Rural Housing Service
Opportunities to Improve Management Gao ID: GAO-03-911T June 19, 2003Federal housing assistance in rural America dates back to the 1930s, when most rural residents worked on farms. Without electricity, telephone service, or good roads connecting residents to population centers, residents were comparatively isolated and their access to credit was generally poor. These conditions led Congress to authorize separate housing assistance for rural residents, to be administered by USDA. Over time, the quality of the housing stock has improved and credit has become more readily available in rural areas. Also, advances in transportation, computer technology, and telecommunications have diminished many of the distinctions between rural and urban areas. These changes call into question whether rural housing programs still need to be maintained separately from urban housing programs, and whether RHS is adapting to change and managing its resources as efficiently as possible.
Our testimony is based on two reports--the September 2000 report on rural housing options and May 2002 report on multifamily project prepayment and rehabilitation issues. GAO found that while RHS has helped many rural Americans achieve homeownership and has improved the rural rental housing stock, it has been slow to adapt to changes in the rural housing environment. Also, RHS has failed to adopt the tools that could help it manage its housing portfolio more efficiently. Specifically, dramatic changes in the rural housing environment since rural housing programs were first created raise questions as to whether separately operated rural housing programs are still the best way to ensure the availability of decent, affordable rural housing. Overlap in products and services offered by RHS, HUD, and other agencies has created opportunities for merging the best features of each. Even without merging RHS's programs with HUD's or those of other agencies, RHS could increase its productivity and lower its overall costs by centralizing its rural delivery structure. RHS does not have a mechanism to prioritize the long-term rehabilitation needs of its multifamily housing portfolio. As a result, RHS cannot be sure it is spending limited rehabilitation funds as effectively as possible and cannot tell Congress how much funding it will need in the future.
GAO-03-911T, Rural Housing Service: Opportunities to Improve Management
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Testimony:
Before the Subcommittee on Housing and Community Opportunity, Committee
on Financial Services, House of Representatives:
United States General Accounting Office:
GAO:
For Release on Delivery Expected at 2:00 p.m. EDT:
Thursday, June 19, 2003:
Rural Housing Service:
Opportunities to Improve Management:
Statement of William B. Shear, Acting Director Financial Markets and
Community Investment:
GAO-03-911T:
GAO Highlights:
Highlights of GAO-03-911T, a testimony before the Subcommittee on
Housing and Community Opportunity, Committee on Financial Services,
U.S. House of Representatives
Why GAO Did This Study:
Federal housing assistance in rural America dates back to the 1930s,
when most rural residents worked on farms. Without electricity,
telephone service, or good roads connecting residents to population
centers, residents were comparatively isolated and their access to
credit was generally poor. These conditions led Congress to authorize
separate housing assistance for rural residents, to be administered by
USDA.
Over time, the quality of the housing stock has improved and credit
has become more readily available in rural areas. Also, advances in
transportation, computer technology, and telecommunications have
diminished many of the distinctions between rural and urban areas.
These changes call into question whether rural housing programs still
need to be maintained separately from urban housing programs, and
whether RHS is adapting to change and managing its resources as
efficiently as possible.
What GAO Found:
Our testimony is based on two reports addressed to this subcommittee”
the September 2000 report on rural housing options and May 2002 report
on multifamily project prepayment and rehabilitation issues. GAO found
that while RHS has helped many rural Americans achieve homeownership
and has improved the rural rental housing stock, it has been slow to
adapt to changes in the rural housing environment. Also, RHS has
failed to adopt the tools that could help it manage its housing
portfolio more efficiently. Specifically:
* Dramatic changes in the rural housing environment since rural
housing programs were first created raise questions as to whether
separately operated rural housing programs are still the best way to
ensure the availability of decent, affordable rural housing. Overlap
in products and services offered by RHS, HUD, and other agencies has
created opportunities for merging the best features of each. Even
without merging RHS‘s programs with HUD‘s or those of other agencies,
RHS could increase its productivity and lower its overall costs by
centralizing its rural delivery structure.
