Unobligated and Unexpended Balances

Mr. Walsh #5

Question: As discussed at the hearing, HUD and its partners continue to be unable to spend the money Congress has provided in a timely and efficient manner, resulting in significant pipelines in almost all HUD's accounts. Last year HUD completed studies of the Section 202, CDBG, and Public Housing Capital Fund programs. Please provide a list of the recommendations made for each program, and HUD's actions to date to implement each recommendation?

Answer: All recommendations in the Study are under review by the Department. Along with these recommendations, others will be solicited. High unobligated balances do not create a good image for the Department. Therefore, all recommendations will be carefully studied to see which will be best to implement for the Department.

Question: Given the large unexpended balances in both the homeless assistance and HOPE VI programs, will HUD review these programs as well?

Answer: Yes, the Department will be reviewing these programs as well. Currently, the HOPE VI program is expected to sunset at the end of fiscal year 2002. Next year, when the Department seeks reauthorization of this program, changes will be proposed which will have an impact of decreasing these high unexpended balances.

For the Homeless program, a policy decision was made to delay the awards in prior years. This has now changed and therefore, the Department does not expect to have high balances in this program in the future.

Section 8/Housing Certificate Fund

Mr. Walsh #6

Question: The Department's budget requests a total of $15.7 billion for the Housing Certificate Fund, representing a net increase of $3.6 billion above the FY 2001 appropriation. This amount includes a $2.2 billion increase to renew all expiring Section 8 contracts, $197 million for 34,000 new incremental vouchers, and a $1.8 billion increase to restore the rescission included in FY 2001. These increases are partially offset by a $640 million reduction in PHA reserve funds. Does the budget request fully fund the renewal of all Section 8 vouchers in FY 2002, including all new incremental vouchers provided in fiscal years 1999, 2000, and 2001? Answer: Yes, the budget request fully funds the renewal of all Section 8 vouchers in FY

2002.

Question: What progress has HUD made in getting a handle on accurately estimating its funding needs for renewals, and what further steps must be taken?

Answer: HUD has shifted funding to actual cost basis instead of based on FMRs.

The Department has recently completed an outlay model which is capable of more accurately projecting the cost of a voucher. The model incorporates data from the many systems at HUD in one place to make cost projections.

Question: Does HUD continue to have a problem with overestimating the cost per

voucher?

Answer: As stated above, HUD has shifted funding to an actual cost basis instead of based on FMRS. This helped tremendously with our overestimating problem. In addition, the new outlay model, which is capable of more accurately projecting the cost of a voucher, should help refine our estimates.

Question: What impact, if any, will there be by reducing to one-month the amount of reserve funding PHAs can retain as has been proposed in the budget submission?

Answer: We do not believe this change will have any significant adverse impact. A 1month reserve should be fully adequate to protect a PHA from any temporary cost overruns it may incur.

Question: In what fiscal year will the recaptures no longer be sufficient to cover amendments to long term project-based contracts, and instead will require additional appropriations?

Answer: It is anticipated that starting in FY 2006, recaptures will no longer be sufficient to cover project-based amendment requirements.

Mr. Walsh #7

New Section 8 Vouchers

Question: The Department is requesting $197 million to fund 34,000 new Section 8 tenant-based vouchers, bringing the total number of new vouchers provided since FY 1999 to 223,000. While this Subcommittee doesn't question the need for affordable housing, we have, and must continue, to question the ability of HUD and the housing agencies to use these vouchers in a timely manner. It is my understanding that none of the vouchers provided in fiscal years 1999 and 2000 were actually used in the years we provided them, and instead the funds went unspent. Will HUD be able to fully obligate the funds provided this year for 79,000 new vouchers before the end of this fiscal year? Once these funds are obligated by HUD, how long will it take for the PHAs to fully utilize these vouchers?

Answer. These vouchers are in the application and review phase of the award process. The award process is on target for the anticipated obligations of all incremental vouchers by the end of FY 2001. Once the funds are obligated by HUD, it is up to the PHAs to quickly utilize these funds.

Question: Is it realistic to assume that the 34,000 new vouchers requested in FY 2002 will actually be used, and the funds spent, in FY 2002?

Answer: It is realistic to assume that HUD will obligate these vouchers in FY 2002. Once the funds are obligated by HUD, it is up to the PHAs to quickly utilize these funds.

Question: Currently, HUD requires a PHA to have a utilization rate of 95 percent of their existing vouchers in order to be eligible to compete for new vouchers. Do you believe that rate is appropriate, or should it be higher?

Answer: Ninety-five percent is the appropriate utilization rate to require of PHAs being given new assistance.

A PHA at a 95 percent utilization rate or higher can realistically be expected to use the incremental vouchers provided to them - those with a lower utilization rate cannot.

As our efforts help to boost the utilization rates of PHAS, we may reevaluate whether to require an even higher utilization rate of PHAs receiving incremental vouchers.

Voucher Utilization

Mr. Walsh # 8

Question: As discussed at the hearing, underutilization existing vouchers coupled with budget estimation problems continues to result in huge recaptures and carryover being realized every year in the Housing Certificate Fund. In addition, these recaptures seem to be concentrated in the same PHAs each year in FY 2002. Now that you have conducted three nationwide recaptures from PHAs, are there any patterns emerging?

Answer: As you already know, a large portion of the recaptures come from a small percentage of Housing Authorities. For example, the Top 10 Housing Authorities account for less than .50 percent of the total number of PHAs, but they represent over 16 percent of the total recaptures in all years. In addition, it appears that the cost per unit remained relatively constant over a 3-year period. Therefore, the amount budgeted for inflation became excess. Furthermore, under-leasing appears to be a problem.

Question: How many of the same PHAs were in the top 100 in terms of recaptures in 1998, 1999, and 2000?

Answer: Please see attached.

Question: What percentage of the total recaptures did these PHAs represent in each of those years?

Answer: Please see attached.

Question: Utilization of vouchers is one of the criteria being used to score the performance of PHAs under the new Public Housing Assessment System.

Answer: Utilization of vouchers is not one of the criteria being used to score the performance of PHAs under the new Public Housing Assessment System. However, it is one of criteria being used to score the performance of PHAs under SEMAP.

Question: Please provide a list, by PHA, of the number of unused vouchers returned to HUD to avoid a low score under PHAS.

Answer: No unused vouchers have been returned to HUD to avoid a low score under PHAS or SEMAP. Currently, HUD is working on a regulation for the reallocation of vouchers.