HUD’s shared service migration is underfunded, on shaky ground

HUD’s Inspector General says the department’s attempt to move its finances to a shared service is moving too fast.

The Department of Housing and Urban Development’s attempt to move its finances to shared services is underfunded and not ready for its upcoming deadlines, said the department’s inspector general.

The “New Core Project” will move HUD’s financial systems into the Treasury Department’s Bureau of Fiscal Service over four different phases, culminating in the federal government’s first department-level shared service.

HUD Inspector General David Montoya said during a speech to the Association of Government Accountants that after auditing two benchmarks in phase one, the department may not be ready for the move.

“We remained concerned that HUD may be moving too fast, quite frankly, with its implementation plans and may repeat the same weaknesses in the next two [benchmarks] let alone the next three phases,” Montoya said.

Those weaknesses stem from an audit of the migration of accounting system services associated with budget execution, accounting, finance, data warehouse reporting and interface solution, which are supposed to be implemented by Oct. 1.

“We feel the department may have rushed the system design and development activities,” Montoya said. “We also found the schedule management deficiencies may impact the timeliness and the quality of release.”

HUD also botched its first benchmark within phase one, which transferred the travel and relocation functions to Treasury last October, Montoya said.

“We found missed requirements and ineffective controls and procedures resulting in inaccurate financial data in HUD’s general ledger and related financial systems,” Montoya said. “We found a number of occasions where there were duplications and triplicate processing of the same financial information.”

HUD also failed to implement a way for users of the program to report problems to the department.

Part of the reason for the troubled rollout of “New Core” is HUD only received about $4.5 million of the $10 million it requested in fiscal 2014.

Congressional cuts to the project in 2015 and possibly in 2016 led to the elimination of all modernization and enhancement funding, a total of $16 million, Montoya said. Additionally, a significant amount of operations and maintenance funding was cut.

As a result, New Core is seeking $18 million to cover the current agreement and pending activity through March 2016.

“As important as this is in it being the first cabinet level department [with shared services] you’d think it’d be fully funded, it’s not,” Montoya said.

HUD has been modernizing its legacy financial system since 2003, according to a June 12 IG report. It cancelled that project in 2012 after spending more than $35 million.

The government is particularly interested in HUD’s performance since it plans to consolidate all of the departments’ financial services. The Fiscal Service is one of four federal financial management shared service providers.

The Office of Management and Budget estimated in 2010 it could save about $1 billion a year by moving to shared services. Since then, a number of agencies canceled their financial system modernization programs in lieu of eventually contracting out a shared service provider.

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