Single-Family Housing: Better Strategic Human Capital Management 
Needed at HUD's Homeownership Centers (26-JUL-01, GAO-01-590).	 
								 
The Department of Housing and Urban Development (HUD), through	 
the Federal Housing Administration (FHA), insures billions of	 
dollars in home mortgage loans made by private lenders. HUD's	 
2020 Management Reform Plan, issued in 1997, sought to downsize  
and reform the Agency, including its single-family mortgage	 
insurance program. As part of its 2020 plan, HUD consolidated the
single-family program's field activities at four new regional	 
homeownership centers and specified resources for the centers.	 
Although HUD has substantially streamlined FHA's single-family	 
mortgage insurance programs, human capital issues remain a	 
concern. This report reviews HUD's implementation of the	 
homeownership center concept under the 2020 plan, focusing on (1)
the deployment of center staff, (2) the training provided to the 
center staff, and (3) the centers' monitoring of contractors. GAO
found that nearly half of the centers' staff remain in 71 field  
offices across the country, even though HUD envisioned that only 
a third of the staff would stay in the field offices. The	 
deployment of staff across the centers is not consistent with	 
their workload, and, as a result, the centers are having trouble 
supervising and making effective use of staff. GAO also found	 
that HUD has not developed a standardized training curriculum for
center staff. The centers have had difficulty using their	 
training funds effectively because HUD provided them late in the 
fiscal year and then pulled back some funds before they could be 
used. Finally, increased responsibilities and staff shortage have
caused the centers to expand their use of contractors. However,  
the centers' ability to monitor contractors has not kept pace	 
with their growing reliance on them.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-590 					        
    ACCNO:   A01124						        
  TITLE:     Single-Family Housing: Better Strategic Human Capital    
             Management Needed at HUD's Homeownership Centers                 
     DATE:   07/26/2001 
  SUBJECT:   Mortgage loans					 
	     Mortgage protection insurance			 
	     Federal downsizing 				 
	     Human resources utilization			 
	     Mortgage programs					 
	     Human resources training				 
	     Contract administration				 
	     HUD 2020 Management Reform Plan			 

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GAO-01-590
     
Report to the Ranking Minority Member, Subcommittee on Housing and
Transportation, Committee on Banking, Housing, and Urban Affairs, U. S.
Senate

United States General Accounting Office

GAO

July 2001 SINGLE- FAMILY HOUSING

Better Strategic Human Capital Management Needed at HUD's Homeownership
Centers

GAO- 01- 590

Page i GAO- 01- 590 HUD's Homeownership Centers Letter 1

Appendix I Objectives, Scope, and Methodology 37

Appendix II Single- Family Contract Obligations for Fiscal Years 1999 and
2000 40

Appendix III GAO?s Human Capital Framework 43

Appendix IV Comments From the Department of Housing and Urban Development 45

Appendix V GAO Contacts and Staff Acknowledgments 52

Related GAO Products 53

Tables

Table 1: Homeownership Center Divisions and Responsibilities 7 Table 2:
Homeownership Centers? Workforce as of January 25,

2001 11 Table 3: Dollar Amounts of Single- Family Program Training

Requested, Approved, and Provided for Fiscal Years 1999 and 2000 24 Table 4:
Entity That Performs Routine Mortgage Insurance

Endorsement and Property Disposition Activities 27 Table 5: Single- Family
Contract Obligations for Each

Homeownership Center and Nationally, Fiscal Years 1999 and 2000 41 Table 6:
Single- Family Contract Obligations by Contract Service

Type, Fiscal Years 1999 and 2000 42 Table 7: GAO?s Human Capital Framework
43 Contents

Page ii GAO- 01- 590 HUD's Homeownership Centers Figures

Figure 1: Geographical Jurisdictions of HUD?s Four Homeownership Centers and
Field Offices with Center Staff 8 Figure 2: Differences Between the
Workforce Originally Planned

for the Centers and the Centers? Workforce as of January 25, 2001 12 Figure
3: Percentage of Each Homeownerships Center?s Workforce

Located in Field Offices 13 Figure 4: Staffing Levels of Field Offices With
Single- Family Staff 14 Figure 5: Endorsements Processed by the Four
Homeownership

Centers, Fiscal Years 1999 and 2000 18 Figure 6: Single- Family Acquired
Properties Managed by the Four

Homeownership Centers At the End of Each Quarter of Fiscal Year 2000 19

Abbreviations

FHA Federal Housing Administration HUD Department of Housing and Urban
Development NAPA National Academy of Public Administration

Page 1 GAO- 01- 590 HUD's Homeownership Centers

July 26, 2001 The Honorable Wayne Allard Ranking Minority Member,
Subcommittee

on Housing and Transportation Committee on Banking, Housing,

and Urban Affairs United States Senate

Dear Senator Allard: The Department of Housing and Urban Development (HUD),
through its Federal Housing Administration (FHA), annually insures billions
of dollars in home mortgage loans made by private lenders. FHA?s mission is
to expand homeownership in the United States by assuming 100 percent of the
risk for the mortgages it insures. Compared with private mortgage insurers,
FHA is more likely to insure loans for low- income and minority borrowers.
To carry out its mission, FHA relies on private lenders to determine
borrowers? creditworthiness and to make and fund loans. FHA also uses
private appraisers to assess the value of the properties that it insures.
Finally, FHA relies on contractors to help assess lenders? compliance with
its requirements, monitor the performance of appraisers, and manage and sell
the properties it acquires through foreclosure. Without careful oversight of
these lenders, appraisers, and contractors, FHA is vulnerable to
mismanagement and fraud.

In 1997, HUD issued its 2020 Management Reform Plan, which provided for
downsizing and reforming the Department, including its single- family
mortgage insurance program. As part of its 2020 reforms, HUD consolidated
the single- family program?s field activities- such as processing mortgage
insurance and overseeing lenders- at four new regional homeownership centers
and specified resources for the centers. Although HUD has substantially
streamlined FHA?s single- family mortgage insurance programs, human capital
issues remain a concern. For this and other reasons, we reported in January
2001 that HUD?s single- family mortgage insurance programs were a high- risk
area for the Department. At that time, we also reported that strategic human
capital management was a high- risk area across the federal government.

In response to your request that we review HUD?s implementation of the
homeownership center concept under the 2020 plan, we assessed HUD?s efforts
to resolve human capital issues related to staffing, training, and

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 01- 590 HUD's Homeownership Centers

oversight of contractors at the homeownership centers. 1 Specifically, as
agreed with your office, we reviewed (1) the deployment of center staff, (2)
the training provided to center staff, and (3) the centers? monitoring of
contractors. In addition, we examined HUD?s use of planning tools to target
its homeownership center resources effectively.

To address these issues, we developed and analyzed workload statistics and
contracting data for fiscal years 1999 and 2000- the first 2 years that the
centers were in operation. We also interviewed officials at HUD headquarters
and visited all four of the Department?s homeownership centers located in
Atlanta, Georgia; Denver, Colorado; Philadelphia, Pennsylvania; and Santa
Ana, California. Appendix I provides additional details on our scope and
methodology.

Central to HUD?s 2020 reform plan was the consolidation of single- family
program activities and staff from HUD?s 81 field offices to 4 homeownership
centers to provide more consistent and efficient program service. Since
their formation, the four centers have provided more uniform service to
customers and reduced the processing time for insurance endorsements from
several weeks to a few days. While the centers have improved program
service, staffing imbalances have hampered center operations. Although HUD
envisioned leaving about a third of the centers? staff in field offices,
nearly half of the centers? staff remain in 71 field offices across the
country. In addition, the deployment of staff across the centers is not
consistent with their workload. As a result, all four centers have
difficulty supervising and making effective use of the staff in field
offices, and the Philadelphia center, which has the largest workload, has
fewer staff than two other centers. These imbalances exist because HUD
assigned staff to the centers without performing a systematic workload
analysis and did not force staff to relocate from the field to the centers.
Furthermore, as the centers have struggled to use their staff effectively,
new initiatives, such as the Department?s fraud prevention efforts, have
increased the centers? workload. To make more effective use of their staff,
the centers would like to eventually move many field office positions to the
centers as field staff leave or retire.

1 We will be issuing a second report later this year on the single- family
information systems used by the homeownership centers. Results in Brief

Page 3 GAO- 01- 590 HUD's Homeownership Centers

Planning training for the centers has been inadequate because HUD has not
developed a standardized training curriculum for center staff. For example,
although HUD has provided basic auditing training to the staff who perform
on- site monitoring reviews of lenders, it has not established a curriculum
that identifies the other types of training these staff should receive. A
training curriculum could help direct the centers? requests for training and
ensure that training funds are used to provide training that develops or
sharpens needed skills. In addition, the centers have had difficulty using
their training funds effectively because HUD provided them late in the
fiscal year and then pulled back some funds before they could be used. For
example, of the $366,000 in single- family training funds approved by HUD
for fiscal year 1999, about $145,500 was spent. HUD did not make the final
training fund allocation for the fiscal year until March 1999, and in July
1999, it withdrew the funds for the remainder of the fiscal year, giving the
centers only about 4 months to provide training.

With increases in their responsibilities and a shortage of staff to handle
the work, the centers have expanded their use of contractors. However, the
centers? ability to monitor contractors has not kept pace with their growing
reliance on them. Whereas the 2020 plan specifically mentioned only that the
centers would use contractors to manage and sell the properties that HUD
acquired through foreclosure, contractors currently perform many of the
centers? mortgage insurance endorsement activities, including evaluating the
underwriting quality of loans insured by FHA. In fiscal year 2000, HUD
obligated about $390 million for contractors handling single- family program
activities. Center staff primarily monitor the contractors; however, our
past work on HUD?s monitoring of center contractors- including contractors
responsible for overseeing loan quality and maintenance and sales of HUD-
owned properties- has indicated that oversight is a significant problem. For
example, in May 2000, we reported that HUD?s assessments of the performance
of its management and marketing contractors did not follow a consistent
format and did not always determine the level of risk posed by contractors?
performance, making it difficult to compare and track the performance of
contractors over time. 2 HUD has recently begun to consider risk in its
monitoring of management and marketing contractors, but it is too soon to
assess the impact this will have on the Department?s oversight of these
contractors.

