HUD Response

8/4/2019 HUD Response

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OFFICE OF CONGRESSIONAL ANDINTERGOVERNMENTAL RELATIONS451 t h Street, SWWashington, DC 20410Tel. 202-708-0380Fax. 202-708-1350

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Date: MAR 23 2011---------------------o Urgent 0 fo r Review o Prease Comment 0 Please Reply


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U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENTWASHINGTON, DC 204101000

ASSISTANT SECRETARY FOR CONGRESSIONALAND INTER('.rt)VERNMENTAL RELATIONS MAR 22 2011The Honorable Darrell IssaChainnanCommittee on Oversight and Government ReformU.S. House of RepresentativesWashington, D.C. 20515-6143Re: Response to your letter of March 8, 2011Dear Chairman Issa:

I am writing in response to your letter to Housing and Urban Development (HUD) ChiefFinancial Officer Douglas Criscitello of March 8, 2011, concerning HUD business andaccounting systems. HUD is committed to excellence in financial management and tocooperating with government-wide financial reporting systems. It is my understanding that youare primarily interested in information contained in agency Performance Accountability Reports(PAR) related to "the electronic systems in use at [the] agency to SUpp0l1 business andaccounting functions, grants and loan management, contracts management, and reporting togovernment-wide systems such as USASpending.gov and Recovery.gov".

In accordance with OMB Circular A-136, HUD provides an Agency Financial Report(AFR), which contains the information presented in a PAR with respect to these subjects.Therefore, in response to questions 1-16 of your request, I am enclosing excerpts from HUD's2010 AFR that relate to financial systems pertinent to the request. As requested in question 17,this information and the entire AFR is available to the public online, in the same format as theAFR itself, at www.hud.gov/offices/cfo/reports/2010AFR.cfm.

With respect to the remainder of the questions in your letter, listed below are responsesfrom our financial officer:18 - Briefly describe your agency's efforts to comply with OMB's memorandum on the OpenGovernment Directive - Federal Spending Transparency, dated April 6, 2010. In particular,describe whether and how your agency has begun to collect and report sub-award data, as requiredby the memorandum, and describe how your agency's reports on OMB's data quality metrics, asrequired by the memorandum, are generated.

Response: Starting in October, 2010, new award data is being reported to the Federal SubRecipient Reporting System (FSRS) managed by GSA. Also beginning in October, 2010,HUD has required all awardees to report sub-award infOlmation directly into FSRS.

www.hud.gov espanol.hud.gov

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19 - If your agency interacts directly with US ASpending.gov , in addition to submitting infonnationto the systems that feed USASpending.gov, describe the nature, frequency, and purposes of thatinteraction.Response: HUD's Office of the Chief Financial Officer (OCFO) submits data files to theGSA website Data Submission and Validation Tool (DSVT), which GSA then uploads intoUSASpending.gov. The data files contain details on obligational activity recorded againstHUD appropriated funds. The primary source of the obligations is the OCFO coreaccolmting system (HUDCAPS), which is described in the enclosed AFR excerpt. Thefrequency of delivery is the 5th and 20th of each month.

20 - Describe the data quality controls and procedures that your agency has implemented forinfonnation that is submitted to USASpending.gov, including information submitted directly andinfonnation submitted to one of the systems that feed USASpending.gov.Response: HVD's process to compile and deliver data under the Federal FinancialAssistance and Transparency Act (FFATA) was recently converted during FY 2010 to anautomated repeatable web-based delivery process. The process supports delivery from thegeneraljoumal which is the source for the generation of the HUD's monthly/quarterlyfinancial statements.HUD has a FFAT A Dashboard or overview, which is used to identify data qualityconsistency issues for the 52 data elements, as appropriate, focusing primarily on theFFATA-required data elements. Validity tests occur against control reference tables,allowing the process to be expanded as needed to other fields as they become required.The Dashboard also supports reviewing the actual journal records with data qualityproblems, e.g., missing addresses. Output of the problem records can then be researchedand resolved.

21 - State whether all of your agency's current grants, contracts, and loans are accurately reflectedon USASpending.gov, and if not, estimate the percentage of current grants, contracts, and loans thatare not accurately reflected, using both the number of transactions and dollar figures.Response: HUD's grants, contracts, and loans that have been provided to GSA's web siteUSASpending.gov appear to be accurately reflected. Recently, GSA has increased theediting requirements; for example, the Dunn and Bradstreet Number for the grantee need tobe current within the Central Contracting Registry. These additional edit requirements haveresulted in the need to modify HUD applications software and data so that GSA will acceptdelivery. HUD continues to strive to improve software and data supportingUSASpending.gov reporting requirements.

