HUD Management: Information on HUD's 2020 Management Reform Plan (Letter
Report, 03/20/98, GAO/RCED-98-86).

Pursuant to a congressional request, GAO reviewed aspects of the
management reform proposals outlined in the Department of Housing and
Urban Development's (HUD) 2020 Management Reform Plan, focusing on: (1)
studies and analyses that HUD performed to determine the efficiencies
derived from the centralization and consolidation of the Federal Housing
Administration (FHA) and other major programs and activities; (2)
studies and workload analyses that were conducted to show that HUD would
be able to carry out its responsibilities with 7,500 employees; and (3)
HUD's plan to manage the personnel changes that will result from its
reforms and downsizing.

GAO noted that: (1) reports covering each of HUD's major program areas
and functions, prepared by teams of HUD employees in the spring of 1997,
are the principal documents supporting the 2020 plan; (2) the reports
identify a number of prospective efficiencies from consolidating and
centralizing certain processes; (3) in addition to allowing the agency
to operate with a reduced workforce, HUD intends the changes to reduce
the time or paperwork required for various processes; (4) the
efficiencies cited are generally not based upon detailed empirical
analyses or studies, but rather on a variety of information, including
some workload data, limited results from a pilot project, identified
best practices in HUD field offices, benchmarks from other
organizations, and managers' and staff's experiences and judgment; (5)
the plan is directed in part towards correcting the management
deficiencies that have been identified; (6) because the reforms are not
yet complete and some of the plan's approaches are untested, the extent
to which they will result in the intended benefits is unknown; (7)
according to HUD's Deputy Secretary, the process changes proposed by the
2020 plan, along with states and local entities and the use of
contractors, will allow the agency to operate with 7,500 staff--a
staffing target level established prior to the plan; (8) however,
proposed staffing levels for each program area are generally not based
upon systematic workload analyses to determine needs; (9) while the
reform teams were instructed by the Deputy Secretary to determine
staffing requirements based upon workload, they were also instructed to
work within targeted staffing levels and the Department's staffing
constraints; (10) the reform teams relied on a variety of factors,
including some workload data, to show whether responsibilities could be
carried out within targeted staffing levels; (11) because the downsizing
target of 7,500 staff is not based upon a systematic assessment of needs
and because proposed legislation could affect those needs, it is
uncertain that HUD will have the capacity to carry out its
responsibilities once the reforms are in place; (12) an August 1997
agreement between HUD and the American Federation of Government
Employees National Council of HUD Locals 222 established the framework
for managing personnel changes to implement the 2020 plan; (13) this
agreement includes buyouts, reassignments, and an outplacement program
for HUD employees and provides that a reduction in force may be used if
necessary, but not before 2002; and (14) this agreement also provides
for hiring new employees for some positions.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-98-86
     TITLE:  HUD Management: Information on HUD's 2020 Management Reform 
             Plan
      DATE:  03/20/98
   SUBJECT:  Reductions in force
             Housing programs
             Community development programs
             Federal agency reorganization
             Mortgage programs
             Federal downsizing
             Strategic planning
             Human resources utilization
IDENTIFIER:  HUD Indian Housing Program
             HUD 2020 Management Reform Plan
             HUD Section 8 Housing Assistance Program
             
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Cover
================================================================ COVER


Report to Congressional Requesters

March 1998

HUD MANAGEMENT - INFORMATION ON
HUD'S 2020 MANAGEMENT REFORM PLAN

GAO/RCED-98-86

HUD's 2020 Management Reform Plan

(385710)


Abbreviations
=============================================================== ABBREV

  CPD - Community Planning and Development
  FHA - Federal Housing Administration
  FHEO - Fair Housing and Equal Opportunity
  GAO - General Accounting Office
  HUD - Department of Housing and Urban Development
  PIH - Public and Indian Housing

Letter
=============================================================== LETTER


B-279193

March 20, 1998

The Honorable Edolphus Towns
Ranking Minority Member
Subcommittee on Human Resources
Committee on Government Reform
 and Oversight
House of Representatives

The Honorable Elijah Cummings
Ranking Minority Member
Subcommittee on Civil Service
Committee on Government Reform
 and Oversight
House of Representatives

On June 26, 1997, the Department of Housing and Urban Development
(HUD) announced its "HUD 2020 Management Reform Plan," a sweeping set
of proposals intended to, among other things, address identified
management weaknesses and continue downsizing the Department from
about 10,500 staff to about 7,500 staff by the year 2000,
subsequently extended to 2002.  The plan outlined a number of
organizational changes, including the consolidation of similar
functions within and across the agency's main program areas, as well
as staff reductions and target staff levels for each of the areas. 
The plan also included a "buyout" and other procedures to achieve the
target staff levels. 

In response to your September 3, 1997, request, we reviewed aspects
of the management reform proposals outlined in the 2020 plan.  As
requested, we focused on the following questions: 

  -- What studies and analyses did HUD perform to determine the
     efficiencies derived from the centralization and consolidation
     of the Federal Housing Administration (FHA) and other major
     programs and activities? 

