43204 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

1Special Note: In January 1997, President

William Clinton asked incoming Secretary Andrew

Cuomo to transform the Department of Housing and

Urban Development through the President’s vision

for community empowerment. The next six months

demonstrated unparalleled creativity and energy by

the Department. This product reflects the input and

insights of many, including: Vice President Al Gore,

David Osborne, James Champy, Ernst & Young LLP,

members of Congress, the Office of Management

and Budget, and the HUD Office of Inspector

General. Most of all, it was made possible by the

talented civil service staff at HUD.

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

[Docket No. FR–4266–N–01]

The HUD 2020 Management Reform

Plan

AGENCY: Office of the Secretary, HUD.

ACTION: Notice of the HUD 2020

Management Reform Plan.

SUMMARY: On June 26, 1997, Secretary

Andrew Cuomo released his plan for

significant management reforms at HUD.

The plan is titled the ‘‘HUD 2020

Management Reform Plan.’’ The reforms

contained in this plan are directed to

restoring HUD’s reputation and

credibility by improving the efficiency

and effectiveness of the Department’s

programs, operations and provision of

services. This notice presents in the

SUPPLEMENTARY INFORMATION section of

this document the Secretary’s HUD 2020

Management Reform Plan.

FOR FURTHER INFORMATION CONTACT: For

further information, contact the Office

of Departmental Operations and

Coordination, the Department of

Housing and Urban Development, 451

Seventh Street, SW, Washington DC,

20410, (202) 708-0988. (This is not a toll

free number.) Comments or questions

can be submitted through the Internet to

Candis lB.lHarrison@hud.gov. More

information on HUD’s Management

Reform Plan can be found on HUD’s

Home Page on the World Wide Web at

http://www.hud.gov, and the plan is

available at http://www.hud.gov/

reform/mrindex.html.

SUPPLEMENTARY INFORMATION:

Introduction

‘‘I believe America needs a

government that is both smaller and

more responsive. One that works better

and costs less. One that shifts authority

from the federal level to states and

localities as much as possible* * * One

that has fewer regulations and more

incentives. One, in short, that has more

common sense and seeks more common

ground.’’

President Clinton, Between Hope and

History

‘‘Everyone in government knows big

challenges remain. It is time for faster,

bolder action to expand our islands of

excellence and reinvent entire

agencies—time to entirely reinvent every

department of government.’’

Vice President Al Gore, The Blair

House Papers

HUD 2020 Management Reform Plan 1

HUD is just over 30 years old—it is time

to prepare HUD for the next 30 years.

Table of Contents

Executive Summary

Road Map to This Plan

Offers a guide for how to use this report

The Six Major Reforms

Describes reforms that cut across the entire

Department.

Business Line Reform Plans

Describes specific issues and reforms for

each business line

Public and Indian Housing (PIH)

Housing

Community Planning and Development

(CPD)

Fair Housing and Equal Opportunity (FHEO)

Chief Financial Officer (CFO)

Administration

Appendices

Provides Additional Details on the

Implementation of the Reforms

Appendix A: Buyout Plan

Appendix B: Annual Management Planning

Strategy

Appendix C: HUD Salaries and Expenses

FTEs

Appendix D: HUD 2020 Structural Reform

Appendix E: Consolidated Centers

Appendix F: HUD Salary and Staff

Reductions

Executive Summary

‘‘For HUD to fulfill its mission, it must

have credibility—with Congress, with

local government and with the

customer. They must all believe that

HUD has the competence and capacity

to perform its functions. It’s time HUD

put its own house in order.’’

Secretary Andrew Cuomo

Responding to Change

Since HUD was created in 1965,

economic and social conditions in the

United States have changed

dramatically. Yet, in many ways, the

Department has not kept pace with that

change. Over the years, Congress, the

General Accounting Office, and HUD’s

own Inspector General have recognized

this mismatch and criticized the

Department for failing to modernize

itself by updating its systems, improving

accountability and performance, and

reducing red tape.

Given these chronic problems, a

priority for HUD in the next few years

must be its management. Specifically, is

the agency taking significant steps to

clean up its act? Are new systems in

place to better steward HUD’s funding?

Are agency operations better

coordinated across functions? Is the

agency defining a clear mission with

clearly delineated organizational roles?

Is it managing workforce and workload?

Is it using new technology? Are its

employees acquiring new skills?

This plan presents a fundamental

management overhaul that, when

carried out, aims to bring HUD in line

with the times, ensuring its relevance

and effectiveness into the 21st Century.

The reform package focuses on getting

HUD’s own house in order, on managing

its programs and people more efficiently

and responsibly. It is a combination of

significant organizational changes, as

well as proposed legislative reforms,

that HUD has submitted to Congress

over the past few months, including:

The Housing Management Reform Act

of 1997; Housing 2020: Multifamily

Management Reform Act of 1997; and

the Homelessness Assistance and

Management Reform Act of 1997.

Compassion without competence has

failed America and HUD; it has let too

many landlords profit without

providing adequate service, left too

many public and assisted housing

residents living in squalor, and

abandoned too many neighborhoods to

decay. HUD is just over 30 years old and

it is time that we prepare HUD for the

next 30 years. This plan says that

management must come first, that a new

empowerment policy for a new century

requires a new HUD, a HUD that works.

Five major forces have combined to

create the need and urgency for the

Department redesign proposed here.

Those forces include: The

groundshaking economic shift as the

U.S. transitions from an industrial to an

information society; passage of the

Welfare Reform Bill, the most

significant change in American poverty

policy in 30 years; the economic and

moral imperative to rein in an explosive

national debt and balance the budget;

the discrediting of top-heavy,

Washington-driven government; and the

legacy of mismanagement at HUD,

which has made it dangerously

vulnerable to waste, fraud, and abuse of

taxpayer funds.

America’s Economic Transition

Despite the fact that America’s

economy is booming, too many

neighborhoods and communities are
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43205

being left behind in the current

revolutionary economic transition. This

transition has supplanted the national

market with a global market, and is

replacing industry with information and

knowledge as the prime economic

drivers. Yet because so many of our

urban economies were built on industry,

their transition into this new era has

been particularly tumultuous and is still

far from complete—and far from

successful. Throughout the 1970s, as

our economy moved into the earliest

stages of deindustrialization, cities were

hit hard—population and incomes fell,

poverty and unemployment increased,

crime and social problems became more

intense and intractable.

To succeed in this economic

transition will require new skills, new

strategies, and new cooperation, not just

between government and business, but

between cities and suburbs. HUD must

marshal all its resources to help cities

thrive in the new economy.

Making Welfare Reform Work

President Clinton made good on his

promise to end welfare as we know it,

and now the hard work begins: moving

millions of our fellow citizens from

welfare to work at a time when global

competition for low-skill jobs is great.

HUD cannot escape the spotlight of

welfare reform. We are the Department

responsible for housing more than a

quarter of the families on welfare today;

the agency with potentially the largest

economic development portfolio in the

federal government; and the branch that

deals most directly with the fate of

cities, where most people on welfare

live. We must recognize that our longterm success as a Department will

largely depend on the degree to which

America can make welfare reform work

for all our citizens.

Balancing the Federal Budget

Both President Clinton and Congress

have committed to balance the federal

budget by the year 2002, the first time

the budget would be in balance since

1969. The need to cut funding to meet

that vital goal pressures all federal

agencies to get the most bang for every

taxpayer buck. In short, we are forced to

find ways to do even more to meet the

demands of a society in transition,

ensuring that everyone coming off

welfare can find and hold a job, while

downsizing staff and saving money in

every way possible. That means HUD

must be leaner and smarter, meeting its

mandate in a creative, competent,

common sense way.

A New Model of Government

While most of America’s major

institutions have changed dramatically

over the past few decades,

government—particularly government

inside the Washington beltway—has

often resisted reform. At times, we act

as if we are insulated from the powerful

forces reshaping the American economy

and society.

But that is wrong. Government must

change—and change dramatically—if it

is to remain relevant. Vice President

Gore has led the way for this

Administration through his effort to

reinvent government. As he wrote in the

Blair House papers, a small but

powerful handbook for organizational

change, ‘‘The need to reinvent was

clear. Confidence in government—

which is simply confidence in our own

ability to solve problems by working

together—had been plummeting for

three decades. We either had to rebuild

that faith or abandon the future to

chaos.’’

Former HUD Secretary Henry

Cisneros recognized this need for

change. Under his leadership, HUD

began that task a few years ago,

proposing sweeping and broad changes

to many of its policies and programs.

However, Congress failed to enact

changes in any authorizing legislation.

Indeed, no comprehensive housing

authorizing legislation has been enacted

over the past six years.

This plan says that we can—we

should—retain our core goals, but we

must change how we carry out those

goals, making HUD run less like a 30-

year-old bureaucracy and more like a

smart, new business.

The HUD Legacy

Finally, and most importantly, HUD

itself has been plagued for years by

scandal and mismanagement. It is the

only federal agency cited by the General

Accounting Office (GAO) as being at

‘‘high risk’’ for waste, fraud, and abuse.

Congress regularly raises concern over

the efficiency and soundness of its

programs. And its Inspector General still

questions HUD’s basic ability to provide

‘‘reasonable stewardship’’ over the

billions of taxpayer dollars we

administer.

These failings have made HUD the

poster child for inept government. That

view is damaging to the agency’s ability

to fulfill its vital goals—goals strongly

supported by the public, such as ending

homelessness, investing in cities, and

moving people from welfare to work—

at a time when Americans have a deep

distrust and disgust with the way

government tries to meet those worthy

goals. When over five million people

cannot afford decent housing, and

hundreds of thousands go homeless, we

cannot afford to waste even one dollar

on inefficiency or corruption.

This plan says that enough is enough,

that the era of an inept HUD must end.

It proposes to change the negative

perception of HUD by changing the

reality—by making HUD work well.

Revitalizing HUD’S Mission

This changing context demands a

shift in HUD’s mission. While our

traditional goals remain the same—

fighting for fair housing, increasing the

supply of affordable housing and

opportunities for homeownership,

reducing homelessness, promoting jobs

and economic development—our

mission must be updated, renewed, and

focused.

If HUD is going to be a significant,

value-added player, helping America’s

communities move from an industrial to

an information economy, with welfare

reform hanging in the balance, we must

strive to empower people, giving them

the tools they need to succeed. HUD

must be an ally to communities, not a

bureaucratic adversary; a creator of

opportunities, not obstacles.

At the same time, in a balanced

budget environment—and with the

storm clouds of mismanagement still

hovering over the agency—HUD must

refocus its energy, ingenuity, and

resources on eliminating waste, fraud,

and abuse in all our programs.

Therefore, two distinct, yet

interrelated missions for HUD are

evident as we approach the new

century:

Mission #1: Empower people and

communities to improve themselves and

succeed in today’s time of transition.

Mission #2: Restore the public trust by

achieving and demonstrating

competence.

Mission #1: Empowering People and

Communities

The empowerment mission is a

dramatic philosophical and paradigm

shift for the Department.

—Rather than top-down programs with

inflexible mandates, the Department

must move to bottom-up, communitydriven partnerships that demonstrate

a comprehensive community

development strategy.

—Rather than long-term dependence,

we must nurture self-sufficiency and

self-reliance; the helping hand of

government must help people and

families become productive,

taxpaying citizens. Whenever

possible, we must strengthen
43206 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

mainstream values of work, family,

responsibility and opportunity.

—Rather than work in isolation, we

must collaborate with other federal

agencies, each of which provides vital

community resources.

—Rather than creating a new

bureaucracy for every program, we

must seek out community

partnerships breaking the habitual

link between the need for federal

action and the growth of federal

bureaucracy.

—Rather than working against the free

market, we must harness market

forces wherever possible, using them

to help people lift themselves up.

Empowerment is the right role for the

federal government, a role that says

‘‘Washington can help communities

thrive, but the decisions and power

must be closest to the people.’’ HUD’s

plan will do just that, getting a greater

portion of our resources out of

Washington and into communities,

investing more in people and less in

overhead.

As President Clinton said in his

Urban Policy Report, ‘‘I believe in a

government that promotes opportunity

and demands responsibility, that deals

with middle-class economics and

mainstream values; a government that is

different radically from the one we have

known here over the last 30 to 40 years,

but that still understands it has a role to

play in order for us to build strong

communities that are the bedrock of this

Nation.’’

Mission #2: Restoring the Public Trust

The public trust mission will restore

public confidence in HUD by instilling

an ethic of competence and excellence

at the agency.

Our goal must be performance and

product rather than process and

perpetuation. We must have zero

tolerance for waste, fraud, and abuse—

and have the institutional courage to

demand accountability from both our

private- and public-sector customers.

For everything we do, we must ask two

questions. First, how can we do it better,

cheaper, and more effectively? And

second, are we taking all reasonable

precautions to protect the public trust

and ensure that every tax dollar is used

properly?

Unfortunately, HUD continues to

suffer from management troubles that

have long plagued the agency. Recent

reports by the GAO highlight essential

steps we must take if we are going to

permanently improve HUD’s

management. These include:

—Consolidating programs and

reorganizing and retraining staff to

align the agency’s resources with its

long-term mission;

—Developing and implementing

stringent internal controls;

—Integrating financial and information

management systems Departmentwide; and

—Increasing program monitoring and

measurement to ensure higher

performance.

The agency’s problems have been long

in the making. We recognize that it will

take a tremendous commitment of time,

energy, discipline, and focus to reinvent

the systems and the values that have

undermined HUD’s credibility and

capability.

We also recognize that we cannot

fulfill our empowerment mission if we

fail to protect the public trust. The

American people and the Congress will

only have faith in an empowerment

approach to urban policy if they believe

we can make that approach work.

Reinventing HUD’S Management

Recognizing both the historic need

and the recent forces that demand

change, HUD undertook a

comprehensive effort to fundamentally

redesign our mission, programs, and

organization. We asked outside

experts—and ourselves—one question:

how do we organize ourselves to ensure

that we effectively and efficiently fulfill

our twin missions of empowerment and

public trust?

This sweeping reform was based on

some basic, common sense premises:

—Start with no ‘‘givens.’’ Everything

about the way we do business is on

the table for discussion.

—Analyze core purposes and organize

by clearly defined responsibilities, in

effect creating separate ‘‘businesses.’’

—Match workload and workforce, skills

and services.

—Measure and reward performance.

—Focus on changes that create the most

leverage.

—Question whether the task is better

performed by the private sector.

—Live in the 21st Century: master and

utilize new technologies.

Driven by these principles, we

assembled teams of ‘‘change agents’’

from all parts of the agency, challenging

them to rethink every aspect of our

management. This HUD team was then

complemented with advice and

assistance from the private sector,

including Ernst & Young LLP, David

Osborne, and James Champy, among

others.

Our process revealed several deepseated, structural dysfunctions:

—Proliferation of a number of small

‘‘boutique’’ programs which are

highly labor-intensive.

—HUD is organized strictly by program

(i.e., Office of Housing, PIH, CPD)

rather than function. A functional

realignment would regroup some

program lines by mission and

responsibility, and eliminate

duplication.

—HUD is driven by process rather than

performance.

—Workload and workforce are

mismatched. While the Department

has downsized, the workload has

increased and the necessary skills for

specific services in some cases do not

exist within the agency.

—Management information systems

have developed parochially rather

than in an integrated fashion—they

need a complete overhaul.

—The Department’s structure is an

outdated pyramid, and the

headquarters/field relationship is

inefficient.

—HUD’s workforce has not been given

a clear mission, but rather

schizophrenic mandates: On the one

hand, to provide assistance to

communities and help them meet

their needs; while on the other, to

police the actions of those same

communities.

—The Department’s culture lacks the

work ethic and ability to make

stewardship of public funds a

priority.

HUD addresses these breakdowns in

several ways:

—The new HUD will be reorganized

into discrete functions to serve

distinct customer groups, rather than

solely along program lines. These

common functions will then either be

performed within HUD or contracted

out if HUD does not have the

expertise or if the private sector can

perform the work more efficiently.

—The culture will more clearly reward

performance rather than perpetuate

process.

—The structure will change from a

rigid, bureaucratic headquarters/field

operation into two distinct parts: (1)

‘‘storefront,’’ customer-friendly local

offices that aim to provide hands-on

service to communities; and (2) ‘‘back

office’’ processing centers to

consolidate and expedite routine

processing and paperwork.

—HUD’s technological systems will

evolve from Jurassic-era to state-ofthe-art.

—HUD’s workload and workforce will

be better matched according to size
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43207

and skills. This will entail critical

shifts in organizational structure,

positions, and personnel to reflect the

aims of the new HUD.

—Everything in HUD will be driven by

the twin missions: empowering

people and communities and

protecting the public trust.

In short, we will reduce staff from

10,500 employees to 7,500, restructure

our operations, and dramatically

consolidate HUD’s current 300-plus

programs and activities. Meanwhile, our

long-term budget for programs rises—

which means that the new HUD will

truly be doing more with less. We will

be investing a greater portion of our

funding into strengthening America’s

communities.

HUD’s transformation is clustered

around six reforms.

Reform 1: Reorganize by function rather than

strictly by program ‘‘cylinders.’’

Consolidate and privatize where needed.

Reform 2: Modernize and integrate HUD’s

outdated financial management systems

with an efficient, state-of-the-art system.

Reform 3: Create an Enforcement Authority

with one objective—to restore public

trust.

Reform 4: Refocus and retrain HUD’s

workforce to carry out our revitalized

mission.

Reform 5: Establish new performance-based

systems for HUD programs, operations,

and employees.

Reform 6: Replace HUD’s top-down

bureaucracy with a new customerfriendly structure.

Reform 1—Reorganize by Function

Rather Than Program ‘‘Cylinders.’’

Where Needed, Consolidate and/or

Privatize

Historically, HUD was formed by

integrating several existing departments:

The Office of Housing, the Public

Housing Administration, the Urban

Renewal Administration, and the

Community Facilities Administration.

These historic entities were never shed.

Consequently, the Department never

achieved operational efficiency, mission

clarity, or organizational unity. The

‘‘stovepipes’’ of the Office of Housing,

Public and Indian Housing, Fair

Housing, and Community Planning and

Development operate essentially

independently. Accordingly, they often

duplicate each others’ efforts and at

times work at cross-purposes, making it

exceedingly difficult for communities to

make sense of HUD services.

Compounding this situation, the

recent workforce reduction has

exacerbated the performance problems

of these separate areas—and further

downsizing from 10,500 employees

today to 7,500 by the end of the year

2000 will increase the strain.

To eliminate these duplications, and

in anticipation of even more downsizing

over the next four years, this plan

reorganizes the Department by

function—maintaining the distinct

business lines of public housing, single

and multifamily housing, community

planning and development, fair housing

and others—but making significant

connections across these business lines

(i.e. the ‘‘stovepipes’’ or ‘‘cylinders’’) to

maximize efficiency and dramatically

improve customer service.

Having identified the common, crosscutting functions, we then asked: How

best do we meet our goals—through

consolidation, privatization, or both?

Consolidation

Program Consolidation: HUD

currently operates over 300 programs

and activities, as cited in a recent

Inspector General audit. After

reorganization, and if Congress passes

HUD’s legislative proposals for program

and activity consolidation and

elimination, HUD will consolidate and

eliminate to about 70.

Functional Consolidation: Under this

plan, several major functions are

consolidated, such as financial systems

and enforcement (discussed in reforms

#2 and #3). Several administrative

functions are also consolidated,

including:

—Real Estate Management System

Neither of HUD’s twin missions—

empowerment and public trust—is well

served by how PIH and the Office of

Housing currently operate. PIH and the

Office of Housing now operate

independently under separate real estate

management operations, yet portfolio

management for the Office of Housing’s

multifamily stock and for the Public

Housing Authorities (PHAs) is a

common function of asset management.

