Section 8 Project-Based Rental Assistance: HUD's Processes for Evaluating and Using Unexpended Balances Are Ineffective

In response to the recommendation, HUD examined the processes that it used for reviewing unliquidated balances Department-wide and determined that the entire process was in need of improvement. In September 1998, HUD issued a memorandum establishing a revised process for HUD review of unliquidated obligations. Under the revised process, each HUD Assistant Secretary was asked to designate a person to coordinate the review of the unliquidated obligations under their control and to certify whether the obligations were still valid and should be kept open or whether they were no longer valid and could be deobligated and the funds recaptured. The written certification requirement is intended to provide an additional level of assurance that the reviews have been performed as required. HUD's Section 8 Financial Management Center is also involved in overseeing the processes relating to the identification of Section 8 contracts that should be reviewed for potential deobligation and processing recaptures. The Center identifies Section 8 contracts that are to be reviewed for potential deobligation, provides lists of such contracts to HUD's Office of Multifamily Housing for review and concurrence, and processes the recapture of funds from contracts that the Office of Multifamily Housing agrees should be deobligated.

The Department's funding requests for the Section 8 project-based program are taking into account the availability of unexpended balances that may be used to offset funding needs. HUD's 2000 budget request included an offset of $2.2 billion from unexpended Section 8 balances. The Department had an independent CPA firm review the supporting analyses for the balances associated with the fiscal year 2000 budget. HUD is using the same methodology for the fiscal year 2001 budget request currently under development.

In response to GAO's recommendation, the Department improved the methodology used to estimate future expenditure rates for Section 8 project-based contracts. According to HUD's Budget Office, the new methodology was used in HUD's FY2001 Budget Estimate.