GAO/RCED-00-150R Status of HUD Funds Drawn Down by MHA

United States General Accounting Office

Washington, DC 20548

Resources, Community, and

Economic Development Division

B-285279

June 6, 2000

The Honorable Harold E. Ford, Jr.

House of Representatives

Subject: The Status of Major HUD Funding Awarded to the Memphis Housing

Authority

Dear Mr. Ford:

The Memphis Housing Authority (MHA), like other housing authorities around the

country, annually enters into a contract with the Department of Housing and Urban

Development (HUD) through which HUD agrees to provide funding for MHA to

provide low-income persons with housing that is decent, safe, and sanitary—MHA’s

primary mission. MHA, in turn, agrees to manage the housing in accordance with the

contract's provisions. In January 1997, HUD’s Office of the Inspector General (OIG)

recommended that HUD declare MHA in violation of its contract with HUD because

the housing authority was not fulfilling its primary mission. The OIG stated that MHA

was not fulfilling this mission because its "buildings, grounds, and individual dwelling

units are in extremely poor condition" because of age and because MHA had not

effectively maintained or modernized its developments.1

HUD declined the OIG’s recommendation to declare MHA in violation of its contract,

instead choosing in early 1998 to enter into a performance agreement with MHA. The

agreement, which took effect in July 1998, set broad goals for the authority, including

time lines and specific benchmarks for improving the overall operation of the

authority as well as for addressing the problems that the OIG identified. However,

because of significant turnover among the authority's top management, MHA made

little progress toward meeting the terms of the agreement. In February 1999, MHA

hired a new executive director; shortly thereafter, the new executive director

initiated discussions with HUD to renegotiate the terms of the agreement to better

reflect his plans for improving MHA's performance. In April 2000, HUD and MHA

entered into a binding memorandum of agreement replacing the March 1998

performance agreement.

1

See Memphis Housing Authority, Memphis, Tennessee, HUD District Inspector General

Southeast/Caribbean District (97-AT-201-1001, Jan. 13, 1997).
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2 GAO/RCED-00-150R Status of HUD Funds Drawn Down by MHA

Because of your interest in MHA’s performance and because the authority's use of

HUD funds has been and will remain an essential part of improving conditions at the

authority, you asked us to report on the status of MHA’s use of these funds. As

agreed with your office, this report (1) presents information on MHA’s receipt of

funds from HUD’s Comprehensive Grant,2 HOPE VI, and Public Housing Drug

Elimination programs from fiscal year 1994 through fiscal 19983and (2) compares

MHA's draw down of funds from these programs with that of three other public

housing authorities that are similar in the number of housing units they manage and

the amount of Comprehensive Grant, HOPE VI, and Public Housing Drug Elimination

funds that they received from HUD.4We selected these three programs because they

represent some of the most significant resources that MHA will depend on to improve

the physically deteriorated conditions that the OIG identified (Comprehensive Grant

and HOPE VI) and at the same time address some of the nonhousing needs of its

residents (Drug Elimination).

In summary, we found the following:

• From fiscal year 1994 through fiscal 1998, HUD awarded MHA about $64.5 million

in Comprehensive Grant funds, about $52.7 million in HOPE VI funds, and about

$8.6 million in drug elimination funds, for a total of about $126 million.

• Of the Comprehensive Grant and HOPE VI funds awarded to MHA from fiscal year

1994 through fiscal 1998, the authority drew down a smaller proportion of funds

than the other three public housing authorities by the end of fiscal 1999. For

example, MHA drew down 50 percent of the Comprehensive Grant funds and 17

percent of HOPE VI funds awarded during this period. In contrast, the three other

housing authorities—on average—drew down 74 percent of their Comprehensive

Grant and 39 percent of their HOPE VI awards. Of the drug elimination funds

awarded to MHA from fiscal year 1994 through fiscal 1998, the authority drew

down a proportion of funding similar to that of the three other authorities by the

end of fiscal 1999.

Background

MHA receives several grants from HUD. Once HUD awards grant funds to housing

authorities, the funds are available to them upon request to be drawn down;

2

Pursuant to recent public housing reform legislation, HUD has consolidated various modernization

programs, including the Comprehensive Grant Program, into a single Capital Fund Program for which

all housing authorities are eligible to participate.

