Information Resource Management Internal Control Issues
Gao ID: GAO-05-288R March 10, 2005In a recently completed report for Congress, we evaluated how the U.S. Department of Agriculture's (USDA) Rural Housing Service (RHS) makes eligibility determinations for its rural housing programs. As part of that review, we used 2000 census data to determine the populations of the rural areas that received RHS housing program loans and grants. We obtained information on the RHS loans and grants provided to communities, from October 1998 through April 2004, from databases maintained by USDA's Information Resource Management (IRM) in St. Louis, Missouri. As with any system, the accuracy of the data and the process used for entry affects reliability and usefulness for management and reporting purposes. During our review, we identified several issues that raised concerns about the accuracy of the information in the IRM databases. For example, while we originally intended to geocode (that is, match) 5 years of the national RHS housing loan and grant portfolio to specific communities, the time needed to ensure the reliability of the data required us to limit much of our analysis to five states (Arizona, California, Maryland, Massachusetts, and Ohio). This report is a follow-up on our report to Congress, and its purpose is to discuss the implications of the data issues for the management and reporting functions of the Administrator, Rural Housing Service. In this report, we describe (1) the types of inaccuracies we encountered with the RHS data and (2) what, if any, reviews and systems controls are in place to detect or control database errors.
Our analysis of information in USDA's IRM loan and grant databases raised concerns about the accuracy of the databases. In reviewing 29,000 records for five states we found incorrect, incomplete, and inconsistent entries. For example, over 8 percent of the community names or zip codes were incorrect. Additionally, inconsistent spellings of community names distorted the number of unique communities in the database. More than 400 entries lacked sufficient information (i.e., street addresses, community names, and zip codes) that are needed to identify the community to which the loan or grant had been made. As a result, some communities served by RHS were double counted, others could not be counted, and the ability to analyze the characteristics of communities served was compromised. Because data from these systems are used to inform Congress, senior agency management, and the public about the reach and effectiveness of RHS programs, eliminating erroneous data will help ensure that key decisions and analyses are reliably supported. However, we found RHS lacks appropriate reviews and database entry processes that could prevent or detect inaccurate or incomplete data in its normal course of business. For example, RHS does not have procedures for second-party review of the data in IRM systems. Moreover, while the databases have edit functions in place that are intended to prevent the entry of nonconforming data (such as the entry of a community name in a street address field), the functions are not preventing incorrect or incomplete entries.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: William B. Shear Team: Government Accountability Office: Financial Markets and Community Investment Phone: (202) 512-4325GAO-05-288R, Information Resource Management Internal Control Issues
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United States Government Accountability Office:
Washington, DC 20548:
March 10, 2005:
The Honorable Russell T. Davis:
Administrator:
Rural Housing Service:
U.S. Department of Agriculture:
1400 Independence Avenue, SW:
Washington, D.C. 20250-1300:
Subject: Information Resource Management Internal Control Issues:
Dear Mr. Davis:
In a recently completed report for Chairman Robert W. Ney, we evaluated
how the U.S. Department of Agriculture's (USDA) Rural Housing Service
(RHS) makes eligibility determinations for its rural housing
programs.[Footnote 1] As part of that review, we used 2000 census data
to determine the populations of the rural areas that received RHS
housing program loans and grants. We obtained information on the RHS
loans and grants provided to communities, from October 1998 through
April 2004, from databases maintained by USDA's Information Resource
Management (IRM) in St. Louis, Missouri. As with any system, the
accuracy of the data and the process used for entry affects reliability
and usefulness for management and reporting purposes. During our
review, we identified several issues that raised concerns about the
accuracy of the information in the IRM databases. For example, while we
originally intended to geocode (that is, match) 5 years of the national
RHS housing loan and grant portfolio to specific communities, the time
needed to ensure the reliability of the data required us to limit much
of our analysis to five states (Arizona, California, Maryland,
Massachusetts, and Ohio).
This report is a follow-up on our report to Chairman Ney, and its
purpose is to discuss the implications of the data issues for your
management and reporting functions. In this report, we describe (1) the
types of inaccuracies we encountered with the RHS data and (2) what, if
any, reviews and systems controls are in place to detect or control
database errors. We also make recommendations intended to improve the
accuracy of RHS loan and grant databases.
To meet these objectives, we contacted officials at RHS headquarters.
