HUD is the principal federal agency responsible for programs dealing with housing, community development, and fair housing opportunities. Its mission includes making housing affordable through the Federal Housing Administration’s (FHA) mortgage insurance for multifamily housing, providing rental assistance for about 4.5 million lower income residents, helping to revitalize over 4,000 localities through community development programs, and encouraging home ownership by providing mortgage insurance. HUD is one of the nation’s largest financial institutions, responsible for managing more than a reported $454 billion in mortgage insurance and, as of September 30, 1997, a reported $531 billion in guarantees of mortgage-backed securities. For fiscal year 1998, the agency’s budget authority was about $24 billion, and its information technology budget was $222 million. HUD’s major program areas are managed by the Office of Housing, which includes FHA’s insurance and project-based rental assistance programs; the Office of Community Planning and Development, which includes programs for Community Development Block Grants, empowerment zones/enterprise communities, and assistance for the homeless; the Office of Public and Indian Housing, which provides funds to help operate and modernize public and Indian housing and administers tenant-based rental assistance programs; and the Office of Fair Housing and Equal Opportunity, which is responsible for investigating complaints and ensuring compliance with fair housing laws. In 1984, we reported that HUD lacked adequate information and financial management systems necessary to ensure accountability for, and control over, departmental programs. In 1989, HUD was involved in highly publicized scandals that included instances in which private real estate agents were able to steal millions of dollars by retaining the proceeds from the sale of FHA-owned properties, rather than transferring the funds to the Treasury. In 1992, we reported that these scandals were attributed, in large part, to fundamental deficiencies in the department’s information and financial management systems. In particular, HUD’s systems were inadequate, lacked credibility and internal controls, and failed to meet program managers’ needs or provide adequate support for oversight of housing and community development programs. To address fundamental deficiencies in the department’s information and financial systems and meet the requirements of the Chief Financial Officers Act of 1990, which called for financial management reform across the federal government, the Secretary of Housing and Urban Development initiated a number of actions. These actions included the appointment of a Chief Financial Officer (CFO) to oversee the department’s financial operations and initiation of a major Financial Systems Integration (FSI) effort to strengthen its financial management systems. Although HUD proceeded with this high priority effort, it continued to be affected by poorly integrated, ineffective, and generally unreliable information systems that did not satisfy management needs or provide adequate support to control housing and community development programs. In 1994, we designated the department a high-risk area, in part because of its inadequate information and financial management systems and slow progress in correcting fundamental management weaknesses that had allowed the 1989 scandals to occur. By 1997, we reported that HUD had formulated approaches and initiated actions to address departmentwide deficiencies, including information and financial management systems problems, but many of these actions were far from being completed. In the meantime, HUD continues to rely on unintegrated and inadequate program and financial management systems, some of which are not yet Year 2000 compliant. Recognizing the need to better manage information technology, recent legislative reforms—the Clinger-Cohen Act of 1996, the Paperwork Reduction Act of 1995, and the Federal Acquisition Streamlining Act of 1994—provide guidance to federal agencies on how to plan, manage, and acquire information technology as part of their overall information resources management (IRM) responsibilities. These legislative reforms highlight the need to ensure that IRM programs and decisions are integrated with organizational planning, budgeting, and financial management. While HUD revised its FSI plan in 1993 and again in 1997, its primary objective—implementing an integrated financial management system to meet the department’s program and financial management needs—remained unchanged. At the same time, HUD’s implementation strategy and the cost and schedule estimates to develop and deploy FSI continue to change. HUD has not yet finalized the cost and schedule estimates for its 1997 FSI strategy and has not performed the detailed analyses needed to determine whether the strategy is cost beneficial. HUD adopted its first Financial Management Systems Strategic Integration Plan in November 1991 to address and resolve material weaknesses in its financial systems. In this plan, HUD acknowledged that inadequate and unintegrated financial management systems rendered it unable to properly manage its programs and financial resources. The plan’s primary objective was, therefore, to implement an integrated financial management system that would meet the department’s program and financial management needs. The 1991 