Detailed Information on the
Housing for the Elderly Assessment

HUD will propose at least two studies designed to determine appropriate and cost-effective outcome measures for the Section 202 program. Potential outcomes include improved quality of life for seniors residing in Section 202 housing, increased alternatives to "worst-case" housing needs among the very-low-income elderly, and reduced overall federal expenditures as the result of Section 202 providing a lower-cost alternative to premature institutionalization. One of the proposed studies should attempt to quantify the annual Federal budgetary savings achieved through reduced Medicaid and other expenditures for elderly individuals in supportive Section 202 housing who would otherwise need nursing home or other institutional care.

HUD will propose changes to the logic model and reporting requirements for the Section 202 program to provide additional information about Section 202 tenants that will improve the measurement of program results. The proposed changes will focus on the degree of frailty of tenants and the number of tenants coming from or going to institutional living environments.

Measure: Maintain the share of Section 202 housing properties that meet the HUD-established physical standards at no less than 95 percent.

Explanation:HUD's physical standards for Section 202 units assure that the low-income elderly tenants continue to live in a safe and decent non-institutional setting. Physical assessment data is tracked through the Real Estate Assessment Center's Physical Assessment Subsystem and the 95% compliance target will be increasingly difficult for the aging stock Section 202 projects to maintain.

Measure: Maintain the share of Section 202 housing properties that meet HUD's financial management compliance at no less then 98 percent.

Explanation:The goal of maintaining the financial standards compliance at 98 percent ensures that safe, decent, and sanitary housing is customarily provided to clients and that the housing is maintained and available over time to the intended residents. Diligent financial management confirms that fiscal prudence is exercised when delivering quality services to the elderly clientele. This is ambitious because the portfolio is aging and limited fiscal resources must be effectively utilized to reach the target population.

Measure: Reduce the numbers of low-income elderly at risk of worst case housing needs by bringing 4,000 Section 202 units (100 projects) to initial closing during FY 2008.

Explanation:The target was established based on the number of projects in the pipeline that are targeted for closing in FY 2008. The number of projects and units is dependent on the amount of funds appropriated. As the appropriated amount remains the same (as it has recently), the number of projects/units selected declines because of the increased cost for development due to cost of living increases.

Measure: Maintain service coordinator presence at the FY 2007 level (152,000 households) to enable low-income elderly to live as independently as possible in private assisted housing developments.

Explanation:The Service Coordinator provides a range of services that are tailored to the needs of elderly persons and enables elderly persons to live with dignity and independence which fulfills the purpose of the Section 202 program. As residents live in facilities for years, they become frailer and less able to live in rental facilities without additional services. The service coordinator links the elderly residents to a range of services aimed at helping them remain independent and age with dignity. The baseline of 152,000 households was established in FY 2007. Maintaining the 2007 level is an ambitious goal for this program due to the diminishing funding each year, which result in less funding to support service coordinators.

Measure: At least 70 percent of projects that are initially closed in FY 2008 will have completed the process within 24 months; and of those, 25 percent will have completed the process within 18 month, thereby, increasing the number of decent and safe community-based living opportunities for the low-income elderly.

Explanation:Section 202 capital advance funding is linked to the expansion of quality and affordable housing for the elderly and persons with disabilities. This efficiency indicator is a measure of the Department's success in achieving the intended outcome by minimizing the time needed for Section 202 projects to proceed from fund reservation to initial closing. A 2003 GAO report found that only 55 percent of Section 202 projects funded from 1998 - 2000 reached initial closing within 24 months of the funding award.

Measure: Maintain the number of Section 202 units at 98 percent of the prior year level, excluding new units that are added to the inventory.

Explanation:The Department is committed to preserving existing low-income rental housing for the elderly. This indicator reports on the number of Section 202 units in multifamily housing developments that serve the elderly, excluding new units added to the Department's inventory. The aggressive target established for FY 2008 uses the FY 2007 level (272,000 units) as a baseline.

Measure: To expand access to and availability of decent, affordable rental housing for low-income elderly households.

Explanation:HUD is still developing metrics to demonstrate that production and maintenance of Section 202 units increases the total stock of decent, affordable rental housing for low-income elderly households. During this process, HUD will consider whether there are substitutable alternatives to Section 202 housing.

Measure: To reduce total federal costs of supporting the elderly by reducing the incidence of institutionalization among Section 202 residents compared to other very-low-income elderly.

Explanation:HUD is still developing baselines and metrics for this measure, which will determine the extent to which institutionalization can be delayed or avoided among Section 202 tenants when compared to other very-low income elderly. After establishing a baseline, HUD will incorporate specific activities in phase two of the Section 202 logic model that project owners will report on to measure their performance in reducing the rate of institutionalization, such as, the supportive services provided, the ages of the residents, the length of time the residents remain in the units, the degree of frailty, the number of residents who moved into the project from institutions, and others.

Is the program purpose clear?

Explanation: The purpose of the program is to enable elderly persons to live with dignity and independence by expanding the supply of supportive housing that is designed to accommodate the special needs of very low-income elderly and to provide a range of services that are tailored to the needs of elderly persons occupying the housing.