  -- What studies and workload analyses were conducted to show that
     the agency will be able to carry out its responsibilities with
     7,500 employees? 

  -- How does HUD plan to manage the personnel changes that will
     result from the reforms and downsizing? 

The information in this report is based on a review of documents
provided by HUD and on interviews with key officials involved in the
2020 planning process.  We did not independently verify the accuracy
of data in the documents that HUD provided. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Reports covering each of HUD's major program areas and functions,
prepared by teams of HUD employees in the spring of 1997, are the
principal documents supporting the 2020 plan.  The reports identify a
number of prospective efficiencies from consolidating and
centralizing certain processes.  In addition to allowing the agency
to operate with a reduced workforce, HUD intends the changes to
reduce the time and/or paperwork required for various processes.  The
efficiencies cited are generally not based upon detailed empirical
analyses or studies, but rather on a variety of information,
including some workload data, limited results from a pilot project,
identified "best practices" in HUD field offices, benchmarks from
other organizations, and managers' and staff's experiences and
judgment.  The plan is directed in part towards correcting the
management deficiencies that we and others have identified.  Because
the reforms are not yet complete and some of the plan's approaches
are untested, the extent to which they will result in the intended
benefits is unknown. 

According to HUD's Deputy Secretary, the process changes proposed by
the 2020 plan, along with partnerships with states and local entities
and the use of contractors, will allow the agency to operate with
7,500 staff--a staffing target level established prior to the plan. 
However, proposed staffing levels for each program area are generally
not based upon systematic workload analyses to determine needs. 
While the reform teams were instructed by the Deputy Secretary to
determine staffing requirements based upon workload, they were also
instructed to work within targeted staffing levels and the
Department's staffing constraints.  The reform teams relied on a
variety of factors, including some workload data, to show whether
responsibilities could be carried out within targeted staffing
levels.  Because the downsizing target of 7,500 staff is not based
upon a systematic assessment of needs and because proposed
legislation could affect those needs, it is uncertain that HUD will
have the capacity to carry out its responsibilities once the reforms
are in place. 

An August 1997 agreement between HUD and the American Federation of
Government Employees National Council of HUD Locals 222 established
the framework for managing personnel changes to implement the 2020
plan.  The agreement includes buyouts (inducements for voluntary
retirements), reassignments, and an outplacement program for HUD
employees and provides that a reduction in force may be used if
necessary, but not before 2002.  The agreement also provides for
hiring new employees for some positions. 


   BACKGROUND
------------------------------------------------------------ Letter :2

HUD is the principal government agency responsible for programs
dealing with housing, community development, and fair housing
opportunities.  HUD's missions include making housing affordable
through FHA's mortgage insurance for multifamily housing and the
provision of rental assistance for about 4.5 million lower-income
residents, helping revitalize over 4,000 localities through community
development programs, and encouraging homeownership by providing
mortgage insurance.  HUD is one of the nation's largest financial
institutions, responsible for managing more than $426 billion in
mortgage insurance and $497 billion, in guarantees of mortgage-backed
securities, as of September 30, 1996.  The agency's budget authority
for fiscal year 1998 is about $24 billion. 

HUD's major program areas are Housing, which includes FHA insurance
and project-based rental assistance programs; Community Planning and
Development (CPD), which includes programs for Community Development
Block Grants, empowerment zones/enterprise communities, and
assistance for the homeless; Public and Indian Housing (PIH), which
provides funds to help operate and modernize public housing and
administers tenant-based rental assistance programs; and Fair Housing
and Equal Opportunity (FHEO), which is responsible for investigating
complaints and ensuring compliance with fair housing laws. 

HUD has been the subject of sustained criticism for weaknesses in its
management and oversight abilities, which has made it vulnerable to
fraud, waste, abuse, and mismanagement.  In 1994, we designated HUD
as a high-risk area because of four long-standing Department-wide
management deficiencies:  weak internal controls, inadequate
information and financial management systems, an ineffective
organizational structure, and an insufficient mix of staff with the
proper skills.  In February 1997, we reported that HUD had formulated
approaches and initiated actions to address these deficiencies but
that its efforts were far from reaching fruition.\1

HUD began a number of reform and downsizing efforts prior to the 2020
plan.  In February 1993, then-Secretary Cisneros initiated a
"reinvention" process in which task forces were established to review
and refocus HUD's mission and identify improvements in the delivery
of program services.  HUD also took measures in response to the
National Performance Review's September 1993 report, which
recommended that HUD eliminate its regional offices, realign and
consolidate its field office structure, and reduce its field
workforce by 1,500 by the close of fiscal year 1999.  Following a
July 1994 report by the National Academy of Public Administration
that criticized HUD's performance and capabilities, Secretary
Cisneros issued a reinvention proposal in December 1994 that called
for major reforms, including a consolidation and streamlining of
HUD's programs coupled with a reduction in staff to about 7,500 by
the year 2000. 

