Mr. FLOOD. Your budget proposes a cut of over $14 million for community development corporations. How many of these would go out of existence if your budget were approved?

MS. OLIVAREZ. OED currently anticipates that as many as six CDCs will have their OED support discontinued during fiscal year 1978 and fiscal year 1979. These anticipated discontinuations of funding are based, however, on evaluations of CDC performance and not on the availability of funding, and would occur even if the OED budget were not cut by $14 million. The proposed cut will severely restrict the amount of money available for venture capital grants to CDCs in fiscal year 1979, but will not force the termination of any CDCs where such action is not merited by performance evaluations.

Mr. FLOOD. Do you have any concrete evidence that this community development program is not working effectively and should, therefore, be cut back substantially? MS. OLIVAREZ. We have substantial financial data and quantifiable measures of community benefits that indicate that only 16 of the 36 CDCs beyond the planning stage have the capacity to develop viable business ventures and produce significant benefits to their constituents. Of the 20 remaining CDCs, 14 are in a transitional category either because they have not been in operation long enough to develop a track record or have sufficient program deficiencies to leave their ultimate potential in doubt. Six have such severe management and program deficiencies as to warrant discontinuation of funding unless a dramatic turn-around occurs. These findings warrant a cut-back in funding levels, since the capacity of a large number of CDCs to effectively absorb venture capital at this stage is limited.

Mr. FLOOD. Do you have any evaluation reports that support your budget cutback proposal?

MS. OLIVAREZ. The cutback proposal is not based on a formal, out-side third-party evaluation. Nevertheless there is ample evidence, in terms of measurable program results, business financial reports, and staff assessments of CDC management and organizational capacities to warrant a retrenchment in CDC funding levels at this stage.

Mr. FLOOD. How did you compute the figure of $21 million for community development corporations in 1979?

MS. OLIVAREZ. The fiscal year 1979 funding plan of $21 million for CDCs is based on the refunding of the strongest CDCs for two years to cover their general administrative and program development costs and the refunding of the other CDCs for one year to cover general administrative and program development costs, with the exception of a few very weak CDC's. It will also provide approximately $4 million in new venture capital for CDCs developing viable business venture proposals. The CDCs will also have available for use during fiscal year 1979 unexpended balances remaining from prior funding periods (for example, over $15 million in new venture funds will be obligated by OED in fiscal year 1978) and will make maximum efforts to mobilize outside sources of venture capital. It is CSA's position that the total of $21 million will provide an adequate administrative and program funding level for those CDCs with the capacity to effectively utilize the funds.

Mr. STOKES. As a Member personally committed to the magnitude of the need to address urban community economic development in our older industrial areas, I am concerned with what has happened in Youngstown, Ohio, this past year and what it may bode for the future. Has CSA had a role in the Federal and local efforts to develop economic alternatives for Youngstown?

Ms. OLIVAREZ. In November 1977, ČSA made a small grant of $50,000 to the National Center for Economic Alternatives to study the Youngstown situation. The purpose of this grant was to assess the economic viability and feasibility of the Youngstown steel plant and develop alternative methods of ownership. This initiative is also directed towards questions of retaining the 5,000 direct jobs, stopping further deterioration of the city and preserving the economic and tax base of Youngstown.

Mr. O'BRIEN. On January 13, in Atlanta Director Olivarez stated that the Humphrey-Hawkins Bill will not guarantee jobs. She stated that she "personally feels the attitudinal barriers in the country are more of an obstacle." Does Ms. Olivarez feel it is the responsibility of CSA to help remove these obstacles?

MS. OLIVAREZ. What CSA does is communicate to Americans the horror of poverty and the desperation of many of the poor to escape from it. The self-help efforts of the millions of poor people involved in CSA programs is a testimony to their motivation to improve their lives and their economic circumstances, and CSA needs to do a better job of getting their story across to the public.

Mr. O'BRIEN. What role should CSA play in seeking to reduce unemployment? Ms. OLIVAREZ. CSA is assisting in the fight against unemployment through (1) direct employment services, (2) cooperation with other job-creating agencies, (3)

provision of outreach services, and (4) improvement of our role as advocate for the poor.

