HUD is the principal government agency responsible for programs dealing with housing, community development, and fair housing opportunities. HUD’s missions include making housing affordable through FHA’s mortgage insurance for multifamily housing and the provision of rental assistance for about 4.5 million lower-income residents, helping revitalize over 4,000 localities through community development programs, and encouraging homeownership by providing mortgage insurance. HUD is one of the nation’s largest financial institutions, responsible for managing more than $426 billion in mortgage insurance and $497 billion, in guarantees of mortgage-backed securities, as of September 30, 1996. The agency’s budget authority for fiscal year 1998 is about $24 billion. HUD’s major program areas are Housing, which includes FHA insurance and project-based rental assistance programs; Community Planning and Development (CPD), which includes programs for Community Development Block Grants, empowerment zones/enterprise communities, and assistance for the homeless; Public and Indian Housing (PIH), which provides funds to help operate and modernize public housing and administers tenant-based rental assistance programs; and Fair Housing and Equal Opportunity (FHEO), which is responsible for investigating complaints and ensuring compliance with fair housing laws. HUD has been the subject of sustained criticism for weaknesses in its management and oversight abilities, which has made it vulnerable to fraud, waste, abuse, and mismanagement. In 1994, we designated HUD as a high-risk area because of four long-standing Department-wide management deficiencies: weak internal controls, inadequate information and financial management systems, an ineffective organizational structure, and an insufficient mix of staff with the proper skills. In February 1997, we reported that HUD had formulated approaches and initiated actions to address these deficiencies but that its efforts were far from reaching fruition. HUD began a number of reform and downsizing efforts prior to the 2020 plan. In February 1993, then-Secretary Cisneros initiated a “reinvention” process in which task forces were established to review and refocus HUD’s mission and identify improvements in the delivery of program services. HUD also took measures in response to the National Performance Review’s September 1993 report, which recommended that HUD eliminate its regional offices, realign and consolidate its field office structure, and reduce its field workforce by 1,500 by the close of fiscal year 1999. Following a July 1994 report by the National Academy of Public Administration that criticized HUD’s performance and capabilities, Secretary Cisneros issued a reinvention proposal in December 1994 that called for major reforms, including a consolidation and streamlining of HUD’s programs coupled with a reduction in staff to about 7,500 by the year 2000. Secretary Cuomo initiated the 2020 planning process in early 1997 to address, among other things, HUD’s needs for downsizing and correcting management deficiencies. The process included, for each major program area, (1) management reform teams that outlined each area’s business and organizational structure, proposed functional changes, identified resource requirements, and allocated staff based on downsizing targets; (2) “change agent” teams that recommended consolidations and other process changes while meeting downsizing targets; and (3) review of these teams’ reports by the Secretary and principal staff. Members of the management reform and change agent teams were drawn from all levels of the agency. The plan has continued to evolve since June 1997, as implementation teams proceed with their work. HUD’s principal documents supporting the 2020 plan are management reform and change agent reports covering each of the agency’s major program areas and functions. Prepared in the spring of 1997, these reports identify a number of potential efficiencies from consolidating and centralizing processes. Beyond allowing the agency to operate with a reduced workforce, other efficiencies include reducing the processing time for single-family housing insurance endorsements and multifamily housing development applications and reducing paperwork requirements for grant programs. The potential efficiencies are generally not based on detailed empirical analyses or studies, but rather on a variety of factors, including some workload data, limited results of a pilot project, identified best practices in HUD field offices, benchmarks from other organizations, and managers’ and staff’s experiences and judgment. In addition to increased efficiency, HUD expects the planned consolidation of functions and other process changes to result in increased effectiveness. For example, fewer public housing authorities and FHA multifamily projects may become “troubled” because staff can better focus on monitoring and improving the performance of the authorities and projects that are potentially troubled. The following sections discuss, for each of HUD’s major program areas—Housing, Community Planning and Development, Public and Indian Housing, and Fair Housing and Equal Opportunity—the specific process changes proposed in the 2020 plan, the potential efficiencies and other benefits expected from the changes, and the studies or other information HUD provided as support for the changes. HUD’s 2020 plan calls for significant organizational and process