DOCUMENT RESUME

02520 - A1752781]

Department of ousing and Urban Development Could BeStreamlined. FPCD-77-56; 9-114860. June 16, 1977. Released June20, 1977. 23 pp. + 9 appendices (23 pp.).

Report to Sen. Henry Bellmon; by Elmer BD. Staats, ComptrollerGeneral.

Issue Area: Personnel Management and Compensation (3C0).Contact: Federal Personnel and Compensation Div.Budget Function: Community and Regional Development: CnmmunltyDevelopment (451).organization Concerned: Department of Housing and UrbanDevelopmenit.Congressional "ilevance Sen. Renry Bellon.

Streamlining the Department of Housing &nd UrbanDevelopmentfs (HUD's) organization through consolidating fieldoffices and realining selected regional and field officefunctions could improve its delivery of services to the publicat reduced costs. Findings/Conclusions: Streamlining HUD'sorganization could improve services to the public and save moneyby reducing the resources needed to provide the services. Itwould also reduce the potential for duplicate 'crk andfragmented authority and responsihbility which have been problemsin the past. This streamlining can be accomplished by reducingthe number of field offices and requiring field offices anregional offices to operate selected dissimilar programs, withboth reporting to the central office, or by requiring fieldoffices to operate all programs now being done by both field andregional offices. Recommendations: Congress should request theSecretary of HUD to submit to appropriate committees thereorganization plan resulting from the Department'sorganizational assessment before implementing the plans. Theplan should explain in detail the changes, and it should addressthe following issues: cost benefits anticipated from the plannelreorganization; improvement in program responsiveness that willresult; changes in staffing requirements forecast for areasonable period subsequent to the reorganization; and theimpact on organizational patterns, roles, and authorities ofregional and field offices. (Author/SC)

RESTRICTED - Not to be rleased outside the @emeoaAccount.ng Office except on the basis of 1spcNif apprevaby the Office of ConIresNl ilRelaton ,.-

REPORT OF THECOMPTROLLER GENERALOF THE UNITED STATES

Departmen Of HousingAnd Urban DevelopmentCould Be Streamlined

Regional offices of the Department of Hous-ing and Urban Development provide essentialservices. Yet, streamlining the Department'sorganization through consolidating field of-fices and realining selected regional and fieldoffice functions can improve its delivery ofservices to the public at reduced costs.

FPCD-7756 JUNE 16, 1977

COMPTROLLER GENERAL OF THE UNITED STATESWASINGON, D.C. 0411

B-114860

The Honorable Henry BellmonUnited Sates Senate

Dear Senator Bellmon:

This report describes (1) the role of regional officesin the organizational structure of the Departmen'- of Housingand Urban Development and (2) the opportunity to improveefficiencies and serviceability through streamlining the orga-nization. Particular emphasis was directed toward past andpresent organizational studies conducted by a special inter-est group, the Congress, a private consultant, and the Depart-ment staff.

Our review was made pursuant to your request of August 2,1976, and subseguent discussions with your office. As re-quested by your office, we did not obtain formal commentsfrom he Department. However, the results of our review werediscussed with various agency personnel, including members ofan ad hoc departmental organization assessment group. Theircomments have been considered in preparing the report.

During our review the organization assessment groupbegan an intensive study of the Department's organization,including its basic structure. It plans to prepare a reorga-nization plan for the Secretary to submit to the Office ofManagement and Budget on or before June 15, 1977.

We are providing a recommendation to the Congress onpage 22. We will soon be in touch with your office to arrangefor release of the report.

S y yo v

Comptroller Generalof the United States

REPORT OF THE DEPARTMENT OF HOUSING ANDCOMPTROLLER GENERAL URBAN DEVELOPMENT COULD BE

STREAMLINED

D I G E S T

The Department of Housing and Urban Developmenthas three organizational levels--a central of-fice in Washington, D.C.; 10 regional offices;and 76 field offices, with about 15,000 per-manent full-time staff located as follows:

Location Number Percent

Central office 3,814 26

Central office staffstationed in field 618 4

Regional offices 1,624 11

Field offices 8,790 59

Total 14,846 100

Streamlining the Department's organizationcould improve services to the public andsave money by reducing resources needed toprovide the services. It would also re-duce the potential for duplicate work andfragmented authority and responsibility,which have in the past been problems.

This can be done by reducing the number offield ffices and requiring

-- field offices and regional offices tooperate selected dissimilar programs,with both reporting to the central of-fice, or

-- field offices to operate all programs nowbeing done by both field and regional of-fices. (See pp. 8, 42, and 43.)

Primarily, the regional offices monitor andevaluate field offices, provide policy andtechnical advice to them, carry out programs,

TLShm. Upson rmovl, the t FPCD-77-56cover date should be noted hereon. FPCD-77-56

and do administrative work. The time spenton these functions in the Dallas RegionalOffice follows (see p. 15):

Function Percent

Program operations 42Administrative operations 20Monitoring and evaluation 11Policy and technical advice 17

Dallas's time spent is typical of the otherregional offices. The four functions are es-sential tasks which, if not done by regionaloffices, would have to be done elsewhere.

Recent studies on Housing and Urban Develop-ment's organizational structure include:

--A 1973 study commissioned by the MortgageBankers Association of America. The studyfound disorganization, fragmentation, con-fusion, and inefficiency and recommendedreorganization of regional and field of-fices. (See p. 7.)

--A March 1976 report of the House Surveysand Investigative Staff. It concludedthat the central office urgently neededto review regional office functions,especially those that had expanded intothe operational and decisionmaking func-tions of field office directors. (Seep. 7.)

-- An extensive Housing and Urban Developmentcontracted study completed in March 1976.It concluded that the number of field of-fices and the size of regional officescould be reduced, resulting in improvedprograms and a savings of up to $14 mil-lion a year. (See p. 8.)

-- Internal Housing and Urban Developmentstudies. These as well as the contractedstudy identified undesirable duplicationat all levels. (See p. 8.)

The Senate Appropriations Committee directedHousing and Urban Development to reduce staff-ing and promote more efficient and streamlined

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services by reorganizing regional offices.(See pp. 7 to 8.)

Housing and Urban Development personneldiffered on ho, much of the work currentlydone by a regional office should be donethere,

Housing and Urban Development is studyingits organization and expects to submit areorganization plan to the Office of Man-agement and Budget by June 15, 1977.

RECOMMENDATION FOR THE CONGRESS

GAO recommends that the Congress requestthe Secretary of the Department of Housingand Urban Development to submit to appro-priate committees the reorganization planresulting from the Department's organiza-tional assessment before implementing theplan. Te plan should in detail explainthe changes and address the

-- cost benefits anticipated from the plannedreorganization;

-- improvement in program responsiveness thatwill esult;

-- changes in staffing requirements forecastfor a reasonable period subsequent to thereorganization; and

-- impact on organizational patterns, roles,and authorities of regional and fieldoffices.

This should give the Congress an opportunityto review the Department's plan to determinewhether the reorganization will resolve pastand current problems that have troubled boththe Congress and Housing and Urban Develop-ment. (See p. 22.)

GAO did not solicit written Department ofHousing and Urban Development comments on

T"r shoa i ii

the report. However, GAO discussed the re-port with top management officials and theorganization assessment group. In general,the Department of Housing and Urban Develop-ment agreed with the facts presented in thezeport. (See p. 23.)

iv

C n t e n t s

DIGEST iDIGEST i

CHAPTER

1 INTRODUCTION 1HUD responsibilities 1HUD organizational structure 2

Functions and relationships ofor nization levels 3

Lirn;- f authority 3HUD staffing 4

Dallas region staffing 5

2 ACTIONS RESULTING FROM ORGANIZATIONAL STUDIES 7HUD reorganization study inprogress 11

Conclusions 13

3 THE HUD REGIONAL OFFICE FUNCTIONS 14What regional offices actually do 14

Monitoring and evaluation 15Policy and technical advice 16Program operations 17Administrative operations 20

Conclusions 20

4 OVERALL CONCLUSIONS AND RECOMMENDATION 21Recommendation for the Congress 22

5 SCOPE OF REVIEW 23

APPENDIX

I Letter from Senator Henry Bellmon,dated August 2, 1976 24

II Historical developmE t of the Departmentof Housing and Development 25

III Map showing jurisu ional boundaries 30

IV Organizational charts of central andregional'offices 31

V HUD staff and line relationships 33

APPENDIX Pa e

VI HUD permanent full-time positions onboard by organizational level and percentof total at the end of each fiscal yearsince 1970 and remarks 34

VII Significant irternal and external studiesof HUD's organization 35

VIII Proposed two-tier organizationalalternatives 42

IX Definitions of regional office functions 45

ABBREVIATIONS

PHA Federal Housing Administration

GAO General Accounting Office

HHFA Housing and Home Finance Agency

HUD Department of Housing and Urban Development

CHAPTER 1

INTRODUCTION

At the request of Senator Henry Bellmon on August 2,1976, (see app. I) and subsequent agreements with his office,we reviewed the role of the regional offices in the organi-zational structure of the Department of ousing and UrbanDevelopment (HUD). We particularly examined recent HUD andexternal study reports on the subject to determine to whatextent their recommendations had been considered or imple-mented. We also made extensive inquiries in HUD's DallasRegion to assess the result o some of the studies' findingsand to determine what functions a regional office performsand why. Our objective was to assess whether regional of-fices were performing essential functions and how regionaland field office staff felt about these services. We did notattempt to determine the optimum number or size of regionaloffices. Specific details concerning the scope of our workare contained in chapter 5.