Mr. O'BRIEN. In a recent "legislative update" published by the National Center for Community Action, they make the following statement:

"The 1979 request for economic development is $25.8 million. The program was funded at $48.2 million for fiscal year 1978. The administration said the funding cut was due to poor evaluations of the program. According to budget documents, the Community Development Corporations have not significantly increased employment or prompted profitable private businesses."

Does the CSA agree with this assessment?

Ms. OLIVAREZ. This assessment is true of many CDCs, but a significant number have had a very positive impact on employment and venture profitability. This group of CDCs has assets of $93 million, a net worth of $38 million, and are generating $67 million in gross sales annually through their ventures. Their ventures, a majority of which have procured profits in the past two years, have created over 4,000 jobs directly, and these CDCs have created indirectly through their ventures, loans and loan guarantees, technical assistance, and other community efforts, another 8,000 jobs. The failure of the other CDCs to match this record justifies the cutback of the funding level for the program overall in fiscal year 1979, since the capacity of a large number of CDCs to effectively absorb venture capital at this stage is limited.

TRAINING AND TECHNICAL ASSISTANCE

Mr. FLOOD. Why are you requesting $3 million for "training and technical assistance?" How will you spend that money?

MS. OLIVAREZ. Training activities begun in 1978 will be expanded with particular emphasis on providing high quality training of CAA managers. Skills sharing arrangements which have proven successful in 1978 will be replicated in other states and areas. Pilot programs of decentralized "hands on" training and technical assistance will be tested as means for improving the abilities of new or low performance CAAs.

Technical assistance emphasis will be placed on low-cost arrangements between CAAS and other organizations which are designed to improve program quality beyond minimally acceptable levels.

ENERGY CONSERVATION

Mr. FLOOD. Of the $110 million that we appropriated for emergency energy conservation in fiscal 1977, you indicate on page 29 that $15 million of that was used for "demonstration". What do you mean by "demonstration"?

MS. OLIVAREZ. The Community Services Act of 1974 provides the authority to conduct research and demonstration projects, including those which further the overall mandate of the "Emergency Energy Conservation Services Program" authorized under Sec. 222(a)(12): to lessen the impact of the high cost of energy on lowincome individuals and families, including the elderly and the near poor, and to reduce individual and family energy consumption.

These include three major areas:

(1) Support of projects designed to provide conclusive information concerning the usefulness of a program or technique thought to have the potential of major impact on an identified special problem. The generation of persuasive knowledge is the central goal of such efforts; the major criterion of success is the utility of the knowledge produced in designing projects which meet carefully defined needs of the poor.

(2) Support of individual or series of projects which test specific program strategies or techniques to deal with special problems of povery. Such demonstrations are designed to (1) provide an experience base sufficient to determine the applicability of the strategy or technique; and (2) provide exposure for strategies and techniques to increase their acceptance and application by funding sources and policy-makers. (3) Support of projects which (1) directly intervene to change established institutions or (2) establish alternative institutions or mechanisms to serve poor people. Mr. FLOOD. For the record, provide a detailed breakdown of that $15 million on page 29.

MS. OLIVAREZ. The categorical breakdown is as follows:

Mr. STOKES. Last year Congress provided Special Crisis Intervention funds in the amount of $200 million to ease the burden of high energy costs and an abnormally severe winter on low income and elderly individuals. Since the move to provide a similar program during the winter months this year has been tied up by another issue, what has CSA done to respond to the critical needs created by the Midwest and Northeast blizzards during the past several weeks?

MS. OLIVAREZ. In response to the recent emergency weather conditions across the Nation and especially in the Midwest and the Northeast, CSA notified all of its Emergency Energy Conservation Program grantees of the following action: Without prior CSA approval, grantees would be allowed to transfer up to 40 percent of energy funds and up to 20 percent of all other Title II accounts to Crisis Intervention. Additionally, CSA would immediately review requests for added funding in the event the above stated flexibility is less than local need for Crisis Intervention monies.

On Friday, February 17, 1978, CSA once again confirmed its intention of assisting those states hardest struck by the recent severe weather crises by approving $600,000 in special emergency funds for the six-state New England area and $300,000 for the Midwest region. These funds are to be used to assist poor and nearpoor families cope with the extreme hardships inflicted by the recent massive blizzards.

