HUD's FY 99 Budget
Congressional Justifications
Management and Administration

Salaries and Expenses

This section provides a consolidated justification for all Salaries and Expenses funds of the Department. Pursuant to 12U.S.C.701(c)(3), the Secretary is authorized to consolidate all operating expenses into a single account to simplify day-to-day financial operations and provide some measure of flexibility in the use of personnel to carry out the wide variety of Departmental programs. This also permits simplification of personnel, payroll, management, and accounting procedures.

APPROPRIATION HIGHLIGHTS

The following table summarizes the funding sources and staffing included in this request.

SUMMARY OF BUDGET REQUEST

For 1999, the requested appropriation is $1,000,826 thousand, which consists of

$471,843 thousand in budget authority, and authority to transfer $518,000 thousand from various FHA accounts, $9,383 thousand from GNMA, $1,000 thousand in administrative funds from Community Planning and Development (Section 108), $200 thousand from Title VI Indian Federal Guarantees Program Account, and $400 thousand from Indian Housing Loan Guarantee Fund Program Account. Including reimbursements, fees and other sources, it is estimated that total obligations for "Salaries and Expenses" will be $1,008,361 thousand. These funds will support 8,955 full-time equivalent staff. The 1998 current estimate amount reflects funding in P.L. 105-65 and "Other Transfers" estimates.

In addition, the 1999 Budget request includes a provision for the Department to transfer to the Departmental Salaries and Expenses account up to 1 percent of the amount appropriated in most

program accounts within the Department. This funding will be used for evaluation and monitoring of programs and collecting and maintaining data under section 7(r) of the Department of Housing and Urban Development Act as determined by the Secretary, including such activities as may be required under the Government Performance and Results Act of 1993 and 31 U.S.C 1115, 1116 and 9703.

The 1999 Budget request of $1,008,361 thousand incorporates sufficient funds for the implementation and execution of HUD 2020 Management Reform. Reform 2020 presents a fundamental management overhaul that, when executed, will bring HUD into the 21^st Century in a manner consistent with the principle of business process reengineering while still focusing on the principle mission of improving housing conditions for the less fortunate. Reform 2020 focuses on getting HUD�s own house in order, on managing its programs and people more efficiently and responsibly.

This revitalization effort demands a change in HUD�s policies and programs. HUD plans to be a major influence in helping communities move from an industrial to an information society and will be an ally to communities and a creator of opportunities and hope. Reform 2020 requires many cross-program consolidations of major functions, downsizing the workforce, streamlining organizational structures, and fundamental changes in HUD�s administrative structure.

HUD 2020

The HUD 2020 Management Reform Plan consolidates several major functions of the Department, including Enforcement operations, Section 8 Financial Management and Real Estate Assessment. The rationale for undertaking these consolidations is to avoid duplication of effort, streamline operations, address major management deficiencies identified by GAO, OIG and NAPA, and integrate activities across HUD business lines to maximize efficiency and dramatically improve customer service. The Plan also calls for the development of "Community Builders." This is an innovative approach to further the goals of community empowerment and increase customer service delivery.

In the past, many HUD programs and functions duplicated each other�s efforts, and, at times, worked at cross-purposes. In enforcement operations, Section 8 financial management, accounting operations, real estate assessment and troubled public housing recovery efforts, elimination of these duplications and overlapping operations provide substantial opportunity for costs savings, management improvements, and, most importantly, improved customer service. These concepts involve establishing central locations to standardize operations.

The Department will continue to reduce staffing through the year 2002. Recently, a Buyout Program was accomplished through which approximately 1,000 buyout offers were accepted. This reduction in staff will generate salaries and expenses savings over the next several years. Additionally, performing many major Departmental functions at consolidated sites will provide cost savings.

Although no offices will be closed and many program areas will continue to maintain a cadre of customer service and outreach staff, the consolidations of many aspects of program operations will provide considerable cost savings, allowing for maximum effective use of appropriated funds.

COMMUNITY RESOURCE CENTERS

The HUD 2020 Management Reform plan addresses two different but interrelated missions for the Department. They are: 1) empower people and communities to improve themselves and succeed in today�s time of transition; and 2) restore the public trust in HUD programs.

