Because public housing represents a $90 billion investment on the part of the federal government since the program’s inception in 1937 and because the Department of Housing and Urban Development (HUD) currently spends $5.4 billion a year on operating subsidies and modernization grants for this housing, interest remains keen in knowing how well local public housing authorities (PHA) are managing their properties. The PHAs, through which HUD provides these subsidies and grants, house 3 million low-income people, many of whom are elderly or disabled. The Congress holds HUD responsible for ensuring that the authorities provide safe and decent housing, operate their developments efficiently, and protect the federal investment in their properties. The National Affordable Housing Act of 1990 required HUD to develop indicators to assess the management performance of PHAs. This law became the framework through which HUD developed one of its primary oversight tools for housing authorities, the Public Housing Management Assessment Program (PHMAP). Primarily, PHMAP establishes objective standards for HUD to evaluate and monitor the management operations of all PHAs to identify those that are troubled. According to HUD, PHMAP also allows the Department to identify ways to reward high-performing PHAs as well as improve the management practices of troubled PHAs. The program also allows PHAs’ governing bodies, management officials, residents, and the local community to better understand and identify specific program areas needing improvement. To help improve public housing management, the National Affordable Housing Act of 1990, as amended (the act), required HUD to develop indicators to assess the performance of PHAs in all the major aspects of their management operations. The act required HUD to use certain indicators as well as provided discretion for the Secretary of HUD to develop up to five additional indicators that the Department deemed appropriate. HUD implemented PHMAP by using the 12 indicators listed in table 1.1, the first seven of which are those required by statute. Because some indicators are more important than others in measuring management performance, HUD assigns them added weight in determining the overall score. HUD considers the indicators for vacancies, rents uncollected, annual inspection and condition of units and systems, and resident initiatives most indicative of good property management and delivery of services to residents, so each one has a greater weight than other indicators. After reviewing existing procedures and extensively consulting with a group of PHAs, public housing industry groups, private management firms, resident groups, and HUD staff in field offices, HUD has significantly revised the PHMAP indicators. HUD’s revisions to PHMAP, published December 30, 1996, eliminated three indicators; consolidated four other indicators into two; and added one new indicator, security. These revisions primarily address the performance indicators on which housing authorities report data, not HUD’s use of PHMAP data. Annually, PHAs receive a grade of “A” through “F” for each of the twelve indicators that apply to their operations. HUD uses a formula that reflects the weights assigned to each indicator, converts indicator grades into points, totals each PHA’s points, and divides that total by the maximum total the PHA could have achieved to arrive at a percentage. That percentage, a number between 0 and 100, is the PHMAP score. HUD draws data on the performance of a housing authority from two sources to determine the authority’s PHMAP score. First, the housing authority submits data to HUD for about half of the PHMAP indicators and certifies that this information is accurate and complete. HUD assigns grades to each of these indicators according to a comparison of the authority’s data and HUD’s criteria for grades “A” through “F.” The balance of the information HUD uses comes from its own information system for tracking expenditures from major grants. This system contains the financial and other types of data the field offices need to grade the remaining indicators for which the PHAs do not provide data. The field offices use this data and the PHA-certified data to determine indicator scores, the PHMAP score, and the PHA’s performance designation. The PHMAP score is HUD’s starting point for both the performance designation it assigns to a PHA and, depending on that designation, the extent of follow-up required of the PHA to correct deficiencies identified during the PHMAP assessment. Generally, HUD uses three designations to describe the performance of PHAs: troubled performers are those scoring less than 60 percent; standard performers are those scoring between 60 and less than high performers are those scoring 90 percent or more. HUD has the discretion to withhold the troubled designation or award the high performer designation if a PHA’s score is within 10 points of the threshold for either designation and HUD determines that its score results from the physical condition and/or neighborhood environment of that authority’s units rather than from the PHA’s poor management practices. If a housing authority