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HUD 2020 Management Reform Plan
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We shall not cease from exploration And the end of all our exploring Will be to arrive where we started And know the place for the first time
T.S. Eliot, |
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.
REFORM | SPECIFIC CHANGES |
#1 Reorganize by function rather than program "cylinders." Where needed, consolidate and privatize |
Organizational Changes
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#2 Modernize and integrate HUD's outdated financial management systems with an efficient, state-of-the-art system |
Organizational Changes
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#3 Create an Enforcement Authority | Organizational Changes
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#4 Refocus and retrain HUD's workforce to carry out our revitalized mission | Organizational Changes
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#5 Establish new performance-based systems for HUD programs, operations, and employees |
Organizational Changes
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#6 Replace HUD's top-down bureaucracy with a new customer-friendly structure |
Organizational Changes
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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.
Currently, the need to monitor activities far outstrips the abilities of both the Office of Housing and the Office of Public and Indian Housing.
"Get out the red pen. Be a ruthless editor. Ask this about every sentence, every rule, every `don't': Does this need to be in there? Is it going to help our company one bit, whit, or iota as it struggles to hustle and achieve towering competence in an upside-down world? No? Tear it out. Crumple it up. See that wastebasket? Practice your hoop skills."
Tom Peters,
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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). |
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.
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.
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:
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:
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.
"The way we organize to get things done in the public and private sectors and in general is undergoing the most profound shift since at least the Industrial Revolution."
Tom Peters, |
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.
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.
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:
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.
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.
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.
"Information
technology greatly enhances
institutional memory: a retrievable account of what
an organization has done who did what, with what resources, at
what costs, and with what results."
John Kao,
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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.
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.
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 |
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.
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.
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.
"I am concerned that we do not take a
Band-Aid approach to curing deep systemic
problems."
Senator
Barbara Mikulski,
HUD and Independent Agencies
Subcommittee
Hearing 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.
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 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.
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.
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.
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.
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.
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.
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.
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.
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 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 year2000. 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.
Peter Drucker,
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.
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.
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.
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.
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 evaluate the current
Public Housing Management Assessment Program (PHMAP) and suggest
future improvements. The board will also study alternative
performance evaluation models used in other 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.
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.
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.
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.
The current field structure has state offices with a full staff of
program-specific employees. This structure will be replaced by field offices staffed
Peter Drucker,
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.
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:
Michael Hammer and A more detailed description of the management plan process can be found in Appendix B.
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 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.
ORGANIZATIONAL CHANGES
PROGRAM CHANGES
ORGANIZATIONAL CHANGES
"To build business performance into
the human organization is difficult. But it is essential."
Managing For Results
ORGANIZATIONAL CHANGES
PROGRAM CHANGES
ORGANIZATIONAL CHANGES
"All institutions, including
governments, churches, universities, and so on will
become more inter-dependent, more market and customer-driven."
Leader to Leaderwith 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.
"At the heart of business reengineering lies the notion
of `discontinuous thinking' - identifying and abandoning the outdated rules and fundamental assumptions that underlie current operations. Reengineering takes nothing for granted. It ignores what is and concentrates on what should be."
James Champy,
Reengineering the CorporationThe 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.
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