Implementing an Asset Management Approach to PHA Planning & Operations: The “New Normal”:

1. Implementing an Asset Management Approach to PHA Planning & Operations: The “New Normal”: MDStrum Housing Services, Inc. Indianapolis, IN June 7, 2010

2. Effective Planning for Managing the PHA’s Assets • New operating reality can be viewed as the asset mgmt approach to managing PHA operations: • Physical resources • The Properties • Equipment • Human resources • Financial resources

3. New Operating Reality • Central to this precept is the need to re-think: • Organizational structure • Decentralized structure vs. traditional centralized structure • Defining the Work flow • Bottom-up vs. Top-down • Business and Management approach: • Requires changes to way PHA- • Conducts its administrative affairs • i.e., “asset management approach” • Delivers housing mgmt services • i.e., project based management & maintenance

4. What is Asset Management ? • There are so many different things that can be defined as “assets”, thus there are so many different meanings of “asset management” • It often depends on what type of asset is involved.

5. Defining “Asset Management” (vs. asset-based mgmt) • Asset Management is a term getting a lot of press recently. • Implies many things to many people; • No industry standard for application • There are, however, some implied basic concepts:

6. Asset Mgmt- Basic Concepts • In “asset management”… • Business goals drive decisions regarding use and care of “assets” • E.g., pvt. Mgmt of public housing stock v. implementing asset mgmt with PHA staff • Asset strategy is determined by operational considerations • staffing requirements, financial limitations, competitive position of properties • Maintenance and reliability are means to a defined goal, not an end in themselves • E.g., end-game is not a “good maintenance program” but rather a good maintenance program that provides competitive properties • Intent is to optimizeall resources • Physical, financial, human

7. A.M. Has been Defined as… • …a global management process through which one consistently makes and executes the highest value decisions about the use and care of the assets(ii)

8. What is Asset Management ? • Asset management is a broad term (1). • It can be defined as a process that guides the gaining of assets, along with their use (and disposal) in order to make the most of the assets and their potential throughout the life of the assets. • While doing this, it also manages and maintains any costs and risks associated with the assets. • It is not something you can “buy”, but rather a discipline you must follow in order to maintain your assets.

9. What is Asset Management ? • In the broadest construct, “Asset management” can be thought of as the set of business practices that join financial, human and inventory (e.g., properties and equipment) functions to support life cycle management and strategic decision making for the targeted business environment. • Assets include all elements that are found in the typical business (i.e., PHA) environment.

10. The Asset Management System Regardless of the form or nature of the “assets”, there are many similar things that your asset manager system should entail, and in the context of the PHA we should plan to: • 1. Optimize asset use(s) and manage all related maintenance/cost efforts involved by making assets as accurate, reliable, and efficient as possible. • Example: Deployment of human resources including contracted services • 2. Reduce the demand for new assets and thus save money by using demand management techniques and maintaining current assets. • Example: Plans for recurring preventive maintenance of the equipment and systems (e.g. HVAC) • 3. Use a form of asset tracking: know where the asset is at all times, how much the asset is worth, and how much the asset cost you to begin with. • Example: Systems for periodic review of the performance of assets (e.g. Rent collection, budget planning & management)

11. The Asset Management System • 4. Always try to achieve greater value for money through evaluating the asset options; i.e., the cost of maintaining, producing, the use of it, etc. • Example: Establishing marketability; Conducting Physical Needs Assessments • 5. Always provide for a report on the value of the assets, along with any costs involved in maintaining the assets. • Example: Producing monthly management and financial reports to assess the continuing viability of the asset(s)

12. What is Asset Based Management (ABM)? Asset Based Management is… ..the theory in property managementrequiring each individual property to act as a self contained entity responsible for managing all aspect of operations including Project-Specific • Marketing • Leasing • Resident Services • Routine and Preventative Maintenance • Lease Enforcement • Protective Services • Focuses on Operation & Management of Project • Day-to-Day Responsibilities & Decision-Making at Project Level— • not Central Office • Addressed Project Needs With Project Resources

13. ABM ABM = PBM + PBB + PBA PHA-Wide Policy & Direction Long-Term Capital & Administrative Planning Property Management Performance Review of Entity-wide Financial Information Long-Term Viability of Properties Risk Management Property Repositioning & Replacement 13

14. What is Asset Based Management ? • The goal of Asset Based Management is to create a property which operates in the black while at the same time is responsive to the needs of its customers by delivering quality service and maintaining an attractive property which effectively competes on the market with similar properties.