In addition, we spoke with state office and St. Louis, Missouri IRM
officials to discuss procedures used to record and check the
information entered into the Dedicated Loan Origination and Servicing
System, Guaranteed Loan System, and the Multifamily Housing Information
System databases; reviewed RHS documents and plans regarding databases
system improvements; and applied GAO's standards for internal control.
We conducted our review from November 2004 through January 2005 in
accordance with generally accepted government auditing standards.
Results in Brief:
Our analysis of information in USDA's IRM loan and grant databases
raised concerns about the accuracy of the databases. In reviewing
29,000 records for five states we found incorrect, incomplete, and
inconsistent entries. For example, over 8 percent of the community
names or zip codes were incorrect. Additionally, inconsistent spellings
of community names distorted the number of unique communities in the
database. More than 400 entries lacked sufficient information (i.e.,
street addresses, community names, and zip codes) that are needed to
identify the community to which the loan or grant had been made. As a
result, some communities served by RHS were double counted, others
could not be counted, and the ability to analyze the characteristics of
communities served was compromised.
Because data from these systems are used to inform Congress, senior
agency management, and the public about the reach and effectiveness of
RHS programs, eliminating erroneous data will help ensure that key
decisions and analyses are reliably supported. However, we found RHS
lacks appropriate reviews and database entry processes that could
prevent or detect inaccurate or incomplete data in its normal course of
business. For example, RHS does not have procedures for second-party
review of the data in IRM systems. Moreover, while the databases have
edit functions in place that are intended to prevent the entry of
nonconforming data (such as the entry of a community name in a street
address field), the functions are not preventing incorrect or
incomplete entries.
Background:
The federal government has provided housing assistance to eligible
residents of rural America since the 1930s. Over time, Congress has
expanded the eligibility categories and changed population limits for
determining what areas are eligible for the programs. Currently, the
Housing Act of 1949, as amended, sets forth eligibility criteria
requirements for rural housing programs. Communities with population
levels up to 25,000 may be determined eligible, but as a community's
population increases, the statute imposes additional requirements that
include being "rural in character," having a serious lack of mortgage
credit, or not being located in a metropolitan statistical area (a
county or counties associated with a core urbanized area of 50,000 or
more people). RHS uses judgment to make decisions on what areas are
"rural in character" and uses population as the primary factor in
determining eligibility.
IRM Inaccuracies Include Incorrect or Incomplete Data Fields and
Inconsistent Entry of the Same Data:
During our review of records for five states, we identified errors and
inaccuracies that included incorrect, incomplete, and inconsistent
entries. The level of inaccuracy in the records we reviewed raises
questions about the accuracy of the IRM databases as a whole. For
example, when we attempted to geocode the loans and grants on a
nationwide basis, we found that about 7 percent of the community names
or zip codes within the databases were incorrect, while about 8 percent
were incorrect in the five states. Additional inaccuracies we
identified included:
* Community names were not spelled uniformly throughout the databases.
While many communities were identified consistently in the three
different databases, in numerous instances the same community names had
different spellings, and thus were counted multiple times. Initially,
from 29,000 records, we identified 3,222 unique communities in the five
states that received loans and grants. After we corrected for the
variations in the names, the number of unique communities decreased by
208 to 3,014. If such inaccuracies occurred at the same rate for the
rest of the states, RHS would be significantly overestimating the
number of communities it served.
* In many cases, so little information was available that we were not
able to identify the communities that had received loans or grants.
Thus we could not identify recipients of more than 400 RHS loans or
grants because the databases lacked information on the street address,
name of community, and zip code. Since population is the primary factor
in determining eligibility, questions arise as to how RHS management
can evaluate eligibility decisions without sufficient information to
identify the community where a loan or grant was made.
* In some cases the communities listed were not officially recognized
as "places" by the Census Bureau (Census). According to Census, a
"place" is a concentration of population either legally bounded as an
incorporated place or delineated for statistical purposes as a Census-
designated place. If the community listed is not a recognized "place,"
RHS management would not have census information available to evaluate
eligibility determinations. For example, Miller, Maryland, was listed
in the RHS data as a community receiving a loan. However, an Allegany
County (Maryland) Boards and Commission staff member stated that to the
best of his knowledge, Miller was never a town, only a farm. We also
found a listing for Central Valley, California, which should have been
listed as Shasta Lake, California--Central Valley has been part of the
incorporated city of Shasta Lake, California, since 1993.
