AFGE’s Guide to FAIR Act Challenges and Appeals

Via electronic mail and overnight mail

November 27, 2002

Ms. Janice W. Blake-Green

U.S. Department of Housing and

Urban Development

Office of the Chief Financial Officer

451 7th Street, S.W., Room 2214

Washington, DC 20410

Subject: Challenge to the Inclusion of the Following Positions on

HUD’s A-76/FAIR Act Inventory—

Dear Ms. Blake-Green:

As the President of the Council of HUD Locals, 222, of the American Federation of Government Employees, AFL-CIO which represents employees working at the U.S. Department of Housing and Urban Development, as well as in my capacity as an "interested party" as established under the provisions of section 3(b) of the Federal Activities and Inventory Reform Act (FAIR Act) of 1998, Public Law 105-270, and as the head of a labor organization as described in section 7103(a)(4) of title 5, United States Code, I submit the following challenge to selected items contained in the Department’s Commercial Activities Inventory of or about April 6, 2002. Notice of the Inventory was published in the Federal Register on or about October 17, 2002.

Specifically, I am challenging the decision to include the positions listed below. I am challenging their inclusion as Commercial Activities in every organization and wherever the organization may be physically located.

Assistant Secretary For Housing-Federal Housing Commissioner:

Activity Function Codes/Positions:

C408 Asset Management

D000 Administrative Support

D606 Asset Appraisal and Valuation

D708 Application Receipt/Processing

D709 Mortgage Underwriting

T804 Architect-Engineering

Assistant Secretary for Public and Indian Housing:

Activity Function Codes/Positions:

C401 Financial Analyst

D000 Administrative Support

L200 Grants Monitoring and Evaluation

T804 Architect-Engineering

Assistant Secretary for Community and Planning Development

Activity Function Codes/Positions:

D000 Administrative Support

Assistant Secretary for Field Policy and Management

Activity Function Codes/Positions:

D000 Administrative Support

L200 Grants Monitoring and Evaluation

Office of General Counsel

Activity Function Codes/Positions:

D000 Administrative Support

Assistant Secretary for Administration

Activity Function Codes/Positions:

L200 Grants Monitoring and Evaluation

Chief Financial Officer

Activity Function Codes/Positions:

C401 Financial Analyst

The Office of Federal Procurement Policy (OFPP) Policy Letter 92-1, "Inherently Governmental Functions" of September 23, 1992 defines inherently governmental functions as follows:

An inherently governmental function involves the execution of the laws of the United States so as to [a] bind the U.S. to take or not take some action, … [c] significantly affect the life liberty or property of private persons, … [e] exert ultimate control over … the disbursement of appropriated funds.

As a matter of policy, an "inherently governmental function" is a function that is so intimately related to the public interest as to mandate performance by Government employees. These functions include those activities that require either the exercise of discretion in applying government authority or the making of value judgments in making decisions for the Government.

It is my contention that in accordance with the above definition, all of the work categorized under the above-referenced Commercial Activity codes should be rightfully defined and reclassified as inherently governmental. The basis of this contention for each position shall be addressed in separate attachments.

The U.S. Department of Housing and Urban Development should uphold these challenges, change its decision and exclude the activities from its list of commercial activities. Thank you for your consideration in this matter. I request that the decision regarding this challenge be sent to me at P.O. Box 5961, Boston, MA 02114.

Sincerely,

Carolyn Federoff, President

AFGE Council of HUD Locals, 222

Attachments

cc: Council 222 Executive Board

and Local Presidents

AFGE National Office (Public Policy Department)

Assistant Secretary for Housing-Federal Housing Commissioner A-76/FAIR Act Inventory:

C408 Asset Management

1. The employees serving in positions indicated by this function code are engaged in activities that bind the United States to take or not to take some action by contract, policy, regulation, authorization, and/or order, as described in the Detailed Description of Duties set out herein below. These activities require the exercise of discretion involving monetary transactions and entitlements. By defining this function as inherently governmental, the agency will guarantee that any final agency action complies with the laws and policies of the United States. Additionally, this will ensure that the decisions performed by these employees reflect the independent conclusions of agency officials.

2. The employees who perform this function have access to competition and procurement sensitive information, as described in the Detailed Description of Duties set out herein below. This function necessitates the use of discretion with regard to monetary transactions and entitlements. Access to this sensitive information by a non-federal employee would compromise the integrity of future competitions, contracts, and procurement actions. It would impede governmental authority and disrupt the procurement process. In addition, releasing to a contractor the information necessary to accomplish the function will result in contractor access to confidential business information.

3. The employees who perform this function exert ultimate control over the acquisition, use, or disposition of the property, real or personal, tangible or intangible, of the United States, including the collection, control, or disbursement of appropriated and other Federal funds, as described in the Detailed Description of Duties set out herein below. Maintaining this function as inherently governmental ensures in using the products of these contracts, that any final agency action complies with the laws and policies of the United States.

Description of duties and relation to inherently governmental standards

for C408 Asset Management

HUD Asset Managers are primarily concerned with monitoring and compliance-assurance activities that involve the application and interpretation of HUD statutes, regulations, handbooks, guidelines and directives. The focus of these activities is to serve the taxpayers by protecting the FHA Mortgage Insurance funds and direct lending programs against fraud, waste and abuse, and to help assure an adequate supply of safe, affordable housing.

The mortgagees and mortgagors that perform work on loans submitted for FHA mortgage insurance are profit-motivated and seek a government guarantee that they will not suffer from any mortgage loan default that may occur. Should a default occur, the mortgagee will seek to have the outstanding mortgage paid by the FHA mortgage insurance. Further, because these are non-recourse loans, FHA may not pursue the mortgagor’s other assets to cover losses that may be sustained.

Similarly, although mortgagors in the direct lending programs (such as the Section 202 and 811 programs) are non-profit, they too seek a government guarantee that they will not suffer from any mortgage loan default that may occur. Should a default occur, HUD will cover the losses. HUD will not pursue the mortgagor’s other assets to cover losses that may be sustained.

The public’s interest is secured only by the real estate, not by any other asset of the mortgagor or mortgagee. Under these circumstances, the work of the HUD Asset Manager is central to the protection of the public’s interest.

Asset Managers are also responsible for the oversight and management of Section 8 and other rental subsidy programs whose total expenditure approximates $20 billion annually. Asset managers are also responsible for contracting with owners to initiate subsidy payments, calculating the amounts and monitoring such funds to protect against fraud, waste, and abuse.

More specifically, the Asset Management position involves the following activities:

a. Acquiring and analyzing facts and utilizing sound judgment in applying legal and technical standards to these facts;

b. Analyzing the pertinent regulations;

c. Conducting management reviews and audits of owners, agents, mortgagees, tenants, and other HUD clients to determine if their practices comply with the federal regulations;

d. Recommending appropriate actions to correct noncompliance;

e. Monitoring subsequent owners, agents, mortgages, tenant, and other HUD clients’ activities to ensure the prescribed corrective steps have been taken; and

f. Writing review reports summarizing all findings and recommendations and performing follow up to ensure compliance.

Upon discovery of non-compliance with the various HUD requirements, Asset Managers must then undertake a variety of corrective actions. These include the following:

a. Issuing letters of non-compliance or other statements informing the program participants of program deficiencies;

b. Determining whether a given property meets HUD’s physical, financial, and occupancy standards;

c. Directing the issuance of Notices of Default where owners or agents are found to be noncompliant with HUD ‘s requirements;

d. Reviewing and referring owners and agents, found to be noncompliant, to the Departmental Enforcement Center;

e. Preparing Limited Denials of Participation in HUD programs against owners, agents, and other participants found to have been significantly noncompliant;

f. Assembling data and administrative records for administrative hearings, including those before Administrative Law Judges or Federal Courts including foreclosure recommendations and mortgagee in possession actions;

g. Recommending the suspension or termination of mortgages, agents, owners, and other participants;

h. Recommending debarment of program participants; and

i. Numerous other compliance and monitoring tasks.

