Following is a transcript of the Deputy Secretary’s webcast. It was taken from the “official” transcript which accompanies the recorded webcast on HUD@work and modified for readability. It should be noted that the transcript does not capture the audio word-for-word, and in preparing this for the web, it was found that in some cases words or whole sentences were completely missing. Caution should be exercised in interpreting any of the information presented.
Conversation with the Deputy Secretary
DEPUTY SECRETARY JONES:
Good afternoon to some and good morning to others. I want to welcome you to our latest version of these conversations. Let me say, I think it’s been a while since we’ve — since we’ve had this dialogue, so thank you for tuning in. Our aspiration is to do these every two weeks. We’ve had, I think, the last couple that have been postponed, I promise that will not be a habit. For scheduling and others reasons, that’s where we’ve ended up on this one. Thank you for tuning in. I’ve got lots to tell you and hopefully get to your questions as well.
Let me start with giving you some updates on where we are with respect to our transformation efforts. Recall, we announced in April the transformations we’re doing in both field policy and management and in multi-family. So let me give you some updates. Our progress continues on both multi-family housing and the field policy management side. Multi-family negotiations with the unions have just gotten underway, and they’re scheduled for the near future. Let me update you, though, son some pretty significant developments. All of the affected employees who were recently provided individual letters that basically identify your proposed reassignment locations, we wanted to make sure that we did those letters ourselves so that you would hear from us. I think you also probably heard earlier on from the unions, because we did have to let unions know when we announces these transformations, what we are doing there.
Concerning union negotiations on the field policy and management side, let me give you the status of those. The NFFE west coast negotiations have begun. They’re currently scheduled to resume the week of July 29. So that’s one piece. The NFFE negotiations covering the Flint field office were completed on the 12th of June. I appreciate the hard effort that went into this on behalf of the union and the management teams involved. My congratulations to you all. The AFGE negotiations covering all of the other offices — this is pretty big news here — wrapped up late last week on the 12th of July. I’ve said from the beginning of this process that this is a process that involves us making some tough choices, some tough decisions, and I remain committed to making this process as employee-sensitive as possible, as transparent as we could possibly get it. So I’m very pleased to talk a little bit about the AFGE agreement and to tell you some of the attributes we have within those agreements — or that agreement.
First thing I wanted to highlight is we will be considering employment preferences as it refers to the actual assignment locations. We also negotiated in this agreement a temporary negotiation of the policy to transition employees into their new duty stations. I’ll continue to keep giving you updates on the transformation efforts on our discussions with our union partners and on other discussions that we have as it relates to the transformation. What I want to say at this point, though, is thank you, thank you, thank you to the union participants and the management participants in the discussions that we have been having. We’re making progress. I want to continue that progress and continue that progress with speed. Our people, our employees need to know with certainty what is involved and we need to tell them as soon as possible. So getting these union conversations on and over with and getting agreements on how we’re going to take care of our people needs are most important. Thank you for the progress that has been made. Nobody should exhale. We need to keep engaging in these conversations and get the details all nailed down so we can let our folks know what the plans are, how this is going to impact our lives, et cetera. It’s been the number one request of people as I’ve traveled to various offices that are going to be directly impacted by these transformation efforts. People have been coming to me and saying, listen, I need to know as soon as possible where I’m going, when I need to be there, et cetera, and, so, it’s really important for our people that these conversations between union and management and among union and management folks take place and take place quickly and we quickly get out news to our folks what’s happened. So thank you for the progress so far. Let’s keep working hard on this stuff.
Let me give you a — an update on another topic that relates to our ODOC function and team. We recently announced we’re realigning the office of departmental operations and coordinations. The functions will be realigned primarily to the office of field policy and management, but there are some other program areas that are going to pick up responsibilities as well. I want to thank everyone that is actually involved in this process, the efforts that we’re making here, again, will help to reshape HUD into a smarter, more efficient agency, and it’s an effort that requires, just like all the other transformation efforts that we’ve talked about, coordination across numerous program areas. I want to particularly recognize and thank Inez Banks Dubose for the work that she and her entire team and the entire ODOC staff have been doing up to this point. They have been making very valuable and dedicated contributions to the department and the country for years. I want to thank them for that. We’re fortunate to have their expertise, their commitment, and we will continue to perform these functions. We are just realigning where they will be performed within the department. So thank you for that. Stay tuned. We’ll keep you posted on how that transformation goes.