3

Significant data for fiscal year 1999 awards are not currently available because HUD made these

awards in late fiscal 1999 and early fiscal 2000. Therefore, we limited our inquiry to data from fiscal

year 1994 through fiscal 1998. The status of funds awarded for these 5 fiscal years, however, is

available up to the end of fiscal 1999.

4

The housing authorities that we compared MHA with are those in Nashville, Tennessee; San Antonio,

Texas; and Seattle, Washington.
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3 GAO/RCED-00-150R Status of HUD Funds Drawn Down by MHA

specifically, a housing authority is responsible for contacting HUD and requesting

that HUD disburse all or part of the awarded funds to the housing authority on a 3-

day turnaround basis.5

Once a housing authority draws down funds, it then uses the

funds to pay for the various eligible invoiced activities that each program supports.

The three HUD programs highlighted in our review are the Comprehensive Grant,

HOPE VI, and Public Housing Drug Elimination programs. Table 1 shows the housing

authorities that we compared with MHA, their size, and the total funding that HUD

awarded to them from these three programs from fiscal year 1994 through fiscal 1998.

Table 1: Statistics of Selected Public Housing Authorities

Total funding awarded from

FY 1994 through FY 1998 PHA Public

housing

units

Comprehensive grant

(modernization) HOPE VI Drug elimination

Memphis, Tenn. 6,243 $64,536,581 $52,705,049 $8,570,090

Nashville, Tenn. 6,261 52,100,490 13,963,876 8,147,290

San Antonio, Tex. 6,809 68,072,270 98,581,070 7,412,905

Seattle, Wash. 6,303 68,882,394 66,325,953 8,196,242

Legend

FY = fiscal year

Through the Comprehensive Grant Program, HUD makes funds available to public

housing authorities--on a formula basis--to correct physical and management

deficiencies and keep its housing safe and desirable. This program is commonly

known as the modernization program. As table 1 illustrates, HUD awarded the four

housing authorities similar amounts of modernization funding from fiscal year 1994

through fiscal 1998.

Through the HOPE VI program, HUD awards competitive grants to rehabilitate the

most distressed public housing developments in the nation. The grants are used by

housing authorities for three general purposes: physical improvements (including

construction), management improvements, and social and community services to

address residents' needs. Because housing authorities must compete for HOPE VI

funds and typically do not receive grants from the program annually (as they do from

the formula-driven modernization program), the amounts that HUD awards to

authorities each year fluctuate greatly. HUD did not award comparable amounts of

funding annually to each of the four authorities from fiscal year 1994 through fiscal

1998. However, the HOPE VI grants that HUD awarded these authorities have general

similarities. For instance, all of the authorities received one to three small grants as

well as one or two large grants during this 5-year period.

Through the Public Housing Drug Elimination Program, HUD made funds available

on a competitive basis to public housing authorities to combat drug use and drug5

That is, the housing authority must have an invoice and need to pay that invoice within 3 days in order

to request a disbursement from HUD.
B-285279

4 GAO/RCED-00-150R Status of HUD Funds Drawn Down by MHA

related crime.6As table 1 illustrates, HUD awarded the four housing authorities

similar amounts of drug elimination funding from fiscal year 1994 through fiscal 1998.

Memphis Housing Authority Has Drawn Down Less Than Half of Its Awarded

Funds

By the end of fiscal year 1999, MHA drew down about $48 million (or 38 percent) of

the $126 million in modernization, HOPE VI, and drug elimination funds awarded by

HUD to the authority from fiscal year 1994 through fiscal 1998. Almost 80 percent of

the funds drawn down by MHA have been used by the authority in the following

ways:

• About $26 million was from MHA’s annual modernization grants and paid for

building or acquiring dwelling structures, expanding existing dwelling units, or

converting unused space into residential units.

• About $6 million was from its HOPE VI grants and paid for family relocation and

demolishing distressed buildings.

• About $6 million was from its drug elimination grants and paid for the

reimbursement of law enforcement and the employment of investigators.

Table 2 shows the modernization, HOPE VI, and drug elimination funds awarded

annually to MHA from fiscal year 1994 through fiscal 1998 and the remaining balances

of these awards at the end of subsequent fiscal years.

