Veterans Affairs Homeless Programs
Implementation of the Transitional Housing Loan Guarantee Program Gao ID: GAO-05-311R March 16, 2005In 1998, Congress passed the Veterans Programs Enhancement Act, which authorized the Department of Veterans Affairs (VA) to establish a new loan guarantee program for the construction or rehabilitation of multifamily transitional housing projects specifically designed to provide housing for homeless veterans. The program is intended to increase the amount of housing available, as well as provide other services to encourage addiction recovery and reestablish work and social relationships. GAO was asked to examine why no multifamily housing projects are operational, given that the VA's loan guarantee program was authorized 6 years ago. Specifically, GAO was asked to provide information on (1) actions VA has taken to implement the Transitional Housing Loan Guarantee Program and (2) issues that have affected program implementation.
GAO found that since enactment of the legislation authorizing the loan program in 1998, VA has drafted regulations; designed the program, including working with program contractors to develop the loan terms and supporting infrastructure for processing and administering the loans; and consulted with OMB and sponsors (potential loan recipients) to conceive the initial housing projects. Program implementation has been affected by the challenges associated with creating VA's first transitional housing loan guarantee program for homeless veterans, deciding on program financing and structure including whether VA or the Department of Housing and Urban Development should manage the program, replacing the initial program development contractor, and addressing delays associated with project-specific, local issues such as historical preservation and obtaining land parcels.
GAO-05-311R, Veterans Affairs Homeless Programs: Implementation of the Transitional Housing Loan Guarantee Program
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March 16, 2005:
The Honorable Christopher H. Smith:
House of Representatives:
Subject: Veterans Affairs Homeless Programs: Implementation of the
Transitional Housing Loan Guarantee Program:
In 1998, Congress passed the Veterans Programs Enhancement Act, which
authorized the Department of Veterans Affairs (VA) to establish a new
loan guarantee program for the construction or rehabilitation of
multifamily transitional housing projects specifically designed to
provide housing for homeless veterans. The program is intended to
increase the amount of housing available, as well as provide other
services to encourage addiction recovery and reestablish work and
social relationships. You asked us to examine why no multifamily
housing projects are operational, given that the loan guarantee program
was authorized over 6 years ago.
Specifically, you asked us to provide information on (1) actions VA has
taken to implement the Transitional Housing Loan Guarantee Program and
(2) issues that have affected program implementation.
To provide this information, we reviewed documentation for the
Transitional Housing Loan Guarantee Program; the Federal Credit Reform
Act of 1990 and other applicable criteria, such as Office of Management
and Budget (OMB) circulars and a Federal Accounting Standards Advisory
Board technical release; OMB's role in federal credit programs; and our
past reports on housing for homeless veterans and other federal credit
programs. We also interviewed the program development contractor and VA
and OMB officials to obtain their views on program development and any
issues that may have impacted implementation. Our work was performed
from September 2004 through March 2005 in accordance with generally
accepted government auditing standards.
In summary, we found that since enactment of the legislation
authorizing the loan program in 1998, VA has drafted regulations;
designed the program, including working with program contractors to
develop the loan terms and supporting infrastructure for processing and
administering the loans; and consulted with OMB and sponsors (potential
loan recipients) to conceive the initial housing projects. Program
implementation has been affected by the challenges associated with
creating VA's first transitional housing loan guarantee program for
homeless veterans, deciding on program financing and structure
including whether VA or the Department of Housing and Urban Development
should manage the program, replacing the initial program development
contractor, and addressing delays associated with project-specific,
local issues such as historical preservation and obtaining land
parcels. Enclosure I contains briefing slides on our findings.
We provided a draft of this report to VA for comment. In its written
comments, VA concurred with the report's findings. VA also provided
technical comments, which we incorporated. (See encl. II for a copy of
VA's comments.)
We are sending copies of this report to the Chairman and Ranking
Minority Member, House Committee on Veterans' Affairs; the Chairman and
Ranking Minority Member, Senate Committee on Veterans' Affairs; and the
Secretary of Veterans Affairs. We will also make copies available to
others upon request. In addition, the report will be available at no
charge on GAO's Web site at http://www.gao.gov. If you or your staff
have any questions about this report, please contact me at (202) 512-
7101 or Michael T. Blair, Jr., Assistant Director, at (404) 679-1944.
Aditi Shah Archer and Michael Tropauer made key contributions to this
report.
Sincerely yours,
Signed by:
Cynthia A. Bascetta:
Director, Health Care--Veterans' Health and Benefits Issues:
Enclosures - 2:
(290417):
Enclosure I:
VA Homeless Programs: Implementation of the Transitional Housing Loan
Guarantee Program:
Briefing slides for the staff of The Honorable Christopher H. Smith:
House of Representatives:
March 16, 2005:
VA Homeless Programs: Implementation of the Transitional Housing Loan
Guarantee Program:
* Introduction;
* Key Questions;
* Methodology;
* Results in Brief;
* Background;
* GAO Findings.
Introduction:
Public Law 105-368 authorized the Department of Veterans Affairs (VA)
to establish a new loan guarantee program for the construction or
rehabilitation of multifamily transitional housing projects
specifically designed to provide housing for homeless veterans. The
program is intended to increase the amount of housing available as well
as provide other services to encourage addiction recovery and
reestablish work and social relationships. We were asked to provide
information about the implementation of the program, which was
authorized over 6 years ago.
Key Questions:
We were asked to provide information on the following questions:
(1) What actions has VA taken to implement the Transitional Housing
Loan Guarantee Program?
(2) What issues have affected program implementation?