2 Single- Family Housing: Stronger Measures Needed to Encourage Better
Performance by Management and Marketing Contractors (GAO/ RCED- 00- 117, May
12, 2000).

Page 4 GAO- 01- 590 HUD's Homeownership Centers

To target departmental resources more effectively, HUD has begun to use its
strategic plan, a new resource estimation and allocation model, and other
planning tools. HUD?s strategic plan has identified goals and objectives for
the single- family program and the homeownership centers. In addition, a
contractor has used a model developed by the National Academy of Public
Administration to analyze the centers? workload and staffing requirements.
HUD is currently evaluating the contractor?s conclusion that the centers?
total workforce could be reduced by 31 staff- a conclusion with which
single- family housing officials disagree. HUD has also recognized the need
for a succession plan that will help it replace the large percentage of the
single- family workforce that is expected to retire in the near future.
Another planning tool that HUD has begun to use at higher levels but not yet
at the centers is our recently published human capital self- assessment
checklist, which contains a framework for linking an agency?s human capital
management to its strategic and business planning. These tools can assist
HUD in determining staffing needs at the centers and allocating center staff
resources, as well as in recruiting and retaining the staff needed to meet
the centers? current and future workforce requirements.

Given the multibillion- dollar insurance risk that FHA assumes annually on
behalf of the American taxpayer, it is critical that the agency carries out
its responsibilities efficiently and effectively. After 2 years in
operation, the centers have demonstrated their potential to improve customer
service. However, our recent designation of the single- family program as a
highrisk area shows that HUD?s establishment of the homeownership centers
has not fully resolved long- standing problems. Many of these problems stem
from weaknesses in the Department?s human capital management. This report
contains recommendations designed to improve HUD?s strategic human capital
management at the centers, including its deployment and training of center
staff and its overall analysis of the centers? human capital needs. HUD
agreed with each of our recommendations.

HUD?s homeownership centers support the single- family activities of FHA. 3
FHA insures lenders against losses on mortgages for single- family homes.
Lenders usually require mortgage insurance when a homebuyer

3 FHA is a unit within HUD, and the Assistant Secretary for Housing is also
the Federal Housing Commissioner. Background

Page 5 GAO- 01- 590 HUD's Homeownership Centers

makes a down payment of less than 20 percent of the value of the home. Thus,
FHA plays a particularly large role in certain market segments, including
loans to low- income borrowers and first- time homebuyers, whose cash for
down payments is likely to be limited. During fiscal year 2000 alone, FHA
endorsed over 900,000 mortgages totaling about $94 billion. If a borrower
defaults and the lender subsequently forecloses on an FHA- insured mortgage,
the lender can file an insurance claim with FHA for the unpaid balance of
the loan. When FHA reimburses a lender for a defaulted loan, HUD receives
the deed to the foreclosed property. HUD, in turn, sells this property via
one of its management and marketing contractors to recoup as much of FHA?s
reimbursement as possible.

In the past, HUD carried out its single- family activities- such as
processing mortgage insurance and overseeing appraisers and lenders
participating in FHA?s programs- in 81 separate field offices. During late
1993 and early 1994, HUD developed and tested a plan for consolidating these
single- family activities into centers so as to achieve more efficient and
effective operations. It established a pilot center in Denver and
transferred the functions for processing and endorsing loans from 17 HUD
field offices to the center. 4 In 1996, HUD declared that the pilot was a
success. It found that the center reduced the time for processing loans from
several weeks to a few days and required only about half as many staff as
previously needed to process and endorse loans. In 1997, the homeownership
centers became a key part of the 2020 Management Reform Plan.

HUD?s 2020 plan was designed to address service- delivery problems that had
prompted congressional proposals to severely downsize or eliminate HUD.
According to the plan, the homeownership centers would correct problems with
the delivery of single- family housing services, such as delays in
processing insurance endorsements and inconsistent customer service. The
plan stated that the homeownership centers would, among other things, (1)
provide faster, more uniform, and more efficient services to clients,
lenders, and borrowers; (2) improve HUD?s risk assessment, loss mitigation,
5 and quality assurance activities; (3) increase HUD?s

4 The pilot involved only the loan processing and insurance endorsement
functions. Consolidation of the rest of HUD?s single- family activities was
not piloted. 5 FHA?s loss mitigation program seeks, among other things, to
reduce the number of foreclosures by using alternatives to foreclosure, such
as loan modifications.

Page 6 GAO- 01- 590 HUD's Homeownership Centers

production of single- family loans to targeted populations; and (4) cut the
processing time for insurance endorsements from 2 weeks to 1 day.

The 2020 plan envisioned downsizing HUD?s workforce from 10,500 to 7,500 by
fiscal year 2000. To help achieve this goal, HUD planned to reduce its
single- family field workforce by about 60 percent and merge the numerous
single- family field office responsibilities into homeownership centers. 6
The consolidation of activities at four centers was carried out in phases
and was substantially completed in December 1998. The centers grant FHA-
approved lenders direct endorsement authority, meaning that they can
underwrite loans and determine their eligibility for FHA mortgage insurance
without HUD?s prior review. They also oversee the contractors who review
loan case files and endorse or reject loans for FHA mortgage insurance on
the basis of these reviews. To monitor lenders? compliance with FHA?s
mortgage requirements, the centers (1) oversee contractors hired to perform
desk audits of the underwriting quality of individual loans already insured
by FHA, known as technical reviews, and (2) conduct onsite evaluations of
lenders? operations, known as lender reviews. The centers also monitor the
contractors who manage and sell properties acquired through foreclosure. As
shown in table 1, each homeownership center is divided into five divisions.

6 Some single- family staff would remain at HUD headquarters.

Page 7 GAO- 01- 590 HUD's Homeownership Centers

Table 1: Homeownership Center Divisions and Responsibilities Division
Responsibilities

Processing and Underwriting Reviews test cases prior to granting lenders
direct endorsement authority and processes requests for FHA mortgage
insurance Real Estate Owned Oversees the preservation and sale of homes

acquired through foreclosure Quality Assurance Monitors mortgage lenders
Program Support Performs an array of technical services,

including contract and grant monitoring and property inspections Program
Operations and Customer Service Provides internal operational support for
the

other divisions and customer service to lenders and the public

Source: HUD.

The homeownership centers are located in Atlanta, Georgia; Denver, Colorado;
Philadelphia, Pennsylvania; and Santa Ana, California. Figure 1 shows the
jurisdiction of each of the four centers, and the field office locations
with center staff. The centers report directly to HUD?s Deputy Assistant
Secretary for Single Family Housing who, in turn, reports to the Assistant
Secretary for Housing- Federal Housing Commissioner.

Page 8 GAO- 01- 590 HUD's Homeownership Centers

Figure 1: Geographical Jurisdictions of HUD?s Four Homeownership Centers and
Field Offices with Center Staff

Page 9 GAO- 01- 590 HUD's Homeownership Centers

Source: GAO?s analysis of data from HUD?s Office of Housing.

In fiscal year 1999, the centers, with the help of contractors, endorsed
about 1.3 million mortgages totaling $123.1 billion- a record in dollar
terms. According to HUD, a strong economy and lower interest rates
contributed to this success. The percentage of FHA- insured loans made to
targeted populations also increased. For first- time homebuyers, the
percentage increased from 70.3 percent in fiscal year 1997 to 80.7 percent
in fiscal year 1999, and for minorities, it increased from 31 percent in
fiscal year 1996 to 37 percent in fiscal year 1999. In addition, the
processing time for insurance endorsements dropped from several weeks to a
few days. The centers achieved this reduction in processing time through a
combination of technology, direct endorsement by lenders, and contracting
out. According to a representative of a major lender association, customer
service has improved because the guidance that the 4 centers provide is more
uniform than the guidance provided by the 81 different field offices.

Despite these successes, our recent reviews of operations at the
homeownership centers revealed problems that can be attributed, in part, to
human capital shortfalls. Specifically, we identified problems with the
centers? oversight of appraisers, mortgage lenders, and property disposition
contractors. These problems increased HUD?s insurance risk and limited its
ability to recoup losses upon foreclosure. According to center officials, a
shortage of staff and insufficient training contributed to these oversight
problems. For example, center officials cited in our April 2000 report on
HUD?s oversight of FHA lenders maintained that inexperience on the part of
staff was one reason why high- risk lenders were not always reviewed. 7 The
officials explained that many of the staff assigned to review lenders came
from a pool of unassigned staff after the reorganization and had no
background in lender monitoring and credit issues. Additionally, according
to officials at the Philadelphia and Denver centers cited in our April 1999
report on HUD?s oversight of appraisers, these centers rarely conducted on-
site reviews of properties that contractors had field reviewed because the
centers lacked sufficient staff and travel resources. 8 As a result, the
centers neither tracked the

7 Single- Family Housing: Stronger Oversight of FHA Lenders Could Reduce
HUD?s Insurance Risk (GAO/ RCED- 00- 112, Apr. 28, 2000). 8 Single- Family
Housing: Weaknesses in HUD?s Oversight of the FHA Appraisal Process

(GAO/ RCED- 99- 72, Apr. 16, 1999).

Page 10 GAO- 01- 590 HUD's Homeownership Centers

percentage of each contractor?s work that received on- site reviews nor
evaluated the contractor?s performance. These shortfalls weakened HUD?s
ability to assess the quality of the appraisals used to support FHA loans.

Under 2020, HUD planned to locate the majority of its single- family field
staff in the four homeownership centers. However, because HUD subsequently
decided not to force staff to relocate from the field offices, more center
staff remain working in field offices than are needed. As of January 2001,
44 percent of the centers? workforce remained in field offices, compared
with the 32 percent originally planned. Because the consolidation envisioned
under the 2020 reforms has never been achieved, it has been difficult for
the centers to use and supervise their scattered workforce. In addition,
staff are not allocated across the centers according to workload. For
example, the center with the largest workload does not have the most staff,
making it more difficult for it to complete its work. Furthermore, increases
in workload stemming from new initiatives, such as the Department?s fraud
prevention efforts, have created further challenges for the centers.

