Recommendation: In order for HUD to fully account for unexpended balances in its funding requests, the Secretary of Housing and Urban Development should (1) develop systems that routinely provide timely, reliable information on the status of unexpended funds for the purpose of quantifying the amount available for recapture or recission, (2) routinely incorporate this information into the management and operation of programs, and (3) consistently use this information in formulating its budget request, clearly demonstrating how it is taking these balances into account when setting forth its budget needs.

Agency Affected: Department of Housing and Urban Development

Status: Closed - Implemented

Comments: In response to this recommendation, HUD said that it already had sufficient systems to identify unexpended balances and that spending scarce resources on new systems was not needed. However, HUD did agree that the quality of the data in its systems needed improvement. GAO's position on HUD's response was that HUD did not necessarily require new systems to quantify unexpended balances but that it needed to better utilize its existing systems and take steps to ensure the quality of the data in them. Since then, HUD has taken significant action on both fronts, which has enabled it to incorporate information on unexpended balances into the management and operation of programs and to take unexpended balances into account in setting forth budget needs. For example, HUD has undertaken initiatives to improve the accuracy and timeliness of the information in numerous program databases. Additionally, at monthly management meetings, HUD's Assistant Secretaries now receive unexpended balance reports to facilitate monitoring of fund utilization rates and spendout delays in the programs within their jurisdiction. HUD has also set fund utilization time limits by moving from no-year to multi-year funding for several programs that historically have had large unexpended balances. Furthermore, HUD now reconciles Section 8 program reserve and contract term data to help identify funds for recapture. Finally, HUD in recent years has consistently recaptured unutilized funds to offset its budget requests in the Certificate Fund, which accounts for over half of its annual budget. Overall, HUD's unexpended funds balance (adjusted for reserves) declined from $137.9 billion in fiscal year 1998 to $101 billion in fiscal year 2002, and is estimated to drop to $86.6 billion in fiscal year 2004.