* RHS does not have a mechanism to prioritize the long-term
rehabilitation needs of its multifamily housing portfolio. As a
result, RHS cannot be sure it is spending limited rehabilitation funds
as effectively as possible and cannot tell Congress how much funding
it will need in the future.
www.gao.gov/cgi-bin/getrpt?GAO-03-911T.
To view the full product, click on the link above. For more
information, contact William B. Shear at (202) 512-4325 or
shearw@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss the management of Rural
Housing Service (RHS) programs. RHS makes a significant investment in
affordable housing for low-income rural Americans through a variety of
direct and guaranteed loan and grant programs. RHS manages a single-
family and multifamily direct loan portfolio of about $28 billion,
oversees a program that guarantees about $3 billion in single-family
mortgages annually, and administers over $700 million in rental
assistance payments each year.
This statement is based on two reports addressed to this Subcommittee:
our September 2000 report on rural housing options and our May 2002
report on multifamily project prepayment and rehabilitation
issues.[Footnote 1] I will also briefly discuss the objectives of our
ongoing work on RHS's rental assistance program. My principle objective
today is to present an overview of the concerns identified in our
previous reports that you may want to consider as you deliberate on how
best to improve housing services for rural Americans.
In summary, while RHS has significantly improved the quality of the
housing stock in rural America and has helped many rural Americans
become homeowners, it has been slow to adapt to changes in the rural
housing environment. In addition, it has not adopted the managerial
tools that are now available that would help it make better use of its
housing portfolio and limited budgetary resources. Specifically:
* First, dramatic changes in the rural housing environment since rural
housing programs were first created raise the question of whether
separately operated rural housing programs are still needed to best
ensure the availability of decent affordable rural housing. Overlap in
the products and services offered by RHS, the Department of Housing and
Urban Development (HUD), and other agencies opened up opportunities for
merging the best features of each program. But even without merging the
best features of RHS's programs with the best features of those of HUD
or other agencies, RHS could increase its productivity and lower its
overall costs by centralizing its rural delivery structure.
* Second, RHS does not have a mechanism for prioritizing the long-term
rehabilitation needs of its multifamily portfolio. As a result, RHS
cannot be that sure that it is spending its limited rehabilitation
funds as effectively as possible and cannot tell Congress how much
funding it will need in the future.
Background:
The government has been providing housing assistance in rural areas
since the 1930s. At that time, most rural residents worked on farms,
and rural areas were generally poorer than urban areas. For example, in
the 1930s very few rural homes had electricity or indoor plumbing.
Accordingly, the Congress authorized housing assistance specifically
for rural areas and made USDA responsible for administering it.
However, rural demographic and economic characteristics have greatly
changed over time. By the 1970s virtually all rural homes had
electricity and indoor plumbing. Today, less than 2 percent of the
nation's population lives on farms, and advances in transportation,
technology, and communications have - or have the potential to - put
rural residents in touch with the rest of the nation. The federal role
has also evolved, with HUD, the Department of Veterans Affairs (VA),
and state housing finance agencies becoming significant players in
administering housing programs.
Homeownership in the United States is at an all-time high with 68
percent of the nation's households owning their own home. In rural
areas, the homeownership rate is even higher --76 percent. However,
according to the Housing Assistance Council, affordability is the
biggest problem facing low-income rural households. Rural housing costs
have increased and income has not kept pace, especially for rural
renters who generally have lower incomes than owners. As a result,
rural renters are more likely to have affordability problems and are
twice as likely as rural owners to live in substandard housing.
Although the physical condition of rural housing has greatly improved
over time, it still lags somewhat behind that of urban housing. The
most severe rural housing quality problems are found farthest from the
nation's major cities, and are concentrated in four areas in
particular: the Mississippi Delta, Appalachia, the Colonias on the
Mexican border, and on Indian trust land. Minorities in these areas are
among the poorest and worst housed groups in the nation, with
disproportionately high levels of inadequate housing conditions.
