Department of Housing and Urban Development: Status of Achieving Key Outcomes and Addressing Major Management Challenges
Released: 2001-08-06T00:00:00

Letter

Background

GPRA is intended to shift the focus of government decisionmaking, management, and accountability from activities and processes to the results and outcomes achieved by federal programs. New and valuable information on the plans, goals, and strategies of federal agencies has been provided since federal agencies began implementing GPRA. Under GPRA, annual performance plans are to clearly inform the Congress and the public of (1) the annual performance goals for agencies’ major programs and activities, (2) the measures that will be used to gauge performance, (3) the strategies and resources required to achieve the performance goals, and (4) the procedures that will be used to verify and validate performance information. These annual plans, issued soon after transmittal of the president’s budget, provide a direct linkage between an agency’s longer term goals and mission and day-to-day activities. Annual performance reports are to subsequently report on the degree to which performance goals were met. The issuance of the agencies’ performance reports, due by March 31, represents a new and potentially more substantive phase in the implementation of GPRA—the opportunity to assess federal agencies’ actual performance for the prior fiscal year and to consider what steps are needed to improve performance and reduce costs in the future.

HUD encourages homeownership by providing mortgage insurance through its Federal Housing Administration (FHA) for about 7 million homeowners who otherwise might not have qualified for loans, as well as by managing about $508 billion in insured mortgages and $570 billion in guarantees of mortgage-backed securities. It also makes housing affordable for about 4 million low-income households by insuring loans for multifamily rental housing and providing rental assistance. In addition, it has helped to revitalize over 4,000 localities through community development programs. To accomplish these missions, HUD relies on the performance and integrity of thousands of mortgage lenders, contractors, property owners, public housing agencies, communities, and others to administer its programs.

Assessment of HUD’s Progress and Strategies in Accomplishing Selected Key Outcomes

This section discusses our analysis of HUD’s performance in achieving the selected key outcomes and the strategies the agency has in place, particularly in regard to strategic human capital planning and information technology, for accomplishing these outcomes. In discussing these outcomes, we have also provided information drawn from our prior work on the extent to which the agency provided assurance that the performance information it is reporting is credible.

Increased Homeownership

HUD’s performance report shows that progress was made toward the outcome of increasing homeownership. For example, HUD reports that it exceeded its goals in fiscal year 2000 for increasing the national homeownership rate to 67.7 percent (compared with the target of 67.5 percent), homeownership in central cities to 51.9 percent (compared with the target of 51.0 percent), and the homeownership rate among families with incomes below the area median to 52.2 percent (compared with the target of 52 percent). However, HUD’s contribution to the achievement of those goals is not clear because (1) HUD’s discussion of external factors that affect homeownership in its annual performance and strategic plans said that HUD has limited control of homeownership rates, and (2) HUD did not achieve its goals for some of its programs that support homeownership. The report does not explain why HUD believes it contributed significantly to the overall increase in homeownership, even though it did not meet its programmatic goals.

In discussing the external factors, the report noted that the record homeownership rate depended in large part on the overall economy, including low interest rates. This statement is consistent with others HUD has made that it is not a dominant player in the homeownership market and has limited impact on whether some national goals are met, including the homeownership goal. Nevertheless, the report, also states that HUD’s programs contributed significantly to the achievement of the increases in homeownership; how this contribution is distinct from the significant external factors that affect achievement of this goal remains unexplained.

HUD did not achieve some of its specific programmatic goals. For example, the report cites the Federal Housing Administration (FHA), Government National Mortgage Association (Ginnie Mae), Community Development Block Grant (CDBG), and HOME Investment Partnership Grant programs as supporting HUD’s homeownership objectives, but HUD did not achieve its goals related to those programs. For example, HUD reported that FHA did not meet its planned goal of processing 1.26 million single-family mortgage endorsements; actual performance was 921,283.

Furthermore, Ginnie Mae did not achieve its goal to securitize 95 percent of single-family FHA and Veterans Administration loans; actual performance was 86.2 percent of eligible loans. The report does not attempt to explain the connection between these results, which were less than expected, and the reported increase in the overall homeownership rates.

HUD’s reasons for not achieving some of its goals are inadequate. For example, the reasons given for not meeting some goals appear to conflict with those cited for achieving other homeownership goals. That is, HUD states that part of the reason for not achieving the projected number of endorsements is higher interest rates that reduced demand for FHA- insured loans; lower interest rates were given as a reason for meeting the national homeownership goals stated above. Although this apparent discrepancy may be related to the timing of the analyses or methodological issues, the presentation of the information appears inconsistent, and this inconsistency is not explained.

Other data necessary to evaluate HUD’s contributions toward achieving the outcome are not currently part of the report. For example, the report says that the homeownership goal was met, but it does not mention the specific numeric target of 2.8 million new homeowners since 1998 that the fiscal year 2000 performance plan said was needed to achieve an increase in the national homeownership goal or how HUD’s 2.2 million mortgage endorsements processed since fiscal year 1998 relate to that target. The report also does not present information on factors that negatively affect homeownership, such as defaults or foreclosures, that would help evaluate whether home purchasers are able to retain the homes they buy using HUD’s programs and therefore the extent to which HUD’s programs contribute to increasing homeownership. The report did not make an overall assessment of the impact of its fiscal year 2000 performance on fiscal year 2001 performance; however, it shows that HUD revised some goals for fiscal year 2001 on the basis of its fiscal year 2000 performance.

