Since HUD began its reform efforts, we have developed a body of knowledge on the management functions that are key to becoming a high- performing agency and elements that are necessary for an organization to sustain management reform. Figure 1 shows the major management functions that are key to becoming a high-performing organization, based on the work we have done in identifying and defining performance and accountability challenges. Figure 2 shows the six elements we have identified as crucial factors to building and sustaining successful management reform initiatives at federal agencies. A successful reform effort requires leadership who articulates a clearly defined vision for reform and communicates this vision through a department’s strategic plans and goals and desired outcomes. It also requires commitment from career, politically appointed, and congressional leadership, as well as rank-and-file employees. Thoughtful human capital policies are also needed to produce an empowered workforce with the skills and training needed to meet an agency’s challenges. Further, sustaining the progress made by the reform effort requires well-planned information technology strategies that give key decision-makers the automated support and tools they need to carry out the agency’s mission. And where an agency relies on private contractors and other external partners to carry out its mission, as HUD does in many of its activities, sustaining the reform effort requires that mechanisms are in place to ensure that the agency and its partners have the same understanding of the goals and objectives desired. Together, these two models provide criteria useful for evaluating the sustainability of management reform initiatives and an agency’s progress toward becoming a high-performing organization. Strategic planning Budget formulation and execution Organizational alignment and control Performance measurement Human capital strategies Financial management Employee involvement Strategic planning Thoughtful and rigorous planning for human capital and information systems In the past, we have identified management functions such as financial management and information technology as “high-risk” because of their greater vulnerabilities to waste, fraud, abuse, and mismanagement. In January 2001, we identified strategic human capital management as a new governmentwide high-risk area. We reported that federal programs involving billions of dollars rely for their success on the performance of the federal government’s people—its human capital. However, after a decade of government downsizing and curtailed investments in human capital, it is becoming increasingly clear that current human capital strategies are not appropriately constituted to meet current and emerging needs of government and its citizens in the most effective, efficient, and economical manner possible. For many years, HUD has been the subject of sustained criticism for management and oversight weaknesses that have made it vulnerable to fraud, waste, abuse, and mismanagement. In 1994, we designated all of HUD’s programs as high-risk because of four long-standing management deficiencies: weak internal controls; inadequate information and financial management systems; an ineffective organizational structure, including a fundamental lack of management accountability and responsibility; and an insufficient mix of staff with the proper skills. At one point in the mid- 1990s, some suggested that the Congress should consider dismantling HUD if it were unable to operate with a clear legislative mandate and in an effective, accountable manner. HUD had undertaken other reorganization and downsizing efforts in 1993 and 1994. However, HUD’s 2020 Management Reform Plan intended to finally resolve its managerial and operational deficiencies, among other things, and to ensure HUD’s relevance and effectiveness into the 21st century. HUD’s 2020 Management Reform Plan was a complex and wide-ranging plan to change the negative perception of the agency by updating its mission and focusing its energy and resources on eliminating fraud, waste, and abuse in its programs. The reform plan presented two interrelated missions for HUD: (1) empower people and communities to improve themselves and succeed in the modern economy and (2) restore public trust by achieving and demonstrating competence. With these two missions, HUD’s goals were to become more collaborative with its partners, move from process-oriented activities to an emphasis on performance and product delivery, and develop a culture within HUD of zero tolerance for waste, fraud, and abuse. The plan also indicated that HUD would demand accountability from its employees, grantees, and private- and public-sector customers. To achieve its new missions, HUD developed six specific reform efforts to substantially overhaul the way it did business. These six reforms, which focused on numerous organization and program changes, are stated in the plan as follows: Reorganize by function rather than program ‘cylinders.’ Where needed consolidate and/or privatize. Modernize and integrate HUD’s outdated financial management systems with an efficient, state-of-the-art system. Create an enforcement authority, with one objective: to restore public trust. Refocus and retrain HUD’s workforce to carry out its revitalized mission. Establish new performance-based systems for HUD programs, operations, and employees. Replace HUD’s top-down structure with a new customer-friendly structure. (See app. I for a description of the six reforms and the specific organizational and program changes required by each reform. See app. II for a summary of HUD’s accomplishments and work that remains to be done for the major activities associated with the six reforms.) In September 2000, we testified on HUD’s progress in addressing its major management challenges as it tries to transform itself from a federal agency whose major programs were designated as “high-risk.” In January 2001, we recognized that HUD’s top management had given high priority to implementing the 2020 Management Reform Plan, HUD’s reorganization was substantially complete, and that the Department’s efforts had resulted in some improvements in its operations. Considering HUD’s progress toward improving its operations through the management reform plan and consistent with our criteria for determining high-risk, we reduced the number of HUD programs deemed to be high-risk to two of its major program areas—single-family mortgage insurance and rental housing assistance. HUD’s reorganization and consolidation efforts have achieved some successes, but not all inefficiencies that these efforts were intended to address have been eradicated. As we have reported, the Department’s reorganization stemming from the 2020 Management Reform Plan is substantially complete. HUD accomplished the restructuring in a little over 2 years, having announced the plan in June 1997 and establishing, staffing, and benefiting from the new entities by the end of fiscal year 1999. Most notably, HUD consolidated and streamlined some of its operations into new specialized centers, such as the Homeownership Centers (HOC), the Real Estate Assessment Center (REAC), and the Troubled Agency Recovery Centers (TARC). However, not all of the new centers are operating as envisioned because of staffing problems, delays in implementing supporting systems, and imbalanced workloads. Further, HUD has not been able to reduce the number of programs it manages. As a result, HUD is not achieving all of the efficiencies it had anticipated. Of the actions undertaken as part of HUD’s 2020 Management Reform Plan, the effort to consolidate and streamline some of its oversight and processing functions has perhaps been the most successful since the centers are operational and achieving results. For example, specialized centers have assumed responsibility for HUD’s single-family mortgage insurance program, physical and financial assessments, and enforcement activity. Some of the specific accomplishments in streamlining HUD’s operations include establishing four single-family HOCs to consolidate single-family housing mortgage insurance activities previously carried out in 81 field offices. The HOCs have reduced the average time for processing single-family mortgage insurance endorsements from 4 to 6 weeks to an average of 2 to 3 days. an REAC to consolidate physical assessments of assisted multifamily properties previously done by two program offices that were using different standards. In fiscal year 2000, REAC examined over 27,200 properties and reported that 83 percent of public housing developments and 85 percent of insured multifamily properties met HUD’s general physical condition standards. a Section 8 Financial Management Center (FMC) to consolidate budgeting, financial, and payment functions for both project-based and tenant-based Section 8 contracts. The FMC currently provides financial management support for about 10,000 Section 8 contracts from the Office of Public and Indian Housing (PIH) and the Office of Housing (Housing). two TARCs to assist failing public housing agencies in correcting major physical, financial, and management deficiencies. The TARCs currently have responsibility for about 50 troubled or poorly performing agencies. a Grants Management Center (GMC) to consolidate the processing, reviewing, and awarding of categorical and formula grants for PIH. All of the new centers have not assumed the responsibilities as HUD envisioned and as a result, problems remain that affect the operations of HUD’s programs. Specifically, our work indicates that HUD has not yet resolved issues pertaining to the effective use of staff and distribution of workload among centers and field offices, such that some offices may be understaffed, and others may be overstaffed. Staffing imbalances still exist at the HOCs. According to the reform plan, HUD would consolidate its single-family operations and about 70 percent of its field staff into the HOC’s. However, as of January 2001, about 44 percent of the single-family staff remained in 71 field offices because HUD subsequently decided not to force staff to relocate from the field offices. As a result, some of the HOCs are understaffed while single-family staff located in some field offices are not utilized in an effective and productive manner. HUD’s internal studies have also noted this problem: for example, a review conducted by HUD at one office reported that eight single-family staff located at that office were not fully utilized.