Housing Programs:

Funding Approach for HUD's Section 8 Certificate Program Needs Changing

RCED-88-136: Published: Apr 18, 1988. Publicly Released: Apr 19, 1988.

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John M. Ols, Jr
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In response to a congressional request, GAO provided information on the adequacy of the Department of Housing and Urban Development's (HUD) funding approach for its Section 8 Existing Rental Assistance Certificate Program, focusing on: (1) the potential shortfall in program funds; (2) whether HUD adequately compensated state and local public housing agencies (PHA) for their costs; and (3) how PHA charged administrative fees that exceeded their actual costs.

GAO found that: (1) HUD omitted some cost factors in its program cost estimates, such as inflationary rent increases, the usage rate for rental certificates, tenant contributions, and PHA administrative costs; (2) many state and local PHA depleted their project reserves, resulting in Congress granting $1.3 billion in supplemental budget authority from 1982 through 1987; (3) PHA had a net surplus of over $22 million because HUD reimbursed them substantially more than their costs to administer the program; (4) HUD preferred to leave primary responsibility for usage of surplus funds with PHA; and (5) PHA used the funds for varying purposes, such as subsidizing other housing units, purchasing office equipment, and paying for office parties.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The certificate program budget authority is now made on a 5-year rather than 15-year basis. The recommendation was based on the prior 15-year period and is no longer applicable given the change in program fund reservations and HUD reported reconciliation of the new period with the old.

    Recommendation: To provide Congress with more accurate total program cost information for the 15-year budget authority of the Section 8 Certificate Rental Assistance Program, the Secretary of Housing and Urban Development should develop budgeting procedures that compute and annually update costs for existing and new certificates, based on all factors that have an impact on total program costs, including certificate usage rates, tenant contributions, rental increases, and administrative fees.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: Congress has legislated a new fee that is consistent for incremental units of vouchers and certificates. HUD resistance to set fees based on actual costs and Congress' predisposition to have a standard fee make it impractical to expect any action on the recommendation. If Congress decides to consolidate the voucher and certificate programs, GAO will reexamine the merits of this recommendation.

    Recommendation: To provide a continuing basis for determining rates for section 8 rental certificate administrative reimbursements and for updating the amounts included for administrative fees in program cost estimates, the Secretary of Housing and Urban Development should periodically determine the actual costs being incurred by PHA throughout the country and provide this information to Congress as part of the annual HUD budget request.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Implemented

    Comments: HUD revised its requirements to make certain that PHA are adequately administering their programs before excess fees can be used. Also, HUD initiated a requirement that the PHA Board of Commissioners set thresholds for amounts of fees which can be used without Board approval.

    Recommendation: The Secretary of Housing and Urban Development should issue more specific guidelines on the type of uses that are appropriate for surplus section 8 administrative fees.

    Agency Affected: Department of Housing and Urban Development


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