HUD RES2ONSIBILIT;ES

HUD was created in 1965 to consolidate Federal housingactivities into a Cabinet-level department. HUD's involve-ment in the housing field has been guided by the FederalGovernment's recognition of (1) a responsibility to maintainand promote economic stability, (2) a social obligation tohelp those in need, and (3) an emerging interest in how thecountry's communities develop. In 1969 HUD and several othersocial agencies were organized into 10 regions with satedboundaries and regional office locations. On February 10,1972, Executive Order 11647 formally established Federal Re-gional Councils in each of 10 tandard Federal regions todevelop closer worki..g relatio..ships between major Federalgrant-making agencies and State and local governments and toimprove coordination of the categorical grant-in-aid system.HUD participates on the Federal Regional Councils. (Thehistorical development of the Department is presented inapp. II.)

HUD is the principal Federal agency responsible forprograms concerned with housing needs and improving anddeveloping the Nation's communities. It has responsibilityfor the administration of over 50 Federal assistance pro-grams involving housing, urban development, and relatedactivities. Some major programs currently ad;: inis-tered by HUD are:

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-- Mortgage insurance--A program administered by thedIeral Housimg inistration (FHA) which provides

mortgage insurance for both single family andmultifamily housing.

--Comit..uIty development--A block-grant program to assistToc-l governments with: eliminating slums, blight,and conditions which are detrimental to health, safety,and public welfare; preventing the deterioration ofproperty; conserving and expanding housing stock; ex-panding and improving the quality and quantity ofpublic services; using land and other resources ef-ficiently; diversifying and vitalizing neighborhoods;and restoring and preserving property of historical,architectural, or esthetic value.

-- Low-rent ublic housing--A program providing financialand technical assistance to public agencies in planning,building, acquiring, and operating decent, safe, andsanitary housing for low-income families at affordablerents.

-- Comprehensive lanning assistance--A program designedto foster sound State and local evelopment throughcomprehensive planning. Grants are made to supplementState and local funds for preparing development plans,policies, and strategies; deciding implementation meas-ures; and coordinating related plans and activitiesbeing carried on at various levels of government.

--Federal disaster assistance--A program to provideassistance to States, local governments, owners ofselected private nonprofit facilities, and individualsin alleviating hardship and suffering resulting fromemergencies or major disasters.

--Federal insurance--Programs designed to provide floodinsurance in flood-prone areas; burglary and robberyinsurance to businesses and residents of homes andapartments; and urban property insurance, particularlyin areas subject to riots or civil disturbance.

HUD ORGANIZATIONAL STRUCTURE

HUD functions and responsibilities are generallyperformed within a three-tier organizational structure--the central office located in Washington, D.C.; 10 regionaloffices located in designated major U.S. cities; and 76

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field offices (area offices and insuring offices) located invarious U.S. cities. Field offices are under the jurisdictionof the regional offices. (See app. III for HUD regional of-fice and field office locations and jurisdictional bounda-ries.)

The administration of most HUD program and operatingfunctions involves all three hierarchical tiers in a de-centralized arrangement. There are, however. exceptions.For instance, Policy Development and Research is a com-pletely centralized arrangement and Federal Disaster As-sistance Administration is a bilevel, centralized arrange-ment with central office staff stationed in field locations.(HUD organization charts are presented in app. IV.)

Functions and relationshipsof organization levels

The functions of the organizational levels prescribedby HUD are:

-- Central office--should make and interpret policy;establish priorities; promulgate standards, criteria,and procedures for all levels of field operation; anddirect program administration.

-- Regional offices--should supervise, coordinate, andeaiiuate -fie office operations. They are torepresent tha Secretary with the Governors and withother Federal agencies on the Federal regional oun-cils. They should be responsible for the allocationof program and administrative funds among field of-fices, ceceiving such funds and guidance an' direc-tion rom appropriate assistant secretaries. Regionaloffices should not duplicate reviews and operationscarried out in field offices, but provide programand technical backup and support as needed.

-- Field offices--should operate and make decisions inthe field and be the Department's principal contactwith program participants and sponsors. Geaerally,delegations to take final actions should be decen-tral.zed t this level, without procedural qualifi-cations or review requirements to dilute authority.

Lines of authority

All HUD programs, resources, and activities arevested by statute in the Secretary. For the most part,

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general line authority flows from the Secretary to theregional administrators and from them to the field officedirectors. This structure was intended to give decision-making authority to the officials closest to the problems--the field office directors.

The flow of programmatic line authority involves anadditional central office level--assistant secretaries.Assistant secretaries were established to assist theSecretary in managing and administering HUD programs andfunctions. Programmatic authority is delegated to theassistant secretaries who, in turn, may redelegate to theregional administrators and, through them, to the field of-fice directors for the accomplishment of program objectives.Not all authority, however, has been delegated by the cen-tral office. (See app. V for HUD staff and line relation-ships.)

Regional administrators are directly responsible to theSecretary for achieving HUD's goals and objectives, and areaccountable to the responsible assistant secretaries forprogram delivery. The regional administrators have assis-tants to supervise, coordinate, and evaluate the programsdecentralized to the field offices. These assistant regionaladministrators are responsible for maintaining qualitycontrol over field office programs; assuring th.c programsare carried out in accordance with HUD policies, criteria,and procedures; and seeing that program goals are being met.They perform continuing evaluations of the field officesand provide functional, technical, and programmatic guid-ance to field office staff. Assistant regional administra-tors, however, do not have line responsibility or authorityover counterpart program areas in the field offices.

HUD staffing

There are about 15,000 permanent full-time employeesin HUD. The following chart shows Fcw onboard employeeswere spread among the three levels o organization as ofSeptember 30, 1976. (See app. VI for HUD permanent full-time positions on board by organizational level and percentcf total at the end of each fiscal year since 1970 and re-maarks.)

4

Number of Percent ofLevels of organization employees total

Central office 3,814 26

Central office staff stationedin field 618 4

Regional offices (10) 1,624 11

Field offices (76) 8,790 59

Total 14.846 100

DALLAS REGION STAFFING

The Dallas Region consists of a regional office and1' field offires. These 11 field offices include 5 areaoffices and 6 insuring offices. Three insuring officeslocated in Albuquerque, Houstoi, and Shreveport are, however,in the process of being transformed into full-service housingoffices. (See app II, p. 29, for a discussion of thischange.) The area offices have responsibility for all HUDprograms decentralized from central and regional offices.The insuring offices have responsibility for all decentral-ized housing programs except low-income and assisted housing.Full-service housing offices are responsible for activitiesof the insuring offices and low-income and assisted housing.

As of September 30, 1976, there were oer 1,300permanent full-time employees in the Dallas Regio.i. Th-following table shows the location, type of office, and dis-tribution of employees.

5

Number of Percent ofT"-e/locaticn of office employees total

Regional office:Dallas, T 9's 177 13

Area offices:Dallas, Texas 250 19Oklahoma City, Oklahoma 138 10San Antonio, Texas 120 9New Orleans, Louisiana 118 9Little Rock, Arkansas 102 8

Insuring offices:Houston, Texas (note a) 109 8Shreveport, Louisiana

(note a) 60 4Albuquerque, New Mexico

(note a) 54 4Fort Worth, Texa- 86 6Lubbock, Texas 67 5Tulsa, Oklahoma 67 5

Total 1,348 *00

a/Designated to be full-service housing offices.