Asset Managers also perform the following duties:

a. Evaluating and monitoring Contract Administrators by performing regular compliance reviews of subsidy administration duties;

b. Acting as the Government Technical Representative for contracts relating to asset management support services;

c. Evaluating the credentials of owners and management agents to determine whether the applicants should be approved to own and/or manage HUD insured and subsidy properties;

d. Monitoring owners’ and agents’ compliance with numerous insurance and subsidy programs;

e. Evaluating owners’ and agents’ requests for waivers regarding programs and other HUD requirements;

f. Answering heavy volumes of technical questions via telephone and electronic mail communications from owners, agents, tenants, other real estate and legal professionals, and the general public;

The following tasks are also performed by Asset Managers:

a. Answering Congressional Inquiries;

b. Responding to requests under the Freedom of Information Act;

c. Working with HUD and GAO auditors and inspectors in the review and monitoring of HUD/FHA programs;

d. Analyzing the requirements of the physical asset to make it financially viable and to ensure that it meets HUD’s standard of providing decent, safe, and sanity housing;

e. Advising and educating owners, agents, tenants, lenders and other real estate professionals concerning HUD standards and requirements for maintaining HUD housing;

f. Answering questions from owners, agents, and tenants concerning delinquent loans, contract renewals, mortgage prepayments, and transfer of assets;

g. Counseling and advising owners and agents of all pertinent options and available resources in order to avoid or cure mortgage defaults, and thereby help them avoid displacement of tenants;

h. Developing creative approaches to present HUD programs to individuals and groups from diverse backgrounds, often in the context of highly sensitive and controversial issues;

i. Communicating effectively, orally and in writing, with HUD clients, local government officials, citizen groups, counseling agencies, attorneys, professional organizations, and the public at large on a wide variety of matters; and

j. Developing and presenting training seminars for owners, agents, tenants, and other program participants concerning HUD insured and subsidized housing requirements including Section 8 Renewals, prepayments, opt outs, and other matters of concern to the public and industry.

The above-described multiple duties of the Asset Management position do not stand alone, but must be integrated to form the basis for decisions. Merging all of these compliance, monitoring, and oversight functions may reveal conflicts with government directives or regulations. The function of forming decisions, merging technical data, resolving conflicts, or finding them irresolvable, is an integral part of protecting FHA insurance funds and HUD’s direct lending programs. If not done properly, the result can be the deterioration, misuse, misappropriation or other degradation of the physical asset. This not only adversely affects the FHA insurance funds and HUD direct lending programs; it also harms families, neighborhoods and communities.

There is a lot of money to be made in real estate development on the front end—financing fees, construction costs, architectural drawings, and much more. But FHA insurance and HUD direct loan programs last for forty years. After almost all of the private sector interests have made their profit and moved to the next deal, HUD and FHA remain at risk. Asset Managers are a critical part of the review necessary to keep properties from foreclosure. The Real Estate Assessment and Enforcement Centers have recovered tens of millions of dollars from owners subject to review. That number would be astronomical without dedicated Asset Managers. By comparison, Housing Finance Agency (HFA) overseen Section 8 contracts as recently as four years ago had rent levels double that of comparable HUD-overseen Section 8 projects. In these particular projects, HFAs charge servicing fees based on rents. It is in their interest to allow higher rent levels.

It should also be noted that, for many borrowers, FHA mortgage insurance is mortgage insurance of last resort. Transactions that are dismissed outright in the conventional private sector will often be found on FHA’s doorstep. Therefore, FHA insured properties require more, not less, scrutiny than conventional properties.

Finally, allowing contractors to do these functions would necessarily result in the release of information that is confidential commercial and financial information, and would potentially harm the competitive abilities of mortgagors and mortgagees who do business with HUD. Data submitted as part of regular monitoring and asset management reveals business sources, estimated costs of doing business and other information that rivals could use to competitive advantage. Corporations do not have rights under the Privacy Act to insist the government not disclose information. But we have specifically recognized a business’s right to have information declared exempt from disclosure under the Freedom of Information Act when it is confidential commercial or financial information. This declaration lasts for ten years (24 C.F.R. Section 15.108). While FOIA would not preclude the agency from releasing this information to a contractor working for the agency, it should be used as an indication of the high level of confidentiality HUD regularly affords this sort of information. Allowing access to this confidential information by persons other than Federal employees would jeopardize the legitimate business interests of the agency’s clients.

Conclusion: C408 Asset Management

Maintaining this function as inherently governmental ensures that any final agency action complies with the laws and policies of the United States. Maintaining it as inherently governmental ensures that decisions reflect the independent conclusions of agency officials and not those of contractors who may have interests that are not in concert with the public interest, and may be beyond the reach of management controls otherwise applicable to public employees. Additionally, this will ensure that the decisions made by these employees reflect the independent conclusions of agency officials.

Additionally, the work performed under this category involves access to confidential business information. Access by other than an employee of the federal government would compromise legitimate business interests of the agency’s clients. It would impede governmental authority and disrupt the procurement process.

Finally, the asset management function directly affects the quality of life and the safety of the personal property of private persons living in HUD-insured and subsidized housing. Executing the laws, which govern the housing programs managed by the Assistant Secretary for Housing, should be inherently governmental, not commercial.

Assistant Secretary for Housing-Federal Housing Commissioner A-76/FAIR Act Inventory:

D000 Administrative Support

The primary function of the Housing Administrative Support (AS) person is to support the staff by performing a variety of administrative and technical support functions and duties that are important to the work of the organization. One of the main duties of the AS is the maintenance of the Time and Attendance records, as well as other sensitive personnel information. The AS works closely with and communicates with key Departmental staff, executives of other Federal agencies, members of congress, and executives from public housing authorities. S/he handles all correspondence, such as acknowledgment letters, requests for additional information and transmittal memorandum, all containing references, dates and citations, which require researching and extracting information from files, records and regulations.

In accordance with Circular A-76 (see Appendix 2, paragraph G(3) of OMB Circular No. A-76 Revised Supplemental Handbook), the definition of this activity as a commercial activity violates the precedent established with this inventory. The activities under Function Code D000 are assigned a reason code of I (Inherently Governmental) at other places in the inventory (compare Sequence Number 403, et al to 992, et al). Therefore, as a matter of consistency and for reason of established precedent, all activities with Function code D000 should be designated as Inherently Governmental.

Assistant Secretary for Housing-Federal Housing Commissioner A-76/FAIR Act Inventory:

D606 Asset Appraisal and Valuation

The employees serving in positions indicated by this function code are engaged in activities that bind the United States to take or not to take some action by contract, policy, regulation, authorization, and/or order, as described in the Detailed Description of Duties set out herein below. These activities require the exercise of discretion involving monetary transactions and entitlements. By defining this function as inherently governmental, the agency will guarantee that any final agency action complies with the laws and policies of the United States. Additionally, this will ensure that the decisions performed by these employees reflect the independent conclusions of agency officials.

The employees who perform this function have access to competition and procurement sensitive information, as described in the Detailed Description of Duties set out herein below. This function necessitates the use of discretion with regard to monetary transactions and entitlements. Access to this sensitive information by a non-federal employee would compromise the integrity of future competitions, contracts, and procurement actions. It would impede governmental authority and disrupt the procurement process. In addition, releasing to a contractor the information necessary to accomplish the function will result in contractor access to confidential business information.

Description of duties and relation to inherently governmental standards

for D606 Asset Appraisal and Valuation

In fiscal year 2001, the Office of Multifamily Housing provided $4.34 billion in mortgage insurance to 470 multifamily housing developments, 67 assisted living facilities, 135 nursing homes and 5 mobile home parks. This is an average of $6.4 million per development insured. Failure on even a small number of developments results in significant loss.

Although the title of Appraiser can be found in the private sector, the work performed by the HUD Appraiser is significantly different. The HUD position performs inherently governmental duties designed to protect taxpayers’ assets, whereas the private-industry Appraiser serves mainly to facilitate private financial transactions.

HUD Appraisers are primarily concerned with monitoring and compliance-assurance activities that involve the application and interpretation of HUD statutes, regulations, handbooks, guidelines and directives. The focus of these activities is to serve the taxpayers by protecting the FHA Mortgage Insurance funds and HUD direct lending programs against fraud, waste and abuse, and to help assure an adequate supply of safe, affordable housing.