Public Housing now assesses its

portfolio through the Public Housing

Management Assessment Program

(PHMAP) system. Despite recent

reforms, PHMAP is often criticized for

failing to provide an accurate measure

of PHA portfolios.

Similarly, the Office of Housing’s

multifamily portfolio experiences

substantial fraud and abuse in its

Section 8 program, with an estimated

5,000 troubled properties nationwide.

To address these issues, the

assessment of all PIH and Office of

Housing properties will be consolidated

and radically redesigned. For the first

time in HUD’s history, all properties will

be physically inspected and financially

audited by outside contractors using a

comprehensive and uniform protocol.

Portfolios will then receive a risk

assessment based on these reports. HUD

staff can thus focus on the most troubled

and neediest properties.

—Contract Procurement

At the Secretary’s direction, a top-tobottom assessment of the FHA

procurement system was conducted by

the National Academy of Public

Administration (NAPA). The study

found that the current system neither

responds efficiently to Department

needs nor adequately ensures

accountability.

As a result, the Department has asked

NAPA to help improve HUD’s

procurement system to ensure

accountability, while responding

flexibly to changing program needs. The

aim of reform is for staff to have the

resources they need to serve their

customers, while safeguarding taxpayer

dollars with a system that ensures

quality and value.

—Section 8 Payments

Both PIH and the Office of Housing

currently operate Section 8 payment

functions, often in disparate field

offices; these functions will be

consolidated into one Section 8

Financial Processing Center.

—Economic Development and

Empowerment Service

A number of economic development

and jobs skills programs now exist

throughout the Department. These will

be consolidated into the new Economic

Development and Empowerment

Service, which will target these

resources to empower people and

communities. Programs to be

consolidated or coordinated include

Economic Development Initiative,

Section 108, Empowerment Zones, and

job training and skills programs in PIH

and the Office of Housing.

Privatization

While many of the common functions

will be consolidated, some will also be

privatized where efficiency or expertise

dictates.

Privatized functions include physical

building inspections for the PIH and

Office of Housing portfolios; financial

audits of Public Housing Authorities, as

well as multifamily project owners and

mortgagees; HOPE VI construction

management supervision; legal and

investigative services for the

Enforcement Authority, where

appropriate; and specific expertise

required by the grantees through

technical assistance.
43208 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

Reform 2—Modernize and Integrate

HUD’s Outdated Financial Management

Systems With an Efficient, State-of-the

Art System

The single most glaring deficiency of

the Department—and the single greatest

shortfall of a Department organized by

program rather than function—is the

financial management systems.

Currently, every program cylinder

operates its own financial systems: The

number of management information

systems within the Department totals

89. Compounding redundancy, many of

the systems can’t talk to each other. This

is the chief reason why the Department

is on the GAO ‘‘high risk’’ list and why

HUD’s Inspector General says that

HUD’s future is ‘‘dim.’’

The new HUD will have a common,

consolidated financial management

information system. Fully implemented

by mid-year 1999, this system will also

facilitate communication between HUD,

its grantees, and communities across the

country. With these improvements and

enhanced financial management, HUD’s

goal is to be removed from the high risk

list.

HUD’s award-winning mapping

software—which HUD will soon launch

in an innovative, joint public-private

marketing venture—will ultimately be

incorporated into the new financial

system for one seamless communication

and financial management system.

With the ease of an ATM, this cuttingedge mapping software will provide a

graphic display of HUD funding in

virtually every community in the

country—helping communities better

plan their future. In the system of the

future, HUD employees will know the

workings of the entire Department on a

real-time basis. By using the best

technology, we will provide faster,

higher-quality service to communities,

while recognizing and cracking down

on problems in HUD programs.

Reform 3—Create an Enforcement

Authority With One Objective: To

Restore the Public Trust

The greatest breach of the public trust

at HUD is the waste, fraud, and abuse

in HUD’s existing portfolio of millions

of housing units. Currently, each of

HUD’s program offices—PIH, the Office

of Housing, FHEO and CPD—operates

independent enforcement functions,

with different standards and

procedures.

PIH, for example, considers

enforcement action when a property

fails its annual assessment. Solutions for

troubled housing authorities have been

ad hoc, ranging from judicial

receiverships to HUD partnership

agreements with the local housing

authority. Housing, on the other hand,

takes enforcement actions against

landlords infrequently, as a last resort.

The Department’s critics note that the

financial interests of the FHA insurance

fund can be at odds with the social

interests of the tenants.

The new HUD will combine

enforcement actions for PIH, CPD,

FHEO (non-civil rights compliance), and

the Office of Housing into one authority.

The Enforcement Authority will be

responsible for taking legal action

against all PHAs that receive a failing

score on their annual assessment. The

Enforcement Authority will also move

against all Office of Housing properties

that fail physical and financial audit

inspections, cleaning up the historical

backlog of 5,000-plus troubled Office of

Housing properties. The Authority will

also crack down on all CPD and FHEO

grantees who fail audit standards or

who engage in waste, fraud, and abuse.

HUD is also seeking new tools to

strengthen its enforcement ability, such

as a one-year mandatory trigger to move

troubled large PHAs into judicial

receivership; a performance evaluation

board to help develop an improved

annual assessment system for PHAs,

including an expanded PHMAP; broad

waivers of reporting requirements for

high-performing and smaller PHAs;

increased funding for multifamily

enforcement; and reform of the

bankruptcy laws to prevent multifamily

owners from hiding behind the law to

avoid prosecution by HUD and the

Department of Justice (DOJ).

The Enforcement Authority will

consolidate existing employees and will

contract with outside investigators,

auditors, engineers, and attorneys where

necessary and appropriate. Lastly, this

division will serve as liaison with the

Inspector General, and coordinate its

work with the FBI, DOJ, and the IRS.

Reform 4—Refocus and Retrain HUD’s

Workforce To Carry Out Our Revitalized

Mission

Under the new HUD, no matter what

area an employee works in, his or her

primary mission is either to empower

communities and people or to enforce

the public trust.

In the past, employees were too often

charged to do both at the same time.

After the HUD scandals in the 1980s, all

emphasis was on monitoring and

enforcing regulations. At other times,

the emphasis was to help the grantee do

whatever it wanted. Too often,

employees were asked to be facilitators

as well as monitors. These charges were

inconsistent and often contradictory.

The new HUD realizes that both roles

have a place in the Department but that

they truly differ. They are distinct

functions and must be performed by

different individuals—and in different

divisions—within the organization.

—Community Resource Representatives:

One function is to empower the

community by bringing in technical

expertise, knowledge of finance

programs and economic development.

The culture of this position is

cooperative, helpful, and

accommodating, and this service will

be performed by a new group of HUD

employees called ‘‘Community

Resource Representatives.’’ These

employees will provide the first point

of contact for our customers and will

be the Department’s ‘‘front door,’’

helping customers gain access to the

whole range of HUD services.

—Public Trust Officers: The public trust

function requires many different skills

in relation to the community. Public

Trust Officers must have absolutely

zero tolerance for waste, fraud, and

abuse; their mission is to ensure that

federal funds are used appropriately

and in compliance with laws and

regulations. They will work in the

field as the front line for monitoring

and will refer significant problem

cases for enforcement to HUD’s new

Enforcement Authority. HUD will

increase the number of staff devoted

to this monitoring work by directing

all facilitation to the Community

Resource Representatives and placing

all routine processing work in

processing centers, thus freeing up a

number of HUD staff to work on

protecting the public trust.

HUD will create training programs for

each of these two new categories of

employees. Training will include a

broad overview of all HUD programs,

while emphasizing general community

development skills for the Community

Resource Representatives and program

monitoring for the public trust officers.

Both employee categories will receive

specialized training at universities,

beginning in the fall of 1998.

Reform 5—Establish New PerformanceBased Systems for HUD Programs,

Operations, and Employees

Today, HUD uses an employee

evaluation system that has some, but not

significant, connection to program and

agency long-term goals. We will explore

changes to that system, as well as

implement effective and meaningful

Government Performance and Results

Act (GPRA) performance measures

designed to hold HUD staff and grantees

accountable for results.

We are also seeking to change—in

large part through legislation—programs
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43209

to emphasize performance. For example,

inflexible, labor-intensive competitive

grants will instead shift to performancebased formula grants; high-performing

housing authorities will be subject to

fewer onerous reporting requirements; a

new board will design more effective

and comprehensive measures for

evaluating PHA performance; and new

incentives will be developed in joint

venture agreements to share financial

risk and rewards for disposing of

defaulted FHA mortgages.

The new HUD will emphasize

product over process, performance over

paperwork. Encouraging achievement,

giving staff the tools they need to be

accountable, and rewarding results is

the new culture HUD embraces.

Reform 6—Replace HUD’s Top-Down

Bureaucracy With a New CustomerFriendly Structure.

With a new mission driving HUD’s

purposes and organization, we must

redesign our structure. The top-down

headquarters/field structure is outdated

and outmoded; while many private

sector companies reorganized and

restructured a decade ago, HUD has not

kept pace.

Particularly compelling—and

relevant—models of this kind of

reorganization can be seen in the

financial services field. Over the past

decades, many banks, like Citibank and

NationsBank, consolidated routine

functions into centralized ‘‘back office’’

processing centers and established

‘‘store-front’’ customer offices closer to

their markets. Using this plan, HUD will

adopt a similar model over a four-year

period.

Organized by function instead of by

program, our newly consolidated

operations will be located in processing

centers, while HUD’s public and grantee

outreach will be conducted in

community-friendly locations. It is

paramount that HUD retain its scope

and presence in communities across the

country; HUD’s 81 field offices will

remain and be better focused in serving

their constituents.

Steps to Implementation

Following the release of this

management plan to all HUD

employees, Congress, and the public,

the agency will launch an aggressive

implementation strategy.

That strategy includes:

—Creating new entities detailed in this

plan, including a new Enforcement

Authority and a national assessment

center for all HUD housing stock;

—Designing, with the help of the Office

of Personnel Management, a new

performance planning and

management program that:

• Links performance requirements to

specific objectives of the Management

Reform Plan;

• Creates incentives for meeting

specific performance objectives; and

• Establishes new performance rating

levels (e.g., ‘‘pass’’ or ‘‘fail’’) and

separates performance appraisal from

performance awards to tie awards to

achievement of major goals.

—Continuing to request Congress to

pass legislation that makes this plan

work, including a public housing bill,

a multifamily ‘‘Housing 2020’’ bill,

and a homeless assistance programs

consolidation bill;

—Contracting out such plan elements as

Hope VI oversight, PIH and Office of

Housing site inspection, and certain

enforcement activities;

—Partnering with financial systems

experts in the Treasury Department to

modernize and integrate HUD’s

financial systems;

—Shifting organizational structures and

personnel to reflect the plan’s broad

changes, then conducting a national

talent search for new senior personnel

where needed; and

—Implementing a targeted buyout plan.

Because the Management Reform Plan

calls for numerous cross-program

consolidations and deep-seated changes

in HUD’s administrative structure, HUD

will assign a project manager to each of

several specific reform targets. These

project managers will take charge of

putting these reforms in place:

• Enforcement Authority

• Real Estate Assessment Center

• Section 8 Financial Management

Center

• Financial Systems Integration

• Technology Enhancements

• Community Resource

Representatives/Store-fronts

Finally, the Senior Executive Service

(SES) anticipated mobility and

movement within the organization and

in keeping with that expectation, there

will be major changes throughout the

Department. This plan will initiate a

shift in virtually all senior management

in the SES positions in PIH and Housing

including: Jose Cintron will become the

General Deputy of PIH, Eleanor Bacon

will become DAS for HOPE VI in PIH,

Joe Smith will become the Deputy for

Operations in Housing and Karen Miller

will become Acting DAS for Multifamily

in Housing. Both Mr. Cintron and Mr.

Smith will be charged with

implementing the management reforms

and transformation of their respective

business lines.

Conclusion

A few years from now, the new HUD

will be judged positively if we have

corrected our most basic problems.

Lessons from management reform and

reengineering show that you can’t do it

piecemeal—the success of each

individual piece of this plan is

dependent on the success of the whole.

To create a new HUD, we will need the

full range of changes set out in this plan.

The success of this reform commitment

will, in part, rise or fall not just on

HUD’s efforts but on the efforts of its

partners in Congress and communities

across the country.

In its overall framework, this plan

adopts a business-like structure to

achieve a public purpose. It defines a

clear mission divided into identifiable

functions for each separate business

line. It centralizes some operations for

economies of scale while decentralizing

other operations to improve service and

innovation. It uses technology to

improve efficiency—both in front-line

service delivery and in the creation of

back-office processing centers. It puts a

new stress on enforcement and

economic development, while making

information on HUD’s resources more

widely available through computers.

And it implements a broad set of

performance measures to best target

resources to communities in need.

We know the American people

consistently support the goals of the

federal government, particularly those

of HUD—helping homeless people

become self-sufficient, strengthening

our cities, helping empower people

through work. The American people see

our nation’s problems—they desperately

want a solution and are frustrated

because we haven’t been able to give

them one.

Americans don’t want to see human

beings lying in the street. They don’t

want to see one in five American

children living in poverty. They don’t

want to see hungry children. Because

they know we can do better. If we

demonstrate that we can solve these

problems, if we show them solutions

that work, we will unleash a power

greater than we’ve ever seen.

We can make that change. If we put

our own house in order, showing people

that HUD has both the competence and

capacity to perform its vital role, we can

help America make the transition into

the 21st Century. We will give people a

reason to believe again.

HUD’s new direction matters to

America. Without HUD, millions of

Americans could not become the proud

owners of a new home, could not lift

themselves from welfare to work, could
43210 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

not walk safely through their own

neighborhood, could not escape a life on

the streets to a new beginning.

What is at stake is more than just the

survival and success of one agency.

When we reinvent HUD, one of the most

historically troubled government

departments, we will have begun to

restore the promise and purpose of

government itself.

These coming decades, the first of a

new millennium, will be both an

exciting and challenging time for all

Americans. We hold our fate in our own

hands: neither friend nor foe will

determine our national destiny—it

belongs to us alone.

This plan affirms HUD’s role in that

new world, in charting that destiny. It

affirms a place at the national table and

a piece of the economic pie for all our

communities. It recognizes the urgency

of creating opportunity for all

Americans—and the importance of

accounting for every single dollar

entrusted to us by millions of taxpayers.

It says that a renewed and reinvented

HUD will work—if we, and our partners

in Congress, are prepared for change.

Road Map to This Plan

Quick Guide

The Six Major Reforms

Describes reforms that cut across the

Department.

Business Line Reform Plans

Describes specific issues and reforms for

each business line.

Appendix

Provides additional details on

implementing the reforms

This plan is divided into three

sections. The first, The Six Major

Reforms, gives readers a compass for

understanding our major changes in six

reform areas:

• Reorganizing by function.

• Replacing HUD’s financial

management system.

• Creating an Enforcement Authority.

• Refocusing HUD’s mission and

retraining our workforce.

• Establishing new performancebased systems.

• Creating a customer-friendly

organization.

The first section shines a spotlight on

each reform area, explaining why it is

relevant, what changes will occur, and

who will be affected. In some cases,

HUD’s organization will change to

implement needed reforms; in others,

specific programs will change to achieve

our reinvention goals. Regardless, they

are reforms that will cut across the face

and through the depth of what HUD is

today, reconstituting the HUD of the

future.

The second section, Business Line

Reform Plans, describes the reforms

each of HUD’s business lines will

undertake. From Public and Indian

Housing to Fair Housing to Community

Planning and Development, specific

problems, reforms, and benefits are laid

out. Each business line answers these

questions: Why do we need to change?

What reforms will we make? What

benefits will result? What legislation, if

any, do we need to make the change?

Finally, the Appendix provides

supporting details.

The Six Major Reforms

‘‘Contrary to what much experience

and certainly much old wisdom tell us,

the essence of reengineering lies in this

principle: The larger the scale of

change, the greater the opportunity for

success.’’

James Champy, Reengineering

Management

HUD cannot affect community change

unless it first changes within.

To effectively bolster community

revitalization and offer new

opportunities for America’s citizens,

HUD must cast aside our outdated

structures that no longer serve

customers well. The bureaucracy that

has swelled and become rigid over time

must make way for a lean, flexible,

results-oriented structure.

This transformation is driven by

HUD’s realization that fundamental

change is critical if HUD is going to

remain relevant into the next century.

These reforms are the product of a

bottom-to-top review of everything HUD

does.

To kick off this change process, HUD

pulled together dynamic thinkers from

across the Department to question every

aspect of our programs and processes.

Complementing these change agents

were outside experts from the private

sector, including Ernst & Young LLP,

David Osborne, and James Champy,

among others, who lent additional

strength and perspective to our

refocusing efforts.

These ‘‘change agents’’ started with

no ‘‘givens,’’ no constraints, no

commitments to bygone structures—

their only mandate was to question how

HUD should organize itself to effectively

fulfill its twin missions of empowering

people and communities and restoring

the public trust. Principles guiding the

process emphasized changes that would

match workload and workforce; focus

on customers; measure and reward

performance; and take advantage of new

technologies.

In figuring out what to fix, change

agents had to find what was broken.

They identified several breakdowns

within HUD’s structure that prevent

optimal fulfillment of our missions.

They noted, for example, that HUD is

driven by process rather than

performance; that we are organized by

program rather than function, creating

wasteful redundancies; that

management information systems aren’t

integrated; and that the current

relationship between headquarters and

field office responsibilities makes poor

use of resources. Finally, change agents

concluded that the Department’s culture

has not made vigilant stewardship of

public funds a priority.

Next, the change agents focused on

how to fix these fundamental structural

flaws. Their recommendations targeted

everything from creating a performancebased culture, to overhauling HUD’s

technological systems, to consolidating

or eliminating redundant functions.

Perhaps most importantly, they

developed a new structure that

emphasizes function, customer service,

and commitment to our mission.

Change agents distilled these

recommendations into six major areas of

reform that affect all aspects of HUD’s

ability to provide the value,

effectiveness, and quality demanded by

our taxpaying customers. Reforms in

these areas will hit home with every

HUD employee, from the way we think

about our purpose to how we measure

progress and the tools we have at hand

to deliver services.

We call these changes ‘‘cross-cutting’’

reforms. Carpenters know that crosscutting lumber means to cut across the

natural grain of the wood. Sometimes

it’s a little harder to do. But the results

make it worth the extra effort.

Transforming HUD will involve

cutting across program lines that have

been in place so long they must seem as

natural as grains of wood. But what

seems natural in bureaucracies may

only be illusion. The reforms that will

transform HUD cut across outmoded

structures that have too often given the

illusion of efficiency, while in reality

making HUD less efficient.

This section explains each of the

Department’s six major reforms and the

organizational and programmatic

changes they entail. It also describes

how these reforms will contribute to a

new HUD—one that partners with local

communities to empower America’s

citizens and that scrupulously protects

the public trust.
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43211

Overview of Reforms and Specific

Changes

#1 Reorganize by Function Rather Than

Program ‘‘Cylinders.’’ Where Needed,

Consolidate and Privatize

Organizational Changes

• Create the following centers:

1. Real Estate Assessment Center for

reviewing and evaluating physical

inspections and financial reporting.

2. Section 8 Financial Management

Center for Housing and PIH.

3. Housing: Single Family

Homeownership Centers, Multifamily

Centers.

4. Public and Indian Housing:

Troubled Agency Recovery Centers,

Special Applications Center, PIH Grants

Center.

5. CFO: Accounting Center.

6. Office of Administration:

Administrative Service Centers,

Employee Service Center.

• Redesign contract procurement

process to improve operations and

oversight.

• Consolidate routine crossoperational processing into centralized

back office processing centers, or hubs,

in the field.

• Consolidate program administrative

functions into the Office of

Administration.