Secretary Cuomo initiated the 2020 planning process in early 1997 to
address, among other things, HUD's needs for downsizing and
correcting management deficiencies.  The process included, for each
major program area, (1) management reform teams that outlined each
area's business and organizational structure, proposed functional
changes, identified resource requirements, and allocated staff based
on downsizing targets; (2) "change agent" teams that recommended
consolidations and other process changes while meeting downsizing
targets; and (3) review of these teams' reports by the Secretary and
principal staff.  Members of the management reform and change agent
teams were drawn from all levels of the agency.  The plan has
continued to evolve since June 1997, as implementation teams proceed
with their work. 


--------------------
\1 High-Risk:  Department of Housing and Urban Development
(GAO/HR-97-12, Feb.  1997). 


   ANTICIPATED EFFICIENCIES ARE
   BASED ON A VARIETY OF FACTORS
------------------------------------------------------------ Letter :3

HUD's principal documents supporting the 2020 plan are management
reform and change agent reports covering each of the agency's major
program areas and functions.  Prepared in the spring of 1997, these
reports identify a number of potential efficiencies from
consolidating and centralizing processes.  Beyond allowing the agency
to operate with a reduced workforce, other efficiencies include
reducing the processing time for single-family housing insurance
endorsements and multifamily housing development applications and
reducing paperwork requirements for grant programs.  The potential
efficiencies are generally not based on detailed empirical analyses
or studies, but rather on a variety of factors, including some
workload data, limited results of a pilot project, identified best
practices in HUD field offices, benchmarks from other organizations,
and managers' and staff's experiences and judgment. 

In addition to increased efficiency, HUD expects the planned
consolidation of functions and other process changes to result in
increased effectiveness.  For example, fewer public housing
authorities and FHA multifamily projects may become "troubled"
because staff can better focus on monitoring and improving the
performance of the authorities and projects that are potentially
troubled. 

The following sections discuss, for each of HUD's major program
areas--Housing, Community Planning and Development, Public and Indian
Housing, and Fair Housing and Equal Opportunity--the specific process
changes proposed in the 2020 plan, the potential efficiencies and
other benefits expected from the changes, and the studies or other
information HUD provided as support for the changes. 


      OFFICE OF HOUSING
---------------------------------------------------------- Letter :3.1

HUD's 2020 plan calls for significant organizational and process
changes in three primary functions of FHA's--single-family housing
activities, multifamily housing activities, and the FHA Comptroller's
activities.  As discussed below, the nature and detail of the studies
and analyses supporting the process changes vary among the offices. 


         SINGLE-FAMILY HOUSING
-------------------------------------------------------- Letter :3.1.1

Process changes proposed for single-family housing include
consolidating functions, such as insurance endorsements, that were
previously carried out in 81 field offices into four homeownership
centers; privatizing or contracting out most property disposition
activities (HUD has to dispose of FHA-insured single-family
properties that it owns as a result of lenders' foreclosures on
defaulted mortgages); and eliminating most loan-servicing functions
by selling the inventory of HUD-held mortgages.\2

HUD expects the reforms to permit a significant reduction in staffing
requirements, reduce insurance endorsement processing time to as
little as 1 day (compared with an average of about 2 weeks), improve
underwriting and loss mitigation, and increase loans to targeted
populations through outreach.  HUD also expects the reforms to
address problems such as poor control and monitoring of HUD-owned
properties and inconsistent delivery of quality services. 

According to the Deputy Assistant Secretary for Single Family
Housing, an in-house team of senior managers developed the
homeownership center concept based upon the regional office structure
of the Federal National Mortgage Association (Fannie Mae).\3 Fannie
Mae serves the entire United States through offices in Atlanta,
Georgia; Chicago, Illinois; Dallas, Texas; Pasadena, California; and
Philadelphia, Pennsylvania.  Certain functions performed by FHA
generally parallel some of those performed by other organizations in
the single-family mortgage industry such as Fannie Mae.  In 1994, as
a pilot project, FHA began consolidating its single-family
loan-processing operations that were performed in 17 of its field
offices into the Denver Homeownership Center.  According to HUD, the
pilot showed that consolidating work at one site and increasing the
use of technology could reduce insurance endorsement processing time
from 2 weeks to as little as 1 day.  In addition, according to the
change agent report, the functions in the Denver Homeownership Center
were carried out with half the staff who were responsible for the
functions in the 17 field offices. 


--------------------
\2 HUD-held mortgages are those that FHA has acquired from private
lenders; most often, they are assigned to FHA by lenders after
borrowers have defaulted. 

\3 Fannie Mae is a government-sponsored enterprise that helps ensure
that funds are available to home buyers by buying mortgages from
mortgage originators, such as savings and loan associations,
commercial banks, and mortgage bankers. 