Evidence: 12 U.S.C. of Section 202 of the Housing Act of 1959, as amended by Section 801 of the National Affordable Housing Act (P.L. 101-625) authorizes the HUD Secretary to provide assistance to private non-profit organizations and consumer cooperatives to expand the supply of supportive housing for the elderly via capital advances and contracts for project rental assistance.

Does the program address a specific and existing problem, interest, or need?

Explanation: The program targets the critical housing needs of the very low-income elderly population. There is consensus that supply and access to affordable housing for this vulnerable and growing section of the population are insufficient.

Evidence: The 2005 HUD Report to Congress, "Affordable Housing Needs: A Report to Congress on the Significant Need for Housing," identifies over one million elderly who do not receive Federal assistance, have incomes below 50 percent of the local median, and pay more than half of their income on rent or live in poor quality housing.

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: The program is specifically designed to target the very low-income elderly through the use of non-profits to provide supportive, affordable housing. Although there are other programs that provide housing for the elderly, they are not uniquely designed to accommodate the special needs of extremely low-income elderly persons, nor to provide a range of services tailored to meet their needs as they age in place. Other programs are not structured to provide special support features such as accessible design, community space, and service coordinators in new housing developments for the extremely low-income elderly. There are a number of ways that duplication is avoided. For the low-income housing tax credit program, duplication is generally avoided because of the different income groups that can be served without rent burdening the residents, specifically residents paying more than 30 percent of their income for rent. It was also noted by AARP that "Section 202 properties are more successful than LIHTC properties in providing services to residents." Duplication is avoided in rural areas through the effective implementation of a long-standing memorandum of understanding with the Department of Agriculture.

Evidence: Though the Low-Income Housing Tax Credits program has been used to finance the development of housing for the elderly, these units are generally not affordable to the extremely low-income population. Housing Choice Vouchers and Public Housing also serve very low income elderly tenants, but these programs generally do not provide supportive services or other features. What distinguishes Section 202 housing from other forms of housing assistance for the elderly is that it includes features designed to accommodate residents as they become frailer with time. Such features include: Accessible design, such as grab rails, ramps, elevators where necessary, and accessible units; community space must be present in order for Section 202 facilities to provide certain on-site supportive services. Public spaces may be designed to provide adequate and appropriate room for socializing, exercising, and supportive services. On-site provision of these activities and services is especially helpful for residents who are frail and facility-bound. Finally, service coordinators (persons trained to work with residents and their families as services are needed) make up the third unique component to the Section 202 program. More specific information can be found in the forthcoming PD&R study, the report of the Millennium Housing Commission and the 2006 AARP publication "Developing Appropriate Rental Housing for Older Persons: A Survey of Section 202 and Low-income Housing Tax Credit Property Managers."

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: Pursuant to the statute, funds are fair shared across the country for experienced, non-profit sponsors who compete for the funds in order to build projects that serve the very low-income elderly. The Housing for the Elderly program works well with other federal, state, and local programs to deliver this unique brand of affordable supportive housing. This is particularly true in areas where the rental housing market is tight or the housing design does not accommodate the special physical needs of the elderly. However, a 2002 GAO report estimated that the total 30 year cost of a one-bedroom Section 202 housing unit is 19% higher (total Government cost was 25% higher) on average than the 30 year cost of a similar housing voucher unit. In 2005 the Department revised the Section regulations so that the program could work more effectively with low-income housing tax credits. The change facilitates leveraging the Section 202 dollars and has resulted in additional units being built.

Evidence: The Notice of Funding Availability (NOFA) that is published in the Federal Register each funding cycle identifies the requirements of the program, as well as the criteria that determine which applicants will be selected. Applicants selected to participate in the program must execute certain documents that state how the project is to be operated, beginning with the Agreement Letter and continuing with the Capital Advance Agreement, Project Rental Assistance Contract (PRAC) Agreement, Regulatory Agreement, Construction Contract, and Use Agreement. Section 202 project owners must also adhere to the statutory and regulatory requirements as stated in 24 CFR 891. Census data are used to identify areas of need, and applicants must demonstrate market needs for their intended projects as required in the Memorandum of Understanding with USDA's office of Rural Housing. 24 CFR 891.800 - 891.865. A 2002 report by GAO, Federal Housing Assistance, Comparing the Characteristics and Costs of Housing Programs.

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: There is ample evidence that the design of the program is effectively enabling elderly persons to live with dignity and independence by providing affordable supportive housing. To ensure that the project serves the intended beneficiaries, the project owner must execute a Use Agreement which is recorded for the term of the 40-year mortgage. In addition, the beneficiaries occupying the units are screened to ensure that they qualify. To support the screening process, consistent with the President's Management Agenda and the provisions of the Rental Housing Integrity Improvement Project (RHIIP), the Department implemented the Enterprise Income Verification System to be used for most elderly projects. This system assists in ensuring that the right benefits go to the right persons. While some of the sponsors of Section 202 housing and other developers do produce other housing for the elderly, most of those housing units are not subsidized and do not address the housing needs of the very low-income elderly. The 1.3 million persons with unmet housing needs indicate that the market is not adequately addressing the housing needs of this population.