15. PHA – Asset Based Management Definitions • 24 CFR 990.115: • Asset Based Management “is a management model that emphasizes project (property) based management, as well as long term strategic planning.” • Project Based Management “is the provision of property management services that is tailored to the unique needs of each property, given the resources available to that property.” • Project Based Budgeting is a list of all planned expenses for a particular project grouping. • Project “means each PHA project under an ACC to which the operating fund is applicable”. • However, under asset management, projects may be identified under the ACC or may be a reasonable grouping or portions of a project or projects under the ACC.

16. PHAs & Asset Based Management • 2oth C PHA Model: largely organized along the traditional “centralized bureaucracy” • 21st C PHA Model: requires transition to a decentralized agency with a “program (e.g. Capital Fund/HCV);property/AMP; and performance budget system.” • budgets are still line item and must flow into the existing HUD financial data schedules • PHA “decisions” must reflect what is in the best interest of the AMP (see PIH 2007-17)

17. ABM…Applicability • All PHAs • Project-Based Budgeting & Accounting • Small PHAs (Less Than 250 PH Units) • Single AMPs • Multiple AMPs • Large PHAs (250+ PH Units) • Multiple AMPs • Decliners Accelerate AM Implementation for Stop-Loss

18. Applicability- cont’d • PBB & PBARequired for All PHAs • FYBs 7/1/07 & Later • PBM & AM Required FY 11 • PHAs With 250 or More PH Units • Accelerate AM Implementation for Stop Loss • PBM & AM Optional • PHAs With Less Than 250 PH Units & 1 AMP • Elect AM Implementation for Stop Loss Incentive

19. Asset Management Asset Management (AM) Project-Based Management (PBM) Project-Based Accounting (PBA) Project-Based Budgeting (PBB) 19

20. Typical Transition Steps • Creation of Project Groupings and Asset Management Plans for each property/grouping • Creation of an Agency Budget tied to individual Project Groupings and Program and Performance Budgets • Self Evaluation employing S.W.O.T. • Development of an Agency Strategic Plan • Assessment & Marketing Studies for Project Groups • Implementation/confirmation of Asset Based Management • Project based management • Pvt mgt or proj-based PHA mgmt. • Site based waiting lists • Project based budgeting • Project based accounting

21. Agency Budgets and Project Groupings Program and Performance Budgets • PHAs developed an overall Agency wide Budget based on the use of a Program/ Performance Model • Within that Budget are separate budgets for each project grouping detailing annual operations • Agency Central Office Cost Centers budgets (COCC) will be financed throughallowable management feesandfee for service charges to the appropriate project groupings or program based on use of the cost center. • Asset mgt fee • Proj-mgt fee • Bookkeeping fee • Can be other income streams from non-HUD sources

22. Performance Budgets… • Overarching financial goal is for the COCC to be viablebased upon fees that HUD allows to be chgd to the AMPs • If PHA cannot live w/in the allowable fees there must be a “plan to adjust” • PHA cannot “just spread the cost” • E.g., in-house legal staff • Attorneys must establish an actual rate that will be chgd to an AMP they work on and only when they perform work for the AMP • Skilled Trades, such as electrician— • If the AMP does not use their services the AMP cannot be charged a portion of the salary

23. Creating A Strategic Plan Where You need to be Mission and Mandates Structure & Systems Communications Programs & Services People & Skills Budget Support PHA Vision, Mission & Goals Where You Are Mission and Mandates Structure & Systems Communications Programs & Services People & Skills Budget Support How to get there Strategic Facilities Plan IT & HR Plans Communications Hiring & Training Restructuring & Reengineering Budget Allocations Strategy Implementation Strategy Formulation

24. Strategic Planning for Improved and Cost Effective Operations • Major Considerations in defining the Plan-Forward • Redefining the HA’s Mission: • “Who” are we in the context of a 21st C. housing provider? • Public housing caretakers? • Local affordable housing developer? • Entrepreneurial PHA? • “What” does our local community need us to be? • Emergency housing? • Homeless or HOPWA provider? • “Where” do we best fit in when assessing the range of other local housing providers?

25. Strategic Planning for Improved and Cost Effective Operations • Major Elements for defining the Plan-Forward • Resource Identification & Resource Acquisition • What are our traditional income sources? • How reliable are they? • How much and what kind of “new” income is needed? • Potential sources? (grants, entrepreneurial activity, development partners, sell existing assets, other?) • Capital Fund (formula & competitive-ARRA) • Replacement Housing Factor (RHF) • CDBG, NSP, HOME, LIHTC • Foundations, Pvt. Financing • Duration? (start-up, gap, ongoing)

26. Strategic Planning… • What are my human resource needs? • Can I rely on existing personnel to meet our needs/requirements? • Can we/have we successfully train our 20th C workforce to become “asset managers” with new and different duties: • E.g., Budget development/budget mgt, procurement, maintenance supervision, capital improvements, etc. • Must we identify and acquire a “different kind” of workforcee.g., IREM-certified property managers