         MULTIFAMILY HOUSING
-------------------------------------------------------- Letter :3.1.2

Process changes in FHA's multifamily housing activities include
consolidating the asset development and management functions into 18
hubs supported by staff in 33 program centers; implementing a
fast-track loan development process, which allows field offices to
waive certain loan-processing requirements and tailor processing
options to local needs and requires lenders to order and pay for the
appraisals and inspections; and consolidating financial and physical
assessments of properties, enforcement, and rental assistance
functions--along with similar functions in other program areas--into
three nationwide centers.  (The three are the Assessment Center, the
Enforcement Center, and the Section 8 Financial Management Center.)

Efficiencies projected from the changes, according to HUD, include
(1) reducing the processing time for housing development applications
from 360 days to 35 days and, (2) using nonfederal experience as a
model, reducing individual asset managers' average workloads from 55
projects to 35 (primarily because some functions such as inspections
and enforcement actions will be handled in part by the enforcement
and assessment centers).  In addition, HUD expects the changes to
address problems such as

  -- inconsistency in processing loan development applications, in
     terms of both time and procedures;

  -- a failure to hold mortgagees accountable, which puts HUD at
     greater risk;

  -- asset managers overburdened with unrelated responsibilities;

  -- the lack of an efficient system to identify, assess, and respond
     to troubled properties; and

  -- an inefficient and burdensome administration system for Section
     8 rental assistance.\4

Multifamily housing officials provided some empirical data for the
projected efficiencies.  For example, support for the reduction in
asset managers' workload included some data on workloads in
nonfederal organizations that perform similar functions and HUD's own
workload analysis, which is based on its current inventory of
properties.  The nonfederal workload ratios varied from 18 to 37
projects per project manager.  Multifamily housing officials
allocated staffing to the field offices (hubs and centers) based, in
part, upon the following ratios: 

  -- 35 insured projects with subsidies per staff person,

  -- 55 insured projects without subsidies per staff person, and

  -- 16 projects per staff person for preventing the projects from
     becoming troubled. 

A HUD survey of multifamily housing field offices showed reductions
in processing time and costs using the fast-track process.  Anecdotal
responses from 14 offices included comments such as, "The old way
took 60 to 90 days, some time longer.  Processing at any one stage
typically takes 30 to 40 days often much shorter;" "FAST-TRACK cut
staff time from 120 hours per case to 40 hours per case;" and
"Estimated savings $17,000 to $20,000 per case in contracting costs."
Other factors that influenced the restructuring of multifamily
housing offices and functions were the experiences of
cross-functional teams (staffed from different offices to assist in
the handling of workload problems) and field office staff's
experiences. 


--------------------
\4 The Section 8 program is a rent subsidy program that assists
eligible low-income families. 


         FHA COMPTROLLER
-------------------------------------------------------- Letter :3.1.3

In accordance with the 2020 plan, the FHA Comptroller has redesigned
the title I debt collection process and consolidated operations from
three centers into one center (Albany, New York).\5 In addition, the
Comptroller plans to transfer routine debt collection to the Treasury
Department or, if this does not prove to be feasible, to a private
contractor.\6

The process changes are being made to address two major problems: 
(1) the recovery processes were cumbersome and poorly integrated with
other processes, such as insurance premium collection from lenders
and claims examination, and (2) the resources invested were not
justified by the level of assets recovered.  The FHA Comptroller
believes that the changes will result in increased debt collection
with significantly fewer staff. 

The changes and benefits identified are based upon a business process
redesign effort, including a workforce study, that was completed in
January 1997.  The process redesign showed that over a 10-year
period, debt collection could increase 23 percent using fewer than
half the existing number of staff.  The process redesign team
included a staff-level team; a management and stakeholder steering
committee; and a contractor that provided consultant services. 


--------------------
\5 Title I of the National Housing Act authorizes FHA to provide
mortgage insurance for home improvement, mobile homes, and the
preservation of historic properties. 

\6 Routine debts are those for which collection is not impeded by
such things as bankruptcy or allegations of fraud and for which it is
possible to use a mechanical process such as salary offsets. 


      OFFICE OF COMMUNITY PLANNING
      AND DEVELOPMENT
---------------------------------------------------------- Letter :3.2

Prior to the 2020 plan, CPD consolidated the process of grantee
planning and reporting for four formula grant programs and initiated
a new automated system for the process.  Additional changes proposed
by the 2020 plan include using advanced mapping software to aid
community planning, converting competitive grants providing
assistance for the homeless to formula grants, and aligning resource
needs and responsibilities within a new Economic Development and
Empowerment Service. 

The reforms are meant to address problems such as fragmented
approaches for solving community concerns, limited resources for
managing the over 1,300 competitive grants CPD approves in a year,
and limited staffing for local monitoring of programs.  From the
reforms, CPD expects to (1) continue to reduce paperwork
requirements; (2) improve the monitoring and review of grantees by
targeting its resources to high-risk projects; and (3) reduce its
workload for processing, awarding, and monitoring grant applications
and grantees' activities. 

CPD did not provide empirical or analytical studies supporting the
efficiencies expected from the reforms.  CPD officials said, however,
that their operations demonstrate the viability of the process
changes because many of the changes are already in place and
personnel reductions had occurred prior to the 2020 plan.  However,
the conversion of the competitive grants to formula grants requires
legislation, and if this does not occur, some monitoring activities
may have to be contracted out. 