The mortgagees, mortgagors, builders, developers and appraisers that perform work on loans submitted for FHA mortgage insurance are profit-motivated and seek a government guarantee that they will not suffer from any mortgage loan default that may occur. Should a default occur, the mortgagee will seek to have the outstanding mortgage paid by the FHA mortgage insurance fund. Further, because these are non-recourse loans, FHA may not pursue the mortgagor’s other assets to cover losses that may be sustained.

The public’s interest is secured only by the real estate, not by any other asset of the mortgagor or mortgagee. Under these circumstances, the work of the HUD Appraiser is central to the protection of the public’s interest.

More specifically, the Asset Appraisal and Valuation position involves the following activities:

Acquiring and analyzing facts and utilizing sound judgment in applying legal and technical standards to these facts;

Analyzing the pertinent regulations;

Determining whether the appraisers’ and mortgagees’ practices comply with the regulations;

Recommending appropriate actions to correct noncompliance;

Monitoring subsequent appraiser and mortgagee activities to ensure the prescribed corrective steps have been taken; and

Writing review reports summarizing all findings and recommendations.

Upon discovery of non-compliance with the various HUD requirements, Appraisers must then undertake a variety of corrective actions. These include the following:

Issuing Notices of Deficiency or similar statements informing the program participants of non-compliance;

Determining whether a given mortgage loan is insurable under HUD standards;

Directing the issuance of Notices of Return (non-endorsement notices) where loans are found to be noncompliant with FHA insuring requirements;

Acquiring and analyzing facts and utilizing sound judgment in applying legal and technical standards to these facts;

Analyzing the pertinent regulations;

Determining whether the appraisers’ and mortgagees' practices comply with the regulations;

Recommending appropriate actions to correct noncompliance;

Monitoring subsequent appraiser and mortgagee activities to ensure the prescribed corrective steps have been taken; and

Writing review reports summarizing all findings and recommendations.

HUD Appraisers also perform the following duties:

Evaluating and monitoring Appraisal Quality Assessments (AQAs), appraisal field reviews, and underwriting technical reviews;

Acting as the Government Technical Representative on contracts for field reviews, underwriting technical reviews, and similar contracts;

Evaluating the credentials of FHA fee inspectors and 203(k) rehabilitation-loan consultants to determine whether the applicants should be placed on FHA’s roster of these positions;

Monitoring lenders’ and appraisers’ compliance with 203(k) rehabilitation loan requirements;

Approving or denying appraiser’s applications for placement on the FHA roster;

Reviewing and approving condominiums and planned unit developments for FHA insurance eligibility;

Evaluating lenders’ requests for waivers regarding property condition and other requirements;

Conducting environmental reviews; and

Answering heavy volumes of technical questions in telephone and electronic mail communications from lenders, appraisers, other real estate professionals, and the general public.

The following tasks are also performed by HUD Appraisers:

Answering Congressional Inquiries;

Responding to requests under the Freedom of Information Act;

Working with HUD and GAO auditors and inspectors in the review and monitoring of HUD/FHA programs;

Analyzing the requirements of construction, processing procedures, escrow procedures, and all other issues related to the physical asset that secures insured loans;

Advising and educating appraisers, lenders, other real estate professionals, and the public concerning HUD standards and requirements for direct endorsement mortgage insurance approval and the principles of underwriting;

Answering questions from homeowners with delinquent FHA loans;

Counseling and advising homeowners of all pertinent options and available resources in order to avoid or cure mortgage defaults, and thereby help them avoid potential homelessness;

Developing creative approaches to present HUD programs to individuals and groups from diverse backgrounds, often in the context of highly sensitive and controversial issues;

Communicating effectively, orally and in writing, with HUD clients, local government officials, citizen groups, counseling agencies, attorneys, and the public at large on a wide variety of matters; and

Developing and presenting training seminars for mortgage lenders, appraisers, underwriters, and other program participants concerning FHA underwriting and loan production topics, including Section 203(k) rehabilitation loans.

With regard to environmental reviews, Phase I reviews are currently done by third party environmental contractors, but HUD staff must review and complete the 4128 Environmental Analysis form and determine the acceptability of each site. By regulation, the environmental reviews are the responsibility of HUD officials. See 24 C.F.R. 50.11, et al.

Regarding the above-described multiple duties of the HUD Appraiser, these duties do not stand alone, but must be integrated to form the basis for decisions. Merging all of these compliance, monitoring, and oversight functions may reveal conflicts with government directives or regulations. The function of forming decisions, merging technical data, resolving conflicts, or finding them irresolvable, is an integral part of protecting FHA insurance funds and HUD’s direct lending programs. If not done properly, the result can be the commitment of mortgage insurance where there should be none, or the failure to insure where it should be done. This not only adversely affects the FHA insurance funds and HUD direct lending programs; it also harms families, neighborhoods and communities.

Additionally, the Appraiser works as part of an underwriting team during the development process. Contracting this work to a contractor located outside of the office and who will only perform certain functions provided for in the statement of work will result in a disjointed and fractured development process. This would necessarily reduce the quality of project underwriting and increase the risk to the FHA insurance funds and HUD’s direct lending programs.

It should also be noted that, for many borrowers, FHA mortgage insurance is mortgage insurance of last resort. Transactions that are dismissed outright in the conventional private sector will often be found on FHA’s doorstep. Therefore, FHA mortgage applications require more, not less, scrutiny than conventional mortgage applications.

The risk to the insurance fund is also undermined by the possibility—indeed the inevitability—of conflict of interest concerns that will occur because the same pool of contractors will serve both HUD and the lender community whose projects are under review. The number of contract appraisers willing to perform HUD multifamily appraisals is limited. The pool of appraisers specializing in health care facilities (a big part of HUD’s multifamily insurance business) is even more restricted. Both HUD and the lender community it serves will hire from the same limited pool of available contractors. Inevitably, the HUD contractor who is reviewing the application package of a lender will also seek commissions from the same lender for future cases. Reviewing appraisals and market studies is a lucrative business for a private contractor; performing these studies for the lender (HUD’s client) is even more lucrative. Privatizing the position of staff multifamily appraiser invites the obvious conflict of interest problems that will occur when a contractor reviews the case of a lender he hopes may employ him. HUD’s (and the taxpayers’) interests are sure to be a casualty.

HUD Appraisers are not just insulated from conflict of interests because they work for only HUD. They are further insulated because they are required to fill out annual financial disclosure statements and complete periodic standard of conduct courses both in connection with their positions at HUD and their licenses from state regulatory bodies.

The challenges regarding conflict of interest, the need for underwriting team work and the inherent increased risk of FHA underwriting are compounded by the fact that the Direct Endorsement program in Single Family and the Multifamily Accelerated Processing (MAP) program in Multifamily come as close as possible to placing the FHA Mortgage Insurance Funds entirely in the hands of the private sector. The only safeguards protecting the public at this time are the underwriting technical reviews, appraisal reviews, and related functions performed by qualified HUD/FHA staff.

With regard to MAP, it is the FHA multifamily insurance application processing method of choice for the department. The agency uses MAP in greater and greater proportions. Rather than using HUD employees or contractors working for HUD, the mortgagee seeking mortgage insurance provides the technical reviews. HUD staff then review the technical reviews submitted by the mortgagee and it’s contractors.

The MAP process is already paper-thin close to resulting in violations of HUD regulations at 24 C.F.R. Section 200.145(b) which state:

Any appraisals, inspections, environmental assessments and technical or financial evaluations conducted by or for the Commissioner are performed to determine the maximum insurable mortgage, and to protect the Commissioner and the FHA insurance funds.

It cannot be argued that technical reviews contracted for by the hopeful beneficiary of the FHA mortgage insurance program are “conducted by or for the Commissioner.” These reviews, bought and paid for by the mortgagee, are for the benefit of the mortgagee. Nonetheless, these technical reviews are used to determine the maximum insurable mortgage, and they are used to protect the FHA insurance fund.

MAP is about as close as you can get to fully bestowing the FHA insurance fund solely in the hands of the private sector without crossing the line of acceptability. The only thing that saves MAP from being in violation of the regulations is the review of the mortgagee technical reviews by qualified HUD/FHA technicians. To contract out the Appraisal and Valuation function would result in no real FHA review of this mortgagee technical review. At an average cost of $6.4 million per development, the costs to the insurance fund can increase quickly.

