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03-23-2011 1 19
k
OFFICE OF CONGRESSIONAL AND
INTERGOVERNMENTAL RELATIONS
451 t
h
Street, SW
Washington, DC 20410
Tel. 202-708-0380
Fax. 202-708-1350
From: #-ffJr>ie"R
Fax: cJ..:;L5" - 3 303 Pages: ____ 9...;.., ____ _
Date: MAR 2 3 2011
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o Urgent 0 for Review o Prease Comment 0 Please Reply
2027085652 SUPPLY DISTRIBUTION 04:09:55 p.m. 03-23-2011
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 204101000
ASSISTANT SECRETARY FOR CONGRESSIONAL
AND INTER('.rt)VERNMENTAL RELATIONS
MAR 22 2011
The Honorable Darrell Issa
Chainnan
Committee on Oversight and Government Reform
U.S. House of Representatives
Washington, D.C. 20515-6143
Re: Response to your letter of March 8, 2011
Dear Chairman Issa:
I am writing in response to your letter to Housing and Urban Development (HUD) Chief
Financial Officer Douglas Criscitello of March 8, 2011, concerning HUD business and
accounting systems. HUD is committed to excellence in financial management and to
cooperating with government-wide financial reporting systems. It is my understanding that you
are primarily interested in information contained in agency Performance Accountability Reports
(PAR) related to "the electronic systems in use at [the] agency to SUpp0l1 business and
accounting functions, grants and loan management, contracts management, and reporting to
government-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's
2010 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 the
AFR itself, at www.hud.gov/offices/cfo/reports/2010AFR.cfm.
With respect to the remainder of the questions in your letter, listed below are responses
from our financial officer:
18 - Briefly describe your agency's efforts to comply with OMB's memorandum on the Open
Government 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 required
by the memorandum, and describe how your agency's reports on OMB's data quality metrics, as
required by the memorandum, are generated.
Response: Starting in October, 2010, new award data is being reported to the Federal Sub-
Recipient 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 infonnation
to the systems that feed USASpending.gov, describe the nature, frequency, and purposes of that
interaction.
Response: HUD's Office of the Chief Financial Officer (OCFO) submits data files to the
GSA website Data Submission and Validation Tool (DSVT), which GSA then uploads into
USASpending.gov. The data files contain details on obligational activity recorded against
HUD appropriated funds. The primary source of the obligations is the OCFO core
accolmting system (HUDCAPS), which is described in the enclosed AFR excerpt. The
frequency of delivery is the 5
th
and 20
th
of each month.
20 - Describe the data quality controls and procedures that your agency has implemented for
infonnation that is submitted to USASpending.gov, including information submitted directly and
infonnation submitted to one of the systems that feed USASpending.gov.
Response: HVD's process to compile and deliver data under the Federal Financial
Assistance and Transparency Act (FFATA) was recently converted during FY 2010 to an
automated repeatable web-based delivery process. The process supports delivery from the
generaljoumal which is the source for the generation of the HUD's monthly/quarterly
financial statements.
HUD has a FF AT A Dashboard or overview, which is used to identify data quality
consistency issues for the 52 data elements, as appropriate, focusing primarily on the
FFATA-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 quality
problems, e.g., missing addresses. Output of the problem records can then be researched
and resolved.
21 - State whether all of your agency's current grants, contracts, and loans are accurately reflected
on USASpending.gov, and if not, estimate the percentage of current grants, contracts, and loans that
are 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 site
USASpending.gov appear to be accurately reflected. Recently, GSA has increased the
editing requirements; for example, the Dunn and Bradstreet Number for the grantee need to
be current within the Central Contracting Registry. These additional edit requirements have
resulted in the need to modify HUD applications software and data so that GSA will accept
delivery. HUD continues to strive to improve software and data supporting
USASpending.gov reporting requirements.
22- State whether your agency incurs any reporting burdens or costs as a result of its obligations
under the Federal Financial Assistance Transparency Act ("FF A T A") that it does not incur as a
result of other reporting obligations, and estimate those burdens and costs in worker-hours and
dollars.
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Response: HUD incurs additional reporting burdens as a result of FF AT A reporting. These
additional reporting burdens are not similar to other reporting responsibilities. HUD has
developed some additional repOlting software to assist in execution and delivery. The
software attempts to automate the identification of data quality issues, and HUD is
undertaking additional efforts, primarily related to software and data analysis, to meet the
data quality requirements of USASpending.gov.
23 - Identify the individual(s) who serve(s) ali Senior Accolmtable Official(s) ("SAO") over federal
spending data quality for your agency, as defined by OMB.
Response: The Senior Accountable Official is HUD's Chief Operating Officer, Estelle
Richman
I 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 your
inquiry and your continuing interest in the Department's programs and activities.