Methodology:
We reviewed documentation for:
* the Transitional Housing Loan Guarantee Program;
* the Federal Credit Reform Act of 1990 and other applicable criteria,
such as Office of Management and Budget (OMB) circulars and a Federal
Accounting Standards Advisory Board technical release;
* OMB's role in federal credit programs; and:
* past GAO reports on housing for homeless veterans and other federal
credit programs.
We interviewed:
* the program development contractor and:
* VA and OMB officials to obtain their views on program development and
any issues that may have impacted implementation.
Our work was performed from September 2004 through March 2005 in
accordance with generally accepted government auditing standards.
Results in Brief:
VA committed conditionally to guaranteeing three loans in 2003 and one
in 2004.[NOTE 1] However, as of February 1, 2005, no project sponsors
had received these loans from the lender the Federal Financing Bank.
Since enactment of the loan program in 1998, VA has:
* drafted regulations;
* designed the program, which included working with program contractors
to develop the loan terms and supporting infrastructure for processing
and administering the loans; and:
* consulted with OMB and sponsors to conceive the initial housing
projects.
NOTE
[1] VA's commitment is dependent on the sponsor meeting a number of
conditions such as purchasing land and obtaining local government
approval for the project's design plan.
Program implementation has been affected by challenges associated with:
* creating VA's first transitional housing loan guarantee program for
homeless veterans;
* deciding on program financing and structure;
* replacing the initial program development contractor; and
* addressing delays associated with project-specific, local issues such
as preserving historical properties and obtaining land.
Background: Homeless Veterans:
An estimated one-third of the adult homeless population has served in
the armed forces. In fiscal year 2003:
* VA's total costs associated with the treatment of about 100,000
homeless veterans using VA health care services was about $1.2 billion
and:
* VA provided over 11,000 beds for homeless veterans nationwide.
Background: Transitional Housing:
VA has three programs that offer transitional housing and
rehabilitative services. [NOTE 2]
The Transitional Housing Loan Guarantee Program is an additional
program intended to increase the amount of housing available, as well
as provide other services to encourage addiction recovery and
reestablish work and social relationships.
The program is to guarantee up to 15 loans with a maximum aggregate
value of $100 million.
In fiscal year 2000, the Congress appropriated about $48 million to VA,
which is presently held in VA's Housing Program Account. 3This subsidy
will be available for VA, the guarantor, to repay the lender the
Federal Financing:
Bank in the event that the project sponsors default on the loans.
Since fiscal year 2000, the Congress has authorized VA to use funds
from its general operating expenses and medical care appropriations for
program administration.
NOTES:
[2] The Compensated Work-Therapy/Transitional Residence Program,
Homeless Providers Grant and Per Diem Program, and Domiciliary Care for
Homeless Veterans Program.
[3] Pub. L. No. 106-74, Oct. 20, 1999.
Question 1: VA Actions to Implement the Program:
[See PDF for image]
[A] On the basis of the Secretary's decision to place a hold on the
program, VA ordered the program contractor to stop work in July 2002;
work resumed in October 2002.
[B] While VA has committed to guaranteeing loans for these housing
projects, its commitment is dependent on the sponsor meeting a number
of conditions, such as purchasing land and obtaining local government
approval for the project's design plan. The conditions had not been met
as of February 1, 2005, and no sponsors have received loans from the
lender.
[End of figure]
Question 2: Issues Affecting Program Implementation:
The program is new to the federal government. Consequently, there is no
financial model or historical data, which would have facilitated:
* identifying a lender and project sponsors,
* developing the program structure, and:
* forecasting financial risk to the federal government.
Although the authorizing legislation was enacted in fiscal year 1999,
VA did not initiate implementation until after funding for the loan
program was provided in fiscal year 2000.
The Secretary's belief that VA should not expend resources to implement
the program accounted for program delays.
* The Secretary placed a hold on program development in July 2002,
indicating that the Department of Housing and Urban Development should
assume management of the program.
* In October 2002, the Secretary, after discussions with the leadership
of the House Committee on Veterans' Affairs, reconsidered and proceeded
with VA management of the program soon after appointing a new lead
program manager in September 2002.
VA did not find the initial program contractor's work satisfactory.
Additional time (February-April 2002) was necessary to:
* conduct a quality review of work performed by the program contractor
to identify areas of work that VA could continue to use and:
* select a replacement contractor to continue program development.
Individual project startup has proven to be time-consuming. For
example, the Vietnam Veterans of San Diego housing project which
received a conditional loan guarantee commitment from VA in 2003 cannot
begin construction until local government approval for the design plan
is obtained.
[End of slide presentation]
[End of section]
Enclosure II:
THE DEPUTY SECRETARY OF VETERANS AFFAIRS:
WASHINGTON:
March 7, 2005:
Ms. Cynthia Bascetta:
Director:
Health Care - Veterans Health and Benefits Issues:
U. S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Ms. Bascetta:
The Department of Veterans Affairs (VA) has reviewed the Government
Accountability Office's (GAO) draft report, VETERANS AFFAIRS HOMELESS
PROGRAMS: Implementation of the Transitional Housing Loan Guarantee
Program (GAO 05-311 R). VA concurs with GAO's findings and provides
comments for clarification in the enclosure.
Veterans Health Administration staff will continue to work with the
Director, Asset Enterprise Management; Director, Homeless Veterans
Programs; staff from the Office of General Counsel; and the Veterans
Benefit Administration. VA expects to develop at least two loan
guarantees for housing project sponsors in San Diego and Chicago in FY
2005 under this pilot program.
VA appreciates the opportunity to comment on your report.
Sincerely yours,
Signed by:
Gordon H. Mansfield:
Enclosure:
[End of section]
