Pursuant to a legislative requirement, GAO reviewed the Department of Housing and Urban Development's (HUD) financial management of the Section 8 rental assistance program, focusing on: (1) the amount of excess budget authority in the Section 8 Moderate Rehabilitation (MOD REHAB) Program and how HUD estimated this amount; (2) the accuracy of HUD's estimate; and (3) HUD's plans for recapturing this excess budget authority from housing agencies.

GAO noted that: (1) in January 1998, HUD estimated that the amount of excess budget authority in the Section 8 MOD REHAB Program before necessary adjustments was $814 million; after subtracting amounts required to cover future requirements and contingencies, HUD estimated that $439 million could be recaptured from the housing agencies that the Department contracts with to administer the program; (2) HUD estimated these amounts after first addressing certain known problems with the data in its information system and then comparing the level of unspent program funds at each participating housing agency with that agency's future need for funding under its current contract with HUD; (3) GAO cannot determine the accuracy of HUD's estimate of excess budget authority in the Section 8 MOD REHAB Program at this time because HUD has neither completed identifying and correcting discrepancies in its data on the program nor tested the reliability of the data it used to estimate the excess budget authority; (4) because HUD still is not confident that its program data are sufficiently accurate, the Department plans to require its field staff to identify and address discrepancies in the accuracy of contract data and to work with a contractor to further address the data's problems on-site at housing agencies; (5) HUD officials do not expect these data cleanup efforts to be completed before the end of fiscal year 1998; (6) HUD plans to require its contractor to perform a statistically valid test of the accuracy of its information system; (7) although HUD plans to recapture the excess budget authority in the Section 8 MOD REHAB Program, the Department has not finalized its approach or timeframe to accomplish this task; (8) in addition to completing the planned data cleanup efforts in the field, HUD must also develop and test the formula it will use to recapture the excess budget authority from the housing agencies' accounts; (9) while some factors in the formula are not within HUD's discretion to change, policy decisions still need to be made to define other factors; (10) for example, HUD may decide that it does not need to leave as much excess budget authority in the housing agencies' accounts to cover contingencies as it originally had estimated in January 1998; (11) therefore, the actual amount recaptured from housing agencies and available for rescission by Congress may change and perhaps be more than the estimated amount in HUD's January 1998 analysis; and (12) HUD officials could not provide GAO with a firm estimate of when the Department will finalize its recapture plan and could not predict a date of completion.