In the performance report, HUD discusses the programs that support its overall homeownership objective but does not discuss its strategies, plans, actions, or time frames for achieving its unmet goals for fiscal year 2000. The fiscal year 2002 performance plan discusses strategies to increase homeownership that are clear and reasonable and generally describe the intended result. The performance plan also includes strategies that HUD will pursue to help ensure home retention and encourage responsible homeownership, which are important to sustaining homeownership levels, although no specific goals or measures were established related to those initiatives.

Neither the performance report nor the performance plan discussed strategic human capital management or information technology issues as part of HUD’s strategies to address the specific outcome. The performance plan lists various evaluations and research related to the strategic goal to increase the availability of affordable housing, but it does not specifically discuss how those evaluations will be used to identify or improve strategies in the future. This outcome is related to one of HUD’s management challenges, and additional information is discussed under the section on management challenges in this report and in appendix I.

Increased Affordable, Decent, and Safe Rental Housing

HUD’s performance report indicates that it made some progress toward the outcome of increasing affordable, decent, and safe rental housing. However, the report shows that HUD was less successful in demonstrating that it was able to increase the supply of affordable housing relative to the number of people who need it most. The report shows that in fiscal year 2000 HUD was most successful in achieving the output goals that show the units inspected or properties developed. For example, HUD met its goals to (1) increase the share of units that meet physical and financial standards by 1 percent (83 and 85 percent for public housing and multifamily development respectively, exceeding the fiscal year 1999 level of 62.5 and 77.3 percent); (2) develop properties for elderly and disabled households (completing initial closings for 278 properties, exceeding the goal of 226); and (3) process multifamily mortgages (endorsing 579 mortgages exceeding the goal of 400). HUD was less successful in demonstrating results that show how its actions increased the overall quantity of affordable and decent housing compared with the number of low-income households. For example, HUD has five outcome measures related to improving the ratio of affordable units to low-income people, but HUD was either unsuccessful in meeting the targets or does not yet have the data to show the results for the measures. HUD said in the report that the physical quality of rental housing has improved greatly, but it also said that housing has become less affordable overall, particularly for poor households. HUD states that for extremely low-income households, the need for affordable rental housing has actually increased. The explanations given for not meeting the goals varied but were generally reasonable given the significant external factors that also affect achievement of this outcome. For example, two factors that HUD cited were grantees’ changing priorities and rent increases exceeding inflation due to the strong economy.

The reliability of HUD’s data is generally not discussed for any outcome in the performance report; a footnote indicates that data issues are discussed in the annual performance plan. In the introduction to the report, HUD acknowledges that the performance data collection systems and controls over data quality remain areas that needs attention. While we recognize that performance data quality is an area that HUD is addressing, this information does not yet increase our confidence regarding the reliability of the performance data, as discussed in previous reports. We also identified one example where the performance data cited in the report might not be accurate, based on our work in the rental assistance area. The preliminary results of our ongoing work with the Office of Multifamily Housing Assistance Restructuring (OMHAR) indicates that HUD may not have achieved the results it reported for the mark-to-market program in fiscal year 2000. The mark-to-market program, administered by OMHAR, seeks to retain affordable rental housing and reduce Section 8 assistance costs by reducing excessive rental subsidies paid to assisted properties and restructuring their mortgages where appropriate. Under a measure that “seventy-five percent of multifamily mortgages restructured under the Mark to Market program are closed within 12 months of PAE acceptance for restructuring,” HUD reports that during fiscal year 2000 OMHAR exceeded the target by completing deals on 494 properties, or 82.7 percent of the 597 properties eligible for restructuring under the program. However, our analysis of data provided by HUD indicates that OMHAR completed only four mortgage restructurings during fiscal year 2000. Two of these mortgage restructurings were completed within 12 months of acceptance by the participating administrative entities for restructuring. OMHAR may be including rent restructurings (deals in which it reduces property rents to market levels but does not carry out a mortgage restructuring) and rent comparability reviews (activities in which OMHAR determines whether current property rents are above or below market) as part of the totals it is reporting.

The performance report includes an overall discussion of the general strategies, programs, and external factors that affect HUD’s efforts to ensure that affordable rental housing is available for low-income households; but it does not discuss strategies, plans, or timeframes for achieving the specific unmet goals for fiscal year 2000. The report discusses evaluations that HUD has done to improve utilization of Section 8 housing vouchers, accuracy of rent determinations for assisted households, and accuracy of subsidy amounts paid for assisted households. However, the information would have been more useful if HUD specifically discussed how the results of the evaluations would be used to identify or improve strategies for achieving the goals in the future. HUD reports that the studies indicate that (1) further attention by management is necessary to better utilize Section 8 housing vouchers; and (2) HUD continues to pay excess rental subsidies, partly because tenant income is underreported and partly because of errors made by public housing agencies, owners, and agents responsible for program administration.