Sincerely,

Peter A. Kovar
Assistant Secretary for Congressional
and Intergovernmental Relations
Cc: Rep. E. Cummings, Ranking Men1ber
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u.s. Department of Housing and Urban Development
FY 2010 Agency Financial Report
04: 10:35 p.m. 03-23-2011
Excerpts from the Management Assurance Section of the Management's Discussion and
Analysis Section
Page 47
In 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. These
requirements are: (1) Federal Financial Management Systems requirements, (2) the applicable
Federal 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 48
HUD's Integrated Financial illanagement Improvement Project (HI Fi14.1P)
HUD continues to strengthen and improve its financial management systems. The Depaltment is
currently engaged in the development of a major financial systems modernization project.
HIFMlP establishes an enterprise vision to achieve a core financial management system as a
resolution to the Department's integration and modernization efforts.
The HIFMIP contract was awarded on September 23, 2010. HIFMIP will replace the
functionality of the HUD Central Accounting and Program System (HUDCAPS) with the
Integrated Core Financial System (lCFS). The IeFS will replace HUD's outdated legacy
systems, provide timely, accurate, and reliable data, and improve efficiency by eliminating
timeconsuming, manual processes. As part of the Secretary's Transformation Initiative, the
Department targets funding toward modernizing HUD's Infonnation Technology (IT) systems.
During FY 2010, HUD began the process of reviewing and documenting its financial
management systems interfaces. This process will continue in FY 2011 and will address future
interfaces, manual processes, and security interfaces to be implemented.
At the end of FY 2010, HUD had three non-compliant financial systelTIs: HUD Procurement
System (HPS), Small Purchase System (SPS), and the Facilities Integrated Resources
Management System (FIRMS). The two systems, HPS and SPS, were identified as noncompliant
as part of HUD's FY 2006 financial statement audit. HUD developed remediation
plans 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 in
FY 2010, and HUD awarded a contract on September 30,2010. While HIAMS is being
developed, compensating controls are in place to mitigate noncompliance issues. FIRMS was
identified as being non-compliant with FFMIA. In FY 2010, HUD made significant
improvements in the areas of security and internal controls for FIRMS; however, internal control
weaknesses still exist.
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Excerpts from the Other Accompanying Information Section, Office of Inspector General's
Management and Performance Challenges
Pages 157 -159
Challenge: Financial Management Systems
Since fiscal year 1991, OIG has annually reported on the lack of an integrated financial
management system, including the need to enhance FHA's management controls over its
portfolio of integrated insurance and financial systems. During the past several years, HUD
has made progress by partially implementing new core financial systems at FHA and Ginnie
Mae and addressing lnost of the previous weaknesses that OrG identified. These
improvements enabled ora to reclassify the weakness in financial management system
requirements from a material weakness to a significant deficiency.
The contract to modernize HUD's financial management systems, the HUD Integrated
Financial Management Improvement Project (HIFMIP), was awarded on
Septen1ber 23,2010. The original scope of HIFMIP was to encompass all of HUD's
financial systems, including those supporting FHA and Ginnie Mae. However, the inclusion
of the FHA and Ginnie Mae portions has been put on hold as a result of review by the Office
of Management and Budget. HIFMIP was launched in fiscal year 2003 and was to have
begun iInplementation of HUD' s core financial system in fiscal year 2006. With the recent
award of the contract, HUD anticipates implementation of phase one of the project in time to
have all of the fiscal year 2012 financial data within the new system. We continue to note
the following weaknesses with HUD's financial management systems:
(oJ HUD' s ability to prepare financial statements and other financial information requires
extensive compensating procedures.
g HUD has lilnited availability of information to assist management in effectively
managing operations on an ongoing basis.
FHA's business increased dramatically as a result of the mortgage crisis and now accounts
for 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 the
business are challenging FHA's ability to respond to changes in the market and implement
needed changes to its business processes. The recent changes in the econOJny and the
housing market and explosive growth in FHA's single-family insurance program have
exacerbated these issues and brought the need to move FHA IT modernization initiatives to
the forefront. Critical maintenance had been deferred, and old technology and fragmented
architecture are inefficient and expensive to maintain. In August 2009, FHA completed the
IT 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 for
FHA 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 organizational
change management activities. Its ultimate goal is to focus leadership effort and resources
needed for a successful transfonnation initiative. HUD has since awarded four contracts
under this initiative.
Another IT concern is the ability to replace the antiquated infrastructure on which HUD and
FHA applications reside in a timely manner. Workloads have dramatically increased and are
processing on systems that are 15 to 30 years old, resulting in perfonnance, flexibility, and
interface issues. The use of aging hardware and software can result in poor performance and
high maintenance costs. If the IT infrastructure is not modernized, it will become
increasingly difficult to maintain operations, make legislative system modifications, and
develop or maintain required interfaces to other IT systems, leaving the system environment
at risk.