Evidence: Guidance to sponsors is provided in 24 CFR 891, the Capital Advance and Project Rental Assistance Contract (PRAC) Agreements, the Supportive Housing for the Elderly Handbooks (4571.3 REV-1 and 4571.5), and the Occupancy Requirements of Subsidized Multifamily Housing Handbook (4350.3). Also, a Computer Matching Agreement between HUD and the Department of Health and Human Services allows HUD to confirm intended beneficiaries and eliminate making improper payments to those ineligible for the program and there is no evidence to suggest that the Section 202 program displaces the construction and maintenance of other affordable housing units targeted to the low-income elderly.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: HUD has identified two long-term outcome measures for the program, but has not yet developed quantifiable timelines and targets for the new measures. The first outcome measure in development will demonstrate an expansion of access to and availability of decent, affordable rental housing for low-income elderly households. The second long-term outcome measure in development will demonstrate a reduction in total federal costs of supporting the elderly by decreasing the rate of institutionalization in the low-income elderly community. Specific activities/outcomes will be put in place in phase two of the logic model that project owners will report on to measure their performance in reducing the rate of institutionalization, such as the ages of the residents, the length of time the residents remain in the units, the degree of frailty, the number of residents who moved into the project from institutions, and others. Last year, HUD incorporated new, ambitious long-term output and efficiency performance measures into its strategic and annual performance plans. In keeping with the purpose of the program, the performance goals of the elderly housing program will ensure that low-income elderly residents in Section 202 housing live in an affordable decent, safe and sanitary non-institutional setting.

Evidence: Quantifiable timelines and targets for Section 202 outcome measures are still in development. The HUD Strategic Plans for FY 2003-2008 and FY 2006 - 2011 contain output and efficiency measures and the timelines for reaching the goals. In addition, the Annual Performance Plan lists specific measures to achieving these goals.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: HUD has not yet developed quantifiable timelines and targets for Section 202 outcome measures. However, HUD has made progress by incorporating the following output and efficiency goals into its strategic plan and annual performance reporting: the share of Section 202 properties that meet HUD-established physical standards are maintained at no less than 95 percent; the share of Section 202 properties that meet HUD's financial management compliance is maintained at no less than 98 percent; the number of elderly households living in Section 202 developments served by a service coordinator is maintained at the FY 2007 level; the number of Section 202 units serving the elderly is maintained at 98 percent of the FY 2007 level, excluding new units that are added to the inventory.

Evidence: The HUD Strategic Plan for FY 2006-2011, the 2008 Annual Performance Plan, and the FY 2008 HUD Management Plan contain details of output and efficiency performance measures as well as existing baseline values.

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: Last year, HUD incorporated long-term output and efficiency performance measures into its strategic and annual performance plans. The measures focus on timely processing and construction of new Section 202 units, and maintaining the quantity and quality of existing units. In keeping with the purpose and goals of the program, the performance measures of the elderly housing program will ensure that low-income elderly residents in Section 202 housing live in an affordable decent, safe, and sanitary non-institutional setting. The following measures contribute to the goal of expanding access to and availability of decent, affordable rental housing for low-income elderly households by ensuring that new Section 202 units are constructed and that existing units are maintained: 1. The share of Section 202 properties that meet HUD-established physical standards are maintained at no less than 95 percent; 2. The share of Section 202 properties that meet HUD's financial management compliance is maintained at no less than 98 percent; 3. the number of Section 202 units serving the elderly is maintained at 98 percent of the FY 2007 level, excluding new units that are added to the inventory. 4. 4,000 Section 202 units (100 projects) will be brought to initial closing during FY 2008. 5. The FY 2008 efficiency goal is to ensure that at least 70 percent of Section 202 projects are brought to initial closing within 24 months and that, of those, 25 percent will have completed the process within 18 months, these targets will increase to 80 percent and 35 percent respectively by 2010. Another output measure is directly linked to the long-term goal of reducing the rate of institutionalization in the low-income elderly community by providing "affordable housing plus services": 6. The number of elderly households living in Section 202 developments served by a service coordinator is maintained at the FY 2007 level. Annual output and efficiency measures, as described in the FY 2008 Annual Performance Plan, are quantifiable through data available in HUD's administrative databases, thus ensuring timely tracking of short-term and long-term progress. Quality of life outcomes for individual residents are not easily measured directly and HUD has not yet incorporated true outcome measure into its performance plans.

Evidence: The HUD Strategic Plan for FY 2006-2011, the 2008 Annual Performance Plan, and the FY 2008 HUD Management Plan contain details of output and efficiency performance measures as well as existing baseline values.

Does the program have baselines and ambitious targets for its annual measures?