Shared services. So we have — I think I talked to you about this maybe a year ago. It’s certainly been a while. But we have been exploring shared services as a strategy to be more efficient and more effective and to get things done in this pretty constrained budgetary environment for quite some time, and we have been looking at shared services as a strategy principally in two places, one on the human capital side. And, if you recall, we, last year — actually, January of this year — entered into an agreement with the Bureau of Public Debt whereby the Bureau of Public Debt was going to perform our hiring and posting functions, et cetera, for one big piece of HUD, and that’s our housing arena. That arrangement is going very, very well, and we look forward to actually rolling that out and expanding it to other parts of the department over the next 12 months or so, and I want you to stay tuned for that.
Another area where we have been looking at shared services as a strategy is in our financial information technology arena. When I arrived here, we were exploring replacing our information technology systems in the financial and accounting arena with another infrastructure to be provided by a private sector vendor. That journey, to be honest with you, was not going well when I arrived and did not, in my estimation, have the promise of really being turned around. So we went out — nevertheless, the need to actually upgrade our antiquated financial management systems remained and, so, we went out and explored the possibility of finding a shared services provider for the financial and accounting it systems as well.
You know the story with our I.T. systems. In total, we have 150-plus. We have systems that are arguably duplicitous. We have systems that have, in many cases, developed in silos. So we don’t have as much integration as we need and the ability to exchange information in the way a 21st century enterprise needs.
We have been putting band-aids on many systems and the financial accounting system is just one of them. We don’t have the budget to continue to manage our financial management infrastructure in the same sort of piecemeal repair approach that we have been following for a while. So we are looking for cost-effective, high-tech, continuously-improving solutions that can help us meet our current and future technology needs, particularly as it relates to something that everybody uses, which is our financial and accounting infrastructure. Thus, we are currently exploring the benefits of a shared services arrangement for our core financial services systems — that’s accounting, travel, procurement, H.R., Web TA.
I just mentioned shared services is something we’re exploring in reference to human capital. I want to remind you shared services is the way we currently run our payroll system. Every time we get paid, it’s because of a shared services agreement. The national finance center, which is part of the US Department of Agriculture, is our shared services payroll service provider, and they provide payroll support for not just us but thousands of government employees and a number of agencies. We’re in the very early stages of examining the benefits of utilizing shared services for human capital, and we’re engaging in serious, serious discussions and conversations and negotiations with respect to a shared services arrangement on the financial systems side. This will be a multi-year process, but, right now, it looks to me like it’s the most cost-effective and efficient way that we can continue to provide the kinds of financial management and accounting services that we will need now and well into the future. So I will keep you posted with respect to our conversations on the shared services piece when it comes to financial accounting as well as what we already have underway in the human capital arena. But I’m excited about the possibility of having a shared services arrangement in both places.
Let me now turn to another area, which is the defense of marriage act. You probably know that, recently, the Supreme Court struck section 3 of the defense of marriage act, which, up to that point, had prohibited federal recognition of same-sex marriages. The Supreme Court now provides equal treatment to all legally married couples in this country. This is a pretty historic decision. It also serves as a qualifying life event for some benefits as identified by OPM, meaning that married same-sex employees may be eligible to enroll their spouses and children immediately in our benefits.
Our human capital arena has already begun a series of communications on this subject, including an announcement on HUD at work of a special 60-day, open-enrollment period for employees in same-sex marriages. For many of you, this has been an extremely long time coming, and we will provide all of the support we can in getting your benefits updated. We’re going to work with you closely to ensure that your loved ones are protected under benefits allowed under this new policy. What I would ask is you please update your benefits right away.
