CARH’S BROADCAST E-MAIL – Regulatory Alert

September 15, 2017

1)  GAO Releases Report on Rental Assistance Funding Gaps in Fiscal Years 2013-2015

On September 13^th, the Government Accountability Office (GAO) released a report entitled, “Rural Housing Service: Additional Actions Would Help Ensure Reasonableness of Rental Assistance Estimates.” (GAO-17-725)

The GAO report is a result of a request from Senators Jerry Moran (R-KS) and Jeff Merkley (D-OR) that was made on the heels of the Rural Housing Service’s (RHS) Rental Assistance (RA) crisis in Fiscal Year (FY) 2015. (At that time of the request, Senators Moran and Merkley served as the chair and ranking member, respectively, of the Senate Agriculture Appropriations Subcommittee. Senator John Hoeven (R-ND) is now the chair and Senator Merkley remains the ranking member of the Subcommittee.) The request also asked GAO to review the Section 515 maturing mortgage issue. A separate study is being conducted on this important issue.

The report found an interplay of three primary factors contributed to the RA program funding gaps:

• FY 2013 sequestration and rescissions. An across-the-board cancelation of budgetary resources in March 2013 decreased the program’s approximately $907 million budget by about $70 million.
• Unreliable methods for estimating RA costs. RHS used a state-wide, per-unit average cost to calculate RA agreement amounts. This resulted in some properties receiving more funds than needed, tying up funds that could have been used for other properties.
• Limited management flexibility. RHS had limited ability to adjust its program management to help prevent funding gaps. For example, RHS does not have authority to fund agreement renewals for less than 1 year.

The results were substantial gaps in timely and proper payment under RA contracts for hundreds of properties. GAO found that RHS has taken steps under its existing authorities to help prevent future funding gaps but lacks certain plans and controls to help ensure its estimates of RA costs are reasonable. GAO also found weaknesses in aspects of RHS’s budget estimation and execution of rental assistance. According to the report, RHS does not have the following:

• a plan for ongoing monitoring or testing of the new estimation method (Federal internal control standards call for management to establish monitoring activities and evaluate results);
• controls to detect misestimates of rental assistance, a problem RHS experienced during early use of the model (Federal internal control standards call for control activities for information systems to respond to risks);
• appropriate inflation rates in its budget estimates since fiscal year 2009 (Office of Management and Budget guidance states budgets should be consistent with the economic assumptions it provides);
• staff guidance has not been provided on their responsibilities for determining whether properties’ rental assistance should be renewed (Federal internal control standards call for documenting responsibilities through policies).

GAO does indicate in the report that weaknesses may exist partly because RHS continues to refine its estimation method, which has been in effect for about two years. By addressing them, RHS would have greater assurance that it will develop the best possible estimates. Click here to access the GAO report and the highlights from the report.

CARH appreciates the interest of Senators Moran, Merkley, and Hoeven in the proper administration of the RA program and looks forward to working with Congress and the Agency   to ensure the integrity of the program well into the future. In particular it is important that appropriate or sufficient inflation rates are used so as to properly anticipate needed increases in RA subsidy rates to pay for property operating expenses including increases in management fees.

2)  Senate Confirms Pamela Patenaude as HUD Deputy Secretary

On September 14^th, the Senate, by a vote of 80-17, confirmed the nomination of Pamela Patenaude to serve as HUD’s Deputy Secretary. According to HUD, Ms. Patenaude will lead the Department’s Disaster Management Group (DMG) and will play a primary leadership and operational role for 16 program and support offices within HUD, including the Offices of Public and Indian Housing, Community Planning and Development, Policy Development and Research, and Housing / Federal Housing Administration (FHA).

Ms. Patenaude served as HUD’s Assistant Secretary for Community Planning and Development under President George W. Bush and was the president of the J. Ronald Terwilliger Foundation for Housing America’s Families.

If you have any questions, please contact the CARH National Office at carh@carh.org or 703-837-9001.