HUD’s experience with the Traditional Application Process (TAP) is illustrative of the results of contracting out technical review functions. TAP relies upon HUD employees to directly appraise, underwrite and review architectural and engineering plans. In the 1990s, HUD engaged in small procurement contracting known as “delegated processing” to provide these services. HUD employees who were specialists in underwriting, valuation, construction analysis, etc., reviewed the contractors’ work. Contractors worked directly for and were paid by HUD. Although each individual contract was small, the total cost was far in excess of the cost of doing the work in house. Additionally, contracting out and then reviewing contractor’s work often made the mortgage insurance application process slow. It is highly likely that this would repeat itself if the MAP technical reviews were contracted out.

Conclusion: D606 Asset Appraisal and Valuation

Assistant Secretary for Housing-Federal Housing Commissioner A-76/FAIR Act Inventory:

D709 Mortgage Underwriting

The employees serving in positions indicated by this function code are engaged in activities that bind the United States to take or not to take some action by contract, policy, regulation, authorization, and/or order, as described in the Detailed Description of Duties set out herein below. These activities require the exercise of discretion involving monetary transactions and entitlements. By defining this function as inherently governmental, the agency will guarantee that any final agency action complies with the laws and policies of the United States. Additionally, this will ensure that the decisions performed by these employees reflect the independent conclusions of agency officials.

The employees who perform this function have access to competition and procurement sensitive information, as described in the Detailed Description of Duties set out herein below. This function necessitates the use of discretion with regard to monetary transactions and entitlements. Access to this sensitive information by a non-federal employee would compromise the integrity of future competitions, contracts, and procurement actions. It would impede governmental authority and disrupt the procurement process. In addition, releasing to a contractor the information necessary to accomplish the function will result in contractor access to confidential business information.

Description of duties and relation to inherently governmental standards

for D709 Mortgage Underwriting

Although the title of Mortgage Underwriter can be found in the private sector, the work performed by the HUD Mortgage Underwriter is significantly different. The HUD position performs inherently governmental duties designed to protect taxpayers’ assets, whereas the private-industry Mortgage Underwriter serves mainly to facilitate private financial transactions.

HUD Mortgage Underwriters are primarily concerned with monitoring and compliance-assurance activities that involve the application and interpretation of HUD statutes, regulations, handbooks, guidelines and directives. The focus of these activities is to serve the taxpayers by protecting the FHA Mortgage Insurance funds and HUD’s direct lending programs against fraud, waste and abuse, and to help assure an adequate supply of safe, affordable housing.

The mortgagees, mortgagors, builders, developers, underwriters and appraisers that perform work on loans submitted for FHA mortgage insurance are profit-motivated and seek a government guarantee that they will not suffer from any mortgage loan default that may occur. Should a default occur, the mortgagee will seek to have the outstanding mortgage paid by the FHA mortgage insurance. Further, because these are non-recourse loans, FHA may not pursue the mortgagor’s other assets to cover losses that may be sustained.

The public’s interest is secured only by the real estate, not by any other asset of the mortgagor or mortgagee. Under these circumstances, the work of the HUD Mortgage Underwriter is central to the protection of the public’s interest.

More specifically, the Mortgage Underwriting position involves the following activities:

a. Acquiring and analyzing facts and utilizing sound judgment in applying legal and technical standards to these facts;

b. Analyzing the pertinent regulations;

c. Determining whether the appraisers’ and mortgagees' practices comply with the regulations;

d. Recommending appropriate actions to correct noncompliance;

e. Monitoring subsequent appraiser and mortgagee activities to ensure the prescribed corrective steps have been taken; and

f. Writing review reports summarizing all findings and recommendations.

Upon discovery of non-compliance with the various HUD requirements, Mortgage Underwriters must then undertake a variety of corrective actions. These include the following:

a. Issuing Notices of Deficiency or similar statements informing the program participants of non-compliance;

b. Determining whether a given mortgage loan is insurable under HUD standards;

c. Directing the issuance of Notices of Return (non-endorsement notices) where loans are found to be noncompliant with FHA insuring requirements;

d. Acquiring and analyzing facts and utilizing sound judgment in applying legal and technical standards to these facts;

e. Analyzing the pertinent regulations;

f. Determining whether the appraisers’ and mortgagees' practices comply with the regulations;

g. Recommending appropriate actions to correct noncompliance;

h. Monitoring subsequent appraiser and mortgagee activities to ensure the prescribed corrective steps have been taken; and

i. Writing review reports summarizing all findings and recommendations.

HUD Mortgage Underwriters also perform the following duties:

a. Evaluating and monitoring Appraisal Quality Assessments (AQAs), appraisal field reviews, and underwriting technical reviews;

b. Acting as the Government Technical Representative on contract for field reviews, underwriting technical reviews, and similar contracts;

c. Evaluating the credentials of FHA fee inspectors and 203(k) rehabilitation-loan consultants to determine whether the applicants should be placed on FHA’s roster of these positions;

d. Monitoring lenders’ and appraisers’ compliance with 203(k) rehabilitation loan requirements;

e. Approving or denying appraiser’s applications for placement on the FHA roster;

f. Reviewing and approving condominiums and planned unit developments for FHA insurance eligibility;

g. Evaluating lenders’ requests for waivers regarding property condition and other requirements; and

h. Answering heavy volumes of technical questions in telephone and electronic mail communications from lenders, appraisers, other real estate professionals, and the general public.

The following tasks are also performed by the HUD Mortgage Underwriter:

a. Answering Congressional Inquiries;

b. Responding to requests under the Freedom of Information Act;

c. Working with HUD and GAO auditors and inspectors in the review and monitoring of HUD/FHA programs;

d. Analyzing the requirements of construction, processing procedures, escrow procedures, and all other issues related to the physical asset that secures insured loans;

e. Advising and educating appraisers, lenders, other real estate professionals, and the public concerning HUD standards and requirements for direct endorsement mortgage insurance approval and the principles of underwriting;

f. Answering questions from homeowners with delinquent FHA loans;

g. Counseling and advising homeowners of all pertinent options and available resources in order to avoid or cure mortgage defaults, and thereby help them avoid potential homelessness;

h. Developing creative approaches to present HUD programs to individuals and groups from diverse backgrounds, often in the context of highly sensitive and controversial issues;

i. Communicating effectively, orally and in writing, with HUD clients, local government officials, citizen groups, counseling agencies, attorneys, and the public at large on a wide variety of matters; and

j. Developing and presenting training seminars for mortgage lenders, appraisers, underwriters, and other program participants concerning FHA underwriting and loan production topics, including Section 203(k) rehabilitation loans.

The above-described multiple duties of the HUD Mortgage Underwriter do not stand alone, but must be integrated to form the basis for decisions. Merging all of these compliance, monitoring, and oversight functions may reveal conflicts with government directives or regulations. The function of forming decisions, merging technical data, resolving conflicts, or finding them irresolvable, is an integral part of protecting FHA insurance funds and HUD’s direct lending programs. If not done properly, the result can be the commitment of mortgage insurance where there should be none, or the failure to insure where it should be done. This not only adversely affects the FHA insurance funds and HUD direct lending programs; it also harms families, neighborhoods and communities.

Additionally, the Mortgage Underwriter works as part of an underwriting team during the development process. Contracting this work to a contractor located outside of the office and who will only perform certain functions provided for in the statement of work will result in a disjointed and fractured development process. This would necessarily reduce the quality of project underwriting and increase the risk to the FHA insurance funds and HUD’s direct lending programs.

It should also be noted that, for many borrowers, FHA mortgage insurance is mortgage insurance of last resort. Transactions that are dismissed outright in the conventional private sector will often be found on FHA’s doorstep. Therefore, FHA mortgage applications require more, not less, scrutiny than conventional mortgage applications.

These challenges are compounded by the fact that the Direct Endorsement program in Single Family and the Mortgage Accelerated Processing (MAP) program in Multifamily come as close as possible to placing the FHA Mortgage Insurance Funds entirely in the hands of the private sector. The only safeguards protecting the public at this time are the underwriting technical reviews, appraisal reviews, and related functions performed by qualified HUD/FHA staff.