plan contained specific objectives to establish sound financial management controls, correct material weaknesses, improve financial management, provide timely and accurate information to managers to enable them to meet their organizational objectives, meet the goals of section 4 of the Federal Managers’ Financial Integrity Act (FMFIA) of 1982 and comply with the Office of Management and Budget’s (OMB) Circular A-127. HUD’s strategy for achieving the FSI objectives was to replace about 100 separate financial and mixed systems with nine new fully integrated systems. This strategy was based on an analysis which concluded that HUD did not have the basic financial management systems to serve as the foundation for an integrated systems environment. The design of the 1991 FSI plan required that eight financial systems be integrated with the new core accounting system and this design was consistent with the Joint Financial Management Improvement Program’s (JFMIP) framework for financial management systems. Once the nine new standard systems were deployed, program offices were to use them to support their business operations. In addition, the plan noted that it would be necessary to make interim improvements to existing systems, since the integration effort would be a long-term project. The interim improvements would be needed to manage programs, comply with legal mandates, and correct material weaknesses until the nine new systems became available. The department estimated that it would cost about $103 million to develop and deploy the nine systems called for in the 1991 FSI plan by September 1998. Table 1 shows the objectives, estimated development and deployment costs, and scheduled deployment dates for the nine planned integrated systems. According to HUD’s CFO, in fiscal years 1992 and 1993, HUD spent about $58 million on FSI. Specifically, $48 million was spent on interim improvements to legacy systems, and $10 million was spent on the Core Accounting System and Mortgage Insurance System projects. During this period, HUD (1) procured Federal Financial System (FFS), a commercial off-the-shelf software package to serve as the department’s Core Accounting System, (2) halted its efforts to develop the Mortgage Insurance System as a result of poor planning, and (3) terminated the Grants, Subsidies, and Loans project because the department could not streamline its grants process. Work on the remaining six projects was not scheduled to begin until 1994. In September 1993, HUD fundamentally changed its FSI strategy. The revised strategy was in response to (1) slow progress in implementing systems integration, (2) the need to comply with revisions to OMB Circular A-127, and (3) senior management’s serious doubt about the viability of creating nine new fully integrated systems and having program offices adapt their business operations to meet the requirements of these systems by 1998. The 1993 FSI plan included the same primary objective of implementing an integrated financial management system to meet the department’s program and financial management needs (which was delineated in the 1991 FSI plan), as well as objectives for improving HUD’s financial systems and bringing HUD into compliance with the provisions of FMFIA and the revised OMB Circular A-127. In addition, the 1993 plan included new objectives, such as eliminating the department’s financial systems from OMB’s list of high-risk areas for management improvement, being consistent with HUD’s reform plan, and meeting the requirements of the Government Performance and Results Act of 1993. The implementation strategy for the 1993 FSI plan was markedly different from that of the 1991 plan. Under the 1993 FSI plan, the CFO’s office was required to complete the core financial system project initiated under the 1991 strategy and program offices were required to develop (1) new systems that would support program management priorities, financial and management information needs, and business needs and (2) integrate these systems with the core financial system. Plans for the remaining eight standard systems called for in the 1991 strategy were cancelled. As in 1991, the conceptual design of the 1993 FSI strategy was consistent with the Joint Financial Management Improvement Program’s requirement that the core financial system receive data from other financial and mixed systems. By 1996, HUD had initiated 10 systems integration projects. Despite differences in the strategies, HUD did not perform a cost-benefit analysis on the 1993 strategy. Therefore, HUD had no assurance that it had selected the most cost-beneficial solution for FSI. In 1995, the department estimated that the development and deployment cost of the 1993 strategy would be about $209 million. Also, the department extended the deployment date to December 1998, 3 months after the initial scheduled completion date of September 1998. Table 2 describes the 10 major projects under the 1993 FSI plan, estimated development and deployment costs, and initial scheduled deployment dates. From fiscal years 1994 through 1997, the department spent about $181 million to develop, deploy, and maintain various functions of the 10 major FSI projects, according to the CFO. These expenditures are in addition to the $58 million reportedly spent on FSI between fiscal years 1992 and 1993 and do not include additional FSI costs that may have been incurred by program offices.