The establishment of Community Resource Centers, designated as "storefront offices" is the first step to providing a customer friendly, open-door approach for communities and customers to access a full range of HUD programs and services. The Centers will be equipped with enhanced technology support and furnishings which will offer an innovative, flexible and efficient customer service environment. Additionally, the Centers will have access to a wide array of HUD programs and services both on site and through the use of "virtual imagery." Pilot "storefront office" development is underway in Wilmington, Delaware and Washington, DC.

Another innovative approach to further the goals of community empowerment, local service delivery and customer service in selected cities, has led to the development of "Community Builders." Community Builders will be the first point of contact for customers and the Department�s front door for access to a wide array of HUD services. These specially trained service providers will have broad, cross-divisional knowledge of HUD programs and initiatives. They will provide facilitation, liaison and marketing services for HUD customers and identify community concerns and special requests, while ensuring that communities receive information and assistance necessary for their empowerment.

A cross-programmatic integrated service delivery plan will be developed for each Community Resource Center and Community Builders will provide the coordination necessary to ensure "one stop shopping" for HUD customers.

HUD is embarking upon a revitalization effort that will significantly change many of its policies and programs. The traditional goals of the Department remain the same, which are increasing the supply of affordable housing and opportunities for homeownership, reducing homelessness, and promoting job and economic development. However, the mission must be updated, renewed and refocused. HUD plans to be a major influence in helping our communities move from the industrial age to an information economy by becoming an ally to communities and a creator of opportunities and hope.

REAL ESTATE ASSESSMENT CENTER

The purpose of the Real Estate Assessment Center (Assessment Center) is to centralize and standardize the manner in which the Department conducts assessments of public housing agencies and Indian housing authorities and the Office of Housing�s multifamily inventory. The Offices of Housing and Public and Indian Housing, currently operate separate and independent real estate management operations, yet portfolio management is a common function of asset management for both the Office�s Housing multifamily stock and the Public Housing Authorities.

The Assessment Center will be comprised of three computer based systems which include physical inspection, audit, and, an integration of audit and physical inspection. These systems will integrate physical inspection and financial audit systems into a comprehensive tool for asset management and compliance monitoring of the multifamily and PHA portfolios. A main data base will link the data from all three systems. This linking will allow for a continuum ranking for a further capacity to detect non-compliance with Federal rules and regulations. The Center will collect specific internal and external information on the condition of the physical stock, the quality of life for residents, and the fiscal and management performance of agencies and owners.

Staff will support and service both the Offices of Housing and Public and Indian Housing. They will review data from financial statements, audits and physical inspections based on guidelines used by public housing authorities, mortgagees and lenders. The assessment process will determine whether projects have passed or failed based on standard protocols for financial and physical performance requirements.

ENFORCEMENT CENTER

Presently, the Office of Housing, Public and Indian Housing, Community Planning and Development, and Fair Housing and Equal Opportunity all have enforcement components.

The Enforcement Center will consolidate existing operations (except civil rights) and employees, contract with outside investigators, auditors, engineers, and attorneys when necessary and appropriate. Because the enforcement system needs reform, HUD will make significant changes, both organizationally and programmatically. The new Enforcement Center will be responsible for establishing receivership for all Public Housing Authorities that do not recover within one year after they have been designated as failing their annual assessment. Additionally, it will be responsible for all multifamily properties failing the physical and financial audit inspections performed by the real estate assessment system. Finally, the Center will handle all grantees who fail program compliance.

HUD�s Office of Inspector General, the Department of Justice, and the Internal Revenue Service will work with the Enforcement Center to help eliminate fraud, waste and abuse in HUD programs.

SECTION 8 FINANCIAL MANAGEMENT CENTER

Payment processing for Section 8 is currently performed by both Public and Indian Housing and the Office of Housing in separate field offices. To reduce this fragmentation, a central location for Section 8 payments is being established. The primary objective of the Center will be to develop a process to minimize overpayment to the owners and verify participant income, while at the same time reducing overhead and overtime costs. Functions will include budgeting, payment scheduling, contract reservations and revisions, financial statement revisions, rent calculations and income verifications. The establishment of a central and unified Section 8 Financial Management Center will increase effectiveness and efficiency of financial management operations and improve internal controls.

ESTIMATED OBLIGATIONS

The table below displays total obligations by object class and is followed by discussions of the estimates.