• Establish Economic Development

and Empowerment Service, aligning

various job skills and other programs

from CPD, PIH, and Housing.

• Outsource legal and investigative

services when appropriate.

• Outsource technical assistance to

grantees when appropriate.

• Privatize physical building

inspections, financial audits, technical

assistance, and real estate assessments.

• Consolidate ten field accounting

divisions into one accounting center

within the Office of the CFO.

• Consolidate operations in 51 field

offices into 17 Multifamily Centers

within Multifamily Housing.

• Consolidate financial management

and budget functions in CFO.

Program Changes [L=Legislation

Required]

• Privatize HOPE VI construction

management and development process

as appropriate (L).

• Consolidate 6 homeless assistance

programs (L).

• Merge Section 8 certificate and

voucher programs to streamline HUD

regulations and oversight (L).

• Extend FHA note sale authority

permanently (L).

• Reform FHA single family property

disposition to reduce staff burden, value

lost while in inventory, and exposure to

risk (L).

#2 Modernize and Integrate HUD’s

Outdated Financial Management

Systems with an Efficient, State-of-theArt System

Organizational Changes

• Integrate HUD’s fragmented

financial management system, repairing

or replacing HUD’s 89 separate financial

management and information systems

• Use advanced mapping software

system, Communities 2020, to show

communities the impact of HUD

funding and activity in their area and

enable them to plan, track, and measure

performance

• Implement HUD’s new Management

Integrity Plan

#3 Create an Enforcement Authority

Organizational Changes

• Consolidate existing organizations

and employees; contract where

appropriate with outside investigators,

auditors, and attorneys.

• Monitor low-performing PHAs,

properties failing physical and financial

audit inspections, and CPD/FHEO

grantees failing program compliance.

• Create a business-like entity to

clean up the backlog of over 5,000

troubled multifamily properties.

Program Changes [L = Legislation

Required]

• Streamline and privatize process for

Housing’s pursuit of negligent owners

(L).

• Reform bankruptcy laws to prevent

owners from using them as a refuge

from enforcement actions (L).

#4 Refocus and Retrain HUD’s

Workforce to Carry Out Our Revitalized

Mission

Organizational Changes

• Select and train staff as Community

Resource Representatives and Public

Trust Officers for all field offices.

• Downsize HUD staff from 10,500 to

7,500, using skills and resources where

they are needed most.

• Develop a road map for downsizing

HUD employees, including a buyout

strategy and options for career

transitions.

• Streamline and consolidate

operations and reassign staff to high

priority work.

#5 Establish New Performance-Based

Ssystems for HUD Programs,

Operations, and Employees

Organizational Changes

• Create meaningful GPRA

performance measures that hold HUD

staff and grantees accountable for

results.

Program Changes [L = Legislation

Required]

• Convert inflexible, labor-intensive

competitive grant programs to

performance-based grant programs,

including: Tenant Opportunities,

Economic Development/Support

Services, Public Housing Drug

Elimination, Competitive PHA Capital

Funds; and six homeless programs (L).

• Deregulate high-performing PHAs

and smaller PHAs by mandating fewer

reporting requirements (L).

• Create a Public Housing Authority

Performance Evaluation Board (L).

• Mandate judicial receivership for

PHAs on the troubled list for more than

one year (L).

• Reduce excessive rent subsidies to

market levels on assisted housing (L).

#6 Replace HUD’s Top-Down

Bureaucracy with a New CustomerFriendly Structure

Organizational Changes

• Create neighborhood ‘‘store-front’’

service centers in communities.

• Offer single point of service to

customers through Community

Resource Representatives and centralize

back-office centers.

• Establish a new management

planning strategy.

• Streamline headquarters and

redeploy staff to field.

Discussion of Reforms and Specific

Changes

Reform 1: Reorganize by Function

Rather Than Program ‘‘Cylinders.’’

Where Needed, Consolidate and/or

Privatize

Management theorists call them

‘‘stovepipes.’’ At HUD we refer to them

as ‘‘cylinders.’’ They mean the

essentially self-contained program areas

within HUD, Housing, Public and

Indian Housing, Fair Housing, and

Community Planning and Development.

Insulated from the outside, operating

from top to bottom in a relatively

narrow way—like a stovepipe—these

units duplicate each other’s efforts, and

sometimes work at cross-purposes. They

make it hard for communities to use

HUD’s programs to shape

comprehensive solutions.
43212 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

Compounding this long-standing

situation are the reductions in

workforce of the last few years. From

13,500 employees in 1992, HUD has

shrunk to 10,500—and plans a further

reduction to 7,500 by fiscal year 2000.

The reductions that have occurred and

those to come will strain HUD’s

organization to the breaking point.

How do we compensate for the

reductions? How do we correct the

problems inherent in HUD’s structure?

The answer: Reorganize the Department

by function to cut across ‘‘stovepipes,’’

eliminate duplication where possible,

and focus on customer service.

Organizational Changes

The most important organizational

efforts to consolidate in the new HUD

involve creating both Department-wide

and program-specific centers. The major

consolidations are described below; a

complete list of consolidated centers

appears in Appendix D.

• Create Consolidated Centers

—Real Estate Assessment Center

Currently, the need to monitor

activities far outstrips the abilities of

both the Office of Housing and the

Office of Public and Indian Housing.

The proliferation of programs itself

creates difficulties for a shrinking staff.

But the wide variety of smaller, highly

specialized programs and the many

facets of public housing options often

call for skills the field office staff do not

have. Consequently, FHA has an

estimated backlog of over 5,000 troubled

properties. And as PHAs are more

accurately assessed, it is more likely

that all of those that are ‘‘troubled’’ will

receive help as needed early on. This

will require still more attention from a

lean staff already overburdened with

conflicting priorities.

Even in the best of organizations such

obstacles would make assessments a

challenge. These challenges are further

aggravated, however, by an inefficient

process. Fragmented and beset by red

tape, the current assessment process

makes an effective and flexible response

almost impossible.

Furthermore, FHA and PIH each use

different standards for performing

separate physical inspections of public

housing and multifamily insured

housing projects.

To help solve these problems, HUD

will create the Department-wide Real

Estate Assessment Center. At the Center,

HUD staff will rigorously review data

from physical inspections, based on

guidelines used by PHAs, mortgagees,

and lenders. They will also determine

whether each project has passed or

failed, using standard protocols for

financial performance reviews

established by the new HUD

Consolidated Asset Management System

(described under Reform #2).

—Section 8 Financial Processing Center

Handled by both Housing and PIH,

financial documentation for the Section

8 rental assistance voucher program has

been neither centralized nor easy to

obtain. Without the necessary financial

data, HUD has had difficulty obligating

and disbursing funds. Worse yet, HUD

has no electronic validation for

processing payments or determining the

accuracy of requests from landlords or

mortgagees. This fragmented system

leaves the door open to fraud—and in

fact, HUD’s Inspector General estimates

overpayments to be in the millions of

dollars each year.

To close these loopholes, the Office of

Housing and PIH will establish a unified

center for Section 8 payments

processing. Functions will include

budgeting, payment scheduling,

contract reservations and revisions,

financial statement revisions, rent

calculations, and income verification.

The electronic, integrated financial

management of all Section 8 processing

helps HUD by monitoring compliance

and ensuring disbursement accuracy.

—Single Family Homeownership

Centers

Currently, loan production, asset

management, and property disposition

for Single Family programs are beset by

problems. Insurance endorsements are

delayed; information systems are often

inappropriate for staff needs;

disposition of properties is poorly

controlled and monitored; and staff

reductions have made it difficult to

deliver consistently excellent service.

One solution: consolidate all Single

Family operations into Homeownership

Centers, or HOCs. It is a move that will

encourage economies of scale and better

use of sophisticated technology.

The Office of Single Family Housing

will open three Homeownership

Centers. Located in Philadelphia,

Denver, and Atlanta, the centers will

become fully operational by fiscal year

1999. The Homeownership Centers will

consolidate work formerly performed in

field offices, including routine

processing, loss mitigation, and quality

assurance.

To jumpstart this transition, HUD will

either streamline, privatize or outsource

Real Estate Owned (REO) activities and

will sell nearly all assigned mortgage

notes.

Such consolidation and streamlining

will result in faster service, better risk

assessment and loss mitigation, and

better loan targeting, among other

benefits.

—Multifamily Development Centers

The Multifamily Centers will carry

out both Asset Management and Asset

Development. Asset Management will

oversee and manage property assets, as

well as administer programs to ensure

that low and moderate income families

have safe and affordable housing. Asset

Development will provide a full range of

development services, including

applications, underwriting approval,

construction inspection, and final

closing.

These centers will provide leadership

for HUD staff who will provide

technical expertise in managing

multifamily properties. Additionally,

several consolidated operations will

facilitate the multifamily asset

development and management

processes, including: the Departmentwide Enforcement Authority, Section 8

Financial Processing Center, and

Property Disposition.

But these are not HUD’s only

organizational efforts to consolidate.

Others include:

• Redesign Contract Procurement

HUD recognizes that its staff can’t

create positive change and serve

communities unless we remove

longstanding roadblocks to action. One

of these roadblocks is obsolete and

inefficient procurement and contracting

processes, long a source of frustration

within the Department.

At the Secretary’s request, the

National Academy of Public

Administration (NAPA) scoured FHA’s

procurement system in an assessment of

what is wrong with the system and how

we can fix it.

NAPA identified how procedures

could be streamlined or eliminated;

pointed out how we could better train

staff to handle procurements fairly,

quickly, and, responsibly; and suggested

how ‘‘best practices’’ should be

supported in the Department’s

operations. Everything from giving

contracting staff greater authority to

using Intranet and e-mail to speed up

approvals was put on the table.

HUD is committed to creating a model

federal government procurement

system, and a road map for getting there.

This new system will:

—Establish high-level procurement

priorities consistent with the

Government Performance and Results

Act of 1993 (GPRA), focusing on

performance;
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43213

—Ensure accountability by clarifying

lines of responsibility and authority;

and

—Respond quickly to changing program

needs, becoming flexible and userfriendly.

Where frustration once was ensured

and fairness questioned, procurement

needs to become a tool HUD’s program

staff can rely on to more effectively and

efficiently serve customers in America’s

communities.

• Consolidate Administrative Functions

Currently, many routine operations

occur at field offices scattered around

the country. These will be moved to a

handful of centralized processing

centers. We have already described four.

One other important example: The

Office of the Chief Financial Officer will

complete its consolidation of ten field

accounting divisions into one

accounting center by the end of fiscal

year 1998. The CFO reviewed

accounting processes to identify

streamlining and consolidation

opportunities.

HUD will also continue to eliminate

redundant administrative functions

through consolidation in the Office of

Administration. To accomplish this, the

Office of Administration has established

three Administrative Service Centers in

New York City, Atlanta, and Denver.

The Centers will support field offices

with such services as information

technology, human resources,

procurement, and space planning. In

addition, an Employee Service Center in

Chicago handles all payroll, benefits,

and counseling services. In conjunction

with adoption of new technologies, the

administrative centers will ultimately

dramatically reduce the need for

administrative staff in each field office.

In addition, HUD will review and

streamline the separate administrative

operations currently being carried out

by each business line in headquarters.

The review will examine how

administrative resources should most

effectively be allocated across the

Department.

• Consolidate Economic Development

and Empowerment Programs

Many economic development and job

skills programs are scattered throughout

the Department, such as the Economic

Development Initiative (EDI), Section

108, Empowerment Zones, and job

training programs in PIH and Office of

Housing. These will be consolidated

into a new Economic Development and

Empowerment Service. The result:

Improved focus on community

empowerment.

• Privatize Specific Functions

Sometimes it is clearly more efficient

to contract with private firms. As

specialists, outside firms can often do

work faster and more economically than

HUD, especially given the Department’s

sharp reductions in workforce. HUD

thus plans to privatize a number of

activities, as appropriate. These include

physical building inspections for the

PIH and FHA portfolios, and financial

audits of both PIH and FHA grantees.

We will also outsource legal and

investigative services to the newly

created Enforcement Authority

(described in Reform #3) as well as real

estate assessment and technical

assistance to grantees.

Program Changes

In addition to changes in HUD’s

organizational charts, HUD is seeking

legislation to allow program changes.

These legislative reforms are necessary

to continue and strengthen the

transformation of public housing, to

ensure that it works for residents and

surrounding communities, and to effect

management reforms that permit all

HUD programs to make the most

efficient, cost-effective use of scarce

federal resources. Specific program

changes we seek include:

• Privatize HOPE VI Construction

Management

Overseeing the HOPE VI construction

management process takes tremendous

staff time and often calls for specialized

skills the field staff may not possess.

Contracting with private real estate

firms, who are familiar with this type of

construction management, would both

ease staffing burdens and improve

oversight of these urban revitalization

projects.

• Consolidate Homeless Assistance

Programs

A myriad of homeless assistance

programs now award grants based on

annual competition for funds. These

competitions are staff-intensive and are

an impediment to long-term planning

and coordination across programs and

providers. HUD’s proposal would

consolidate these programs and change

the funding award process to a

performance-based formula grant

program. Permanent consolidation

would remedy this time-consuming,

unproductive process.

• Merge Rental Assistance Certificate/

Voucher Programs

The Section 8 certificate and voucher

programs currently operate under two

different sets of rules. HUD’s proposal

would establish standardized guidelines

and procedures, consolidating these

programs into a uniform whole. This

change would facilitate staff oversight of

the program, streamline HUD

regulations, and reduce the opportunity

for waste and abuse.

• Extend FHA Note Sale Authority

Permanently

FHA’s loan asset sales program was

initiated to address the substantial

inventory of HUD-held mortgages, a

result of the downturn in real estate

markets in the late 1980s. This program

has been tremendously successful in

returning assets to the private sector and

in generating savings for the federal

government. The asset sales program

has benefitted FHA in other important

ways: It has increased understanding of

portfolio composition and performance;

helped managers refine portfolio

strategies; allowed staff to focus on

managing the insured portfolio to

prevent defaults; and institutionalized

the capacity to dispose of unsubsidized

mortgages. Enactment of HUD’s

proposed legislation to extend this

authority would perpetuate these

benefits.

• Reform FHA Single Family Property

Disposition

When HUD takes possession of a

property after its owners default on an

FHA loan, the process consumes

tremendous staff time. Meanwhile, the

property loses value while in HUD’s

inventory, and exposes HUD to risk. It

is easier for HUD to find buyers for

notes (mortgages on these properties)

than to sell the properties themselves.

FHA is considering possession of Single

Family notes instead of properties upon

default. HUD’s proposal will also allow

FHA to consider outsourcing or

streamlining disposition, including

using joint ventures to dispose of

properties and notes—further reducing

financial risk and staff time on servicing

defaulted properties.

Reform 2: Modernize and Integrate

HUD’s Outdated Financial Management

Systems With an Efficient, State-of-theArt System

The Book of Genesis describes the

Tower of Babel, whose completion was

frustrated because its builders all spoke

different languages and couldn’t talk to

one another.

At HUD, this is one story that rings

true. The Department’s single most

glaring deficiency is its financial

management systems. Today, every

program cylinder operates its own

system—a total of 89 separate systems

throughout the Department.
43214 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

Written in many different languages,

these systems can’t talk to each other.

This bureaucratic Tower of Babel is the

key reason the Department finds itself

on the GAO ‘‘high risk’’ list and why

HUD’s own Inspector General says

HUD’s future is ‘‘dim.’’

The Inspector General (IG) has

described HUD’s material weaknesses

and systemic management and program

difficulties to Congress. The IG has

argued that HUD would greatly improve

its ability to address these problems if

it finishes upgrading its financial

management system.

Meanwhile, the GAO has sharply

criticized HUD’s financial management

system, calling it poorly integrated,

ineffective, and generally unreliable.

HUD does not dispute this

assessment; since 1989 it has made

many similar points in its reports under

the Federal Managers Financial Integrity

Act (FMFIA). And in his confirmation

hearing, Secretary Cuomo stated that his

top priority would be to put HUD’s

management systems in order and to

restore effective management and

financial accountability at HUD.

To effect a complete overhaul of

HUD’s financial management system,

HUD will take these steps:

Organizational Changes

• Integrate HUD’s Fragmented Financial

Management System, Repairing or

Replacing HUD’s 89 Separate Financial

Management and Information Systems

The new HUD will have a common,

consolidated financial management

information system. This system will

ease communication throughout HUD

and will allow HUD to better

communicate with grantees and

communities across the country.

The new system will provide quick,

user-friendly access to accurate, current,

and complete consolidated financial,

program, and portfolio information. It

will support program management

decision-making and financial

management, readily provide

information to partners and

constituents, and generate program and

financial performance measurements.

The new HUD integrated financial

system will incorporate the following

features: Efficient data entry, support for

budget formulation and execution,

updates on status of funds, standardized

data for quality control, security

controls, and the ability to correlate

program performance measures with

related spending transactions in

accordance with GPRA.

HUD has identified the 89 separate

information and accounting systems in

major use throughout the Department

that fail to comply with FMFIA. These

systems will be overhauled to either

correct deficiencies, consolidate

functions into new accounting systems,

or be eliminated.

• Use the Advanced Mapping Software

System, Communities 2020, To Show

Communities the Impact of HUD

Funding and Activity in Their Area

It was only a few decades ago that

ATMs were unknown. Now we see them

on every corner and Americans use

them routinely, comfortably moving

through a variety of transactions by

pushing a few buttons.

In a way, HUD’s 2020 mapping

software is a kind of housing ATM.

Users can move through graphic

displays of HUD funding in virtually

every community in the country.

The Consolidated Plan advanced

mapping system, which has won an

award from Harvard University’s

Kennedy School, will be enhanced to

provide current, accurate information

on where and how public housing

dollars are being spent. This helps

communities better understand the

options open to them. It also allows

every HUD employee to grasp the

workings of the entire Department.

HUD will incorporate its awardwinning mapping software into the new

financial system to provide one

seamless communication and financial

management system.

HUD’s Community Resource

Representatives can then bring this

software into the communities they

serve. By interacting with other HUD

program databases, Communities 2020

will allow Community Resource

Representatives and non-profits to see

where specific programs like Elderly

Housing or Homeless Assistance are

most needed—and to do so as easily as

they use an ATM.

• Implement HUD’s New Management

Integrity Plan

Recent Inspector General and GAO

reports identify a serious disconnect at

the program management level between

responsibility and accountability. The

basic problem is that the current

management control process is driven

by ‘‘external policemen’’—the Inspector

General and GAO. To be successful,

HUD must change from a negative,

externally-driven internal control

process to a new business culture—a

positive financial management process

that is fully integrated with day-to-day

operations and owned by program

managers. An effective financial

management system simply ensures that

what should occur does occur.

How do we create a new business

culture in which management monitors

itself and looks at its own results? How

do we make financial integrity

everybody’s business?

To transform HUD into an agency

where fiscal prudence matches

management responsibility, HUD will

follow a three-part Management

Integrity Plan.

First, it will make program managers

responsible for their programs’ financial

management. We will hold them

accountable for results—and reward

them for excellent results.

Second, HUD will set clear,

reasonable expectations and give

managers the resources necessary to

meet them. In particular, HUD will

expand the role of its Chief Financial

Officer.

Third, HUD will develop and

demonstrate this new business culture

by incorporating front-end risk

assessments in reorganized and

consolidated programs outlined in the

Management Reform Plan.

Reform 3: Create an Enforcement

Authority With One Objective: To

Restore the Public Trust

Restoring public trust is a priority that

drives the entire reorganization. And the

greatest breach of public trust is the

waste, fraud, and abuse in HUD’s

existing portfolio of ten million housing

units.

