Mr. BOLAND. Mrs. Boggs? Mrs. BOGGS. Thank you, Mr. Chairman. PROJECTS IN IMPACTED AREAS Madam Secretary, I was very pleased to hear about the flexibility that you hoped to inaugurate in the whole Department. Specifically, I would like to ask you if you are going to be a little more flexible in the existing policy of not allowing new construction and other housingrelated assistance in areas of heavy low income or minority concentration. This, of course, prevents communities from being able to plan and approve many activities in the worse neighborhoods. This policy has been carried out despite the expressed desire for such activties by the people affected, in full knowledge it is not a move to further segregate them into low income minority areas. Secretary HARRIS. Congresswoman Boggs, I think the short answer to your question is, yes, we have already moved to what is more of a flexible policy, but those policies we have instituted do not retreat from the position of encouraging integrated communities, both racially integrated and economically integrated communities. However, we do have a new regulation which will permit activity by HUD and HUD-approved programs in neighborhoods which have determined that they wish to sponsor a neighborhood preservation or improvement program. It is the difference between the imposition of segregating activities by the public-which, unfortunately, has been part of our unhappy past history which I would hope to avoid-and decisions about the nature of neighborhoods by people themselves, where the neighborhood group, which would otherwise be a racially or economically impacted community, decides it wants neighborhood revitalization. We expect to be able to permit it in the future. Mrs. BOGGS. Thank you, Madam Secretary. Also, I was delighted about the flexibility in computing the fair market rent values under section 8, because this, of course, has been one of the largest roadblocks to the financial feasibility of many of the section 8 developments. I am pleased you are going to change the policy in this regard. For instance, HUD has undertaken mortgage limits for section 202 and section 8 housing from the old 231 program which was not statutorily direct. On the Housing Committee, we presumed this was for guidance, since limits were omitted from the legislation in order not to restrict its success. Despite the fact HUD's own office and regional office in my area have recommended review of the insufficient mortgage levels which had been set for our area and despite the fact the Secretary had, at that time, increased 202 direct loan limits because they had been determined unrealistic, it took almost a year to achieve a change in the mortgage limits that had been set for these programs. I am delighted we are going to have some programs that will indeed be able to move much more quickly. The only other thing I would ask, Madam Secretary, in conjunction with all of these programs, it would appear that since most of our housing programs during the last few years have been merely procedural reforms that HUD's interpretation of its responsibility under the community development block grant program merely mandates it to be a procedural watchdog rather than a counseling tool to achieve the objectives of the act. I wonder whether you anticipated any new counseling activities by the Department. COUNSELING AND TECHNICAL SERVICES Secretary HARRIS. Counseling and service activities, technical service kinds of approaches to help local communities participate more effectively in our program are among the initiatives that I hope will soon come to fruition in HUD. The first communication I sent to the field said something like this: "Remember, these are our clientele; not our adversaries. And let us be helpful." I think that that is the approach that I would hope to use, to be counselor and helper, rather than simply the traffic cop that says, "Now you can go," and, "Now you have to stop and redo it." Mrs. BOGGS. Thank you very much. Mr. TRAXLER. Mr. Chairman, may I just touch on perhaps an open end left by Mrs. Boggs' question on the counseling. In the 1977 budget, my recollection is that you had an appropriation in the area of $2.5 million for contract counseling authority. Do you know to what extent that has been utilized, what the figure is; and as you review your counseling needs, do you see the expansion of in-house counseling, or do you see it on the concept of private nonprofit community agencies funded to perform this function? Secretary HARRIS. While Al is looking for what we spent last year, let me answer the last part of your question. We are in the preliminary phases of examining how we will utilize our ability to provide counseling services. I also as soon as our Assistant Secretaries are on board-intend to have a review of those activities that are performed in-house and those activities that are contracted out. We made no decision as to the future about whether or not the services we provide in any area, either research or counseling, will be through contract or whether we will attempt to do it with our own people. I have some private opinions, but I would rather wait an investigation of the most efficient way of working. Mr. TRAXLER. What is the time factor-weeks or months? Secretary HARRIS. More 2 or 3 months; $3 million was the amount that we received. Mr. TRAXLER. How much has been obligated? Mr. KLIMAN. $400,000. Mr. TRAXLER. There isn't much time left. Mr. KLIMAN. Only one quarter of the year has gone. MISUSE OF DISASTER ASSISTANCE UNEMPLOYMENT BENEFITS Mr. YOUNG. Mr. Chairman, Madam Secretary, on page 10 of your statement, you talk about the Presidential