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We audited the functionality of the U.S. Department of Housing and Urban Development’s (HUD) New Core Interface Solution (NCIS) for phase 1, release 3, as part of the internal control assessments required for the fiscal year 2016 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 the phase 1, release 3, functionality of NCIS and the impact of the release implementation on the project.  This audit is the third in a series of audits completed on the New Core Project implementation.

We found that following the implementation of phase 1, release 3, of the New Core Project on October 1, 2015, HUD had unresolved data conversion errors, inaccurate funds management reports and lacked a fully functional data reconciliation process.  In addition, NCIS’s performance was not monitored, tracked, or measured, and controls over processing errors within Oracle Federal Financials were routinely bypassed.  These conditions occurred because HUD rushed the implementation of the release.  Specifically, HUD did not move the implementation date when issues were identified during system testing to allow time to resolve the issues, development of the custom reports was not far enough along to allow full system testing, development of the reconciliation tool could not be completed before the scheduled implementation date, and time did not permit the establishment of performance metrics.  As a result, in June 2016, unresolved data conversion errors were estimated at an absolute value of more than $9 billion, HUD’s funds management reports contained inaccurate data, the newly completed status of funds reconciliation report indicated that there was an absolute value of $4.5 billion in differences between the HUD Centralized Accounting and Processing System and Oracle Financials, and it was difficult to tell whether NCIS met user needs and business process requirements.

We recommend that HUD correct the data conversion errors, verify the reconciliation reports and resolve differences, and improve the custom Oracle Discoverer reports and error handling.