6

Beginning with awards of the fiscal year 1999 funds, HUD replaced the competitive distribution of

drug elimination funds with a formula-based allocation funding system.
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5 GAO/RCED-00-150R Status of HUD Funds Drawn Down by MHA

Table 2: Memphis Housing Authority Authorized Amounts and Fiscal Year End Balances of Three HUD

Programs

HUD program Fiscal

year of

award

Authorized

amount

FYE 1995

balance

FYE 1996

balance

FYE 1997

balance

FYE 1998

balance

FYE 1999

balance

1994 $14,831,217 $14,825,725 $13,425,700 $11,645,920 $297,961 $0

1995 14,039,752 13,245,594 10,224,118 1,515,421

1996 11,659,770 11,426,294 10,578,656 8,635,615

1997 11,691,495 10,061,087 10,011,333

Modernization

1998 12,314,347 12,306,181

Subtotal $64,536,581 $14,825,725 $13,425,700 $36,317,809 $31,161,821 $32,468,550

1994 (p) 481,000 396,688 91,868 84,312 0

1995 (p) 400,000 370,522 22,435 0

1995 (i) 47,281,182 46,930,448 46,430,536 44,760,626 43,756,150

HOPE VI

1996 (i) 4,542,867 375,477 0

Subtotal $52,705,049 $396,688 $47,392,838 $46,537,283 $45,136,103 $43,756,150

1994 1,741,759 1,386,964 590,154 82,440 0

1995 1,752,750 1,648,564 852,432 0

1996 1,733,281 1,611,803 407,103 0

1997 1,821,300 1,382,967 481,079

Drug

Elimination

1998 1,521,000 1,337,666

Subtotal $8,570,090 $1,386,964 $2,238,718 $2,546,675 $1,790,070 $1,818,745

Cumulative

total

$125,811,720 $16,609,377 $63,057,256 $85,401,766 $78,087,994 $78,043,445

Legend

FYE = fiscal year end

(i) = implementation grant

(p) = planning grant

Note: Funds awarded during fiscal year 1994 through fiscal 1998.

Memphis Housing Authority Drew Down a Smaller Proportion of Its

Modernization and HOPE VI Funds Than Three Other Authorities Did

As shown in figure 1, MHA has been noticeably slower in its draw down of

modernization funds than the three other housing authorities, particularly for the last

3 years for which we obtained data.
B-285279

6 GAO/RCED-00-150R Status of HUD Funds Drawn Down by MHA

Figure 1: Percentage of Housing Authorities' Modernization Funding Drawn Down by End of Fiscal Year

1999

By the end of fiscal year 1999, MHA had drawn down 50 percent of the modernization

funds awarded from fiscal 1994 through fiscal 1998, while the three other housing

authorities—on average—had drawn down 74 percent during this period.

The years during which MHA drew down a smaller proportion of its modernization

funds than comparable housing authorities did partially coincided with the OIG's

review that ultimately recommended that HUD declare the authority in violation of its

contract. Regarding Memphis’ use of modernization funds, HUD's OIG specifically

found that “it takes the Memphis housing authority an exorbitant amount of time to

complete renovation activity after it receives funding.” A subsequent review by the

U.S. Army Corps of Engineers found that MHA continued to have difficulty expediting

its use of modernization funds in the years following the OIG's report. In October

1999, the Corps of Engineers reported that the authority was not obligating these

funds in a timely manner.7

During the fiscal year 1994 through fiscal 1999 period, MHA drew down 17 percent of

the HOPE VI funds awarded to the authority from fiscal year 1994 through fiscal 1998.

As figure 2 illustrates, the proportion of the awarded funds that MHA drew down is

only comparable to that of the San Antonio Housing Authority and is much less than

the proportion drawn down by the housing authorities in Nashville, Tennessee, and

Seattle, Washington. Specifically, by the end of fiscal year 1999, the three other

7

Physical Inspection and Contract Administration Review of the Modernization Program at the

Memphis Housing Authority, U.S. Army Corps of Engineers Work Order No. TTN-1 (Oct. 5, 1999).







































































































 0%

20%

40%

60%

80%

100%

1994 1995 1996 1997 1998

Fiscal year of award

Public Housing Authority

Percent

Memphis  Nashville San Antonio Seattle
B-285279

7 GAO/RCED-00-150R Status of HUD Funds Drawn Down by MHA

housing authorities—on average—had drawn down 39 percent of their awards during

this period.8

Figure 2: Percentage of HOPE VI Program Funding Awards Fiscal Years 1994-98 Drawn Down by End of

Fiscal 1999

Although HUD established the HOPE VI program in 1993, grant agreements and

funding were not available to housing authorities until fiscal year 1995. In July 1998,

we reported that a large share of the HOPE VI grant funds awarded from fiscal year

1994 through fiscal 1998 remained to be drawn down across all public housing

authorities. We attributed this delay to the lag time between planning and

construction as well as unique site-specific delays.9

For the years for which we obtained data, MHA drew down a proportion of drug

elimination funds similar to that of the other three housing authorities, as figure 3

illustrates.