changes in three primary functions of FHA’s—single-family housing activities, multifamily housing activities, and the FHA Comptroller’s activities. As discussed below, the nature and detail of the studies and analyses supporting the process changes vary among the offices. Process changes proposed for single-family housing include consolidating functions, such as insurance endorsements, that were previously carried out in 81 field offices into four homeownership centers; privatizing or contracting out most property disposition activities (HUD has to dispose of FHA-insured single-family properties that it owns as a result of lenders’ foreclosures on defaulted mortgages); and eliminating most loan-servicing functions by selling the inventory of HUD-held mortgages. HUD expects the reforms to permit a significant reduction in staffing requirements, reduce insurance endorsement processing time to as little as 1 day (compared with an average of about 2 weeks), improve underwriting and loss mitigation, and increase loans to targeted populations through outreach. HUD also expects the reforms to address problems such as poor control and monitoring of HUD-owned properties and inconsistent delivery of quality services. According to the Deputy Assistant Secretary for Single Family Housing, an in-house team of senior managers developed the homeownership center concept based upon the regional office structure of the Federal National Mortgage Association (Fannie Mae). Fannie Mae serves the entire United States through offices in Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; Pasadena, California; and Philadelphia, Pennsylvania. Certain functions performed by FHA generally parallel some of those performed by other organizations in the single-family mortgage industry such as Fannie Mae. In 1994, as a pilot project, FHA began consolidating its single-family loan-processing operations that were performed in 17 of its field offices into the Denver Homeownership Center. According to HUD, the pilot showed that consolidating work at one site and increasing the use of technology could reduce insurance endorsement processing time from 2 weeks to as little as 1 day. In addition, according to the change agent report, the functions in the Denver Homeownership Center were carried out with half the staff who were responsible for the functions in the 17 field offices. Process changes in FHA’s multifamily housing activities include consolidating the asset development and management functions into 18 hubs supported by staff in 33 program centers; implementing a fast-track loan development process, which allows field offices to waive certain loan-processing requirements and tailor processing options to local needs and requires lenders to order and pay for the appraisals and inspections; and consolidating financial and physical assessments of properties, enforcement, and rental assistance functions—along with similar functions in other program areas—into three nationwide centers. (The three are the Assessment Center, the Enforcement Center, and the Section 8 Financial Management Center.) Efficiencies projected from the changes, according to HUD, include (1) reducing the processing time for housing development applications from 360 days to 35 days and, (2) using nonfederal experience as a model, reducing individual asset managers’ average workloads from 55 projects to 35 (primarily because some functions such as inspections and enforcement actions will be handled in part by the enforcement and assessment centers). In addition, HUD expects the changes to address problems such as inconsistency in processing loan development applications, in terms of both time and procedures; a failure to hold mortgagees accountable, which puts HUD at greater risk; asset managers overburdened with unrelated responsibilities; the lack of an efficient system to identify, assess, and respond to troubled properties; and an inefficient and burdensome administration system for Section 8 rental assistance. Multifamily housing officials provided some empirical data for the projected efficiencies. For example, support for the reduction in asset managers’ workload included some data on workloads in nonfederal organizations that perform similar functions and HUD’s own workload analysis, which is based on its current inventory of properties. The nonfederal workload ratios varied from 18 to 37 projects per project manager. Multifamily housing officials allocated staffing to the field offices (hubs and centers) based, in part, upon the following ratios: 35 insured projects with subsidies per staff person, 55 insured projects without subsidies per staff person, and 16 projects per staff person for preventing the projects from becoming troubled. A HUD survey of multifamily housing field offices showed reductions in processing time and costs using the fast-track process. Anecdotal responses from 14 offices included comments such as, “The old way took 60 to 90 days, some time longer. Processing at any one stage typically takes 30 to 40 days often much shorter;” “FAST-TRACK cut staff time from 120 hours per case to 40 hours per case;” and “Estimated savings $17,000 to $20,000 per case in contracting costs.” Other factors that influenced the restructuring of multifamily housing offices and functions were the experiences of cross-functional teams (staffed from different offices to assist in the handling of workload problems) and field office staff’s experiences.