Modifications to the original 2020 reforms have resulted in a slightly
larger single- family workforce overall and more staff in the field offices
than HUD initially projected. According to a report HUD issued in the spring
of 1997 in support of the 2020 plan, the centers were to have a staff of 805
by fiscal year 2000. 9 We reported in March 1998 that this proposed staffing
level was based on targeted staffing levels and the Department?s staffing
constraints, rather than a systematic analysis of workload to determine
need. 10 HUD?s plans assumed that the centers? workforce would be divided
equally among the four centers. In May 1998, the Secretary decided to limit
the planned downsizing, and as of January 2001, the centers had 841 fulltime
positions (see table 2).

9 HUD?s 2020 plan did not discuss the specific staffing level envisioned for
the homeownership centers. 10 HUD Management: Information on HUD?s 2020
Management Reform Plan

(GAO/ RCED- 98- 86, Mar. 20, 1998). Center Staff Are Not

Deployed Where Needed

More Staff Remain in Field Offices Than Planned

Page 11 GAO- 01- 590 HUD's Homeownership Centers

Table 2: Homeownership Centers? Workforce as of January 25, 2001
Homeownership center Full- time positions

Atlanta 230 Denver 223 Philadelphia 210 Santa Ana 178

Total 841

Source: HUD?s Office of Housing.

Under 2020, the majority of center staff were to be located at the centers
and responsible for such activities as loan endorsements, reviews of
FHAinsured loans, and management and oversight of HUD- acquired properties.
Lender monitors and selected program support staff were to be located in
field offices. Of the 805 staff originally planned for the centers, 551 were
to be located at the homeownership centers, and 254, or 32 percent, were to
be in the field offices. However, HUD decided in late summer 1997 not to
force field office staff who had not yet been reassigned after the
reorganization to relocate. Some of these unassigned staff were subsequently
assigned to the centers but remained located in field offices. As of January
2001, 44 percent of the homeownership centers? workforce was still located
in field offices (see fig. 2). As a result, 71 field offices still have
single- family staff. We believe that leaving such a large percentage of
center staff scattered across field offices is contrary to the original
objective of the homeownership center concept, which was to increase
efficiency through consolidation.

Page 12 GAO- 01- 590 HUD's Homeownership Centers

Figure 2: Differences Between the Workforce Originally Planned for the
Centers and the Centers? Workforce as of January 25, 2001

Source: HUD?s Office of Housing (2020 Reform Workforce) and GAO?s analysis
of data provided by the Office of Housing (January 25, 2001, Workforce).

As figure 3 shows, all four centers have about 40 percent or more of their
staff located outside the actual center. The Denver center has the largest
percentage of field office staff (50 percent), while the Santa Ana center
has the smallest (39 percent).

Page 13 GAO- 01- 590 HUD's Homeownership Centers

Figure 3: Percentage of Each Homeownerships Center?s Workforce Located in
Field Offices

Source: GAO?s analysis of data from HUD?s Office of Housing.

Because the location of center field office staff was determined more by the
location of staff who remained unassigned after the 2020 reorganization than
by the centers? needs, the centers have had difficulty making effective use
of staff that remain in field offices. The centers have used their field
office staff in a variety of ways. For instance, some field office staff are
performing lender reviews and overseeing management and marketing
contractors as originally planned. All four centers are using field office
staff to answer telephone calls and perform the bulk of the centers?
customer service activities. Denver tasked its field office staff with
determining the correct status of all properties erroneously classified as
active properties in HUD?s inventory. One field office employee assigned to
the Santa Ana center has been designated to provide data from a major
single- family information system to other center and HUD staff.

Despite their efforts to use field office staff, center managers told us
that having such a large percentage of their workforce scattered across
numerous locations makes it a challenge for them to use their field office
staff effectively. The 4 centers have staff located in 71 field offices,
with as Centers Have Found It

Difficult to Use and Supervise Field Office Staff Effectively

Page 14 GAO- 01- 590 HUD's Homeownership Centers

many as 21 offices linked to a single center (see fig. 4). Moreover, each of
the centers has staff located in more than 10 cities. To use these staff,
the centers must sometimes ship case files to the field offices for review.
For example, Denver ships files for technical review to staff in San
Antonio, Texas; Salt Lake City, Utah; and Milwaukee, Wisconsin. In addition,
65 percent of the 71 field offices have fewer than five single- family
staff. With such small contingents of field staff scattered across numerous
locations, the centers cannot assign large projects to these offices.
Furthermore, limiting field office staff to a single activity when they are
trained to perform multiple functions can adversely affect their morale. For
example, in an October 2000 report on the call center activities of its
Richmond staff, the Philadelphia center concluded that continuing to limit
the staff?s duties to answering the telephones every day would lead to
employee dissatisfaction and frustration, resulting in less effective
customer service. While we believe that these activities may succeed in
keeping field office staff busy, the effort required on the part of center
managers to keep staff occupied hinders the centers? operations.

Figure 4: Staffing Levels of Field Offices With Single- Family Staff

Source: GAO?s analysis of data from HUD?s Office of Housing.

Atlanta 16 offices

Denver 21 offices

Philadelphia 20 offices

Santa Ana 14 offices

Number Total Field offices with fewer than five single- family program staff
Field offices with five or more single- family program staff

35% 65%

Page 15 GAO- 01- 590 HUD's Homeownership Centers

According to the results of quality management reviews reported by HUD in
July and August 2000, center staff located in field offices were not always
effectively employed. For example, at the Minnesota State Office in
Minneapolis, eight customer service staff outstationed from the Denver
center were reportedly so severely underemployed that they routinely went to
other office staff asking for work to fill their workday. Similarly, at the
Atlanta center, the review team found that a large number of the center
staff were outstationed and underutilized, while staffing levels inside the
center were inadequate.

The current distribution of staff poses challenges for supervision as well
as workload management. Managers at all four centers expressed concerns
about their ability to supervise their field office staff, 42 percent of
whom do not have a supervisor on- site. 11 The Santa Ana center has the
highest percentage of field office staff without an on- site supervisor (62
percent), while the Denver center has the smallest (25 percent). Several
large contingents of field office staff- such as the nine employees in both
Milwaukee, Wisconsin and Boise, Idaho and the eight employees in New York
City, New York- do not have on- site supervisors. According to one center
official, the lack of supervision at one of their field offices has
exacerbated staff conflicts. The lack of adequate supervision can also
affect office performance. HUD?s July 2000 quality management review found,
for example, that Atlanta center staff outstationed in the Chicago field
office would not meet performance goals assigned to them, in part, because
they were inadequately supervised. Recently, the Denver center requested an
on- site supervisor for the Milwaukee office in response to an agreement
with the union to staff on- site supervisors in field offices with more than
three employees. In its request, the center described this position as its
most critical supervisory need because of the high number of employee
grievances in the office. The Santa Ana center also requested an on- site
supervisor for Boise, where the center has six customer service staff.

To better handle their workload, managers at all four centers told us that
they would like to bring some of their field office staff into the center or
move them to other field office locations. For example, the directors of the
Atlanta and Philadelphia Operations and Customer Service Divisions

11 We considered field office staff to have on- site supervision if the
field office contained one or more of the following: a GS- 14 or GS- 15
housing program officer who reported directly to the center director, a
branch chief, or a position with ?supervisory? in the title.

Page 16 GAO- 01- 590 HUD's Homeownership Centers

would like to bring their customer service functions into the centers as
their field office staff quit or retire. The acting director of the Quality
Assurance Division in Santa Ana stated that he would like to bring some of
his field monitors into the center because the majority of the lenders and
most of the fraud activities in the center?s jurisdiction are located in
southern California. While Denver managers stated that some of the field
offices in their jurisdiction have too many people, they thought they needed
more staff in their Texas and Louisiana offices. In fact, the center has
requested an additional quality assurance monitor for New Orleans because of
the number of high- risk lenders in the area.

HUD?s Deputy Assistant Secretary for Single Family Housing agreed that the
centers? workforce is not optimally deployed, but he noted that there are
several challenges associated with relocating field office staff and closing
some field offices. First, he stated that HUD is required by law to have an
office in each state ?to ensure the adequate processing of applications? for
FHA mortgage insurance. 12 Second, he noted that, in order to relocate field
office staff and close field offices, the Department would need as much as
$50,000 per person to pay for relocation costs or the authority to offer
field office staff early retirement. According to an official in HUD?s
Office of Human Resources, HUD currently has voluntary early retirement
authority through September 30, 2001.

In initially allocating the centers? workforce, HUD assumed an equal
division of workload, as well as a more extensive transfer of field office
staff to the centers than actually occurred. In fact, the centers? workload
is not divided equally, and this, combined with HUD?s decision not to force
field office staff to relocate, has resulted in disparities between workload
and staffing across the four centers. The Atlanta and Denver centers have
the most staff (see table 2), but the Philadelphia center has the largest
workload in two key single- family areas- mortgage insurance endorsements
and single- family acquired properties. Although contractors perform many of
the activities associated with these functions at all of the centers, HUD
staff monitor the contractors and perform various reviews

12 See 12 USC 1735f- 12 (a). According to an Assistant General Counsel in
HUD?s Office of General Counsel, HUD has not performed any formal analysis
to determine what the Department must do to comply with this requirement.
Since many of the mortgage insurance functions performed by HUD staff at the
time the requirement was enacted have been shifted to mortgage lenders and
contractors, he observed that a toll- free customer service number in a
state might be enough to satisfy the requirement. Distribution of Staff

Across Centers Does Not Reflect Current Workload

Page 17 GAO- 01- 590 HUD's Homeownership Centers

and inspections. Thus, the center staffs? workload increases with the
contractors? workload.

In fiscal year 1999, the four centers processed about 1.3 million
endorsements, with Philadelphia processing the most (see fig. 5). In fiscal
year 2000, Philadelphia again processed more endorsements than the other
three centers. It also processed over 50 percent of FHA?s 203( k)
endorsements in fiscal year 2000. 13 Furthermore, Philadelphia performed the
greatest number of technical reviews, or evaluations of the underwriting
quality of loans insured by FHA, in fiscal years 1999 and 2000 because each
center?s goal is to review at least 10 percent of the loans it insures. The
director of Philadelphia?s Processing and Underwriting Division told us that
his division does the best it can with the staff it has. We believe that
center staffing should reflect each center?s workload.