Explanation: Building on substantial improvements to HUD's data systems, FY 2007 data is used as a baseline for the majority of the Section 202 performance measures. HUD has established recurring annual goals to maintain the quality and quantity of Section 202 units as well as service coordinator coverage. These goals are ambitious because it will be increasingly difficult for aging Section 202 projects to maintain compliance with HUD's standards. For new Section 202 projects, the efficiency measure of time to initial closing sets ambitious targets for improvement over the next three years. The FY 2008 targets for the annual output and efficiency measures include the following: ensuring that Section 202 properties that meet HUD-established physical standards are maintained at no less than 95 percent; making certain that the share of Section 202 properties that meets HUD's financial management compliance is maintained at no less than 98 percent; ensuring that the number of units is maintained at 98 percent of those at the FY 2007, excluding new units that are added to the inventory; and maintaining the number of elderly households living in private assisted housing developments served by a service coordinator at the FY 2007 level. The construction phase output target is increasing the availability of affordable housing for the elderly by bringing 4,000 units (100 projects) to initial closing during FY 2008. The FY 2008 annual efficiency target is to ensure that 25 percent of projects that initially close do so within 18 months and 70 percent close within 24 months, these goals will increase to 80 percent and 35 percent respectively by 2010.

Evidence: The Real Estate Management System (REMS) is the official source of data on Multifamily Housing's portfolio of assisted properties. The FY 2008 Annual Performance Plan documents the annual performance measures and provides more detail on the specific baselines and targets for these measures.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: Sponsors of Section 202 projects must execute a "Sponsor's Resolution for Commitment to Projects" during the application phase whereby they acknowledge their responsibilities of sponsorship, long-term support, willingness to assist the owner to develop, own, manage and provide appropriate services in connection with the proposed project, and the commitment reflects the will of the membership. They also commit to providing the required minimum capital investment (MCI) of one-half of one percent of the HUD-approved capital advance, not to exceed $25,000 ($10,000 for sponsors not affiliated with a national sponsor) and the estimated cost of any amenities or features (and operating cost related thereto) which would not be covered by the approved capital advance. The Department will waive one-half of the MCI if construction starts within the initial 18 months of the funding award. If the project is finally closed within 6 months of construction completion, HUD will approve the return of all remaining MCI funds not used to cover operating deficits during the first 3 years of operation. In addition to the sponsor's resolution of commitment to the project, the above provides additional incentives to the sponsors and owners to complete the projects within the established timeframes or earlier. In addition, if approved, each program participant signs a funding agreement letter (obligation of funds, timeframe for initial closing and use of funds); regulatory agreement (maintaining that the property is in good repair, restricts use of property funds, standard for reporting and maintaining records, and annual audited financial statement); construction contract with performance standards, capital advance agreement, mortgage note, deed of trust, and Project Rental Assistance Contract (PRAC) Agreement. In signing the capital advance agreement letter, the sponsors commit to closing the projects with the established timeframes as well as operating the project in accordance with other regulatory and statutory provisions of the program. HUD field offices also hold planning conferences with the sponsors to go over HUD's requirements for developing projects and the established timeframes for getting to each stage of the process. Should the owner or any of the other partners default on any of the business agreements, HUD can take to appropriate administrative action including but not limited to flagging the HUD automated system to prevent future participation and judicial remedies, debarment, civil money penalties and criminal action.

Evidence: In addition to the documents listed above, the NOFA, program regulations (24 CFR 891), and the Supportive Housing for the Elderly Handbooks (4571.3 REV-1 and 4571.5) outline the performance requirements of the project sponsors and owners, as well as what action HUD will take if the required performance milestones are not met. The Logic Model prepared by the sponsor at application submission is also evidence of their commitment to completing the project within the established time frame and their understanding of what it takes to get the project to occupancy.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: HUD has not completed an evaluation of the 202 program in terms of its overall impact on poor elderly individuals. However, a forthcoming HUD report "Section 202 Supportive Housing for the Elderly: Program Status and Performance Measurement" identifies many potential outcome measurements and will serve as a valuable resource for development of further evaluations.

Evidence: HUD has not completed an evaluation of the 202 program in terms of its overall impact on poor elderly individuals.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: The Congressional Justification for 2009 Estimates describes the number of new units that can be constructed using the funds requested for capital advances and project-based rental assistance. The 2009 budget request is also aligned with the long-term goals of the Section 202 program. Funding is requested for a pilot program to leverage capital grant amounts with non-federal resources. If such a pilot is successful, HUD could facilitate the construction of additional Section 202 units without increasing budgetary resources. The budget request also includes funding specifically for the provision of services and congregate dining facilities and the conversation of existing Section 202 units into assisted living facilities. These additional services contribute to HUD's efforts to reduce the rate of institutionalization in the low-income elderly community.

Evidence: Annual budget justifications. Real Estate Management System (REMS). Tenant Rental Assistance Certification System (TRACS)

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: HUD has taken a number of meaningful steps to correcting strategic planning deficiencies. In expanding the supply of affordable housing, pursuant to the Consolidated Appropriations Resolution of FY 2003, HUD conducted a summit to study recommendations for shortening the development processing time and to examine the processing of other Federal agencies. As a result of the summit, a study was conducted by the National Association of Homebuilders (NAHB) Research Center to see how the initial funding levels compared with other objective measures of development costs. Since the study, the development cost limits have been revised to the same level as the Section 221(d) (3) statutory limits. Also, performance evaluations of managers were tied to the goal of timely project development and to assess the progress the managers are making, regular pipeline conference calls are held to discuss the status of their projects and to identify solutions for those projects that are not making adequate headway. Another step taken by HUD in the expansion of the supply is through the mixed finance program. Through the additional resources added to the projects, additional units of affordable housing units are produced. HUD has also adopted the Logic Model concept so the sponsors and owners will evaluate their performance in enabling elderly residents to live with dignity and independence. The Logic Model is developed and reported in two phases. During the first phase, the sponsor/owner will measure their performance in expanding the supply of affordable units and assess the timely development of the project. During the second phase, the owner will measure their performance in enabling the elderly residents to remain independent by looking at the supportive services provided to the residents.

