[Federal Register Volume 62, Number 155 (Tuesday, August 12, 1997)]
[Notices]
[Pages 43204-43234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21081]



[[Page 43203]]

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Part II





Department of Housing and Urban Development





_______________________________________________________________________



The HUD 2020 Management Reform Plan; Notice

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

[[Page 43204]]


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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.

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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 
__B.__H<a href="/cdn-cgi/l/email-protection#c7a6b5b5aeb4a8a987afb2a3e9a0a8b1"><span class="__cf_email__" data-cfemail="a5c4d7d7ccd6cacbe5cdd0c18bc2cad3">[email protected]</span></a>. More information on HUD's Management Reform 
Plan can be found on HUD's Home Page on the World Wide Web at <a href="http://
www.hud.gov">http://
www.hud.gov</a>, and the plan is available at <a href="http://www.hud.gov/reform/
mrindex.html">http://www.hud.gov/reform/
mrindex.html</a>.

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\
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    \1\ Special 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.
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    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

[[Page 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 long-term 
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, community-driven 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

[[Page 43206]]

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 Department-
wide; 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 deep-seated, 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-
of-the-art.
--HUD's workload and workforce will be better matched according to size

[[Page 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 customer-
friendly 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, cross-cutting 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-to-bottom 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.

[[Page 43208]]

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 cutting-edge 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 Performance-Based 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

[[Page 43209]]

to emphasize performance. For example, inflexible, labor-intensive 
competitive grants will instead shift to performance-based 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 Customer-
Friendly 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:

    <bullet> Links performance requirements to specific objectives of 
the Management Reform Plan;
    <bullet> Creates incentives for meeting specific performance 
objectives; and
    <bullet> 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:

    <bullet> Enforcement Authority
    <bullet> Real Estate Assessment Center
    <bullet> Section 8 Financial Management Center
    <bullet> Financial Systems Integration
    <bullet> Technology Enhancements
    <bullet> 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

[[Page 43210]]

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:
    <bullet> Reorganizing by function.
    <bullet> Replacing HUD's financial management system.
    <bullet> Creating an Enforcement Authority.
    <bullet> Refocusing HUD's mission and retraining our workforce.
    <bullet> Establishing new performance-based systems.
    <bullet> 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 performance-based 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 cross-cutting 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.

[[Page 43211]]

Overview of Reforms and Specific Changes

#1 Reorganize by Function Rather Than Program ``Cylinders.'' Where 
Needed, Consolidate and Privatize

Organizational Changes
    <bullet> 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.
    <bullet> Redesign contract procurement process to improve 
operations and oversight.
    <bullet> Consolidate routine cross-operational processing into 
centralized back office processing centers, or hubs, in the field.
    <bullet> Consolidate program administrative functions into the 
Office of Administration.
    <bullet> Establish Economic Development and Empowerment Service, 
aligning various job skills and other programs from CPD, PIH, and 
Housing.
    <bullet> Outsource legal and investigative services when 
appropriate.
    <bullet> Outsource technical assistance to grantees when 
appropriate.
    <bullet> Privatize physical building inspections, financial audits, 
technical assistance, and real estate assessments.
    <bullet> Consolidate ten field accounting divisions into one 
accounting center within the Office of the CFO.
    <bullet> Consolidate operations in 51 field offices into 17 
Multifamily Centers within Multifamily Housing.
    <bullet> Consolidate financial management and budget functions in 
CFO.
    Program Changes [L=Legislation Required]
    <bullet> Privatize HOPE VI construction management and development 
process as appropriate (L).
    <bullet> Consolidate 6 homeless assistance programs (L).
    <bullet> Merge Section 8 certificate and voucher programs to 
streamline HUD regulations and oversight (L).
    <bullet> Extend FHA note sale authority permanently (L).
    <bullet> 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-the-Art System

Organizational Changes
    <bullet> Integrate HUD's fragmented financial management system, 
repairing or replacing HUD's 89 separate financial management and 
information systems
    <bullet> 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
    <bullet> Implement HUD's new Management Integrity Plan

