Department of Housing and Urban Development:

Status of Efforts to Implement an Integrated Financial Management System

GAO-03-447R: Published: Apr 9, 2003. Publicly Released: Apr 9, 2003.

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Weaknesses in the Department of Housing and Urban Development's (HUD) financial management systems have been a long-standing challenge for the department and have contributed to our designating two of its major programs areas as high-risk and the financial management information systems in particular as a major management challenge. While some progress has been made, both GAO and the HUD Office of the Inspector General (IG) have reported extensively on weaknesses related to HUD's financial management systems. In audits of HUD's consolidated financial statements, the IG has consistently identified several material internal control weaknesses resulting from inadequate financial management systems. In recent audit reports, the HUD OIG also noted that the completion of the development of adequate financial management systems is the most critical need faced by HUD in improving its financial management control environment. Responsive financial management systems are particularly critical to HUD's ability to meet its mission, deliver key services, and establish sufficient management control over its operations. In light of these issues, Congress asked that we (1) summarize HUD's past efforts to implement an integrated financial management system, (2) identify the challenges HUD faces with its current financial management systems, and (3) determine the status of HUD's current efforts to identify and address its financial management systems needs.

HUD's past efforts have not resulted in the implementation of a modern integrated financial management system to carry out its core accounting functions and meet other needs. HUD's current Central Accounting and Program System (HUDCAPS), as implemented in fiscal year 1999, is the product of its Financial System Integration (FSI) effort, which began in 1991. While this effort did result in the development and deployment of various modules and systems to support several key programs and processes, it did not result in an integrated financial management system, which was a stated goal of the project. In 1998 we reported1 that even though HUD spent hundreds of millions of dollars, the FSI effort was not fully successful because of the lack of (1) adequate project management, (2) finalized project plans that provided an integration roadmap, and (3) adequate cost-benefit analyses that properly estimated the costs to achieve the objectives of the plan and how long it would take to achieve these objectives. HUD uses HUDCAPS as its core financial management and general ledger system. However, this system is not efficient, has become outdated, and has high annual maintenance costs. HUDCAPS requires numerous manual adjustments at year-end and cannot provide HUD managers with accurate, timely, and useful information to manage the agency on a day-to-day basis. HUDCAPS is not used across the department as originally intended by the FSI effort. The Federal Housing Administration (FHA) and the Government National Mortgage Association (Ginnie Mae) continue to maintain their own general ledger/financial management systems that are not integrated with HUDCAPS. HUD also continues to maintain the Program Accounting System (PAS), which it uses to perform funds control and other functions for the department. To help address ongoing deficiencies with its general ledger, FHA recently implemented the general ledger module of a commercial-off-the-shelf (COTS) software package that automates the interface with HUDCAPS. However, it is too early to determine whether this new general ledger system will address FHA's reported deficiencies in this area. HUD is currently in the early stages of deciding whether to upgrade HUDCAPS or acquire and deploy a new financial management system. According to HUD officials, the department has submitted a procurement request for the initial study of the HUD Integrated Financial Management Improvement Project (HIFMIP). The study is expected to document and analyze business functions of the department and the feasibility, risks, and costs of core systems options. Since September 2002, HUD's plans for awarding a contract to conduct a feasibility study have been postponed twice. The latest delay came with the recent hiring of an Assistant Chief Financial Officer for Systems (ACFO), who made a decision to broaden the scope of the Needs Statement to include the financial management needs of FHA and Ginnie Mae, which we view as a sound decision. Proper planning is an essential element to the success of the project and therefore to HUD's effort to correct its long-standing financial management systems problems. HUD now plans to award the contract for the study in May 2003 and to complete the study by July 2004. Given the nature of HUD's longstanding financial management systems problems and the importance of these systems to carrying out HUD's mission and activities, we are recommending that HUD's Secretary make the modernization and integration of its financial management systems a continuing top priority and to take the necessary actions to help ensure successful implementation.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To help ensure the success of future systems implementation efforts, the Secretary of the Department of Housing and Urban Development should make the modernization and integration of the department's financial management systems a continuing top priority and direct the Chief Financial Officer to develop and maintain milestones.

