Project-Based Rental Assistance:

HUD Should Streamline Its Processes to Ensure Timely Housing Assistance Payments

GAO-06-57: Published: Nov 15, 2005. Publicly Released: Dec 15, 2005.

Additional Materials:

Contact:

Mathew J. Scire
(202) 512-6878
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

The Department of Housing and Urban Development (HUD) provides subsidies, known as housing assistance payments, under contracts with privately owned, multifamily projects so that they are affordable to low-income households. Project owners have expressed concern that HUD has chronically made late housing assistance payments in recent years, potentially compromising owners'ability to pay operating expenses, make mortgage payments, or set aside funds for repairs. GAO was asked to discuss the timeliness of HUD's monthly housing assistance payments, the factors that affect payment timeliness, and the effects of delayed payments on project owners.

From fiscal years 1995 through 2004, HUD disbursed three-fourths of its monthly housing assistance payments on time, but thousands of payments were late each year, affecting many property owners. Over the 10-year period, 8 percent of payments were delayed by 2 weeks or more. Payments were somewhat more likely to be timely in more recent years. The process for renewing HUD's subsidy contracts with owners can affect the timeliness of housing assistance payments, according to many owners, HUD officials, and contract administrators that HUD hires to work with owners. HUD's renewal process is largely a manual, hard-copy paper process that requires multiple staff to complete. Problems with this cumbersome, paper-intensive process may delay contract renewals and cause late payments. Also, a lack of systematic internal processes for HUD staff to better estimate the amounts that HUD needs to obligate to contracts each year and monitor contract funding levels on an ongoing basis can contribute to delays in housing assistance payments. Although HUD allows owners to borrow from reserve accounts to lessen the effect of delayed housing assistance payments, 3 of 16 project owners told GAO that they had to make late payments on their mortgages or other bills--such as utilities, telephone service, or pest control--as a result of HUD's payment delays. Owners who are heavily reliant on HUD's subsidy to operate their properties are likely to be more severely affected by payment delays than other, more financially stable, owners. Owners reported receiving no warning from HUD when payments would be delayed, and several told GAO that such notification would allow them to mitigate a delay. Nonetheless, project owners, industry group officials, and HUD officials generally agreed that late housing assistance payments would be unlikely to cause an owner to leave HUD's housing assistance programs, because such a decision is generally driven primarily by local market factors.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: As of September 2010, HUD had not completed its efforts to streamline and automate the contract renewal process, although it had taken some steps and had additional efforts underway. HUD's interim steps included consolidating its accounting system and migrating approximately 4,500 project-based contracts from traditional to project-based contract administrators. HUD also was in the beginning stages of contracting for a business process reengineering project that would implement an integrated budget forecasting model and recommend workflow management improvements. However, the improvements that HUD described would not necessarily include automating the contract renewal process, and HUD did not have a firm date for completing this project.

    Recommendation: To improve the timeliness of housing assistance payments and mitigate the effects on owners when payments are delayed, the Secretary of Housing and Urban Development should streamline and automate the contract renewal process to prevent processing errors and delays and eliminate paper/hard-copy requirements to the extent practicable.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: According to HUD's FY09 budget request, during 2007, HUD employed an outside contractor to conduct a clean-up and analyze all of the project-based rental assistance contracts. As a result of this analysis, HUD believes that it will be able to incrementally fund all program contract renewals through fiscal year 2009 and into the first 2 months of fiscal year 2010. Moreover, the improved contract data will help HUD project future program needs by providing verified data for contract funding dates, renewal dates, and monthly costs. HUD plans to maintain and update this data.

    Recommendation: To improve the timeliness of housing assistance payments and mitigate the effects on owners when payments are delayed, the Secretary of Housing and Urban Development should develop systematic means to better estimate the amounts that should be allocated and obligated to project-based housing assistance payment contracts each year, monitor the ongoing funding needs of each contract, and ensure that additional funds are promptly obligated to contracts when necessary to prevent payment delays.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Not Implemented

    Comments: As of September 2010, HUD had not implemented a method to notify owners if their housing assistance payments were likely to be late. HUD was in the preliminary stages of contracting for a business process reengineering project that is intended to develop a series of tools for improving the budget and funding functions of project-based rental assistance programs. The planned tools would include the capability to promptly identify cases where a payment is anticipated to be late and automatically generate an e-mail alerting the project owner affected. HUD did not have a firm date for completing this project. In the interim, budget and funding staff monitor the payment portfolio monthly to assure adequate funding or allocate additional funding as needed.

    Recommendation: To improve the timeliness of housing assistance payments and mitigate the effects on owners when payments are delayed, the Secretary of Housing and Urban Development should notify owners if their monthly housing assistance payments will be late and include in such notifications the date by which HUD expects to make the monthly payment to the owner.

    Agency Affected: Department of Housing and Urban Development

 

Explore the full database of GAO's Open Recommendations »

Aug 1, 2014

Mar 31, 2014

Mar 27, 2014

Mar 18, 2014

Feb 6, 2014

Jan 30, 2014

Jan 28, 2014

Oct 22, 2013

Aug 8, 2013

Looking for more? Browse all our products here