13 The 203( k) Home Rehabilitation Mortgage Insurance program combines, in
one insured mortgage, the funds needed to purchase and rehabilitate a
single- family home. Therefore, these loans are more complicated to process
than other FHA loans.

Page 18 GAO- 01- 590 HUD's Homeownership Centers

Figure 5: Endorsements Processed by the Four Homeownership Centers, Fiscal
Years 1999 and 2000

Source: HUD?s Office of Single Family Housing.

In addition to processing more endorsements than the other three centers,
Philadelphia also had the highest volume of acquired single- family
properties in fiscal year 2000, placing proportionally more demands on its
workforce. As shown in figure 6, the Philadelphia center?s inventory
included about 14,000 properties at the end of fiscal year 2000, whereas the
Atlanta and Denver centers? inventories included about 9,000 and 5,000
properties, respectively. Such disparities have led managers in
Philadelphia?s Real Estate Owned Division to conclude that their division is
understaffed.

Page 19 GAO- 01- 590 HUD's Homeownership Centers

Figure 6: Single- Family Acquired Properties Managed by the Four
Homeownership Centers At the End of Each Quarter of Fiscal Year 2000

Source: Single Family Acquired Asset Management System.

According to managers in Philadelphia?s Real Estate Owned Division, other
factors have added to the center?s property disposition workload. For
instance, many of the properties in the northeastern United States are
older, and the cold climate requires additional maintenance activities, such
as snow removal. In addition, according to these managers, HUD is legally
required to remove all the lead- based paint from houses in the city of
Philadelphia before they can be sold. Therefore, the center had to hire
contractors to remove lead- based paint, creating additional oversight
responsibilities for center staff.

Page 20 GAO- 01- 590 HUD's Homeownership Centers

According to the Associate Deputy Assistant Secretary for Single Family
Housing, the Office of Single Family Housing realizes that it needs to
better use its staff at the homeownership centers. However, before it can
develop a plan for moving center staff around, it needs to determine how
proposed changes to single- family business processes will affect the
centers? need for staff. In the interim, Single Family Housing is
considering temporary solutions such as transferring some of Philadelphia?s
loan processing workload to the Denver center.

As the centers are struggling to use their staff effectively, a series of
new initiatives have increased the centers? workload without increasing
their staff resources. In some cases, the centers have requested, but not
yet received, additional staff to help them with the new workload. These
initiatives include HUD?s Fraud Prevention Program, the recertification of
nonprofit agencies that participate in FHA?s programs, and HUD?s Teacher
Next Door and Dollar Homes programs. These initiatives and their impact on
the centers? workload are as follows:

 To protect certain FHA borrowers from abusive mortgage practices, the
Department, under its Fraud Prevention Program, designated certain lowincome
neighborhoods with higher- than- normal foreclosure rates as ?hot

zones? in the summer of 2000. The Atlanta center is responsible for hot
zones in Atlanta and Chicago; the Philadelphia center is responsible for hot
zones in Baltimore (the pilot) and New York; and the Santa Ana center is
responsible for a hot zone in Los Angeles. In each of these hot zones, HUD
instituted additional requirements to detect or guard against fraud. Center
staff review mortgage applications to detect evidence of inflated property
appraisals, examine defaulted loans, and review lenders to determine if they
are following FHA?s underwriting guidelines. In both Philadelphia and Santa
Ana, the directors of the Processing and Underwriting Division stated that
this hot zone work was their most staffintensive duty. Staff in
Philadelphia?s Quality Assurance Division devoted 2-ï¿½ or 3 staff years to
performing desk reviews of lenders as part of the Baltimore pilot. The Santa
Ana center has asked to fill five vacancies in its Quality Assurance
Division to help the division handle the workload associated with this
initiative.

 In March 2000, HUD issued a mortgagee letter requiring the
recertification, within 45 days of the letter?s date, of all nonprofit
agencies that wanted to New Initiatives Increase

Centers? Workload

Page 21 GAO- 01- 590 HUD's Homeownership Centers

continue to participate in FHA activities. 14 While HUD had previously
required nonprofit agencies to be recertified every 2 years, this mortgagee
letter increased the centers? workload because all the nonprofit agencies
were required to submit applications within a short period of time. Staff at
all four centers had to be trained on the new recertification process. Two
Program Support Division directors stated that this was their division?s
most staff- intensive duty, while managers representing the Program Support
Divisions at the other two centers described the initiative as a major
workload item. Each center assigned 10 or more staff to the project for up
to 9 months.

 The Teacher Next Door Program, announced in December 1999, allows teachers
to purchase HUD- owned homes at 50 percent off the list price in HUD-
designated revitalization neighborhoods. 15 (HUD introduced a similar
program for police officers in 1997.) The Dollar Homes Program, effective in
May 2000, allows local governments to purchase HUD- owned homes that have
not sold within 6 months for $1 each. As part of HUD?s recent hiring
initiative, the Santa Ana center asked to fill two vacancies in its Program
Support Division to provide oversight and monitoring for these programs. In
February 2001, HUD?s Inspector General concluded that the management control
procedures that HUD had in place for the Officer/ Teacher Next Door programs
were not adequate, which significantly increased the risk of program fraud
and abuse. 16 About a month and a half later, HUD announced that it would
suspend these two programs for 120 days while it strengthened its oversight
measures.

14 Nonprofit agencies can apply for approval to (1) act as a mortgagor using
FHA mortgage insurance, (2) purchase the Department?s properties at a
discount, and (3) provide secondary financing.

15 Revitalization neighborhoods are neighborhoods that offer significant
opportunities for local economic growth and are, therefore, receiving
targeted public and private- sector assistance.

16 Interim Results - Officer/ Teacher Next Door Program (Report No. 2001-
AT- 0801, Feb. 14, 2001).

Page 22 GAO- 01- 590 HUD's Homeownership Centers

HUD has not developed a formal single- family training curriculum to guide
the homeownership centers? requests for training and to ensure that center
staff develop the skills they need to accomplish their missions. For fiscal
years 1999 and 2000, a request of about $1.5 million for single- family
training was developed on the basis of input from center managers. Of the
amount requested for single- family training in these 2 years, HUD provided
about $331, 000, or 22 percent. The centers had difficulty effectively using
these training funds because HUD provided them late in the fiscal year and
then pulled back some funds before they could be used.

HUD has not established a formal training curriculum to guide the centers?
requests for training and to ensure that the centers use the training funds
they receive to help the staff acquire and sharpen the skills they need to
carry out their work. Our work at the centers showed that center managers
desire training for their staff. For example, over 70 percent of the
homeownership center managers we surveyed told us that training in the use
of information systems and in technical skills related to job
responsibilities should be increased. 17 In addition, the centers? training
requests for fiscal year 2001 showed that training in such areas as
organizational skills, writing, project management, and investigative
techniques is needed. Finally, staff would like HUD to pay for training
needed to maintain professional certifications, such as appraiser licenses.
One headquarters official told us that it is very important that HUD
professional staff, such as appraisers, be on a par with and have the same
professional certifications as their peers, whose work the HUD staff review.
18

The training requested for the centers is based on center managers? yearly
assessments of training needs rather than on a set of required training
courses to be provided to center staff. 19 For example, according to Office

17 As part of our Performance and Accountability Series, we surveyed HUD
managers between September and October 2000 to obtain their views on
staffing and workload issues after HUD implemented its 2020 plan.

18 For fiscal year 2001, the Training Academy provided the Office of Housing
with $70,000 to support this type of training and other discretionary fees
and tuition training. This was the first time in the last 3 years that such
funds were provided.

19 Currently, managers at the homeownership centers annually assess their
staffs? training needs, and their training requests are consolidated and
transmitted through HUD?s Office of Single Family Housing and Office of
Housing to HUD?s Training Academy. The Training Academy allocates training
funds among HUD?s program offices and coordinates the training. Lack of
Curriculum

and Timing of Funding Restricts Training Provided to Center Staff

No Formal Training Curriculum to Guide Centers? Training Decisions

Page 23 GAO- 01- 590 HUD's Homeownership Centers

of Single Family Housing officials, HUD has provided lender monitors with
extensive basic auditing training but has not established what other types
of skill training these monitors should receive. The officials stated that
beyond this basic training, HUD provides training to the monitors that
managers believe will help monitors react to new situations that they may
encounter during their audits, such as the latest lender fraud schemes or
new mortgage requirements. While we agree that training plans for the
centers should include introductory training and updates to reflect industry
trends, it is also important for training plans to provide for developing
advanced skills that will better enable center staff to fulfill their
responsibilities. In our view, a formal training curriculum would accomplish
this.

The Deputy Assistant Secretary for Single Family Housing and other single-
family housing officials told us that HUD has not established a formal
training curriculum for center staff and that it would be premature for HUD
to do so because the centers? duties and responsibilities are changing. For
example, the Deputy Assistant Secretary said that HUD intends to implement
the automated underwriting of FHA- insured loans and still hopes to
implement a lender insurance program. 20 Both of these initiatives would
affect the duties and responsibilities of the centers? processing and
underwriting staff. As a result, in the view of the Deputy Assistant
Secretary for Single Family Housing and other single- family housing
officials, HUD needs to wait for the centers? activities to stabilize before
it considers establishing a standard training curriculum for center staff.
Recent experience at the centers suggests, however, that responsibilities at
the centers will continue to fluctuate and may never remain constant for
long. Furthermore, a curriculum that provides comprehensive training would
help ensure that staff are qualified to handle change.

The centers have found it difficult to use their training funds effectively
because HUD provided them late in the fiscal year and pulled some funds back
before they could be used. For fiscal years 1999 and 2000, the Office of
Housing requested a total of about $1.5 million for single- family

20 Under the lender insurance program, HUD would further delegate the
authority to insure single- family mortgages to certain mortgagees that are
approved under the direct endorsement program. Timing Limits Effective

Use of Training Funds

Page 24 GAO- 01- 590 HUD's Homeownership Centers

program training. 21 As shown in table 3, the Training Academy approved
slightly more than half of this amount, but the total spent for single-
family program training was only about 22 percent of the total requested for
the 2 fiscal years. 22

Table 3: Dollar Amounts of Single- Family Program Training Requested,
Approved, and Provided for Fiscal Years 1999 and 2000

Total dollar amount of single- family program training Fiscal year Requested
by the

Office of Housing Approved by the

Training Academy (percent of request)

Spent (percent of

request)

1999 $739,800 $366,000 (50%)

$145,538 (20%) 2000 $794,400 $484,400

(61%) $185,518

(23%)

Total $1,534,200 $850,400 (55%)

$331,056 (22%)

Source: GAO?s analysis of data provided by HUD?s Office of Housing and
Training Academy.

