1). Comparing Unexpended Budget Authority With Future Needs for Each Housing Agency Has Yielded an Estimated Excess of $439 Million

In January 1998, HUD estimated that the excess budget authority in the Section 8 MOD REHAB Program was $814 million before adjustments. After subtracting amounts required to cover future requirements and contingencies, HUD estimated that $439 million could be recaptured from the housing agencies that administer the program. The Accuracy of HUD’s Estimate Cannot Be Determined Without Evidence of Reliable Data

We cannot evaluate the accuracy of HUD’s estimate at this time because the Department has not completed its efforts to reconcile discrepancies between the data in its information system and contract documentation contained in field offices’ files. For its Section 8 tenant-based program, HUD engaged a contractor to independently evaluate its estimate of excess budget authority. HUD plans to require the contractor that will be correcting contract discrepancies to perform a similar evaluation of the accuracy of the MOD REHAB Program’s information system. HUD Has Not Finalized Its Plans to Recapture the Excess Budget Authority in Its Mod Rehab Program

Although HUD plans to recapture the available excess budget authority from housing agencies’ accounts, the Department has not finalized its plans for this activity, according to officials in HUD’s offices of Public and Indian Housing and the Chief Financial Officer. For example, in addition to completing the data cleanup efforts discussed above, HUD also needs to develop and test the formula it will use to recapture the excess budget authority from housing agencies’ accounts. While some factors in the formula, such as the inflation rate and certain economic assumptions prescribed by the Office of Management and Budget, are not within HUD’s discretion to change, other aspects of the formula are still undetermined. For example, HUD may decide after its field offices complete their efforts to clean up the data that it no longer needs to keep the full $184 million in the housing agencies’ accounts to cover contingencies, as it originally had estimated in January 1998. This means that the actual amount recaptured and available for rescission may change and perhaps be more than the $439 million estimated in HUD’s January 1998 analysis. HUD officials could not provide us with a firm estimate of when the Department will finalize its recapture plan and could not predict a date for completing the recapture. In commenting on the report, HUD said that it generally agreed with our assessment of the steps being taken to properly report to the Congress the amount of excess budget authority in the Section 8 MOD REHAB Program. To determine what HUD plans to do with the excess budget authority in the Section 8 MOD REHAB Program, we interviewed program and budget officials and officials in HUD’s Office of the General Counsel about the Department’s plans and legal authority to recapture the program’s excess budget authority and reuse it to meet ongoing needs for housing assistance. Comments From the Department of Housing and Urban Development

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Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the Department of Housing and Urban Development's (HUD) financial management of the Section 8 rental assistance program, focusing on: (1) the amount of excess budget authority in the Section 8 Moderate Rehabilitation (MOD REHAB) Program and how HUD estimated this amount; (2) the accuracy of HUD's estimate; and (3) HUD's plans for recapturing this excess budget authority from housing agencies.

What GAO Found

GAO noted that: (1) in January 1998, HUD estimated that the amount of excess budget authority in the Section 8 MOD REHAB Program before necessary adjustments was $814 million; after subtracting amounts required to cover future requirements and contingencies, HUD estimated that $439 million could be recaptured from the housing agencies that the Department contracts with to administer the program; (2) HUD estimated these amounts after first addressing certain known problems with the data in its information system and then comparing the level of unspent program funds at each participating housing agency with that agency's future need for funding under its current contract with HUD; (3) GAO cannot determine the accuracy of HUD's estimate of excess budget authority in the Section 8 MOD REHAB Program at this time because HUD has neither completed identifying and correcting discrepancies in its data on the program nor tested the reliability of the data it used to estimate the excess budget authority; (4) because HUD still is not confident that its program data are sufficiently accurate, the Department plans to require its field staff to identify and address discrepancies in the accuracy of contract data and to work with a contractor to further address the data's problems on-site at housing agencies; (5) HUD officials do not expect these data cleanup efforts to be completed before the end of fiscal year 1998; (6) HUD plans to require its contractor to perform a statistically valid test of the accuracy of its information system; (7) although HUD plans to recapture the excess budget authority in the Section 8 MOD REHAB Program, the Department has not finalized its approach or timeframe to accomplish this task; (8) in addition to completing the planned data cleanup efforts in the field, HUD must also develop and test the formula it will use to recapture the excess budget authority from the housing agencies' accounts; (9) while some factors in the formula are not within HUD's discretion to change, policy decisions still need to be made to define other factors; (10) for example, HUD may decide that it does not need to leave as much excess budget authority in the housing agencies' accounts to cover contingencies as it originally had estimated in January 1998; (11) therefore, the actual amount recaptured from housing agencies and available for rescission by Congress may change and perhaps be more than the estimated amount in HUD's January 1998 analysis; and (12) HUD officials could not provide GAO with a firm estimate of when the Department will finalize its recapture plan and could not predict a date of completion.