HUD is committed to restructuring its resources in a way that is suitable to meet the demanding tenets of our Reform 2020 initiative.

EXPLANATION OF CHANGES FY 1999 vs. FY 1998

1. Personal Services: Personal services costs include all salaries and personnel benefits which are paid by the Department. These include health and life insurance, the Government�s contribution to employee retirement plans, accrued leave, and reimbursement for costs incurred during transfers, as well as salary and overtime payments and payments made to the Employees� Compensation Fund (ECF) for the medical support of former employees who have job-related medical problems.

Personal services costs also include payments to or for former personnel, including payments to the Federal Employee Compensation Account (FECA), which is a vehicle for reimbursing the various States for unemployment compensation payments made to former HUD employees. The FECA program is administered by the Department of Labor. In addition, severance pay for employees who have been involuntarily separated is directly provided to eligible former employees.

The 1999 estimate is $609,380 thousand and will fund approximately 8,955 FTE. This a reduction in funding of $46,328 thousand and a decrease of 487 FTE from fiscal year 1998, and a decrease of 1,500 FTE over a 2-year period of time. The funding covers the full year cost of a 1999 pay raise, changes to the average grade, within-grade increases, benefits, terminal leave payments, and relocation costs. The decrease is in concert with the Department�s Reform 2020 plan to achieve an FTE usage of approximately 7,500 by the end of fiscal year 2002.

2. Travel and Transportation of Persons: This category represents the transportation of Government employees and/or other persons who travel under the auspices of the Federal Government, their per diem allowances when in authorized travel status, and other expenses incident to travel which are paid by the Government directly or by reimbursing the traveler. It consists of travel both away from the official duty station and in and around the official station of an employee.

The 1999 estimate is $27,092 thousand, an increase of $2,344 thousand over the 1998 current estimate. The increase is related to implementation and execution costs associated with the new centers being established under Reform 2020. Anticipated types of costs associated with these centers include: relocation costs, increased visits to troubled properties, and increased inspections of troubled properties.

3. Transportation of Things: This classification consists of charges for the transportation of things and the care of such things while in the process of being transported. It includes rental trucks and other transportation equipment, and reimbursement to Government personnel for authorized movement of household effects or house trailers.

The 1999 estimate of $1,749 thousand is a decrease of $1,610 thousand from the 1998 current estimate. This anticipated decrease is the result of the majority of relocations associated with Reform 2020 occurring in fiscal year 1998.

4. Rent, Communications, and Utilities: The funds under this object classification provide for all rental costs�-both space and equipment�-communication services, and utilities. The major cost associated with this object class is real property rental. The General Services Administration establishes rental rates and provides cost estimates for the space requirements identified by the Department.

The 1999 estimate of $99,168 thousand is a decrease of $5,355 thousand from the 1998 current estimate. The decrease is anticipated as a result of a decrease in staff and the completion of identified program consolidations into the Centers.

5. Other Services: This object class encompasses a wide array of services that are not captured in the other object classes. The types of services included are training; storage of household goods; data processing services; other contracts such as data and statistical collection and analysis, management studies, technical, and public information services; and other services such as health services, library services, stenographic services, visual art services, etc.

The 1999 estimate of $247,372 thousand is an increase of $52,958 thousand over the 1998 current estimate. The increase is principally due to training, space alterations and contracting for legal services. The Department�s 1999 training program maintains and accelerates training to refocus and retrain HUD�s workforce to carry out its revitalized mission under Management Reform 2020. Also associated with management reform are costs related to space alterations which are required in locations experiencing increases in staff as well as those with decreases in staff. Additionally, the Department anticipates contracting for such legal services as may be necessary and appropriate as demand increases in several areas, such as enforcement case development, litigation for special cases, and multifamily insured closings.

Reform 2020 plans to create Community Resource Centers across the Country along with three major consolidated centers: Real Estate Assessment Center; Section 8 Financial Management Center; and an Enforcement Center. Under Reform 2020, the Department will outsource legal and investigative services when appropriate; outsource technical assistance to grantees when appropriate; privatize physical building inspections, financial audits, technical assistance, and real estate assessments; privatize other programs where it is deemed cost effective; and invest in ADP services to help integrate financial management systems.