I realize that, for some of you, you may be concerned about applying for the benefits. I want to ensure you — and I mean this in the deepest way — that the benefits information you provide is confidential, and our human capital folks will not release it to supervisors or other employees. I’d also like you to know that you’ve got my full support and the full support of all of us who are on the leadership team. I am proud that this form of discrimination has been struck and that we are taking another step forward towards ensuring that everyone is treated equally and fairly. So please reach out to the human capital arena. If you have questions about this, please look forward to notices and other information and other communications on this, but we want to make sure that, as quickly as we can possibly do it, that we take the steps that are now warranted under the Supreme Court decision.
At least lastly, for the intro parts of this, let me talk to you about sequestration. I promised you that I would give you an update — I should put it another way. I promised you I would give you an accounting of just how we’re doing with respect to our sequestration demands, and the demands are around how much money we have to save in order to comply with the president’s sequestration order which was given in early March — excuse me one second. Let me remind you of a couple of initial items. Remember that our budget as it relates to — well, let me step back even further.
Big picture. The sequestration order that was given in early March reduced the federal budget by about $85 billion over a 6-month period. HUD’s piece of that reduction was about 2.2 billion. Right? The overwhelming bulk of the $2.2 billion reduction that we had to take is coming from our programs, and we have been talking for some time about the huge risk to our clients and our partners and our customers that big reductions in appropriations poses over a six-month period. If you recall — so the $2.2 billion cut, a piece of that — the biggest piece of that comes from our programmatic area.
The other piece, though, comes from what we call the east side of the budget, which is basically people in contracts, for lack of better way of putting it. So, big picture… Our budget as it relates to the S&E side of the ledger is or was in 2012 $1.3 billion. So that’s $1.3 billion out of 40-plus billion. So for 2013, congress gave us that 1.3 billion, but, because of the furlough, reduced it by 5% over the course of the last six months of the fiscal year. What that means is we had to save $69.6 million. That was the reduction — or that is the reduction that we’ve got to come up with as it relates to the S&E side of the subject.
There are no options — or I should say we can’t opt out of that savings requirement. We have to reduce the budget by that much. Now, remember this, 83% of that S&E budget, that $1.3 billion, is people. It’s salaries and benefits. That’s 83% of the 1.3 billion. The remainder is what we would call, you know, the non-personnel stuff — training, contracts, travel, et cetera. Remember this, 140 million of that 1.3 billion budget is rent, utilities and security, which you just take off the table that you cannot cut.
Would I like to be in a position of being able to pay our rent payments on time? Yeah, I’d like to be there, but that’s not the reality. So we could not reduce that, so we had to take that off the table. Another factoid to remember in this conversation, is when sequestration hit, we were almost halfway through the year S&E budget, so we had to find the necessary savings based on what was remaining. So we estimated savings based on historical attrition rates. We froze hiring unless it was mission critical, et cetera, et cetera. We limited non-mission critical travel and training. We scaled back or eliminated a number of contracts — our accounting and financial statement services, data analysis, maintenance and cleaning services, et cetera — we had to just eliminate a lot of those.
The targeted savings of post-sequestration, let me tell you what we’ve come up with. Actually, I want to make sure — no. This is not — well, here’s what I will tell you that we’ve realized. There are two points that I wanted to highlight for you. One with was that, on the non-people side — let me put it to you that way — on the non-people side, we, back in March, cut training, we cut — let me just see if I can pull that up for you. I want to be precise. Give me one second. So — yeah, here we go. So let me tell you what we’ve done to produce the savings we need. So what we did back in March was we cut from contracts $7.8 million. We cut from travel $1.9 million. We cut where we could from utilities, et cetera, $1.9 million. We cut from furniture purchases $1.2 million. We cut from training $1.1 million. We cut from basic supplies, purchases, $507,000. And then there is a category we call presentation of things, we reduced everybody’s budget by $5,000. So what we did in March was basically reduced from the non-people side, right, from the non-salary and non-benefits side, we reduced everybody’s spending authority by $14.2 million. We just cut it because we could not afford not to do it in order to get to our number. So that’s what we did there. And if you remember what we were hoping to do to get to the remainder was take seven furlough days, save $4 million a day, as it relates to furlough days. Well, what I’ve asked — and that was a projection. Right? So what I asked people to do was, once we had the first furlough day, come back to me and tell me how much we really saved so I can come back to you and report to you. So I want to report that to you now.
