New Core Partially Delivered Financial Management Systems Capabilities; Other Initiatives Are Under Way for Remaining Capabilities

By October 2015, HUD had completed transitioning 4 of the 14 planned  financial management systems capabilities to shared service solutions  provided by ARC. Travel and relocation. As a result, the department continues to execute programmatic  transactions using costly and inefficient legacy systems. After spending at least $58 million over a period of 3  years, in April 2016 the department officially completed development  close-out activities for the New Core program. According to a June 20, 2016, memorandum,  HUD’s Deputy CFO reported that the migration also resulted in  improved internal controls, such as real-time checks with the  documents in the procurement system for recording commitments and  obligations;  increased discipline in financial activities, including the use of  delegated authority for purchases;  improved compliance with laws and regulations; better data quality due to ARC’s core accounting system ensuring that  budget funds control balances are the same as balances in the  general ledger;  strengthened funds-control process because of, among other things,  improvements in the accuracy of payroll costs and improved  procedures for accounts receivable; and  increased confidence in controls and configurations employed on  systems used for purchase cards, processing invoice payments,  procurement management, and employee time and attendance. HUD officials, including the Deputy Secretary, also stated that other new  initiatives were under way to deliver financial management systems  capabilities and replace legacy systems that were not addressed under  New Core. Implementation of New Core Demonstrated Weaknesses in HUD’s IT Management and Governance

Our experience with IT-related programs has shown that disciplined  management practices can help agencies plan, manage, and oversee  modernization efforts. For instance, the roadmap did not account for when or how  the department would replace other systems identified to be replaced with  the program and fell short of clearly outlining what needed to occur to  achieve expected benefits such as reducing the costs of legacy systems. Individual schedules were also  established and managed for the 4 capabilities delivered through October  2015. Nevertheless, limitations existed in HUD’s implementation of these  requirements management practices. For example, the  department did not document its “as-is” processes to aid in defining and  managing requirements. HUD’s IT Governance and Executive-Level Oversight for New Core Were Not Fully Effective

GAO’s guide to effective IT investment management emphasizes the  importance of applying effective disciplined, repeatable governance  processes for selecting and re-selecting, controlling, and evaluating  investments to ensure mission needs are met. Specifically, although the governing entities reviewed the same  New Core program artifacts we assessed, HUD’s reviews did not raise  concerns regarding the management weaknesses we identified during the  course of our review and did not require improvement plans for known  deficiencies. Until HUD addresses weaknesses in IT governance practices and  strengthens executive-level oversight for financial management systems  modernization efforts, the department’s capacity to manage and control  successor efforts may be limited. With New  Core, the department transitioned 4 of 14 planned capabilities to shared  service solutions. In doing so, the department added efficiencies and  integrated systems that support the processing of financial management  functions. HUD’s efforts to modernize its financial management systems have been  hindered by weaknesses in implementing key IT management practices. Further, HUD faced  challenges with sustaining leadership, coordinating among stakeholders,  and aligning New Core with other IT modernization efforts. Recommendations for Executive Action

To address weaknesses in the department’s financial management  systems modernization efforts, we recommend that the Secretary of HUD  direct the Chief Financial Officer to work with the Chief Information Officer  to take the following three actions with regard to managing subsequent  initiatives: define a high-level depiction of the IT systems anticipated in the future  state, a description of the operations that must be performed and who  must perform them, and an explanation of where and how the  operations are to be carried out; develop comprehensive plans for scope, schedule and cost; and ensure requirements are fully documented and traceable. In its comments,  HUD neither agreed nor disagreed with our recommendations, but noted  that it plans to improve management practices and IT governance for  future modernization efforts. Our specific objectives for  this review were to (1) determine the planned financial management  systems capabilities implemented through New Core and (2) evaluate  HUD’s implementation of key IT management practices applied to the  program. In the area of program definition, we reviewed documentation  including the New Core Implementation Plan and the New Core  Program Charters, and New Core Program Management Plans for  each release, and briefings to determine whether these artifacts were  developed in adherence with key practices and elements for fully  defining a program as called for in PMI program management  standards, concept of operations guidance published by the Institute  of Electrical and Electronics Engineers, and our previous reports on IT  modernization efforts. Specifically, HUD gained access to 7  systems operated by ARC.
Why GAO Did This Study

HUD is responsible for managing and reporting on the nearly $45 billion it spends annually for housing programs. The department has reported its reliance on outdated and costly-to-maintain systems used for financial management functions. In 2013, HUD initiated a modernization program called New Core, which involved migrating financial management capabilities to a federal shared service provider, with expected benefits to include reducing legacy systems costs, improving the data, and resolving weaknesses in its financial management systems. After spending about $58 million over 3 years, HUD decided to end New Core development in April 2016.
Congress included a provision for GAO to review the New Core program. This review (1) determined the financial management systems capabilities implemented through New Core and (2) evaluated HUD's implementation of key IT management practices applied to the program. GAO reviewed New Core plans and documentation to assess the capabilities delivered, compared HUD's implementation to recognized IT practices, and interviewed relevant agency officials.

What GAO Found

In October 2015, as part of its planned New Core financial management systems modernization efforts, the Department of Housing and Urban Development (HUD) completed transitioning 4 of 14 capabilities to shared service solutions. The implemented capabilities were for managing employee travel and relocation; recording time and attendance; performing core accounting functions such as general ledger accounting, producing financial reports, and processing salaries and expenses transactions; and managing procurements. As a result, the department reported that it fully replaced 4 systems, gained access to 7 shared service solutions, streamlined administrative services, and added efficiencies to the processing of financial management functions. For example, the systems used for core accounting and procurement were integrated to support the timely recording of commitments and obligations. However, while the 4 capabilities were transitioned as scheduled, none fully met the department's requirements or expectations. For instance, the department continues to execute programmatic transactions using costly and inefficient legacy systems that were expected to be replaced with New Core. HUD has begun other initiatives to deliver financial management systems capabilities and replace legacy systems that were not addressed under New Core. Detailed plans for these efforts are in development.
HUD's efforts to implement planned capabilities for New Core demonstrated weaknesses in the department's information technology (IT) management and governance practices. Key management practices include fully defining what a program is intended to accomplish; developing the program scope, schedule, and costs; and managing requirements. However, HUD's management of New Core had weaknesses in these areas. For example, the department did not:
outline operations for all planned capabilities or create a roadmap for transitioning to the desired modernized environment;
create comprehensive scope, schedule, and cost documentation; and
manage requirements to ensure they were fully documented and traceable from business needs to system implementation.
Effective governance and executive-level oversight also help ensure programs achieve expected results. Specifically, establishing governance control reviews and providing oversight through, among other things, sustained leadership and coordination among stakeholders can strengthen modernization efforts. However, during the effort to implement New Core, HUD's IT governance and oversight were not fully effective. For example, governance reviews did not raise concerns or require improvement plans for management weaknesses identified, such as the lack of a schedule with a valid critical path. Moreover, executive-level oversight did not ensure effective coordination among stakeholders.
With any further pursuit of new initiatives to modernize its financial management systems, it is critical that the department consistently apply key IT management practices and effective governance to ensure it does not jeopardize the success of these efforts.

What GAO Recommends

GAO is recommending that HUD address weaknesses in key IT management practices for future financial systems modernization efforts and take action to improve its governance and strengthen investment oversight. HUD neither agreed nor disagreed with GAO's recommendations, but stated it would improve management practices and governance for future efforts.