Evidence: The HUD Annual Performance Plan offers a thorough strategy to Embrace High Standards of Ethics, Management, and Accountability. HUD's Management Plan also spells out ways in which HUD has addressed management deficiencies. HUD's Annual Performance Plan. The Notice of Funding Availability spells out instructions concerning the Logic Model. See also, the NAHB Cost Evaluation of the Section 202 program.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: The agency monitors its goal achievement monthly through various automated systems. A monthly report of the pipeline is sent to the managers to help them monitor their progress in achieving the management plan goals. Quarterly conference calls are made to each of the 18 Multifamily Hub Directors throughout the country to discuss progress, the impediments to progress, and solutions for resolving issues on projects in the development pipeline. This information is used to assess HUD's performance in meeting its APP goal of increasing the availability of affordable housing for the elderly. Annually, owners submit audited financial statements including balance sheets, profit and loss statements, cash flow statements, etc., to ensure that financial compliance thresholds are met and that resources are being effectively and appropriately utilized. Also, physical inspections are conducted based on established performance criteria to ensure that decent, safe, and sanitary conditions are customary. The performance information collected is matched against effectively managed comparables and is used to identify deficiencies for mitigation. In reviewing the performance information collected over the past and reviewing the strategic goals, HUD added the following two performance output measures to the APP last year. The number of Section 202 units serving the elderly is maintained at 98 percent of those at the FY 2007 level, excluding new units that are added to the inventory and that at least 70 percent of projects initially closed in FY 2008 will have completed the process within 24 months; and of those 25 percent will have completed the process within 18 months. Management uses these two performance measures to assess whether the units are decent, safe and sanitary so the elderly can live with dignity.

Evidence: HUD maintains several administrative databases to track the program's performance. These include the Real Estate Management System (REMS) and the Development Application Processing (DAP) system. These systems regularly provide a variety of management reports that track program performance and tenant information.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: Federal managers and program partners are expected to meet time and cost objectives and the Department's Management Plan goals are critical elements in the evaluation of mangers of the Section 202 program. Performance evaluations of managers are tied to timely processing and initial closing goals. During the construction phase, projects are developed with a construction contract, which contains penalties for non-performance. Physical inspections of the projects are performed by HUD inspectors and private contract inspectors to ensure that the projects are on schedule. During the term of the 40-year use agreement, owners who do not maintain properties according to contractual agreements which are directly related to the long term physical and financial goals of the Department are subject to administrative action. This action could include denial of the opportunity for future participation in HUD programs. Projects are inspected according to a prescribed schedule to verify that they are decent, safe and in good repair. Audited financial statements are submitted annually. Information on both is submitted electronically to the Department for review and monitoring. During application processing, participants are penalized through the deduction of points if any previous project for which they were the sponsor had been extended beyond 24 months, unless it was beyond their control. They also lose points if amendment money was needed for previously approved projects. There is a scoring system for physical inspections that has the incentive of reducing HUD oversight for high performing managers who maintain properties above standard. For example, a property that receives a score of 90 or above gets inspected every three years instead of annually.

Evidence: NOFA, Regulatory Agreement, Use Agreement, Performance Appraisals, Construction Contacts, and Rental Assistance Contracts and REMS automated system.

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: HUD regularly obligates funds six to eight months after Section 202 award notification. Although HUD has carried a sizable unexpended balance recently of $4.7 billion for the Section 202 program, that balance is decreasing because of the more rapid obligation of funds and because projects are closing sooner. The latest unexpended balance is $2.1 billion. The capital advance agreement, Project Rental Assistance Contract (PRAC) Agreement, and use agreement ensure that the funds are spent for the intended purpose of developing and operating housing projects for the very low-income elderly. Capital grant awards are announced annually and the amounts, project sponsor recepients, and project description are posted on HUD's website. In accordance with the program plans, funds are reserved for the projects after Headquarters completes the review of the field office's selection submission. The funds are obligated and recorded in the Department's Financial Accounting System after the sponsor/owner and the Assistant Secretary of Housing have signed the agreement letter. Funds are disbursed during the construction phase on a cost reimbursable basis based on the firm commitment application that the owner submitted and HUD approved. The disbursements are dependent upon a progress inspection conducted by an agent of HUD; HUD holds 10 percent of the disbursement until a complete cost certification is finished. The PRAC funds are disbursed monthly after occupancy for the residents and the sponsor/owner.