The fiscal year 2002 annual performance plan discusses HUD’s strategy to strengthen its existing programs and improve usage of Section 8 housing vouchers and public housing capital funds. The specific strategies HUD outlines in the plan support these objectives and the measures related to the outcome, although they do not discuss specific tools or risk assessments that HUD will use to implement the strategies and achieve the objectives. The performance plan refers to HUD’s coordination with other federal agencies to increase affordable rental housing. However, HUD does not discuss specific coordination activities or other agencies’ specific contributions to HUD’s goals. Neither the performance report nor the fiscal year 2002 performance plan discusses human capital and information technology as strategies to achieve this outcome. This outcome is related to one of HUD’s management challenges, and additional information is provided under the section on management challenges in this report and in appendix I.

Improved Community Economic Vitality And Quality of Life

HUD’s performance report indicates that the Department made some progress toward achieving this outcome. For example, HUD reports that it met its goals of increasing jobs and reducing poverty in cities, increasing capital in underserved neighborhoods, reclaiming brownfields (contaminated commercial and industrial land), reducing crime, and targeting grant funds to the most needy. HUD also noted a decrease in the number of “doubly burdened” cities during fiscal year 2000. The number of cities that were experiencing both a population loss and a high poverty rate declined from 1 in 7 in 1999 to 1 in 8 in 2000. However, the report also shows problems with the performance measures and data collected for specific programs that make it difficult for the reader to determine what HUD contributed to the achievement of the goals. HUD reports it does not have data for one performance measure and thus could not report results; two performance measures were related to programs that were never authorized, and HUD did not report results. Even for one measure that HUD achieved, the report notes that the measure was not a reliable indicator of progress because it fluctuates from year to year. HUD reports that half of the selected measures related to this outcome were revised or deleted in future performance plans. Some of the reasons given include that the measures were revised or deleted to eliminate comparisons between cities and suburbs or to improve performance measurement, such as to track performance over a 3-year period to obtain a more reliable indicator of progress. Additionally, HUD’s discussion of external factors notes the significant challenges it faces with this outcome. For example, the economic issues mitigating against this outcome, such as mismatches in the location of jobs and available workers, concentrations of poverty, and grantees’ discretionary use of block grants (they may choose to use the funds in other ways that may not contribute to specific HUD objectives), may affect the results that HUD is able to achieve. The report does not discuss how those problems will be mitigated.

For this outcome, the discussion of the measures more clearly acknowledges data reliability issues and show HUD’s efforts to address them. This may be a result of a report from the OIG in March 2001 that identified several weaknesses in performance data from HUD’s community development programs, among others, which support much of HUD’s effort to improve community economic vitality and quality of life. For example, the OIG reported that projections and estimates were used to formulate program performance measurements rather than actual grantee accomplishments.

In discussing the strategies that support this outcome, the performance report discusses the contributions of some of HUD’s major programs, such as CDBG, Empowerment Zones/Enterprise Communities, FHA, and the Public Housing Drug Elimination Grant Program. As previously discussed, however, it does not address whether and how unmet goals will be achieved. As noted, this may be because about half of the measures will be significantly revised or deleted in future years. The fiscal year 2002 performance plan discusses various strategies to promote relationships with communities, other federal agencies, industry groups, and nonprofit organizations to achieve this outcome, but it does not describe specific tools or means of doing this. For example, the plan includes some strategies that state HUD will encourage communities to address economic issues. The plan does not describe how HUD will do this, even though it notes that HUD’s direct impact on specific and measurable results is somewhat limited. Neither the performance report nor the fiscal year 2002 performance plan discusses human capital and information technology as strategies to achieve this outcome. The plan does not discuss the use of evaluations to identify or improve strategies for achieving future goals.

Less Fraud, Waste, and Error in HUD’s Programs

As we reported last year, HUD’s strategic and annual performance plans do not contain strategic goals or objectives for reducing fraud, waste, and error in HUD programs. However, HUD has a strategic goal to “ensure public trust” to improve its operations and address its management challenges. Under this strategic goal, HUD includes performance measures to achieve more accurate subsidy payments, better data, and better quality housing, thereby reducing fraud, waste, and error. HUD’s progress toward meeting the outcome of less fraud, waste and error during fiscal year 2000 is not clear based on the results for these measures. The performance report shows that HUD met its targets for some significant measures, such as increasing the share of assisted housing units that met HUD housing standards, the number of grantees reviewed, and the reporting of tenant information in a data system. However, the report also shows that HUD did not achieve its goals for other measures, such as setting baselines for reducing the share of public housing and Section 8 units managed by troubled housing authorities, reviewing single-family appraisals, and developing a data quality plan. This information may result in a somewhat more negative view of HUD’s accomplishments in reducing fraud, waste, and error than is warranted because the 1-year assessment does not consider the progress that HUD has made in recent years to overcome some of its long-term management deficiencies, and its plans for future improvements.