declaration of disaster areas in five States, and you say you have already identified a need for approximately $100 million, of which $59 million is for disaster unemployment assistance in the States of Maryland, Virginia, Florida, New York, and New Jersey. I wonder if you are familiar with many reports coming from Florida about abuses and real ripoffs in this program, where people are refusing to go to farms to work where they are actually needed, because they are able to get this disaster unemployment assistance. Are you familiar with those accounts? Secretary HARRIS. I have not seen those charges, or those accounts, but I will ask Mr. Dunne, who is the administrator. Would you comment on that? Mr. DUNNE. I am aware of it and have been in contact this past week with Justice Department, Labor Department, Agriculture Department, and SBA loan officials. As you know, a full-scale probe is going on by the U.S. attorney there and also the Washington office of the Justice Department is much aware of it and working with us, and in the Labor and Agriculture Departments, in terms of doing an investigation. Mr. YOUNG. I wonder if, in view of this, you think we shouldn't slow down a little bit on that $59 million, because it looks like people who haven't been close to farms are accepting this, but those who are familiar with it are refusing to accept jobs where they could be earning income. I wonder if the other States, Maryland, New York, Virginia, New Jersey, if they have had any report of this type of abuse. Mr. DUNNE. There are no reports, but we made the Justice Department aware of the potential. When reports of between 50,000 and 80,000 people in your State are going to be unemployed, the Labor Department, working through the State office which administers the program for Labor, has to get the checks into the hands of the people who are eligible. When you are dealing in such big numbers and in such periods of time, there is always a potential for this type of illegal activity. Some who are not in need will try to get a benefit that they are not entitled to. That is why we made the Justice Department aware of this. I think the State's attorney general's office is also investigating the allegations. Mr. YOUNG. I know you are not involved in the food stamp part of this operation, but the rip-off there seems to be even bigger. Several reporters have put on shabby old clothes and gone to the office and said they used to work on a farm and they couldn't get a job, and they have got food stamps coming out of their ears and they are finding the food stamps can be used for any purpose. In fact, there is one report in one of our newspapers that prostitutes are accepting food stamps now that have been collected through this program. It looks like some people are really taking advantage of the American taxpayer and I would think, before we go into this extra $100 million, we ought to be really aware of what we are talking about as far as the use of dollars. Mr. Chairman, because of the time limitations I would like to submit several questions in writing that you might respond to. [The information follows:] Question: Answer: Under the Section 8 program, you state that there were past errors in the recording of adjustments to prior year Public Housing contracts, with an estimated $31.3 million of the recorded Public Housing balances being committed for the support of contract adjustments. How were these errors made and when did you catch them? What steps have you taken to remove the possibility of these errors reoccurring? These adjustments were discovered in mid-December subsequent to Under the Public Housing program, there are a number of instances during the development stage and even after project completion and occupancy when the original annual contributions contract (ACC) may be amended. For example, changes in interest rates during construction or the period of temporary financing may require a revision to the subsidy payment contract. Further, legitimate additional costs occur which also may require an amendment to the ACC. The transactions in question for the most part relate to whether all amendments and adjustments to certain contracts have been accurately recorded as obligations. As a While standard accounting procedures require that the Regional Accounting Divisions be notified every time an amendment is approved, it now appears that the annual financial reports issued in recent years did not include all amendment activity. precautionary measure, in order to prevent any over obligation of contract authority, the Office of Finance and Accounting currently is treating the entire amount in question as fully obligated pending a detailed case-by-case analysis of each contract. In addition to the case-by-case analysis of the contracts in question, the Office of Finance and Accounting also is conducting a review of the existing reporting procedures to determine what changes, if any, must be made to assure prompt and complete recording of amendments and adjustments in the future for the Public Housing program. Existing procedures will be changed where warranted to prevent a reoccurrence. Question: In the $439.5 million supplemental for "Housing Payments" you include $53.5 million for unfunded liabilities resulting from adjustments of prior year obligations. Could you explain in greater detail why you have unfunded liabilities? Answer: The Supplemental request of $439.5 million includes the following: The 1976 and the Transition Quarter unfunded liabilities result The increase in existing units was unanticipated because of the lack The $53.5 million, which is a part of the Transition Quarter |