      OFFICE OF PUBLIC AND INDIAN
      HOUSING
---------------------------------------------------------- Letter :3.3

Process changes in PIH include consolidating some of the functions
previously performed in 52 public housing field offices into 27 hubs
and 16 program centers; centralizing and consolidating enforcement,
real estate assessment, and Section 8 payment functions into three
nationwide centers along with other program areas; centralizing the
management of competitive grants and public housing operating and
capital funds into one PIH Grants center; centralizing applications
for PIH demolition/disposition, designated housing plans, and
homeownership plans into one Special Applications center;\7
centralizing functions to improve the performance of troubled public
housing authorities into two Troubled Agency Recovery centers; and
deregulating (reducing monitoring and reporting requirements for)
small and high-performing public housing authorities. 

HUD envisions that the consolidation of the field offices will even
out the public housing authority workload across offices, while the
specialization of functions will result in less time and fewer staff
needed to carry out the functions.  The reforms are meant to address
problems such as a lack of monitoring and coordination of PIH
programs, staffing imbalances among PIH field offices, and difficulty
identifying and resolving problems with housing authorities earlier
because of the intensive field resources needed to deal with troubled
authorities. 

PIH did not provide empirical data or analyses that show how the
changes will produce the expected efficiencies.  As discussed further
in this report, PIH used workload and staffing data to redistribute
the workload across its field offices.  Other support for the
changes, according to PIH officials, are on the basis of managers'
and staff's past experiences. 


--------------------
\7 This center will review, process, and approve all nonfunded,
noncompetitive applications or plans for such things as demolishing
public housing units and moving public housing residents into
homeownership. 


      OFFICE OF FAIR HOUSING AND
      EQUAL OPPORTUNITY
---------------------------------------------------------- Letter :3.4

Process changes in FHEO include consolidating its existing field
structure of 48 offices into 10 hubs, 9 project centers, and 23
program offices; consolidating, within both its headquarters and
field offices, program compliance monitoring and enforcement
functions; and cross-training field staff. 

HUD intends the changes to result in more flexibility to shift
resources to meet priorities or handle workload demands; improved
communication and cooperation among FHEO staff; an organizational
structure that will be clearer to the public; and better integration
of fair housing into HUD's other programs.  The changes address
problems such as fragmentation of responsibility and accountability
in areas such as policy development, planning, and program
evaluation; duplication of field oversight functions; and a split in
field management between enforcement and program compliance
functions, resulting in a "two FHEO" phenomenon. 

FHEO did not perform analytical studies to support the changes. 
Rather, the reforms and benefits identified were based on the FHEO's
self-analysis, brainstorming sessions, the findings of a change agent
team, a review of workload data, and discussions with employees and
customers. 


   HUD'S ABILITY TO OPERATE WITH
   7,500 STAFF IS NOT BASED UPON
   SYSTEMATIC ANALYSES OF NEEDS
------------------------------------------------------------ Letter :4

According to the Deputy Secretary, the process changes proposed by
the 2020 plan, along with partnerships with states and local entities
and the use of contractors, will allow the agency to operate with
7,500 staff--a staffing target level established prior to the plan. 
Proposed staffing levels for each program area, as outlined in the
management reform team and change agent team reports, are generally
not based upon systematic workload analyses to determine needs. 
While the teams were instructed by the Deputy Secretary to determine
staffing requirements on the basis of workload, they were also
instructed to work within targeted staffing levels and HUD's staffing
constraints.  The teams relied on a variety of factors, including
workload data, to show whether they could carry out their
responsibilities within assigned targeted staffing levels. 

The 2020 plan proposes a staffing target of 2,900 for the Office of
Housing, a reduction of about 44 percent from fiscal year 1996
staffing of 5,157.  The 2,900 figure includes some positions that
will be transferred to the Department-wide Assessment, Enforcement,
and Section 8 Financial Management centers; the exact numbers are
still evolving as implementation plans are developed for the three
centers.  The following sections discuss some of the factors
considered in assessing the Housing Office's staffing needs. 

  -- FHA's proposal to carry out single-family housing activities
     with the reduced staffing level of 764 (as of January 1998)
     stems primarily from the elimination of most loan servicing and
     property disposition activities.  According to the Deputy
     Assistant Secretary for Single Family Housing, the proposed
     staffing level is based on past experience, input from the
     change agent team and the managers of the 2020 reorganization
     project, and staffing levels at the Denver Homeownership Center
     pilot. 

  -- Staffing for the Title I Asset Recovery Center, part of the FHA
     Comptroller's office, was based in part on a workload analysis
     performed as part of the business processing reengineering
     project.  The workload analysis showed a need for a staffing
     level of 62.  This number was reduced to 50, according to FHA
     officials, after (1) discussions with Department of Treasury
     officials who, based on their experience with debt collection
     activities, believed the operations could be performed more
     efficiently and (2) higher level reviews, which concluded that
     further reductions were needed. 