The performance report generally provides reasonable explanations of why some goals were not met and how they would be revised in the future. For example, although we report that HUD did not meet several performance measures based on the targets set in the fiscal year 2000 performance plan, HUD reports that it considers the targets “substantially met” because the performance was very close to the target. HUD reported that it “substantially” met the targets for determining the number of public housing units managed by troubled housing authorities, determining the number of multifamily properties with substandard financial management, and matching tenant income data to tax and Social Security records. The report states that these were one-time measures to track the implementation of specific processes designed to improve HUD operations. Because implementation was successful, HUD states that these measures would not be reported on in the future. Additionally, the plan states that some of the measures were dependent upon two of HUD’s assessment activities that were delayed, one of which was delayed at the request of the Congress. The report noted that over half of the performance measures used in fiscal year 2000 would be significantly revised or deleted in 2001 or 2002.

The performance report discusses strategies to achieve HUD’s goal of ensuring public trust and links some of those strategies to the achievement of specific performance measures related to this outcome. It does not, however, specifically address plans and time frames for achieving unmet goals. As stated above, several of the unmet measures were one-time measures to track implementation of systems or processes. A substantial number of others will be revised in future years on the basis of performance or data issues, so there would be no need to discuss strategies for achieving these goals. The performance report includes some human capital and information technology strategies under its discussion of external factors that affect achievement of its efforts to restore public trust. The report notes that HUD will continue implementing a resource estimation and allocation process to aid in managing workload, improve risk-based monitoring techniques, continue to push for simplification of rental subsidy program requirements, and work with HUD managers to ensure that systems requirements and data quality controls are properly established.

The discussion of strategies contained in the 2002 performance plan related to this outcome are somewhat better than those for the other outcomes because they discuss more specific steps to be taken. They also include some actions the Department plans to take if public housing authorities, lenders, or others do not comply with policy. However, we noted that the plan could be improved by including strategies, goals, or measures that would specifically address the prevention and detection of fraud, waste, and errors in HUD programs. This would also include a risk assessment process to identify the most vulnerable programs and institute internal controls to prevent and detect occurrences. The performance plan’s strategies also address some of HUD’s human capital issues, such as training employees, completing its resources estimation and allocation process, developing a long-term staffing strategy to deal with expected retirements, and continuing to develop a performance-based appraisal process. However, the plan does not include measures to determine the effectiveness of those strategies. The strategies also include efforts to improve HUD’s information technology, such as improving equipment for higher productivity, improving data quality, and increasing citizen access to information through electronic means such as HUD’s Web site. Both we and the OIG have raised concerns about HUD’s strategic human capital management and information technology issues, and additional information is provided under the section on management challenges in this report and in appendix I. The annual performance plan lists a number of significant evaluations planned or currently under way pertaining to the goal of ensuring public trust, such as an evaluation of aspects of HUD’s 2020 management reform and efforts to improve the quality of assisted housing. The studies will be useful for evaluating HUD’s overall progress in improving its operations and customer service.

Comparison of HUD’s Fiscal Year 2000 Performance Report and Fiscal Year 2002 Performance Plan With the Prior Year Report and Plan for Selected Key Outcomes

For the selected key outcomes, this section describes major improvements or remaining weaknesses in HUD’s (1) fiscal year 2000 performance report in comparison with its fiscal year 1999 report, and (2) fiscal year 2002 performance plan in comparison with its fiscal year 2001 plan. It also discusses the degree to which the agency’s fiscal year 2000 report and fiscal year 2002 plan address concerns and recommendations by the Congress, GAO, the OIG, and others.

Comparison of Performance Reports for Fiscal Years 1999 and 2000

HUD revised its performance report for fiscal year 2000 consistent with the new format developed for its annual performance plans beginning in fiscal year 2000, which included revised goals, objectives, and many new measures. This improved the linkage to the annual performance plan and, therefore, the readability and clarity in presentation of the fiscal year 2000 performance report, compared with the fiscal year 1999 report. HUD combined the performance report with its fiscal year 2000 annual accountability report, which consolidated a substantial amount of important information on HUD’s operations and activities into one document. The report summarizes HUD accomplishments for each strategic goal and includes discussions of the major programs and the most significant performance measures, general strategies, and external factors that affect the achievement of the strategic goals. The report also includes a summary of the management problems identified by the OIG and HUD’s response to each of the remaining concerns; however, the report includes only a limited discussion of the current management challenges we identified. In our opinion, the performance report could be further improved if it included a discussion of resource issues, an overall assessment of HUD’s progress toward achieving its strategic goals for the fiscal year, and a more specific assessment of the completeness and reliability of performance data.

The performance report did not provide an overall assessment of HUD’s progress toward achieving its strategic goals and objectives for fiscal year 2000. The report shows that HUD did not achieve many of the results expected, but no assessment was made on the significance of not achieving the desired results to the overall achievement of the strategic goals. As discussed above, where targets were not met, usually no explanation was provided of what or whether anything could be done to meet those goals in the future. For example, even in cases where the rise of interest rates or other economic factors were given as reasons for not achieving the desired results, a more comprehensive assessment would have been useful to either identify any other underlying problems or demonstrate that the result was reasonable given the influence of external factors. In general, some insight into what kinds of problems were experienced would be useful to the Congress and other decisionmakers as they consider HUD’s budget and other requests.