HUD?s Deputy Assistant Secretary for Single Family Housing told us that the
centers have difficulty using all of their training funds because the
Training Academy provides the funds late in the fiscal year and then pulls
some funds back before the centers have a chance to use them. He stated that
training must be scheduled around staff vacations and other events. He also
noted that those responsible for planning and scheduling training assume
that training funds will be available all year, but this has not been the
case. For example, Office of Housing records show that for fiscal year 1999,
the Academy provided its final training fund allocation to Housing on March
16, 1999. However, the records also show that on July 1, 1999, the Academy
notified Housing that training funds were no longer available for the
remainder of the fiscal year. As a result, according to Housing?s training
coordinator, Housing lost $200,000 of the single- family training funds
approved by the Academy for fiscal year 1999, and conducted only two of the
four approved training courses. According to HUD?s Deputy Assistant
Secretary for Single Family Housing, his office had to use all of

21 For the 2 fiscal years, the Office of Housing also requested a total of
about $7. 2 million for multifamily and other program training. Of this
amount, HUD approved about $3. 1 million, or 43 percent.

22 For fiscal year 2001, the Office of Housing requested approximately $639,
000 in singlefamily program training. HUD?s Training Academy approved
$240,000, or about 38 percent of this request.

Page 25 GAO- 01- 590 HUD's Homeownership Centers

its single- family training funds for fiscal year 2000 by the third quarter
because any funds left over would be taken back. A Training Academy official
told us that because of a travel fund cap in fiscal year 2000, the Training
Academy pulled back some of the single- family training funds that it had
approved for the fiscal year.

The centers? reliance on contractors has grown, but the ability of HUD staff
to monitor contractors has not kept pace. As proposed in its 2020 plan, HUD
has contracted out the management and marketing of properties it acquires
through foreclosure. In addition, the Department has hired contractors to
perform many routine mortgage insurance endorsement activities- such as
issuing mortgage insurance certificates and reviewing individual insured
loans to monitor lenders? performance- and to monitor the performance of its
management and marketing contractors. As HUD?s reliance on contractors has
grown, our past work and the work of HUD?s Inspector General have shown that
the centers have frequently had problems with both monitoring contractors
and ensuring they perform as required.

Because of increases in the centers? responsibilities and staff shortages,
HUD is using contractors more than it projected in its 2020 plan. The plan
stated that HUD functions would be privatized where efficiency or expertise
dictated and specified that activities related to the management and sale of
the single- family properties HUD acquires through foreclosure would be
streamlined or contracted out. In April 1998, HUD?s Office of Single Family
Housing issued a risk assessment of the homeownership center concept in
which it stated that contractors would be used to fill in gaps in skill and
expertise and that contractual assistance could be increased or decreased to
meet production goals based on fluctuations in single- family activity. 23
The Office of Single Family Housing also noted that if sufficient staff were
not available, contractors might also be used to monitor the performance of
other contractors.

As shown in table 4, contractors currently perform many of the centers? day-
to- day mortgage insurance endorsement and property disposition activities,
while the program staff spend time monitoring contractors.

23 Single Family Homeownership Centers Front End Risk Assessment, Office of
Single Family Housing, Apr. 27, 1998. The Centers Make

Extensive Use of Contractors, but Monitoring Has Been a Significant
Challenge

Centers Have Expanded Their Use of Contractors

Page 26 GAO- 01- 590 HUD's Homeownership Centers

According to officials in HUD?s Office of Single Family Housing, the centers
were forced to rely more on contractors than originally planned because
HUD?s plan to further delegate the authority to insure singlefamily
mortgages to mortgage lenders was never implemented. When the centers did
not receive any additional staff to handle this responsibility, they had to
rely on contractors. Contractors now help to process mortgage insurance,
review individual loans to monitor lenders? performance, and manage and
market HUD?s inventory of acquired single- family properties. In some cases,
contractors monitor the performance of other HUD- hired contractors. For
instance, HUD has hired third- party contractors to inspect 10 percent of
the properties handled by each of the management and marketing contractors.
Another national contractor is responsible for reviewing 10 percent of the
management and marketing contractors? property case files each month.

Page 27 GAO- 01- 590 HUD's Homeownership Centers

Table 4: Entity That Performs Routine Mortgage Insurance Endorsement and
Property Disposition Activities

Activity Performing entity Mortgage insurance endorsement

Perform preclosing reviews of test cases submitted by lenders seeking direct
endorsement authority and lenders that have had their direct endorsement
authority suspended

Contractor/ program staff a

Log loan case files submitted by lenders to the centers for insurance
endorsement Contractor Review loan case files to ensure that paperwork is
present and complete and issue mortgage insurance certificates Contractor
Select sample of all endorsed loans for review Program staff Perform
technical reviews of insured loans b Contractor Oversee technical review
contractors Program staff

Property disposition

Manage and market acquired single- family properties Contractor Inspect
properties maintained by management and marketing contractors Contractor
Review files maintained by management and marketing contractors Contractor
Oversee property inspection contractors and file review contractor c Program
staff Provide closing agent services Contractor Oversee closing agents
Program staff Process and review invoices submitted by management and
marketing contractors Contractor Assess the performance of management and
marketing contractors Program staff a At the Atlanta center, a contractor
performs preclosing reviews of lenders seeking direct

endorsement authority, and program staff perform such reviews of lenders
that have had their direct endorsement authority suspended. At the Santa Ana
center, a contractor performs the vast majority of preclosing reviews of
lenders seeking direct endorsement authority and lenders that have had their
direct endorsement authority suspended. At the Denver and Philadelphia
centers, program staff perform all preclosing reviews, but the Philadelphia
center is in the process of contracting out this activity. b These reviews
are desk audits performed to evaluate the underwriting quality of loans
insured by FHA. c Program staff conduct follow- up property inspections and
file reviews on a 10- percent subset of the

properties reviewed by HUD?s third- party contractors. Source: GAO?s
analysis of HUD information.

In addition to contracting out many routine insurance endorsement and
property disposition activities, HUD is assessing the feasibility of
contracting out lender reviews traditionally performed by center staff. In
September 2000, the Philadelphia center hired two contractors to perform up
to 20 on- site reviews of lenders. These extra reviews are part of a pilot
program designed to provide supplemental monitoring reviews and to

Page 28 GAO- 01- 590 HUD's Homeownership Centers

assess the effectiveness of the risk management policies and procedures HUD
uses to monitor lenders.

To determine the extent to which HUD has used contractors in its
singlefamily program, we analyzed data that the Department provided on its
single- family contract obligations. Our analysis showed that the Department
obligated $458 million and $390 million, respectively, for single- family
contract support in fiscal years 1999 and 2000. 24 These singlefamily
contract obligations represented 37 percent and 30 percent of HUD?s total
contract obligations for these 2 fiscal years. See appendix II for more
information on HUD?s single- family contract obligations.

Although HUD previously had used contractors in various aspects of its
property disposition activities, some center managers told us that it was a
challenge for their staff to shift from performing insurance endorsement and
property disposition activities themselves to monitoring the performance of
contractors. For example, according to the former director of the
Philadelphia center, staff initially assigned to the center?s Processing and
Underwriting Division were very familiar with certain loan endorsement
functions but were not experienced in monitoring contractors. To address
this problem, the division trained certain staff to be contract monitors.
Managers at both the Philadelphia and Santa Ana centers noted that it was
difficult for their staff to move from managing and selling HUD- owned
properties with the assistance of contractors to overseeing the performance
of contractors solely responsible for property disposition.

Our past work and the work of HUD?s Inspector General have shown that the
centers have had difficulties monitoring their contractors? performance. In
May 2000, we reported that HUD?s assessments of the performance of its
management and marketing contractors did not follow a consistent format and
did not always determine the level of risk posed by contractors?
performance, making it difficult to compare and track the performance of
contractors over time. 25 In addition, we reported that HUD lacked the tools
needed to ensure that the contractors actually performed

24 Although HUD contracted out more activities in fiscal year 2000, its
total obligations for single- family contracts declined because, among other
reasons, HUD obligated about $88 million less for managing and marketing its
properties.

25 GAO/ RCED- 00- 117. Centers? Oversight of

Contractors Has Been Inadequate

Page 29 GAO- 01- 590 HUD's Homeownership Centers

as required. In April 2000, we reported that three of the four centers were
not tracking the work of their technical review contractors against
prescribed standards. 26 As a result, these centers lacked the information
necessary to evaluate the quality of the contractors? work or to determine
whether actions should be taken against the contractors for poor
performance. Since technical review contractors evaluate the quality of the
loans HUD is insuring, poor performance by these contractors could increase
HUD?s insurance risk.

In its most recent semiannual report to the Congress, HUD?s Inspector
General stated that ?HUD is compensating for staff shortages through
contracting out major activities? and concluded that ?HUD is not prepared to
effectively monitor this increased level of contractor activity.? 27 The
Inspector General cited its September 2000 report on HUD?s single- family
property disposition program as evidence that HUD is not equipped to oversee
contractors? performance. In that report, the Inspector General noted that
HUD?s management and marketing contractors had not performed timely
inspections, corrected hazardous conditions, made repairs, or performed
routine maintenance to preserve and protect properties. The poor property
conditions decreased marketability, increased FHA?s holding costs, and
negatively affected surrounding communities. Although FHA was aware of these
problems, it had not been successful in improving property conditions and
compliance.

The centers? failure to develop effective selection procedures for reviewing
contractors? work, including procedures that incorporate risk factors into
contractor oversight, has affected the centers? ability to monitor their
contractors. In the absence of such procedures, HUD has not been making the
most efficient use of its monitoring resources. In response to our
recommendations, HUD recently incorporated risk factors when monitoring the
performance of appraisers and lenders. In April 1999, we reported that HUD
was not targeting appraisers who performed 10 or more appraisals during a
given period for field reviews. 28 Without performance information on these
individuals, HUD had little assurance that they were conducting accurate and
thorough appraisals. We also

26 GAO/ RCED- 00- 112. 27 Semiannual Report to the Congress as of September
30, 2000, HUD Office of Inspector General. 28 GAO/ RCED- 99- 72.