22- State whether your agency incurs any reporting burdens or costs as a result of its obligationsunder the Federal Financial Assistance Transparency Act ("FFATA") that it does not incur as aresult of other reporting obligations, and estimate those burdens and costs in worker-hours anddollars.

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Response: HUD incurs additional reporting burdens as a result of FFAT A reporting. Theseadditional reporting burdens are not similar to other reporting responsibilities. HUD hasdeveloped some additional repOlting software to assist in execution and delivery. Thesoftware attempts to automate the identification of data quality issues, and HUD isundertaking additional efforts, primarily related to software and data analysis, to meet thedata quality requirements of USASpending.gov.

23 - Identify the individual(s) who serve(s) ali Senior Accolmtable Official(s) ("SAO") over federalspending data quality for your agency, as defined by OMB.

Response: The Senior Accountable Official is HUD's Chief Operating Officer, EstelleRichmanI hope that this information will be helpful to you and the Committee. Please do not

hesitate to contact me if you would like any further information. Thank you again for yourinquiry and your continuing interest in the Department' s programs and activities.

Sincerely,

I ~ A . ( ~ Peter A. KovarAssistant Secretary for Congressional

and Intergovernmental Relations

Cc: Rep. E I ~ a h E. Cummings, Ranking Men1ber

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u.s. Department of Housing and Urban DevelopmentFY 2010 Agency Financial Report

04: 10:35 p.m. 03-23-2011

Excerpts from the Management Assurance Section of the Management's Discussion andAnalysis SectionPage 47In order for HUD's financial management systems to be in substantial compliance with FFMIA,its systems must meet the three requirements as defined by Section 803(a) of FFMIA. Theserequirements are: (1) Federal Financial Management Systems requirements, (2) the applicableFederal Accounting Standards, and (3) U.S. Standard General Ledger at the transaction level.At the end of FY 2010, HUD determined that the Department is in compliance with FFMIA.Page 48HUD's Integrated Financial illanagement Improvement Project (HIFi14.1P)HUD continues to strengthen and improve its financial management systems. The Depaltment iscurrently engaged in the development of a major financial systems modernization project.HIFMlP establishes an enterprise vision to achieve a core financial management system as aresolution to the Department's integration and modernization efforts.The HIFMIP contract was awarded on September 23, 2010. HIFMIP will replace thefunctionality of the HUD Central Accounting and Program System (HUDCAPS) with theIntegrated Core Financial System (lCFS). The IeFS will replace HUD's outdated legacysystems, provide timely, accurate, and reliable data, and improve efficiency by eliminatingtimeconsuming, manual processes. As part of the Secretary's Transformation Initiative, theDepartment targets funding toward modernizing HUD's Infonnation Technology (IT) systems.During FY 2010, HUD began the process of reviewing and documenting its financialmanagement systems interfaces. This process will continue in FY 2011 and will address futureinterfaces, manual processes, and security interfaces to be implemented.At the end of FY 2010, HUD had three non-compliant financial systelTIs: HUD ProcurementSystem (HPS), Small Purchase System (SPS), and the Facilities Integrated ResourcesManagement System (FIRMS). The two systems, HPS and SPS, were identified as noncompliantas part of HUD's FY 2006 financial statement audit. HUD developed remediationplans to replace these systems with the HUD Integrated Acquisition Management System(HIAMS) to meet the agency's procurement and business needs. A solicitation was issued inFY 2010, and HUD awarded a contract on September 30,2010. While HIAMS is beingdeveloped, compensating controls are in place to mitigate noncompliance issues. FIRMS wasidentified as being non-compliant with FFMIA. In FY 2010, HUD made significantimprovements in the areas of security and internal controls for FIRMS; however, internal controlweaknesses still exist.

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Excerpts from the Other Accompanying Information Section, Office of Inspector General'sManagement and Performance ChallengesPages 157 -159

Challenge: Financial Management SystemsSince fiscal year 1991, OIG has annually reported on the lack of an integrated financialmanagement system, including the need to enhance FHA's management controls over itsportfolio of integrated insurance and financial systems. During the past several years, HUDhas made progress by partially implementing new core financial systems at FHA and GinnieMae and addressing lnost of the previous weaknesses that OrG identified. Theseimprovements enabled ora to reclassify the weakness in financial management systemrequirements from a material weakness to a significant deficiency.The contract to modernize HUD's financial management systems, the HUD IntegratedFinancial Management Improvement Project (HIFMIP), was awarded onSepten1ber 23,2010. The original scope of HIFMIP was to encompass all of HUD'sfinancial systems, including those supporting FHA and Ginnie Mae. However, the inclusionof the FHA and Ginnie Mae portions has been put on hold as a result of review by the Officeof Management and Budget. HIFMIP was launched in fiscal year 2003 and was to havebegun iInplementation of HUD' s core financial system in fiscal year 2006. With the recentaward of the contract, HUD anticipates implementation of phase one of the project in time tohave all of the fiscal year 2012 financial data within the new system. We continue to notethe following weaknesses with HUD's financial management systems:

(oJ HUD' s ability to prepare financial statements and other financial information requiresextensive compensating procedures.g HUD has lilnited availability of information to assist management in effectivelymanaging operations on an ongoing basis.