Although the performance report made some additional improvements in discussing data issues, more needs to be done to improve the usefulness of the performance information. The Reports Consolidation Act of 2000 requires that the GPRA performance report contain an assessment of the completeness and reliability of performance data. In the introduction to the performance report, HUD states that it needs to focus on improving performance data collection systems and controls over data quality, particularly in the formula and discretionary grant programs. However, the report does not provide an overall assessment of the performance data. The HUD OIG reviewed a sample of the performance data reported in 1999 and found problems with its reliability. We noted examples where the fiscal year 2000 performance report seemed to address the concerns raised by the OIG. For example, the report articulates performance measures for which the results are “snapshots” rather than performance for the complete fiscal year, and are estimates rather than actual performance. However, we identified discrepancies in other information in the report, suggesting that more work remains to be done. For example, as in the OMHAR example discussed above, the data in the report do not agree with other data HUD provided to us. We identified other performance measures in the report where the methodology for charting progress changed or a baseline that was supposed to have been set was not, but no information was provided on why such changes were made or why they were significant.

Comparison of Performance Plans for Fiscal Years 2001 and 2002

The fiscal year 2002 performance plan continues to improve over the 2001 performance plan. HUD revised its fiscal year 2002 performance plan to reflect the updated strategic plan for fiscal years 2000 to 2006, adding one new strategic objective and revising several others to cover the Department’s activities more fully. The plan also includes additional information on the Department’s resources, expands the discussion of evaluations, creates a new type of measure that will be used for monitoring purposes only, and includes information on actions to address HUD’s human capital challenges. For example, the plan refers to research being done on the outcomes in areas of concentrated CDBG investment that will be used to shape the performance measures. The plan also adds a measure that will track implementation of HUD’s resource estimation and allocation process. However, we noted that the discussion of how resources were linked to the achievement of performance goals, the credibility of performance data, and the coordination strategies could be improved. Additionally, goals or measures for HUD’s management challenges would be useful for tracking HUD’s progress toward resolving those specific issues.

In its performance plan, HUD includes a table for each strategic goal that shows the programs, budget authority, and staff levels that HUD estimates generally support the achievement of that goal. Although this table is a step toward showing how budgetary and human resources relate to achieving goals, the information becomes somewhat confusing because HUD also includes a second table for the underlying strategic objectives that conflicts with the first table. For example, one table shows that HUD allocated $1.585 billion of CDBG funds to the overall strategic goal of increasing the availability of decent, safe, and affordable housing in fiscal year 2002. A table for an underlying objective to increase homeownership shows that an estimated $4.802 billion of CDBG funds is allocated to achieve the homeownership objective in fiscal year 2002. Hence, it seems that the underlying objective requires a larger portion of the budget than the primary strategic goal that it supports. A footnote for this table indicates that allocations at the underlying objective level are not currently available; but the table would have been clearer if HUD either used the estimated allocations by program that were in the first table, or left out the information completely until better estimates can be developed.

As discussed above, HUD has made it a priority to address the reliability of its performance data. Although the plan continues to improve the discussion of limitations to the performance data and discusses HUD’s plans to improve its data quality, data credibility is an area we will continue to monitor. HUD also notes that it has plans to review concerns about performance measure data in response to a recommendation by the National Academy of Public Administration. In a July 1999 study of HUD’s compliance with GPRA, the Academy recommended that HUD develop a plan that outlines a clear, departmentwide data quality goal with minimally acceptable data quality standards for key elements, such as timeliness, reliability, and accuracy. The Academy noted that the HUD’s quality assurance approach did not have data quality standards, a plan for verifying data quality, or assigned roles and responsibilities for those involved in the quality work.

We have previously discussed with HUD the usefulness of including goals and performance measures in the performance planning documents that show HUD’s progress toward resolving its management challenges. The 2002 annual performance plan takes steps toward this by adding measures and strategies that address some aspects of the management challenges, but goals or measures that focus on the specific challenges that we and the OIG have identified would be useful. For example, we have identified HUD’s single-family insurance program and rental assistance programs as high risk. Measures designed to address HUD’s progress on the issues related to the challenges, such as monitoring lenders, overseeing appraisers, managing single-family properties, or reducing excess subsidy payments, would be useful in assessing HUD’s progress toward resolving the management challenges.

The one area in which HUD appears to have weakened since the 2001 performance plan is in its coordination with other federal agencies. The 2002 performance plan does not discuss some coordination activity that was in the 2001 report. For example, under the objective to increase homeownership, HUD does not mention its coordination with the Department of Agriculture’s (USDA) or the Veterans Administration’s housing programs. Also, we reported on the overlap between USDA’s Rural Housing Service and FHA’s single and multifamily programs and suggested that Congress consider requiring the two agencies to examine the benefits and costs of merging those programs. In its response to our report, HUD disagreed with the suggestion to merge the single family programs but said opportunities to improve delivery of rural housing services should be explored. These activities are not discussed in the performance plan. Additionally, some indicators that were previously identified as potential interagency indicators are not so designated in the 2002 performance plan. The plan does not provide information on HUD’s reason for dropping these items or discuss the impact, if any, on HUD’s achievement of its goals. We have also reported on the importance of interagency coordination on community growth issues and that opportunities exist for federal agencies to improve their coordination. We reported that the large number of federal programs that fund economic development activities and the large number of federal agencies that administer the programs can reduce communities’ flexibility in pursuing reinvestment projects. HUD’s programs were among those most frequently mentioned as helpful to community revitalization, but the plan makes limited mention of HUD’s coordination activity with other agencies on these interagency issues. In general, even where coordination activity is discussed, the plan does not discuss the specific contribution of other agencies to the achievement of HUD’s goals.