Page 30 GAO- 01- 590 HUD's Homeownership Centers

concluded in April 2000 that the centers were not using a risk- based
selection process when choosing lenders for lender monitor reviews and loans
for technical reviews. 29 Therefore, while the centers were meeting their
goals in these two areas, they were not always reviewing the lenders and
loans that posed the greatest insurance risk. Subsequent to our reports, HUD
instituted a more risk- based approach for field appraisals and lender
monitor reviews. In June 2000, HUD adopted new procedures for selecting
appraisals for review. These procedures direct HUD staff to consider the
amount of time since the last review and statistical indicators of appraisal
quality. Similarly, when selecting lenders for review, center staff must now
consider factors such as lenders? default rates, lenders? loan volume,
borrowers? complaints, and reports of fraudulent activity.

HUD has just begun to incorporate risk factors in its monitoring of
management and marketing contracts- contracts that represented almost half
of the single- family program?s contract obligations in fiscal year 2000. In
the past, HUD used a national contractor to review a random 10- percent
sample of the management and marketing contractors? property case files each
month. In September 2000, the Department hired a new national contractor to
conduct operational, management, and performance reviews of each management
and marketing contractor. This new contractor is developing a risk- based
methodology for performing on- site reviews of management and marketing
contractor compliance. The methodology will include, among other things, the
use of a statistically valid sampling methodology. However, it is too soon
to assess what impact these new procedures will have on the Department?s
oversight of its management and marketing contractors.

HUD has started to employ several planning tools to help target its
singlefamily program resources more effectively. These include establishing
goals and objectives for the homeownership centers through strategic
planning and using a resource estimation model to analyze workload and
staffing requirements at the centers. In addition, HUD has recognized the
need for succession planning and started using our human capital checklist.
30

29 GAO/ RCED- 00- 112. 30 Human Capital: A Self- Assessment Checklist for
Agency Leaders (GAO/ OCG- 00- 14G, Sept. 2000, Version 1). Planning Tools
Could

Help HUD Improve Centers? Operations

Page 31 GAO- 01- 590 HUD's Homeownership Centers

HUD?s strategic plans have established a mission for the Department and
goals and objectives for the single- family program and homeownership
centers. These plans were developed under the Government Performance and
Results Act of 1993, which requires HUD and other federal agencies to set
goals, measure performance, and report on their accomplishments as a means
of achieving results. HUD issued its first strategic plan in September 1997,
shortly after publishing its 2020 plan. In its most recent strategic plan,
HUD states that its overall mission is to promote adequate and affordable
housing, economic opportunity, and a suitable living environment free from
discrimination. The strategic goal for which the homeownership centers are
partly responsible is increasing the availability of decent, safe, and
affordable housing in American communities. The Department has translated
this strategic goal into specific strategic objectives and a business
operating plan for the homeownership centers. The centers? strategic
objectives are to increase homeownership and reduce disparities in
homeownership rates among groups defined by race, ethnicity, and disability
status. Their business operating plan includes goals to increase the number
of insurance endorsements and to perform a certain number of lender
monitoring reviews each year.

HUD has assessed staffing requirements at the centers. Concerned that HUD
did not have a system to assess its human capital needs, the Congress
commissioned the National Academy of Public Administration (NAPA) in 1997 to
examine HUD?s process for estimating resource needs. 31 The study, completed
in 1999, developed and pilot- tested a resource estimation and allocation
process- a resource management approach that bases estimates and allocations
of staff resources on the level of work that should be done and the place
where it is performed. 32 In August 2000, HUD awarded a contract to Arthur
Andersen to use NAPA?s model to determine resource allocation needs
departmentwide. Arthur Andersen analyzed the workload at the Atlanta center,
projected the results of this analysis to the other centers, and in March
2001, recommended a net decrease of 31 staff in the total center workforce.
Specifically, it recommended that the two divisions with the largest
percentage of field office staff be reduced by 92 staff and that the other
three divisions be increased by 61 staff. The Associate Deputy Assistant

31 NAPA is an independent, nonpartisan organization chartered by the
Congress to improve governance at all levels- federal, state, and local. 32
Aligning Resources and Priorities at HUD: Designing a Resource Management
System

(Washington, D. C.: NAPA, Oct. 1999).

Page 32 GAO- 01- 590 HUD's Homeownership Centers

Secretary for Single Family Housing disagreed with the recommended decrease,
noting that the center directors believe they need more staff. She said
Arthur Andersen?s application of NAPA?s model did not recognize that field
office staff, because of their decentralized deployment, cannot be used as
effectively as center staff. She also characterized the questionnaire used
by the contractor to assess differences in functions among the four centers
as difficult for center staff to fill out accurately. Therefore, she
believed that the staff?s answers may not have captured the differences in
operations.

In addition to assessing the centers? workforce needs, HUD has recognized
the need for succession planning. This type of planning is designed to
ensure leadership continuity for all key positions by developing activities
that will build talent from within. Succession planning is necessary at HUD
because a large percentage of the Department?s workforce is eligible for
retirement. The Department reported in August 2000 that about 41 percent of
the workforce in the Office of Housing, which includes the homeownership
centers, was eligible for optional (i. e., regular) or early retirement.
Within the next 3 years, HUD estimates that 53 percent of Housing?s
workforce will be eligible for optional or early retirement.

Another tool that HUD is using to address its human capital challenges is
our human capital self- assessment checklist, published in September 2000.
The checklist is designed to help agencies focus on human capital as a
strategic asset by providing a tool for assessing their human capital
approaches in light of their organizational needs. In general, the checklist
enables agencies to determine whether their human capital approaches have
been designed to support their mission, goals, and other organizational
intents. More specifically, the checklist may help HUD plan its deployment
of staff, training, and strategies for monitoring contractors in light of
the five key areas identified in the framework: strategic planning,
organizational alignment, leadership, talent, and performance culture. HUD?s
Office of Human Resources has used this five- part framework to ensure that
the Department is addressing important human capital issues. However, HUD?s
Office of Single Family Housing has not used the checklist to assess the
homeownership centers? specific human capital needs. (See app. III for more
information on our human capital framework.)

After 2 years in operation, the homeownership centers have demonstrated
their potential to improve single- family program operations and customer
service. However, given the multibillion- dollar insurance risk that FHA
Conclusions

Page 33 GAO- 01- 590 HUD's Homeownership Centers

assumes annually, it is critical for HUD to address the human capital
challenges at the centers. Changes in single- family business processes and
increases in the centers? responsibilities have exacerbated the current
imbalances in homeownership center staffing. These imbalances create
inefficiencies, as well as problems with supervision and morale. HUD?s
application of NAPA?s resource estimation model was a first step toward
addressing these imbalances. But until HUD determines where center staff
should be deployed to meet its current organizational needs, develops a
deployment plan, and implements this plan, it will not be able to maximize
the centers? effectiveness.

As the centers? business processes evolve and their responsibilities grow,
training will be critical. Determining what skills center staff need is an
essential first step in providing them with the training they require, as
well as a logical first step in developing a formal training curriculum. As
the current staff retire and new staff are hired, HUD will have an
opportunity to refine and expand its understanding of the centers? training
needs, specify training requirements to meet those needs, and develop a
formal training curriculum that encompasses the requisite skills and
establishes an appropriate sequence for teaching and reinforcing them.
Setting training priorities and communicating these priorities to the
Training Academy will also be important to ensure that the centers? most
critical training needs are met when training funds are limited.

HUD?s substantial and growing reliance on contractors to perform
singlefamily activities once conducted in- house requires efficient and
effective oversight. Our previous work at the centers has shown that their
monitoring of contractors has been inadequate. The Department recently
incorporated risk factors in its monitoring of lenders and appraisers and
has begun to incorporate risk factors in its monitoring of management and
marketing contractors. These are steps in the right direction. Since we have
made a number of recommendations in the past designed to improve HUD?s
oversight of its contractors, we are making no new recommendations in this
report regarding contractor oversight.

Although HUD has begun to use our human capital self- assessment checklist
to assess its human capital plans for the Department as a whole, it has not
developed a strategic human capital management plan for the homeownership
centers. To its credit, HUD has used NAPA?s resource estimation model to
determine the workforce needs at the centers and begun to consider
succession planning. However, strategic human capital planning involves much
more than determining workforce needs. Integrating the results of its
workforce analysis with other aspects of

Page 34 GAO- 01- 590 HUD's Homeownership Centers

human capital planning, such as workforce deployment and training
strategies, will enable HUD to better position the centers for the future.
As it reviews the centers? current and future workforce and training needs
and plans for upcoming retirements at the centers, it can benefit from using
our human capital self- assessment checklist to guide its efforts.

To address the human capital challenges facing HUD?s homeownership centers,
we recommend that the Secretary of Housing and Urban Development direct the
Assistant Secretary for Housing- Federal Housing Commissioner to

 assess the deployment of the centers? workforce in light of current
organizational needs, develop a plan for locating center staff where they
are needed, and deploy the staff accordingly;

 develop a training curriculum for center staff that ensures that available
training funds are allocated and used to develop the skills that the staff
need to perform their responsibilities; and

 use tools, such as our human capital self- assessment checklist, to
develop a strategic human capital management plan for the homeownership
centers that considers all areas of human capital management, including the
size of the workforce, workforce deployment, training, and oversight of
contractors.

The Assistant Secretary for Housing- Federal Housing Commissioner provided
written comments on a draft of this report in a June 22, 2001, letter, which
is reprinted in appendix IV. Overall, HUD agreed with our three
recommendations, commenting as follows on each:

 HUD stated that it is assessing the deployment of the centers? workforce
in the course of implementing a resource estimation and allocation process.
HUD proposes to reduce the number of outstationed staff through attrition
and develop a plan for redistributing the centers? workload.

 HUD noted that it is currently identifying core skill requirements for
each major program area and plans to develop a training curriculum for
center staff that addresses these requirements.