8

In commenting on a draft of this report, HUD stated that since MHA hired a new executive director in

February 1999, significant activity has taken place in MHA's HOPE VI implementation and planning

process.

9

See HOPE VI: Progress and Problems in Revitalizing Distressed Public Housing (GAO/RCED-98-187,

July 20, 1998).

0%

20%

40%

60%

80%

100%

Memphis, TN Nashville, TN San Antonio, TX Seattle, WA

Public Housing Authority

Percent

Disbursed Not disbursed
B-285279

8 GAO/RCED-00-150R Status of HUD Funds Drawn Down by MHA

Figure 3: Percentage of Housing Authorities' Fiscal Years 1994-98 Drug Elimination Funding Drawn

Down by End of Fiscal 1999

Note: HUD does not adjust its disbursement data to reflect funds that public housing agencies return

to HUD; therefore, in some cases (e.g., San Antonio in fiscal year 1996), the amount of funds

"disbursed" by HUD is greater than the amount originally awarded.

Agency Comments

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

commenting on the draft, the Deputy Assistant Secretary for HUD’s Office of

Troubled Agency Recovery advised us of HUD’s position that it expects to see a

marked improvement in MHA's expenditure of funds as a result of the actions MHA's

new executive director has taken, including entering into the memorandum of

agreement with HUD. HUD plans to monitor MHA's progress monthly in meeting the

terms of the agreement and expects to see, in addition to improvements in MHA's use

of funds, a significant overall improvement in the condition of the authority. Because

of MHA’s history of troubled performance as documented by HUD’s OIG, we believe

that such monitoring by HUD would be beneficial. HUD also provided several

technical changes and clarifications to the report, which we made, as appropriate.

Scope and Methodology

We compared MHA's use of modernization, HOPE VI, and drug elimination funds

awarded by HUD from fiscal year 1994 through fiscal 1998 with that of three similar

housing authorities. We selected these three grant programs because (1) HUD

awarded a large amount of funding to MHA during the period of inquiry via these

three programs and (2) sufficient data were available among the four housing



























































 



 





 





































 0%

20%

40%

60%

80%

100%

120%

1994 1995 1996 1997 1998

Fiscal year of award

Percent

Memphis  Nashville San Antonio Seattle
B-285279

9 GAO/RCED-00-150R Status of HUD Funds Drawn Down by MHA

authorities. We obtained the data from HUD’s Line of Credit and Control System

database.

Our analysis covered the amounts that HUD had authorized for each housing

authority from the grant programs and the amounts that each housing authority had

drawn down. For the analysis of the financial data on the modernization and drug

elimination programs, we compared the annual draw down of funds by each authority

because HUD awarded comparable grants to these authorities during each fiscal year.

For the analysis of the HOPE VI financial data, we compared the total amount

awarded during the fiscal year 1994-98 period; we carried out the analysis in this

manner because HUD did not award comparable amounts to each authority during

each fiscal year. However, the HOPE VI grants awarded to the four housing

authorities during this period have general similarities. Specifically, all of the

authorities received one to three small grants as well as one or two large grants

during this 5-year period.

We supplemented this analysis with information that we obtained from MHA, HUD

officials, HUD’s Office of Inspector General, and our reviews of background and

other pertinent program information.

We conducted our work from October 1999 through June 2000 in accordance with

generally accepted government auditing standards.

-----

As arranged with your office, unless you publicly announce this report’s contents

earlier, we plan no further distribution of the report until 15 days from the date of this

letter. We will then send copies to the Honorable Andrew Cuomo, Secretary of

Housing and Urban Development. We will also make copies available to others on

request.

Please contact me at (202) 512-7631 if you or your staff have any questions about this

report. Key contributors to this report were Anne Cangi, Bill MacBlane, and Eric

Marts.

Sincerely yours,

Stanley J. Czerwinski

Associate Director, Housing, Community Development,

and Telecommunications Issues

(385847)
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