After the first furlough day and after we got peoples’ pay slips in, people have come back to me and said we saved from the first furlough day $200,000 less than estimated. The truth is that’s not bad for an estimate. All right? We were $200,000 off of what we thought we would save, and the reason why is we actually realized fewer reductions on the benefits side than we originally estimated. We’ve also learned that — actually, as you think about the context within which we’re all working and living nowadays, we’ve also learned that the attrition rate that we assumed back in March that we would experience as a department is actually slightly lower than we originally estimated. So for these reasons, we have to search for additional savings.
We’re going to get those savings not from the people side. We’re going to get those savings from the non-personnel side. We need essentially about $2.2 million more in savings in order to hit our $69.6 million reduction that we need to hit on this side of the ledger. We’re going to get it from — we’ve got to do more in the area of contracts, more in the area of travel, more in the area of furniture, all of those non-people stuff, if you will, all those non-people savings, we’ve got to cut them even further.
Now, the implication of this is we have budgeted to do up to seven furlough days, right. And, so, right now, it looks to me we’re still on track to the seven furlough days. We’re going to need those seven furlough days in order to hit the savings that we were promising. So instead of the $4 million a day, we’re getting $3.8 million. — $3.8 million.
Let me break it down. The original projection is we would get to the $69.6 million in the following way — attrition plus hiring freeze, except for the exceptions we make, we were going to save 27.4 million. Furlough days, $4 million a day times 7, $28 million. And then the non-people stuff, the $14.2 million. That was the original strategy for how we were going to get to the 69.6 million.
Now that we know exactly what we saved from the first furlough day, we’ve had to make an adjustment. This is how we’re going to get to the 69.6. Attrition plus hiring freeze turns out, instead of 27.4 million, we actually get 26.7 million. Still a substantial chunk, but attrition, it turns out, is lower than what we were originally estimating. Not — again, it was an estimate, so to be a little bit off on that is not surprising and, frankly, we’re not too far off.
It was 26.7 million versus 27.4 million was the original prognostication. Furlough day savings, seven days at 4 million was 28 million. Now the revised projection is seven days at 3.8 million, which gets us 26.5 million.
So where we will make it up is in the following places — non-person, the contracts, the training, the travel, instead of the $14.2 million savings we were originally forecasting, we’re now going to get 16.4 million from there. So that’s how we’ll get to the $69.6 million. Again, the somewhat challenging news on this is it looks to me like we’re going to need all of our seven furlough days in order to hit the savings that we were — the savings that we’re trying to get. We’ll keep working on this. I’m going to keep working on this hard. If we can do less than seven days, we will. But it’s looking to me like I want to prepare all of us for the seven days.
Just a reminder, the remaining furlough days are Monday, July 22, Friday August 2, Friday August 16 and Friday August 30. Okay? Great. So I think, with that, a lot of information. I hope I haven’t gone too fast, and I’m happy for any follow-ups that you have.
But let me jump into your questions, because we have questions that I’d like to answer as well.
First question, why is the department still hiring people during sequestration? I thought we were only hiring in places where it was absolutely necessary.
That is a great question, and I really thank you for posing that question, because I think there is a fair amount of misinformation out there about this. We said from the very beginning, look, we’re going to place a hiring freeze with exceptions, right, and those exceptions would be we would continue to make critical hires because we can’t shut the department down during sequestration. We can’t do harm toward the mission. So we were going to make critical hires that we needed to continue to try to be competent and excellent with respect to our mission, but we wouldn’t do any more than that. That’s what we’ve done.
So let me give you some statistics so you will know the real story when it comes to hiring. I asked folks, I said, tell me, go back to 2012 and tell me how many people we hired from March of 2012 to September, the same period of se questions sequestration, so I can see if we’re really dramatically reducing our hiring. The answer is absolutely yes.