Currently, each of HUD’s housing

agencies—PIH, FHA, FHEO, and CPD—

operate independent enforcement

divisions, with different priorities. PIH,

for example, considers enforcement

action when an authority fails its annual

assessment, and has a variety of ad hoc

solutions, from judicial receiverships to

partnership agreements with the local

housing authority.

FHA, on the other hand, takes

enforcement action only as a last resort;

the Department’s critics note that the

financial interest of FHA’s insurance

fund can be at odds with the social

interests of the tenants.

Because the enforcement system

clearly needs reform, HUD will make

significant changes, both organizational

and programmatic.

Organizational Changes

• Consolidate Existing Organization and

Employees; and Contract With Outside

Investigators, Auditors, and Attorneys

Where Appropriate

The new HUD will combine non-civil

rights compliance enforcement actions

for PIH, CPD, FHEO, and Housing

program participants into one new

organization. This Enforcement
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43215

Authority will consolidate existing

employees and contract with outside

investigators, auditors, engineers, and

attorneys. It will also work with the

Inspector General, consult with the FBI

on training staff, and share information

with the IRS.

• Monitor Low-Performing PHAs,

Properties Failing Physical and

Financial Audit Inspections, and CPD/

FHEO Grantees Who Fail Program

Compliance

The new Enforcement Authority will

be responsible for all PHAs that receive

a failing score on their annual

assessment. It will also be responsible

for all multifamily properties failing the

physical and financial audit inspections

performed by the real estate

management system. Finally, the

authority will handle all CPD and FHEO

grantees who fail program compliance.

• Create a Business-Like Entity To

Clean Up an Estimated Backlog of Over

5,000 Troubled Assisted Properties

HUD will aggressively pursue owners

of troubled HUD-insured and subsidized

properties that do not meet established

standards. This entity will receive

ratings from the Assessment Center on

properties that ‘‘fail’’ those established

standards. Using professional resources

under contract, the entity will: (1)

Quickly identify and implement

appropriate sanctions based on

contractor recommendations; (2) initiate

appropriate civil or criminal actions in

a timely manner; and (3) proceed

expeditiously to acquire, foreclose on,

and dispose of the property.

When a property fails its assessment,

it will be forwarded for immediate

action to recover the property or

misspent funds. Action may include

transfer of physical assets, sanctions,

acquisitions, foreclosures, and civil or

criminal referrals. In the event of

foreclosure, a contractor will prepare

the disposition plan and dispose of the

property.

General contractors will perform the

work through qualified subcontractors

in areas of specific expertise in three

major areas: asset management, legal,

and property disposition. A National

Advisory Board of independent

stakeholders from the private and nonprofit sectors will give ongoing feedback

on performance and policy and will

advise on particularly sensitive issues

prior to final action.

Program Changes

• Streamline and Strengthen the Office

of Housing’s Process for Pursuing

Negligent Owners

HUD’s legislative proposals would

strengthen FHA’s enforcement authority

to minimize fraud and abuse in FHA

and assisted housing programs. Key

provisions expand the Mortgagee

Review Board’s ability to impose

sanctions on lenders and other HUD

program participants who violate HUD

rules; increase equity skimming

penalties and expand equity skimming

prohibitions to all National Housing Act

programs, Section 202, elderly, and

multifamily risk-sharing pilot programs;

and broaden HUD’s authority to impose

civil penalties and double damage

remedies. These new or expanded

authorities would reduce the staff

burden for each enforcement action and

put teeth in their ability to resolve

troubled properties.

• Reform Bankruptcy Laws To Prevent

Owners From Using Them as a Refuge

From Enforcement Actions

Currently the bankruptcy code

legitimizes non-compliance for owners

who have misused HUD funds and who

avoid repayment under bankruptcy

protection. HUD seeks to reform

Sections 105 and 362 of the Code,

which make this refuge possible. HUD’s

proposed amendments would allow the

agency to proceed with timely

foreclosure of insured or assisted

multifamily housing projects, while

protecting the residents, the property,

and the FHA insurance fund.

Reform 4: Refocus and Retrain HUD’S

Workforce To Carry Out Our Revitalized

Mission

Partly because HUD was originally an

amalgam of several different

organizations, its mission has never

been sharply defined.

Moreover, HUD has often changed its

emphasis to suit the times. After the

HUD scandals of the 1980s, for example,

all emphasis was on monitoring and

enforcing regulations. At other times,

the emphasis was to help grantees do

whatever they wanted.

Under the new HUD, we will refocus

our mission—then retrain HUD’s leaner

workforce to serve that mission. This

reform includes four organizational

components.

Organizational Changes

• Select and Train Community

Resource Representatives and Public

Trust Officers for All Field Offices

HUD’s mission involves both

empowering communities and winning

the public trust. They are distinct

functions and will be performed by

different individuals—and in different

divisions—within the organization.

—Community Resource Representatives,

a new group of HUD employees, will

facilitate community empowerment

by bringing in technical expertise,

program knowledge, and knowledge

of finance and economic

development. Their purpose is to be

cooperative, helpful problem solvers.

—Public Trust Officers require different

skills and a different public stance.

Public Trust Officers ensure that

federal funds are used appropriately

and that HUD customers comply with

the law. They must have zero

tolerance for waste, fraud, and abuse.

HUD will sharply increase the

number of staff devoted to this

monitoring work by shifting all

facilitating work to the Community

Resource Representatives and placing

all routine processing work in ‘‘back

office’’ processing centers.

• Downsize HUD Staff From 10,500 to

7,500 by the End of Fiscal Year 2000,

Using Skills and Resources Where They

Are Needed Most

Once refocused, employees must be

retrained. The HUD Training Academy

is designing a training program for

Public Trust Officers in each program

area. It will retrain Community

Resource Representatives as well, since

they must have broad knowledge of

HUD’s programs and the field.

Throughout downsizing HUD will

retrain and redeploy available staff to

minimize workload imbalances. HUD

will also try to avoid reductions-in-force

(RIFs), with their disproportionate effect

on mid-level and mid-career employees.

Since April, 1994 a total of 1,190

employees have separated with a buyout

from the Department—a 9.4 percent

reduction, without one involuntary

layoff.

In general, HUD will downsize by

consolidating and streamlining

operations; contracting out program and

support functions that the private sector

can perform cost-effectively; eliminating

functions that are only marginally

effective; and reducing part-time and

temporary employees.

• Develop a Road Map for Downsizing

for HUD Employees, Including a Buyout

Strategy and Options for Career

Transitions

HUD will reduce staff levels by

maintaining an employment freeze

throughout the downsizing period,

except for limited hiring targeted at

urgently needed skills. The Department

will implement early retirement and
43216 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

buyouts to spur staff reduction and will

also offer employee outplacement and

other transition services.

HUD has received approval for

Voluntary Separation Incentive

Payments (VSIP)—also known as

buyouts—for employees in targeted

locations, titles, series, grades, and

program operations. Under this

authority, the Department will offer

600–1,000 buyouts to employees to most

effectively make progress toward

reducing the Salaries and Expenses

(S&E) Appropriation to 7,500 Full Time

Equivalents (FTEs) by fiscal year 2000.

The buyout strategy, provided in

Appendix A, will target areas where

consolidations and streamlining make

staff reduction most necessary. Buyouts

will be used as an alternative to

involuntary separations that might

otherwise be required for downsizing

and restructuring.

Alone, HUD’s traditionally low

attrition rate (less than 2 percent per

year) would be insufficient to meet the

target staffing number of 7,500 FTEs.

Buyouts have been an integral part of

HUD’s efforts to streamline, downsize,

and consolidate operations. These

buyouts, as well as early-out authority

begun in March 1994 and an

employment freeze since October 1994,

have substantially reduced staffing

levels.

Without buyouts, HUD may have to

resort to RIFs as the only other tool

available to meet downsizing goals. Yet

RIFs would strip the agency of key midlevel employees, disrupt agency

operations, and defeat staff diversity

gains.

Continued use of buyouts, however,

will allow us to target management

reforms to specific positions, locations,

programs and/or functions. In this way,

HUD can focus buyouts on those

employee populations and functions

which present the greatest need to

reduce staff levels. Buyouts are much

more cost-effective than RIFs and are

more positively viewed by employees

prepared to seek new challenges.

Reform 5: Establish New PerformanceBased Systems for HUD Programs,

Operations, and Employees

In this, we are guided by the story

about Bobby Knight, who, when he first

became the basketball coach at Indiana

University, reportedly received a

telegram from the Alumni Association:

‘‘Bobby, we’re with you all the way,’’ it

read. ‘‘Win—or tie.’’ Alumni

Associations are noted for caring about

results—sometimes too much.

HUD’s management reform plan

places a new emphasis on results. It

creates new internal and external

benchmarks, as well as uniform

standards for measuring performance, to

increase productivity and accountability

across program lines.

These tools increase HUD’s ability to

mandate compliance from contractors

and customers. But by rewarding efforts

that go beyond mere compliance—like

performance-based grants for

contractors or added autonomy for HUD

employees—they will make HUD’s

ability to measure and reward

performance and results the true

foundation of its reengineering.

To that end we have made one

organizational change and seek

legislation for many program changes.

Organizational Changes

The Government Performance and

Results Act of 1993 (GPRA) essentially

requires federal agencies to demonstrate

to the public that its tax dollars are

being well used. GPRA requires each

agency to identify specific measures of

its performance, results it will achieve,

and timelines for doing so.

In line with these requirements, HUD

will create meaningful performance

measures that hold its staff and grantees

accountable for results—in a

quantifiable, measurable way. These

measurements will allow HUD staff to

compare actual performance against

established goals.

By the end of fiscal year 1997, HUD

must submit to the Office of

Management and Budget a three-year

strategic plan and mission statement for

complying with GPRA. In that

document, HUD will describe its

changing direction, including concrete

actions. It will then establish

performance measures that conform to

GPRA goals. In fact, we have already

begun creating these measures: at least

20 percent of HUD’s major goals and

objectives are based on straightforward

outcome-oriented performance

standards. Outside contractors will be

held to the same standards.

Program Changes

• Convert Inflexible and LaborIntensive Competitive Grant Programs

Into Performance-Based Grant Programs

HUD advocates the use of

performance-based grant programs

wherever feasible as part of its

‘‘reinvention’’ to serve its customers

more efficiently and effectively.

Performance-based grant programs

distribute funds by formula, and reward

good performance. They also conserve

valuable staff time by eliminating timeconsuming annual competitions and

make funding more predictable so that

grantees can plan more strategically.

Finally, they give the Department

greater flexibility in partnering with

local communities to monitor

individual projects.

Thus, HUD has proposed legislation

that would allow it to convert

competitive grants into performancebased formula grants. Affected programs

include Tenant Opportunities,

Economic Development/Support

Services, Public Housing Drug

Elimination, and Competitive PHA

Capital Funds.

In CPD, HUD has legislation to

consolidate homeless assistance services

from six disparate programs into one

flexible, performance-based formula

grant program. Affected homeless

programs include Emergency

Assistance, Safe Haven Housing,

Supportive Housing Program, Shelter

Plus Care, Rural Housing, and the

Section 8 Mod Rehab Program.

• Deregulate High-Performing PHAs

and Smaller PHAs by Mandating Fewer

Reporting Requirements

Currently all PHAs must prepare

extensive reports, planning documents,

and other operational reviews.

Monitoring compliance with this stream

of paperwork requires inordinate staff

time and is burdensome to those PHAs

that already perform responsibly and

efficiently. HUD will reduce staff

oversight burdens and reward effective,

high-performing PHAs by reducing the

volume of paperwork they are required

to submit. Specific changes HUD will

make include streamlining planning

submissions and performance indicators

for small PHAs, and reducing

submission requirements for highperforming ones. These steps will

substantially reduce the burden on field

staff for monitoring and oversight.

• Create a Public Housing Authority

Performance Evaluation Board

An independent Performance

Evaluation Board will be established to

help HUD monitor public housing

authority performance. The board will

be composed of seven members, all

appointed by HUD, with members

representing public housing authorities,

residents, the real estate industry and

local government.

The board will be responsible for

making broad recommendations for

improving HUD’s oversight and

monitoring of all facets of public

housing authority performance. The

board will be evaluating the current

Public Housing Management

Assessment Program (PHMAP) and

suggest future improvements. The board

will also study alternative performance

evaluation models used in other
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43217

industries, including accreditation

models that can be applied to public

housing. The board will also develop

standards for professional competency

for PHA employees and review HUD’s

system to increase on-site physical

inspections and independent audits of

PHAs.

• Mandate a Judicial Receivership for

All Large PHAs on the Troubled List for

More Than One Year

Currently, troubled PHAs may remain

on HUD’s troubled list for years,

consuming tremendous staff energy and

oversight time in attempts to restructure

and salvage these properties. This

prevents HUD staff from focusing

attention on those properties that may

need additional support to prevent their

becoming troubled. HUD proposes to

place troubled PHAs in judicial

receivership if they remain on the

troubled list for more than one year.

This step gets HUD staff out of the

business of managing and restructuring

large, troubled PHAs.

• Reduce Excessive Rent Subsidies To

Market Levels on Assisted Housing

The Section 8 program, which

subsidizes rents, is HUD’s largest

housing program for low-income

people. Established as a means to help

low-income people find affordable

housing, the program has become

fraught with abuse by landlords and

developers. FHA insurance of

multifamily Section 8 development

virtually eliminated risk from the

development process. As a result,

investors developed ‘‘affordable’’

multifamily properties that required

rents well above market simply to meet

the development cost. Also, significant

tax advantages made Section 8

development even more palatable.

Excessive subsidies reduce the

incentive for managers to provide the

results demanded both by residents and

HUD. The FHA insurance on these

properties also makes unscrupulous

landlords less willing to invest in their

properties. The resulting neglect,

abandonment, or ‘‘deferred

maintenance’’ has in many cases led to

much lower property values, even as

rents remain high.

Roughly 65 percent of HUD’s Section

8/FHA loan portfolio is currently

subsidizing rents that are substantially

above market. In ten years, the annual

cost of renewing Section 8 project-based

contracts at their current above-market

levels will increase to approximately $7

billion, about one-third of HUD’s

current budget. HUD simply cannot

afford to continue this level of spending.

The Department is therefore engaged

in an intensive legislative push to lower

these rents to market levels (mark-tomarket) and restructure the portfolio of

FHA-insured loans with Section 8

assistance. Without such actions, HUD

risks defaulting on approximately $18

billion of federal guarantees.

HUD has introduced legislation that

forces landlords to bring their rents

down to supportable levels and

restructure their current debt. This will

reduce the likelihood of massive

foreclosures when landlords’ Section 8

contracts expire over the next few years.

Reform 6: Replace HUD’s Top-Down

Bureaucracy With a New CustomerFriendly Structure

Just like a bank or a mortgage broker,

HUD realizes that we too have

customers. And like a business, we have

to think about what makes customers

satisfied. The top-down structure that

characterizes HUD, from headquarters to

the smallest field office, is no longer

appropriate.

That structure is based on corporate

models of the 1930s and 1940s; yet

while many corporations reorganized

and restructured a decade ago, HUD has

not kept pace.

Where are the models for HUD? One

comes from the financial services field.

Banks like Citibank and NationsBank

have consolidated routine functions into

centralized ‘‘back office’’ processing

centers. They have established ‘‘storefront’’ customer offices closer—and

more responsive—to their markets.

HUD has learned from their example.

HUD’s goal is to provide integrated

delivery of services and products and to

offer a single point of service to all

customers. We have identified a number

of organizational changes allowing us to

do just that.

Organizational Changes

• Create Neighborhood ‘‘Store-Front’’

Service Centers and Back Office

Processing Centers

The current field structure has state

offices with a full staff of programspecific employees. This structure will

be replaced by field offices staffed with

Community Resource Representatives

and Public Trust Officers. While none of

the field offices will close, their

operations will change dramatically,

becoming processing centers and new

store-front service centers. In this way

HUD will maintain its presence in the

communities while allocating resources

the way a customer-friendly Department

should.

• Offer Single Point of Service to

Customers Through Community

Resource Representatives

Community Resource Representatives

will play the most critical role in the

new HUD. Highly trained generalists

with expertise in all HUD programs,

they will be trained with coursework in

housing development, information

technology, real estate and economic

development, small group dynamics,

and related topics. They will be the new

generation of urban and community

leaders.

These Community Resource

Representatives will be the first point of

contact for our customers and will be

the Department’s ‘‘front door,’’ helping

customers gain access to the whole

range of HUD services. They will also

help HUD coordinators assess the

agency’s performance and the impact of

programs in local communities.

• Establish a New Management

Planning Strategy Based on Customer

Feedback and the Secretary’s Priorities,

Goals, and Objectives

In a top-down management style,

goals decided at the top are passed

down through the ranks. But where is

the avenue for bottom-up goals and

ideas? How can customers guide HUD’s

direction?

HUD’s new planning strategy makes

that possible. It creates a loop in which

Department goals are constantly refined

by feedback from customers. While the

Secretary sets priorities for achieving

the Department’s mission, increased

attention will go to:

—Creating an integrated customer

service plan;

—Internal consultation; and

—External consultation.

The Secretary’s Representatives and

Community Resource Representatives

will be responsible for establishing an

effective partnership and working

relationship with customers as we

implement management plans.

A more detailed description of the

management plan process can be found

in Appendix B.

• Streamline Headquarters

The Department will undertake a

broad range of downsizing and

streamlining initiatives that support our

major management reforms. We will

look for opportunities to consolidate

and improve personnel, procurement,

information technology, training, and

other administrative functions.

For example, FHEO will eliminate

one deputy assistant secretary position,

reduce its offices from six to four and its

divisions from 14 to six. CPD will
43218 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

combine affordable housing, block grant

assistance, and economic development

into a new Office of Community and

Economic Development. We will

transfer the administration of Section

312 loan functions to Ginnie Mae.

The Housing, OGC, PIH, and

headquarters transformations will

include major organizational changes

and consolidations, as well as

significant staffing reductions and

redeployment to field activities. We will

expand the Office of the CFO to include

the Office of Budget to better comply

with the CFO Act, as well as to improve

the strategic planning, performance, and

measurement of HUD’s operations.

Reform Plans for Each HUD Business

Line

‘‘We must admit that some programs

do not work. We must recognize the

right roles for government and the

private sector. We must crack down on

waste, fraud and abuse wherever and

whenever we find it. We must

understand that quick-fix solutions do

not work—that many of these challenges

require long-term structural changes.’’

Secretary Andrew Cuomo

Overview

HUD’s twin missions are to empower

people and communities and restore the

public trust. The Department relies on

the services and products delivered by

each of its business lines to accomplish

these missions. To identify how each

business line will contribute to the new

HUD’s success, and highlight where

greater strength is needed, the

Department reviewed program and

management performance in detail at

every level during a recent staff retreat.

Over the following months, senior

managers from headquarters and field

offices, acting as change agents, teamed

with key staff and program managers to

find practical and effective answers to

HUD’s most pressing problems. These

teams developed management reform

targets consistent with the Secretary’s

goals. This was the foundation for

HUD’s reform agenda. Each business

line was asked to define its reform plans

according to:

—Need for change

—Reforms (administrative, legislative,

or management)

—Benefits of reform.

In addition, each area prepared a

staffing plan, as well as the tools needed

to implement these reforms (technology

and training). These comprehensive

reform plans will fundamentally change

how HUD operates. When implemented,

they will allow HUD to more effectively

fulfill its mission. HUD will implement

many reforms immediately—others

require Congressional action.

This section describes specific

management reform plans for each

business line. Each plan includes: A

summary of key issues, background on

the need for change, reforms we will

make, benefits gained through reform,

and any legislative changes required to

make progress.

Program and Reforms

Program: Office of Public and Indian

Housing Reforms

• Establish a cross-cutting Real Estate

Assessment Center for reviewing

physical inspections and financial

statements of PIH housing authorities

and multifamily projects.