The MAP process is already paper-thin close to resulting in violations of HUD regulations at 24 C.F.R. Section 200.145(b) which state:

MAP is about as close as you can get to fully bestowing the FHA insurance fund solely in the hands of the private sector without crossing the line of acceptability. The only thing that saves MAP from being in violation of the regulations is the review of the mortgagee technical reviews by qualified HUD/FHA technicians. To contract out the Mortgage Underwriting function would result in no real FHA review of this mortgagee technical review. At an average cost of $6.4 million per development, the costs to the insurance fund can increase quickly.

HUD’s experience with the Traditional Application Process (TAP) is illustrative of the results of contracting out technical review functions. TAP relies upon HUD employees to directly appraise, underwrite and review architectural and engineering plans. In the 1990s, HUD engaged in small procurement contracting known as “delegated processing” to provide these services. HUD employees who were specialists in underwriting, valuation, construction analyses, etc., reviewed the contractors’ work. Contractors worked directly for and were paid by HUD. Although each individual contract was small, the total cost was far in excess of the cost of doing the work in house. Additionally, contracting out and then reviewing contractor’s work often made the mortgage insurance application process slow. It is highly likely that this would repeat itself if the MAP technical reviews were contracted out.

Conclusion: D709 Mortgage Underwriting

Assistant Secretary for Housing-Federal Housing Commissioner A-76/FAIR Act Inventory:

D708 Application Receipt/Processing

Description of duties and relation to inherently governmental standards

for D708 Application Receipt/Processing

HUD’s employees involved in Application Receipt and Processing are primarily concerned with monitoring and compliance-assurance activities that involve the application and interpretation of HUD statutes, regulations, handbooks, guidelines and directives. The focus of these activities is to serve the taxpayers by protecting the FHA Mortgage Insurance funds and HUD’s direct lending programs against fraud, waste and abuse, and to help assure an adequate supply of safe, affordable housing.

The public’s interest is secured only by the real estate, not by any other asset of the mortgagor or mortgagee. HUD employees involved in the receipt and processing of applications serve at the fulcrum of the decision making process regarding both FHA insurance and HUD direct loan programs. Under these circumstances, their work is central to the protection of the public’s interest.

More specifically, the Application Receipt/Processing position involves the following activities:

Acquiring and analyzing facts and utilizing sound judgment in applying legal and other HUD standards to these facts;

Analyzing the pertinent regulations;

Determining whether mortgagee and mortgagor practices comply with regulations;

Determining whether Risk Sharing mortgagee partners’ practices comply with regulations;

Recommending appropriate actions to correct noncompliance, including debarment;

Issuing notices of deficiency or similar statements informing program participants of noncompliance;

In concert with other disciplines, determining whether a given mortgage loan is insurable or a proposed Capital Advance is qualified under HUD standards and regulations;

answering heavy volumes of technical questions in telephone and electronic mail communications from lenders, appraisers, other real estate professionals, and the general public;

Answering Congressional inquiries;

Responding to requests under the Freedom of Information Act;

Working with HUD and GAO auditors and inspectors in the review and monitoring of HUD/FHA programs;

Assembling data and administrative records for administrative hearings, including those before Administrative Law Judges;

Acting as Government Technical Representatives on contracts for field review;

Participating as a trainer or facilitator in training sessions for lenders and for-profit and nonprofit owners;

Developing creative approaches to present HUD programs to individuals and groups from diverse backgrounds, often in the context of highly sensitive and controversial issues; and

Communicating effectively, orally and in writing, with HUD clients, local government officials, citizen groups, attorneys, and the public at large on a wide variety of matters.

The Application Receipt/Processing position is more than a mere paper pusher. This position gathers the technical reviews provided by the Mortgage Underwriter, Appraiser and Architect/Engineer, and puts them together to form the basis for a recommendation for agency action. From his/her position, an overview of technical reviews may reveal conflicts between them, or disclose conflicts with government directives or regulations. The function of forming decisions, merging technical data, resolving conflicts or finding them irresolvable is an integral part of protecting FHA insurance funds and HUD’s direct loan programs. It not done properly, the result can be the commitment of mortgage insurance or funding reservation where there should be none, or the failure to insure or reserve funds where it should be done.

The Application Receipt/Processing position works as the fulcrum of the underwriting team during the development process. Contracting this work to a contractor located outside the office and who will only perform certain functions provided for in the statement of work will result in a disjointed and fractured development process. This would necessarily reduce the quality of underwriting and increase the risk to the FHA insurance funds and HUD’s direct loan programs.

Conclusion: D708 Application Receipt/Processing

Assistant Secretary for Housing-Federal Housing Commissioner A-76/FAIR Act Inventory:

T804 Architect-Engineering

1. The employees serving in positions indicated by this function code must have technical skills found in their colleagues in the private sector. However, while the technical knowledge of design and construction is critical to the performance of their duties, the essence of their function is to make value judgments regarding the suitability of proposed designs and construction for government programs. Their reviews constitute value judgments in making decisions for the Federal Government. Thus they are engaged in activities that bind the United States to take or not to take some action by contract, policy, regulation, authorization, and/or order, as described in the Detailed Description of Duties set out herein below. These activities also require the exercise of discretion involving monetary transactions and entitlements. By defining this function as inherently governmental, the agency will guarantee that any final agency action complies with the laws and policies of the United States. Additionally, this will ensure that the decisions performed by these employees reflect the independent conclusions of agency officials.

3. The employees who perform this function engage in the inherently governmental exercise of discretion in the application of governmental authority as they must review and comment on the suitability of actions which exert ultimate control over the acquisition, use, or disposition of the property, real or personal, tangible or intangible, of the United States, including the collection, control, or disbursement of appropriated and other Federal funds, as described in the Detailed Description of Duties set out herein below. Maintaining this function as inherently governmental ensures in using the products of these contracts, that any final agency action complies with the laws and policies of the United States.

Description of duties and relation to inherently governmental standards for

for T804 Architect-Engineering

HUD design professionals categorized as “Architect-Engineering” include architects, engineers, cost analysts, and construction analysts. These all are primarily concerned with monitoring and compliance-assurance activities that involve the application and interpretation of HUD statutes, regulations, handbooks, guidelines, and directives. The focus of these positions is to serve the taxpayers by protecting the FHA Mortgage Insurance Funds and HUD direct loan programs against fraud, waste, and abuse, and to help assure an adequate supply of safe, affordable housing.

There is little similarity between the HUD position and the design professional position in private industry, aside from the position titles, as demonstrated by the detailed description of position duties set outbelow. The HUD position performs inherently governmental duties designed to protect taxpayers’ assets, whereas the private-industry position serves mainly to facilitate private financial transactions.

Asset Development: The mortgage lenders, design professionals, developers, and appraisers that perform work on loans submitted for FHA mortgage insurance are profit-motivated and seek a government guarantee that they will not suffer from any mortgage loan default that may occur. Should a default occur, the mortgagee lender will seek to have the outstanding mortgage paid by the FHA mortgage insurance.

The public’s interest is secured only by the real estate, not by any other assets of the mortgagor or mortgagee. Under these circumstances, the mortgage underwriting, design, and property appraisal reviews are of truly critical value.

Asset Management: Once an asset is under an FHA mortgage, the owner of the asset must comply with the regulatory agreement signed at closing. This agreement authorizes HUD to monitor the management of the property, including disbursement of funds and maintenance of the physical structures. Such oversight assures that both the financial condition of the project and the physical structures that stand as security for the mortgage will be maintained in a manner that protects the public interest. Architects, engineers, cost analysts and construction analysts in this category are called upon to review and approve designs, proposals, repairs, contracts, and disbursements related to the operation and management of the project to see that such activities will not only protect the value of the assets but also fulfill the mission, goals, and priorities of the Department of Housing in providing decent, safe, sanitary, and affordable housing. This process requires an intimate knowledge of HUD programs and regulations, as well as a firm grasp on principles of sound and cost-effective design and construction.