Here are the numbers, and I want you to have these numbers so that, when anybody comes to you and tells you that we’re not dramatically reducing hiring, you can tell them, here are the numbers. From March of 2012 through September of 2012, the department hired 367 employees. Right? So that’s a pretty significant pace there, 367 employees over a six-month period. That would be the equivalent of, you know, over 60-some a month, right. So get this — so I asked, how many people have we hired from March of this year until the end of June, right. So March, April, May, June, four months, all right? How many people have we hired in four months. Remember, last year, we were hiring on average over 60-some or just about 60-some a month from March through September. March, April, May, June of this year, total, we’ve only hired 54 people. That is a dramatic reduction and is exactly what we have to do under sequestration, and it is consistent with what we told you we would do. Hiring freeze with limited, limit exceptions, and that is what we’re doing, that is what we’ll have to continue to do.
I just gave you the numbers on the savings that we have to produce in sequestration. So we’ll have to continue to be rigorous and vigilant about limited — very limited hiring. That doesn’t mean no hiring, but, as you can tell, it means a dramatic reduction in hiring over our usual pace. That’s the only way we get through this.
But I want to make sure that this notion that people — some people are harboring that the department is continuing to hire as if we’re not in sequestration, the facts just do not bear that out. You’re armed with the facts now, spread the word, please.
Second question, why aren’t employees from the Office of the Inspector General and Ginnie Mae also being furloughed?
They’re September from the department’s appropriations, so I don’t have the ability to comingle their funds with ours. Otherwise, I would have.
I told you from the very beginning what we’re trying to do is treat HUD as one enterprise, to move moneys to the different places within the department to make sure that no place has to do more than any other place when it comes to furlough days and no place has to do less, right. So we agreed from the very beginning that we would move moneys around so we would do up to seven and no more than seven. The one challenge with that is Ginnie Mae and the I.G.’s appropriations are separate from HUD’s and don’t fall within the same bucket, so I can’t use any of their funds to offset any others. Do I wish it were different? Yes, but it’s not and it’s by statute and I don’t have any authority more than that.
Next question: are other remaining HUD field offices targeted for closure in the future transformation efforts?
So I won’t speculate about future transformation efforts when we have a plan that’s right that’s deliberated over, that is vetted, then we’ll share plans for future transformation efforts. We’re still, as you know, very much in the midst of these transformations efforts, trying to do them well and right and with the speed that our employees deserve so that we can get them some finality and certainty in their lives. So with respect to future transformation efforts, when we have plans that are ready for prime time, then we’ll bring them forward, and I appreciate you asking that. Keep asking. Definitely keep asking.
I will say on that, as you know, I’ve asked every part of the enterprise to look at their particular operations and to make the changes, to make the recommendations that are necessary for us to be efficient and effective in the 21st century and beyond. So everybody’s looking at their operations within an eye toward is my model sustainable? If not, what changes do I need to make.
Next question, could you provide a more specific time frame concerning the buy-out window and the anticipated date of separation for employees accepting the buy-out?
So my assumption is this is related to our two transformation efforts. Let me, at the outset, say that keep in mind that this is part of the discussions with the unions and, so, I don’t want to interfere or get ahead of that process, but the plans, all right, what we laid out was with respect to the field policy and management offices that we would be aspiring to offer buy-outs this fiscal year, with respect to the transformation efforts going on in the multi-family area, our anticipation is that our buy-out offers there, except for those people in the field policy management offices that are closing, will be in the next fiscal year. That’s the proposition on the table. That’s the plan. We have to conclude our conversations with the union before that’s finalized and, again, what I’m doing is pushing very hard for those conversations to be concluded with dispatch so that we know with certainty, so that you know with certainty what the actual plan is. So thank you for that question, too.
Next question: Recently, we were asked to respond to surveys such as the employee viewpoint survey. It states, feeling invested in where you work starts with feeling that you’re being heard, that your contribution to the organization is both recognized and valued. I don’t know of a single employee who feels that upper management even reads the responses. Can you respond to that?
