complished by either ratably reducing all states over the holdharmless level or through the use of discretionary funds. However, no agreement could be reached on what the effective holdharmless level actually should be. Even though the statutory formula specifically prescribed fiscal year 1975 as the hold-harmless level, the Appropriations Committees in fiscal year 1976, fiscal year 1977, and fiscal year 1978 had indicated in report language that all existing grantees should receive cost-of-living increases. In addition, the question of which States should receive a fiscal year 1978 cost-of-living increase was also an issue which could not be settled.

Members of the House Education and Labor Economic Opportunity Subcommittee did reach agreement on what they believed to be the correct application of the formula, the hold-harmless level, and cost-ofliving increases. In a letter to Secretary Califano dated November 30, 1977, the Subcommittee indicated that Headstart funds should be distributed in the following manner:

STEP ONE

Of the sums appropriated for fiscal year 1978, up to 2 percent will be withheld for allocation to the Territories. Up to 20 percent of the appropriation may then be reserved for discretionary funding. Of the remaining money, one-half is to be distributed on the basis of the relative number of children living with families below the poverty line in each State as compared to all the States; and one-half on the basis of the relative number of public assistance recipients in each State as compared to all the States-except that no State is to be allocated less than it received in fiscal year 1975.

STEP TWO

For those States whose fiscal year 1978 entitlements in Step One are less than their actual fiscal year 1977 allocation, funds from the Secretary's discretionary reserve are to be used to bring such States up to the level of their fiscal year 1977 allocations.

STEP THREE

Additional discretionary moneys are to be used to give every State a 6-percent cost-of-living increase. With respect to those States whose fiscal year 1978 entitlements exceed their fiscal year 1977 allocations, an amount equal to 6 percent of the fiscal year 1978 entitlement is to be added. With respect to all other States, an amount equal to 6 percent. of the fiscal year 1977 allocation is to be added to the fiscal year 1977 level.

The Senate authorizing committee did not indicate to HEW its concurrence with the suggested distribution formula. Although HEW indicated it was not in complete agreement with the House suggestion, HEW distributed the fiscal year 1978 Headstart funds according to the House suggestion.

The controversy over the Headstart distribution formula continues. The States which benefit from the hold-harmless support the continuation of a hold-harmless provision along with cost-of-living increases. There are many other States, however, which benefit from the actual formula and now realize that the hold-harmless prevents these States from receiving the expansion money they would if all funds were distributed under the formula only.

REPORT TO THE SENATE

SUBCOMMITTEE

ON

EMPLOYMENT, POVERTY AND MIGRATORY LABOR

FROM

Graciela (Grace) Olivarez
Director

COMMUNITY SERVICES ADMINISTRATION

Appendix A

On September 20, 1977, in response to the House Government Operations Committee Report "Major Reforms Needed in the Community Services Administration" (H. Rpt. 95-583), CSA Director Graciela (Grace) Olivarez observed

"Since assuming the duties as Director of the Community
Services Administration (CSA) on April 29, 1977, I have
been carefully reviewing and assessing the agency's renewed
commitment to the Nation's poor and their needs in the late
1970s and 1980s. Ours is a mission unique in the Federal
government, intricately interwoven with the patchwork array
of public, private, Federal, state and local attempts to
deal with poverty. I strongly believe effective, committed
leadership and direction are prerequisites to achieving the
goals of alleviating poverty.

Reviewing the operations of the agency, and its proper role at
this challenging time in our history has been a constructive
and edifying experience. As the Committee is no doubt aware,
this process began early in the Carter Administration when a
team from the White House was asked to undertake a review of
CSA for the President. The initial assessments and recommendations
of this team provided me, and the new management team I assembled,
with a good overview of the agency and the framework for a more
extensive and comprehensive look at its strengths and weaknesses.
Hand in hand with this assessment went a policy evaluation of the
needs of the poverty community and this Nation in addressing the
problems poverty currently presents. Both of these assessments
are continuing and both have already made important contributions
to our initial directions and decisions for improving CSA's day-
to-day effectiveness, as well as its overall impact in the poverty
community."

POLICY DIRECTIONS

In the past ten months the Community Services Administration has greatly improved its management, administration and program operations. The deficiencies at CSA cited in congressional reports have been corrected or are in the process of being remedied. Moreover, new, encouraging program initiatives have been undertaken.