More specifically, the Architect/Engineer position involves the following activities:

a. Acquiring and analyzing facts and utilizing sound judgment in applying legal and technical standards to these facts;

b. Analyzing the pertinent regulations;

c. Determining whether the designers’ and contractors’ practices comply with the regulations;

d. Recommending appropriate actions to correct noncompliance;

e. Monitoring subsequent contractor, owner, and mortgagee activities to ensure the prescribed corrective steps have been taken;

f. Writing review reports summarizing all findings and recommendations; and

g. Representing the Department at meetings with owners, developers, architects and engineers, mortgagees, contractors, state and local government entities, and tenant organizations, to express and interpret the Department’s requirements, practices, and priorities related to the design, construction, rehabilitation, maintenance, and repair of housing structures.

Upon discovery of non-compliance with the various HUD requirements, HUD architects and engineers must then undertake a variety of corrective actions. These include the following:

a. Providing a written description of the non-compliance for review and use of the HUD official authorized to act on behalf of the government;

b. Determining whether a given mortgage loan is insurable under HUD standards;

c. Determining whether a given proposal for a property under management meets regulatory requirements under HUD standards;

d. Reviewing and referring insured cases found to be noncompliant for indemnification in the event of a claim by the insured lender;

e. Assisting in the preparation of Limited Denials of Participation in FHA programs against designers, contractors, fee inspectors, and other participants found to have been significantly noncompliant;

f. Assembling data and administrative records for administrative hearings, including those before Administrative Law Judges or Federal Courts;

g. Recommending the removal of designers and contractors from the approved participants’ list for the Multifamily Accelerated Processing program; and

h. Recommending debarment of program participants.

Architects and Engineers also perform the following duties:

a. Review of documents at closings for compliance with government regulations and to see that the interests of the public are protected;

b. Acting as the Government Technical Representative on contract for field reviews, underwriting technical reviews, and similar contracts;

c. Acting as a liaison between the Department and private industry design professionals, including advising these parties regarding the design and program requirements of the Department;

d. Reviewing field reports of private contractors who have been hired to inspect construction of FHA-insured projects and Section 202 and 811 projects;

e. Reviewing construction draw requests to see that amounts requested are reasonable and that sufficient funds will be available to complete the work;

f. Monitoring lenders’ and designers’ compliance with FHA loan requirements, including those of the Multifamily Accelerated Processing (MAP) program;

g. Approving or denying appraiser’s applications for placement on the FHA roster;

h. Reviewing and approving reports by private-industry design professionals for accuracy, competency, and relevency. Such review often mediates between conflicting professional opinions and provides judgment regarding the acceptance, rejection, and interpretation of such opinions;

i. Monitoring and reporting on the performance of both HUD employees and private entities with regard to specific Management Plan goals;

j. Maintaining and accessing data bases of information on projects and participants for management and oversight purposes and in response to FOIAs and congressional inquiries;

k. Evaluating owners’ requests for the disbursement of funds regarding property condition and other requirements; and

l. Answering heavy volumes of technical questions in telephone and electronic mail communications from lenders, appraisers, other real estate professionals, and the general public.

The following tasks are also performed by HUD architects and engineers:

a. Answering Congressional Inquiries;

b. Responding to requests under the Freedom of Information Act;

c. Analyzing the requirements of construction, processing procedures, escrow procedures, and all other issues related to the physical asset that secures insured loans;

d. Advising and educating appraisers, lenders, other real estate professionals, and the public concerning HUD standards and requirements for direct endorsement mortgage insurance approval and the principles of underwriting;

e. Counseling and advising project owners of all pertinent options and available resources in order to avoid or cure mortgage defaults, and thereby help them avoid potential homelessness;

f. Developing creative approaches to present HUD programs to individuals and groups from diverse backgrounds, often in the context of highly sensitive and controversial issues;

g. Providing advice and assistance to HUD attorneys, managers, public affairs officers, and enforcement officials regarding sensitive and critical issues where the condition of building structures and the advisability of various options is critical to the situation;

h. Communicating effectively, orally and in writing, with HUD clients, local government officials, citizen groups, counseling agencies, attorneys, and the public at large on a wide variety of matters; and

i. Developing and presenting training seminars for mortgage lenders, architects, engineers, contractors, underwriters, and other program participants concerning FHA underwriting and loan production topics.

The above-described multiple duties of the HUD/Housing design professionals do not stand alone, but must be integrated to form the basis for a decision. Merging all of these compliance, monitoring, and oversight functions may reveal conflicts with government directives or regulations. The function of forming decisions, merging technical data, resolving conflicts, or finding them irresolvable, is an integral part of protecting FHA insurance funds and HUD direct loan programs. If not done properly, the result can be the commitment of mortgage insurance or funding reservation where there should be none, or the deterioration, misuse, or other degradation of the physical asset. This not only adversely affects the FHA insurance funds and HUD direct loan programs; it also harms families, neighborhoods and communities.

Additionally, during the development process, Architects and Engineers work as part of an underwriting team. Contracting this work to a contractor located outside of the office who will only perform certain functions provided for in the statement of work will result in a disjointed and fractured development process. This would necessarily reduce the quality of project underwriting and increase the risk to the FHA insurance funds and HUD’s direct lending programs.

It should also be noted that, for many borrowers, FHA mortgage insurance is mortgage insurance of last resort. Transactions that are dismissed outright in the conventional private sector will often be found on FHA’s doorstep. Therefore, FHA mortgage applications require more, not less, scrutiny than conventional mortgage applications.

On the development side, these challenges are compounded by the fact that the Multifamily Accelerated Processing (MAP) program in Multifamily comes as close as possible to placing the FHA Mortgage Insurance Funds entirely in the hands of the private sector. The only safeguards protecting the public at this time are the underwriting technical reviews, appraisal reviews, and related functions performed by qualified HUD/FHA staff.

The MAP process is already paper-thin close to resulting in violations of HUD regulations at 24 C.F.R. Section 200.145(b) which state:

MAP is about as close as you can get to fully bestowing the FHA insurance fund solely in the hands of the private sector without crossing the line of acceptability. The only thing that saves MAP from being in violation of the regulations is the review of the mortgagee technical reviews by qualified HUD/FHA technicians. To contract out the Architectural and Engineering function would result in no real FHA review of this mortgagee technical review. At an average cost of $6.4 million per development, the costs to the insurance fund can increase quickly.

HUD’s experience with the Traditional Application Process (TAP) is illustrative of the results of contracting out technical review functions. TAP relies upon HUD employees to directly appraise, underwrite and review architectural and engineering plans. In the 1990s, HUD engaged in small procurement contracting known as “delegated processing” to provide these services. HUD employees who were specialists in underwriting, valuation, construction analyses, etc., reviewed the contractors’ work. Contractors worked directly for and were paid by HUD. Although each individual contract was small, the total cost was far in excess of the cost of doing the work in house. Additionally, contracting out and then reviewing contractor’s work often made the mortgage insurance application process slow. It is highly likely that this would repeat itself if the MAP technical reviews were contracted out.

Conclusion: D804 Architect-Engineering

Assistant Secretary for Public and Indian Housing A-76/FAIR Act Inventory:

C401 Financial Analyst

4. In accordance with Circular A-76 (see Appendix 2, paragraph (G)(3) of OMB Circular No. A-76 Revised Supplemental Handbook), the definition of this activity as a commercial activity violates the precedent established with this inventory. The activities under Function Code C401 are assigned a Reason code of I. Therefore, as a matter of consistency and for reason of established precedent, all activities with a Functional Code of C401 should be designated as inherently governmental.

Description of duties and relation to inherently governmental standards

for C401 Financial Analyst

The PIH Financial Analyst (FA) serves as an advisor and internal consultant for financial matters relating to the Public Housing Agencies (PHAs) in their portfolio. Responsibilities include review and approval of program budgets/funding documents, obligation of funds, scheduling of payments, and the resolution of audit findings related to the financial management of PHAs. FAs have monitoring and compliance duties that involve the application and interpretation of HUD statutes, regulations, handbook, guidelines and directives. The main objective is to protect against fraud, waste, and abuse, as well as ensuring that the public housing stock and Section 8 units are safe and affordable.