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CHAPTER 2

ACTIONS RESULTING FROM ORGANIZATIONAL STUDIES

Widespread concern about HUD's organizational structurehas prompted recent external and internal studies. In late1973 the Mortgage Bankers Association of America commissioneda study of HUD's organizational structure with emphasis onFHA's role within the Department. The study concluded thatthe disorganization, fragmentation, and confusion of HUDmakes it difficult for the Department to focus on the gravity,urgency, and organizational nature of its problems and in-efficiencies. Further, the study noted that HUD's organiza-tional structure results in red tape, slow service, ineffi-ciency, and incapacity to control losses. To remedy theseproblems the study recommends that, in essence, HUD returnto the organizational arrangement that prevailed rior tothe decentralization of HUD that occured in the _J70-71 re-organization. (See p. 27.) This change would result in atwo-tier HUD organizational structure; that is, field andregional offices would report directly to the central office.(See p. 42 for a brief description of this alternative.)

In October 1974 the House Subcommittee on HUD--Independent Agencies of the Committee on Appropriations re-quested its surveys and investigations staff to conduct acomprehensive investigation of HUD's organizational struc-ture. The study identified deficiencies but urged that HUDnot undergo a major reorganization. Rather, it recommendedthat HUD review regional office functions and realine cer-tain roles that had exparded into operational and decision-making functions of field offices. (See app. VII for speci-fic details regarding the study.)

As a result of hearings, the House Committee eliminated333 staff-years in regional offices. They identified theactivities to be eliminated as "* * * the excess of regionaloffice supervision, evaluation and review of area and insuringoffices." The Senate Appropriations Committee, which alsoconsidered the House Committee report, restored all except110 staff-years. but stated essential agreement with thereasons behind the House reduction.

The Senate Committee made it clear that they consideredthe staff of the regional offices larger than needed to per-form their functions. The Committee concluded that a com-plete reorganization of the structure and responsibilitiesof regional offices was needed. It directed HUD to submit

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with its fiscal year 1977 budget request a comprehensivereorganization plan providing for substantial regional staff-ing reductions in supervision in an attempt to promote moreefficient and streamlined delivery of regional and fieldoffice services.

In March 1975 HUD initiated a management improvementprogram to address the deficiencies cited in the Housestaff study and internal concerns resulting from self-examination. Special teams were established to documentand analyze program processes in regional and field of-fices and develop more logical procedures for program deliv-ery. HUD also commissioned a consulting firm to conduct athorough independent study of the organization. This studyincluded an analysis of the percentage share of total work-load of various field offices. Based on this analysis, theconsultants concluded that the larger field offices enjoy thebenefits of economy of scale when compared to the work doneby the smaller offices and that inefficient offices could beclosed and personnel reduced or shifted.

Various near-term and long-term recommendations weremade as a result of these efforts. (See app. VII forspecifics of both process analysis and the consultant'sstudy.) The counsultant's study recommended that HUDreduce a tier of JD organization. It estimated savingsthrough the reduction of the number of field offices andsize of regional offices at up to $14 million annually.(See app. VIII, p. 43, for alternative two.)

Subsequently, the Secretary solicited views on theproper functions and role of the regional offices front theassistant secretaries, the regional administrators, andseveral field office directors. There was no consensusamong these managers, even those at the same organizationallevel. Some favored no regional involvement in proGzamoperations; others believed that regionalization of certainprogram operations was appropriate.

HUD did not subrit a comprehensive reorganization planwith its fiscal year 1977 budget request. Instead, it sub-mitted the "Secretary's Report to Congress on Organization andManagement Activities." This document, dated March 1976,summarized the findings and resultant actions of a conferenceheld by the Secretary in February 1976 to consider the variousinternal and external studies and the other previously de-scribed efforts. The Secretary stated that both the internalanalyses and the consultant's study closely paralleled theconclusions of the House staff study. Specifically:

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--Ht¶D had been suffering from a lack of stabilitydue to a series of reorganizations since thelate 1960s.

-- Lines of authority from the central office to theregional offices and ultimately to the field officeshas been fragmented and confused.

-- Inconsistencies existed in the decentralization ofauthority, which in turn had created undesirableduplication at all three levels of the organization.

--A lack of clarity was evident in the specific rolesto be played by each of the three levels of theorganization, particularly the regional office.

The Secretary noted that a consensus of the required actionhad emerged from the various analyses and studies. Namely.HUD must

-- articulate clearly and disseminate effectivelyits goals and objectives;

-- clarify the roles of personnel at the centraloffice, regional office, and field office levelsand ensure effective communication among theselevels;

-- eliminate any duplication of work between theregional offices and field offices; and

-- avoid a large-scale reorganization at this timebecause of the potentially devastating effect onemployee morale and disruptive impact on programdelivery without curing managment deficiencies.

The Secretary, however, decided to retain the presentthree-tier organization. She commented that the problemswere not endemic to their present organizational structurebut resulted from management deficiencies in definingprogram objectives, enforcing respect for lines ofauthority, and clarifying relationships in the chain ofcommand.

HUD recognizes, however, that maintaining the presentstructure offers some disadvantages, such as Congressionalconcerns over HUD'o regional office operations and costs notbeing fully satisfied. Also, levels of management are notreduced and program integration and coordination are not sub-

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stantially improved. Further, opportunities for duplicationremain.

Actions to be taken by HUD were cited by the Secretaryof HUD during the 1977 appropriation hearings, as follows:

-- Six major goals and 58 specific secretarialand 324 assistant secretarial objectives wereestablished for fiscal year 1976. (These goalsand objectives are contained in HUD's new goalsmanagement system.)

-- Assistant secretaries are to ontinue to be fullyresponsible for all program activities delegatedto them.

-- That portion of authority dealing with actualprogram delivery and administration is to bedecentralized and delegated to field officesto the maximum extent possible.

-- Except in those instances where economies ofscale can be achieved by delivery at theregional office level, all program deliverywill be delegated to field offices.

-- Regional offices are to continue to beresponsible to each appropriate assistantsecretary for supervising performance of thefield offices.

-- Field offices have been given greater staffingflexibility in carrying out their responsibili-ties. Managers are now being held accountable forthe results attained by measurements againstspecific objectives.

--Duplicate processing was recognized as extremelyinefficient and will be eliminated whereverpossible.

Regarding the last point, the Secretary stated that allduplicate program processing should be identified and elimi-nated except in unusual circumstances in which approval bythe Secretary is required. This was still an open issue.Therefore, two task forces were formed to deal with it. Onedealt solely with duplicate processing in administrativesupport, and the other covered most other aspects of HUD'soperations.

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The administrative support task force recommendedthe authority of field offices be increased to strengthentheir capability to act quickly and decisively on primarilyinternal operations issues. Recommendations were also madeto broaden some regional office authority for similar rea-sons. Of the fifty issues the task force identified, mostdealt with the location of authority and little actualduplication surfaced.

The task force that covered most other operatingfunctions recommended delegating authority to officials atlower organizational levels on 13 items, all of which havebeen accepted.

HUD REORGANIZATIONSTUDY IN PROGRESS

During our review the National Administration changed.Consistent with the new President's reorganization program,which includes all executive departments, the Secretary ofHUD, in February 1977, established a ecial in-house taskforce for internal organizational assessment. At the outsetthis group planned to:

-- Review the reporting relationship of assistant re-gional administrators for housing and communityplanning and development, including whether thisreporting relationship should be more vertical tothe central office.

-- Review the role of HUD area offices and the functionsthey perform.

-- Examine the viability and function of the regionaloffice system to determine what reforms or modifica-tions might be necessary.

-- Consider consolidating some of the various staff of-fices now reporting to the Secretary.

-- Consider consolidating various field offices.

The task force, named th3 organization assessment group,ib composed of rpresentatives from the major program areasof the Department at the central office level from regionaloffices and field offices representing different geographicareas of the country.

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Initial assignments for the group have included:

--Review the statutory missions of the Department,analyzing those programs used to accomplish eachmission and listing organizational units now havinglead responsibility for their delivery. HUD considersthis analysis to be essential to the nature. degree,and extent to which the integration and coordinationof HUD programs can be achieved within certain organi-zational alternatives.

--Prepare an activity analysis entify existing HUDprograms reasonably expected to ontinue in operationover the next four years and their estimated levels.

--Analyze the staffing resources rurrently availablein the Department. This resource inventory will con-tain information on total staff-years and detaileddata on the availabilty of personnel having specificskills necessary to implement programs--appraisers,engineers, financial management analysts, architects,etc.

--Develop a preliminary statement of organizationalproblems now perceived within the Department,relying upon several studies already completed andthe personal experience of the group's participants.This analysis already has identified several keyissues which must be addressed as HUD framesalternative organizational structures.

