Statement Before the House Banking and
Financial Services Committee
by Saul N. Ramirez, Jr.,
Deputy Secretary

Thank you Chairman Leach, and thank you members of the Committee on Banking and Financial Services for including HUD in these proceedings regarding the Year 2000 computer problem. If it pleases the Subcommittee, I would like to have my testimony entered in the record. Thank you.

Let me start by saying first and foremost what I think many of you want to hear from me about the Year 2000, and that is: HUD is ready. HUD's Year 2000 readiness is evident by the A- that HUD received on the last Year 2000 Progress Report Card. To display HUD's Year 2000 readiness, I will focus my following remarks specifically on the areas we were asked to address:

• HUD's application systems status
  
• Business continuity and contingency planning, and
  
• HUD's Year 2000 outreach to its business partners.
  

HUD is proud to announce that it met on or ahead of schedule all of OMB's Year 2000 application systems goals.

• On September 25, 1998, we fulfilled our commitment and completed the Year 2000 renovation of all our computer applications (mission critical and non-mission critical) 5 days ahead of OMB's Year 2000 renovation goal.
  
• On January 28, 1999, HUD completed validation testing and certified our entire application inventory (mission critical and non-mission critical) as Year 2000 compliant 3 days ahead of OMB's Year 2000 certification goal.
  
• On March 31, 1999, we completed the implementation of all of these compliant applications (mission critical and non-mission critical) into HUD's Year 2000 compliant production environment (Hitachi, Unisys, PC/LAN) on schedule with OMB's Year 2000 implementation goal.
  

The point I would like to emphasize here is that HUD addressed its entire application inventory, both mission critical and non-mission critical, within the OMB Year 2000 mandated goals even though OMB focused only on mission critical application systems. HUD will re-certify all major enhancements and date-related modifications to its legacy application systems as well as certify all new applications built during calendar year 1999. HUD uses a standard Year 2000 certification process on all application systems. This includes applications developed in-house and purchased commercially (COTS).

Renovating, testing and implementing our application inventory is the first step in ensuring that HUD's business will continue to operate in the Year 2000. In order to further validate that HUD's business will continue to operate on January 1, 2000, we are currently performing an Integrated Certification Test (ICeT), also known as an end-to-end testing of our 9 most critical business processes:

• Single Family Mortgage Insurance
  
• Multifamily Mortgage Insurance
  
• Title I Mortgage Insurance
  
• Rental Assistance to HUD Approved Agents
  
• Physical and Financial Assessment of HUD Properties Grants
  
• Fair Housing and Equal Housing Opportunities
  
• Mortgage-Backed Securities
  
• Administration and Management Information Systems.
  

In order to properly certify that these business processes will be performed correctly in the new century, the applications that support the 9 most critical business functions will be tested together, as a single unit or process. Applications which interface with HUD's external business partners are included in the ICeT in order to further ensure and encourage the readiness of our data exchange partners. The first step of the ICeT will be a baseline test, where business transactions are executed using baseline FY1999 data. The next step is the forward date test where the system date used for the baseline run and the baseline data is aged proportionately and the business transactions are again executed in a forward date environment. The results of the baseline and forward date tests are compared and any differences are investigated, explained and corrected.

As part of the ICeT, we will perform an automated code review to further determine Year 2000 compliance of our legacy business applications. This second pass will highlight areas of potential risk in the code that may not have been uncovered during the initial assessment and certification testing. This code review will be performed by an independent group of people separate from the code remediators / developers. Overall, ICeT high-level planning is complete and the entire effort is on-schedule to be completed in August 1999.

But, of course, it is not enough for just HUD to be ready. The thousands of banks, mortgage companies, public housing authorities, state, local, and tribal governments with whom HUD does business need to be ready too, or at least to the point where they can continue operations while they complete the necessary changes. While we can't do the work for them, we are providing them with a vital tool� information.

Obviously, remaining in full operation after January 1, 2000, is everyone's goal and HUD is highly confident that the work we're doing on our computer systems as stated previously, will see us safely to the other side of the millennium. The successful operation of HUD's core business functions depends heavily on complex information systems, a wide range of internal and external products and services, and the uninterrupted operation of the major information technology infrastructure. Most of these things are outside HUD's direct control. HUD cannot take for granted that others upon whom we depend will also be successful, or even that we have necessarily fixed every single date problem in our 50 million lines of computer code. Therefore, we have developed 30 contingency plans that support the core business functions previously stated. All of us need to be prepared to continue operations even in the presence of a critical component failure - such as a vital supplier being unable to establish connectivity with a system. We are continuing to refine our business contingency plans on a bi-monthly basis to ensure that processes may continue, or resume in the case of any internally or externally related Year 2000 technology failures, with minimal impact on the customer or the Department.