More specifically, the Financial Analyst position involves the following duties and responsibilities:

1. Participates in compliance assessments of financial areas (such as: accounting practices, procurement, etc.), collecting and analyzing data to check for statutory and regulatory compliance;

2. Develops appropriate strategies, tools and procedures to address identified performance deficiencies and problem solving;

3. Identifies technical assistance needs and develops targeted technical assistance strategies to address the needs of the PHA;

4. Provides expert advice, guidance and technical assistance to internal HUD staff, other team members and PHA staff on complex financial management policy or operational issues;

5. Assists the Hub Director in developing and carrying out recommendations for intervention or imposition of sanctions when the housing authority management and local leaders fail to take actions to correct documented financial deficiencies;

6. Coordinates and consolidates team member input for audit resolution. Prepares draft audit response for team review and approval and submits final report to the Hub Director;

7. Utilizes computer/data systems, such as PIC, LOCCS, ROBOTS, etc., to maintain current PHA data, track PHA performance trends and compliance issues, and generate appropriate work products;

8. Develops appropriate strategies, tools, and procedures to address identified performance deficiencies and unusually complex problems regarding improvement efforts;

9. Serves as Hub and PIH representative at local, regional, state and other conferences, seminars, workshops, etc., on finance and budget issues and topics, making oral and written presentations;

10. Assists in the control, monitoring and oversight of allocations of development, subsidy and grant (DRUG, CIAP, COMP, CFP, etc.) funding for the Hub; and

11. Responds to Congressional Inquiries and Freedom of Information Act requests.

Employees who perform duties within Function Code C401 should be classified as inherently governmental under the standard identified in OFPP Policy Letter 92-1. Their work requires the interpretation and execution of the laws of the United States.

The Financial Analysts who perform these functions under C-401 bind the United States to take actions by contract, policy, regulation and authorization (through, for example, Operating Subsidy or Section 8 allocations by the Financial Analysts) under the several Public Housing programs. Their duties include the review and recommendation for approval of funding obligations as well as for the recapture of unused or improperly used program funds. These activities require the exercise of a high degree of judgment and discretion involving monetary transactions and entitlements. Therefore, they are inherently governmental. By defining this function as inherently governmental, the agency will guarantee that any final agency action complies with the laws and policies of the United States. Additionally, this will ensure that the decisions performed by these employees reflect the independent conclusions of agency officials.

At the Field Office level, the employees who perform these functions are not “back office” employees who only process financial documents or review construction documents. Rather, they are an intrinsic part of the oversight and monitoring process by which the Department ensures and enforces compliance with its regulations—programmatic as well as financial.

The employees who perform these functions have access to highly sensitive competitive procurement information. During monitoring reviews, the Financial Analysts evaluate all facets of the housing authorities’ financial activities, including compliance with their Procurement Policies and contracts. These activities necessitate the use of judgment and discretion with regard to monetary transactions and entitlements. Access by a non-federal employee would compromise the integrity of future competitions, contracts and procurement actions and would impede the government’s ability to conduct adequate oversight of recipients of Federal funds.

The employees who perform these functions have access to private, personnel sensitive and confidential information, including proprietary vendor information. Preserving the sanctity of this data demands the discretionary exercise of Government authority and therefore involves the act of governing. These activities require the use of Government authority to protect the interests of its citizens as this data significantly affects the life, liberty, or property of private persons or companies. During on site reviews, employees in both functions view personnel and tenant files that contain confidential information such as social security numbers. Maintaining these functions as inherently governmental guarantees that any final agency action complies with the laws and policies of the United States. It ensures that decisions reflect the independent conclusions of agency officials and not those of contractors and private companies that may profit from the misuse of this confidential or personal information. The employee in the administrative support function views and maintains personnel files of government employees, which contain all manner of personal information such as social security numbers, home addresses and other personal information. Access by non-federal employees would compromise the health and welfare of government employees in light of the current acts of terrorism against our government.

Finally and perhaps most importantly, in accordance with Circular A-76 (see Appendix 2, paragraph (G)(3) of OMB Circular No. A-76 Revised Supplemental Handbook) the definition of this activity as a commercial activity violates the precedent established with this inventory. This same activity Function Code, C401, was assigned a Reason code of I (see Sequence Number 173). Therefore, as a matter of consistency and for the reason of established precedent, all activities with a Function Code of C401 should be designated as inherently governmental.

Conclusion: C401 Financial Analyst

Additionally, the work performed under this category involves access to confidential information. Access by other than an employee of the federal government would compromise the interests of its citizens as this data significantly affects the life, liberty, or property of private persons. It also includes access to business sensitive data that could compromise the legitimate business interests of the PHA contractors. It would impede governmental authority and disrupt the procurement process.

Finally, as a matter of consistency, the position should be designated as inherently governmental, just as it is in other parts of the inventory.

Assistant Secretary for Public and Indian Housing A-76/FAIR Act Inventory:

D000 Administrative Support

The primary function of the PIH Administrative Support (AS) person is to support the staff by performing a variety of administrative and technical support functions and duties that are important to the work of the organization. One of the main duties of the AS is the maintenance of the Time and Attendance records, as well as other sensitive personnel information. The AS works closely with and/ communicates with key Departmental staff, executives of other Federal agencies, members of congress, and executives from public housing authorities. S/he handles all correspondence, such as acknowledgment letters, requests for additional information and transmittal memorandum, all containing references, dates and citations, which require researching and extracting information from files, records and regulations.

In accordance with Circular A-76 (see Appendix 2, paragraph (G)(3) of OMB Circular No. A-76 Revised Supplemental Handbook), the definition of this activity as a commercial activity violates the precedent established with this inventory. The activities under Function Code D000 are assigned a reason code of I (Inherently Governmental) at other places in the inventory (compare Sequence Number 403, et al to 1969, et al.). Therefore, as a matter of consistency and for reason of established precedent, all activities with Function code D000 should be designated as Inherently Governmental.

Assistant Secretary for Public and Indian Housing A-76/FAIR Act Inventory:

L200 Grants Monitoring and Evaluation

In accordance with Circular A-76 (see Appendix 2, paragraph (G)(3) of OMB Circular No. A-76 Revised Supplemental Handbook), the definition of this activity as a commercial activity violates the precedent established with this inventory. The activities under Function Code L200 are assigned a reason code of I (Inherently Governmental) at other places in the inventory. In one instance, a group of 45 employees performing this function are considered Inherently governmental, while another group of 32 employees performing this function are considered commercial (compare Sequence Numbers 2115 and 2019). As a matter of consistency and for reason of established precedent, all activities with Function code L200 should be designated as Inherently Governmental.

Assistant Secretary for Public and Indian Housing A-76/FAIR Act Inventory:

T804 Architect-Engineering

Description of duties and relation to inherently governmental standards for

for T804 Architect-Engineering

HUD design professionals categorized as “Architect-Engineering” include architects, engineers, cost analysts, and construction analysts. These all are primarily concerned with monitoring and compliance-assurance activities that involve the application and interpretation of HUD statutes, regulations, handbooks, guidelines, and directives. The focus of these positions is to serve the taxpayers by protecting the public housing real estate assets against fraud, waste, and abuse, and to help assure an adequate supply of safe, affordable housing.

Architect-Engineering duties include:

a. Acquiring and analyzing facts and utilizing sound judgment in applying legal and technical standards to these facts;

b. Analyzing the pertinent regulations;

c. Providing oversight and technical assistance to Public Housing Agencies (PHAs) for the planning, design, construction and maintenance of new and existing public housing dwelling units using public housing grant funds;

d. Determining whether the PHA’s practices comply with the regulations and HUD Handbooks and guidelines;

e. Reviewing environmental studies;

f. Recommending appropriate actions to correct noncompliance;

g. Monitoring subsequent PHA activities to ensure the prescribed corrective steps have been taken;

h. Writing review reports summarizing all findings and recommendations.

i. Assembling data and administrative records for administrative hearings, including those before Administrative Law Judges or Federal Courts;

j. Recommending debarment of program participants; and

k. Numerous other compliance and monitoring tasks.