On March 1, 1977, the Secretary of HUD notified theDirector of the Office of Management and Budget that HUDexpects to submit a complete reorganization plan no laterthan June 15, 1977. We were advised by central office of-ficials that the magnitude of the reorganization will dependupon the results of the organizational assessment. Thephrase "complete reorganization" may, therefore, be anoverstatement, especially since the Secretary of HUD statedthat "During its brief eistence as a Cabinet level Depart-ment, HUD has been reorga,& zed too many times. As a result,the Department has become preoccupied with its internalprocesses, and forgot its external responsibilities." 1/

1/Mar. 28, 1977, in testimony before the Subcommittee onHUD--Independent Agencies, Senate Committee on Appropria-tions.

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CONCLUSIONS

The issue of the need for and role of HUD regionaloffices has been studied thoroughly in recent years. Anumber of problems have been identified, including

--duplicate effort at all organizational levels,

-- fragmented and confused lines of authority, and

--inconsistent decentralization of authority.

Recommendations have been made for substantially reduc-ing the number of field offices and the size and role of re-gional offices, and organizational alternatives have beenproposed. (See app. VIII.) Cost savings have been estimatedat up to $14 million annually.

HUD has begun, short of major reorganization, to alleviatesome of the identified problems in its organization. Thisincludes establishing departmental goals and objectives andconducting process analyses, which resulted in proposals forstreamlining HUD procedures for program delivery. In addi-tion, efforts were made to identify and minimize duplicateprogram processing.

HUD is currently conducting a comprehensive organizationalassessment with a goal to submit a complete reorganizationplan to the Office of Management and Budget no later thanJune 15, 1977.

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CHAPTER 3

rHE HUD REGIONAL OFFICE FUNCTIONS

When HUD was reorganized in 1971-72 and a formal fieldoffice and regional office structure established, HUDmanagement envisioned that the regional office would relin-quish the day-to-day responsibility for operating HUD pro-grams to the field offices. The regional office was toevaluate and monitor activities of the field office level,provide them technical services and specialized support,allocate funds, and set program priorities. In addition,they were to perform certain operational functions.

WHAT REGIONAL OFFICES ACTUALLY DO

In 1974 HUD conducted a study of the Philadelphia Re-gional Office to determine how many people were involved invarious regional office functions. Drawing on this dataHUD projected the total number of people involved in thevarious functions in all 10 regional offices, as shownbelow.

Projections ofPercent total peopleof time involved in

Regional office functions spent in ten regional(note a) Philadelphia offices

Monitoring and evaluation 13 216Policy and technical advice 16 266Program operations 30 500Administrative operations 16 266General management 14 233Employee development

& training 6 100Resource allocation

& management 5 83

Total 100 1,664

a/See app. IX for definitions of regional office functions.

We reviewed the functions performed by the Dallas Re-gional Office. We also asked personnel in the Dallas regionalarea how they felt about these functions. Our results arepresented below.

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The Dallas Regional Office generally perform-n the samefunctions that were identified in the 1974 Philadelphia study.The percent of time devoted to the regional office's variousfunctions is shown below.

Percent of time spent

Regional office functions (note a)

Monitoring and evaluation 11Policy and technical advice 17Program operations 42Administrative operations 20.General management 4Employee development & training 4Resource allocation & manigement 2

Total 100

a/Does not include time spent by 17 employees in the immedi-ate office of the Dallas Regional Administrator.

Monitoring and evalua.ion

According to HUD officials, monitoring and evaluation isneeded in tracking the performance nd accomplishments of the76 field offices. In testimony before a subcommittee of the

House Government Operations Committee, the Atlanta RegionalAdministrator stated that HUD needs to monitor and evaluatefield offices' performance if only to identify deficienciesand assist the field offices in correcting them. This func-tion consists primarily of site evaluations at the fieldoffices and is a prime responsibility of the regional office.

The Dallas Regional Administrator advised us that thisfunction could perhaps be shifted to the central office.However, he said it would not be performed as well there,because the closeness of the regional offices to the fieldoffices allows for more effective execution of the function.

A task force was formed in December _975 to study cur-rent monitoring and evaluation processes. Its May 1976draft report concluded that there are 10 different regionalevaluation systems with no common link to the central officein terms of procedural guidance, joint planning, or standardi-zation of performance measures.

As a result, another task force was created in December1976 to develop standard technical and management criteriato evaluate the performance of both the regional and field

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offices. The Deputy Under Secretary for Field Operationsadvised us that the monitoring and evaluating function hadbeen a significantly deficient area for years. He viewedthis effort to develop a standardized system of performanceevaluation with appropriate criteria as an extrememly im-portant recent undertaking.

Policy and technical advice

Another major role of the regional office is to providepolicy and technical advice, guidance, and support to fieldoffices. These services include passing on, explainino, andinterpreting policies, procedures, technical guidelines andrequirements, and related directions and instructions.

Most field office personnel we interviewed were dis-pleased with the assistance received from the regionalspecialists. Key criticisms expressed were:

-rThe regional office staff does not have expertise orfamiliarity with HUD programs because they are notinvolved on a day-to-day basis.

-- The regional office is serving more as a relay stationbetween the field and central offices.

-- Responses from the regional office are untimely.

Field personnel provided a number of examples to supporttheir observations. One said the regional office took nearlya year to respond to a policy question after indicating ananswer would be forthcoming within several days. Anotherindicated that because of the region's unwillingness to makea policy interpretation requested in March 1976, a housingapplication form problem remains unsolved. To avoid theseand other problems, field personnel told us they often by-passed the regional office, directing their inquiries tothe central office. Also, some said they do not request ad-vice because they are more familiar with the programs andhave more confidence in their own judgments and decisionsthan those rendered by regional office personnel.

Officials in the Dallas Regional Office have acknowledgedthese deficiencies and the reasons for them. The Regional Ad-ministrator contends that the regional office cannot be themain source of technical assistance because regional officepersonnel are caught between the central office, where techni-cal guidance is formulated, and the field offices where theday-to-day confrontation between that guidance and reality

16

occurs. Accordingly, he maintains that technical assistancecannot realistically be assigned to the regional office.According to the Deputy Under Secretary for Field Operations,these responsibilities should be carried out by selectedfield offices instead of the regional office.

HUD's 1969 reorganization study indicated that for theregional staff to remain current on actual program conditions,a close -rking relationship between them and field officepersonnel would be necessary. Also, the regional officestaff would have to be self-sufficient in the variety ofskills reaiired for the program being monitored and belimited in number to insure they did not become enmeshed inthe day-to-day details. However, regional office efforts inproviding policy and technical advice seems to have followeda rpttern contrary to these views. Close working relationshipsdJ not appear to have developed between regional and fieldoffices.

Program operations

Under HUD's decentralization theme, program operationsshould be the responsibility of the field offices. The studywhich led to HUD's reorganization in 1971-72 stressed that ifthe regional office level or above is involved in direct pro-gram processing, another unwanted layer of management wouldbe created, thereby preventing prompt delivery of services.At the same time, the study recognized there were some pro-grams, such as equal opportunity, which were better suited fordirect regional office control. Consequently, some programswere not decentralized to the field offices.

HUD defines program operations and its connection withthe regional office as all functiors which normally, underideal circumstances and adequate staff resources, would beperformed by field offices. This includes direct projectprocessing performed in the regional offices and direct con-tact with clients on pecific cases or projects. Such pro-cessing may be originated in the regional office, or it maybe a reprocessing of material forwarded from field offices.The function also includes direct support to field offices.

In the Dallas Regional Office, approximately 42 percentof the staff's work time is devoted to program operations.This ranged from 20 percent in housing management to 87 per-ce~nt for equal opportunity.

17

Regional involvement in programsnot delegated to fleldduring reorganizai;ion

Program functions which were not delegated to field of-fices during the 1971-72 reorganization account for nearlyhalf of the Dallas Regional Office's involvement in programoperations. These functions include the Regional Counsel'sactions regarding litigation, tort claims, and privatemarket financing; equal opportunity; and certain engineeringsupport.

On a test basis, the central office has delegated fulllitigation authority to three field offices--one of which isin the Dallas region. Field attorneys we interviewed thoughtthis was long overdue; they believe they are more knowledge-able of day-to-day operations than the regional office staff.

Regional office officials stated that equal opportunityand housing compliance reviews and investigations are morelogically located at the regional office level due to greaterefficiency of operations and the possibility of bias if fieldstaff were permitted to perform their own reviews and analyses.Most field personnel did not concur with the regional officepersonnel and believed that most, if not all, program opera-tions performed by the regional office could be decentra-lized to the field offices.