HUD’s Efforts to Address its Major Management Challenges Identified by GAO

We have identified two governmentwide high-risk areas: strategic human capital management and information security. Regarding human capital, we found that the fiscal year 2000 performance report does not explain HUD’s progress in resolving human capital challenges. However, it does provide information on the steps HUD is taking to implement a resources estimation and allocation process and develop a framework to begin addressing human capital issues. We found that HUD’s fiscal year 2002 annual performance plan does not include specific goals or measures to address strategic human capital management; however, it has three performance measures pertaining to human capital issues. These three measures are that (1) HUD employees are more satisfied with the Department’s performance and work environment, (2) HUD will implement the new resource estimation and allocation process, and (3) HUD will improve the diversity of the workforce. With respect to information security, the agency’s performance report discusses the status of a new Enterprise Security Program that the Chief Information Officer is creating. The report states that this program will provide adequate security measures and safeguards to protect information resources from unauthorized access, use, modification, and disclosure. Although the performance report does not specifically address this high-risk area, it states that during fiscal year 2000, HUD developed policies, wrote a handbook, and created a training program for a Critical Infrastructure Assurance program. We found that HUD’s performance plan does not have goals and measures associated with information security, although we have had open recommendations on this issue since 1994.

In January 2001, we reported on three long-standing, major management challenges facing HUD. We concluded that continued improvements were needed to reduce HUD’s single-family insurance risk and to ensure that HUD’s rental housing assistance programs are used effectively and efficiently. We designated these two programs as high-risk areas for HUD. We also reported that HUD needs to resolve its information and financial management systems and human capital issues. In reviewing HUD’s fiscal year 2000 annual performance report, we found that the report does not provide goals or measures for addressing the management challenges we identified, but it does state that the high-risk areas are a top priority for the Secretary. The report also includes some measures that relate to the issues we have raised in the single-family, rental assistance, and financial management systems and human capital areas. For example, the report has measures to increase the use of loss mitigation tools to reduce the number of foreclosures (which reduces FHA’s insurance costs) and to increase the net recovery on sales of single-family real estate owned. However, the report does not include goals or measures related to other aspects of the single-family program that we have been concerned about, such as lender oversight. Two of these management challenges are related to outcomes discussed in this report (increased homeownership and increased affordable, decent, and safe rental housing).

HUD’s fiscal year 2002 performance plan does not contain goals and measures to resolve the three management challenges we identified; however, the plan contains some measures related to aspects of the single- family, rental assistance, and information and financial management and human capital issues. For example, for the rental assistance management challenge, the public trust strategic goal includes measures to increase the share of assisted housing units that meet physical and financial standards and to improve tenant income verification. The performance plan also includes a separate section under its public trust strategic goal that discusses HUD’s management challenges. The section discusses the management challenges identified by us and states that addressing the long-standing management challenges is a top priority for the Secretary in fiscal year 2002. It also discusses HUD’s recent progress and the activities planned or being implemented that are expected to yield future improvements. The plan notes that the Department has corrective action plans to address the management challenges identified by us. It also states that HUD will use the performance measures established for its strategic goal of ensuring public trust to track the results of its management improvements and identify where further improvements are needed, although it does not identify those measures. However, as discussed above, strategies, goals, or measures specific to resolving the management challenges would improve the plan. See appendix I for a summary of the major management challenges and related measures.

Conclusions

HUD prepared a performance report that is much improved from last year and made additional improvements to its fiscal year 2002 performance plan. Generally, the documents are understandable and well organized. However, HUD did not achieve all of the performance measures for the four key outcomes. For some performance measures that were achieved, specifically for the homeownership outcome, the report did not clearly explain how HUD’s programs contributed to achieving its goals, given the significant external factors discussed. The report would be more useful to Congress and other decisionmakers if it more clearly articulated HUD’s overall progress toward achieving its goals, including identifying the specific contributions it makes distinct from external factors or other contributors. HUD has continued to revise and improve the performance plan; but the quality of strategies for achieving goals varied by outcome and generally did not include strategies to mitigate the external factors, resource information was somewhat confusing, and some coordination discussions from prior years were eliminated. The performance plan would benefit from further discussion of HUD’s strategies for achieving the goals; the estimated resources needed to achieve the goals; and coordination with external partners, specifically other federal agencies. Although the plan and report discuss HUD’s management challenges and contain some performance measures that pertain to those challenges, developing specific performance measures and strategies would serve to focus HUD’s efforts to improve its management and ensure accountability in its programs. The performance plan would be more useful if it included goals, measures, and strategies to address HUD’s management challenges and its efforts to reduce fraud, waste, and error, along with a risk assessment process to identify the programs most vulnerable to fraud, waste, and error. Finally, the report includes statements about HUD’s plans and efforts to improve the accuracy of its data. To increase confidence that the results HUD reported accurately and fairly represent its achievements and to fully comply with the Reports Consolidation Act, the performance report should contain a specific assessment of the completeness and reliability of HUD’s performance data.