LOCAL INITIATIVE

Mr. STOKES. For Fiscal '78 this Committee increased by $33 million, which in conference became $39 million, the basic funding of Community Action Agencies. Can you tell me how that increases is being distributed and what your plans would be for a $12 million fiscal 1979 increase?

Ms. OLIVAREZ. That money will be used for four things. The first is cost of living increases because the community action agencies that had static funding for the last few years were not able to give cost of living increases to their employees. We are also going to use it to strengthen administration of the community action agencies, to reduce the disparity of funding that exists right now, and to encourage innovation among the community action agencies. The $12 million in 1979 will be used to increase the smaller community action agencies, that is, basically those below $150,000 annually. The amount is necessary to increase all grantees to that number so they have a basic staff to function with.

Mr. STOKES. If additional local initiative funds, above the requested $381 million, were recommended by this Committee, how would your administration determine priorities and allocations for their distribution?

Ms. OLIVAREZ. Some would be used to further the objectives outlined in the previous answer. However, we would put much of it to more innovative uses. A system of "incentive awards" could be established, which would enable effective CAAs to apply for extra funds to carry out innovative programs which they feel would meet the particular problems of the communities they serve. We would, of course, be guided by the intent of the Congress as expressed in your Committee Report. Every percentage point in cost of living increases costs $3.8 million. It is estimated that $55 million would extend community action to cover the rest of the country.

MANAGEMENT IMPROVEMENT

Mr. FLOOD. What steps have you taken since becoming Director to increase the number and quality of Field Representatives in the regional offices?

MS. OLIVAREZ. Under the Regional Reorganization Plan, there will be an addition of 35 Field Representatives, an increase of 22 percent. The number of supervisors and administrative support staff will also be increased to improve CSA's Regional field operations capability.

The increase in the number of support personnel serves a dual purpose. It relieves Field Representatives of paperwork, enabling them to spend more time with grantees and also serves as a means of providing training to potential Field Representatives.

Position descriptions for the various levels of Field Representative have been standardized, with an emphasis on the importance of their responsibilities as CSA's presence in the field.

Skills development training will be initiated as soon as the reorganization of Regional Offices is complete.

Mr. EARLY. Who serves on the Board of the community action agencies?

MS. OLIVAREZ. As mandated by Section 211 of the EOA, each CAA is governed by a broad-based board of directors, composed of no more than fifty-one members. The board must be constituted so that one-third of the members are elected public officials, or their representatives and at least one-third are representatives of the poor in the area being served. The remainder are members of the private sector.

SENIORS PROGRAM

Mr. EARLY. What opportunities are provided for the elderly poor to develop and direct programs for their own benefit?

MS. OLIVAREZ. The Senior Opportunities and Services "Guidelines for Programming and Planning for the Elderly Poor," OEO Instruction 6170-1, “requires the development of separate boards for the conduct of SOS projects. Each project shall have a board composed of a majority of democratically selected older poor persons. Other members of the board may be individuals who have a history of advocacy for older low-income persons

Additionally, Community Action Agencies have followed the OEO Staff Instruction 6170-1 which states: "Since the elderly constitute suc;h a large minority of the poor they should be well represented on boards, as staff and volunteers, and in programming and all other aspects of multi-generated CAA activity."

Mr. EARLY. What other federal programs do you work with to serve the needs of older persons?

Ms. OLIVAREZ. We work principally with HEW's Administration on Aging, but there are several other HEW programs with which we work, including the Public Services Administration, the Social Security Administration and the National Institutes on Aging. We also maintain contact with Labor, Agriculture, Energy and the Veterans Administration concerning needs of the elderly.

Mr. EARLY. What specific problems of the low-income elderly do you address through your local projects that cannot be met by more general programs designed to serve multi-generational groups?

MS. OLIVAREZ. Multi-generational programs traditionally have not sufficiently recognized the specific needs of elderly poor for companionship, physical assistance and transportation.

Through CAAS, the elderly poor are provided with more direct access and entree into the entire range of social services. SOS Programs provide not only outreach, information and referral but also follow up to insure that older poor persons receive their entitlements.

