Recognizing the need to improve its budget process with better oversight and documentation, HUD has developed and begun implementing corrective actions. However, HUD did not implement many of the changes in time to affect the Department’s fiscal year 1999 budget estimate. However, HUD’s request for $4.7 billion to renew Section 8 tenant-based contracts could still be reduced by the amount of excess budget authority in HUD’s moderate rehabilitation program, or $439 million. In addition, because excess budget authority exists in the moderate rehabilitation program, HUD may not need the $70 million it has requested for moderate rehabilitation amendments. Although HUD has improved its budget-estimating process, we believe that the Department is still overestimating its need for contract renewal funding because $439 million in excess budget authority in the moderate rehabilitation program could be used to renew expiring contracts in lieu of requesting new budget authority. HUD’s Project-Based Amendment Request May Be Overstated

According to HUD, the total amount of Section 8 project-based amendment funding needed for fiscal year 1999 is $1.7 billion. Furthermore, HUD’s budget request for Section 8 project-based amendment funding substantially exceeds the amounts that HUD’s analyses indicated are needed. Although congressional concern exists about the proportion of homeless funding spent on supportive services as compared to the amount spent on direct housing assistance, HUD’s request for 34,000 new vouchers for the homeless would increase housing assistance for the homeless. However, HUD has not developed the eligibility standards or other planning criteria for these vouchers that would facilitate program delivery. New Initiative Would Provide Additional Housing but Might Benefit From More Detailed Planning

With its fiscal year 1999 budget request for $192 million to fund 34,000 new Section 8 vouchers for homeless individuals or families, HUD proposes to increase the amount of funding for direct housing assistance. Key Report Underlying HUD’s Regional Connections Initiative Does Not Recommend a Significant Federal Effort

HUD’s fiscal year 1999 budget proposal includes $100 million for a new Community Development Block Grant (CDBG) set-aside—the Regional Connections Initiative (RCI). HUD is planning to award grants under the program to states and localities on a competitive basis. However, given that RCI is a new initiative, HUD’s budget justification does not provide enough detail to determine whether $100 million is a reasonable funding level. In addition, HUD officials believe that the $100 million requested for RCI will be awarded in fiscal year 1999. While welfare reform may have a significant impact on HUD’s future year budgets, measuring the potential impact may not be possible. Finally, we based portions of this statement on our recently issued report on HUD’s financial management of its Section 8 tenant-based program as well as on our current work focusing on HUD’s financial management of the Section 8 moderate rehabilitation and project-based programs and the impact of welfare reform on public and assisted housing.
Why GAO Did This Study

GAO discussed the Department of Housing and Urban Development's (HUD) fiscal year (FY) 1999 budget request, focusing on: (1) actions HUD has taken or plans to take to improve its budget estimates; (2) the reasonableness of HUD's estimate for Section 8 tenant-based assistance; (3) HUD's justification for its Section 8 project-based amendment request; (4) HUD's request for funding to assist the homeless; (5) HUD's request for $100 million to fund its new Regional Connections Initiative; and (6) the future budgetary implication of welfare reform.

What GAO Found

GAO noted that: (1) HUD recognizes the need to improve its budget estimating process with better oversight and documentation and has started to improve its process by modifying its organizational structure to increase oversight among the staff responsible for formulating budget estimates; (2) however, many of HUD's planned improvements were not implemented in time to affect HUD's FY 1999 budget estimate but, according to HUD officials, will be in place to enhance the FY 2000 process; (3) HUD's request for $4.7 billion to renew Section 8 tenant-based assisted housing contracts for FY 1999 could be reduced by $439 million; (4) this is the amount of excess budget authority in the Section 8 moderate rehabilitation program that could be used in place of new budget authority to renew expiring housing assistance contracts; (5) in addition, because this excess budget authority exists, HUD may not need the $70 million it has requested for Section 8 moderate rehabilitation amendment funding; (6) HUD's budget request for $1.3 billion in Section 8 project-based amendment funding--funds needed to cover shortfalls in long-term Section 8 contracts--substantially exceeds the amounts that HUD's analyses indicated are needed; (7) to help address the needs of the nation's homeless, HUD has requested 34,000 new Section 8 vouchers; (8) although these new vouchers will increase the amount of direct housing assistance for the homeless, HUD has not developed the eligibility standards or other planning criteria for these new vouchers that would facilitate implementing the program; (9) HUD's budget request for $100 million for the Regional Connections Initiative (RCI), a new set-aside within the Community Development Block Grant program to address key regional issues, does not provide enough detail to indicate whether this is a reasonable funding level for the program; (10) the additional support that HUD provided, however, does not recommend a significant federal effort to address regional problems; (11) nevertheless, HUD officials believe the funding level is a manageable set aside; (12) because of the work required to initiate a new program like this, GAO questions whether the funds can be awarded in FY 1999; (13) welfare reform may have a substantial future impact on HUD's spending for assisted housing for low-income households; and (14) however, estimating the impact may not be possible because the states' differing welfare reform provisions will create varied state-by-state and year-by-year impacts.