FHA's business increased dramatically as a result of the mortgage crisis and now accountsfor 30 percent of the market share. The shortcomings of the current infonnation technology(IT) systems and the lack of systems capabilities and automation in critical areas of thebusiness are challenging FHA's ability to respond to changes in the market and implementneeded changes to its business processes. The recent changes in the econOJny and thehousing market and explosive growth in FHA's single-family insurance program haveexacerbated these issues and brought the need to move FHA IT modernization initiatives tothe forefront. Critical maintenance had been deferred, and old technology and fragmentedarchitecture are inefficient and expensive to maintain. In August 2009, FHA completed theIT Strategy and Improvement Plan, which identifies FHA's priorities for IT transformation.The plan identifies 25 solution initiatives to address specific FHA lines of business needs.Initiatives are prioritized with the top five being single-family related. The plan also calls forFHA to create a program management office to facilitate coordination and communication

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and track and report progress, provide support to managers, and support organizationalchange management activities. Its ultimate goal is to focus leadership effort and resourcesneeded for a successful transfonnation initiative. HUD has since awarded four contractsunder this initiative.Another IT concern is the ability to replace the antiquated infrastructure on which HUD andFHA applications reside in a timely manner. Workloads have dramatically increased and areprocessing on systems that are 15 to 30 years old, resulting in perfonnance, flexibility, andinterface issues. The use of aging hardware and software can result in poor performance andhigh maintenance costs. If the IT infrastructure is not modernized, it will becomeincreasingly difficult to maintain operations, make legislative system modifications, anddevelop or maintain required interfaces to other IT systems, leaving the system environmentat risk.During 2009, HOD unsuccessfully attempted to move certain applications off the antiquatedUnisys mainframe onto a modem platform. Computer processing utilization reached thecritical rate of 80-90 percent during 2009, which necessitated an upgrade in the processingpower of the existing mainfralue in May 2009. The upgrade brought the utilization ratedown to 60-70 percent. HUD perfonned another upgrade in June 2010, bringing theutilization rate down further to 35-40 percent. During August 2010, HUD replaced the oldUnisys mainframe with the latest model with newer technology. In addition, HUD replacedthe antiquated tape drives that were attached to the old Unisys mainframe with viliual tapesystems to increase performance.We continue to report weaknesses in internal controls and security regarding HUD's generaldata processing operations and specific applications. The effect of these weaknesses is thatHUD carmot be reasonably assured that system infonnation will remain confidential,safeguarded, and available to those who need it without intemlption.As part of our annual IT security review mandated by the Federal Information SecurityManagement Act, we found that HUD had not completed all requirements for systemscontaining personally identifiable infonnat ion, including categorization and inventory ofsuch systems. Also HUD had not implemented two factor authentications on all enterpriseremote access solutions.

The Department's ProgressHUD has strategically planned for and delivered a modernized infrastnlcture that facilitates theprovisioning of services and allows scalability and agility in meeting on-demand businessrequirements, improved quality of service, and increased cost efficiencies. HUD's data centerenvironment represents the success of these efforts through the implemented upgrade to theantiquated Unisys platform that represented a significant barrier to FHA business expansion.With the delivery of the Unisys Dorado 780, capacity has been significantly expanded andmaintenance costs lowered. Furthermore, this infrastnlcture enhancement was designed to

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anticipate future capacity requirements and was implemented in a tilnely manner to ensureenhanced performance availability to meet increased programmatic requirements.As HUD moves forward with its mission and strategic goals, the oversight and management ofthe infrastructure will continue to implement strategies and procedures for timely, cost-effectiveacquisition, use, and reallocation of infrastructure resources to provide quality service to HUD.Future plans continue to focus on an agile enterprise that embraces industry best practices, ITmandates, and perfonnance-based management, with significant milestones for the following:

t;) Implementing end-to-end processes, enterprise identity management, real-timetransactions, and integrated systems;Continuing to eliminate costly proprietary systems;

Q Easing access to data when-needed, where-needed; anda Migrating rigid business processes to highly leveraged and flexible service oriented

systems.Progress towards these Inilestones will enable HUD to continue moving towards an agile highleveragelhigh speed organization.

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Excerpts from the Other Accompanying Information SectionPage 179Other' A c ( ' o m p ~ D y i n g Infol'mation

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