Migrant farm workers in particular have difficulty finding affordable,
livable housing. The higher incidence of housing quality problems,
particularly in these four areas, offsets many of the advantages of
homeownership, including the ability to use homes as investments or as
collateral for credit.
USDA's Farmers Home Administration managed rural housing programs and
farm credit programs until reorganization legislation split these
functions in 1994.[Footnote 2] Farm credit programs were then shifted
to the new Farm Service Agency. Housing programs were moved to the
newly created RHS in the new Rural Development mission area which was
tasked with helping improve the economies of rural communities. RHS
currently employs about 5,500 staff to administer its single family,
multifamily, and community facilities programs.
RHS's homeownership programs provide heavily subsidized direct loans to
households with very low and low incomes, guaranteed loans to
households with low and moderate incomes, and grants and direct loans
to low-income rural residents for housing repairs. Multifamily programs
provide direct and guaranteed loans to developers and nonprofit
organizations for new rental housing that is affordable to low and
moderate income tenants; grants and loans to public and nonprofit
agencies and to individual farmers to build affordable rental housing
for farm workers; housing preservation grants to local governments,
nonprofit organizations, and Native American tribes; and rental
assistance subsidies that are attached to about half the rental units
that RHS has financed. In addition, RHS administers community
facilities programs that provide direct and guaranteed loans and grants
to help finance rural community centers, health care centers, child
care facilities, and other public structures and services.
For fiscal year 2003, RHS received an appropriation of $1.6 billion. Of
this amount, the largest share, $721 million, is for its rental
assistance program. Congress also authorized about $4.2 billion for
making or guaranteeing loans, primarily for guaranteeing single-family
loans.[Footnote 3] RHS oversees an outstanding single-family and
multifamily direct loan portfolio of about $28 billion. Table 1 lists
RHS's programs, briefly describes them, and compares the spending for
them in fiscal year 1999 with the spending for them in fiscal years
1979 and 1994. The table also shows that, although RHS's single and
multifamily guaranteed programs are relatively new, by 1999 RHS had
guaranteed more single-and multifamily loans than it made directly.
Table 1: Data on RHS's Housing Programs:
RHS housing program: Single-Family Housing Direct
Loans (sec. 502); Total dollars spent, fiscal year
1979: $2,870.0[A]; Total dollars spent, fiscal
year 1994: $1,656.8[A]; Total dollars spent,
fiscal year 1999: $966.9[A]; Number of households
helped, fiscal year 1999: 15,600; Type of
assistance: Loans subsidized as low as 1 percent interest.
RHS housing program: Single-Family Housing
Guaranteed Loans (sec. 502); Total dollars spent,
fiscal year 1979: [Empty]; Total dollars spent,
fiscal year 1994: $725.9[A]; Total dollars spent,
fiscal year 1999: $2,980.0[A]; Number of
households helped, fiscal year 1999: 38,600; Type
of assistance: No money down, no monthly mortgage insurance loans.
RHS housing program: Single-Family Home Repair
Grants and Loans (sec. 504); Total dollars spent,
fiscal year 1979: $33.7; Total dollars spent,
fiscal year 1994: $52.7; Total dollars spent,
fiscal year 1999: $46.8; Number of households
helped, fiscal year 1999: 9,021; Type of
assistance: Grants for elderly and loans subsidized as low as 1 percent
interest.
RHS housing program: Single-Family Housing Mutual
Self-Help Grants (sec. 523); Total dollars spent,
fiscal year 1979: $5.6; Total dollars spent,
fiscal year 1994: $12.8; Total dollars spent,
fiscal year 1999: $25.4; Number of households
helped, fiscal year 1999: 1,350; Type of
assistance: Grants to nonprofit and public entities to provide
technical assistance.