#3 Create an Enforcement Authority

Organizational Changes
    <bullet> Consolidate existing organizations and employees; contract 
where appropriate with outside investigators, auditors, and attorneys.
    <bullet> Monitor low-performing PHAs, properties failing physical 
and financial audit inspections, and CPD/FHEO grantees failing program 
compliance.
    <bullet> Create a business-like entity to clean up the backlog of 
over 5,000 troubled multifamily properties.
Program Changes [L = Legislation Required]
    <bullet> Streamline and privatize process for Housing's pursuit of 
negligent owners (L).
    <bullet> 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
    <bullet> Select and train staff as Community Resource 
Representatives and Public Trust Officers for all field offices.
    <bullet> Downsize HUD staff from 10,500 to 7,500, using skills and 
resources where they are needed most.
    <bullet> Develop a road map for downsizing HUD employees, including 
a buyout strategy and options for career transitions.
    <bullet> 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
    <bullet> Create meaningful GPRA performance measures that hold HUD 
staff and grantees accountable for results.
Program Changes [L = Legislation Required]
    <bullet> 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).
    <bullet> Deregulate high-performing PHAs and smaller PHAs by 
mandating fewer reporting requirements (L).
    <bullet> Create a Public Housing Authority Performance Evaluation 
Board (L).
    <bullet> Mandate judicial receivership for PHAs on the troubled 
list for more than one year (L).
    <bullet> Reduce excessive rent subsidies to market levels on 
assisted housing (L).

#6 Replace HUD's Top-Down Bureaucracy with a New Customer-Friendly 
Structure

Organizational Changes
    <bullet> Create neighborhood ``store-front'' service centers in 
communities.
    <bullet> Offer single point of service to customers through 
Community Resource Representatives and centralize back-office centers.
    <bullet> Establish a new management planning strategy.
    <bullet> 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.

[[Page 43212]]

    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.
<bullet> 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 
Department-wide Enforcement Authority, Section 8 Financial Processing 
Center, and Property Disposition.
    But these are not HUD's only organizational efforts to consolidate. 
Others include:
<bullet> 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;

[[Page 43213]]

--Ensure accountability by clarifying lines of responsibility and 
authority; and
--Respond quickly to changing program needs, becoming flexible and 
user-friendly.

    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.
<bullet> 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.
<bullet> 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.
<bullet> 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:
<bullet> 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.
<bullet> 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.
<bullet> 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.
<bullet> 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.
<bullet> 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-the-Art 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.

[[Page 43214]]

    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
<bullet> 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.
<bullet> 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 award-winning 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.
<bullet> 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
<bullet> 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

[[Page 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.
<bullet> 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.
<bullet> 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 non-profit 
sectors will give ongoing feedback on performance and policy and will 
advise on particularly sensitive issues prior to final action.

Program Changes

<bullet> 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.
<bullet> 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
<bullet> 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.
<bullet> 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.
<bullet> 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

[[Page 43216]]

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 mid-level 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 Performance-Based 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
<bullet> Convert Inflexible and Labor-Intensive 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 time-consuming 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 performance-based 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.
<bullet> 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 high-performing ones. 
These steps will substantially reduce the burden on field staff for 
monitoring and oversight.
<bullet> 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

[[Page 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.
<bullet> 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.
<bullet> 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-to-market) 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 Customer-
Friendly 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 ``store-front'' 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
<bullet> Create Neighborhood ``Store-Front'' Service Centers and Back 
Office Processing Centers
    The current field structure has state offices with a full staff of 
program-specific 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.
<bullet> 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.
<bullet> 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.
<bullet> 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

[[Page 43218]]

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

    <bullet> Establish a cross-cutting Real Estate Assessment Center 
for reviewing physical inspections and financial statements of PIH 
housing authorities and multifamily projects.
    <bullet> Create a cross-cutting Section 8 Financial Processing 
Center for Housing and PIH.
    <bullet> Establish a Department-wide integrated financial system.
    <bullet> Create an Enforcement Authority to manage PIH and 
multifamily troubled portfolios.
    <bullet> Establish two Troubled Agency Recovery Centers (TARCs).
    <bullet> Create a special (non-funded) applications center for 
demolition/disposition, designated housing, and 5(h) homeownership.
    <bullet> Provide block grant funds for high performers.
    <bullet> Replace PHMAP for better assessment and propose receivers 
for troubled management.
    <bullet> Streamline headquarters and enhance field office 
responsibilities and authority.
    <bullet> Privatize functions such as physical inspections, legal 
and investigative services, technical assistance and HOPE VI 
construction management.
    <bullet> 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

    <bullet> Establish a cross-cutting Real Estate Assessment Center 
for reviewing physical inspections and financial statements of PIH 
housing authorities and multifamily projects.
    <bullet> Create a cross-cutting Section 8 Financial Processing 
Center for Housing and PIH, as well as other consolidated processing 
centers.
    <bullet> Establish a Department-wide integrated financial system.
    <bullet> Create an Enforcement Authority to manage PIH and 
multifamily troubled portfolios.
    <bullet> Reallocate staff in shift from retail to wholesale service 
delivery.
    <bullet> Retrain workforce to meet new challenges.
    <bullet> Privatize Real Estate Owned functions.
    <bullet> Develop streamlined contract and procurement process.