* Community names were sometimes listed in the wrong field. For
example, in the Guaranteed Loan System database, we found the community
name listed in the street address field for 73 loans or grants.
Improved Internal Control Would Allow RHS to Better Assess and Verify
IRM Data:
On the basis of our review, we determined that RHS lacked sufficient
internal control to ensure the accuracy of IRM data and to help
decision makers reliably assess whether RHS is meeting its
accountability goals and strategic and annual performance goals.
According to GAO's Standards for Internal Control in the Federal
Government and related documents, an agency's system of internal
control should include appropriate measures designed to ensure the
validity, accuracy, and completeness of the data in agency systems and
that erroneous data are captured, reported, investigated, and promptly
corrected.[Footnote 2]
The controls that RHS has implemented to ensure the completeness and
accuracy of its databases do not appear to be sufficient. According to
one senior RHS administration official, entering correct loan and grant
data at the field level has been a continuous and frustrating problem.
The official noted that field staff responsible for entering data do
not recognize the importance of uniformly recording correct and
complete data. One agency control for helping to ensure that data are
correct would be to include a second-party review of the data. However,
RHS said that they do not have procedures requiring that the data
entered into IRM systems at state and local levels undergo such a
review.
Although there is no second-party review, according to USDA's Fiscal
Year 2004 Annual Plan, the databases RHS uses do contain a variety of
"edits" to minimize the risk of inaccurate data input. Staff in state
offices we visited said that the types of errors we found would have
been caught if the edit functions that are built into the systems had
worked as intended. For example, we should not have found key fields
left blank or street address information in the community field and
vice versa. These officials agreed that the high number of
nonconforming data entries we identified indicated that an assessment
was needed, particularly to determine if the edit functions were not
detecting the errors or if RHS staff were overriding the edits.
Since these data form the basis of information used to inform Congress
(and the public) about the effectiveness of RHS programs, data accuracy
is central to RHS program management and the ability of Congress and
other oversight bodies to evaluate the agency and its programs. The
agency has worked to improve its management information systems (e.g.,
since 2002, the agency has spent $10.3 million to improve its
management information systems including developing single and
multifamily program data warehouses, which were designed to improve its
reporting capabilities); however, the system still relies upon
information collected and entered from state and local field offices.
Unless steps are taken to ensure that the data entered into the systems
are accurate, simply upgrading the systems will not result in correct
information.
Conclusions:
In reviewing RHS data for selected states, we identified various errors
that raise questions about the accuracy of the databases in their
entirety. Although the agency is making efforts to improve its
management information systems, our findings suggest additional
measures could ensure more accurate data entry and reporting,
particularly at the field level. In addition to improving the accuracy
of the information, such an effort could ensure that RHS's investment
in system upgrades would provide more meaningful and useful information
to the agency, Congress, and the public.
Recommendations for Executive Action:
To improve data entry and accuracy and, in turn, better ensure accurate
internal reporting and reporting to Congress, we recommend that the
Administrator, RHS, take the following actions:
* Issue an Administrative Notice to field management and staff
explaining how data are used for management and reporting purposes and
advising them of the need to establish a second-party review to help
ensure that data in the three IRM databases are accurate and complete.
* Require that each state office correct errors in existing information.
* Take corrective action to ensure that system edit functions are in
place and properly functioning.
Agency Comments and Our Evaluation:
We provided a draft of this report to USDA for review and comment. The
Acting Undersecretary for Rural Development wrote that USDA recognizes
that accurate and complete loan and grant address data are a critical
component and management resource for its single-family and multifamily
housing programs and emphasized the importance of correctly inputting
the initial address information for loans and grants in the IRM systems
to ensure precision and uniformity. In response to our recommendations,
the Acting Secretary agreed to (1) issue an Administrative Notice to
field management and staff explaining the importance of entering
accurate and complete data into the three loan and grant databases and
establishing a second-party review of address data input, where
necessary; (2) correct existing address information identified as
incorrect in the databases, if possible; and (3) where needed, enhance
system edit functions so that input errors can be curtailed or
eliminated (as budget resources permit).