RHS housing program: Multifamily Direct Rural
Rental Housing Loans (sec. 515); Total dollars
spent, fiscal year 1979: $869.5[A]; Total dollars
spent, fiscal year 1994: $512.4[A]; Total dollars
spent, fiscal year 1999: $114.3[A]; Number of
households helped, fiscal year 1999: 2,181; Type
of assistance: Loans to developers subsidized as low as 1 percent
interest.
RHS housing program: Multifamily Housing
Guaranteed Loans (sec. 538); Total dollars spent,
fiscal year 1979: [Empty]; Total dollars spent,
fiscal year 1994: [Empty]; Total dollars spent,
fiscal year 1999: $74.8[A]; Number of households
helped, fiscal year 1999: 2,540; Type of
assistance: Guaranteed loans for developing moderate-income
apartments.
RHS housing program: Multifamily Housing Farm
Labor Grants and Loans (secs. 516/514); Total
dollars spent, fiscal year 1979: $68.8; Total
dollars spent, fiscal year 1994: $56.3; Total
dollars spent, fiscal year 1999: $33.2; Number of
households helped, fiscal year 1999: 622; Type of
assistance: Grants and loans subsidized at 1 percent interest.
RHS housing program: Multifamily Housing
Preservation Grants (sec. 533); Total dollars
spent, fiscal year 1979: [Empty]; Total dollars
spent, fiscal year 1994: $23.0; Total dollars
spent, fiscal year 1999: $7.2; Number of
households helped, fiscal year 1999: 1,800; Type
of assistance: Grants to nonprofit organizations, local governments,
and Native American tribes, usually leveraged with outside funding.
RHS housing program: Multifamily Housing Rental
Assistance (sec. 521); Total dollars spent, fiscal
year 1979: $423.0; Total dollars spent, fiscal
year 1994: $446.7; Total dollars spent, fiscal
year 1999: $583.4; Number of households helped,
fiscal year 1999: 42,000; Type of assistance:
Rental assistance to about one-half the residents in RHS rental and
farm labor units.
Source: Rural Housing: Options for Optimizing the Federal Role in Rural
Housing Development (GAO/RCED-00-241, September 15, 2000). pp. 15-16.
[A] Dollar amounts represents private-sector loan levels guaranteed by
RHS or loans made directly by RHS during the year. Actual federal
outlays are much lower because they cover the subsidy cost, not the
face value of the loans or guaranteed loans. The subsidy cost is the
estimated long-term cost to the government of a direct or guaranteed
loan calculated on a net present value basis, excluding administrative
costs.
[End of table]
While RHS administers its programs in rural areas, HUD, VA, and state
housing finance agencies provide similar programs nationwide, including
assistance to households that may be eligible for RHS programs in rural
areas. For example, RHS's single-family loan guarantee program serves
moderate-income homebuyers as does the Federal Housing Administration's
(FHA) much larger single-family insurance program. VA and most state
housing finance agencies also offer single-family loan programs. In the
multifamily area, HUD's multifamily portfolio is similar to RHS's
multifamily portfolio and HUD's project-based section 8 program
operations parallel RHS's rental assistance program. Further, in
contrast to RHS, HUD has more established systems for assessing the
quality of its multifamily portfolio through its Real Estate Assessment
Center (REAC) and for restructuring financing and rental assistance for
individual properties through its Office of Multifamily Housing
Assistance Restructuring (OMHAR).
Changes in the Rural Housing Environment Raise Questions About the Need
to Maintain Separately Operated Rural Housing Programs:
Given the diminished distinctions between rural and urban areas today,
improvements in rural housing quality and access to credit, and RHS's
increasing reliance on guaranteed lending and public/private
partnerships, our September 2000 report found the federal role in rural
housing is at a crossroads. We listed arguments for and against
fundamentally changing the programs' targeting, subsidy levels, and
delivery systems, as well as merging RHS's programs with HUD's or other
agencies' comparable programs.