is designated as troubled, it faces several mandatory follow-up activities and/or corrective actions to improve performance and remove the troubled designation. Specifically, the act requires HUD to perform an independent management assessment of the troubled PHA’s overall operations to identify the causes of the deficiencies that led to its poor PHMAP score. HUD uses private contractors to perform these independent assessments. HUD expects the independent assessments to form the basis for the second requirement for troubled PHAs—the memorandum of agreement (MOA). A memorandum of agreement is a binding contract between HUD and a troubled PHA to identify solutions to its management problems and pursue those solutions in a way that is significant, expeditious, and lasting. Among other things, HUD requires that the MOA address the specific responsibilities of HUD and the PHA, the resources each will commit to resolving the authority’s problems, the annual and quarterly performance targets for improving its performance on PHMAP indicators, and the incentives for it to meet its performance targets as well as sanctions for failing to do so. A PHA’s initial MOA generally lasts 18 months so that it can complete a second-year agreement with HUD, if necessary, before the first expires. HUD’s regulations for implementing PHMAP require standard- and high-performing PHAs to develop improvement plans for every PHMAP indicator on which the PHA received an “F,” unless the PHA can correct the deficiency within 90 days; HUD may also choose to require these plans for indicators receiving scores of “D” or “E” when failure to raise the grade might pose significant added risk. An improvement plan documents how and when the PHA plans to correct deficiencies. Although similar in content and scope to a memorandum of agreement, improvement plans differ in that (1) PHAs develop and submit them to HUD for approval rather than negotiate them with HUD officials and (2) they are not a binding contractual commitment between the PHA and HUD. When HUD first implemented PHMAP, it offered high-performers a variety of incentives, primarily regulatory relief from various reporting requirements. These incentives included less frequent reviews of changes to a PHA’s operating budget and, for those performing well on the modernization indicator, no prior HUD review for architects’ or engineers’ contracts. In addition to regulatory relief, high-performing PHAs receive a HUD certificate of commendation and public recognition for their performance. In its fiscal year 1997 budget request, HUD proposed an additional PHMAP-based incentive for high-performing PHAs when it sought to create a $500 million capital bonus fund (as part of the $3.2 billion it sought for its public housing capital fund). To be eligible for a bonus, a PHA would have to be a PHMAP high performer and have undertaken substantive efforts to obtain education and job training for its residents. However, the Congress chose not to fund the bonus proposal for public housing or any of HUD’s other major programs, in part because of concerns about HUD’s ability to accurately and reliably track the performance of bonus recipients. With nearly 800 staff devoted to oversight of housing authorities and implementation of the full range of HUD’s public housing programs, its field offices have the bulk of the Department’s responsibility for the day-to-day implementation of PHMAP. Field offices’ PHMAP responsibilities include determining the indicator grades and PHMAP scores, negotiating memorandums of agreement, approving PHAs’ improvement plans, and monitoring their progress in meeting the goals the MOA or improvement plan set forth. To determine a housing authority’s PHMAP score, a field office relies on that PHA to provide about half the data that leads to the overall PHMAP score and certify the data’s accuracy. As a result, the overall PHMAP score and everything it influences—from incentives for high performers to sanctions for troubled PHAs—are very much a joint effort and a shared responsibility. A PHA may also request to exclude or modify the data HUD should consider in computing its PHMAP score. An exclusion means that the indicator (or one or more of its components) is entirely excluded from calculations to determine the PHMAP score. For example, PHAs with no ongoing modernization or development programs are automatically excluded from being assessed on those indicators. Modifying the data for an indicator allows HUD to consider unique or unusual circumstances by exempting some of the data HUD usually requires the PHA to consider. The PHA still receives a score for the indicator, but the score would not reflect the data associated with the PHA’s unique or unusual circumstances. For example, a PHA operating under a court order not to collect tenants’ rent at specific developments until it corrects deficiencies the court had identified can seek to exempt those units in its developments from being considered in its indicator score for rents uncollected. A PHA always has the right to appeal a field office’s decision about modifications, exclusions, indicator scores, or the performance designation.