Rural Housing Service:
Additional Actions Would Help Ensure Reasonableness of Rental Assistance Estimates
GAO-17-725: Published: Sep 13, 2017. Publicly Released: Sep 13, 2017.
Additional Materials:
- Highlights Page:
- Full Report:
- Accessible Version:
Contact:
(202) 512-8678
garciadiazd@gao.gov
Office of Public Affairs
(202) 512-4800
youngc1@gao.gov
What GAO Found
An interplay of three primary factors contributed to the funding gaps that the rental assistance program of the U.S. Department of Agriculture's Rural Housing Service (RHS) faced in fiscal years 2013–2015:
- Fiscal year 2013 sequestration and rescissions. An across-the-board cancelation of budgetary resources in March 2013 decreased the program's approximately $907 million budget by about $70 million.
- Unreliable methods for estimating rental assistance costs. RHS used a state-wide, per-unit average cost to calculate rental assistance agreement amounts. This resulted in some properties receiving more funds than needed, tying up funds that could have been used for other properties.
- Limited management flexibility. RHS had limited ability to adjust its program management to help prevent funding gaps. For example, RHS does not have authority to fund agreement renewals for less than 1 year.
RHS took steps to mitigate the effects of the funding gaps on property owners, but some had negative consequences. For example, to cover fiscal year 2014–2015 gaps, RHS used unexpended rental assistance funds from properties that had exited the program. But, as a result, the program lost the associated rental assistance units and RHS could not re-assign the units to other properties.
RHS has taken steps under its existing authorities to help prevent future funding gaps but lacks certain plans and controls to help ensure its estimates of rental assistance costs are reasonable. In fiscal year 2016, RHS began using a new cost model integrated with its program information system that more accurately estimates rental assistance agreement renewals. For instance, the model estimates renewal costs based on property-level data rather than state-wide averages. RHS also began including estimates of agreements that would need two renewals in the same fiscal year (a number of which are to be expected) in budget requests. But, GAO found weaknesses in aspects of RHS's budget estimation and execution of rental assistance. Specifically, RHS:
- does not have a plan for ongoing monitoring or testing of the new estimation method. Federal internal control standards call for management to establish monitoring activities and evaluate results.
- lacks controls to detect misestimates of rental assistance, a problem RHS experienced during early use of the model. Federal internal control standards call for control activities for information systems to respond to risks.
- has not used the appropriate inflation rates in its budget estimates since fiscal year 2009. Office of Management and Budget guidance states budgets should be consistent with the economic assumptions it provides.
- has not provided staff guidance on their responsibilities for determining whether properties' rental assistance should be renewed. Federal internal control standards call for documenting responsibilities through policies.
The weaknesses may exist partly because RHS continues to refine its estimation method, which has been in effect for about 2 years. By addressing them, RHS would have greater assurance that it will develop the best possible estimates.
Why GAO Did This Study
RHS provides about $1.4 billion annually in rental subsidies to owners of multifamily housing for more than 270,000 low-income rural households. RHS's agreements with property owners provide rental assistance payments estimated to last 1 year. In fiscal years 2013–2015, RHS was unable to renew all its agreements because it ran out of funds. For example, in fiscal year 2015, the funding gap was about $97 million. As a result, some property owners' rental assistance payments were delayed.
GAO was asked to examine the reasons why RHS ran out of funds and how RHS plans to improve its budget requests. This report examines (1) reasons RHS ran out of funds for renewing rental assistance agreements in fiscal years 2013–2015 and how it responded, and (2) what RHS has done to help prevent future funding gaps and the extent to which it has addressed related budgetary issues. GAO analyzed RHS budget and rental assistance data for fiscal years 2011–2016, reviewed RHS policies and procedures, and interviewed RHS national office officials and staff from15 (of 47) randomly selected state offices.
What GAO Recommends
GAO recommends that RHS develop plans for testing rental assistance estimation methods, develop estimation controls, create controls to ensure use of appropriate assumptions in budget requests, and provide guidance on reviews of rental assistance renewals. RHS did not comment on GAO's recommendations.