• Create a cross-cutting Section 8

Financial Processing Center for Housing

and PIH.

• Establish a Department-wide

integrated financial system.

• Create an Enforcement Authority to

manage PIH and multifamily troubled

portfolios.

• Establish two Troubled Agency

Recovery Centers (TARCs).

• Create a special (non-funded)

applications center for demolition/

disposition, designated housing, and

5(h) homeownership.

• Provide block grant funds for high

performers.

• Replace PHMAP for better

assessment and propose receivers for

troubled management.

• Streamline headquarters and

enhance field office responsibilities and

authority.

• Privatize functions such as physical

inspections, legal and investigative

services, technical assistance and HOPE

VI construction management.

• Consolidate PIH job skills and

economic development programs with

similar programs in CPD and Office of

Housing into a new Economic

Development and Empowerment

Service.

Program: Office of Housing Reforms

• Establish a cross-cutting Real Estate

Assessment Center for reviewing

physical inspections and financial

statements of PIH housing authorities

and multifamily projects.

• Create a cross-cutting Section 8

Financial Processing Center for Housing

and PIH, as well as other consolidated

processing centers.

• Establish a Department-wide

integrated financial system.

• Create an Enforcement Authority to

manage PIH and multifamily troubled

portfolios.

• Reallocate staff in shift from retail

to wholesale service delivery.

• Retrain workforce to meet new

challenges.

• Privatize Real Estate Owned

functions.

• Develop streamlined contract and

procurement process.

Program: Office of Community Planning

and Development Reforms

• Convert inflexible, labor-intensive

competitive grant programs to

performance-based grant programs.

• Outsource technical assistance as

necessary.

• Monitor grantees failing program

compliance through an Enforcement

Authority.

• Use advanced mapping software

system (Communities 2020) that shows

communities the impact of HUD

funding and activities in their area.

• Align resource needs and

responsibilities within the newly

established Economic Development and

Empowerment Service.

Program: Office of Fair Housing and

Equal Opportunity Reforms

• Eliminate the split of enforcement

and program compliance functions in

headquarters and the field.

• Cross-train field staff.

• Consolidate field oversight

functions.

• Restructure leadership functions at

headquarters.

• Integrate fair housing principles

throughout HUD’s other program areas.

• Make use of other program areas’

software and new technology to fill gaps

in information.

Program: Office of the Chief Financial

Officer Reforms

• Consolidate program and

administrative accounting operations

from ten accounting divisions into one

accounting center.

• Consolidate HUD budget functions

into CFO operations.

• Ensure implementation of

Management Integrity Plan.

• Incorporate Resource Estimation

and Allocation Process (REAP) into

budget process.

Public and Indian Housing

‘‘Our purpose is not to criticize

government, as so many have, but to

renew it. We are as bullish on the future

as we are bearish on the current

condition of government. We do not

minimize the depth of the problem, nor

the difficulty of solving it. But, because

we have seen so many public

institutions, we believe there are

solutions.’’

David Osborne and Ted Gaebler,

Reinventing Government
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43219

Summary

The Office of Public and Indian

Housing (PIH) faces many challenges as

it continues to transform public housing

across America. In order to successfully

meet these challenges, PIH will align its

staff resources to address the greatest

needs. It will establish centers that

house ‘‘back office’’ activities, freeing

field staff to target their energies on

monitoring and providing services to

3,400 Housing Authorities and the 1.4

million families they house.

PIH will establish its own grants

center; establish a Department-wide

Section 8 Financial Processing Center;

participate in the Department-wide Real

Estate Assessment Center; establish

Troubled Agency Recovery Centers to

work with troubled Housing

Authorities; and undertake other

privatization and streamlining efforts to

encourage greater productivity and

accountability with local PIH partners

and customers.

The Office of Public and Indian

Housing has identified six areas where

change is most needed. These are:

—Staffing Imbalances

Two forces have created staffing

imbalances in PIH field offices: PIH’s

field restructuring and the Department’s

ongoing effort to reduce overall staffing

to 7,500 employees by fiscal year 2000.

The 1994 field restructuring organized

field staff into several disciplines to

match the functions of property

management. This specialization of

duties, combined with significant

reductions in the number of field staff,

has led to many shortages within

disciplines, particularly in smaller

offices.

—Myriad Programs To Deliver and

Monitor

The proliferation of PIH programs in

the last decade has created a gap

between the need to monitor activities

and the ability to do so. Many of the

smaller PIH programs (e.g., the Tenant

Opportunities Program, the Family

Investment Centers, and the Urban

Youth Corps Initiative) are highly

specialized and require intensive staff

effort, making it difficult to give them

the attention they need while

monitoring overall business line

program operations. Also, the high

number of PIH programs has greatly

increased the demand for staff to

oversee the grant award process in

response to Notices of Funding

Availability (NOFAs).

—Program Transitions

The tremendous variety of public

housing options now available requires

field office staff to have new skills. They

must be familiar with the unique

features of gap financing, specialized

grant agreements and contracting, and

program monitoring—all qualitatively

different from traditional public

housing.

Additional program changes involve

the shift of the Section 8 Moderate

Rehabilitation program and many

Section 8 New Construction/Substantial

Rehabilitation properties to the Section

8 tenant-based program(s), requiring a

new consolidated system for processing

all certificates.

—Coordinating Delivery of HUD

Programs

PIH, like many of the Department’s

business lines, has difficulty

coordinating a plethora of programs,

especially in developing and

implementing so-called place-based

strategies, those strategies that address

the specific places where Americans

work and live. Because each program is

designed independently, it is difficult to

uniformly coordinate complex,

disparate requirements and procedures.

—Troubled Agencies

Given new, more effective approaches

to assessing PHAs, HUD will be in a

position to move quickly to identify

‘‘troubled’’ PHAs. Because of the

complexity and sensitivity experienced

by the Department in past work with

troubled agencies, we need to make

greater efforts to turn around troubled

PHAs and prevent them from reaching

that stage. This will require more staff

attention, which is difficult to allocate

given the competing priorities for

administering a multitude of programs

with limited staff resources.

—Current Program Delivery Process

The roles and responsibilities of both

headquarters and field office staff are

often poorly differentiated, overlapping,

unclear, and fragmented, making

coordinated, effective allocation of

staffing and resources difficult. Red tape

in navigating multiple levels of

authorization and reporting is plentiful,

reducing effectiveness and flexibility in

the field.

To perform its work, field office staff

are now grouped into several disciplines

that mimic property management

functions. These existing groupings

include:

—Finance and Budget Specialists

—Facilities Management Specialists

—Public Housing Revitalization

Specialists divided into subspecialists:

• Organization, Management and

Personnel (OMP).

• Marketing, Leasing and

Management (MLM).

• Community Relations and

Involvement (CRI).

While created to address existing

needs, these classifications must change

to better reflect HUD’s reforms and

PIH’s efforts to streamline its service

and delivery process.

Reforms

Three main restructuring areas have

been identified to address these problem

areas:

• Department-Wide Collaboration

Opportunities

—Establishing a Real Estate Assessment

Center

• Collaboration With Housing

—Development of a Section 8 Financial

Processing Center

• Processing Center Reforms Specific to

PIH

—Troubled Agency Recovery Centers

—Special Applications Center

—PIH Grants Center

• Other Reforms

—Headquarters streamlining

—Enhancing the role of field offices

—Enhanced financial accountability

The proposed reforms and expected

benefits from reengineering each of

these areas are described below.

Department-Wide Collaboration

Opportunities: Establish a DepartmentWide Real Estate Assessment Center

HUD will create a Real Estate

Assessment Center to centralize and

standardize the way the Department

conducts annual PHA assessments. The

Center’s staff will supervise the

assessment process and manage

contractor performance, generating an

overall score and incorporating

performance and compliance concerns

for every agent/agency receiving HUD

funding. This scoring and ranking will

give the Department a comprehensive

oversight tool. PIH can thus spend less

time with high performing agencies,

instead focusing attention and

assistance on troubled authorities with

lower scores.

How will the Center measure program

performance and compliance with

federal rules? It will gather relevant

data, both qualitative and quantitative,

pertaining to each program recipient,

including: (a) Physical inspections; (b)

independent audits (combining

standard fiscal audit requirements with

compliance factors defined by HUD); (c)

management and performance

assessment, as defined by the revised
43220 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

PHMAP; and (d) evaluations of

community and residents’ satisfaction.

Physical inspections and audits will

be performed by contractors. An

expanded, more accurate PHMAP will

provide inputs for other performance

measures. HUD field staff will supply

qualitative management assessment

(e.g., recent turnover of critical staff

and/or number and complexity of

programs) and assessments of grants

management. We will obtain views of

residents and other community clients

from surveys and toll-free calls. The

Center will then analyze the information

and grade the agent/agency according to

the following system:

(1) Pass with distinction or ‘‘high

performance.’’ The highest grade will

give a PHA a possible bonus award of

operating funds and allow it to prepare

fewer performance reports. The PHA

will be highlighted as a ‘‘best practices’’

site as a model for other PHAs.

(2) Pass. For PHAs of more than 250

units that score adequately but still have

problems (higher than average vacancy

rates or one to two poorly managed

properties, for instance), field offices

will perform targeted monitoring of

PHA activities in problem areas and will

help them improve annual scores. PHAs

of less than 250 units that score in this

range will receive the benefits of ‘‘high

performance,’’ except for the bonus

award of operating funds.

(3) Fail. We will assign failing PHAs

to a Troubled Agency Recovery Center

for targeted intervention.

For PHAs that score above the failing

level but have a serious breach of

contract between annual assessments,

the PIH Assistant Secretary may

intervene.

Benefits of Reform

The new Assessment Center provides:

—Comprehensive, annual assessments

based on the key components of PHA

performance—tenants’ quality of life,

PHA management, condition of

physical stock, and compliance with

federal rules.

—Stronger HUD management controls.

—A front-end risk assessment approach

for public housing that ranks PHAs,

helping management focus limited

resources on the neediest PHAs.

—Uniform standards for early detection

of fraud, waste, and abuse.

The Assessment Center also oversees

the contracts for physical inspections of

every agent/agency and for expanded

independent audits.

Contracting out functions

supplements scarce PIH field staff

resources and increases the assessments’

objectivity.

Proposed legislation would reward

high-performing authorities with

incentives through allocation of

operating funds. This would encourage

a ‘‘management by results’’ philosophy

and provide an incentive for grantees to

improve performance. Proposed

legislation would also permit highperforming and non-troubled housing

authorities to reduce the number of

planning and status reports prepared.

Collaboration With Housing: Create a

Section 8 Financial Processing Center

for Housing and PIH

PIH will establish a unified center for

Section 8 payments processing with

Housing. It will:

—Review and approve budgets

—Establish payments

—Maintain HUDCAPS

—Process year-end statements

—Calculate renewal needs

—Maintain funding control.

Currently, Housing and PIH have two

very distinct methods for processing

payments: Housing uses a monthly

voucher system based on actual subsidy

needs, while PIH uses an annual budget

projection, with adjustments made upon

receipt of year-end statements. Unifying

these processes will benefit both

business lines. This will also necessitate

improvements to the HUDCAPS system

to accommodate processing of all

certificates.

Benefits of Reform

The combined Section 8 Financial

Management Center will standardize

and consolidate Section 8 processing

functions—ensuring uniformity,

consistency, and accountability in

processing Section 8 subsidies and

projecting future Section 8 subsidy

needs. It will provide a single, effective

financial management system,

enhancing program accountability. The

Center will also centralize and focus

staff resources to better identify and

respond to training and development

needs.

PIH-Specific Reforms: Establish Two

Troubled Agency Recovery Centers

To deal with ‘‘failing’’ PHAs, PIH will

establish two Troubled Agency

Recovery Centers (TARCs). Any agent/

agency receiving a failing annual

assessment score will be referred to a

TARC, which will develop and

implement an intervention strategy to

bring the agent/agency to passing scores.

The TARCs will be arms of PIH’s

existing Office of Troubled Agency

Recovery (OTAR), located in

headquarters. The 192 staff proposed for

this effort will be divided between the

two TARCs and program hubs.

PIH will divide staff assigned to the

TARCs into several teams. Each team

will be assigned one large, troubled

PHA. Where appropriate, staff will be

temporarily relocated to work directly

with residents, PHA staff, and leaders in

the community. If PHA problems are not

addressed within a one-year time limit,

as prescribed by proposed legislation,

the TARCs will recommend judicial or

administrative takeovers to the Assistant

Secretary. To address small, troubled

PHAs (failing score with less than 250

units), teams of three staff will be

located in program hubs to correct

problem areas and prevent further

declines in performance. Staff will be

assigned several small PHAs in their

geographic area and report directly to

one of the TARCs.

Individual skills on TARC teams will

encompass all aspects of PHA

management and operations, including

the Section 8 program, financial and

management systems, deterioration of

physical stock, resident needs, and

more. Other field staff may perform

some routine functions for troubled

authorities under TARC direction.

Benefits of Reform

The TARC model more clearly defines

and separates the roles of intervention/

recovery and program operation/

management. Intervention functions

will be performed by specialized

personnel, all under the authority of a

TARC Director. This staff will be largely

assigned to the TARCs, with a

contingent distributed to the program

hubs. TARCs will enable field staff to

focus on community priorities and

enhancing performance of passing

PHAs, rather than on problem PHAs.

The proposal encourages effective,

targeted program delivery: specialized

staff for large or small PHA recovery

efforts and field staff dedicated to

preventing decline in good PHA

performance.

Consolidating intervention activities

will also generate more expertise as

teams learn to swiftly identify and

correct problem areas and share

solutions with staff.

Finally, TARCs will remove intensive,

specialized work from field offices,

allowing staff to focus on monitoring

and improving the bulk of agents/

agencies which are neither high

performing nor troubled.

PIH-Specific Reforms: Create a Public

and Indian Housing Grants Center

PIH will establish a center to perform

competitive grants selection, allocation

and reservation requirements, as well as

Public Housing Operating Fund

management, as follows:
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43221

—Competitive Grants. The Grants

Center will be responsible for all

aspects of competitive grants

management, including preparation

and publication of NOFAs, grants

application and review process, and

notice of grant award.

—Funds Management. The Grants

Center will also be responsible for the

Public Housing Operating Fund and

Capital Fund. For the Public Housing

Operating Fund, the Center will

provide a range of services, including

calculation of subsidy allocations,

review and approval of PHA budgets,

and processing of year-end

statements. For the Capital Fund, the

Center will review and approve a fiveyear plan, reserve funds, notify

Congress and the PHA, and prepare

grant agreements.

PIH-Specific Reforms: Create a Special

Applications Center

PIH will consolidate special (nonfunded) applications and processes for

its unique programs in a single Special

Applications Center. Those applications

are: demolition/disposition, designated

housing, and 5(h) homeownership. PIH

will assign up to 15 staff to this center.

Benefits of Reform

Consolidating these discrete functions

will maximize staff effectiveness and

increase program accountability.

Consolidation will also eliminate

current duplication of efforts in the

field, for example: demolition/

disposition processing, now conducted

at four locations, and processing

designated housing and 5(h)

applications, now performed at all

existing field offices. The center will

standardize application processing and

use staff specifically trained in

evaluating and processing these

applications. Centralizing these

functions will relieve regular field staff

of specialized processing burdens.

Other PIH-Specific Reforms: Streamline

Headquarters/Enhance Field Office

Responsibilities/Enhance Financial

Accountability

PIH will consolidate the field

structure to better use existing staff and

to take advantage of cross-program

efficiencies. The total number of PIH

offices will decrease by ten, as the

existing 52 offices evolve into 26

program hubs and 17 program centers.

An additional 76 staff will move into

the field as a result of headquarters

reorganization.

Field offices are the first point of

contact for PHAs that pass the annual

assessment; they will work toward

community goals using HUD and other

federal resources. Field staff will assess

risk and monitor programs for large

PHAs with passing scores, all capital

fund programs (except for HOPE VI, in

some cases), and various competitive

grants. Annual personnel assessments

will be tied to the annual performance

of PHAs for which they are assigned.

PIH will also abandon the functional

discipline specialization resulting from

earlier field restructuring. Instead,

program hub and program center needs

will be better met by consolidating the

OMP, MLM, CRI and planning and

evaluation functions into a generalist

position.

PIH will also take steps to strengthen

financial accountability and controls,

including integrating PIH financial

systems with the rest of the agency,

working closely with the new

Department-wide consolidated budget

function within the CFO’s office, and

bringing on board new financial

personnel such as a chief financial

officer.

Benefits of Reform

By creating central processing centers

and enhancing field offices—thus

separating intervention/recovery

functions from routine activities—PIH

strengthens field office staff. Field staff

can concentrate on helping and

monitoring non-troubled PHAs, flagging

potential or emerging problems. This

structure better meets community needs

by focusing staff expertise on troubled

agencies (both large and small) where

necessary, community service

coordination, and program monitoring.

This reform also links agency

performance to individual personnel

assessments.

Proposed Legislation

Internal reforms are under way

throughout the agency. But to effect real

change within the PIH business line,

Congressional action is needed to

facilitate lasting reform. Proposed

authorizing legislation will support the

reorganization plan by:

—Replacing the PHMAP system, making

it a component of the annual

assessment conducted by the

Assessment Center;

—Making poor physical condition of

properties automatic grounds for

designation of an agent/agency as

‘‘troubled,’’ providing a framework for

the Assessment Center to contract out

physical inspections and giving new

input into the revised assessment

system;

—Creating a formula for distributing

operating funds and providing

incentives to housing authorities with

good management, rewarding highperforming housing authorities;

—Waiving four of the nine planning

requirements for non-troubled small

housing authorities and highperforming large authorities, enabling

these entities to submit one interim

statement during the five-year

comprehensive plan;

—Supporting TARCs by giving agents/

agencies a one-year deadline to

correct their troubled status or be

placed in judicial receivership (for

larger authorities) or administrative

receivership (for smaller authorities);

and

—Consolidating programs, such as

incorporating the Public Housing

Drug Elimination Program into the

proposed formula award of operating

subsidies.

Proposed Legislation—Public Housing

Management Reform Act of 1997

1. Deregulate Small PHAs and HighPerforming PHAs

Streamlining planning submissions

and performance indicators for small

PHAs, HUD will substantially reduce

burden on field staff for compliance

monitoring and oversight. Highperforming PHAs will also have lighter

submission requirements.

2. Merge Section 8 Certificate and

Voucher Programs

Consolidation allows streamlining of

HUD regulations and oversight of a

single program.

3. Consolidate Tenant Opportunities

Program (TOP) and Economic

Development/Supportive Services

Program

Combination allows HUD to conduct

one competition, rather than two, under

a single set of regulations.

4. Streamline PHA Submissions to HUD

and Provide for Timely and Limited

HUD Review Process

Submission of a single streamlined

comprehensive plan with annual

modifications requires substantially less

HUD staff time for review and approval.

Lighter submission requirements for

high performers will also reduce staff

workload.

5. Create New Performance Evaluation

Board to Recommend System

Enhancements for Public Housing

Authority Oversight

Creation of board to enhance

performance measurement system and

develop system for site inspections; use

of audit reports will create a more

efficient, more effective system for

oversight of public housing authorities.
43222 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

6. Allocate Public Housing Drug

Elimination Funds by Performancebased Formula

Conversion to formula will eliminate

the need to conduct staff-intensive

annual competition.

7. Allocate Capital Funds for Small

PHAs by Formula Instead of

Competition

Formula allocation of capital

resources to small PHAs will eliminate

the need to conduct annual competition.

8. Automatic Judicial Receivership for

Persistently Troubled Large PHAs.

Gets HUD staff out of the business of

managing restructuring of large troubled

PHAs.

9. Privatize Oversight of HOPE VI

Construction Process

Contracting with private real estate

firms will ease staffing burdens and

improve oversight of HOPE VI projects.