We are pleased that USDA agrees with us on the importance of accurately
entering loan and grant data and having effective system edit
functions, as well as acting on our recommendations to achieve those
goals. However, the qualifications used in the response raise some
concerns. First, GAO's internal control standards require that design
features contribute to data accuracy and that erroneous data are
captured, reported, investigated, and promptly corrected. Until USDA
can demonstrate that its edit functions or other data entry design
features can ensure the accuracy and completeness of the data in the
IRM databases, second-party review would be necessary. Second, based on
our assessment of the problems with the data systems, it does not
appear to us that fixing them as recommended should require a
significant level of additional resources. USDA's complete written
comments appear in the enclosure.
We are sending copies of this report to the Chairman, Subcommittee on
Housing and Community Opportunity, House Committee on Financial
Services, and other interested congressional parties. We will make
copies available to others upon request. This report will also be
available at no charge on GAO's Web site at http://www.gao.gov.
This report was prepared under the direction of Andy Finkel, Assistant
Director. Other major contributors included Mark Egger, Richard LaMore,
Barbara Roesmann, and Thomas Taydus. If you have any questions about
this report, please contact me at shearw@gao.gov or Andy Finkel at
finkela@gao.gov or either of us at (202) 512-8678.
Sincerely yours,
William B. Shear:
Director, Financial Markets and Community Investments:
Enclosure:
Comments from the Department of Agriculture:
DEPARTMENT OF AGRICULTURE:
OFFICE OF THE SECRETARY:
WASHINGTON, D.C. 20250:
FEB 25 2005:
William B. Shear:
Director, Financial Markets and Community Investment:
United States Government Accountability Office:
441 G Street, NW:
Room 2A10:
Washington, DC 20548:
Dear Mr. Shear:
Thank you for providing the United States Department of Agriculture
(USDA), Rural Development, with your draft report entitled Information
Resource Management Internal Control Issues, Report Number GAO-05-288R.
For your consideration, Rural Development offers the following comments
on the draft report and requests that a copy of these continents be
included in your final report.
The draft report indicates that Rural Development's data systems were
difficult to use for geocoding information. The systems Rural
Development uses for its loan and grant databases capture basic address
information, like street address, town or city, and zip code.
Historically, the address information has been used for certain
reporting and mailing purposes. The purpose of the address information
in the systems is not for geocoding it to designations such as census
tracks or Metropolitan Statistical Areas. While geocoding is
increasingly relied upon for program reporting purposes, Rural
Development's data systems may have some limitations in this regard
since only primary address information is captured. For instance, the
systems do not identify a loan or grant to a specific census track.
Census tracks are a common element useful for geocoded type reporting,
and had our systems included this information, it may have provided
useful information to the Government Accountability Office.
Nevertheless, Rural Development recognizes that accurate and complete
loan and grant address data is a critical component and management
resource for its Single Family and Multi-Family Housing programs. It is
important that the initial address information for a loan or grant
input into the Dedicated Loan Origination and Servicing System, the
Guaranteed Loan System, or the Multifamily Housing Information System,
be done carefully to ensure precision and uniformity.
Rural Development will issue an Administrative Notice to field
management and staff that explains the importance of entering accurate
and complete data into the three loan and grant databases, and for
establishing a second-party review of address data input, where
necessary. Existing address information identified as being incorrect
in the databases will be rectified, if possible. Where needed, Rural
Development will enhance system edit functions so that data input
errors for address information can be curtailed or eliminated. Any
needed system enhancements will be given high priority; however, the
enhancements would be dependant upon the necessary budget resources to
complete the necessary development and implementation.
Rural Development is committed to the future of rural communities, and
intends to continue improving the opportunities for decent, safe, and
affordable housing in Rural America.
Thank you for the opportunity to comment on the report. If you have any
questions, please contact John M. Purcell, Director, Financial
Management Division, at (202) 692-0080.
Signed by:
GILBERT GONZALEZ:
Acting Under Secretary:
Rural Development:
[End of section]
(250225):
FOOTNOTES
[1] GAO, Rural Housing: Changing the Definition of Rural Could Improve
Eligibility Determinations, GAO-05-110 (Washington, D.C.: Dec. 3, 2004).
[2] GAO, Standards for Internal Control in the Federal Government, GAO-
AIMD-00-21.3.1 (Washington, D.C.: November 1999) provides guidance to
agencies to help them assess, evaluate, and implement effective
internal controls that can be helpful in improving their operational
processes and GAO, Internal Control Management and Evaluation Tool, GAO-
01-1008G (Washington, D.C., August 2001) assists agencies maintain or
implement effective internal control and, when needed, helps them
determine what, where, and how improvements can be made.