27. Strategic Planning… • Major Elements for defining the Plan-Forward • Building PHA capacity to Establish and Maintain “Asset-Based Mgt” • MIS/IT: Improving upon existing or acquiring new IT system to accommodate project-based: • Budgeting, Accounting, Maintenance, Waiting Lists, HUD-required reporting data • Staff: Defining skill sets required; train-up? Or hire “ready to go”? • Mission Critical Plans & Systems: • HR: recruitment, retention, evaluation, personal accountability, effective job descriptions & corresponding performance appraisal system, • Financial Mgmt: timely & accurate record-keeping, reporting, analysis, financial adjustments, supporting documentation, GAAP, audits, operational adjustments • Compliance Monitoring: “minding the shop” w/spot audits, internal/external customer feedback, regular meetings and pointed questions

28. Strategic Planning… • Major Elements for defining the Plan-Forward • Achieving Broad Support & Mission-Critical Input • Board training & board outreach • Staff training • Resident training & resident outreach • Partner briefings-partner input • Local gov’t • Area/adjacent businesses • Civic organizations • Human service providers • Development partners • Financing sources

29. Periodic Evaluation • In order for a PHA to successfully maintain an Asset Based Approach to its property and organizational operations, there must be periodic self-evaluations of the current capacity of the organization (S.W.O.T.) to better define the current or emerging needs. • A scan of the internal and external environment is an important part of the strategic planning process. • Environmental factors internal to the organization can usually be classified as: • strengths (S); • weaknesses (W), • and those external to the organization can be classified as: • opportunities (O) or • threats (T).

30. The SWOT Analysis • A strategic analysis of the environment is referred to as a SWOT analysis. • The SWOT analysis provides information that is helpful in matching the organization ‘s resources and capabilities to the competitive environment in which it operates. • As such, executing the SWOT analysis is instrumental in strategy formulation and selection. • The following diagram shows how a SWOT analysis fits into an environmental scan:

31. The SWOT Framework SWOT Analysis Framework Environmental Scan /\ Internal Analysis External Analysis / \ / \ Strengths Opportunities Weaknesses Threats | SWOT Matrix

32. Planned Outcomes of a PHA Strategic Plan • Comprehensive • Cuts across departments of the PHA • Considers all factors by dept. (e.g., human, financial, technological) • Incorporates • Outcome/conclusions from integrated physical needs assessment to include: • Review of prior PNAs/conclusions • Energy audits • Environmental assessments • Maintenance reports • Onsite review of current physical condition of property

33. Ten-Step Strategic Planning Process* • Initiate and agree upon a strategic planning process. • Who will lead? Participate? (?) • Logistics • Scope: internal at first? involve others right away? Internal only.? • Identify organizational mandates. • What are the rules and regulations? • What do we know we absolutely have to do? • Review/revise organizational mission and values. * Note: This process is discussed in detail in the following book: Bryson, JM. Strategic Planning for Public and Nonprofit Organizations. Jossey-Bass, 1995.

34. 10 Step Process- cont’d 4. Assess the organization’s external and internal environments to identify strengths, weaknesses, opportunities and threats. • Internal assessment with all Agency personnel and contractors? • External assessment with other systems with which this system interacts • Customers, families, advocates and any other stakeholders 5. Identify the strategic issues facing the organization. • How do we capitalize on strengths and opportunities? • How do we resolve weaknesses and mitigate threats? • What forces are driving these issues? What are the barriers?

35. 10 Step Process- cont’d • Formulate specific-strategies to manage or remediate “the” issues, such as. • Workforce w/out basic skill sets or background to succeed at asset mgmt (i.e., PBB, PBA, procurement, construction mgmt) • GI/GO: “bad data” in the MIS/IT system • Deficit-spending • Review and adopt the (draft) strategic plan or plans. • Internal review with all Agency personnel and contractors • External review with other systems with which this system interacts • E.g., pvt. Property mgmt companies • Resident families, vendors, advocates and any other stakeholders • Establish an effective organizational vision using the information gathered.

36. 10 Step Process- cont’d 9. Develop an effective implementation process. • How to operationalize these strategies? • i.e., major tasks & related sub-tasks • Responsible person(s) • Start/end dates • Resources required • Forms of confirmation • New programs or redesign of existing programs and contract expectations? • Timetable for achieving implementation • What resources do we need? • Human • Financial • Technological

37. 10 Step Process- cont’d 10. Reassess strategies and the strategic planning process. • How do we know if our strategies are working? • How do we measure our performance at implementing the strategies? • How do we continually revisit the plan to ensure that it remains a living, working document?