Summary of Public and Indian Housing

Problems, Reforms and Benefits

Problems

• Staffing is imbalanced,

geographically and by specialization.

• Tracking and assessing of projects is

not uniform.

• Delivering and monitoring too

many programs amplifies staffing

problems.

♦ Changes in statutes, regulations,

and delivery process are not

communicated well throughout the field

offices and headquarters.

• Coordination of program delivery

and targeting of HUD staffing resources

is insufficient.

• Resource-intensive management of

troubled PHAs prevents staff from

nipping PHA problems in the bud.

Reforms

• Establish a cross-cutting Real Estate

Assessment Center for reviewing

physical inspections and financial

statements of PIH housing authorities

and FHA multifamily projects.

• Create a cross-cutting Section 8

Financial Processing Center for Housing

and PIH.

• Establish a Department-wide

integrated financial system.

• Create an Enforcement Center to

management PHA and FHA troubled

portfolios.

• Establish two Troubled Agency

Recovery Centers (TARCs).

• Create a special applications center

for demolition/disposition, designated

housing, and 5(h) homeownership.

• Provide block grant funds for high

performers.

• Revise PHMAP for better

assessment and propose receivers for

troubled management.

• Streamline headquarters and

enhance field office responsibilities.

• Privatize functions such as physical

inspections, legal and investigative

services, technical assistance, HOPE VI

construction management.

• Consolidate PIH job skills and

economic development programs with

similar programs in CPD and FHA into

a new Economic Development and

Empowerment Service.

Benefits

• Annual assessments are

standardized, providing better access to

critical information and ensuring

fairness and objectivity across projects.

• Uniformity, consistency and

accountability are ensured for

processing Section 8 subsidies and

projecting future subsidy needs.

• Roles of intervention/recovery,

program operation, and management are

more clearly defined through TARCs.

• Through consolidation, field staff

are relieved of intensive processing

burdens.

• Program staff can concentrate

efforts on core functions by realigning

staff responsibilities and certain PIH

programs.

Housing

‘‘If you change your systems,

organizations, and people, but leave the

work processes alone, or change your

systems, organizations, and processes,

but not the way your people work, think,

and feel, you will sentence your

organization to ongoing conflict. To

reach your destination, you must bring

all five levels into alignment.

David Osborne and Peter Plastrik,

Banishing Bureaucracy

Summary

The Office of Housing faces specific

problems: poor alignment of staff and

resources, lack of integrated computer

systems, and high risks in multifamily

portfolios.

Addressing these problems will

involve establishing additional

consolidated processing centers, such as

a Section 8 Financial Processing Center;

turning over troubled properties to a

centralized enforcement authority;

privatizing discrete functions, such as

Real Estate Owned properties; creating

an asset management system; and

aggressively managing portfolio risk.

The Need for Change

For more than 60 years, the Federal

Housing Administration (FHA) has

helped make capital available to support

rental housing, single family

homeownership, and community health

care facilities. To continue this role for

America’s communities in the 21st

Century, the Office of Housing has

developed a reform plan that blends the

efficiency and flexibility of the private

sector with FHA’s continuing

commitment to serve the public.

The areas to address in order to

accomplish our goals:

—Accurately assessing the financial or

physical condition of multifamily

properties;

—Increasing accountability of internal

managers, property owners, and

stakeholders;

—Relieving asset managers of non-asset

manager work;

—Changing service delivery from retail

to wholesale;

—Verifying income in the Section 8

program;

—Linking the reform plan to personnel

performance standards;

—Making sure the right skills are

available to match needs; and

—Managing staff reductions.

Proposed Legislation—Housing 2020

Multifamily Management Reform Act of

1997

1. FHA Mark-to-Market Reforms

Repositioning/rehabilitating the

500,000 over-subsidized and insured

properties will lighten FHA’s exposure

to default and reduce staff workload

because remaining properties will be in

better condition and better regulated

through market discipline.

2. Strengthen FHA Multifamily

Enforcement

Creation of new Department-wide

Enforcement Authority. Streamlining

and privatizing the process for FHA

pursuit of bad owners reduces staff

burden for enforcement actions, and

thus reduces burden on staff for

overseeing/resolving troubled

properties.

3. Reform Bankruptcy Laws To Prevent

FHA Multifamily Property Owners

From Evading Enforcement

Preventing owners from using

bankruptcy laws as refuge from

enforcement action makes it easier for

FHA to pursue bad owners, thus

reducing burden on staff and improving

the caliber of the housing stock.

4. Extend Permanently FHA Note Sale

Authority

Note sales reduce staff drain that

results from having to service troubled

properties and notes.
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43223

5. Consolidate Multiple Multifamily

Insurance Authorities into a Single

General Authority

Single, flexible insurance authority

will replace more than 10 specialized

authorities. Will enhance user access to

multifamily insurance products and

streamline management systems.

Overview to Subdivisions

Each of the Office of Housing’s

subdivisions contributed reorganization

strategies to the HUD-wide

reengineering effort. The following

sections describe the individual

strategies of Multifamily Housing,

Single Family Housing, and the

Comptroller. In addition, Housing

headquarters is also being reorganized.

Multifamily Housing

The Need for Change

During the 1980s, the Office of

Housing was significantly affected by

the decline in real estate markets. In the

early 1990s, it owned almost 2,400

multifamily mortgages, with an

outstanding balance of over $7 billion.

The substantial inventory of HUD-held

mortgages was costing taxpayers

hundreds of millions of dollars and

compromising HUD’s ability to perform

its other principal functions,

specifically production of new,

affordable housing and effective

management of the insured portfolio.

Strategies are needed to set the future

course for multifamily housing.

Necessary reforms are identified in the

following areas:

Asset Development

Asset development services (intake,

processing, underwriting approval,

construction inspection, and final

closing) are currently delivered in 51

field offices. However, this service

delivery structure has several major

weaknesses:

—Services are poorly integrated and

delivery is fragmented;

—Processing is slow and inconsistent:

the industry standard for processing is

30–45 days, far less than HUD’s

current average, and answers to

similar client questions vary from

field office to field office;

—Mortgagees are not held accountable

for performing due diligence, putting

HUD at greater risk;

—Quality control is weak, with 51

different underwriting authorities

making decisions—leading to

increased risk and inconsistencies;

—Confusion and clouded accountability

result from burdensome reporting

relationships; and

—Existing staff skill mix doesn’t offer

consistent, uniform, quality service

across all offices.

Asset Management

Asset Management oversees and

manages assets including 31,000

projects with approximately 5,400

‘‘troubled’’ properties. It also

administers nearly 30 different housing

programs to ensure that low and

moderate income residents have safe,

affordable housing, to safeguard tax

dollars, and to protect the FHA

insurance fund. Asset managers monitor

and service many properties, with an

average workload of 55 projects per

person. Typical tasks include property

inspections, financial analysis, and

reviewing grant and other applications.

The current delivery structure has

four major weaknesses:

—Asset managers are overburdened

with non-asset manager

responsibilities, are poorly trained,

and lack the experience to handle a

broad range of troubled and nontroubled projects;

—Owners may exploit bankruptcy laws

to avoid compliance;

—No efficient system exists to identify,

assess, and respond to troubled

properties; and

—Section 8 subsidy administration is

inefficient and burdensome.

Reforms

Asset Development

The following reforms will be made:

—Multifamily Housing will consolidate

51 field offices into 17 program

centers. These hubs will be supported

by staff in program centers; staff will

be on detail to various locations,

moving across hubs and program

centers. Shifting assignments allows

staff to adapt resources and focus as

needed to respond to changing

markets;

—Implement a fast-track development

process;

—Delegate certain underwriting

responsibilities to mortgagees or

contractors;

—Establish a quality assurance unit.

Benefits of Reform

Multifamily Housing will see these

results from reform:

—Uniform, consistent processing;

—Sharply reduced processing time;

—Less underwriting risk and

inconsistency by having fewer people

make underwriting decisions;

—More responsibility and

accountability for mortgagees;

—Clear lines of authority and

responsibility, more accountability;

—Shared use of skilled staff across

hubs;

—Flexibility to meet rapid market

changes; and

—Fewer material weaknesses in

managing and controlling staff

resources.

Asset Management

We will usher in change and correct

flaws within Asset Management with

the following reforms:

—Create a Department-wide

Enforcement Authority to handle the

troubled properties of PIH and Office

of Housing.

—Create a Department-wide Real Estate

Assessment Center for PIH and Office

of Housing.

—Housing will consolidate key

functions in processing centers.

Contractors and/or skilled HUD staff

will perform such core functions as

property disposition, insurance

conversion, and Section 8 voucher

processing. To align work with

available skills, anticipating further

staff reductions by the year 2000,

Housing hubs will be located in 17

areas to best serve customers and

support the 34 program centers;

—Increase consistency and

cohesiveness in processing control;

—Reduce asset managers’ non-troubled

property workload to appropriate

levels;

—Provide direct lines for staff reporting;

—Improve service quality and balance

of staff skills;

—Expand the Insurance Conversion

Servicing Center to handle co-insured

portfolio refinancing; and

—Coordinate autonomous field offices.

Benefits of Reform

Multifamily Housing will reap the

following benefits from acting on these

reforms:

—Reduce non-core functions performed

by asset managers;

—Provide timely, accurate financial and

physical condition status of

multifamily properties through the

Assessment Center; and

—Dedicate resources to deal with all

troubled properties in the Recovery

and Enforcement Authority.

Single Family Housing

The Need for Change

Single Family Housing currently

performs loan production, asset

management, and property disposition

with 2,080 employees in 81 locations

across the country, in addition to 190

headquarters staff. One critical goal is to

rid the agency of the administrative

burden of a substantial inventory of
43224 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

HUD-held mortgages. However, this

goal, among others, is more difficult to

achieve with the existing service

delivery structure. Among its flaws:

—Delays and problems in insurance

endorsement processing;

—Information systems that do not help

staff effectively monitor compliance;

—Poorly controlled and monitored

property disposition; and

—Staff reductions that prevent

consistent delivery of quality services.

Reforms

Single Family Housing will

consolidate all Single Family operations

into three Homeownership Centers

(HOCs). This reform will generate

economies of scale, encourage better use

of technology, and allow us to dedicate

staff solely to customer assistance. To

jump start the transition, we will either

streamline or outsource Real Estate

Owned (REO) activities and sell nearly

all assigned notes.

When fully implemented, HOCs will

perform functions which are now

performed in individual field offices.

Specifically, they will be staffed to

perform the following core functions:

—Insurance endorsements

—Operational post-endorsement

technical reviews

—Fee panel oversight

—Underwriting

—Servicing advice and guidance to

mortgagees

—Contractor oversight/management

—Loss mitigation

—REO sales (carryover inventory)

—Marketing and outreach

—Quality control post-endorsement

technical reviews

—Lender monitoring

—Sanctions

—Audits/investigations

Benefits of Reform

This consolidation and streamlining

will achieve several objectives:

—HOCs will provide faster, more

uniform, efficient service to clients,

lenders, and borrowers;

—Risk assessment, loss mitigation, and

quality assurance will all improve;

—Loan production will increase in

targeted populations with better

marketing and outreach;

—HOCs will cut the processing time for

insurance endorsements from two

weeks to one day;

—Service to lenders will improve

through automated systems; and

—A state-of-the-art financial system will

vastly improve HUD’s underwriting

and loss mitigation efforts.

Housing Comptroller: Asset Recovery

Centers

The Need for Change

Currently, Title I asset recovery

operations are performed by 108

employees in three Asset Recovery

Centers. The existing delivery structure

has two major weaknesses:

—Recovery processes are cumbersome

and are poorly integrated with

premium collection and claims

examination; and

—Resource investment is not justified

by the level of assets recovered.

Reforms

HUD will work with the Department

of Treasury to transfer appropriate asset

recovery activities to Treasury.

Benefits of Reform

By transferring asset recovery

activities to the Treasury, HUD will

reduce resources committed to this noncore function and can refocus staff on

higher priority tasks. Treasury can better

ensure timely and accurate debt

collection, significantly increasing the

amount of unpaid debts collected.

Housing Headquarters

The Need for Change

Housing headquarters develops policy

and budgets, conducts Congressional

and industry relations, plans and

implements new products and services,

and oversees lender compliance, among

other tasks. It also provides field

support. Three major weaknesses in

headquarters’ current operations have

been identified:

—Field support is inadequate;

—Information systems are outdated and

disparate, preventing staff from

comparing data and flagging

problems; and

—Procurement is cumbersome.

Reforms

Headquarters will streamline

operations to better focus on such HUDwide responsibilities as policy and

budget development, troubleshooting,

industry relations, and those that

support field office service delivery. Its

field support will focus on personnel,

procurement/contracting, information

technology, training and auditing, and

technical assistance. Headquarters will

also:

—Limit its role in compliance and

execution to providing data resources,

administrative support, and auditing;

—Design a 360 degree review system of

headquarters by field staff;

—Accelerate reconciliation of Generally

Accepted Accounting Principles with

Federal Credit Reform accounting

systems;

—Treat field office staff as customers,

allowing field staff to devote their full

attention to making programs work;

and

Housing will also make full use of the

new financial systems being developed

in the Department-wide integrated

financial system.

Benefits of Reform

Headquarters will create positive

change by:

—Using less staff in targeted support of

core field office functions;

—Helping field staff better serve

customers;

—Streamlining program development,

monitoring, enforcement, risk

management and budgeting, through

better information systems; and

—Expediting policy and program

implementation through the

Department’s overall reform of

procurement and contracting.

Summary of Housing Problems, Reforms

and Benefits

Problems

• Limited accountability of internal

managers, property owners, and

stakeholders.

• Poor allocation of staff and

resources.

• Lack of training asset managers.

• Little integration of computer

systems that produce consistent data.

• Transition from retail to wholesale

service delivery requires significant

shifts in resources.

• Risk mitigation in multifamily

portfolio is increasingly necessary.

• Insufficient balance between

community needs and program

objectives.

Reforms

• The Department will establish a

cross-cutting Real Estate Assessment

Center for reviewing physical

inspections and financial statements of

PIH housing authorities and FHA

multifamily projects.

♦ The Department will create a crosscutting Section 8 Financial Processing

Center for Housing and PIH.

♦ The Department will create an

enforcement center to manage

troubled portfolios.

♦ Establish a Department-wide

integrated financial system.

♦ Reallocate staff in shift from retail to

wholesale.

♦ Retrain workforce to meet new

challenges.

♦ Privatize Real Estate Owned

functions.
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43225

♦ Develop streamlined contract and

procurement process.

Benefits

♦ Fewer processing problems and

delays in loan origination.

♦ Faster, more uniform service to

clients, lenders, and borrowers.

♦ Improved underwriting and loss

mitigation efforts.

♦ Increase in unpaid debt collection.

♦ Greater claims processing capacity.

♦ Ability to meet targeted staff

reductions by FY 2000.

♦ Faster policy and program

implementation through reduced

procurement time.

♦ Greater accessibility to financial

information for budgeting, reporting,

risk management, and enforcement.

♦ Better control over resources and

outcomes.

Office of Community Planning and

Development

‘‘National social problems will be

solved the same place they are

manifested—at the grass-roots level.

National governments will be standard

setters, supporters of local development,

suppliers of resources, and facilitators

or guardians of economic and political

activity . . .’’

Rosabeth Moss Kanter, World Class

Summary

Problems encountered by Community

Planning and Development (CPD)

include limited resources for managing

competitive grants; limited staff for onsite monitoring; fragmented approaches

to solving community problems; and an

inability to completely track and

respond to market trends.

CPD is in the process of correcting

these weaknesses by converting

competitive grants into performancebased grants; outsourcing discrete

functions; using advanced mapping

software to aid community planning;

aligning resources within a new

Economic Development and

Empowerment Service; and downsizing

its headquarters staff.

CPD has had many successes,

including: increasing the number of

homeless families and individuals

helped to reach self-sufficiency from

20,000 to nearly 290,000; creating 1.4

million jobs; and serving nearly 1.7

million people through CDBG and

Home programs. Yet CPD also sees the

need to improve its performance. CPD

has identified several areas where

reforms are necessary. Key problem

areas include:

—Resources are limited and on-site

monitoring is inadequate

Limited staff and budgets prevent

adequate on-site monitoring and

oversight of high-risk activities.

—Grant award staff are overloaded

CPD approves over 1,300 competitive

grants a year, but staff reductions of

23% since 1992 have prevented

adequate monitoring of thousands of

competitive grants.

—Insufficient resources to monitor the

rapid increase in development projects

CPD has insufficient staff resources,

both in number and expertise, to

adequately monitor hundreds of

economic development projects

approved in the past several years.

—Solid data are unavailable

Timely, complete, and accurate data

to measure program outputs are often

lacking.

Reforms

Elements of new and continuing

management reforms are:

—Combining planning and application

reports into a single plan;

—Using comprehensive plan software

that allows applications to display

proposed projects as maps and submit

data electronically;

—Upgrading information systems to the

Communities 2020 system;

—Implementing the Integrated

Disbursement and Information

System, an automated reporting

system showing ‘‘real time’’

achievements;

—Introducing the Grants Management

System, which includes an annual

comparative review of all entitlement

grantees, showing the full spectrum—

from ‘‘best practices’’ to high-risk

projects and cities in need of

technical assistance and monitoring.

CPD is assessing the following

structural changes:

—Combining the Office of Block Grant

Assistance and the Office of

Affordable Housing into an Office of

Community Development.

—The Office of Economic Development

will be consolidated into the

Economic Development and

Empowerment Service. It will retain

the economic development function

and handle the brownfields program,

if authorized and given to CPD. This

combination will enhance efficiency

and give communities the help they

need to address problems holistically

and will bring needed economic

development expertise to CPD’s

largest program.

—Regulatory oversight and policy

functions of the Office of

Environment and Energy will move to

the Office of General Counsel; other

environmental functions will be

contracted out.

—The Office of Executive Services and

Office of Administration will be

retained with reduced staff.

—The Office of Management would

ensure that all offices have adequate

technology to do their jobs.

Administration of the remaining 312

loan functions will be transferred to the

Government National Mortgage

Association.

Additional considerations:

—Assess how CPD can support the

central coordination of the EZ/EC

program for both existing and

proposed zones and communities;

—Consider contracting out monitoring

functions, if homeless assistance

legislation is not approved to reduce

competitive grants volume; and

—Develop an automated system to

manage competitive grants, integrated

with IDIS and the Grants Management

System, and provide a seamless

process for recipients. The system

should identify high-risk recipients

and projects for targeted monitoring.

Benefits of Reform

Benefits of enacting these reforms

include:

—Serving CPD’s mission by enabling

communities to apply a more

comprehensive approach to solving

myriad urban problems;

—Reducing unnecessary paperwork;

—Helping citizens play a more

meaningful role in the community

development process by making

proposed plans clearer and more

accessible;

—Improving the speed, ease, and

accuracy of reporting achievements

and drawing down funds; and

—Improving monitoring and oversight

by targeting scarce resources on highrisk projects and publicizing highperforming projects and cities.

Proposed Legislation

Proposed legislation has been or will

be introduced to create a homeless

assistance performance fund and

streamline the HOME program.

Proposed legislation will provide a

single performance fund distributed by

formula for all homeless programs to: (1)

Reduce staff time on grant approvals,

since funds will be distributed by

formula; (2) Approach homeless

problems locally and comprehensively;

(3) Ensure role of non-profits and other

community organizations in shaping
43226 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

and operating programs to help

homeless persons reach self-sufficiency

to the extent possible; and (4) Give cities

responsibility for monitoring homeless

problems in future block grants.

Proposed Legislation—Homeless

Assistance and Management Reform Act

Convert 6 Separate Homeless

Programs to Performance-based Formula

Grant Program.