Regional office consolidation of engineering servicesis designed to alleviate uneven workload distribution whilestill maintaining a level of expertise. Field office of-ficials reacted favorably to this source of expert adviceand were pleased with the services provided by regional of-fice staff.

Regional involvement in programsregionalized since reorganization

The remaining program functions currently performed inthe Dallas Regional Office consist of those which managementbelieved would be best handled by the regional office. Theirrationale included increased efficiency through economies ofscale, inadequate field performance, greater concentrationof expertise, and an improved vehicle for coordination withother agencies.

We found insufficient evidence to support the rationale.For example, seven programs are being phased out as a resultof the Housing and Community Development Act of 1974. Accord-ing to regional office officials, these programs were

18

regionalized because (1) the tield was not iving proper pri-ority to closing out the projects and consequently was notmeeting its assigned goals and (2) a savings in staff yearswas expected. The support provided for the first rationaleincluded a series of evaluation reports which, in our opinion,did not reveal any shortcomings that could not have beencorrected by the field offices. In several programs, thefield had closed more projects during the six months priorto regionalization than had the regional office during thesix months since regionalization. Additionally, there wasno documentation or formal analysis supporting anticipatedsavings in staff years.

Problems have developed because of regional involvementin program operations. Tc illustrate, the comprehensiveplanning assistance program was regionalized in 1975, butsince then a system of coordination between field and re-gional office staffs has not developed. Field personnel weredispleased since programmatic difficulties between the com-prehensive planning assistance program and closely relatedprograms administered by the field offices have occurredand the regional office has not taken the initiative toremedy them.

Prior to regionalization, a team of HUD analystsexpressed the opinion that regionalization of the comprehen-sive planning assistance program would undermine the pro-gram's potential and prevent effective coordination withclosely related programs. For example, the analysts reportedthat, because officials in specific field offices have devel-oped close contact ith chief elected officials who haveinfluence in local community planning decisions, field officestaff can manage the comprehensive planning assistance programmore effectively than regional office planners. Also, theanalysts claim that there is need for considerable interfacebetween the comprehensive planning assistance program andthe community development block grant program--administered,for the most part, at the field office level--because ofcommon requirements regarding housing assistance plans.They say that while coordination is not guaranteed if bothprograms ae in the field office level, coordination is pre-cluded by regionalization.

Possibilities cf additional regionalization in the futureseem strong. The Regional Administrator believes the com-munity development block grant program, a new approach in fun-ding city development emanating from the 1974 legislation,is a candidate because the program's simple format and basicreliance on locally determined priorities eliminates the need

19

for on-the-scene management by HUD employees. This would,according to a field official, resolve serious problems offragmented authority. Some field officials view the wholeseries of past regionalizations as means for the regionaloffice to justify its existence.

Administrative operations

Another major responsibilty of the regional offices isdirect administrative support for the field offices. Adminis-trative support includes personnel operations, administrativeservices, financial management, and management organizationand information systems.

Generally, HUD recognizes that a certain degree of cen-tralized administrative processing is justified because ofthe small volume of activity at field offices. Yet, somefield offi, personnel in the Dallas region believe thatdecentralize more administrative functions would be moreeffective, because field office directors are closer to theproblems. They admit, however, that this would most oftenrequire additional staff.

Recently HUD has studied ways to improve the adminis-trative operations of the Department. Attention was givento eliminating duplicate effort and determining the mostlgical levels for performing duties. Most of the recom-mendations from these studies have been accepted and arein various stages of implementation.

CONCLUSIONS

The primary functions of a regional office are (1) moni-toring and evaluation, (2) policy and technical advice, (3)program operations, and (4) administrative operations. Inour view, these are essential functions which need to beperformed at some level in the organization. If they werenot done at the regional level, they would have to be doneeither by the central office or at selected field offices.

HUD personnel had differing views on the need for thesefunctions to be regionalized as well as the effectivenesswith which they were performed by regional office personnel.Some believe that regionalized functions could be bettercarried out by the central or selected field offices; othersbelieve these functions to be best carried out at the regionaloffice level. Overall, there was no clear consensus of views.

20

CHAPTER 4

OVERALL CONCLUSIONS AND ECOMMENDATION

The issue of whether HUD regional offices are needed isnot a simple one to address or resolve. The answer depends,to an important degree, on the appropriate delegation ofprogram authority and responsibility to meet Departmentalgoals and objectives.

in recent years the issue of the delegation of authorityand responsibility and its relationship to the regionaloffices has been studied. From these studies, organizationalproblems have beei identified and recommendations made tomodify HUD's organization, including the role and size ofthe regionail offices. Organizational alternatives have beenproposed. (See app. VIII.)

HUD has initiated action on some of the study recom-mendations, short of major reorganization. This reluctanceto reorganize may have been appropriate since a number ofstudies, while recognizing the need for reorganization,concluded that its impact on morale outweighed the benefitsof near-term reorganization.

Evidence suggests that HUD can streamline its organ'.za-tion if (1) field offices perform only selected common fn-tions and their number is reduced through consolidation, whileother functions are performed by regional offices. with bothreporting directly to the central office, or (2) field of-fices perform all program operation functions now done bythose offices and regional offices, but their number is re-duced through consolidations and they report directly to thecentral office. Adopting one of these alternatives seems tobe economical and would reduce the opportunities for duplica-tion and fragmentation of authority which have Lten problemsin HUD in recent years. Nevertheless, the question of theappropriate organizational form for HUD and the place of theregional offices in the organization still remain unresolved.

HUD's priority should be to clearly define its goals andobjectives and sort out appropriate program authority andresponsibility so that organizational form can follow a logi-cal assignment of functions. This, we believe, is the chargefor HUD's newly formed organizational assessment group. At-tempts to simplify HUD's organization could go a long way

21

toward improving the delivery of its services and minimizingthe resources committed to doing it.

HUD's efforts to reorganize the Department should,therefore, focus on the best means to meet its legislatedprogram responsibilities and Departmental goals and objec-tives.

RECOMMENDATION FOR THE CONGRESS

We recommend that the Congress request the Secrtaryof HUD to submit to appropriate committees the reorganizaticnplan resulting from UD's organizational assessment beforeimplementing the plan. The plan should in detail explain theplanned changes and address the

-- cost benefits anticipated from the planned reorgani-zation;

-- improvement in program responsiveness that willresult;

-- changes in taffing requirements forecast for areasonable period subsequent to the reorganization;and

-- impact on organizational patterns, roles, andauthorities of regional and field offices.

This should give the Congress an opportunity to reviewHUD's plan to determine whether the reorganization willresolve HUD's past and current problems that have troubledboth the Congress and H'JD.

22

CHAPTER 5

SCOPE OF REVIEW

We reviewed policies, procedures, and practicesrelating to various HUD programs. Our methodology includedthe use of flow charts to identify and analyze the pertinentdecision points for the major programs. We also reviewedapplicable legislation and congressional hearings.

We reviewed, analyzed, and summarized reports pertainingto HUD's organizational structure and overall management.Organizational alternatives proposed by groups both internaland external to HUD were considered. We discussed these mat-ters with, and obtaired narrative comments of, HUD officialsat all major levels ,)f the organization.

We made our review at HUD Central Office in Washington,D.C., and at the Dallas Regional Office. We also visitedfield offices in Shreveport, New Orleans, Fort Worth. Dallas,and Oklahoma City.

The majority of our review work was conducted betweenSeptember 1976 and February 1977. At the instruction ofSenator Bellmon's office, we did no* solicit written HUDcomments. Throughout the review, however, we discussed ourfindings as they were developed with responsible HUD of-ficials and obtained their comments. At the conclusion ofour work, we held conferences with HUD top management of-ficials and the organization assessment group.

23

APPENDIX I APPENDIX

HENRiY ELLMON Cwr

UDGITAPPROPRIATIONS

' JI+ifeb ^fcdesl ^a~~,ab AGRICULTURE ANOD ORESTRW~tnffebi Lf4t* $ZenaiDT OFlrFCI

AND CIVIL SirViCeI

WAINTON. D.C. l.·S[rCT COMMITTm CONWASHINGTON. D.C. MID NUTRITION AND HUMAN NIEDS

August 2, 1976

Mr. Elnmer StaatsComptroller General of the United StatesGeneral Accounting Office441 G Street, N. W.Washington, . C. 20548

Dear Mr. Staats:

During recent years, the Department of II ousing and Urban Develop-ment has created a sizeable bureaucracy at the regional levels. Forinstance, at Dallas, there are now about 200 federal employeesserving in the Regional Office. At the same time, iIUD operatesstate and district offices in all or most of the 50 states.