    Agency Affected: Department of Housing and Urban Development

    Status: Closed - Implemented

    Comments: HUD's is a multi-year, multi-phase project scheduled to be completed in FY 2013. HUD established and maintains documentation related to the Integrated Financial Management Improvement Project (HIFMIP)project that focuses on project milestones. HUD's HIFMIP Roadmap contains a description of significant events and milestones extending through the project's completion. HUD's Financial Management Segment Architecture also includes the key milestones for the project. The most detailed milestones are submitted to OMB in Exhibit 300: Capital Asset Plan and Business Case Summary. Any slippage from the original and revised baseline milestone dates are currently reflected in this document.

    Recommendation: To help ensure the success of future systems implementation efforts, the Secretary of the Department of Housing and Urban Development should make the modernization and integration of the department's financial management systems a continuing top priority and direct the Chief Financial Officer to obtain stakeholder involvement.

    Agency Affected: Department of Housing and Urban Development

    Status: Closed - Implemented

    Comments: HUD Integrated Financial Management Improvement Project (HIFMIP). HUD established an executive level advisory committee including top-level representatives from not only the OCFO, but also the heads of HUD's major components (FHA & Ginnie Mae) and key program offices (PIH, CPD, PDR, OCIO). Meetings of this group are still ongoing. Also in 2003, HUD established a working level group was also formed, comprised of both financial and IT representatives from HUD's major program offices. This group also continues to meet periodically. The formation of these groups and their continued stakeholder involvement satisfy the intent of our recommendation that the CFO work collaboratively with the directors of HUD's components and that the CFO obtain stakeholder involvement.

    Recommendation: To help ensure the success of future systems implementation efforts, the Secretary of the Department of Housing and Urban Development should make the modernization and integration of the department's financial management systems a continuing top priority and direct the Chief Financial Officer to acquire a qualified and experienced project manager.

    Agency Affected: Department of Housing and Urban Development

    Status: Closed - Implemented

    Comments: In response to this recommendation, the Department of Housing and Urban Development (HUD) hired a systems implementation Project Manager in February 2003. GAO met reviewed the project manager's resume and determined that the individual had extensive project manager experience, both in the private and public sector, including at the Bureau of the Census and the U.S. Mint. Consequently, this recommendation has been adequately addressed.

    Recommendation: To help ensure the success of future systems implementation efforts, the Secretary of the Department of Housing and Urban Development should make the modernization and integration of the department's financial management systems a continuing top priority and direct the Chief Financial Officer to work collaboratively with the directors of the department's components.

    Agency Affected: Department of Housing and Urban Development

    Status: Closed - Implemented

    Comments: HUD established an executive level advisory committee including the heads of HUD's major components (FHA & Ginnie Mae) and key program offices (PIH, CPD, OCFO, PDR, and OCIO) to help oversee its Integrated Financial Management Improvement Project (HIFMIP). The IG has an advisory role. The initial meeting of this group was held in 2003 and group meetings are still ongoing. A working level group was also formed, comprised of financial and IT representatives from HUD's major program offices. The kick off meeting for this group was held on April 22, 2003 and meetings continue to occur. The formation of these groups and their top-level direction satisfy the intent of our recommendation that the CFO work collaboratively with the directors of HUD's components and that the CFO obtain stakeholder involvement.

    Recommendation: To help ensure the success of future systems implementation efforts, the Secretary of the Department of Housing and Urban Development should make the modernization and integration of the department's financial management systems a continuing top priority and direct the Chief Financial Officer to establish measurable performance indicators.

    Agency Affected: Department of Housing and Urban Development

    Status: Closed - Implemented

    Comments: HUD has established measurable performance indicators by fiscal year which are linked to HUD's strategic goals. These performance measures are reported on quarterly and are directly related to outcomes that have or will result from the implementation of HUD's Integrated Financial Management Improvement Project (HIFMIP). Such outcomes include reducing the number of legacy systems and enabling HUD to meet E-government and President Management Agenda goals such as reducing material weaknesses and reportable conditions attributable to its financial systems. HUD is also monitoring monthly the implementation of HIFMIP using Earned Value Management (EVM) used to measure schedule and/or cost variances.

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