Program: Office of Community Planning and Development Reforms

    <bullet> Convert inflexible, labor-intensive competitive grant 
programs to performance-based grant programs.
    <bullet> Outsource technical assistance as necessary.
    <bullet> Monitor grantees failing program compliance through an 
Enforcement Authority.
    <bullet> Use advanced mapping software system (Communities 2020) 
that shows communities the impact of HUD funding and activities in 
their area.
    <bullet> Align resource needs and responsibilities within the newly 
established Economic Development and Empowerment Service.

Program: Office of Fair Housing and Equal Opportunity Reforms

    <bullet> Eliminate the split of enforcement and program compliance 
functions in headquarters and the field.
    <bullet> Cross-train field staff.
    <bullet> Consolidate field oversight functions.
    <bullet> Restructure leadership functions at headquarters.
    <bullet> Integrate fair housing principles throughout HUD's other 
program areas.
    <bullet> Make use of other program areas' software and new 
technology to fill gaps in information.

Program: Office of the Chief Financial Officer Reforms

    <bullet> Consolidate program and administrative accounting 
operations from ten accounting divisions into one accounting center.
    <bullet> Consolidate HUD budget functions into CFO operations.
    <bullet> Ensure implementation of Management Integrity Plan.
    <bullet> 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

[[Page 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 sub-
specialists:

    <bullet> Organization, Management and Personnel (OMP).
    <bullet> Marketing, Leasing and Management (MLM).
    <bullet> 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:
<bullet> Department-Wide Collaboration Opportunities
--Establishing a Real Estate Assessment Center
<bullet> Collaboration With Housing
--Development of a Section 8 Financial Processing Center
<bullet> Processing Center Reforms Specific to PIH
--Troubled Agency Recovery Centers
--Special Applications Center
--PIH Grants Center
<bullet> 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 Department-
Wide 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

[[Page 43220]]

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 
high-performing 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:


[[Page 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 five-year plan, reserve funds, notify 
Congress and the PHA, and prepare grant agreements.

PIH-Specific Reforms: Create a Special Applications Center

    PIH will consolidate special (non-funded) 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 high-
performing housing authorities;
--Waiving four of the nine planning requirements for non-troubled small 
housing authorities and high-performing 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 High-Performing PHAs
    Streamlining planning submissions and performance indicators for 
small PHAs, HUD will substantially reduce burden on field staff for 
compliance monitoring and oversight. High-performing 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.

[[Page 43222]]

6. Allocate Public Housing Drug Elimination Funds by Performance-based 
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
    <bullet> Staffing is imbalanced, geographically and by 
specialization.
    <bullet> Tracking and assessing of projects is not uniform.
    <bullet> Delivering and monitoring too many programs amplifies 
staffing problems.
    <diamond> Changes in statutes, regulations, and delivery process 
are not communicated well throughout the field offices and 
headquarters.
    <bullet> Coordination of program delivery and targeting of HUD 
staffing resources is insufficient.
    <bullet> Resource-intensive management of troubled PHAs prevents 
staff from nipping PHA problems in the bud.
Reforms
    <bullet> Establish a cross-cutting Real Estate Assessment Center 
for reviewing physical inspections and financial statements of PIH 
housing authorities and FHA multifamily projects.
    <bullet> Create a cross-cutting Section 8 Financial Processing 
Center for Housing and PIH.
    <bullet> Establish a Department-wide integrated financial system.
    <bullet> Create an Enforcement Center to management PHA and FHA 
troubled portfolios.
    <bullet> Establish two Troubled Agency Recovery Centers (TARCs).
    <bullet> Create a special applications center for demolition/
disposition, designated housing, and 5(h) homeownership.
    <bullet> Provide block grant funds for high performers.
    <bullet> Revise PHMAP for better assessment and propose receivers 
for troubled management.
    <bullet> Streamline headquarters and enhance field office 
responsibilities.
    <bullet> Privatize functions such as physical inspections, legal 
and investigative services, technical assistance, HOPE VI construction 
management.
    <bullet> Consolidate PIH job skills and economic development 
programs with similar programs in CPD and FHA into a new Economic 
Development and Empowerment Service.
Benefits
    <bullet> Annual assessments are standardized, providing better 
access to critical information and ensuring fairness and objectivity 
across projects.
    <bullet> Uniformity, consistency and accountability are ensured for 
processing Section 8 subsidies and projecting future subsidy needs.
    <bullet> Roles of intervention/recovery, program operation, and 
management are more clearly defined through TARCs.
    <bullet> Through consolidation, field staff are relieved of 
intensive processing burdens.
    <bullet> 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.