Evidence: The GAO Report for Elderly Housing: Project Funding and Other Factors That Delay Assistance to Needy Households found an increase of unexpended funds from FY 1998 through 2002. The Section 202 agreement letter is the obligating document. Obligating actions are tracked in the Financial Data Mart system. Construction Cost Certification verifies the appropriateness of expenditures of funds during the development phase. The annual audited financial statements verify appropriate expenditure of funds for the management and operation of the properties during the term of the 40-year use agreement. All multifamily properties receiving a new Real Estate Assessment Center (REAC) physical inspection score below 60 will be referred to the Departmental Enforcement Center for review to determine and notify the owner that they are in violation of a business agreement with HUD. The Section 202 Handbook 4571.3 REV-1 provides the guidance for the Hub and Program Offices to obligate and disburse funds. The Data Mart system provides data on the funds awarded, obligated and expended. The 2007 Capital Grant awards are accessible online (http://www.hud.gov/news/releases/pr07-157.pdf).

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: HUD does not have an efficiency measure for the Section 202 program that focuses on cost effectiveness and does not regularly conduct unit cost or other productivity analysis. However, HUD has incorporated a performance measure of time to initial closing and has established regular procedures for monitoring project timeliness including monthly pipeline reports and quarterly conference calls with each of the field managers. Through these evaluation processes, HUD identifies problems in the timely development of Section 202 projects. In response to a 2003 GAO report and 2003 NAHB study findings that inadequate project funding limits led to delays in construction of Section 202 projects HUD adopted Section 221(d)(3) mortgage limits, which reflect the costs of developing projects in different market areas throughout the country. Because sponsors/owners will not have to spend time locating other funding to complete project development, the project can reach initial closing sooner. One of the APP efficiency goals for 2008, for which the baseline was established in 2007, is to initially close 70 percent of the projects within 24 months and 25 percent within 18 months.

Evidence: The Notice of Funding Availability (NOFA). Handbook 4571.5 and Notice 96-102. Monthly pipeline reports.

Does the program collaborate and coordinate effectively with related programs?

Explanation: HUD has worked with housing funders to more efficiently develop affordable housing. Local field staff also meets with local funders to coordinate the development of affordable housing at the local level. During the development of the Occupancy Handbook, HUD worked with the office of Rural Housing Services at U.S. Department of Agriculture (USDA) and the IRS to ensure that determinations of rent and income were consistent among the agencies. One result of this collaboration is that the agency's Model Lease is utilized by USDA's Rural Housing office. In addition, HUD's Occupancy Handbook, 4350.3, is referenced by IRS in its "Guide for Completing Form 8823 Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition. The Guide is used by the developers of low income housing tax credit projects. There is on-going communication and coordination with USDA's Rural Housing Services Office, as well as with all state housing finance agencies. HUD works with these entities to ascertain the extent of the need for housing and to ensure that there will be no adverse impacts if housing is developed. HUD has also collaborated with the Federal Housing Finance Board to streamline the closing process for Section 202 projects receiving subordinate financing from Federal Home Loan Banks. This was necessary because the two agencies had different requirements. There is on-going communication and coordination with USDA's Rural Housing Services Office, as well as with all State Housing Finance Agencies. HUD works with these entities to ascertain the extent of the need for housing and to ensure that there will be no adverse impacts if housing is developed. There is coordination with programs internal to the agency, namely the Multifamily Development Office and the Office of Public and Indian Housing, to effectively market assisted housing offerings to the targeted population. There is also coordination with other HUD programs, through the Multifamily Development Office and the Office of Public and Indian Housing, to effectively market assisted housing offerings to the targeted population.

Evidence: A memorandum of understanding is signed with the U.S. Department of Agriculture. Coordination and collaboration activities with other related programs are discussed in the NOFA. In supporting the analyses of housing needs and services, applicants must demonstrate collaboration with local housing providers. Also, throughout the life of the project, the provider must meet goals of their respective local jurisdiction. There is also a memorandum of agreement with the Federal Home Loan Bank (FHLB) to streamline the closing of projects in which the FHLB has provided secondary financing. IRS's Guide for Completing Form 8823 Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition.

Does the program use strong financial management practices?

Explanation: During the construction phase, funds are released on a cost reimbursable basis and dependent upon a progress inspection conducted by an agent of HUD. HUD holds back 10 percent of the disbursement until a complete cost certification is finished. The cost certification step is for HUD to make sure that the funds expended for the project were expended in accordance with the HUD-approved firm commitment application. If HUD determines that funds were not expended properly, the Owner will not be reimbursed or the owner will have to pay back funds, if they were previously reimbursed. HUD reviews the operational budgets of the development to ensure costs are reasonable and appropriate for the area in which the project is located. The budgets are compared with annual audited financial statements, which are reviewed by HUD. If HUD's review indicates that funds were not spent in accordance with the approved budget, HUD will either allow the Owner to resolve the issue or bring enforcement action if it cannot be resolved or depending on the severity of the offense.

Evidence: Multifamily Project Management and Asset Servicing Handbook (4350.1). Mortgage Credit Analysis for Project Mortgage Insurance Handbook (4470.1). Cost Certification Guide for Mortgagors and Contractors of HUD-Insured (4470.2). Government Auditing Standards Handbook (The Yellow Book). Inspector General Handbook, Consolidated Audit Guide for Audits of HUD Programs Handbook (2000.4).

Has the program taken meaningful steps to address its management deficiencies?

