Corrective Actions That HUD Has Taken or Initiated

HUD has taken important steps to strengthen its internal controls and financial reporting, improve its information and financial management systems, consolidate its operations, and appropriately deploy and train its staff. HUD has improved its financial reporting and has strengthened its internal controls by conducting risk assessments for some of its programs . Our recent work indicates that these management deficiencies continue to exist or it is too soon to tell whether HUD’s reforms will resolve them. We reported in December 1998 that HUD has not finalized detailed project plans or cost and schedule estimates for its financial systems integration effort. We concluded that without such plans the Department is likely to continue to spend millions of dollars, miss milestones, and still not fully meet its objective of developing and fully deploying an integrated financial management system. Other problems with information and financial management systems were identified by us, the Inspector General, or HUD. These problems included (1) the effectiveness of HUD’s processes for taking unexpended balances into account when determining funding needs as part of its budget process; (2) a February 1998 determination by HUD that 38 of its 92 systems did not conform to the requirements of FMFIA and of the Office of Management and Budget Circular A-127; and (3) a March 1998 report by the Inspector General which continued to report material internal control weaknesses in financial management systems including insufficient information on the credit quality of individual multifamily loans and insufficient information on FHA’s operations by program, geographical area, or other relevant components. Further Action Needed

While HUD has initiated actions under the 2020 Management Reform Plan that could help to address its management deficiencies, the reforms are not fully implemented or it is too soon to assess their effectiveness. Nevertheless, with close oversight by the Congress, HUD is making significant changes and has made credible progress since 1997 in laying the framework for improving its management. This top management attention is critical and must be sustained in order to achieve real and lasting change. While major reforms are under way, several are in the early stages of implementation, and it is too soon to tell whether they will resolve the major deficiencies that we and others have identified. Therefore, in our opinion, the integrity and accountability of HUD’s programs remain at high risk. High-Risk Series: Department of Housing and Urban Development (GAO/HR-97-12, Feb. 1997).
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed its January 1999 report on the Department of Housing and Urban Development's (HUD) major management challenges and program risks, focusing on: (1) corrective actions that HUD has taken or initiated on its major management challenges; (2) major management challenges that remain and limit HUD's effectiveness in carrying out its mission; and (3) further actions that are needed to resolve these challenges.

What GAO Found

GAO noted that: (1) HUD is making significant changes and has made credible progress in overhauling its operations to correct its management deficiencies; (2) among other things, it has improved its financial reporting and development risk assessments for its programs, developed and deployed components for its information and financial management systems, consolidated and centralized many of its operations, and reassigned and begun to retrain many of its staff; (3) a major contributor to this progress is HUD's June 1997 2020 Management Reform Plan, a set of proposals intended to, among other things, correct the management deficiencies that GAO and others identified; (4) however, it should be recognized that HUD's problems were years in the making and will take time and much effort to correct; (5) HUD management has placed high priority on removing HUD programs from the high-risk designation, but it will take continued and sustained efforts before meaningful and lasting results can be achieved; (6) while major reforms are under way, GAO's recent work indicates that internal control weaknesses and problems with information and financial management systems persist; (7) recently, GAO reported that HUD is likely to continue to spend millions of dollars, miss milestones, and still not meet its objective of developing and fully deploying an integrated financial management system because it has not yet finalized detailed project plans or cost and schedule estimates for this effort; (8) furthermore, recent reforms to address HUD's organizational and staffing problems are in the early stages of implementation, and it is too soon to tell whether the reforms will resolve the major deficiencies that GAO and others have identified; (9) therefore, pending the achievement of substantial results, the integrity and accountability of HUD's programs remain at high risk in GAO's opinion; and (10) GAO reached this conclusion using the same methodologies and criteria as it used for its 1995 and 1997 reports.