[[Page 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 non-troubled 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

[[Page 43224]]

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 non-core 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 
HUD-wide 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
    <bullet> Limited accountability of internal managers, property 
owners, and stakeholders.
    <bullet> Poor allocation of staff and resources.
    <bullet> Lack of training asset managers.
    <bullet> Little integration of computer systems that produce 
consistent data.
    <bullet> Transition from retail to wholesale service delivery 
requires significant shifts in resources.
    <bullet> Risk mitigation in multifamily portfolio is increasingly 
necessary.
    <bullet> Insufficient balance between community needs and program 
objectives.
Reforms
    <bullet> 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.
<diamond> The Department will create a cross-cutting Section 8 
Financial Processing Center for Housing and PIH.
<diamond> The Department will create an enforcement center to manage 
troubled portfolios.
<diamond> Establish a Department-wide integrated financial system.
<diamond> Reallocate staff in shift from retail to wholesale.
<diamond> Retrain workforce to meet new challenges.
<diamond> Privatize Real Estate Owned functions.

[[Page 43225]]

<diamond> Develop streamlined contract and procurement process.
Benefits
<diamond> Fewer processing problems and delays in loan origination.
<diamond> Faster, more uniform service to clients, lenders, and 
borrowers.
<diamond> Improved underwriting and loss mitigation efforts.
<diamond> Increase in unpaid debt collection.
<diamond> Greater claims processing capacity.
<diamond> Ability to meet targeted staff reductions by FY 2000.
<diamond> Faster policy and program implementation through reduced 
procurement time.
<diamond> Greater accessibility to financial information for budgeting, 
reporting, risk management, and enforcement.
<diamond> 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 on-site 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 performance-based 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 
high-risk projects and publicizing high-performing 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

[[Page 43226]]

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
<diamond> Limited resources for managing competitive grant programs
<diamond> Limited staff for on-site monitoring
<diamond> Information is not complete or timely
<diamond> Community problems are not addressed holistically
<diamond> Limited ability to handle increased number of economic 
development projects
Reforms
<diamond> Convert inflexible and labor-intensive competitive grant 
programs to performance-based grant programs
<diamond> Outsource technical assistance as necessary
<diamond> Monitor grantees failing program compliance through an 
Enforcement Authority
<diamond> Use advanced mapping software system (Communities 2020) that 
shows communities the impact of HUD funding and activities in their 
area
<diamond> Align resource needs and responsibilities within the newly 
established Economic Development and Empowerment Service
Benefits
<diamond> Communities can apply a more comprehensive approach to 
solving urban problems
<diamond> Unnecessary paperwork is eliminated
<diamond> Citizens will play a more meaningful role in the community 
development process
<diamond> Speed, ease, and accuracy in reporting
<diamond> 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.

[[Page 43227]]

--Streamline Headquarters Functions
    <bullet> Headquarters will be streamlined and its functional areas 
reconfigured to reflect those in the field;
    <bullet> One Deputy Assistant Secretary will be responsible for 
both enforcement and program functions; and
    <bullet> 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:
    <bullet> Technical assistance on civil rights requirements for 
recipients of HUD funds;
    <bullet> Section 202/811 application reviews;
    <bullet> Supporting fair housing on-site monitoring;
    <bullet> Voluntary programs with housing industry groups; and
    <bullet> 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 Self-
Sufficiency; 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.

[[Page 43228]]

--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-to-day 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
<bullet> Program and administrative accounting services not 
sufficiently cost-effective
<bullet> Lack of coordinated budget operations, strategic planning, and 
financial management
<bullet> Lack of resources estimation and allocation capability
<bullet> Lack of accountability and internal controls
<bullet> Inaccurate, unreliable, and tardy financial management systems
Reforms
<bullet> Consolidate program and administrative accounting operations 
from ten accounting divisions to one accounting center
<bullet> Consolidate Budget and CFO Operations
<bullet> Implement new Management Integrity Plan
<bullet> Incorporate Resource Estimation and Allocation Process (REAP) 
into budget
Benefits
<bullet> Stronger internal management controls
<bullet> Easier access to information through the single accounting 
center saves time and increases reliability
<bullet> Greater financial management accountability since budgetary 
and financial responsibilities are centralized
<bullet> 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:

[[Page 43229]]