For more information, contact Daniel Garcia-Diaz at (202) 512-8678 or garciadiazd@gao.gov.
Recommendations for Executive Action
Status: Open
Comments: In June 2019, RHS said that implementing the recommendation would require information technology funding.
Recommendation: The Administrator of RHS should develop and implement a plan for ongoing monitoring, including testing and evaluation, of the obligation tool using relevant data. (Recommendation 1)
Agency Affected: Department of Agriculture: Rural Housing Service
Status: Open
Comments: In June 2019, RHS said that implementing the recommendation would require information technology funding.
Recommendation: The Administrator of RHS should develop controls to check the reasonableness of rental assistance agreement amounts calculated by the obligation tool. (Recommendation 2)
Agency Affected: Department of Agriculture: Rural Housing Service
Status: Open
Comments: In June 2019, RHS said it would incorporate the recommended controls into the fiscal year 2021 budget cycle.
Recommendation: The Administrator of RHS should develop controls to ensure that RHS uses the inflation rates from the President's economic assumptions in developing budget estimates. (Recommendation 3)
Agency Affected: Department of Agriculture: Rural Housing Service
Status: Open
Comments: In June 2019, RHS said it was working toward providing the recommended guidance to Rural Development state offices.
Recommendation: The Administrator of RHS should provide guidance to Rural Development state offices that specifies that prior to obligating funds, staff are to review information related to a property's mortgage servicing status. (Recommendation 4)
Agency Affected: Department of Agriculture: Rural Housing Service
Explore the full database of GAO's Open Recommendations
»
Dec 16, 2020
-
Lead Paint in Housing:
HUD Has Not Identified High-Risk Project-Based Rental Assistance PropertiesGAO-21-55: Published: Dec 16, 2020. Publicly Released: Dec 16, 2020.
Dec 15, 2020
-
Disaster Housing:
Improved Cost Data and Guidance Would Aid FEMA Activation DecisionsGAO-21-116: Published: Dec 15, 2020. Publicly Released: Dec 15, 2020.
Dec 8, 2020
-
Troubled Asset Relief Program:
Treasury Continues Winding Down Housing ProgramsGAO-21-39: Published: Dec 8, 2020. Publicly Released: Dec 8, 2020.
Aug 13, 2020
-
Homelessness:
Better HUD Oversight of Data Collection Could Improve Estimates of Homeless PopulationGAO-20-433: Published: Jul 14, 2020. Publicly Released: Aug 13, 2020.
Jul 29, 2020
-
Crumbling Foundations:
Extent of Homes with Defective Concrete Is Not Fully Known and Federal Options to Aid Homeowners Are LimitedGAO-20-649: Published: Jul 29, 2020. Publicly Released: Jul 29, 2020.
Jul 27, 2020
-
Housing:
Preliminary Analysis of Homeownership Trends for Nine CitiesGAO-20-544R: Published: Jun 25, 2020. Publicly Released: Jul 27, 2020.
Jun 26, 2020
-
Rental Housing:
As More Households Rent, the Poorest Face Affordability and Housing Quality ChallengesGAO-20-427: Published: May 27, 2020. Publicly Released: Jun 26, 2020.
Apr 30, 2020
-
Priority Open Recommendations:
Department of Housing and Urban DevelopmentGAO-20-500PR: Published: Apr 23, 2020. Publicly Released: Apr 30, 2020.
Mar 17, 2020
-
Working Capital Fund:
HUD Could Improve Management to Better Achieve Efficiencies and Help Ensure Customer SatisfactionGAO-20-263: Published: Mar 17, 2020. Publicly Released: Mar 17, 2020.
Mar 3, 2020
-
Military Housing:
Preliminary Recommendations to Strengthen DOD's Oversight and Monitoring of Privatized HousingGAO-20-471T: Published: Mar 3, 2020. Publicly Released: Mar 3, 2020.
Looking for more? Browse all our products here