HUD fights GAO's 'high-risk' label

The Department of Housing and Urban Development and several members of Congress are questioning the General Accounting Office's reasons for keeping HUD on the GAO's list of "high-risk" agencies, specifically, and what criteria in general makes any agency high-risk.

HUD has a history of organizational and management problems that go back more than 20 years, including the lack of an integrated financial system or an oversight process for procurement. Those and other problems are the main reasons why the department was designated a high-risk agency in 1994, according to GAO.

But in the last two years, HUD has taken significant steps toward reforming its management and programs, including information technology programs, which GAO noted in its latest high-risk report, released in January. Since then, HUD Secretary Andrew Cuomo, HUD Deputy Secretary Saul Ramirez and several members of Congress have asked GAO why HUD is still listed - despite its progress - and whether there is a governmentwide standard procedure to being removed from the list.

GAO gives HUD credit for its reforms. But until the department shows positive results from the changes, GAO can give no guarantee that there has been any improvement, said Judy England-Joseph, director of housing and community development issues at GAO, testifying before the Senate Housing and Transportation Subcommittee hearing on management challenges at HUD last week.

"The bottom line is that proof of the agency's progress will be in the results they achieve," she said.

This view is backed up by recent audits by HUD inspector general Susan Gaffney and KPMG LLP. Both have concluded that HUD's reforms have led to essential IT programs being sidelined for lack of personnel and resources. The department's reform efforts began in 1994 under then-Secretary Henry Cisneros as a plan to reduce HUD's staffing level, amid congressional talks about abolishing the agency. The cuts left some programs with no staff and others staffed with employees who had been reassigned but not retrained.

In 1997, Cuomo announced the HUD 2020 Management Reform Plan to address the management deficiencies highlighted by GAO and HUD's Office of the Inspector General. But while the organizational and staffing changes are almost complete, the management changes, including retraining of employees and consolidation of programs, still lag, said the GAO and the inspector general.

Because few employees know what their responsibilities are, the chances for waste, fraud and abuse at HUD have risen, Gaffney testified.

Cuomo, at an appropriations hearing this month, said he and other HUD officials felt GAO judged the department using subjective criteria, and that he had asked GAO for a standard definition of what makes an agency high-risk. He said he had yet to receive a response from GAO.

Ramirez said in a written statement that while GAO was determining HUD's 1999 high-risk status, he and other officials were told that the department's designation would be based on the "professional judgment" of GAO staff, highlighting four agencywide problems. GAO concluded that HUD had:

* Internal control weaknesses, including the lack of necessary data and management processes.

* Poorly integrated and ineffective information and financial management systems.

* Organizational problems, including overlapping and ill-defined responsibilities, and lack of accountability and responsibility.

* Staff without the proper skills to perform, monitor and oversee programs.

However, Ramirez said in his statement, "I was informed that this test of four problems had not been applied uniformly to other agencies."

At the same time, GAO told HUD that redesignation was possible if "HUD demonstrated reasonable progress in implementing its reforms," Ramirez said. They were later told the standard for redesignation is long-term, sustainable results, he said.

"The difference in the two standards - reasonable progress vs. results - is significant since one is attainable in two years and the other could take an undetermined amount of time," Ramirez said in the statement. "There is a significant difference between having management deficiencies and being labeled high-risk."

This concerns HUD, Ramirez said, because "the designation of an agency as high-risk has important consequences to the morale of its employees, the confidence of its constituents and the public at large."

At the hearing, Sen. John Kerry (D-Mass.) said he was puzzled at HUD's high-risk designation, especially compared with problems at other agencies, such as the Defense Department. Kerry and Sen. Christopher Dodd (D-Conn.) asked GAO to make the high-risk designation more objective.

But GAO's England-Joseph said creating a definition is not easily done. "There is not a formula," she said. "It is not that simple."

High-risk designations for each agency are based on the history of GAO reports, and until HUD can show results that are more than surface changes, GAO will leave the agency on the list, she said.

GAO is working with the Maxwell School of Public Administration at Syracuse University to determine whether objective standards and criteria can be developed.