In the 1930s, when most rural residents worked on farms and rural areas  generally were poorer than urban areas, Congress authorized separate  housing assistance for rural areas and made USDA responsible for  administering it. The Section 514 and 516 Farm Labor Housing Loan and Grant  Program (farm labor housing program) provides direct loans and  grants for the development of on-farm and off-farm housing for  farmworker tenants. Opportunities Exist to Increase Collaboration and Consider Consolidation of RHS and HUD Programs

Our prior work assessing fragmentation, overlap, and duplication in  selected housing programs concluded that increased collaboration or  even consolidation of certain housing programs (including RHS  programs) could make the programs and program administration more  effective. In an August 2012 report, we found that overlap exists between selected  single-family federal housing programs—particularly those of RHS and  HUD—in the products offered and populations (income groups) and  geographic areas they served. Our August 2012 report also found overlapping purposes in selected  RHS, HUD, and Treasury multifamily programs, but differing products,  areas served, and delivery methods. We recommended that to build on efforts already under  way to coordinate, consolidate, or improve housing programs, and help  inform Congress’s decision-making process, HUD, Treasury, USDA, and  VA should evaluate and report on the specific opportunities for  consolidating similar housing programs, including those that would  require statutory changes. HUD, USDA, and VA generally agreed with the  recommendation. However, the recommendation has yet to be  implemented. Additional Actions Are Needed to Address GAO Recommendations on Improper Rental Assistance Payments and Oversight of Farm Labor Housing

In our prior work on RHS’s rental assistance and farm labor housing  programs, we concluded that RHS could take additional steps to enhance  program oversight and efficiency. Our May 2012 report on improper  rental assistance payments made seven recommendations to RHS, three  of which are implemented. In a March 2011 report on oversight of the  farm labor housing program, we made seven recommendations to RHS,  three of which are implemented. Further actions are needed to address  the remaining recommendations. For example, USDA’s  Performance and Accountability Reports (1) did not contain a description  of steps the agency took to ensure managers were accountable for  reducing and recovering improper payments; and (2) did not fully discuss  whether the agency had the internal controls, human capital, information  systems, and other infrastructure to reduce improper payments. Preliminary Observations on Risk Management of RHS’s Single-Family Loan Guarantee Program

As requested by this Subcommittee, we are conducting ongoing work on  RHS that focuses on RHS’s methods of estimating credit subsidy costs  and risk-management practices for its single-family guarantee program. Overall, our work as of May 2015 indicates that while  aspects of RHS’s risk-management practices broadly align with selected  federal requirements, other aspects are not fully consistent with  requirements and leading practices. RHS has policies, procedures, and practices for a number of risk- management functions addressed in OMB Circular A-129. RHS has policies and procedures for overseeing lenders that  underwrite or service RHS-guaranteed mortgages. Based on our ongoing work, we have found elements of RHS’s risk  management that are not fully consistent with federal requirements and  leading practices, which may limit the effectiveness of RHS’s overall risk- management efforts. While RHS uses a  number of benchmarks to assess the performance of its guaranteed  portfolio, two key benchmarks have limitations that diminish their  usefulness. The weakness in the benchmark is two-fold. However, FHA has at times  exhibited shortcomings in this area. RHS does not  have written procedures for a key part of its risk-management  structure. Specifically, since 2009 RHS has had a Credit Policy  Committee that, according to RHS officials, meets regularly to detect,  discuss, and analyze credit quality issues and address them through  policy changes. According to federal internal control standards,  agencies should have effective control activities, including policies  and procedures, to help mitigate risks and should document  significant events. Additionally, our  ongoing work has identified shortcomings in certain aspects of RHS’s risk  management for the single-family guarantee program. Appendix I: Content and Status of Relevant GAO Recommendations

The following table summarizes the status of our prior recommendations  to USDA from our August 2012, May 2012, and March 2011 reports that  discuss RHS housing assistance programs.
Why GAO Did This Study

RHS, an agency within USDA, administers a number of direct loan, loan guarantee, and grant programs that support affordable housing and community development for rural residents. According to USDA financial and budget data, RHS manages a portfolio of almost $120 billion in housing loans and loan guarantees and administers more than $1 billion in rental assistance payments each year. GAO issued three reports since March 2011 on RHS housing assistance programs (see GAO-11-329 , GAO-12-554 , and GAO-12-624 ) and has ongoing work in this area.
This testimony is based on those three reports and ongoing GAO work. It discusses (1) prior GAO findings on the extent to which the housing programs of RHS and HUD overlap and related implications for program collaboration and consolidation; (2) the status of GAO recommendations on the rental housing assistance program and farm labor housing loan and grant program; and (3) preliminary observations from the ongoing review of risk-management practices for the single-family loan guarantee program. To update the status of recommendations, GAO reviewed RHS policies, procedures, and reports. For its ongoing work, GAO reviewed federal requirements and leading practices for risk management and compared them with RHS policies, procedures, and practices. GAO also interviewed RHS officials.
GAO makes no new recommendations in this testimony, but may consider making additional recommendations once its ongoing work is complete.

What GAO Found

Overlap in housing assistance programs—particularly those of the Department of Agriculture's (USDA) Rural Housing Service (RHS) and the Department of Housing and Urban Development (HUD)—highlight opportunities for increased collaboration and consolidation. GAO's August 2012 report found overlap in the products offered and populations (income groups) and geographic areas served by RHS and HUD single-family mortgage guarantee programs. GAO also found selected multifamily housing programs served similar purposes. The report made three recommendations to RHS. RHS generally agreed with the recommendations and implemented one by formalizing collaborative efforts with other federal agencies on single-family housing programs. However, RHS and other federal housing agencies have not yet taken other recommended steps to build on interagency efforts—for example, by evaluating specific opportunities for consolidating similar housing programs, including those that would require statutory changes.
RHS generally agreed with and has addressed some of GAO's prior recommendations for the rental assistance and farm labor housing programs, but others require further attention. Specifically, RHS implemented three of the seven recommendations GAO made in May 2012 to enhance the agency's efforts to identify and reduce improper rental assistance payments. Additional steps are needed to implement the remaining recommendations, which address shortcomings in the way RHS estimates and reports on improper payments. RHS also addressed three of the seven recommendations GAO made in March 2011 on oversight of the farm labor housing program. Further actions are required to implement the other four, which address weaknesses in RHS controls for ensuring tenant eligibility, among other issues.
Ongoing GAO work indicates that aspects of RHS's risk management for the single-family mortgage guarantee program broadly align with federal requirements, while others are not fully consistent with requirements and leading practices. For example, RHS has policies and procedures for a number of risk- management functions addressed in Office of Management and Budget guidance (such as determining borrower creditworthiness and overseeing lenders). However, GAO's ongoing work indicates that, contrary to federal internal control standards, RHS does not have written policies and procedures for a committee responsible for evaluating credit quality issues and addressing them through policy changes. Also, certain benchmarks RHS uses to help assess the performance of its guaranteed portfolio have limitations that diminish their value for assessing risk and are not fully consistent with leading practices for successful performance measures. These shortcomings may limit the effectiveness of RHS's risk-management efforts.