PERSONNEL PRACTICES

Mr. FLOOD. Under what circumstances do you utilize consultants in your Agency? MS. OLIVAREZ. The employment of consultants is authorized by our Act (Section 602-b) for no more than 100 days at a rate not in excess of $100 per diem. Direct appointment is authorized through a formal agreement with CSC. Consultants are used sparingly to provide advice on programmatic issues and for short term projects. Mr. FLOOD. How many are you currently using?

MS. OLIVAREZ. Currently we are using three consultants.

Mr. FLOOD. For the record provide the amounts that you are budgeting for consultants in 1978 and 1979.

MS. OLIVAREZ. Using the authorized guidelines we are budgeting for three (3) consultants for a maximum of 100 days each at $100 per day or $30,000 per fiscal year. We do not anticipate increases in consultant requirements.

Mr. FLOOD. What is your current on-board strength?

Ms. OLIVAREZ. The total personnel on-board as of 2-16-78 was as follows:

Mr. FLOOD. What are the end of year employment ceilings for your Agency for 1978 and 1979, as approved by the Office of Management and Budget? Full time permanent positions.

MS. OLIVAREZ. The permanent ceiling at September 30, 1978 is 1,037. That declines to 1,015 at September 30, 1979.

Mr. FLOOD. What actions have you taken since becoming Director to improve the management of this Agency?

MS. OLIVAREZ. The approval of the total Agency organization structure on July 29, 1977 set the stage for the appointment of key personnel to carry out the new Administrations renewed commitment to the Nation's poor and their needs.

The selection of a Deputy Director and four Assistant Directors and four Associate Directors, to head the eight major offices of the Agency was accomplished, and program and procedural evaluations were undertaken.

Throughout the restructuring of the Agency the Civil Service Commission has provided guidance and expertise in the moulding of an organization which will be efficient and economical in performing the duties and mission of CSA, while at the same time protect the rights of each individual employee of the Agency.

The permanent position ceiling assigned to CSA at the end of 1979 is 1,015. The current organization plan provides for 378 positions in headquarters and 637 in the regions. This assignment of positions will represent an increase of 71 positions in the regions over the former 566 assigned under the previous structure. The increased positions will provide additional field representatives and, efforts will be directed towards increasing grantee monitoring, training and technical assistance, and evaluation capabilities.

To obtain increased employee standards of performance training programs have been developed which will ensure that CSA Field Representatives are well equipped to do their job in a correct manner. Training programs were also developed for CSA supervisors in the area of labor-management relations, these were conducted in the first quarter of 1978. The Director and Deputy Director are conducting periodic meetings with supervisors to provide a forum for discussing porblems anyone may have concerning the Agency.

Several new initiatives were begun in 1977 on monitoring, review and evaluation efforts with respect to the functioning of programs the Agency administers:

Major evaluations of CSA's national emphasis programs, such as community food and nutrition, rural housing, and State Economic Opportunity offices were begun. A guidance manual on how to meet the CSA standards of program effectiveness has been published and sent to all grantees.

A plan has been established so that all Community Action Agencies will be the subject of a Type II evaluation on a rotating basis.

Regional Offices will provide a regular program of training for grantees. CSA auditors will do a training and technical assistance session for auditors who serve Community Action Agencies. CSA Regional offices will also conduct Training and Technical Assistance for Community Action Agency boards, Executive Directors and selected staff members. These sessions will stress the responsibilities and duties these individuals have and various management models that have been successful in the past. There will also be training sessions conducted by the Regional offices in property management, personnel management and accounting systems. The effort will extend throughout 1978.

The agency is conducting an extensive study of its Regional offices. The new system will reduce the clerical work imposed on field representatives so that they can spend more time in the field with grantees. These changes will be implemented in 1978.

A high priority has been placed on monitoring efforts by reorganizing the formerly separate Inspection, Audit, Human Rights, and General Counsel Division into one office to serve as the enforcement arm of the Agency. This office, the Office of Legal Affairs and General Counsel, is now headed by a Presidentially appointed Assistant Director who has been delegated the responsibility for insuring that CSA law and