Permanent consolidation will

eliminate the need for HUD to

administer staff-intensive, multiple

competitions for funds. The new

program will allow communities

through local planning boards to shape

comprehensive ‘‘continuum of care’’

systems. This plan would lie within the

overall consolidated plan for that

community.

Summary of CPD Problems, Reforms

and Benefits

Problems

♦ Limited resources for managing

competitive grant programs

♦ Limited staff for on-site monitoring

♦ Information is not complete or timely

♦ Community problems are not

addressed holistically

♦ Limited ability to handle increased

number of economic development

projects

Reforms

♦ Convert inflexible and laborintensive competitive grant programs

to performance-based grant programs

♦ Outsource technical assistance as

necessary

♦ Monitor grantees failing program

compliance through an Enforcement

Authority

♦ Use advanced mapping software

system (Communities 2020) that

shows communities the impact of

HUD funding and activities in their

area

♦ Align resource needs and

responsibilities within the newly

established Economic Development

and Empowerment Service

Benefits

♦ Communities can apply a more

comprehensive approach to solving

urban problems

♦ Unnecessary paperwork is eliminated

♦ Citizens will play a more meaningful

role in the community development

process

♦ Speed, ease, and accuracy in

reporting

♦ Improved project oversight

Office of Fair Housing and Equal

Opportunity

‘‘Reengineering is about

Reinvention—not improvement,

enhancement, or modification. Radical

redesign means getting to the root of

things: not making superficial changes

or fiddling with what is already in

place.’’

Michael Hammer and James Champy,

Reinventing the Corporation

Summary

Fair Housing and Equal Opportunity

faces challenges in fragmented

responsibilities and lack of

accountability; duplication of field

oversight functions; inefficient

separation of staff resources between

enforcement and program/compliance;

and inadequate use of technology.

To overcome these problems, FHEO

will eliminate the separation between

enforcement and program/compliance

functions; cross-train staff; consolidate

field oversight and policy functions;

integrate fair housing principles

throughout HUD’s other program areas;

and make greater use of other areas’

technology.

The Need for Change

Since its establishment in 1969, FHEO

has evolved according to changing

statutes and program needs. This

sporadic approach to building a

business line has created a number of

service delivery problems. The areas

that most need to change are:

—Lack of clear responsibility and

accountability for policy

development, planning, program

evaluation, control, and performance

standards and measurement;

—48 local offices report to multiple sets

of field oversight offices in

headquarters;

—A split in field management between

enforcement and program/

compliance, resulting in a ‘‘two

FHEO’’ phenomenon;

—A structure top-heavy with

supervisors;

—Inadequate integration of fair housing

policies into other HUD program

areas;

—Redundant, inefficient paperwork and

processes; and

—Outdated technology and data

tracking systems.

Organizational inefficiency is most

noticeable in field operations, where

two separate FHEO staffs oversee

investigations and programs. In

headquarters, this organizational

structure has resulted in six distinct

offices and 14 divisions, directed by

three Deputy Assistant Secretaries.

Reforms

—Eliminate the current division of civil

rights enforcement and program

responsibilities in headquarters and

field offices so that FHEO operates

more uniformly and cohesively.

A new position, Deputy Assistant

Secretary for Enforcement and

Programs, will combine the functions

currently performed by the Deputy

Assistant Secretary for Enforcement and

Investigations and Deputy Assistant

Secretary for Programs and Compliance,

and will report to the newly created

position of General Deputy Assistant

Secretary, the chief operating official.

—New Field Organization

Field offices will be organized into

ten program hub offices and program

center offices. Each program hub office

will provide civil rights complaint

assessment/control services for its entire

area. Each program hub’s director will

be accountable to the General Deputy

Assistant Secretary for all FHEO

functions, and will be the point of

contact on all major policy and program

issues regarding HUD’s civil rights

responsibilities in that area.

Program center offices will process

complaints, review programs and

compliance, and investigate complaints,

among other tasks. Program center

directors will work with other program

directors to carry out community-based

customer service.

Program center offices will have new,

consolidated responsibility for all FHEO

civil rights enforcement and program

activity functions—investigations,

compliance, and programs. Directors at

the local level will deliver effective

enforcement, compliance, and program

results, and will assign staff to highest

priorities.

—Use Staff More Efficiently

FHEO Civil Rights Analysts will

investigate violations of civil rights

laws, as well as perform program/

compliance work, while directors

balance workloads among different

requirements and priorities with the full

complement of staff available. Use of

BPR reforms, including enhanced

technology to increase efficiency, will

be expanded.

—Consolidate field Oversight

Field oversight functions will be

consolidated into one office under the

General Deputy Assistant Secretary. The

number of offices reporting to

headquarters will drop from 48 to 10.

The General Deputy Assistant Secretary

will also direct FHEO’s consolidated

policy and program evaluation

functions, gaining a better

understanding of current issues and

problems, and providing clearer

guidance to field offices on litigation

and policy initiatives.
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43227

—Streamline Headquarters Functions

• Headquarters will be streamlined

and its functional areas reconfigured to

reflect those in the field;

• One Deputy Assistant Secretary will

be responsible for both enforcement and

program functions; and

• All field oversight, policy

formulation, program evaluation, and

the development of program standards

will be consolidated to eliminate

duplication and to establish clear lines

of accountability and responsibility.

—Integrate Fair Housing Into HUD’s

Other Program Areas

FHEO will continue to focus on:

• Technical assistance on civil rights

requirements for recipients of HUD

funds;

• Section 202/811 application

reviews;

• Supporting fair housing on-site

monitoring;

• Voluntary programs with housing

industry groups; and

• Fair housing planning.

HUD will focus on mainstreaming fair

housing government-wide and

throughout the Department through:

—Streamline Existing Front-End

Reviews

Other program areas will expand their

current application procedures to

include routine front-end reviews now

performed by FHEO for the:

Comprehensive Improvement

Assistance Program; Family SelfSufficiency; Comprehensive Grant

Program; Multifamily Development

Programs; Section 108 Loan Guarantees;

and Annual Action Plans.

—Standard Information Collection

PIH and CPD will expand their

standard data collection (e.g., IDIS) to

include indicators of fair housing

compliance by grantees.

—Integrate Fair Housing Into the

Proposed Assessment Centers

FHEO will support a process to

ensure that fair housing compliance is

included in assessing public housing

authorities.

—Section 3

Section 3 can be moved from FHEO

to the Office of Small and

Disadvantaged Business Utilization, to

take advantage of greater expertise in

economic development and

procurement.

—Training of Community Resource

Representatives

New Community Resource

Representatives will be trained in fair

housing laws, issues surrounding

Section 8 recipients, and other thorny

fair housing issues.

Benefits of Reform

—A unified FHEO

—More flexible staff who can handle

both enforcement and program/

compliance functions

—More effective field offices due to

clearer guidance on policy initiatives

—Less duplication and paperwork

—More effective elimination and

prevention of discriminatory practices

—More effective use of technology and

other program areas’ data.

Summary of FHEO Problems, Reforms

and Benefits

Problems

—Fragmented responsibilities

—Lack of accountability

—Duplication of field oversight

functions

—Confusing, complex lines of reporting

—Lack of clear communication

—Fragmented approach to compliance

and enforcement

—Poor use of technology

Reforms

—Eliminate the split of enforcement and

program/compliance functions in

headquarters and the field

—Cross-train field staff

—Consolidate field oversight functions

—Restructure leadership functions at

headquarters

—Integrate fair housing principles

throughout HUD’s other program

areas

—Make use of other program areas’

software and new technology to fill

gaps in information

Benefits

—A unified FHEO

—More flexible staff who can handle

both enforcement and program/

compliance functions

—More effective field offices due to

clearer guidance on litigation and

policy initiatives

—Less duplication and paperwork

—More effective elimination and

prevention of discriminatory practices

—Streamlined headquarters functions

Office of the Chief Financial Officer

‘‘The major complaint about

organizations is that they have become

more complex than is necessary.’’

Tom Peters, In Search of Excellence

Summary

The Chief Financial Officer is unable

to provide cost-effective, efficient

accounting services within the current

decentralized structure and lacks the

ability to link budgeting, strategic

planning, and financial management,

thwarting clear accountability.

To remedy these problems, the Office

of the CFO will consolidate accounting

operations from ten centers to one

accounting center and will absorb

budgeting operations into strategic

planning and financial management

operations within the office.

The Need for Change

—Consolidating Program and

Accounting Operations

Performing accounting services in

multiple locations with large numbers

of staff is no longer cost effective. Better

financial management and information

systems make it possible to reduce

staffing, streamline operations, and

strengthen management controls.

—Consolidating Budget and CFO

Operations

Budgeting, strategic planning, and

financial management are critical to

HUD’s success. But these functions are

currently independent, with little or no

coordination. This has led to criticism

from the GAO, IG, and NAPA. Effective

management means we must weave

budgeting, strategic planning, and

financial management oversight

together. This requires matching

workload planning (estimates and

allocations) through the use of GPRA

performance measures, HUD’s strategic

plan, and a new management plan

process.

—Implementing New HUD Management

Integrity Plan

Program managers must be

responsible for their programs’ financial

management. They must be held

accountable for results and rewarded for

excellent results. Managers will be

provided with clear, reasonable

expectations and the resources

necessary to meet them. The CFO must

be a partner with and advocate for

program managers.

—Linking Budget, Performance

Measures, and Program Delivery

GPRA recognizes the natural links

between budget operations and program

outputs and outcomes. At HUD, budget

operations, program performance, and

program delivery are fragmented and

disjointed.

—Estimating Resources and Making

Budget Allocations

The GAO and HUD’s own Inspector

General have criticized the Department

for its weak and fragmented ability to

estimate its resource needs and make

budget allocations.
43228 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

—Financial Systems Integration

Since 1989, HUD has reported under

FMFIA that it does not have an efficient,

effective, and integrated financial

management system that can be relied

on to provide timely, accurate, and

complete financial information to

management. Also, in February 1997 the

GAO reported that HUD’s financial

management systems were ‘‘poorly

integrated, ineffective, and generally

unreliable.’’ In his confirmation hearing,

Secretary Cuomo stated his top priority

is to put HUD’s management systems in

order and to restore effective

management and financial

accountability at HUD.

Reforms

—The Office of the CFO will

consolidate its programs and

administrative accounting operations

from ten field accounting divisions

into one accounting center; all

accounting operations will be

performed at this center.

—Consolidate headquarters budget

operations into the Office of the CFO

to ensure budgeting is integrated with

financial management oversight.

—Accountability is the cornerstone of

HUD’s new business culture. Effective

systems of management controls are

critical to the long-term success of the

Department’s mission, and

outstanding performance in this area

should be rewarded. Employees will

be held accountable for carrying out

responsibilities related to financial

credibility. The new focus will be on

positive reinforcement, rather than

negative sanctions. For instance,

managers who demonstrate

outstanding performance or who

contribute to HUD’s financial

management will be considered for

Secretarial awards and recognition.

Also, the CFO will partner with

programs as the principal driver of

financial management to ensure that

programs achieve intended business

results.

—Risk management is a major

component of financial management.

If it is to be integrated in the day-today operations of HUD’s programs,

risk management must be as simple as

possible. It must focus on prevention,

not process, and must balance risk

and resources with reasonable

controls and verification procedures.

A new Office of Risk Management

will be established to play a key role

in changing managers’ perspective of

the review/audit function.

—Linking budget, performance

measures, and program delivery will

enable the Department to meet the

requirements of the CFO Act, ensure

the integration of financial systems

and controls, and consolidate

monitoring of all performance

measures in the same organization.

The CFO will lead the Department’s

GPRA implementation efforts.

—The newly merged budget office will

implement a proposed Resource

Estimation and Allocation Process

(REAP) that will link resources to

results as required by GPRA. The

fiscal year 1999 call for budget

estimates and legislative proposals

will incorporate this new process.

—The Department will develop and

implement an integrated financial

management system that is accurate,

reliable, and timely.

Summary of Chief Financial Officer

Problems, Reforms and Benefits

Problems

• Program and administrative

accounting services not sufficiently

cost-effective

• Lack of coordinated budget

operations, strategic planning, and

financial management

• Lack of resources estimation and

allocation capability

• Lack of accountability and internal

controls

• Inaccurate, unreliable, and tardy

financial management systems

Reforms

• Consolidate program and

administrative accounting operations

from ten accounting divisions to one

accounting center

• Consolidate Budget and CFO

Operations

• Implement new Management Integrity

Plan

• Incorporate Resource Estimation and

Allocation Process (REAP) into budget

Benefits

• Stronger internal management

controls

• Easier access to information through

the single accounting center saves

time and increases reliability

• Greater financial management

accountability since budgetary and

financial responsibilities are

centralized

• Improved resource estimation and

allocation capability

Benefits of Reform

Staff cost savings and financial

management improvements will accrue

from these consolidations and

streamlining efforts. Specific benefits

include:

—Stronger internal management

controls;

—Better access to consistent, uniform

financial data;

—Linking budget, performance

measures, and program delivery will

enable the Department to meet the

requirements of the CFO Act;

—Greater accountability through linked

budget and financial management

responsibilities;

—Improved resource estimation and

allocation capability;

—Less duplication of resources and

effort; and

—Clear lines of authority and

responsibility.

Office of Administration

‘‘Mobilizing an organization to adapt

its behaviors in order to thrive in new

business environments is critical.

Without such change, any company

today would falter.’’

Ronald A. Heifetz and Donald L.

Laurie, Harvard Business Review

Summary

In many ways, the Office of

Administration faces a dual challenge. It

must help the Department make

sweeping changes, while at the same

time reforming itself, streamlining and

becoming as efficient as possible.

Implementing such massive change in

a Department of this size impels the

Office of Administration to be as

flexible and performance-oriented as

possible. Each of these areas will help:

Human Resources, Information

Technology, Training, Management and

Planning, Administrative Services, and

Procurement and Contracts. Supporting

business lines with new staffing plans,

technology assessments, training

programs, and equipment planning are

just a few of the many services the

Office of Administration will offer.

The Departmental organization

described in this plan will help the

Office of Administration identify what

services it can provide to meet the needs

of its customers within HUD. While an

earlier reorganization of the Office of

Administration achieved significant

staffing reductions, greater efficiency

and the ability to better target our

services will provide further

opportunities for downsizing.

Once implemented, the HUD 2020

reform plan is designed to achieve

support staff levels comparable to

private sector personnel efficiencies. As

part of the reform effort, the Office of

Administration is examining and

streamlining its own core functions and

processes.

In the near future, the Office of

Administration will:
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43229

• Manage client requests using our

Automated Client Request System, stateof-the-art technology;

• Increase our use of satellite

technology to train employees;

• Execute personnel actions through

the Internet and HUD’s own Intranet

site, HUDweb;

• Create flexible workspaces,

technology, and furniture in

‘‘Workplaces of the Future’’ to enhance

teamwork and dynamic work

environments; and

• Use visual and voice technology to

manage remote staff.

The Office of Administration’s highest

priority is to support organizational

changes that most impact HUD’s ability

to fulfill its mission. Changes within the

Office of Administration will parallel

those in business lines, as we identify

the needs of a restructured HUD.

Creating a leaner, smarter, and more

effective Department is the primary

focus of the Office of Administration.

The Office of Administration will plan,

develop, and implement a realistic

strategy for helping executives and

managers carry out approved

management reforms. Individual offices

within the Office of Administration will

provide the following assistance:

Human Resources will provide labormanagement relations strategy;

organization change and personnel

processing services; staffing and

classification support; support in

performance management planning; and

buyout, outplacement, and employee

career transition assistance.

Information Technology will identify

technology needs; realign technology

investments and services; and provide

contractor and staff support for major

reforms.

Training Academy will carry the

message of management reforms to

employers and customers; assess current

workforce skills against new

requirements and adapt training

programs; provide employee career

counseling; and adapt current university

partnerships to address new program

and technical training needs (including

procurement, contractor management,

financial analysis, internal controls, and

community and economic

development).

Specific Training will also be

conducted for Community Resource

Representatives and Public Trust

Officers. Because the Community

Resource Representatives will epitomize

the facilitation function in the new

HUD, a special national recruitment

open to new hires and existing HUD

employees will be launched.

University Training will make certain

that employees in both of these new

categories are fully equipped with the

latest knowledge and skills to carry out

their important functions. HUD will

arrange for high quality, universitybased training emphasizing a broad

overview of HUD programs, community

development skills for the Community

Resource Representatives and program

monitoring for the Public Trust Officers.

The university training will be

interspersed with regular HUD work to

enrich both experiences. The

Department is prepared to make a major

commitment to this training which is

central to achieving the aims of the

Management Reform Plan.

Management and Planning will

support organizations as they develop

and follow plans for reassessing their

business processes; and provide

attendant organizational development,

team building, and culture change

support.

Administrative Services will help

client organizations develop plans to

address space, equipment, and other

administrative requirements; and

realign current administrative resource

plans with long-term management

reforms.

Procurement and Contracts will work

with affected organizations to assess

procurement and contracting

requirements; develop specific

procurement plans; and support

expedited assistance.

The Office of Administration will

assign interdisciplinary teams,

comprising experts in all administrative

functions, from both headquarters and

the field, to each area undergoing

change to work through implementation

details and ensure global logistical and

policy coordination.

Procurement and Contracting will

work with affected organizations to

assess procurement and contracting

requirements, develop specific

procurement plans, and support

expedited assistance. At the same time,

it will work with NAPA to analyze and

reconstruct a more efficient

procurement process, as executed by

both the Office of Procurement and

Contracts and by the business lines.

ADMINISTRATIVE SUPPORT STRATEGY

[Office of Administration]

Reforms Human resources Information technology Training

#1 Reorganize by function rather

than program ‘‘cylinders.

Identify space, equipment, and

other administrative needs; develop and coordinate plans to

speed organizational changes.

Develop process redesign and

cultural change strategies.

Support plans for outsourcing and

contracting; assist in A76 process; help expedite procurements. Assist as needed. #2 Modernize and integrate HUD’s

outdated financial management

systems with an efficient, stateof-the-art system.

Assist as needed .......................... Provide contract support and assistance.Advise project leaders and managers.

#3 Create an Enforcement Authority with one objective: to restore

the public trust.

Provide same support services as #1.Provide contract support, advice,

and assistance.

Provide same support services as #1.

#4 Refocus and retrain HUD’s

workforce to carry out our revitalized mission.

Assist as needed .......................... Provide same support services as #1.Assist as needed.

#5 Establish new performancebased systems for HUD programs, operations, and employees.

Assist as needed .......................... Advise on culture changes and

team building strategies.

Assist as needed.

#6 Replace HUD’s top-down bureaucracy with a new customerfriendly structure.

Consider alternative office and

worker locations, consistent with

management reforms.

Develop new organization development strategies to improve

customer service.

Assist as needed.
43230 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

ADMINISTRATIVE SUPPORT STRATEGY

[Office of Administration]

Reforms Administrative services Management and planning Procurement and contracting

#1 Reorganize by function rather

than program ‘‘cylinders’’.

Suggest most efficient strategies

for organization changes, position management and classification, union negotiations, and

staffing.

Adapt current technology plan to

accommodate reforms. Support

technology and information system changes.

Assess workforce skills and training needs; develop new training’

revise existing training.

#2 Modernize and integrate HUD’s

outdated financial management

systems with an efficient, stateof-the-art system.

Assist as needed .......................... Adjust technology budgets to accommodate project costs; help

project manager and contractor;

provide guidance on architecture and other requirements.

Develop training for new systems.

#3 Create an Enforcement Authority with one objective: to restore

the public trust.

Provide same support services As #1.Provide same support services #1 Provide same support services as #1.

#4 Refocus and retrain HUD’s

workforce to carry out our revitalized mission.

Help managers develop new positions, qualification requirements

and internal/external recruitment.

