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Department Updates


The President's Management Agenda is on Target at HUD

Integrating the President's Management Agenda with HUD's Management Structure

HUD's management challenges are longstanding. Until recently, HUD was the only cabinet level agency that the General Accounting Office (GAO) designated as High-Risk in its entirety. Although that designation was removed in 2001, HUD's two largest program areas - single family housing mortgage insurance and rental housing assistance - remain on GAO's High Risk list. We're working hard to fix that. As the Deputy Secretary and Chief Operating Officer of the Department, I personally oversee and assure HUD's commitment to, and progress on, the President's Management Agenda. HUD's senior management reports on the status of their plans and progress on the President's Management Agenda at monthly Executive Management Meetings. This is just one of the steps we take to assure the proper emphasis and coordination needed across HUD's program and support organizations to succeed in implementing lasting solutions to HUD's management challenges. To sustain this focus, we have also engrained the President's Management Agenda goals into our strategic and annual performance and operating plans. We are making real progress on HUD's most significant challenges.

Financial Management Performance
Learn what HUD is doing to address its greatest management challenges.
Challenge:    To improve funds control and modernize financial management systems
Solution:    Strengthen policies and procedures and adequately plan for the next generation core financial management system
Challenge:    To reduce erroneous rental housing assistance payments
Solution:    Better monitor high-risk areas and access more data to make more informed decisions.

The President's Management Agenda includes a specific focus on improving financial management performance. So HUD had to focus on improving its control over its funds. Simply put, the agency's internal controls did not provide reasonable assurance that spending was within legally authorized limits.

We soon discovered that HUD hadn't updated its policies and procedures on funds control since 1984. Furthermore, despite a decade long promise of a modern, integrated and fully compliant financial management system, HUD's financial management systems remained poorly integrated. Some of HUD's financial systems failed to meet Federal financial systems requirements or Federal accounting standards.

To get better control over the money the Department is spending, we consolidated, updated and significantly strengthened HUD.s policies and procedures for funds control. These new policies provide a more prescriptive and disciplined funds control process. For instance, HUD offices are now required to develop and implement detailed funds controls plans to better ensure allotted funds are used only for the purposes allowed. Staff receives formal periodic training on funds controls laws, policies and procedures. In fact, the GAO's Center for Performance and Learning is teaching classes for many HUD personnel on the principles of appropriations law. We also are developing an annual all-hands satellite broadcast presentation and a web-based training course on funds control. To make sure the training is having the desired effect, we have planned periodic program audits.

In addition to these Department-wide management improvements, we are providing special focus to the Federal Housing Administration (FHA), which manages $500 billion in insured single-family mortgages. Because of its reliance on private lenders, appraisers, and property managers, FHA is particularly vulnerable to waste, fraud and abuse. On October 1, 2002, the FHA successfully replaced its archaic commercial accounting system with one that complies with generally accepted Federal accounting standards. Plans are proceeding to change FHA's business practices to institute stronger funds control and to more efficiently integrate program feeder systems with their new accounting system.

HUD Management and Performance Challenges - Reducing Overpaid Housing Assistance

Inadequate internal controls and lax oversight of HUD’s largest programs area – rental housing assistance – have contributed to an estimated net overpayment of $2 billion in assistance each year. These erroneous payments are the result of errors made by program administrators and underreporting of income by tenants. Because HUD’s various rental housing assistance programs provide $21 billion annually to house nearly 4.8 million families through over 26,000 housing intermediaries, there will always be a risk of waste, fraud, and abuse. But the Department’s capacity to monitor this large, complex and widely dispersed program activity deteriorated significantly over the past decade. So in early 2001, Secretary Martinez established a task force to develop a comprehensive strategy to address the underlying causes of erroneous payments. He set the goal to reduce overpaid rental housing assistance by 50 percent.

As with funds control, we began to reestablish an adequate program monitoring capacity by updating HUD’s program guidance and providing staff training on program and monitoring requirements. We developed risk-based targeting models to focus our oversight on the performance of program administrators that pose the greatest risk to HUD in terms of the volume of their program activity and indicators of performance problems. This was an important step to ensure we made the most of HUD’s limited monitoring resources. Nearly 400-targeted Rental Integrity Monitoring (RIM) reviews were conducted at public housing agencies in the past year, with six-month follow-up sessions scheduled to assess progress in correcting program deficiencies identified. In addition, close to half of our 22,000 Housing Assistance Payment agreements with rental housing owners have been placed under performance-based monitoring contracts.

Another key component of HUD’s error reduction strategy is the use of computer matching with income databases for upfront verification of tenant income to eliminate income related processing and payment errors. The Administration has submitted a legislative proposal to the Congress for statutory authority to utilize available federal income data sources more effectively. The legislation, H.R. 1030, gives HUD access to the National Directory of New Hires, which contains new hire, quarterly wage and unemployment insurance data from all fifty states. Obviously, this new authority will enhance our ability to verify the income of tenants that receive housing assistance. In the interim, however, we continue to promote the currently authorized use of State wage data sources by local public housing agencies administering HUD’s rental assistance programs. We will measure the impact of these actions in reducing erroneous payments over the next three years.

Alphonso Jackson

Department Updates:

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