Arguments For and Against Separately Operated Programs:
A number of arguments have been presented to support continuing RHS's
housing programs separately from HUD and other agencies or for
maintaining a separate system for delivering these programs, including
the following:
* Some rural residents need the close supervision offered by RHS local
offices because they do not have access to modern telecommunications or
other means of obtaining information on affordable housing
opportunities;
* Rural borrowers often need a local service office familiar with their
situation in the first year of a loan;
* Rural areas could lose their federal voice in housing matters;
* Rural areas could lose the benefits of the lower rates and terms
RHS's direct and guaranteed loan programs currently offer; and:
* HUD and other potential partners have not focused on rural areas.
Proponents of arguments for merging RHS's housing programs with other
housing programs or not maintaining a separate system for delivering
housing programs in rural areas present a different set of arguments:
* RHS's field role has changed from primarily originating and servicing
direct loans to leveraging deals with partner organizations;
* In some states, local banks, nonprofit organizations, social workers,
and other local organizations are doing much of the front-line work
with rural households that was previously done by RHS staff;
* The thousands of RHS staff with local contacts could provide a field
presence for HUD, and other public partners, applying their leveraging
and partnering skills to all communities; and:
* RHS and HUD could combine management functions for their multifamily
portfolios that are now provided under separate systems.
We also noted that without some prodding, the agencies are not likely
to examine the benefits and costs of merging as an option. As a first
step toward achieving greater efficiency, we suggested that the
Congress consider requiring RHS and HUD to explore the potential
benefits of merging similar programs, such as the single-family insured
lending programs and the multifamily portfolio management programs,
taking advantage of the best practices of each and ensuring that
targeted populations are not adversely affected.
Actions Taken to Share Resources and Expertise:
Since we issued our report in September 2000, it appears that RHS and
FHA have shared some mutually beneficial practices. First, RHS's
single-family guaranteed program plans to introduce its automated
underwriting capabilities through technology that FHA has already
developed and has agreed to share with RHS. Second, RHS, FHA, and VA
have collaborated in developing common reporting standards for tracking
minority and first-time homeownership statistics. Third, we understand
that there have been discussions between RHS and HUD staff on
developing a model to restructure RHS section 515 mortgages using
techniques that HUD has learned through restructuring similar HUD
section 236 mortgages.
Opportunities Exist to Improve RHS Program Efficiencies:
Our September 2000 report also identified a number of actions that RHS
officials and others have identified that could increase the efficiency
of existing rural housing programs, whether or not they are merged. I
will limit my discussion today to two issues that deal with RHS's field
structure.
The first issue involves state delivery systems. When state Rural
Development offices were given the authority to develop their own
program delivery systems as part of the 1994 reorganization, some
states did not change, believing that they needed to maintain a county-
based structure with a fixed local presence to deliver one-on-one
services to potential homeowners. Other states tried innovative, less
costly approaches to delivering services, such as consolidating local
offices to form district offices and using traveling loan originators
for single-family programs. However, RHS has undergone a major shift in
mission during the past few years. RHS is still a lending agency like
its predecessor, the Farmers Home Administration, but it now emphasizes
community development, and uses its federal funding for rural
communities to leverage more resources to develop housing, community
centers, schools, fire stations, health care centers, child care
facilities, and other community service buildings. Some state Rural
Development officials we spoke with questioned the efficiency and cost-
effectiveness of maintaining a county-based field structure in a
streamlined environment where leveraging, rather than one-on-one
lending, has become the focus of the work.
For example, the shift in emphasis from direct to guaranteed single-
family lending moved RHS from relying on a labor intensive loan
generation process to one that relies on private lenders to underwrite
loans. When we performed our audit work in 2000 we found that
Mississippi, which maintains a county-based Rural Development field
structure, had more staff and field offices than any other state but
the next to lowest productivity as measured by dollar program activity
per staff member. Ohio, however, which ranked fifth in overall
productivity, operated at less than one-fifth of Mississippi's cost per
staff member. We recognize that it is more difficult to underwrite
single-family loans in the Mississippi Delta and other economically
depressed areas than in rural areas generally, and Mississippi does
have a substantial multifamily portfolio. Nevertheless, the number of
field staff in Mississippi far exceeded that in most other states.