Recommendations for Executive Action

We recommend that the Secretary of Housing and Urban Development consider the following improvements to future performance plans and reports: Include sufficient information in the performance report to evaluate HUD’s accomplishments, including an overall assessment of HUD’s progress toward achieving its goals, identification of HUD’s specific contributions to achieving the goals, and determination of the contributions of other entities to HUD’s goals.

Continue improving the performance plan by better estimating the resources necessary to achieve the goals, articulating strategies to achieve the goals and mitigate the problems encountered, and further discussing coordination strategies with other federal agencies. Include sufficient goals, measures, and strategies to demonstrate HUD’s efforts and progress in addressing its management challenges. In support of HUD’s efforts to continue improving its management, future performance plans would benefit from the inclusion of goals, measures, or strategies to assess the prevention and detection of fraud, waste, and error, as well as a risk assessment process to identify the most vulnerable programs. Include an assessment of the completeness and reliability of performance data that clearly articulates the implications of relying on that data to evaluate HUD’s achievements.

Scope and Methodology

As agreed, our evaluation was generally based on the requirements of GPRA; the Reports Consolidation Act of 2000; guidance to agencies from the Office of Management and Budget (OMB) for developing performance plans and reports (OMB Circular A-11, Part 2); previous reports and evaluations by us and others; our knowledge of HUD’s operations and programs; our identification of best practices concerning performance planning and reporting; and our observations on HUD’s other GPRA- related efforts. We also discussed our review with the HUD’s OIG and obtained written comments from HUD. The agency outcomes that were used as the basis for our review were identified by the Ranking Minority Member of the Senate Committee on Governmental Affairs as important mission areas for the agency, and three of the four reflect the outcomes for HUD’s major programs or activities. The major management challenges confronting HUD, including the governmentwide high-risk areas of strategic human capital management and information security, were identified by us in our January 2001 Performance and Accountability Series and High-Risk Update. HUD’s OIG identified its top management challenges in December 2000. We did not independently verify the information contained in the performance report and plan, although we did draw from our other work for assessing the validity, reliability, and timeliness of HUD’s performance data. We conducted our review from April 2001 through June 2001 in accordance with generally accepted government auditing standards.

Agency Comments

We provided HUD a draft copy of this report for review and comment. HUD generally agreed with the information presented in our report. Overall, HUD found the report to be balanced and useful for both recognizing the significant progress that the Department has made and pointing out areas where more progress is needed. In general, HUD concurred with the need for further analysis of the Department’s role in meeting specific performance indicators, as well as larger strategic objectives and goals, specifically in the homeownership area, and with the need to develop more representative performance measures, without necessarily increasing the total number of indicators. While agreeing with most of the report, HUD identified some areas that it believed should be clarified. For example, HUD disagreed with our statement that it generally did not provide strategies for achieving its unmet homeownership goals because some of the goals were not achieved for reasons beyond their control and some information on prospective strategies that would address the issue was discussed. We clarified the report to address most of the issues that were raised by HUD. In addition, we incorporated HUD’s technical comments where appropriate. HUD’s comments and our detailed responses are in appendix II.

As arranged with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after the date of this letter. At that time, we will send copies to appropriate congressional committees; the Secretary, Department of Housing and Urban Development; and the Director, Office of Management and Budget. Copies will also be made available to others upon request.

If you or your staff have any questions, please call me at (202) 512-7631. Key contributors to this report were Shirley L. Abel, Steven L. Cohen, Jeannie B. Davis, Mark H. Egger, David G. Gill, Danielle P. Hollomon, Bonnie J. McEwan, Sally S. Moino, John T. McGrail, and Kirk D. Menard.

Appendix I: Observations on the Department of Housing and Urban Development’s Efforts to Address Its Major Management Challenges

The following table identifies the major management challenges confronting the Department of Housing and Urban Development (HUD), which includes the governmentwide high-risk areas of human capital and information security. The first column lists the management challenges that we and/or HUD’s Office of Inspector General (OIG) have identified. The second column discusses the progress, as discussed in its fiscal year 2000 performance report, HUD made in resolving its challenges. The third column discusses the extent to which HUD’s fiscal year 2002 performance plan includes performance goals and measures to address the challenges that we and HUD’s OIG identified. We found that HUD’s performance report discusses the management challenges identified by the OIG, as authorized by the Reports Consolidation Act, but does not specifically discuss the agency’s progress in resolving the management challenges we identified in January 2001, other than to note that they were a high priority for HUD management. Of the agency’s 15 management challenges, its performance plan had measures that were directly related to 10 of the challenges, had measures that were indirectly applicable to 2 challenges, and had no goals or measures related to 3 other challenges.

