Community Development: Primarily through grants to the states, large metropolitan areas, small cities, towns, and counties, HUD provides community planning and development funds for local economic development under its Community Development Block Grant (CDBG) and Empowerment Zone/Enterprise Community Programs (EZ/EC), housing development under its HOME Program, and assistance to the homeless under its McKinney Act Homeless Programs. This request includes seven set-asides totaling $210 million. While the budget impact—a net increase of about 9 percent in new budget authority—of the new programs and increases to existing programs that HUD proposes is not overwhelming, the proposed budget does raise questions about HUD’s capacity to manage such an increase. The Details of HUD’s Project-Based Section 8 Program Are Not Clearly Explained in the Budget Proposal

One of the largest program increases in HUD’s fiscal year 2000 budget proposal is in its Section 8 housing assistance program (see app. We also believe that the basis for the substantial increase in total Section 8 project-based and tenant-based outlays—$2.5 billion—should be examined, as well as HUD’s rationale for the $4.2 billion advance appropriation for fiscal year 2001 requested in the fiscal year 2000 budget request. Of the 10 set-asides, half are for new initiatives totaling about $60 million. However, our recent work shows that IDIS, as implemented, does not provide detailed performance information. However, HUD plans to convert the current version of IDIS for use in the new grants management system, which may occur over the next several years. The Success of HUD’s New Contract Administration Program Depends on Adequate Contract Selection, Administration, and Oversight

Contract Administration is a new initiative in fiscal year 2000 under HUD’s Housing Certificate Fund. HUD is requesting $209 million for this program, of which $42 million will be available to contractors who have not formerly participated in this activity. However, because of the documented weaknesses in HUD’s contracting practices in other areas, we question whether HUD is prepared to administer a new contracting initiative of this size. We, HUD’s Inspector General, and the National Academy of Public Administration have cited weaknesses in HUD’s contracting and procurement practices: inadequate oversight of contracted services because of a lack of skilled, trained staff; workload imbalances; and unclear duties, time frames, costs, and products. Therefore, we believe that to ensure the success of HUD’s contracting for the new Section 8 contract administration initiative, HUD may need to provide some assurances to the Congress that the Department will have an adequate administrative structure and sufficient staffing in place to provide proper oversight of a new contracting program of this magnitude. Empowerment Zone Initiatives and Increases Raise Questions

HUD is also proposing an increase in its EZ Program. It is unclear why HUD needs to fund the same communities with two different programs. New Programs and Initiativesa in HUD’s Fiscal Year 2000 Budget Request

	Low Income Housing Tax Credit Vouchers for the Elderly

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For this table, GAO defined new programs and initiatives as any program or initiative that the Congress did not fund in fiscal year 1999. However, some of these programs or initiatives may have been funded in prior years. A recorded menu will provide information on how to obtain these lists.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed the Department of Housing Urban Development's (HUD) fiscal year (FY) 2000 budget request, focusing on: (1) new initiatives or significant increases proposed by HUD; and (2) observations about HUD's request for funding related to several areas GAO has reported on in the past year.

What GAO Found

GAO noted that: (1) to support 19 new programs and initiatives, HUD is requesting nearly $731 million of its $28 billion total request for FY 2000; (2) in each case, Congress did not provide funding for the activity in FY 1999, although in some cases the program has been funded in prior years; (3) GAO is concerned about HUD's overall capacity to plan for, administer, and oversee this many new programs, particularly when HUD itself is undergoing significant organizational reform and when some of the new initiatives are in areas, such as contracting, that HUD's performance has been questioned in the past; (4) one of the most significant increases in HUD's current programs for FY 2000 is a $1 billion increase in its Section 8 rental housing assistance program; (5) however, the budget does not provide sufficient information to evaluate this request; (6) GAO believes a number of associated issues exist that warrant review; (7) HUD's tracking and oversight of its Community Development and Planning grants are made difficult because information in its grants management information system is unreliable; (8) although HUD plans to replace the current system for managing and tracking Community Development Block Grants, a new system is several years away from implementation; (9) in the meantime, HUD's FY 2000 budget request proposes to continue adding set-asides to the block grant; (10) however, HUD cannot be assured that financial tracking of the individual grants and grantees will be adequate; (11) in one of its largest new initiatives, HUD is requesting over $200 million in FY 2000 to fund contract administrators for the contracts it has with owners of multifamily properties in HUD's project-based Section 8 housing assistance program; (12) however, work that GAO, HUD's Inspector General, and the National Academy of Public Administration have done in the past on HUD's contracting activities identified weaknesses in HUD's ability to administer contracts and monitor contractors' performance; (13) however, GAO believes that the success of this program will depend on the adequacy of HUD's contract selection, administration, and oversight of these contracts; (14) HUD is proposing both a new initiative and a program increase in the area of empowerment zones as well as two set-asides in the Community Development Block Grant Program for empowerment zones; and (15) these proposals raise questions about how the programs will coordinate with and benefit from each other because they target similar beneficiaries.