For each core business function that I mentioned before, HUD's team determined which interruptions in service would cause the greatest consequence to HUD and its business partners if they failed. This list of interruptions includes loss of essential services such as rental subsidy disbursements, loss of income, loss of HUD-owned properties due to foreclosure for non-payment of taxes, loss of ancillary income from investment of direct income, and the ability to conduct fraudulent activities due to HUD systems' inability to perform data analysis. HUD developed specific, detailed steps that the Department will take to work around Year 2000 induced failures like these, including identifying what would cause HUD to initiate a work-around and how we would resume normal operations. Some of these steps or work-arounds are:

• Ordering additional alternative telecommunication phones in December 1999 to be delivered by January 3, 2000, the first business day of year 2000, in the event they are necessary; and
  
• Writing paper checks when necessary if automated procedures are unavailable.

To further reduce negative public reaction should a Year 2000 failure occur, HUD will establish a Y2K emergency response team in conjunction with the Federal Emergency Management Agency (FEMA) that will be available to address the issues and concerns of our constituents and business partners. In addition, Housing Authorities such as Anne Arundel County are planning to have staff on-site on January 1, 2000 to address their tenants' concerns should a failure occur as the year 2000 begins.

HUD is also establishing a weekly status report that will monitor the progress of both the Integrated Certification Test and the Year 2000 Business Continuity Contingency Plans. The status report will be driven by 9 core business functions and will provide Assistant Secretaries with a look at the Year 2000 readiness of their individual business processes.

The next area I would like to speak about today is the extensive Year 2000 outreach program that HUD has undertaken over the past year and a half. The goal of this campaign is not only to raise awareness of the problem in general, but to let our partners know what HUD is doing about it, what they can do about it, and what resources are available to help them.

On March 30, 1999, HUD performed a nationwide broadcast titled "Six Steps to Year 2000 Readiness". The six steps discussed during the broadcast were:

• Form your team;
  
• Identify critical business functions;
  
• Reduce critical functions to individual elements;
  
• Make assessments of individual elements;
  
• Determine schedule and workarounds for critical functions; and
  
• Determine fix solutions for non-compliant elements.
  

Over 2000 individuals from Housing Authorities, Tribally Designated Housing Entities, and Public Housing Authorities viewed this broadcast from 180 sites nationwide. A copy of the video and accompanying workbook are being distributed to over 18,000 of our business partners.

In addition, we've created a brochure outlining the Year 2000 challenge to HUD and our business partners and have posted Y2K information at several sites on the World Wide Web, including information on specific data exchanges with HUD systems. These web sites include HUD's Year 2000 site at www.hud.gov/cio/year2000 and the President's Council site at www.y2k.gov. We've sent Year 2000 awareness letters to our business partners, and we've conducted briefings for groups such as housing authorities and Housing Management Associations, across the nation. HUD's proactive approach has focused on readiness as well as the need for contingency planning. The end recipients of HUD's funding, particularly those with special needs such as the elderly and public housing subsidy recipients, have always been in the forefront of our thoughts and planning.

There is other important outreach work being done collectively by this administration, such as that being done by the President's Council on Year 2000 Conversion, under the direction of Mr. John Koskinen. The Council is made up of representatives of the departments and agencies of the federal government. It is conducting a comprehensive examination of the economic sectors of this country, such as finance and banking, health care, energy, and housing to name a few. The Council is assessing how the Year 2000 problem will impact each of the sectors, and then looking for avenues to get the word out to the businesses and institutions which make up these sectors.

The housing sector is grouped with the Building / Real Estate / Housing Sector which is co-chaired by the General Services Administration (GSA) and HUD. GSA has the lead for the Buildings and Real Estate portion of this sector and HUD, naturally, is spearheading the examination of the housing sector. The housing sector has a substantial impact on the Nation's economy. It affects such areas as construction, building materials, building and trades workers, furnishings, and appliances. HUD is leading an interagency assessment with the Departments of Agriculture and Interior, that is evaluating the housing sector's preparations for the Year 2000. Based on the initial survey results (December 1998), the Housing Sector, as a whole, is aware of the Year 2000 problem, but it is largely unaware of the scope of the problem, particularly when it comes to embedded microchips. There is also an immediate need to define critical milestones for the assessment, renovation, validation, and implementation of mission-critical applications and embedded microchips in order to be Year 2000-ready well before December 31, 1999. Overall, 25 percent of those surveyed have completed work on their mission-critical application systems and 8 percent have completed work on their embedded chips. We have distributed a survey to 14,000 business partners with a response due in April 1999. The results will be available in May 1999. The Housing sector will be reassessed in June 1999.

One item I would like to address that was not included specifically in the testimony agenda, is the desktop software assessment that HUD will perform on its 9,000+ desktop personal computers. This effort will identify desktop software components, analyze their Year 2000 readiness, and provide recommendations and/or solutions if necessary. HUD has chosen to address this area at the end of the Year 2000 project lifecycle, 3rd and 4th quarter of FY1999 due to the volatility of the desktop environment. To date, HUD has leveraged the work of other Federal agencies and relied on vendors' Year 2000 compliance letters due to the pure volume of desktop software components. The desktop operating software was tested during our Year 2000 certification testing.

As I have stated, HUD has taken major steps towards ensuring that our business will operate in the Year 2000 and we will continue to focus on minimizing HUD's Year 2000 risk during this calendar year.

Thank you for your kind attention and I wish you well in the next century.

Content Archived: January 20, 2009