Ohio, whose loan originators were based in four offices and traveled
across the state with laptop computers, ranked seventh in the dollar
value of single-family guaranteed loans made and fifth in the dollar
amount per staff member of direct loans made. Ohio had also done a good
job of serving all of its counties, while Mississippi had experienced a
drop in business in the counties where it had closed local offices.
Ohio's travel and equipment costs had increased with the use of
traveling loan originators.
The Maine Rural Development office had also fundamentally changed its
operational structure, moving from 28 offices before the reorganization
to 15 afterwards, and in 2000 it operated out of 3 district offices.
The state director at the time, who had also headed the Farmers Home
Administration state office in the 1970s, said that he had headed the
agency under both models and believed the centralized system to be much
more effective. He added that under the new structure, staff could no
longer sit in the office waiting for clients to come to them but had to
go to the clients. He also maintained that a centralized structure was
better suited to building the partnerships with real estate agents,
banks, and other financial institutions that had become the core
element of RHS's work.
The second issue involves the location of field offices. Consistent
with its 1994 reorganization legislation, USDA closed or consolidated
hundreds of county offices and established "USDA service centers" with
staff representing farm services, conservation, and rural development
programs. However, the primary goal of the task team that designed the
service centers was to place all the county-based agencies together,
particularly those that dealt directly with farmers and ranchers, to
reduce personnel and overhead expenses by sharing resources. But while
the farm finance functions from the old Farmers Home Administration fit
well into the new county-based Farm Service Agency, the housing finance
functions that moved to the new state Rural Development offices were
never a natural fit in the centers. The decision to collocate Rural
Development and Farm Service offices was based on the fact that Rural
Development had a similar county-based field structure and the
Department needed to fill space in the new service centers. Collocating
Rural Development and Farm Service offices designed to serve farmers
and ranchers makes less sense today, especially in states where Rural
Development operations have been centralized.
RHS Does Not Have a Mechanism to Prioritize the Long-Term
Rehabilitation Needs of Its Multifamily Portfolio:
How to deal with the long-term needs of an aging portfolio is the
overriding issue for section 515 properties. In the program's early
years, it was expected that the original loans would be refinanced
before major rehabilitation was needed. However, with prepayment and
funding restricted, this original expectation has not been realized,
and RHS does not know the full cost of the long-term rehabilitation
needs of the properties it has financed. RHS field staffs perform
annual and triennial property inspections that identify only current
deficiencies rather than the long-term rehabilitation needs of the
individual properties. As a result, RHS does not know whether reserve
accounts will cover long-term rehabilitation needs. Without a mechanism
to prioritize the portfolio's rehabilitation needs, including a process
for ensuring the adequacy of individual property reserve accounts, RHS
cannot be sure it is spending its limited rehabilitation funds as
effectively as possible and cannot tell Congress how much funding it
will need to cover the portfolio's long-term rehabilitation costs.
RHS's state personnel annually inspect the exterior condition of each
property financed under the section 515 program and conduct more
detailed inspections every 3 years. However, according to RHS
guidelines, the inspections are intended to identify current
deficiencies, such as cracks in exterior walls or plumbing problems.
Our review of selected inspection documents in state offices we visited
confirmed that the inspections are limited to current deficiencies. RHS
headquarters and state officials confirmed that the inspection process
is not designed to determine and quantify the long-term rehabilitation
needs of the individual properties.
RHS has not determined to what extent properties' reserve accounts will
be adequate to meet long-term needs. According to RHS representatives,
privately owned multifamily rental properties often turn over after
just 7 to 12 years, and such a change in ownership usually results in
rehabilitation by the new owner. However, given the limited turnover
and funding constraints, RHS properties primarily rely on reserve
accounts for their capital and rehabilitation needs. RHS officials are
concerned that the section 515 reserve accounts often are not adequate
to fund needed rehabilitation.