  -- When assessing multifamily housing staffing needs, FHA
     considered factors such as job functions, types of housing
     projects (subsidy or nonsubsidy, troubled or nontroubled),
     supervisor/staff ratios recommended by the National Performance
     Review, and nonfederal workloads for asset managers.  As part of
     its assessment, FHA assumed that it will reduce troubled
     projects to 10 percent of the inventory (from an estimated 20
     percent currently) by year 2000. 

The 2020 plan proposes a staffing target of 770 for Community
Planning and Development, a reduction of 8.8 percent from fiscal year
1996 staffing of 844.  However, the CPD management reform plan states
that an additional 200 personnel may be needed to fully implement its
grants management system and undertake adequately staffed on-site
monitoring for high-risk projects.  This staffing level need is
based, according to a CPD official, on staffing and workload data
from 1992 and 1996.  According to the official, the analysis used a
formula that takes into consideration the number of grants, dollar
amount of grants, and staffing levels and compared workloads for the
2 years.  CPD was unable to provide documentation of the detailed
analysis. 

For Public and Indian Housing, the 2020 plan proposes a staffing
target of 1,165, a reduction of 14 percent from fiscal year 1996
staffing of 1,355.  After receiving its staffing target, PIH first
identified the needs of the processing and operations centers.  It
then allocated the remaining staff to field office sites using a
formula that incorporated the number of public housing authorities
with 250 or more low-income housing units and/or 500 or more Section
8 rental assistance units within each office's jurisdiction. 

The 2020 plan proposes a staffing target of 591 for Fair Housing and
Equal Opportunity, a reduction of about 11 percent from fiscal year
1996 staffing of 663.  Of the 591 staff, 475 will be in field
offices.  In 1996, FHEO reviewed field office workload data and
estimated that it needed from about 150 to about 250 more staff than
the 474 then on board.  However, officials told us that the Office's
legislatively established missions can be accomplished with the
allotted personnel level. 

In its latest semiannual report, HUD's Inspector General raised
concerns about the 2020 plan, including the agency's capacity to
implement the reforms.\8 The report noted that the downsizing target
of 7,500 was adopted without first performing a detailed analysis of
HUD's mission and projected workload under its proposed reforms.  The
report also noted that although HUD is downsizing, implementation
plans are not final, and the proposed legislation to streamline and
consolidate programs has not been enacted. 

In commenting on a draft of this report, HUD's Acting Deputy
Secretary stated that the Department plans to achieve its downsizing
goal of 7,500 full-time employees by 2002 in two phases.  During the
first phase, HUD has reduced staff to approximately 9,000 employees
who are being deployed to enhance the delivery of HUD's programs and
services.  According to the Acting Deputy Secretary, HUD now plans to
continue downsizing to 7,500 by 2002--the second phase--only if (1)
the Congress enacts legislation to consolidate HUD's program
structure and (2) there has been a substantial reduction in the
number of troubled multifamily assisted properties and troubled
public housing authorities. 


--------------------
\8 Department of Housing and Urban Development, Office of Inspector
General Semiannual Report to Congress as of September 30, 1997
(Washington, D.C.:  Dec.  29, 1997). 


   UNION AGREEMENT ESTABLISHED
   FRAMEWORK FOR MANAGING
   PERSONNEL CHANGES
------------------------------------------------------------ Letter :5

On August 10, 1997, HUD and the American Federation of Government
Employees National Council of HUD Locals 222 signed an implementation
agreement to carry out the 2020 plan.\9

The agreement, among other things, stated that buyouts, attrition,
and aggressive outplacement services would be used in lieu of
reductions in force through year 2002.  The agreement identified two
types of positions that would be filled to implement the reforms: 
substantially similar positions (those that entail similar duties,
critical elements, and qualification requirements and can be
performed by the incumbent with little loss in productivity) and new
positions. 

The procedures outlined in the agreement to fill substantially
similar positions are as follows: 

  -- Reassignments to similar positions will be in the local
     commuting area. 

  -- Positions not filled by reassignments will be filled by merit
     selection. 

  -- Any positions still vacant will be filled by management's
     directed reassignment of an employee.  (Because of employees'
     concerns, HUD has decided not to use this procedure.)

  -- Any position still vacant will be filled by outside hires. 

The procedures outlined in the agreement to fill new positions are as
follows: 

  -- For HUD's new consolidated centers, positions will be filled
     using merit selection procedures.  Except for positions that
     require special skills--for example, HUD attorneys and some
     Community Builders--merit staffing will be restricted to HUD
     employees. 

  -- Any positions still vacant will be filled by management's
     directed reassignments.  (Because of employees' concerns, HUD
     has decided not to use this procedure.)

  -- Any positions still vacant will be filled by outside hires. 

HUD initiated personnel actions to implement the 2020 reforms in
September 1997.  A buyout was held that closed September 30, 1997, in
which 771 employees were approved to leave the agency.  In October
1997, HUD mailed letters to each of its employees regarding their
status under the reforms. 