 HUD agreed that there is room for improvement in its human capital
planning and management strategy. It noted that, in addition to using our
human capital self- assessment checklist and implementing a resource
estimation and allocation process, it is developing agency staffing plans
and performing workforce analysis. It further noted that, because the human
capital planning and management issues cited in our report are not
Recommendations for

Executive Action Agency Comments and Our Evaluation

Page 35 GAO- 01- 590 HUD's Homeownership Centers

unique to the homeownership centers, the Department is addressing these
issues in the overall context of its resource management efforts.

HUD also provided technical comments on specific issues discussed in the
report. HUD?s letter and our responses to these technical comments appear in
appendix IV.

We conducted our work at HUD headquarters and at all four of the
Department?s homeownership centers in Atlanta, Denver, Philadelphia, and
Santa Ana. Our review focused on staffing, training, and contract support.
We reviewed HUD?s 2020 Management Reform Plan and supporting documents. We
interviewed officials from HUD?s Office of Single Family Housing, Training
Academy, and the four centers. We reviewed documentation to determine the
workforce and training provided to the four centers. To determine how much
HUD obligated for single- family contract support in fiscal years 1999 and
2000, we analyzed data HUD provided from the HUD Procurement System.
Although the data were not used to draw any conclusions or make
recommendations, we assessed the integrity of the data through electronic
testing and working closely with the agency official who provided the data.
We determined that the data were reliable enough for the purposes of this
report. Finally, we reviewed HUD?s strategic plan, information on HUD?s
implementation of NAPA?s Resource Estimation and Allocation Process, and
HUD?s succession and workforce planning documents. We performed our work
from July 2000 through April 2001 in accordance with generally accepted
government auditing standards.

As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 10 days after
the date of this letter. At that time, we will send copies to the Chairman,
Subcommittee on Housing and Transportation, Senate Committee on Banking,
Housing, and Urban Affairs; the Chairman and the Ranking Minority Member,
Senate Committee on Banking, Housing, and Urban Affairs; the Chairwoman and
the Ranking Minority Member, Subcommittee on Housing and Community
Opportunity, House Committee on Financial Services; and the Chairman and the
Ranking Minority Member, House Committee on Financial Services. We will also
send copies to the Secretary of Housing and Urban Development; the Assistant
Secretary for Housing- Federal Housing Commissioner; and the Director of the
Office of Management and Budget. We will make copies available to others
upon request. Scope and

Methodology

Page 36 GAO- 01- 590 HUD's Homeownership Centers

Please call me on (202) 512- 2834 if you or your staff have any questions
about this report. Key contributors to this report are listed in appendix V.

Sincerely yours, Stanley J. Czerwinski Director, Physical Infrastructure
Issues

Appendix I: Objectives, Scope, and Methodology

Page 37 GAO- 01- 590 HUD's Homeownership Centers

Our objectives were to examine (1) the deployment of staff at the Department
of Housing and Urban Development?s (HUD) homeownership centers, (2) the
training provided to center staff, and (3) the centers? monitoring of their
contractors. In addition, we examined HUD?s use of planning tools to target
its homeownership center resources effectively.

To examine the deployment of the homeownership centers? staff, we reviewed
HUD?s 2020 Management Reform Plan and supporting documents to determine the
workforce and deployment planned for the centers. The supporting
documentation reviewed included the April 1997 draft organization plan
prepared by HUD?s Office of Housing; the March 1998 Booz- Allen & Hamilton
assessment of HUD?s implementation of the 2020 plan; and the April 1998
Office of Single Family Housing assessment of the homeownership centers?
susceptibility to fraud, waste, and mismanagement. We interviewed officials
in HUD?s Office of Single Family Housing concerning the homeownership center
concept and the assumptions used to develop estimates of the staffing needed
at the centers. To determine the actual number of staff provided to the
centers and their deployment, we analyzed information provided by HUD?s
Office of Housing on the size and location of each of the four centers?
workforce as of January 25, 2001. To determine how the deployment of the
centers? staff has impacted center operations, we interviewed the director
and division heads at all four centers to obtain information on the centers?
accomplishments and their workload and resource challenges. We obtained and
analyzed information from each center on its staffing needs and hiring plans
and on each center?s workload and performance for fiscal years 1999 and
2000. We examined how the centers? responsibilities have changed or
increased since they were established and how the distribution of human
capital resources among the centers compared with each center?s workload and
performance. We reviewed the results of quality management reviews that HUD
conducted at various field offices in fiscal year 2000. We focused on
observations related to the centers? use and supervision of field office
staff. Finally, to obtain the views of HUD clients and customers regarding
the centers? overall performance and the quality of the services they
provide, we interviewed representatives of the Mortgage Bankers Association
and the National Association of Homebuilders.

To examine the training provided to the homeownership centers? staff, we
reviewed HUD?s 2020 plan and supporting documents to determine the amount of
training envisioned for the four centers. We interviewed officials from
HUD?s Training Academy and Office of Housing and analyzed data provided by
both offices to determine the amount of single Appendix I: Objectives,
Scope, and

Methodology

Appendix I: Objectives, Scope, and Methodology

Page 38 GAO- 01- 590 HUD's Homeownership Centers

family program training requested and actually provided to the centers in
fiscal years 1999 and 2000. We also interviewed Office of Single Family
Housing officials to determine how they assess the training needs at the
centers and their views regarding establishing a training curriculum. To
determine how the training provided to the centers? staff has impacted
center operations, we interviewed the director and division heads at each of
the four centers regarding the training they desired for their staff. We
also reviewed the results of our telephone survey of HUD managers conducted
in September and October 2000, as part of the Performance and Accountability
Series, for information regarding the views of center management on the
training needs of center staff. Finally, we obtained and analyzed documents
that identified the training requested by the centers and training provided
by the centers to its staff in fiscal year 2000.

To examine the homeownership centers? oversight of their contractors, we
first reviewed HUD?s 2020 plan and supporting documents to determine the
extent to which HUD planned to use contractors at the centers. We then
determined the actual extent of contract support for the centers.
Specifically, we (1) interviewed division heads and contracting personnel at
the centers and reviewed contracts and other documents to identify those
day- to- day center activities performed by center staff and those performed
by contractors and (2) analyzed contract obligation data from the HUD
Procurement System and developed information on the total dollar value of
single- family contract obligations for each center for fiscal years 1999
and 2000. (See app. II for a detailed discussion of our contracting analysis
and its results.) Finally, to determine how well the centers have monitored
their contractors, we reviewed reports on our prior work at the centers
involving HUD?s oversight of appraisers and lenders and its experiences with
management and marketing contractors and similar reports issued by HUD?s
Inspector General.

To determine what planning tools HUD is using to target the centers?
resources effectively, we interviewed HUD officials and reviewed documents
outlining HUD?s overall strategic, workforce, succession, and human capital
planning activities. Specifically, we reviewed HUD?s most recent strategic
plan to determine which of the Department?s strategic goals and objectives
pertained to the centers. We interviewed HUD officials regarding the
Department?s progress in implementing a resource estimation and allocation
process developed by the National Academy of Public Administration, and
reviewed the preliminary results of the Department?s implementation of the
resource estimation process at the homeownership centers. We also
interviewed HUD officials regarding

Appendix I: Objectives, Scope, and Methodology

Page 39 GAO- 01- 590 HUD's Homeownership Centers

their use of our human capital checklist and reviewed HUD?s succession
planning documents.

We performed our work from July 2000 through April 2001 in accordance with
generally accepted government auditing standards.

Appendix II: Single- Family Contract Obligations for Fiscal Years 1999 and
2000

Page 40 GAO- 01- 590 HUD's Homeownership Centers

In response to our request for the dollar value of contracts obligated by
the homeownership centers in fiscal years 1999 and 2000, the Department of
Housing and Urban Development (HUD) provided us with data files that listed
the single- family funded contract actions for each fiscal year by
homeownership center. There were about 100 single- family funded contract
actions in each fiscal year that were not identified with a specific
homeownership center and were provided separately. To create these files,
HUD initially exported from the HUD Procurement System all the contract
actions funded by the Office of Housing in fiscal years 1999 and 2000. HUD
then used three appropriation accounts to limit the contract actions to only
those that funded single- family activities.

Despite HUD?s attempts to limit the contract actions it provided to
singlefamily activities, our initial analysis showed that HUD?s files
included contract actions for multifamily activities. To eliminate these
actions from our analysis, we initially reviewed the customer office codes
provided us by HUD to identify those offices that would likely award single-
family contracts. We matched this list of customer service codes with those
codes for all the contract actions and kept only those contract actions that
were found in the customer code list. We grouped the contract actions by
contract number and summed up the obligated dollar amounts for each contract
for fiscal years 1999 and 2000. We then matched the contracts to HUD files
that contained contract service type codes, and categorized the information
by contract dollars obligated for each contract service type for the 2
fiscal years. We assessed the integrity of the data through electronic
testing and working closely with the agency official who provided the data,
and determined that the data were reliable enough for the purposes of this
report.

Our analysis showed that the Department obligated $458 million and $390
million, respectively, for single- family contract support in fiscal years
1999 and 2000. Tables 5 and 6, respectively, show the single- family
contract obligations for fiscal years 1999 and 2000 for each homeownership
center and nationally, and the single- family contract obligations, by
contract service types, for each of the 2 fiscal years. Appendix II: Single-
Family Contract

Obligations for Fiscal Years 1999 and 2000

Appendix II: Single- Family Contract Obligations for Fiscal Years 1999 and
2000

Page 41 GAO- 01- 590 HUD's Homeownership Centers

Table 5: Single- Family Contract Obligations for Each Homeownership Center
and Nationally, Fiscal Years 1999 and 2000

Center Fiscal year 1999 Fiscal year 2000

Atlanta $84,509,231 $32,716,465 Denver 28,010,332 13,309,139 Philadelphia
97,421,078 42,274,098 Santa Ana 93,429,420 19,679,676 National 154,611,056
282,289,978

Total $457,981,117 $390,269,356

Source: GAO?s analysis of data from the HUD Procurement System.