The bleak history of the past several years surrounding CSA is now, for the most part, in the past. The present and future belongs to a new administration which is firmly committed to the Agency's mission of spearheading the war on poverty in America.

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This agency has begun to revitalize its research and demonstration capacity and is seeking the cooperation of other federal agencies in the commitment of resources to innovative demonstration programs addressing the needs of the poor. CSA has traditionally been the federal agency which has served as the national laboratory for innovative human service programs addressing the needs of the poor. Programs such as Headstart, Job Corps, Legal Services and Home Weatherization were tested and developed at CSA. CSA has renewed this emphasis on the development of innovative approaches to dealing with poverty problems and then "spinning off" workable programs to the appropriate agency or institution for sustained and expanded operation. The latest example of this approach is the weatherization program which, after being piloted at CSA, is being taken over by the new Department of Energy.

CSA is, by design, a small agency in federal terms. It is able to move with flexibility and imagination. As such, it has the need to mobilize external resources to bring them to bear on problems of poverty. The Agency has begun to move vigorously to make the various Executive Departments increasingly aware of their responsibilities to the poor. The Agency's Office of Policy, Planning and Evaluation's recently completed impact analysis of the "non metropolitan" Community Development Block grants of the Department of Housing and Urban Development is just one example of such action.

These findings can be used to help the Department better focus its available resources upon the needs of poor people in the areas served by these grants. The information has been shared with HUD and other interested organizations.

The agency has also recognized the importance of increased participation by the poverty community in decisions affecting their lives and communities. To emphasize this commitment and to take the first step in this ongoing process, the Agency recently held a series of ten public policy forums, one in each Federal Region. Nearly seven hundred individuals participated in these forums and most were poor people rather than representatives of poverty organizations. The testimony is now being analyzed and a report to the President, Congress and the public is being prepared for completion by March 31, 1978.

The priorities identified and the concerns expressed by the poor themselves will serve as the basis for agency policy and directions in the future.

IMPROVED MANAGEMENT

The most consistent criticism of the CSA in recent years has centered around the agency's ability to efficiently and effectively direct and manage the resources available to it for combatting poverty. A primary concern of Congress has been the agency's repeated failure to implement an adequate internal reorganization and higher standards of performance.

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REORGANIZATION

When Graciela (Grace) Olivarez assumed the position of Director in April 1977, she discovered that a proposed organization plan, dated July 1976, had been approved by the Office of Management and Budget, as was required by the Community Services Act of 1974. After review of the structure, it was determined that further clarification was necessary to reflect, from a management standpoint, the priorities of the new Administration. Director Olivarez ordered an immediate evaluation and review of the existing structure and functions of the agency, separated into two components: Headquarters functions and Regional Office functions.

In order to review these matters, a detailed assessment process was begun which included evaluations through personal interviews with every employee in the Regional Offices and most in Headquarters Offices. As a result, starting on July 29, 1977, a new series of agency instructions began to be issued, setting forth the new Headquarters realignments in terms of structure and function. This included the detailed, new organization charts. As a result, the Headquarters reorganization is in place structurally. A detailed plan for the Regional Offices was completed in the Fall of 1977.

The highlights of what the new CSA organization provides are as follows:

Clarifies the role of the Office of Community Action (formerly the Office of Operations) in planning, administering and evaluating CSA programs funded under Title II, Community Action Programs, and provides a focal point for guiding and monitoring the operations of the ten Regional Offices.

Creates an Office of Policy, Planning and Evaluation (OPP&E) which reports to the Director and provides the Director with coordinated policy recommendations based on input supplied by the Assistant and Associate Directors and Regional Directors. OPP&E also exercises provisions authorized by Title IX of the Economic Opportunity Act of 1964, as amended, and conducts Agency evaluations consistent with the Act.

Creates a new Office of Management which combines the former Office of Administration and the Office of the Controller. Functions now located in the Office of Management include: Information, Management and Systems; Labor/ Management Relations; Administrative Services; Personnel; Internal Audit; Procurement; Data Processing; Financial Management; Fiscal Systems and Payroll; and Budget and Program Analysis.

Changed the title of the Office of General Counsel to the Office of Legal Affairs and General Counsel and added the following additional responsibilities: Labor/Management and Personnel Division which will provide legal advice and counsel to the Office of Management and to the Human Rights Division on personnel administration and equal employment policies; Human Rights Division