  -- HUD sent letters to 3,024 employees notifying them that their
     jobs were unaffected by the reforms. 

  -- HUD sent letters to 3,184 employees notifying them that they
     would be voluntarily reassigned to substantially similar
     positions within the same geographical area. 

  -- HUD sent letters to approximately 3,000 employees notifying them
     that they had not been placed in a position in HUD's new
     organization.  The letters also stated that they would remain in
     their current position if they did not obtain a position through
     merit staffing, or voluntary reassignment, or a career outside
     of HUD.  The letter stated that HUD would not implement a
     reduction in force until 2002 if one was necessary. 

On October 16, 1997, according to HUD, it announced 1,676 merit
staffing vacancies.  The announcements closed November 3, 1997.  In
November, an Office of Personnel Management team reviewed HUD's merit
staffing guidance for filling these vacancies and made several
suggestions for revising the language in the guidance.  Also, in
November, HUD announced a second buyout that employees had to take
advantage of by December 23, 1997.  An additional 230 employees were
approved to leave the agency under the buyout. 

In January 1998, HUD announced additional voluntary reassignments for
positions that remained unfilled.  Any positions still vacant after
the voluntary reassignments will be advertised for outside hires. 


--------------------
\9 On December 1, 1997, HUD signed a separate agreement with the
National Federation of Federal Employees, which, among other things,
establishes procedures for filling merit selection announcements in
its bargaining unit positions in HUD offices. 


   OBSERVATIONS
------------------------------------------------------------ Letter :6

The HUD 2020 Management Reform Plan is the latest in a series of
recent proposals to overhaul a department that has been
long-criticized for its management weaknesses--including those that
contributed to our designation of HUD as a high-risk area.  The plan
is directed, in part, towards correcting the management deficiencies
that we and others, including the Inspector General and the National
Academy of Public Administration, have identified.  The plan also
incorporates steps for simultaneously reducing the agency's
workforce. 

The 2020 plan is still evolving.  Because the reforms are not yet
complete and some of the plan's approaches are untested, the extent
to which its proposed reforms will result in the plan's intended
benefits is unknown.  In addition, because the downsizing target of
7,500 staff is not based upon a systematic workload analysis to
determine needs, it is uncertain whether HUD will have the capacity
to carry out its responsibilities once the reforms are in place. 
Furthermore, the plan references legislative proposals, some of
which, if not enacted, could affect workloads and staffing needs. 
Moreover, the process changes and downsizing suggest a greater
reliance on contractors to help carry out HUD's mission. 

These uncertainties heighten the need for HUD, as it moves forward
with implementing the 2020 plan's reforms, to carefully monitor its
performance, assess the impact of the reforms, and amend the plan if
necessary--including its staffing targets.  Consulting with the
Congress, its customers, and other stakeholders through a mechanism
such as the Government Performance and Results Act could enhance the
success of these efforts. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :7

HUD provided comments on a draft of this report (see app.  I).  HUD
said that the report did not consider the agency's need for
management reform and whether the plan focuses on the right areas. 
HUD also said that (1) due to its focus on the role of empirical
analysis, the draft report did not adequately acknowledge other
methods used to develop specific management reforms, (2) the draft
report did not reflect that HUD undertook substantial workload
analyses to plan for reaching the goal of 7,500 employees, and (3)
the draft report failed to discuss any of the benefits likely to
emerge from the plan's systemic changes.  In its comments, HUD also
included information on the 2020 plan's implementation status and how
certain of its specific reforms are expected to address problems
identified by its Inspector General, GAO, and others. 

Our draft report did not specifically assess HUD's need for
management reform and whether the plan focuses on the right areas
because they were outside the scope of our objectives.  However, the
report contains background information on the agency's history of
management problems and its reform and downsizing efforts prior to
the 2020 plan.  We agree that there was a need for HUD to take action
and that some actions included in the 2020 plan may help to correct
deficiencies that we and others have identified.  The 2020 plan seeks
to solve many of the critical problems facing the Department.  HUD's
recognition that it needs to establish Department-wide capacities for
real estate assessment and enforcement activities; improve internal
controls; and improve systems and staffing for monitoring funds and
multifamily project and public housing authority activities is
consistent with the long-standing concerns that we and others have
had.  In this regard, our report was not intended to fault HUD's
attempts to correct these deficiencies, and we have made changes
where appropriate to reflect a proper tone. 

Regarding HUD's comment about a focus on empirical analysis, two of
our three objectives concerned the studies and analyses underlying
(1) the efficiencies derived from centralizing and consolidating
certain programs and activities and (2) the Department's ability to
carry out its responsibilities with the plan's target staffing level
of 7,500.  By their nature, these questions encompass the role of
empirical analysis.  The draft report did acknowledge the role played
by other factors--including the change agent and management reform
teams, the experience of HUD managers and staff, the practices of
other organizations, and the experience of the Denver Homeownership
Center pilot project--in setting out the efficiencies HUD expects
from centralizing and consolidating certain activities.  In its
comments, HUD said that, in addition to the factors cited in our
draft report, it consulted with recognized management experts prior
to the June 1997 release of the 2020 plan; consulted with affected
constituent groups and the Congress since the plan's release; and
incorporated the Inspector General's suggestions into its
implementation plans.  We agree that such steps may be useful in
building support for HUD's reforms.  However, as noted, our
objectives were to provide information on HUD's analytical support
for the efficiencies it expects from the reforms--that is, the extent
of data supporting the anticipated quantitative and qualitative
benefits stated in the 2020 plan. 