    <bullet> Manage client requests using our Automated Client Request 
System, state-of-the-art technology;
    <bullet> Increase our use of satellite technology to train 
employees;
    <bullet> Execute personnel actions through the Internet and HUD's 
own Intranet site, HUDweb;
    <bullet> Create flexible workspaces, technology, and furniture in 
``Workplaces of the Future'' to enhance teamwork and dynamic work 
environments; and
    <bullet> 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 labor-management 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, university-based 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       
----------------------------------------------------------------------------------------------------------------
<SUP>#1 Reorganize by function rather than  Identify space,          Develop process          Support plans for      
 program ``cylinders.                   equipment, and other     redesign and cultural    outsourcing and       
                                        administrative needs;    change strategies.       contracting; assist in
                                        develop and coordinate                            A76 process; help     
                                        plans to speed                                    expedite procurements.
                                        organizational changes.                           Assist as needed.     
<SUP>#2 Modernize and integrate HUD's       Assist as needed.......  Provide contract         Advise project leaders 
 outdated financial management                                   support and assistance.  and managers.         
 systems with an efficient, state-of-                                                                           
 the-art system.                                                                                                
<SUP>#3 Create an Enforcement Authority     Provide same support     Provide contract         Provide same support   
 with one objective: to restore the     services as <SUP>#1.          support, advice, and     services as <SUP>#1.       
 public trust.                                                   assistance.                                    
<SUP>#4 Refocus and retrain HUD's           Assist as needed.......  Provide same support     Assist as needed.      
 workforce to carry out our                                      services as <SUP>#1.                                
 revitalized mission.                                                                                           
<SUP>#5 Establish new performance-based     Assist as needed.......  Advise on culture        Assist as needed.      
 systems for HUD programs,                                       changes and team                               
 operations, and employees.                                      building strategies.                           
<SUP>#6 Replace HUD's top-down bureaucracy  Consider alternative     Develop new              Assist as needed.      
 with a new customer-friendly           office and worker        organization                                   
 structure.                             locations, consistent    development strategies                         
                                        with management          to improve customer                            
                                        reforms.                 service.                                       
----------------------------------------------------------------------------------------------------------------


[[Page 43230]]


                                         Administrative Support Strategy                                        
                                           [Office of Administration]                                           
----------------------------------------------------------------------------------------------------------------
                                                                                             Procurement and    
               Reforms                 Administrative services  Management and planning        contracting      
----------------------------------------------------------------------------------------------------------------
<SUP>#1 Reorganize by function rather than  Suggest most efficient   Adapt current            Assess workforce skills
 program ``cylinders''.                 strategies for           technology plan to       and training needs;   
                                        organization changes,    accommodate reforms.     develop new training' 
                                        position management      Support technology and   revise existing       
                                        and classification,      information system       training.             
                                        union negotiations,      changes.                                       
                                        and staffing.                                                           
<SUP>#2 Modernize and integrate HUD's       Assist as needed.......  Adjust technology        Develop training for   
 outdated financial management                                   budgets to accommodate   new systems.          
 systems with an efficient, state-of-                            project costs; help                            
 the-art system.                                                 project manager and                            
                                                                 contractor; provide                            
                                                                 guidance on                                    
                                                                 architecture and other                         
                                                                 requirements.                                  
<SUP>#3 Create an Enforcement Authority     Provide same support     Provide same support     Provide same support   
 with one objective: to restore the     services As <SUP>#1.          services <SUP>#1.             services as <SUP>#1.       
 public trust.                                                                                                  
<SUP>#4 Refocus and retrain HUD's           Help managers develop    Ensure that the new      Plan, design and       
 workforce to carry out our             new positions,           workforce uses best      conduct new training  
 revitalized mission.                   qualification            available technology     program, including    
                                        requirements and         applications to          university            
                                        internal/external        achieve reforms.         partnerships.         
                                        recruitment.                                                            
<SUP>#5 Establish new performance-based     Development of new       Develop information      Incorporate performance
 systems for HUD programs,              performance structures   systems to support       concepts into         
 operations, and employees.             and incentives for       changes.                 management and other  
                                        improved results.                                 training programs.    
<SUP>#6 Replace HUD's top-down bureaucracy  Work with Deputy         Help staff improve use   Help organizations     
 with a new customer-friendly           Secretary and            of information           develop customer      
 structure.                             principal staff on       resources.               service training      
                                        options to reconfigure                            programs.             
                                        HQ-field structure,                                                     
                                        operations and human                                                    
                                        resources.                                                              
----------------------------------------------------------------------------------------------------------------

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.

[[Page 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

[[Page 43232]]

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          
------------------------------------------------------------------------
                                                Actual   Budget   Target
                   Programs                      1996     1998     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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[[Page 43233]]

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[[Page 43234]]

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]
BILLING CODE 4210-32-P


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