Section 8 Tenant-Based Housing Assistance:

Opportunities to Improve HUD's Financial Management

RCED-98-47: Published: Feb 20, 1998. Publicly Released: Feb 20, 1998.

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Pursuant to a congressional request and a legislative requirement, GAO: (1) reviewed the accuracy of the Department of Housing and Urban Development's (HUD) estimate of unexpended budget authority in the Section 8 tenant-based program; and (2) assessed HUD's budget formulation process for this program.

GAO noted that: (1) in 1997, HUD estimated that $20.7 billion in unexpended budget authority existed in the Section 8 tenant-based program and that $9.9 billion of that amount was in excess to known program needs; (2) this is funding that housing agencies received under contracts with HUD but did not expend because the funding was not needed as planned to make housing assistance payments to landlords on behalf of low-income families; (3) because HUD based its estimate largely on the data in its tenant-based program's information system--which HUD's Office of Inspector General and an independent audit firm have tested and determined to be reliable--GAO believes that the estimate is reasonably accurate; (4) after Congress rescinded a total of $4.2 billion in June and October 1997 and HUD set aside $2.2 billion for unanticipated costs and to account for future transactions, the balance of $9.9 billion in excess unexpended budget authority was reduced to about $3.5 billion in October 1997 and placed in a congressionally established Reserve Preservation Account; (5) the budget information process that HUD used to prepare its fiscal year (FY) 1998 budget request for renewing Section 8 tenant-based contracts did not produce an accurate estimate of needs; (6) key HUD offices did not adequately oversee critical steps in the process, and the process did not require reasonable justification for substantial portions of the estimate--including several hundred million dollars proposed for contingency costs; (7) in addition, although at the time of its FY 1998 budget submission HUD had an estimate of the impact of welfare reform on the cost of the Section 8 program, more recent information caused HUD to conclude that including this estimate in the budget request was necessary; (8) as a result, HUD eventually lowered by $1 billion its FY 1998 budget estimate for renewing Section 8 contracts; and (9) to improve its process, HUD has further enhanced its tenant-based program's information system, consolidated its budget development with strategic planning and financial management, and changed its budget process; HUD also plans additional changes in these areas but does not have a timetable for accomplishing them.

Recommendations for Executive Action

  1. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To improve HUD's fiscal responsibility to the Section 8 program and to ensure that Congress is adequately informed about the amount of excess unexpended budget authority at HUD in the future, the Secretary of Housing and Urban Development should direct the Office of the Chief Financial Officer to modify the agency's consolidated financial statements so that they: (1) identify the portions of the unexpended appropriations for the Section 8 program that accrued during the year and are attributable to the tenant-based and project-based programs, respectively; and (2) disclose the amounts of budget authority in each program that are excess to current needs and therefore available for other uses.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To improve HUD's fiscal responsibility to the Section 8 program and to ensure that Congress is adequately informed about the amount of excess unexpended budget authority at HUD in the future, the Secretary of Housing and Urban Development should include in HUD's annual budget justification documents the amount of unexpended budget authority in the Section 8 assisted housing program that is in excess of current obligations and recapture amounts that accumulate above what is prudently needed to address contingent costs.

    Agency Affected: Department of Housing and Urban Development

 

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