Explanation: Aggressive steps have been taken to address identified management deficiencies. After GAO issued a finding in 2002 that there were data integrity issues in the system that was used to monitor the development process, a process was instituted to routinely verify the accuracy of information in the system. After a good baseline was established regular reports are made available to the field so that errors can be corrected. When it was verified that many projects took an unnecessarily long time to reach occupancy a plan was developed to ensure that agency management and partners were held accountable for developing projects in a timely manner. Performance evaluations of managers were tied to the goal of timely project development. To ensure that adequate progress is being made, regular pipeline conference calls are held with field leadership to discuss the status of projects in their jurisdictions and to identify solutions for those projects that are not making adequate headway. To more effectively manage projects during the 40-year use agreement period, the agency has established objective physical and financial standards for projects in the portfolio. Sponsors annually submit audited financial statements of project operations. In addition, physical inspections of projects are conducted on an established schedule based on the score of the last inspection.

Evidence: The HUD Annual Performance Plan offers a thorough strategy to Embrace High Standards of Ethics, Management, and Accountability. HUD's Management Plan also spells out ways in which HUD has addressed management deficiencies. HUD's under 60 Policy for physical inspection.

Are grants awarded based on a clear competitive process that includes a qualified assessment of merit?

Explanation: Section 202 Capital Advances are awarded based on a clear competitive process. The Section 202 program NOFA, which is published annually in the Federal Register as part of the SuperNOFA, provides the criteria and review process for selecting the Section 202 awardees. The criteria on which applicants are rated include: their past experience in serving the intended population, as well as experience with previously funded projects; other funds and resources committed to the project; location of the site; need for the units in the market area; and their understanding of what it takes to get the project to occupancy. After the SuperNOFA is published, a satellite broadcast is held to explain the submission and rating criteria. Local HUD offices also conduct workshops to further describe the submission, rating and review requirements for applications submitted during that fiscal year.

Evidence: The SuperNOFA. The FY Processing Notice provides instructions to HUD staff on the application processing procedures and processing schedule.

Does the program have oversight practices that provide sufficient knowledge of grantee activities?

Explanation: As part of the application for funds, HUD requires applicants to provide information on their past experience in serving the proposed client population. Applicants must register with and also go through a Name Check review through Dun and Bradstreet. The officers and directors of the Sponsor and Owner boards must also undergo clearance through the 2530, Previous Participation Review Process, and a credit check is also conducted on the officers of the Owner board. During the construction phase of the project, regular inspections of each site are undertaken. Construction payments are made based on percentage of construction completed. A percentage of the construction budget is not released until construction is completed and the cost certification process has been completed. Once completed, properties are inspected on an annual basis. However, as an incentive, projects that score between 90 and 100 are inspected every three years and those that score 80-89, every two years. The regulation for physical inspection protocol is outlined in 24 CFR parts 5 and 200. Annual management reviews are conducted of Section 202 projects with Section 8 rental assistance by Project Based Contract Administrators. Annual audited financial statements are also required of each project. Finally, the business agreement signed by the project manager responsible for day to day operation stipulates that management reviews, financial statement evaluation, and physical inspections are all evaluation tools used to oversee operating and management activities.

Evidence: There are several handbooks that outline oversight guidance and reporting requirements. Examples include: Section 202 Supportive Housing for the Elderly Handbook (4571.3), Architectural Analysis Inspections for Project Mortgage Insurance Handbook (4460.1), Cost Certification Guide for Mortgagers and Contractors of HUD (4470.2), Occupancy Requirements of Subsidized Multifamily Housing Programs Handbook (4350.3), the Management Agent Handbook (4381.5), Multifamily Asset Management and Project Servicing Handbook (4350.1), Mortgage Credit Analysis for Mortgage Credit Insurance Handbook (4470), and Secretary-Held Servicing Handbook (4335.2).

Does the program collect grantee performance data on an annual basis and make it available to the public in a transparent and meaningful manner?

Explanation: HUD does not currently provide grantee performance data to the public in a clear and accessible manner. HUD is developing a central website with the name and location of project sponsors, the amount of the award, the location of the project to be developed, and other information as appropriate. Starting in 2008, HUD will post approved logic models on the Grants web site. As the project owners submit their required performance reports, they will also be posted on the web site. HUD does collect grantee performance data. Physical inspections are conducted every 1 to 3 years (for moderate to highest scoring projects, respectively), while audited financial statements are required annually of all projects. A balance sheet, profit and loss statement, applicable schedules and notes must be submitted for review. Owners must make inspection reports available for review by tenants in the property office. Information on property inspections may also be obtained at anytime through the Freedom of Information Action (FOIA). Financial performance data are proprietary and exempt from public review under Exemption 4 of FOIA.

Evidence: The Super NOFA. Executive Order 13392 published in the Federal Register on December 19, 2005 (70 FR 75373). Uniform Physical Condition Standards and Physical Inspection Requirements for Certain HUD Housing (24 CFR Parts 5 and 200, December 2, 2000). Guidance for Oversight of Multifamily Housing Physical Inspection directive issued to all multifamily Hub/Program Center Directors and Performance-Based Contract Administrators, May 24, 2001.