Architect-Engineers also perform the following duties:

a. Answering Congressional Inquiries;

b. Responding to requests under the Freedom of Information Act;

c. Analyzing the requirements of construction, processing procedures, escrow procedures, and all other issues related to the physical asset;

d. Advising and educating PHAs, contractors, and others concerning HUD standards and requirements for physical assets;

e. Answering heavy volumes of technical questions in telephone and electronic mail communications from PHAs, contractors, tenants, local officials and the general public;

f. Developing creative approaches to present HUD programs to individuals and groups from diverse backgrounds, often in the context of highly sensitive and controversial issues; and

g. Communicating effectively, orally and in writing, with HUD clients, local government officials, citizen groups, counseling agencies, attorneys, and the public at large on a wide variety of matters; and,

The above-described multiple duties of the Architect-Engineer do not stand alone, but must be integrated to form the basis for a decision. Merging all of these compliance, monitoring, and oversight functions may reveal conflicts with government directives or regulations. The function of forming decisions, merging technical data, resolving conflicts, or finding them irresolvable, is an integral part of protecting public housing assets. If not done properly, the result can be the commitment of grant funds where there should be none, or the deterioration, misuse, or other degradation of the physical asset. This not only adversely affects the public housing assets; it also adversely affects families, neighborhoods and communities.

Employees who perform duties within Function Code T804 should be classified as inherently governmental under the standard identified in OFPP Policy Letter 92-1. Their work requires the interpretation and execution of the laws of the United States.

The Architect-Engineers who perform these functions under T804 bind the United States to take actions by contract, policy, regulation and authorization (through, for example, Capital Funds, HOPE VI funds, or Replacement Housing Factor funds) under the several Public Housing programs. Their duties include the review and recommendation for approval of funding obligations as well as for the recapture of unused or improperly used program funds. These activities require the exercise of a high degree of judgment and discretion involving monetary transactions and entitlements. Therefore, they are inherently governmental. By defining this function as inherently governmental, the agency will guarantee that any final agency action complies with the laws and policies of the United States. Additionally, this will ensure that the decisions performed by these employees reflect the independent conclusions of agency officials.

At the Field Office level, the employees who perform these functions are not “back office” employees who only process review construction documents. Rather, they are an intrinsic part of the oversight and monitoring process by which the Department ensures and enforces compliance with its regulations—programmatic as well as financial.

Although it may be argued that Architect-engineering contractors or consultants could provide technical assistance to PHAs in the area of planning, design, and construction, the best interests of the public housing resident and the taxpayers would not be served by this arrangement. Private companies, by their nature, are profit motivated and cannot be viewed as independent third parties. For example, private consultants may advise a PHA that a project needs to be done at a certain time, with a particular level of effort, and state that it is sufficiently complex as to require on-site architectural or engineering services. Thus, the total project cost (as the architect-engineer’s profit is a percentage of the total project cost) significantly increases. This results in an inefficient use of government funds that hurts public housing residents by reducing the total number of projects that the PHA can accomplish with their limited funds.

Finally, the employees who perform these functions have access to highly sensitive competitive procurement information. During monitoring reviews, the Architect-Engineers evaluate all facets of the housing authorities’ construction activities, including compliance with their Procurement Policies and contracts. These activities necessitate the use of judgment and discretion with regard to monetary transactions and entitlements. Access by a non-federal employee would compromise the integrity of future competitions, contracts and procurement actions and would impede the government’s ability to conduct adequate oversight of recipients of Federal funds.

Conclusion: T804 Architect-Engineering

Assistant Secretary for Community and Planning Development

D000 Administrative Support

The primary function of the CPD Administrative Support (AS) person is to support the staff by performing a variety of administrative and technical support functions and duties that are important to the work of the organization. One of the main duties of the AS is the maintenance of the Time and Attendance records, as well as other sensitive personnel information. The AS works closely with and communicates with key Departmental staff, executives of other Federal agencies, members of congress, and executives from public housing authorities. S/he handles all correspondence, such as acknowledgment letters, requests for additional information and transmittal memorandum, all containing references, dates and citations, which require researching and extracting information from files, records and regulations.

In accordance with Circular A-76 (see Appendix 2, paragraph G(3) of OMB Circular No. A-76 Revised Supplemental Handbook), the definition of this activity as a commercial activity violates the precedent established with this inventory. The activities under Function Code D000 are assigned a reason code of I (Inherently Governmental) at other places in the inventory (compare Sequence Number 403, et al to 249, et al). Therefore, as a matter of consistency and for reason of established precedent, all activities with Function code D000 should be designated as Inherently Governmental.

Assistant Secretary for Field Policy and Management

D000 Administrative Support

The primary function of the FPM Administrative Support (AS) person is to support the staff by performing a variety of administrative and technical support functions and duties that are important to the work of the organization. One of the main duties of the AS is the maintenance of the Time and Attendance records, as well as other sensitive personnel information. The AS works closely with and communicates with key Departmental staff, executives of other Federal agencies, members of congress, and executives from public housing authorities. S/he handles all correspondence, such as acknowledgment letters, requests for additional information and transmittal memorandum, all containing references, dates and citations, which require researching and extracting information from files, records and regulations.

In accordance with Circular A-76 (see Appendix 2, paragraph G(3) of OMB Circular No. A-76 Revised Supplemental Handbook), the definition of this activity as a commercial activity violates the precedent established with this inventory. The activities under Function Code D000 are assigned a reason code of I (Inherently Governmental) at other places in the inventory (compare Sequence Number 403, et al to 562, et al). Therefore, as a matter of consistency and for reason of established precedent, all activities with Function code D000 should be designated as Inherently Governmental.

Assistant Secretary for Field Policy and Management

L200 Grants Monitoring and Evaluation

In accordance with Circular A-76 (see Appendix 2, paragraph (G)(3) of OMB Circular No. A-76 Revised Supplemental Handbook), the definition of this activity as a commercial activity violates the precedent established with this inventory. The activities under Function Code L200 are assigned a reason code of I (Inherently Governmental) at other places in the inventory (compare Sequence Numbers 2115 and 110). As a matter of consistency and for reason of established precedent, all activities with Function code L200 should be designated as Inherently Governmental.
Office of General Counsel

D000 Administrative Support

The primary function of the OGC Administrative Support (AS) person is to support the staff by performing a variety of administrative and technical support functions and duties that are important to the work of the organization. One of the main duties of the AS is the maintenance of the Time and Attendance records, as well as other sensitive personnel information. The AS works closely with and communicates with key Departmental staff, executives of other Federal agencies, members of congress, and executives from public housing authorities. S/he handles all correspondence, such as acknowledgment letters, requests for additional information and transmittal memorandum, all containing references, dates and citations, which require researching and extracting information from files, records and regulations.

In accordance with Circular A-76 (see Appendix 2, paragraph G(3) of OMB Circular No. A-76 Revised Supplemental Handbook), the definition of this activity as a commercial activity violates the precedent established with this inventory. The activities under Function Code D000 are assigned a reason code of I (Inherently Governmental) at other places in the inventory (compare Sequence Number 403, et al to 1713, et al). Therefore, as a matter of consistency and for reason of established precedent, all activities with Function code D000 should be designated as Inherently Governmental.

Assistant Secretary for Administration

L200 Grants Monitoring and Evaluation

In accordance with Circular A-76 (see Appendix 2, paragraph (G)(3) of OMB Circular No. A-76 Revised Supplemental Handbook), the definition of this activity as a commercial activity violates the precedent established with this inventory. The activities under Function Code L200 are assigned a reason code of I (Inherently Governmental) at other places in the inventory (compare Sequence Numbers 2115 and 110). As a matter of consistency and for reason of established precedent, all activities with Function code L200 should be designated as Inherently Governmental.

Chief Financial Officer

C401 Financial Analyst

In accordance with Circular A-76 (see Appendix 2, paragraph G(3) of OMB Circular No. A-76 Revised Supplemental Handbook), the definition of this activity as a commercial activity violates the precedent established with this inventory. The activities under Function Code C401 are assigned a reason code of I (Inherently Governmental) at other places in the inventory (compare Sequence Number 166 to 173). Therefore, as a matter of consistency and for reason of established precedent, all activities with Function code C401 should be designated as Inherently Governmental.