This letter is being written to inquire as to whether or not the GeneralAccounting Office has examined the HIUD Regional Office operationto determine whether these offices are providing an essential service.There is the danger that the Regional Offices anlount to simpl anothercostly layer of bureaucracy.

If such a study has been made, I would appreciate a copy. If it has notbeen made, I would like to discuss with you or the appropriate membnerof your staff the possibility f undertaking such an investigation priorto the beginning of the apprapriations process for the 1978 budget.

Sincerely,

Henry IBelln'on

FIB:csb

cc: The lion. William Proxnrire

24

APPENDIX II APPENDIX II

EISTORICAL DEVELOPMENT OF THE

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

PRE-HUD ORGANIZATION

The complex and many-faceted role of the FederalGovernment in housing had its origin in the collapse of thehousing economy during the Great Depression of the 1930s.

At that time, Congress made two fundamental policydecisions that remain basically intact today. The firstwas completely restructuring the private home financingsystem creating

-- the Federal Housing Administration (mortgage insur-ance);

-- the Federal Home Loan Bank Board and the Bank Sys-tem (savings and loan industry);

-- such institutions as the Federal Deposit InsuranceCorporation and the Federal Savings and Loan In-surance Corporation (insurance on deposits of com-mercial banks, mutual savings banks, and savingsand loan associations); and, finally,

-- the Federal National Mortgage Association (secondarymortgage market).

These institutions resulte in the acceptance of long-term,low-downpayment, fully amortizing mortgages and a systemto provide a large flow of capital into the mortgagemarket.

The other decision was the concept of Government-subsidized housing for low-income families. The creationof the U.S. Housing Authority (subsequently the PublicHousing Administration) by the Housing Act of 1937 began aprogram which, although intended primarily as a means ofstimulating employment and clearing slums, marked thefirst time-that Federal funds were used to finance newhousing construction for the less fortunate.

A reorganization in 1947 brought together the FederalHome Loan Bank Board, the Federal Housing Administration,and the Public Housing Administration under the auspicesof the Housing and Home Finance Agency (HHFA). This "superagency," however, had only general supervision and co-ordination responsibilities for the housing programs under

25

APPENDIX II APPENDIX II

these agencies. Each agency, therefore, remained intactand continued to operate as a distinct entity under HHFA.For example, FHA continued to run its own discrete organi-zation with 76 field insuring offices established in the1930s. In addition, another organizational structure, withsix regional offices, was created for HHFA's direct adminis-tration of various categorical grant programs, such as urbanrenewal.

Because the HHFA Administrator did not have lineauthority over the subordinate agencies or the power toreorganize agency functions, HHFA programs often operatedat cross purposes. The inability of State and local officialsto look to a single authority for housing added to the dis-satisfaction with the lack of coordination within HHFA.There was a general feeling that only a Cabinet-level de-partment and an improved organizational structure would givecoherence to the widely separated efforts and provide focusfor local inquiries.

THE CREATION OF HUD

Efforts to strengthen HHFA's organizational structurein the 1950s and 1960s paralleled increasing Federal involve-ment in housing and urban development. Finally, the Depart-ment of Housing and Urban Development Act, passed September 9,1965, created HUD. The most significant results were thatthe functions of HHFA were raised to Cabinet level and theadministration of these functions was simplified by con-solidating most statutory authority in the Secretary. Itdid not, however, consolidate housing and urban developmentfunctions existing in other parts of the Federal Government(Farmers Home Administration and Veterans' Administration).

The initial organizational structure of HUD providedthe Secretary with the full capability to direct HUD policyand operations. Program responsibilities were regrouped atthe national level by four assistant secretaries who wereto function as both line and staff officers, responsiblenot only for executing specific programs, but also forfully and continuously coordinating these programs.

In this organizational structure, HHFA regionaladministrators represented all HUD programs at the regionaland local levels. They were given responsibility for proc-essing and approving individual project actions. Each ad-ministrator was to be assisted by various assistant re-gional administrators.

26

APPENDIX II APPENDIX II

FHA remained essentially intact and in full control of

its programs, funds, resources and field operations duringthe first 3-1/2 years of HUD's existence. One change ofsignificance in the FHA field structure affected the FHAzone operations commissioners. These officials had alwaysbeen part of the FHA Central Office and had direct lines ofcommunication and authority between the central office andthe 76 local insuring offices.

The zone perations commissioners on the FHA CentralOffice staff re replaced by assistant regional administra-tors for FHA who were stationed in HUD regional offices.They continued to answer to the central office, but werealso responsible for coordinating with other affected as-

sistant regional administrators on project applications hav-ing interprogram effects. This was significant because itmarked the beginning of regional layering in the FHA organi-zational structure.

DECENTRALIZING UD

On March 27, 1969, a Presidential policy memorandumdirected HUD to reorganize into eight regions with statedboundaries and regional office locations. Th:{n originalmemorandum was amended on May 21, 1969, to add two addi-tional Federal regions, with minor adjustments in the origi-nal boundaries. To comply with this directive and to improvethe effectiveness of the organizational structure, the Secre-tary undertook a comprehensive study for reorganization. Theprimary objectives the Secretary established for the organiza-tion of the Department were:

-- To achieve greater effectiveness, coordination, andproductivity by combining related functions under asingle official.

-- To achieve greater responsivenss, flexibility, andservice to communities by decentralizing operationsbeyond the regional office level to a new level ofarea offices.

-- To foster better coordination of HUD programs andassist communities on a unified basis by organizingthe area offices on a geographic and functional basisrather than a program basis.

In developing the area office structure, the basicassumptions were that the area office should

-- normally have full program processing and decision-making authority;

27

APPENDIX II APPENDIX II

-- have clear lines of authority and direction that flowfrom the regional administrator to the area officedirector to the staff of .ae area offices

-- be organized to assure maximum coordination and produc-tion of all HUD programs;

--be sructured to insure maximum use of personnel andskills available;

-- provide an easy access "one-stop" capability forprivate and public contacts with HUD.

In selecting the locations for the new area offices.HUD officials felt that the existing FHA insuring officesformed the most obvious base of possible locations becausethe factors that governed their original selection put themin urban areas of HUD concern. Of the 76 FHA insuring offices,39 assumed the role of area ffices and 37 :emained in therole of performing FHA insuring functions. out without proc-essing capability for all HUD programs. Often. an area officewill be responsible for FHA mortgage insurance programs foronly a portion of the geographic area for which it has re-sponsibility for other HUD programs. (See app. III.)

Thus, a major change occurred in the role of theregional offices. Under the new organization structure.the regional office was to relinquish day-to-day responsi-bility for operating HUD programs to the field offices. Theregional office was to evaluate and monitor activities atthe field office level: provide them technical services andspecialized support; allocate funds; and set program priori-ties.

The reorganization also caused a major change in therole of the central office. The new modified roles were inthe areas of policy establishment and guidance. fund alloca-tions, and progress and program management monitoring.

The objectives of the reorganization were carried outin two phases for the central office level. By November1971. when the second stage was completed, HUD had com-pletely shifted the focus of its central office from narrowand uncoordinated categorical programs to major functionalareas, with related programs grouped under a single official.

The revised field organization was similarly carried outin two phases. The major changes were

28

APPENDIX II APPENDIX II

--installing area offices and delegating day-to-dayprogram operating authority to them and

-- incorporating FHA insuring offices into the unifiedHUD structure.

The overall intent o these changes was to give decision-making authority on projects and applications to officialsclosest to the poblems--the field office directors. Discus-sions continu- as to whether this philosophy is appropriate,and it remains to be seen if it will have a permanent impres-sion on the organization. Certainly if the philosophy doeschange. the organizational structure could also be alteredonce again.

CREATION OF FULL-SERVICE OUSING OFFICES

During our review the Secretary of HUD announced that16 HUD insuring offices will become full-service housingoffices. These offices join six others that were' establishedin mid-1974 on an experimental basis. This change gives full-service housing offices low-income and assisted housing re-sponsibilities in addition to the FHA insurance activitiesthey have had. According to a HUD press release, these addi-tional duties may or may not require additional people ineach of the offices depending on how they are presentlystaffed. If additional staff in a given office are needed,they will be provided fom resources presently allocatedto that region.

The Secretary said that the change is being made to getmaximum productivity out of a limited staff available to HUDand to locate the delivery of HUD's housing programs closerto those who benefit from these programs. The new Secretaryhas, however, stopped the conversion of the Denver and SanDiego Insuring Offices until completion of the ongoing organi-zation assessment.