HUD said that it undertook substantial workload analyses to plan for
reaching the goal of 7,500 employees and that the workload
analyses--along with the reengineering of numerous processes--formed
the foundation for staffing size and allocation decisions.  As we
noted in our draft report, HUD's management reform and change agent
teams relied on a variety of factors, including workload data, to
show whether each program area could carry out its responsibilities
within assigned targeted staffing levels.  However, we draw a
distinction between (1) analysis that is directed at determining how
many staff are needed to carry out a given responsibility or function
and (2) the use of historical workload data to apportion, or
allocate, a predetermined target number of staff among different
locations or functions.  While HUD clearly used the latter approach,
at least within some program areas, it provided us with no evidence
during our review or in its comments that it used the former.\10
Rather, as our report states, the management reform and change agent
teams were instructed by the Deputy Secretary to work within targeted
staffing levels; the predetermined target level for the entire
Department was 7,500, a number established prior to the 2020 planning
process.  As is also noted in our report, HUD's Inspector General
reported in December 1997 that the downsizing target of 7,500 was
adopted without first performing a detailed analysis of HUD's mission
and projected workload under its proposed reforms.  We have revised
the language in our report where appropriate to make this distinction
clear.  We also added information that HUD provided in its comments
concerning future downsizing to the 7,500 level from the current
level of about 9,000. 

Concerning HUD's comment that the draft report did not acknowledge
potential benefits from the 2020 reform plan, the report noted that
the plan is directed in part towards correcting management
deficiencies that we and others have identified.  Furthermore, the
report noted that, in addition to increased efficiency, HUD expects
the planned consolidation of functions and other process changes to
result in increased effectiveness, such as fewer troubled public
housing agencies and troubled FHA multifamily projects.  For the
reasons stated in the report, we continue to believe that the extent
to which these benefits will be realized is as yet uncertain.  HUD
implicitly acknowledges this uncertainty in its comments by
conditioning its further downsizing in part on a "substantial"
reduction in troubled public housing agencies and multifamily
projects. 


--------------------
\10 An exception was the analysis for staffing the Title I Asset
Recovery Center.  As discussed in the report, staffing for this
center was based in part on a workload analysis performed during a
business processing reengineering effort.  Staffing for this center
was part of the Office of Housing's staffing target of 2,900. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

To identify HUD's analyses supporting the (1) prospective
efficiencies from centralizing and consolidating major programs and
activities and (2) agency's ability to carry out its responsibilities
with 7,500 employees, we reviewed the management reform and change
agent reports for each of HUD's major program areas.  We also
interviewed officials in each program area who had participated in,
or were familiar with, the process of developing the 2020 plan.  We
asked officials in each program area to provide any empirical studies
or analyses underlying the proposed reforms that did not appear in
the management reform or change agent reports.  In addition, we spoke
with officials in HUD's Office of the Assistant Secretary for
Administration and obtained the Inspector General's report on the
2020 planning process.  To identify how HUD plans to manage the
personnel changes that will result from the reforms and downsizing,
we interviewed officials responsible for the changes and obtained
copies of union agreements and other relevant documents.  We
performed our work from September 1997 through February 1998 in
accordance with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :8.1

We are sending copies of this report to appropriate congressional
committees; the Secretary of Housing and Urban Development; and the
Director, Office of Management and Budget.  We will make copies
available to others upon request. 

If you or your staff have any questions, please call me on (202)
512-7631.  Major contributors to this report are listed in appendix
II. 

Judy A.  England-Joseph
Director, Housing and Community
 Development Issues




(See figure in printed edition.)Appendix I
COMMENTS FROM THE DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT
============================================================== Letter 



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MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II


      RESOURCES, COMMUNITY, AND
      ECONOMIC DEVELOPMENT
      DIVISION
------------------------------------------------------ Appendix II:0.1

Tim Baden, Senior Evaluator
Larry Goldsmith, Senior Evaluator
Frank Minore, Senior Evaluator
Dave Wood, Assistant Director


      OFFICE OF THE GENERAL
      COUNSEL
------------------------------------------------------ Appendix II:0.2

John McGrail, Senior Attorney

RELATED GAO PRODUCTS

Results Act:  Observations on the Department of Housing and Urban
Development's Draft Strategic Plan (GAO/RCED-97-224R, Aug.  8, 1997). 

High-Risk Series:  Department of Housing and Urban Development
(GAO/HR-97-12, Feb.  1997). 


*** End of document. ***