Yes, I can. I read the responses and other people on the senior team read the responses as well and, so, I appreciate this kind of feedback. It reminds me of just how much work we have to do to make sure we are creating an environment here where everybody feels like they get a hearing. That doesn’t mean that we will always make the decisions that you would make, right, that I would always make the decision that you would make or vice versa, but no question, I want you to feel like you’re being heard. This questioner is telling me that he or she is not feeling that way, which tells me I’ve got more work to do. So I thank you for that reminder.
What is the latest update on integrating our core values into our daily work?
The initial speaker in the speaker series was canceled. The initial panel discussion was canceled. It appears nothing has happened with core values since the transformation since the 21st century changes were announced.
When can we expect more on core values?
So thank you for this question. The first thing I would do is just refer you to the piece that we have on the web site on core values which gives you an update on the work that we are continuing to do there. There was a panel discussion that I think that we were supposed to have on core values that was either last week or the week before last that we have postponed, not canceled, and I will take the blame for that. I believe it was postponed or canceled because of my travel schedule. We will get that back on and continue to update you on what we’re trying to do around the core values journey.
Let me just highlight, it is a journey. We are attempting to embed our core values at various places across the enterprise. We’re going to start with our leaders, and we’re going to start with incorporating the core values, responsibilities and charges into our senior leaders’ performance contracts, if you will. That’s where we’ll start. But we’ve got other plans, as well, and I will update you on — I’ll take that as a piece of homework for the next time we get together, as well as, as I say, I want to refer you to our web site on this topic as well. So thank you for that question.
It is a journey. It’s a journey, by the way, that has no perfection destination. It’s a journey that we need to do to get better and better and better, and I’m certainly going to be working hard to contribute to us taking that journey. We’ll make mistakes. We’ll have imperfections. But we’re certainly still pursuing core values across the board.
Next question: Is it anticipated HUD employees will have furlough days in FY 2014?
That is a great question. I don’t know the answer to that now. What I will tell you is that the president’s budget lists sequestration and, therefore, would lift the need for furlough days. So we are working hard to get the president’s budget passed and, so, that’s our focus. I will keep you posted.
The House and Senate have — committees, at least — have announced their respective budget marks for HUD. The House’s mark is brutal and is certainly a mark that is disfavored by us. The Senate’s mark is better and, so, we’re hoping to work hard on getting a compromise through that reflects for the Senate’s mark than the House’s mark. So that’s a great question. Keep asking questions. I’ll have better answers as we get further air long.
I think our time’s running out. So this looks like the last question that I can ask and answer now. My apologies for — I think there are some questions I’m leaving on the table. We will get to those questions in some form or fashion, we’ll follow up.
Last question: Headquarters claims that serious efforts will be made in management accountability and to improve HUD’s employee survey results of being the worst federal agency to work for. When will employees start seeing changes in the field offices?
Boy, there is a lot packed into this question, so thank you for it. Here’s what I’d tell you on that. We certainly aspire to be the best federal agency to work for. The agency with the most compelling mission, the agency that has its operations in tip-top shape, the agency that has strong core values that are utilized to make important decisions, the agency that has a strong succession planning enterprise in place, the agency that is welcoming to a diverse, strong talent pool, the agency that is managing its resources most efficiently. That is our aspiration.
We still have work to do on all of those. It is my hope that getting up every day and working on those opportunities or challenges or problems will be felt not just in headquarters but also in the field and that we will all embrace the opportunity and the call to work on this stuff, that we are all committed to the cause of making HUD, amongst other things, the best place to work in the federal government. So I believe that, if we all take on that calling, people, no matter where you are — field, headquarters, doesn’t matter — will feel this, it will enhance our pride, it will enhance our effectiveness and, yes, it will enhance scores on employees’ service as well.
Thank you for these questions. Thank you for all you do. Thank you for remaining professional in a pretty tough environment. Keep sending in your critique, your questions, et cetera. We’ll try to get you answers to all of those. I thank you on behalf of the senior leadership team and the people across the country for the work that you continue to do every day. Take care.