29

APPENDIX III APPENDIX III

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APPENDIX V APPENDIX V

STAFF AND LINE RELATIONSHIPS

SECRETARY

PROGRAMMATIC

ASSISTANT

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CHIEF

SOURCE: RECOMMENDATIONS FOR NEAR TERM FIELD ORGANIZATION

STRUCTURE, JANUARY 1S76, COOPERS & LYRRAND.

33

APPENDIX V APPENDIX VI

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APPENDIX VII APPENDIX VII

SIGNIFICANT INTERNAL AND EXTERNAL STUDIES

OF HUD'S ORGANIZATION

STUDY OF THE HOUSE SURVEYSAND INVESTIGATIONS STAFF

The investigation of the regional and field officestructure addressed four general areas: (1) the organiza-tion and management of regional and field offices, (2) thefunctions and interrelationships of organizational levels,(3) the effectiveness of program delivery, and (4) thecaliber, adequacy, and morale of HUD's regional and fieldoffice personnel. The information used to prepare the studywas developed through interviews and visits at all levelswithin the organization. In all, approximately 115 individ-uals representing HUD and its clients were contacted. Sup-plementing the interviews, the staff analyzed HUD handbooksand other documentation dealing with matters of organization,management, and delegations of authority.

The general observation of the investigative staff,which was reported to the Committee on March 26, 1975. wasthat the organization and management of HUD suffered fromconfusion, fragmentation, and administrative inconsistency.This situation had resulted in ineffectiveness in many areasof HUD's program delivery. More specifically, they observedthat a detrimental effect had resulted from HUD's numerousreorganizations and realinements, and as a result, confusionconcerning lines of authority and lack of adherence to themhad occurred. Further, the lack of effective decentraliza-tion of authority had created a perceived tendency to expandthe supervisory role of the regional offices and the adminis-trative oversight of the central office. The investigativestaff also noted that the field offices had an overall lackof flexibility in the allocation of funds and use of person-nel, and that considerable variation existed in the mannerand degree of communications and evaluations which took placebetween the various organizational levels.

The study made several constructive recommendations tochange what they viewed as serious shortcomings in manage-ment discipline of a Cabinet department. It recommendedthat HUD

-- pursue the establishment of clearly stated Departmentalobjectives and goals for carrying out the legislationprovided by the Congress;

35

APPENDIX VII APPENDIX VII

-- give immediate attention to insuring stability in itsorganization and management structure; and

-- instill upon its policymaking officials their respon-sibility to more strictly respect the lines of author-ity and to renounce those areas in which operationalfunctions have been improperly assumed.

In addition, as was pointed out in chapter 2, the study spe-cified that there was "* * * an urgent need for the centraloffice to review the regional office functions and, wherenecessary, take steps to realign their role that has, in someinstances been expanded into the operational nd decision-making functions of the area office directors."

The investigative staff further recommended that theCommittee consider obtaining a commitment from HUD whichwould have precluded any further large-scale reorganizationor realinement for a logical period of time.

DEPARTMENTAL MANAGEMENT INITIATIVES

Initiated in March 1975, Departmental management initia-tives were a series of comprehensive management studies ofHUD's organization and major field program functions andoperations. Included were an activity known as "processanalysis" and a study by an independent management consultingfirm.

Process analysis

Process analysis consisted of a series of detailed on-site reviews of selected field offices to analyze the proc-esses used to deliver HUD's programs to the public. Theresponsibilities assigned to the field teams, which wereheaded by field office directors, were specific:

-- Determine how Departmental program processes areactually being carried out at field offices.

-- Incorporate recommendations of field office staff onhow these processes can be improved.

--Develop these ideas, techniques, and recommendationsinto simplified, improved methods and instructions.

-- Prepare "as" flow charts of certain program process-ing in the designated field office.

36

APPENDIX VII APPENDIX VII

-- Develop simpler, more logical procedures in proc-essing and identify them by a recommended flowchart.

In essence, process analysis was an attempt to discover,through recommendations from field managers, whether therewere better, simpler, and more realistic ways to get thejob done. All four major program areas in the field and athorough review of the administrative support functions andoperations were covered. This encompassed the work of about85 percent of HUD's field staff.

Numerous recommendations for improvement surfaced fromthese efforts, and they may lead to developing and adoptingseveral more logical procedures aimed at streamlining programdelivery. In addition, many significant observations concern-ing numerous aspects of HUD management were raised and broughtto the attention of policymaking officials. Two of thosewhich were common throughout the field offices were the needfor

-- improved and effective communication and coordinationbetween all organizational levels and

-- clear and supported Departmental policies and goals.

Current plans are for HUD to continue to employ processanalysis as a means to improve the efficiency of its opera-tions.

Consultant's study

The study by a consulting firm focused on HUD's presentorganization and made recommendations concerning both near-term and long-term actions. The methodology employed in-cluded analyses of administrative and legislative documenta-tion, interviews with appropriate officials both internaland external to HUD, and analyses of procedures and decisionpoints of the various programs. The culmination of theseefforts was internal seminars and a "sounding board" meetingin which HUD personnel from several levels discussed theorganizational alternatives developed and proposed by thestudy.

The basic organizational problem of HUD field structureidentified by the study could be generally described as anenvironment in which a lack of programmatic coordination atthe assistant secretary level had resulted in conflicting

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priorities and confused communications in the field. Thestudy indicated that the present HUD organizational structurehad built-in potential conflicts due to the existence of botha programmatic line authority from assistant secretaries toregional administrators to field office directors and a gen-eral line authority from the Secretary/Under Secretary tothe regional administrators to the field office directors.This dual authority structure was cited as creating dysfunc-tions in the formal organizational communications and in thedelegation of authority.

With specific regard to HD's field organization, thestudy stated:

"In addition to problems caused by the dual author-ity structure, the 76 offices in the Field varygreatly in workload accomplished when compared bystaffing and in the staff/grade relationships whencompared to Headquarters.

"Our examination of the communications with theField showed that they can be characterized by:

A lack of standardized channels of communi-cations up or down the organization, whichvary in quality by location, program, orpersonality.

A lack of standardized procedures for FieldOffice monitoring done by the Regions with aseparate evaluation format developed byeach Region.

A lack of clarity in the de facto authori-ties and responsibilities. Each Regionperceives its role and the role of theField Offices differently and assumes avarying degree of authority and responsi-bility.

"To a great degree, these communications prob-lems are caused by the delegations of authority.These delegations are such that:

The Department is characterized by a dualspan of command in which 'general lineauthority' and 'programmatic authori ,eassigned differently and interpreted dif-ferently by the Regions.

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The Regional Administrator is the focal pointfor potential conflict between the program-matic influence of the Assistant Secretariesand the 'general line authority' of his ownposition.

The delegation of authority to the AreaDirector through the Regional Adminis-trator is a source of overlap and confus-ion.

The Assistant Regional Administrators arenot considered in the programmatic or gen-eral line authority chain, but their jobdescriptions say they shall 'supervise'--which is exactly what many do.

"A duplication of programmatic effort exists inthe Field because:

The delegation of authority to the FieldOffices are not followed: many forms thatare processed at the Field Offices are re-viewed and reprocessed again at Headquarters.

Frequently, the Regions merely reprocessField Office paperwork and then almostalways concur with the Field Office deci-sions--allegedly without independent review.

"Our analysis showed that in regard to Fieldstaffing and workload that:

With only 25% of the total staff, HUD Head-quarters has two-thirds of all grades GS-15and higher, whereas the Field has most ofthe responsibility for operating the programs.

There exist great variations in workloadperformed by similar-sized offices; workloadvaries by office size, location, and programarea.

The smaller Area and Insuring Offices sufferfrom diseconomy of scale; they are overstaffedand below average in workload equity."

The study examined five different options for the develop-ment of both near-term and long-term field organizational

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structure. These were (1) maintaining the status quo, (2)reducing the regional offices to serve strictly a ministerialfunction, (3) eliminating completely the regional offices,(4) consolidating the regional office and coincident fieldoffice, and (5) clustering offices into a series of fieldprogram offices. The latter option was the preferred choiceof the study since it was viewed as a means by which lessefficient offices could be closed and personnel shifted tobring about economies of scale. The study stated that:

"Under this alternative, the present RegionalOffices would be eliminated as a HUD managerialtier and the personnel at gsbordinate geographiclocations of the Field Program Offices shouldbe withdrawn to the main FPO [Field Program Office]location to the extent politically feasible. Ifpolitical considerations dictate keeping certainother offices, they should be 'service offices'subordinate to the FPO and should not be anothertier in the organization. In this way, all ofHUD's Field operations would be conducted out of22 to 29 Field locations, and no other manageriallevel would lie between them and a newly reorga-nized HUD Headquarters."

