We audited the U.S. Department of Housing and Urban Development’s (HUD) New Core Interface Solution (NCIS) for release 1 of phase 1 as part of the internal control assessments required for the fiscal year 2015 financial statement audit under the Chief Financial Officer’s Act of 1990.  Our objective was to determine whether adequate internal controls were in place for NCIS and to relate the results of the review to the upcoming release 3 implementation.  This audit is the second in a series of audits to be completed on the New Core Project implementation.

HUD’s implementation of release 1 of the New Core Project was not completely successful.  Our review of NCIS processing for release 1 travel and relocation transactions found that missed requirements and ineffective controls and procedures resulted in inaccurate financial data in HUD’s general ledger and Oracle Financials.  As a result, NCIS processed for more than 6 months with unresolved errors, leaving HUD’s general ledger and Oracle Financials with inaccurate financial data and discrepancies in the balances between HUD’s general ledger and Treasury’s Government Wide Accounting System.  We concluded that the implementation of release 1 confirmed the concerns we cited when we reviewed release 3.  Although HUD had taken action in its plans for release 3 to mitigate some of the problems that occurred with release 1, we are concerned that HUD could be moving too fast with its implementation plans and may repeat these weaknesses.

We recommend that the Deputy Chief Financial Officer correct the deficiencies cited in this report to ensure financial data is recorded accurately in HUD’s general ledger and Oracle Financials.  Additionally, implement controls in current and future releases that will prevent similar errors from occurring.