Appendix II: Comments from the Department of Housing and Urban Development

The following are GAO’s comments on the Department of Housing and Urban Development’s letter dated June 21, 2001.

GAO’s Comments

1. To address HUD’s concerns that our statements about strategic human capital management and information technology strategies appear contradictory, we clarified the report to emphasize that strategic human capital management and information technology were not discussed as strategies related to the programmatic outcomes selected for this review. However, we recognize they are discussed as part of HUD’s efforts to address its management challenges and achieve its goal of ensuring public trust as shown in other parts of the performance report. 2. We believe the report recognizes that HUD has included strategies and performance measures that address aspects of reducing fraud, waste, and error in its programs, and our analysis of HUD’s progress included most of the measures HUD cites in its letter. Our intent was not to say that HUD did not have such measures but that our analysis indicated that the results did not present a clear picture of HUD’s progress toward achieving this outcome. Our analysis of the selected measures, including most of those mentioned in HUD’s comments, showed that for all but five, HUD set baselines, modified the measure, did not achieve the results expected, or will not set baselines until fiscal year 2002 so that performance related to those measures can not yet be assessed. We clarified the report to emphasize that HUD’s progress toward reducing fraud, waste, and error is not clear based on the results reported as of fiscal year 2000. However, as stated in our report, we believe that the strategies, goals, and measures, (and therefore the plan) could be improved by specifically including a focus on preventing and detecting fraud and errors. Additionally, this would be in line with our requester’s interest in seeing an outcome related to reducing fraud, waste, and error in HUD programs. This report contains a reference to our exposure draft on this subject; we have agreed to discuss with HUD ways of developing goals and measures that more specifically measure HUD's progress in reducing fraud, waste, and error in future performance plans. 3. We recognize that in some places the performance report notes where unmet measures would be revised or deleted, or other actions would be taken in the future, although we did not specifically list all of those situations. However, there are also places where unmet goals provide the opportunity to evaluate HUD’s performance and future actions, particularly where significant external factors affect its ability to achieve its goals as planned. These external factors do not release HUD from the responsibility to develop strategies to mitigate the extent of those external factors or to determine whether or how the goals and measures should be revised to compensate for those factors. In fact, the extensive external factors the Department faces (also see comment 4) in trying to achieve its goals make it especially important that HUD have these strategies to address its unmet goals, and evaluations may be useful for that purpose. This comment specifically refers to our observation about the homeownership outcome for which HUD notes the external factors are particularly complex. 4. We agree that the issue of determining the impact of an agency’s role in achieving goals for which there are many external partners and economic influences is complex. We have agreed to discuss this issue with HUD, and we also encourage the Department to consult with OMB and the Congress on the most appropriate strategies and means for the Department to measure the impact of its programs. (See also comment 3.) 5. We appreciate the Department’s concerns about accurately portraying data reliability issues, and we clarified the discussion to (1) emphasize that HUD also recognizes that more work remains to be done in this area, and (2) this is one example of our concerns. However, we did not change the example because the performance report does not explain the substantial difference between what the measure says it will achieve and the results reported. The report is written in such a way that only those familiar with this program would detect the discrepancy and understand the possible reason for the difference. Until we are assured that the performance reports show results based on accurate data for all the key outcomes and that the results presented are a fair representation of HUD’s activities, we will continue to report concerns about the reliability of the performance data. 6. We clarified the report, where appropriate, to make it clear in the examples cited that we are not saying that HUD did not achieve specific numeric goals but that HUD did not achieve its goals to set baselines in fiscal year 2000 as planned. For the purposes of our analyses, we considered a goal to set a baseline by the same criteria as other measures that were to achieve a specific numeric target. We believe this is an important issue because until baselines are set, HUD cannot measure its progress toward achieving its goals. 7. The intent of our observation was not necessarily to recommend that HUD develop more measures but develop goals and measures that focus more on resolving the specific management challenges. We clarified the report to emphasize that the goal is to develop measures that effectively address the specific management challenges. We have agreed to consult with HUD on possible ways of developing goals and strategies that reflect the management challenges; but we also suggest that HUD consult with the Congress and OMB on this issue, particularly since OMB’s Circular A-11 requires goals that address agency management challenges. Such goals, according to OMB, often will be expressed as milestone events for specific remedial steps. 8. We clarified our report to note that the performance report includes measures that relate to aspects of HUD’s 2020 Management Reform, such as for the new centers, but it generally does not include goals that relate to the specific issues raised by the OIG. 9. Our observation on HUD’s performance measure to obtain clean audit opinions was included in the report to explain why we did not include this measure in our analysis of HUD’s efforts to address its management challenge related to financial systems. Although we do not consider it a measure that helps evaluate HUD’s progress toward improving its systems or addressing it management challenges, this should not be construed as a criticism of HUD’s decision to include the measure in its GPRA documents, if it finds the measure useful. Achievement of a clean audit opinion is an important milestone; however, until HUD addresses the Inspector General’s concerns about HUD's integrated financial management systems and FHA’s general ledger, it will not be in a position to provide reliable, timely information on a day-to-day basis to support ongoing management and accountability.