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: HUD has not yet developed quantifiable baselines and performance goals for Section 202 outcome measures. However, to expand the supply of affordable housing for the low-income elderly, the Department continues to add new Section 202 units to the inventory and is expecting to maintain the inventory of existing units at 98 percent of the FY 2007 level. To increase the supply of housing available to the frail elderly the agency tracks project development to ensure that projects are finished in a timely manner. Currently, most projects are available for occupancy within 36 to 48 months from the time the sponsors are advised that their project has been funded. Concurrently, a baseline for the existing portfolio of Section 202 housing was established. This allows the Department to verify that the supply of Section 202 units is in fact increasing. Performance goals and management systems have been established to monitor the financial and physical condition of the portfolio and ensure the continued quality of Section 202 housing. The agency also has aggressive preservation strategies which have assisted in upgrading some of the oldest Section 202 housing. For example, many projects are refinancing to generate additional resources, which are reinvested into the project.

Evidence: Information can be found in the Department's annual Performance and Accountability Reports and year end Management Plan Reports. The REMS and DAP systems contain information on the Section 202 portfolio, existing, as well as projects currently being developed.

Does the program (including program partners) achieve its annual performance goals?

Explanation: The program's annual performance goals are generally being met. The share of Section 202 properties meeting HUD-established physical standards is consistently above 95 percent and the share meeting HUD's financial management requirements has only fallen below 98 percent for one of the last five years. The number of elderly households living in Section 202 developments served by a service coordinator is being maintained at the FY 2007 level and it is expected that the number of Section 202 units serving the elderly will be maintained at 98 percent of the FY 2007 level, excluding new units that are added to the inventory. On the construction side of the program, the program has continuously met its goal of initially closing projects each year. For FY 2008, the goals are to bring 4,000 Section 202 units (100 projects) to closing and to ensure that at least 70 percent of Section 202 projects are brought to initial closing within 24 months and that, of those, 25 percent will have completed the process within 18 months. The Department has implemented automated tracking systems to monitor goal achievement throughout the year. The systems provide timely management information to ensure that all goals are on target and assist in the early identification of specific individual projects that may require more attention.

Evidence: Information can be found in the Department's annual Performance and Accountability Reports and year end Management Plan Reports. The REMS and DAP system contain information on the Section 202 portfolio, existing as well as projects currently being developed.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: HUD does not have an efficiency measure for the Section 202 program that focuses on cost effectiveness and does not regularly conduct unit cost or other productivity analysis. HUD requires that the development costs for all projects be comparable to similar projects developed in the same geographical area and do not exceed the maximum capital advance amount that HUD will allow. HUD uses the Marshall and Swift industry standards in developing its local high cost factor. The development costs are certified after project completion to insure that the project was developed in accordance with the costs approved by HUD. In the application selection process, points are awarded based on the amount of additional resources the sponsor is able to leverage from public/private partners. Through the leveraging of additional resources up front, Section 202 projects can be built in a more efficient time frame. The points awarded for leveraging resource were revised in FY 2006 to give more weight to those applications with the most leveraged resources.

Evidence: The HUD Strategic Plan for FY 2006-2011, the 2008 Annual Performance Plan, the FY 2008 HUD Management Plan, the NOFA, and the Development Application Processing System.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: The program is uniquely designed to target the very low-income elderly through the use of non-profits to provide supportive affordable housing. Although, there are other programs that provide housing for the elderly, they are not uniquely designed to accommodate the special needs of low-income elderly persons, or to provide a range of services tailored to meet their needs as they age in place. Other programs are not structured to provide special support features such as accessible design, community space, and service coordinators in new housing developments for the extremely low-income elderly. Furthermore, results from the AARP 1999 National Survey of Section 202 Elderly Housing indicate that about 37 percent of Section 202 properties have service coordinators on staff. Also the Section 202 program insulates elderly tenants from increases in rent burdens by limiting rents to 30 percent of household income-vouchers do not.

Evidence: A 2002 study by the Government Accountability Office (GAO) compared the total per-unit costs of six active programs: Housing Choice Vouchers, Low-Income Housing Tax Credits, Hope VI, Section 202, Section 811, and Section 515. GAO determined total costs and estimated the share of total costs paid by the Federal government, tenants, and others, including State and local governments. It was also noted by AARP that "Section 202 properties are more successful than LIHTC properties in providing services to residents." AARP study, "The 1999 National Survey of Section 202 Elderly Housing."

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: No known independent and comprehensive evaluation exists that evaluates the program's impact and effectiveness in terms of results that are linked to long-term outcomes. A 1999 evaluation of the HOPE for the Elderly demonstration program, which provided affordable housing and services to a similar population of low-income elderly, found no statistically significant difference in the rate of placement in nursing homes between program participants and a control group. A 2006 IFAS report reiterated this finding.

Evidence: Westat Report for HUD: Evaluation of the HOPE for Elderly Independence Demonstration (December 1999) (http://www.huduser.org/publications/suppsvcs/hopeval.html); IFAS study for HHS: A Synthesis of Findings from the Study of Affordable Housing Plus Services for Low-and Modest-Income Older Adults (August 2006) (http://www.huduser.org/publications/affhsg/synthesis.html)