RHS and industry representatives agree that the overriding issue for
section 515 properties is how to deal with the long-term needs of an
aging portfolio. About 70 percent of the portfolio is more than 15
years old and in need of repair. Since 1999, RHS has allocated about
$55 million in rehabilitation funds annually, but owners' requests for
funds to meet safety and sanitary standards alone have totaled $130
million or more for each of the past few years. RHS headquarters has
encouraged its state offices to support individual property owners
interested in undertaking capital needs assessments and has amended
loan agreements to increase their rental assistance payments as
necessary to cover the future capital and rehabilitation needs
identified in the assessments. However, with varying emphasis by RHS
state offices and limited rental assistance funding targeted for
rehabilitation, the assessments have proceeded on an ad hoc basis. As a
result, RHS cannot be sure that it is spending these funds as cost-
effectively as possible.
To better ensure that limited funds are being spent as cost-effectively
as possible, we recommended that USDA undertake a comprehensive
assessment of the section 515 portfolio's long-term capital and
rehabilitation needs, use the results of the assessment to set
priorities for the portfolio's immediate rehabilitation needs, and
develop an estimate for Congress on the amount and types of funding
required to deal with the portfolio's long-term rehabilitation needs.
USDA agreed with the recommendation and requested $2 million in the
President's 2003 budget to conduct a comprehensive study. RHS staff
drafted a request for proposal that would have contracted out the
study, but the Undersecretary for Rural Development chose to lead the
study himself. Plans are to develop an inspection and rehabilitation
protocol by February 2004 on the basis of an evaluation of a sample of
properties.
GAO Is Examining Rental Assistance Program Issues:
Finally, I would like to mention some work we have begun on the Section
521 rental assistance program. With an annual budget of over $700
million, the rental assistance program is the largest line item
appropriation to the Rural Housing Service. This is a property-based
subsidy that provides additional support to units created through the
Section 515 multifamily and farm labor housing programs. RHS provides
this subsidy to property owners through 5-year contracts. The
objectives for our current work are to review (1) how RHS estimates the
current and future funding needs of its Section 521 rental assistance
program; (2) how RHS allocates the rental assistance; and (3) what
internal controls RHS has established to monitor the administration of
the rental assistance program. We anticipate releasing a report on our
findings in February of 2004.
Mr. Chairman, this concludes my prepared remarks. I would be pleased to
answer any questions you or any other members of the Committee may
have.
Contact and Acknowledgements:
For questions regarding this testimony, please contact William B. Shear
on (202) 512-4325 or at shearw@gao.gov, or Andy Finkel on (202) 512-
6765 or at finkela@gao.gov. Individuals making key contributions to
this testimony included Emily Chalmers, Rafe Ellison, and Katherine
Trimble.
FOOTNOTES
[1] Rural Housing: Options for Optimizing the Federal Role in Rural
Housing Development (GAO/RCED-00-241, September 15, 2000) and
Multifamily Rural Housing: Prepayment Potential and Long-Term
Rehabilitation Needs for Section 515 Properties (GAO-02-397, May 10,
2002).
[2] Federal Crop Insurance Reform and Department of Agriculture
Reorganization Act of 1994, Pub. L. 103-354 (1994).
[3] Authorized dollar amounts represent the expected private-sector
loan levels guaranteed by RHS as well as loans made directly by RHS
during the year. Actual appropriations are much lower because they
cover the subsidy cost, not the face value of the loans or guaranteed
loans. The subsidy cost is the estimated long-term cost to the
government of a direct or guaranteed loan calculated on a net present
value basis, excluding administrative costs. In fiscal year 2003, the
$4.2 billion in loan authorizations are estimated to require about $37
million in credit subsidy costs.