Since the above recommendation involved a major re-organization, and since the study specifically recommendedthat HUD not totally reorganize within the next four years,various interim steps were suggested for all three organiza-tional levels. They were proposed in order to restructurethe duties and responsibilities of the regional administra-tors and the assistant regional administrators to preventtheir involvement in operational activities at the regionallevel, to insure the staff role of the assistant regionaladministrator position, and to strengthen the coordinationof the craluation function. A two-step approach was recom-mended for near-term changes in the field structure. Stepone included

-- removing all program execution (excepting liquidat-ing programs) from the regional offices and locat-ing them in the coincident field offices;

-- keeping at the regional office only the programexpert staff necessary for providing technicalassistance to the field offices; and

-- structuring the regional office in such manner asto preclude the temptation to pull back programmaticauthority.

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APPENDIX VII APPENDIX VII

Step two recommendations were

-- restructuring the duties of the assistant regionaladministrators to remove supervising from their jobdescriptions and to end de facto direction of fieldoffice program activities;

-- creating new assistant regional administrators forprogram planning and equal opportunity and citizenservices; and

-- eliminating the strictly program execution unitsat the regional offices.

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APPENDIX VIII APPENDIX VIII

PROPOSED TWO-TIER ORGANIZATIONAL ALTERNATIVES

Various HUD organizational structures have been proposedby groups internal and external to HUD. For informationalpurposes, brief narratives on two proposed organizationalstructures which would reduce or eliminate a level of man-agement are provided below.

ALTERNATIVE ONE

An alternative proposing a two-tier organization is theseparation of the subsidized housing and community develop-ment programs from the FHA mortgage insurance programs of theDepartment. In essence, this would constitute a return tothe FHA structure which existed prior to the integration of.FHA and HUD and, according to some, would represent a revitali-zation of FHA activities.

Under this alternative, the regional offices would assumeresponsibility for all subsidized housing and community develop-ment programs and report directly to specific assistant secre-taries in the central office. All FHP mortgage insurance pro-grams would be administered by field offices. According toHUD consulcants. the number of these offices could, however,be reduced by about two-thirds through consolidations. Theseoffices would report directly to specific central office as-sistants to the FHA Commisioner. (The Department of Housingand Urban Development Act, 1965, provided that there shallbe in HUD a Federal Housing Commissioner, who shall be oneof the assistant secretaries and shall head a Federal HousingAdministration within HUD.) It has been purported that thislatter arrangement keeps the lines of communications andauthority between the central office and the field officesshort, direct. and close.

This alternative structure would give autonomy to FHA,which could then return to the basic function of insuringmortgages made by private lenders. It would also give autono-my to the other programs of the Department. The overall HUDstructure would then consist of two or three major two-tierbureaus, each self-contained and fully empowered to carry outits functions. In addition, this structure could eliminateprogram fragmentation that presently exists between fieldoffices and regional offices, thus reducing the potentialfor duplication.

This alternative coincides with views of several HUD of-ficials and special interest groups, such as the Mortgage

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Bankers Association of America. The special interest groupswere especially concerned that both insured and assistedhousing programs are presently a responsibility of each fieldoffice. These groups and several officials we interviewedmaintain that the present offices should not be responsiblefor tboth areas and that changing to such a structure wouldeliminate current program effectiveness concerns.

Steps are being aken in behalf of the Mortgage BankersAssociation and others to introduce a proposal in the 95thCongress, 1st session, to bring about this type of organiza-tional structure for HUD.

ALTERNATIVE TWO

Executive Order 11647 and an amended Presidential policymemorandum require that HUD maintain a regional presence andpreserve the basic integrity of regional boundaries. A re-duction of the regional office role was proposed by a consult-ing firm. It recommended, as a long-term option, that HUDgreatly reduce the number of field offices. This could pro-vice the basis to eliminate the regional office level orplace regional offices in a ministerial role and establish atwo-tier managerial structure.

To implement this recommendation, the consulting firmproposed a "clustering" strategy that involved consolidatingHUD field offices into primary offices designated as fieldprogram offices. Based on wokiload considerations, thiswould combine all field activities into a lesser number ofoffices. The consultants belia HUD's field operationscould be conducted by 22 to 29 ield program offices. Thesefield program offices would communicate and interact directlywith the central office.

If field program offices are to be established based onthe clustering methodology, the process of relating the goalsmanagement system to HUD's mission should be beneficial indeciding which field offices could be closed or reduced instaff. Based upon workload, field offices could be closedand programmatic personnel shifted to field program officeswhere economies of scale could be achieved.

Innate to the clustering strategy is the elimination ofthe regional office as a managerial tier. The resultingcreation of a two-tier HUD organizational structure would,according to the consultants, facilitate more effectivemanagement operations and organizational communication while

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APPENDIX VIII APPENDIX VIII

achieving a significant cost savings. HUD consultants esti-mate that HUD could save between $6.9 and $14.2 millionannually by eliminating 23 to 47 percent of the 1,664 re-gional office positions. (See p. 14.) Under this planHUD would keep between 18 and 16 percent at the regionaloffices and relocate between 37 and 18 percent and between22 and 19 percent to the central office and selected fieldoffices, respectively. Generally, eliminating these posi-tions is the result of achieving economies of scale by con-solidating some functions in the central office.

Another clustering benefit is the reduction of fieldoffices. Fewer field offices could enable the central of-fice to achieve a reasonable span of control with the reor-ganized two-tier organization.

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APPENDIX IX APPENDIX IX

DEFINITIONS OF REGIONAL OFFICE FUNCTIONS

GENERAL MANAGEMENT ACTIVITIES

This category includes general activities relating tooverall regional office and regionwide management functions.Specifically included are management by objectives, long-rangeplanning including implementing new legislation or programactivities), the Federal Regional Council, the regional admin-istrator's staff meetings, general correspondence, publicaffairs, and the managing and supervising activities of theregional administrator and assistant regional administrators.

RESOURCE ALLOCATION AND MANAGEMENT

This category includes regional office activities de-voted to the distribution of resources (either funds, person-

nel, or units, etc.) among area and insuring offices andmonitoring and evaluating the use of such resources.

POLICY AND TECHNICAL ADVICE

This category includes all formal and informal policy and

technical advice, assistance, and direction provided byregional office staff to HUD field offices or clients. Thisincludes passing on, explaining, or interpreting policy,procedures, technical guidelines or requirements, and relateddirections or instructions. Activity in this category may

be performed at the regional office through memorandum, byphone, or onsite at area or insuring offices or client lo-cations.

MONITORING AND EVALUATION

This category includes all activities devoted to themonitoring and evaluation of field office activities and

performance. Included in this category are two specializedactivities--audit review and followup and the review, anal-

ysis, and consolidation of field office reports. Activitiesincluded in this category may be performed either at theregional office or onsite in field offices.

EMPLOYEE DEVELOPMENT AND TRAINING

This category includes most employee development andtraining activities, both formal and informal, but does notinclude all informal on-the-job training. The category in-

cludes training activities devoted to both regional andfield office employees and, in some cases, client employees

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(such as housing authority management employees). Includedin this category ars workshops and regionwide meetings,such as the quarter v meeting of area economists.PROGRAM OPERATIONS (RETAILING)

This activity includes all functions performed by re-gional office staff which are, or relate directly to, pro-gram nperations or processing, etc. This category includesall functions which normally, under ideal circumstances andadequate staff resources, would be performed by area orinsuring offices. The category includes direct projectprocessing performed in the regional offices and directcontact with clients on specific cases or projects. Suchproject processing may be originated in the regional of-fice, or it may be a reprocessing of material forwarded from.area and insuring offices. The category includes directstaff support to field offices in terms of the provision ofregional office staff as temporary supplements to, or inplace of, field office staff. The category also includesthe following activities which, although assigned to theregional office, are of an operational or project nature:litigation, private market financing, and equal opportunitycomplaint processing.

ADMINISTRATIVE OPERATIONS

This category includes the direct administrative operat-ing functions under the Assistant Regional Administrator forAdministration. It includes such functions as processingpersonnel actions, performing accounting operations, operat-ing the library, or running the motor pool. It does notinclude functions or activities such as providing advice orassistance to field offices on administrative matters ormonitoring or evaluating field office administrative func-tions.

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