 

OCFO Office of the Chief Financial Officer

OCHCO Office of the Chief Human Capital Officer

OFPM Office of Field Policy and Management

OHHLHC Office of Healthy Homes and Lead Hazard Control

OIG Office of Inspector General

OMB Office of Management and Budget

OSPM Office of Strategic Planning and Management

PBRA Project-Based Rental Assistance

PD&R Office of Policy Development and Research

PHA Public Housing Agency 

PIH Office of Public and Indian Housing 

Recovery Act American Recovery and Reinvestment Act of 2009 

SNAPS Special Needs Assistance Program

SRI Special Risk Insurance Fund

TDHEs Tribally Designated Housing Entities 

TI Transformation Initiative
HUD FY 2010 Agency Financial Report 

Appendices

Page 182

TRA Transforming Rental Assistance

Treasury U.S. Department of the Treasury 

VA U.S. Department of Veterans Affairs
Appendices

Acronyms and Websites

Page 183

Appendix B: Table of Websites 

Mission, Organizations, Major Program Activities, and Strategic 

Plan 

1. http://portal.hud.gov/portal/page/portal/HUD/localoffices

2. http://portal.hud.gov/portal/page/portal/HUD/program_offices/housing 

3. http://www.hud.gov/offices/hsg/sfh/hsgsingle.cfm 

4. http://portal.hud.gov/portal/page/portal/HUD/i_want_to/talk_to_a_housing_counselor 

5. http://www.hud.gov/offices/hsg/hsgmulti.cfm 

6. http://portal.hud.gov/portal/page/portal/HUD/federal_housing_administration/healthcare_facilities/mortga

ge_insurance/about_the_office_of_healthcare_programs 

7. http://www.hud.gov/offices/hsg/ramh/reguprog.cfm 

8. http://www.ginniemae.gov/about/about.asp?Section=About 

9. http://portal.hud.gov/portal/page/portal/HUD/program_offices/public_indian_housing 

10. http://www.hud.gov/offices/pih/programs/ph/ 

11. http://www.hud.gov/offices/pih/programs/hcv/index.cfm 

12. http://www.hud.gov/offices/pih/ih/index.cfm 

13. http://portal.hud.gov/portal/page/portal/HUD/program_offices/comm_planning 

14. http://portal.hud.gov/portal/page/portal/HUD/program_offices/fair_housing_equal_opp 

15. http://portal.hud.gov/portal/page/portal/HUD/program_offices/healthy_homes

16. http://portal.hud.gov/portal/page/portal/HUD/program_offices/sustainable_housing_communities 

17. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan

18. http://www.huduser.org/portal/ 

19. http://portal.hud.gov/portal/page/portal/HUD/program_offices/faith_based 

20. http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-

145 

21. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan

22. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD_Strategic_Plan_C_goal

1.pdf 

23. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD_Strategic_Plan_D_goal

2.pdf 

24. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD_Strategic_Plan_E_goal3

.pdf 

25. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD_Strategic_Plan_F_goal4

.pdf 

26. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD_Strategic_Plan_G_goal

5.pdf 

Foreclosure Prevention 

1. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD_Strategic_Plan_C_goal

1.pdf 

2. http://makinghomeaffordable.gov/ 

3. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD%20Strategic%20Plan%

20060810.pdf#page=22

Rental Assistance 

1. http://www.hud.gov/offices/cpd/communitydevelopment/programs/ 

2. http://www.hud.gov/offices/cpd/affordablehousing/programs/home/ 

3. http://www.hud.gov/offices/cpd/aidshousing/programs/ 
HUD FY 2010 Agency Financial Report 