Ensure that the new workforce

uses best available technology

applications to achieve reforms.

Plan, design and conduct new

training program, including university partnerships. #5 Establish new performancebased systems for HUD programs, operations, and employees.

Development of new performance

structures and incentives for improved results.

Develop information systems to

support changes.

Incorporate performance concepts

into management and other

training programs.

#6 Replace HUD’s top-down bureaucracy with a new customerfriendly structure.

Work with Deputy Secretary and

principal staff on options to reconfigure HQ-field structure, operations and human resources.

Help staff improve use of information resources.Help organizations develop customer service training programs.

Appendix A: Buyout Plan

An integral part of the HUD 2020

Management Reform Plan is streamlining and

consolidating major functions and

downsizing the overall workforce funded by

the Salaries and Expenses Appropriation

from approximately 10,500 to 7,500 FTEs by

the end of fiscal year 2000. To achieve this

employment level, the Department will need

to reduce on-board staff by approximately

3,000 employees over a four-year period.

As we proceed with the implementation of

the HUD Management Reform Plan, 600 to

1,000 buyouts will allow the Department to

aggressively streamline and consolidate

functions while limiting the need for

involuntary employee separation that might

otherwise be required. To accomplish this

objective, specific program operations will be

targeted for reductions, downsizing and

consolidations. An effective, targeted buyout

strategy will minimize disruptions to

program areas and ease the career transition

process for impacted employees. The

following program operations will be targeted

in priority order for staff reductions through

the buyout program.

Buyout applications will be accepted in

July 1997. Employees will be notified of

approval or denial of a buyout opportunity

from August-September, 1997. Employees

will be allowed to separate with a buyout

beginning in late August through the end of

the fiscal year (September 30, 1997). The

Secretary reserves the right to stop buyout

offers at any point in the process.

—Priority Group 1

Office of Housing (headquarters and field

operations): Single Family, Multifamily,

Federal Housing Administration Comptroller,

and Operations.

—Priority Group 2

Administrative functions, headquarters

and field, in all program offices and in the

Office of Administration, except the Office of

Information Technology.

—Priority Group 3

Office of Chief Financial Officer

(headquarters and field operations).

—Priority Group 4

Office of Public and Indian Housing

(headquarters and field operations).

—Priority Group 5

Headquarters and field operations of the

Office of General Counsel, Office of Fair

Housing and Equal Opportunity, and the

Office of Community Planning and

Development.

—Priority Group 6

Other operations funded by the Salaries

and Expenses Appropriation to include

Office of Policy Development and Research,

Office of Congressional and

Intergovernmental Relations, Government

National Mortgage Association, Office of

Public Affairs, Office of Lead Hazard Control,

Office of Departmental Equal Employment

Opportunity and all offices under the Office

of the Secretary.

Buyout Policy and Process

Most employees who meet the legal

requirements of Section 663 of the Treasury,

Postal Service and General Government

Appropriations Act, 1997 (Pub. L. 104–208)

are eligible to apply. However, employees

must be serving under an appointment

without time limitations and have been

continuously employed for at least three

years with HUD in order to be eligible for a

buyout. Additionally, the following

categories of employees will not be eligible

to apply:

—An employee who, during the previous 24

months, received a recruiting or relocation

bonus, or within 12 months of the

separation date received a retention

allowance;

—Employees relocated to other positions/

offices (under HUD’s relocation programs)

where relocation costs were incurred and

the buyout offer falls within one year of the

effective date of the relocation. Exceptions

can be granted if the employee reimburses

HUD for all relocation costs;

—An employee already approved for a

voluntary separation incentive payment

under HUD’s previous buyout program

under the Federal Workforce Restructuring

Act of 1994 who is completing an

additional period of service for a delayed

separation;

—An employee in receipt of a specific notice

of involuntary separation for misconduct

or unacceptable performance;

—An employee who previously received any

buyout payment by the federal government

and has not repaid such payment;

—A re-employed annuitant;

—An employee who is or would be eligible

for disability retirement;

—An employee with statutory reemployment

rights of transfer to another organization;

—All employees serving under Schedule C,

non-career Senior Executive Service, or

Presidential appointments;

—All employees in the Office of Information

Technology paid from the Working Capital

Fund;

—All employees in the Office of Inspector

General; and

—All employees in the Office of Federal

Housing Enterprise Oversight.

The amount of each buyout will be

calculated using the severance pay formula.
Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices 43231

Employees approved for a buyout will be

paid an amount equal to their severance pay

or $25,000, whichever is less.

Employees interested in the buyout will be

allowed to submit a written (pre-designed)

application. Applications will be ranked in

priority order according to the organization

described above. Employees will be informed

when and where applications may be

obtained as early as possible following formal

buyout announcement. The Office of Human

Resources will be responsible for the

management and operation of the buyout

program.

Categories for Job Elimination

Based on the preceding targeted program

operations and geographical locations, the

following occupations and grade levels are

targeted for buyouts in the following priority

order according to program functions:

—Priority #1—Office of Housing—

Headquarters and Field

Eligibility for buyouts in this group apply

to all employees in all titles, series and

grades in headquarters and in all field

locations in all Housing operations.

Examples of occupational series and titles in

this organization include, but are not limited

to:

GS–301 Systems Analyst, Program Advisor,

Program Specialist, Management

Information Specialist, Field Manager

GS–303 Staff Assistant, Clerk Typing,

Program Assistant, Disbursements

Assistant, Loan Assistant, Title Assistant/

Clerk

GS–305 Mail Clerk, File Clerk

GS–318 Secretary (Typing)

GS–322 Clerk—Typist

GS–325 Office Enforcement Clerk

GS–326 Office Automation Clerk

GS–343 Management Analysis, Program

Analysis

GS–501 Financial Operations Analyst,

Accounting Advisor, Financial Review

Compliance Specialist, Loan Servicing

Specialist, Deputy Comptroller

GS–505 Housing Comptroller

GS–510 Staff Accountant, System

Accountant, Operating Accountant

GS–525 Accounting Technician

GS–806 Materials Engineer

GS–808 Architect

GS–810 Structural Engineer

GS–828 Construction Analyst

GS–830 Mechanical Engineer

GS–990 Claims Examiner

GS–0110 Financial Economist

GS–1101 Default Loan Specialist, Debt

Servicing Rep., Debt Management

Specialist, Loan Technician, Single and

Multifamily Housing Spec., Real Estate

Owned Spec., Asset Manager, Mortg. Spec.

Underwriter

GS–1160 Financial Analyst

GS–1165 Loan Specialist, Loan Assistant

GS–1170 Single Family and Multifamily

Asset Manager, Realty Spec.

GS–1171 Appraiser

GS–1510 Actuary

GS–1531 Statistical Assistant

—Priority #2—Administrative Functions—

Headquarters and Field

Eligibility for buyouts in this group apply

to all employees at all grade levels in

operations, management and administrative

support functions in all Program Offices, and

in all offices in the Office of Administration

(except the HUD Training Academy and the

Office of Procurement and Contracts).

Occupational groups generally fall in the GS–

200, 300 and 500 job classification series.

Examples of occupational titles and series

include, but are not limited to:

GS–201 Personnel Management Specialist

GS–203 Personnel Assistant/Clerk

GS–212 Personnel Staffing Specialist

GS–221 Position Classification Specialist

GS–230 Employee Relations Specialist

GS–235 Employee Development and

Training

GS–301 Management and Organizational

Development Specialist, Personnel Pay

Specialist, Personnel Services Specialist,

Program Management Specialist,

Administrative Staff Assistant

GS—303 Personnel Pay Technician/

Assistant, Personnel Support Services

Assistant, Records Clerk

GS–318 Secretary-Typing

GS–322 Clerk-Typist

GS–326 Office Automation Assistant

GS–332 Computer Operator

GS–334 Computer Specialist

GS–335 Computer Clerk/Assistant

GS–340 Program Management Specialist

GS–341 Administrative Officer

GS–342 Support Services Specialist

GS–343 Management Analyst

GS–344 Management Assistant

GS–391 Telecommunications Specialist

GS–501 Financial Analyst, Accounting

Advisor

GS–503 Comptroller Assistant

GS–505 Comptroller

GS–510 Accountant, Systems Accountant

GS–511 Auditor

GS–525 Accounting Technician

GS–540 Voucher Examiner

GS–544 Time and Leave Technician

GS–560 Budget Analyst

GS–561 Budget Assistant

GS–570 Financial Institution Examiner

GS–1160 Financial Analyst

—Priority #3—Office of the Chief Financial

Officer—Headquarters and Field

Eligibility for buyouts in this group apply

to all employees in all titles, series, and

grades in all locations in headquarters and

the field. Examples of occupational series

and titles in this organization include, but are

not limited to:

GS–303 Accounting Clerk

GS–318 Secretary

GS–326 Office Automation Clerk

GS–343 Management Analyst

GS–501 Financial Operations Analyst

GS–503 Comptroller Assistant

GS–510 Accounting Officer, Operating

Accountant

GS–511 Internal Auditor

GS–525 Accounting Technician

GS–540 Voucher Examiner

GS–570 Accountant

GS–1160 Financial Analyst

—Priority #4—Public and Indian Housing—

Headquarters and Field

Eligibility for buyouts in this group apply

to all employees in all titles, series and

grades in all geographical locations in

headquarters and the field. Examples of

occupational series and titles in this

organization include, but are not limited to:

GS–301 Special Asst., Mgmt. Info. Spec.,

Prog. Support Spec.

GS–303 Staff Asst., Program Asst.

GS–304 Information Receptionist

GS–318 Secretary

GS–322 Clerk-Typist

GS–326 Office Automation Clerk

GS–335 Computer Clerk

GS–343 Program Analyst, Management

Anal.

GS–344 Management Asst.

GS–503 Financial Asst.

GS–801 General Engineer

GS–807 Landscape Architect

GS–808 Architect

GS–810 Civil Engineer

GS–828 Construction Analyst

GS–1082 Writer-Editor

GS–1101 Desk Ofcr., Housing Spec.,

Revitalization Spec., Native American

Program Spec.

GS–1160 Financial Analyst

GS–1163 Insurance Examiner

GS–1171 Appraiser

GS–1173 Housing Management Spec.

GS–1530 Statistician

—Priority #5—Other Priority Program

Operations—Headquarters and Field

Eligibility for buyouts in this group apply

to all employees in all titles, series and

grades in all geographical locations in

headquarters and the field based on the

employee’s retirement service computation

date (SCD). Examples of occupational series

and titles in this category include, but are not

limited to:

GS–246 Industrial Relations Specialist

GS–301 Spec. Asst., CPD Rep., Field Mgmt.

Ofcr.

GS–303 Program Asst., Staff Asst.

GS–305 Mail Clerk

GS–806 Materials Engineer

GS–810 Structural Engineer

GS–830 Mechanical Engineer

GS–905 Attorney Advisor

GS–950 Paralegal Specialist

GS–963 Legal Instruments Examiner

GS–986 Legal Technician

GS–0020 Community Planner

GS–0101 Social Science Analysts

GS–1101 Grants, Spec., Housing Spec.,

Asset Mgr., Rehab. Spec.

GS–1165 Loan Specialist

GS–1170 Realty Specialist

GS–1173 Housing Mgmt. Specialist

GS–1801 Compliance Specialist

—Priority #6—Other Program Operations

Eligibility for buyouts in this group apply

to all employees in all titles, series and

grades in all geographical locations in

headquarters and the field based on the

employee’s retirement service computation

date (SCD). Examples of occupational series

and titles in this category include, but are not

limited to:

GS–110 Economist
43232 Federal Register / Vol. 62, No. 155 / Tuesday, August 12, 1997 / Notices

GS–260 EEO Specialist

GS–318 Secretary

GS–322 Clerk-typist

GS–326 Office Automation Clerk

GS–335 Computer Clerk/Asst.

GS–343 Management Analyst

GS–344 Management Assistant

GS–360 EEO Specialist

GS–361 EEO Assistant

GS–0028 Environmental Protect. Specialist

GS–1035 Public Affairs Specialist

GS–1102 Contracting Specialist

GS–1301 Environmental Policy Specialist

Appendix B: Annual Management

Planning Strategy

‘‘Some governments are not only trying to

prevent problems, they are working to

anticipate the future—to give themselves

radar. This is extremely difficult in today’s

short-term political environment. But it is

also extremely important, given the pace of

change* * *’’

David Osborne and Ted Gaebler,

Reinventing Government

HUD’s new management planning strategy

transforms the goals of HUD’s Management

Reform Plan into action. The HUD

management plan process will directly link

the Government Performance Results Act

requirements for a strategic plan, program

goals and objectives, performance measures,

budget formulation, and the management

process. This process will express how HUD

measures performance, measuring outputs

and outcomes of programs and operations. To

guarantee that this plan meets local needs,

HUD field staff will provide essential

feedback. The new process will have the

following steps:

1. Setting Priorities

The Secretary establishes major priorities

for achieving the Department’s mission.

2. Defining Goals and Objectives

The Deputy Secretary oversees the

Assistant Secretaries, who develop specific

goals and objectives to support the

Secretary’s priorities. The Chief Financial

Officer is the process manager. In

consultation with the Director of Budget and

Assistant to the Deputy Secretary for Field

Management, the Deputy Secretary

coordinates the development of the

Management Plan goals, objectives,

performance measures, customer service

standards, and management control plans.

Policy and program guidance is then issued

to the field to guide the development of

preliminary field office-based Management

Plans.

3. Scheduling Workload

The Management Plan will include

preliminary workload schedules for various

consolidated operations, including grant

administration, physical and financial

assessments, enforcement and recovery,

rental assistance, funding, etc.

4. Creating Integrated Customer Service Plans

The Secretary’s Representatives and

Coordinators will plan and coordinate the

development of proposed Field Office

Management Plans, including integrated

customer service plans. Program managers

will work with the Secretary’s

Representatives and Coordinators on the

integrated customer service plans and will

also ensure that the plans respond to program

workload requirements.

5. Internal Consultation

Secretary’s Representatives and

Coordinators will conduct sessions with the

program managers to review the overall

Management Plan priorities, goals, objectives,

and policy guidelines.

6. External Consultation

The Secretary’s Representatives and

Coordinators and program managers will

consult with HUD’s major customers and

partners (state, county, city, housing

authorities, finance agencies, etc.).

7. Finalizing Management Plans

Consolidated and office-wide Management

Plan proposals will be submitted by the

Secretary’s Representatives to the Deputy

Secretary for review. The CFO will

coordinate review, revision, and resource

allocation requirements with the appropriate

Assistant Secretary, budget, and field

management officials. The Deputy Secretary

will approve final Management Plans for

implementation.

8. Implementing Management Plans

Management Plans will be carried out

through an integrated service delivery

process. The Secretary’s Representatives,

Coordinators, and Community Resource

Representatives will be responsible for:

—Establishing an effective partnership and

set of working relationships with

customers;

—Helping state and local governments and

related industry and nonprofit

organizations make better use of HUD

programs and services;

—Achieving housing and community and

economic development goals efficiently

and effectively.

Program managers and their staffs will:

—Carry out program administration (e.g.,

grants management, monitoring, technical

assistance, policy interpretations and

related oversight activities); and

—Provide technical support and assistance to

the Secretary’s Representatives and

Coordinators.

9. Headquarters responsibilities

Headquarters program offices will be

responsible for effectively and efficiently

managing field programs and staff. They will

ensure that program administration goals and

objectives do not conflict with

responsibilities of the Secretary’s

Representatives and Coordinators.

10. Performance appraisals

HUD is working with OPM to design a

state-of-the-art performance-based appraisal

system.

11. Information systems and reporting

The CFO develops and maintains an

accurate and reliable Management Plan

information system, accessible to

headquarters and field managers. Monthly

reports will be presented to the Management

Committee with an executive summary of

progress and problems in achieving major

Management Plan goals. The Assistant to the

Deputy Secretary for Field Management will

develop a major component of this report,

including quantitative and qualitative

assessments of customer service results.

12. Annual process evaluation

The CFO, in coordination with principal

staff, will conduct an annual evaluation of

the Management Plan process in

headquarters and the field. The CFO will

report on major findings and

recommendations for improvement to the

Deputy Secretary. Improvement actions will

be incorporated into the next draft.

Appendix C: HUD Salaries and

Expenses and Full-Time Equivalents

HUD SALARIES AND EXPENSES AND

FULL-TIME EQUIVALENTS

Programs Actual

1996

Budget

1998

Target

2000

Housing ............. 5,157 4,599 2,900

Public and Indian

Housing .......... 1,355 1,325 1,165

Ginnie Mae ........ 63 72 72

Community Planning Development ............... 844 820 770

Policy Development and Research ............ 109 107 105

Fair Housing and

Equal Opportunity .............. 663 635 591

Dept. Equal Employment Opportunity ......... 18 19 19

Department

Management .. 105 105 105

Lead Hazard

Control ........... 24 24 24

Chief Financial

Officer ............ 381 300 220

General Counsel 498 465 369

Administration .... 988 965 590

Field Direction

and Operational Support

(Community

Resource Representatives) .. 337 525 570

Total ........ 10,542 9,961 7,500

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Appendix E: Consolidated Centers

The following is a list of consolidated

centers.

Department-wide

Real Estate Assessment Center

Enforcement Authority

Economic Development and Empowerment

Service

Section 8 Financial Center for PIH and

Housing

Office of Public and Indian Housing

Troubled Agency Recovery Centers

(TARCs)—(2)

Special Applications Center

Public and Indian Housing Grants Center

Office of Housing

Single Family Homeownership Centers

(HOCs)—(3)

Multifamily Centers—(17)

Title I Asset Recovery Center

Multifamily Property Disposition

Processing Center

Office of the Chief Financial Officer

Accounting Center

Office of Administration

Administrative Service Centers (ASC)—(3)

Employee Service Center (ESC)

Appendix F: HUD Salary and Staff Reductions

HUD SALARIES AND EXPENSES: PROJECTED STAFF REDUCTION DURING DOWNSIZING PERIOD

1997 1998 1999 2000 Total

Total Reduction Required ......................................................................... 1,025 965 910 215 3,115

Staff On-Board, Start of FY ...................................................................... 10,615 9,590 8,625 7,715

How Reduction Can Be Achieved:

Normal Attrition .................................................................................. 325 290 260 215 1,090

Buyouts .............................................................................................. 600 400 .................... .................... 1,000

Early outs ........................................................................................... 50 75 100 .................... 225

Outplacements ................................................................................... 50 200 300 .................... 550

Temporaries ....................................................................................... .................... .................... 250 .................... 250

Reductions-In-Force* ......................................................................... .................... .................... .................... .................... ....................

Total Potential ............................................................................ 1,025 965 910 215 3,115

Staff Reduction: Staff on Board, End of FY ............................... 9,590 8,625 7,715 7,500

*Process to be planned in 1998 for use as necessary to meet targeted levels.

Assumptions:

Normal attrition: A 3.0% rate is used for normal attrition of on-board employees, traditionally less than 4%. (Note: this equates to an annual

1.5% FTE rate). This assumes a full hiring freeze until reduction goals are met.

Buyouts: Buyout projections are based on

recent buyout experience and are consistent

with our buyout plan under the current

authority, which expires December 31, 1997.

Early outs: Early outs beyond FY 1997

assume continued OPM approval.

Outplacements: Special programs will be

used to support placing employees outside

the agency. These efforts can be intensified

as necessary to achieve targeted reductions.

Separation of Temporaries: Although

temporary employees will continue to

support the transition, they can be separated

as appropriate.

Reductions-in-Force: This process may be

necessary in some areas to meet required

staffing levels.

Dated: August 5, 1997.

Andrew Cuomo,

Secretary.

[FR Doc. 97–21081 Filed 8–11–97; 8:45 am]

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