Appendix II: Single- Family Contract Obligations for Fiscal Years 1999 and
2000

Page 42 GAO- 01- 590 HUD's Homeownership Centers

Table 6: Single- Family Contract Obligations by Contract Service Type,
Fiscal Years 1999 and 2000

Service Type Fiscal year 1999 total Fiscal year 2000 total

Management and marketing $276,111,341 $188,435,053 Closing agents 12,813,536
19,190,814 Insurance endorsements 1, 968,517 2,929,750 Technical reviews 2,
019,721 2,925,752 Single- family inspections 1, 977,653 3,718,277 Architect
and engineering reviews 226,026 0 Administrative support 367,028 81,600 Real
estate asset management 34,295,569 5, 107,590 Real estate asset management
monitoring 987,628 469,000 File reviews 3, 001,262 10,271,838 Single- family
appraisals 4,484,921 1,117,198 Field reviews of appraisals 4,586,638
5,895,980 Other appraisals 2,702,497 (320,052) Marketing/ advertising
252,458 136,339 Construction/ repair 653,099 1, 308,871 Defective paint
services 2,229,931 3,134,326 Mortgage credit 116,998 123,957 Credit reports
(61,102) 2,211 Housekeeping services 422,352 1, 242 Housing support 107,840
25,234 Servicing reviews 1, 434,827 0 Management and marketing voucher
reviews 0 1, 485,356 Legal services 52,500 626,500 Other a 24,187,885 9,
509,709 Miscellaneous b 113,510 22,044 Service type not listed c 82,928,482
134,070,767

Total $457,981,117 $390,269,356

Note: Figures in parentheses indicate deobligations or amounts that contract
obligations were reduced. a This category includes contract actions for such
items as fees for registration, advertising,

promotional items, and other expenses for housing- related exhibits, fairs,
shows, and other events; structural analysis of experimental housing and
other properties; demolition of properties and removal of debris; monitoring
of nonprofit organizations; and supplies. b This category includes contract
obligations for the following service- type categories: cost analyses,
deeds- in- lieu, exclusive listings, foreclosure services, repair services,
space rentals, and title services. c We could not determine the service type
for these contract actions either because the service type

field was blank in the HUD Procurement System or HUD did not provide the
data we needed to determine the service type.

Source: GAO?s analysis of data from the HUD Procurement System.

Appendix III: GAO?s Human Capital Framework

Page 43 GAO- 01- 590 HUD's Homeownership Centers

It is important for agencies to focus on human capital as a strategic asset.
Agencies can begin by assessing how well their existing human capital
approaches support their missions, goals, and other organizational needs. A
useful assessment tool is our human capital framework, which identifies a
number of human capital elements and underlying values that are common to
high- performing organizations. This framework is shown in table 7 and also
presented in Human Capital: A Self- Assessment Checklist for Agency Leaders.
1

Table 7: GAO?s Human Capital Framework

Strategic Planning Establish the agency?s mission, vision for the future,
core values, goals and objectives, and strategies.

 Shared vision

 Human capital focus Organizational Alignment Integrate human capital
strategies with the agency?s core

business practices.

 Improving workforce planning

 Integrating the human resources function Leadership Foster a committed
leadership team and provide for

reasonable continuity through succession planning.

 Defining leadership

 Building teamwork and communications

 Ensuring continuity Talent Recruit, hire, develop, and retain employees
with the skills

needed for mission accomplishment.

 Recruiting and hiring

 Training and professional development

 Workforce deployment

 Compensation

 Employee- friendly workplace Performance Culture Empower and motivate
employees while ensuring

accountability and fairness in the workplace.

 Performance management

 Performance incentives

 Continuous learning and improvement

 Managers and supervisors

 Job processes, tools, and mission support

 Information technology

 Inclusiveness

 Employee and labor relations Source: GAO.

1 Human Capital: A Self- Assessment Checklist for Agency Leaders (GAO/ OCG-
00- 14G, September 2000, Version 1). Appendix III: GAO?s Human Capital

Framework

Appendix III: GAO?s Human Capital Framework

Page 44 GAO- 01- 590 HUD's Homeownership Centers

The self- assessment checklist is a simple diagnostic tool for agency
leaders, rather than a methodologically rigorous evaluation. It is meant
simply to capture senior leaders? informed views of their agencies? human
capital policies and practices. Each of the questions in the checklist is
followed by suggested sources of information or indicators; not every agency
will have these sources on hand, and most of the conclusions that users
arrive at can be expected to be somewhat subjective. We hope that using the
self- assessment checklist will allow federal agencies to quickly determine
whether their approach to human capital supports their vision of who they
are and what they want to accomplish, and to identify those aspects of their
?people policies? that are in particular need of attention. In addition,
even the most rudimentary review by agencies of their human capital systems
should help them pinpoint the strengths and weaknesses of their human
capital performance measures and data systems. Effective performance
management requires fact- based decisionmaking; one of the first
requirements is relevant and reliable data.

Appendix IV: Comments From the Department of Housing and Urban Development

Page 45 GAO- 01- 590 HUD's Homeownership Centers

Appendix IV: Comments From the Department of Housing and Urban Development

Note: GAO comments supplementing those in the report text appear at the end
of this appendix.

Appendix IV: Comments From the Department of Housing and Urban Development

Page 46 GAO- 01- 590 HUD's Homeownership Centers

Appendix IV: Comments From the Department of Housing and Urban Development

Page 47 GAO- 01- 590 HUD's Homeownership Centers

Appendix IV: Comments From the Department of Housing and Urban Development

Page 48 GAO- 01- 590 HUD's Homeownership Centers

See comment 1.

Appendix IV: Comments From the Department of Housing and Urban Development

Page 49 GAO- 01- 590 HUD's Homeownership Centers

See comment 4. See comment 3.

See comment 2.

Appendix IV: Comments From the Department of Housing and Urban Development

Page 50 GAO- 01- 590 HUD's Homeownership Centers

Appendix IV: Comments From the Department of Housing and Urban Development

Page 51 GAO- 01- 590 HUD's Homeownership Centers

1. We recognize that the centers have many responsibilities, some of which
may have a greater impact on the workload at one of the centers than that at
the other centers. However, we specifically mentioned mortgage insurance
endorsements and the disposition of single- family acquired properties
because they are the centers' two major singlefamily program
responsibilities and workload areas. As a result, we made no change to the
report's discussion of this issue.

2. While cold weather and aged properties are not unique to the Philadelphia
center, center managers told us that having a large number of older
properties and properties in cold areas has added to their property
disposition workload. We revised our report to clarify this point. In
addition, our analysis of HUD?s obligations for singlefamily contracts in
fiscal years 1999 and 2000 showed over $5 million in contracts for defective
paint services- all by the Philadelphia center. We believe that overseeing
these contractors is ultimately the responsibility of property disposition
staff at the Philadelphia center and adds to their workload. As a result, we
made no further revisions to the report.

3. The report recognizes that, while third- party contractors gather
empirical data on property conditions, it is center staff who analyze the
data they gather and monitor contract compliance. Therefore, we feel that no
additional discussion is needed.

4. This is a reference to a HUD Inspector General report that we quoted,
which relates the poor conditions of HUD properties to a lack of contract
oversight resulting from staffing shortages at the centers. We made no
revisions to the report in response to this comment. GAO Comments

Appendix V: GAO Contacts and Staff Acknowledgments

Page 52 GAO- 01- 590 HUD's Homeownership Centers

Stanley Czerwinski, (202) 512- 2834 Paul Schmidt, (312) 220- 7681

In addition to those named above, Daniel Gage, Cathy Hurley, Barbara
Johnson, John McGrail, Stanley Ritchick, Stewart Seman, and Paige Smith made
key contributions to this report. Appendix V: GAO Contacts and Staff

Acknowledgments GAO Contacts Acknowledgments

Related GAO Products Page 53 GAO- 01- 590 HUD's Homeownership Centers

Single- Family Housing: Stronger Oversight of FHA Lenders Could Reduce HUD?s
Insurance Risk (GAO/ T- RCED- 00- 213, June 29, 2000).

Single- Family Housing: Stronger Measures Needed to Encourage Better
Performance by Management and Marketing Contractors (GAO/ T- RCED00- 180,
May 16, 2000).

Single- Family Housing: Stronger Measures Needed to Encourage Better
Performance by Management and Marketing Contractors (GAO/ RCED- 00117, May
12, 2000).

Single- Family Housing: Stronger Oversight of FHA Lenders Could Reduce HUD?s
Insurance Risk (GAO/ RCED- 00- 112, Apr. 28, 2000).

Homeownership: Problems Persist With HUD?s 203( k) Home Rehabilitation Loan
Program (GAO/ RCED- 99- 124, June 14, 1999).

Single- Family Housing: Weaknesses in HUD?s Oversight of the FHA Appraisal
Process (GAO/ RCED- 99- 72, Apr. 16, 1999).

Homeownership: Results of and Challenges Faced by FHA?s Single- Family
Mortgage Insurance Program (GAO/ T- RCED- 99- 133, Mar. 25, 1999).

Homeownership: Management Challenges Facing FHA?s Single- Family Housing
Operations (GAO/ T- RCED- 98- 121, Apr. 1, 1998).

Major Management Challenges and Program Risks: Department of Housing and
Urban Development (GAO- 01- 248, January 2001).

HUD Management: Information on HUD?s 2020 Management Reform Plan (GAO/ RCED-
98- 86, Mar. 20, 1998).

Human Capital: Meeting the Governmentwide High- Risk Challenge (GAO01- 357T,
Feb. 1, 2001).

Major Management Challenges and Program Risks: A Governmentwide Perspective
(GAO- 01- 241, January 2001).

Human Capital, A Self- Assessment Checklist for Agency Leaders (GAO/ OCG-
00- 14G, September 2000, Version 1). Related GAO Products

Single- Family Housing HUD Management Human Capital

Related GAO Products Page 54 GAO- 01- 590 HUD's Homeownership Centers

Human Capital: Managing Human Capital in the 21st Century (GAO/ TGGD- 00-
77, Mar. 9, 2000).

Human Capital: Key Principles From Nine Private Sector Organizations (GAO/
GGD- 00- 28, Jan. 31, 2000).

Federal Workforce: Payroll and Human Capital Challenges During Downsizing
(GAO/ GGD- 99- 57, Aug. 13, 1999).

(385860)

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