During 2009, HOD unsuccessfully attempted to move certain applications off the antiquated
Unisys mainframe onto a modem platform. Computer processing utilization reached the
critical rate of 80-90 percent during 2009, which necessitated an upgrade in the processing
power of the existing mainfralue in May 2009. The upgrade brought the utilization rate
down to 60-70 percent. HUD perfonned another upgrade in June 2010, bringing the
utilization rate down further to 35-40 percent. During August 2010, HUD replaced the old
Unisys mainframe with the latest model with newer technology. In addition, HUD replaced
the antiquated tape drives that were attached to the old Unisys mainframe with viliual tape
systems to increase performance.
We continue to report weaknesses in internal controls and security regarding HUD's general
data processing operations and specific applications. The effect of these weaknesses is that
HUD 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 Security
Management Act, we found that HUD had not completed all requirements for systems
containing personally identifiable infonnation, including categorization and inventory of
such systems. Also HUD had not implemented two factor authentications on all enterprise
remote access solutions.
The Department's Progress
HUD has strategically planned for and delivered a modernized infrastnlcture that facilitates the
provisioning of services and allows scalability and agility in meeting on-demand business
requirements, improved quality of service, and increased cost efficiencies. HUD's data center
environment represents the success of these efforts through the implemented upgrade to the
antiquated Unisys platform that represented a significant barrier to FHA business expansion.
With the delivery of the Unisys Dorado 780, capacity has been significantly expanded and
maintenance 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 ensure
enhanced performance availability to meet increased programmatic requirements.
As HUD moves forward with its mission and strategic goals, the oversight and management of
the infrastructure will continue to implement strategies and procedures for timely, cost-effective
acquisition, 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, IT
mandates, and perfonnance-based management, with significant milestones for the following:
t;) Implementing end-to-end processes, enterprise identity management, real-time
transactions, and integrated systems;
~ Continuing to eliminate costly proprietary systems;
Q Easing access to data when-needed, where-needed; and
a 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 high
leveragelhigh speed organization.
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Excerpts from the Other Accompanying Information Section
Page 179
Other' Infol'mation
CumpJiilLll't' Statu'):
CrOmpliance Status of Financial Management Systems
;\" nfSpp'fIomhpr :\0, Zit III
TotU Syr:tems: 12 Total COClpliant System:x: 39
("f),\JPJ.1Al\'1.\'lSTF.l4'S -,{9
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A91
(PSCRS) ... ".
FIIl:lJlci:J Dala]\.hr1 (FDrv!)""
CO:lsolidated ('csl and FTE Files ([eff)
Pr<'grarn Acco\lutin.:& Sy:;tcm (PAS) A96
DOS
D61
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BOild P:.yxnellt (aON::lMAPPER)
EZBJdge: Fon:lUht.1011 Systtm (EZB)
Scctlo:1 B Budget Outlay Support Sy'>tcm
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EHimation aid Allocation !vfecba.J.ism-
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Electnmic Tr;n"el S)mem lnterface
mrn ItH'i'E,r.1ts>rl ('Off' rln;m;".I:tl

OffiCE< olT.hid' HUlIlitD (.;apit.al Uftlrn (I)
PI 52 ITtlD Iutegrat.ed I:uw.aa T.ralJ.1l11g
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(HIA.."vfS)
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COSA Recowf] Gr:1DtRep-ortm S)'s:em
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A'i'i All) f('In,fl'fnHlt SYl;tt'1Tl (HP<;)
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5
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P111 r rVl"utory M:uneffi1f"nt Sy-.t:-tn (l1\fS)
PH2 S\lbs:dyand G1ants Into SYST.em (SAG IS)
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(DSRS) .
F:mlJly Mortga8t' As.et
S,\,'Stem (SMART)
Smgk Family Mortgag;:: NotCJ
limgle Family ?re:nium Colle-:nc-n
UpfrOJl[ (SrPCS-U)
SmgJe [\.:qui,red
t:;y;.tenl (SAMS)
S,ng1e FaJruly Housing Enterprise Dan
(SFHEDW)
Ro'lli" E11Uty COflvff!'ton Mmt.e;1p:f'S (HFr:M)
Complltrrized IIonlc Uil\lcnl{r.iting
SYF.tem (CHUMS)
SmgJe ramiiy Uefaulr Ivlon.i:oring ;,;utsystenl
(SrDMS)ltu.
FJe (IMF)
Uebt t:olltction & As.o;eb> Manag<!ment
SYMCIU - Title 1 Notes (DCA1vlS)
Title [ InsUJanee and Claims (TIIS)
T::.-narl! Itental A3sislmce Cfrtific3rion
SV'"&.cm (TRACS)
FHA (FHA-SL)*"
Delinquency :md Default
Rcportlr:g (MDDR) .. HI
Cri.nie :\lae Ol
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fof'!"
..... '''''CIt: nol nrut kll it fwc.oJ(;i."l
Sy.f:.tem FY 20:0. Hcwe1.'I?f'.
they are Jot Ilt"wly lnlplt'lDented systems.
un DUllugFY 20)9, tile oCfil:t" IC}JlIlcJ
the .. , 1& noa fin;;,nci:L. HC"'ever. they
need to be .... alidattc by reviews.
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