Appendices

Page 184

4. http://www.hud.gov/offices/hsg/mfh/progdesc/eld202.cfm 

5. http://www.hud.gov/offices/hsg/mfh/progdesc/disab811.cfm 

6. http://www.hud.gov/offices/hsg/mfh/mfbroch/mfbroc3.cfm 

7. http://www.hud.gov/offices/pih/ih/grants/ 

8. http://www.hud.gov/offices/pih/programs/hcv/pwd/mainstream.cfm 

9. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD_Strategic_Plan_D_goal

2.pdf 

10. http://hud.gov/budgetsummary2011/affordable-rental-homes.pdf 

Veterans’ Homelessness 

1. http://www.usich.gov/PDF/OpeningDoors_2010_FSPPreventEndHomeless.pdf 

2. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD%20Strategic%20Plan%

20060810.pdf#page=29 

3. http://hud.gov/budgetsummary2011/utilizing-housing.pdf 

Energy and Green Retrofits 

1. http://portal.hud.gov/portal/page/portal/HUD/recovery/partnerships/HUD_DOE 

2. http://www.usgbc.org/DisplayPage.aspx?CategoryID=19 

3. http://www.hud.gov/offices/pih/programs/ph/capfund/ocir.cfm 

4. http://portal.hud.gov/portal/page/portal/RECOVERY/PLANS/Indian%20Community%20Development%2

0Block%20Grants%20(Formula).pdf 

5. http://www.hud.gov/offices/pih/programs/ph/hope6/index.cfm 

6. http://www.hud.gov/offices/pih/programs/ph/am/index.cfm 

7. http://www.huduser.org/portal/publications/hsgfin/energy.html 

8. http://portal.hud.gov/portal/page/portal/HUD/recovery/programs/green 

9. http://www.hud.gov/offices/hsg/omhar/paes/greenini.cfm 

10. http://www.hud.gov/offices/hsg/mfh/progdesc/eld202.cfm 

11. http://www.hud.gov/offices/hsg/mfh/progdesc/disab811.cfm 

12. http://portal.hud.gov/portal/page/portal/HUD/program_offices/healthy_homes 

13. http://www.hud.gov/offices/cpd/affordablehousing/programs/home/ 

14. http://www.hud.gov/offices/cpd/communitydevelopment/programs/ 

15. http://hudatwork.hud.gov/inhouse/recoveryact/jan10.cfm 

16. http://www.hud.gov/recovery/weatherization 

17. http://portal.hud.gov/portal/page/portal/HUD/program_offices/sustainable_housing_communities 

18. http://portal.hud.gov/portal/page/portal/HUD/program_offices/sustainable_housing_communities/Sustaina

bleCommunitiesPrograms4-29-10.pdf 

Transform the Way HUD Does Business 

1. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD_Strategic_Plan_G_goal

5.pdf 

2. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD_Strategic_Plan_G_goal

5.pdf#page=6 

3. http://www.hud.gov/budgetsummary2010/fy10budget.pdf#page=30 

4. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD_Strategic_Plan_G_goal

5.pdf#page=6 

5. http://portal.hud.gov/portal/page/portal/HUD/program_offices/cfo/stratplan/HUD_Strategic_Plan_G_goal

5.pdf#page=6 

 
Appendices

Acronyms and Websites

Page 185

Recovery Act 

1. http://www.recovery.gov/ 

Notes to Financial Statements 

1. http://www.hud.gov/offices/hsg/fhahistory.cfm 

2. http://www.ginniemae.gov/about/about.asp?Section=About 

3. http://www.hud.gov/offices/hsg/mfh/rfp/s8bkinfo.cfm 

4. http://www.hud.gov/offices/pih/programs/ph/am/of/opfnd2010.cfm 

5. http://www.hud.gov/offices/cpd/communitydevelopment/programs/ 

6. http://www.hud.gov/offices/pih/programs/ph/capfund/index.cfm 

7. http://www.hud.gov/offices/hsg/mfh/progdesc/eld202.cfm 

8. http://www.hud.gov/offices/hsg/mfh/progdesc/disab811.cfm 

9. http://www.hud.gov/offices/cpd/affordablehousing/programs/home/ 
If you have any questions or comments, please call

Jerome A. Vaiana

Acting Assistant Chief Financial Officer for Financial Management

at 202-402-8106. 

Written comments or suggestions for improving this report

may be submitted by mail to:

U.S. Department of Housing and Urban Development

451 7th St. SW, Room 2210

Washington, DC 20410

Attention: Jerome A. Vaiana

Acting Assistant Chief Financial Officer for Financial Management

Or by e-mail to

Jerome.A.Vaiana@hud.gov

For additional copies of this report, please call the

Office of the Chief Financial Officer

at 202-402-6411

or e-mail Anthony.A.Twyman@hud.gov

To view the report on the internet, go to the following website:

http://www.hud.gov/offices/cfo/reports/2010AFR.cfm