oversight

Resolution Trust Corporation: Stronger Information Technology Leadership Needed

Published by the Government Accountability Office on 1990-07-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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                                                RESOLUTION TRUST
                                                CORPORATION
                                                Stronger Information
                                                Technology
                                                Leadershi,p Needed

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                                                                         141848




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                   United States
                   General Accounting Office
                   Washington, D.C. 20648

                   Information Management and
                   Technology Division

                   B-239796

                   July 23, 1990

                   The Honorable Henry B. Gonzalez
                   Chairman, Committee on Banking, Finance,
                     and Urban Affairs
                   House of Representatives

                   The Honorable Donald W. Riegle, Jr.
                   Chairman, Committee on Banking, Housing,
                     and Urban Affairs
                   United States Senate

                   As you know, the Resolution Trust Corporation and its Oversight Board
                   were established through emergency legislation to expeditiously resolve
                   failed thrifts. The magnitude of this effort is unparalleled in recent his-
                   tory and will likely pose unprecedented management problems. Timely,
                   accurate, and complete financial and operational information on failed
                   thrifts and related assets will be essential in resolving our nation’s thrift
                   crisis. In this connection, the Corporation will have to effectively
                   develop, acquire, and use its automated systems to collect, analyze, and
                   disseminate this information.

                   Because of the importance of information technology in managing the
                   thrift crisis, we reviewed the adequacy of (1) key components of the
                   Resolution Trust Corporation’s information resources management
                   (IRM)’ and (2) the Oversight Board’s role in reviewing the Corporation’s
                   current and planned use of information resources. Appendix I details
                   our objectives, scope, and methodology.


                   As a newly created entity, the Resolution Trust Corporation has had to
Results in Brief   make many difficult operational decisions over a short period of time.
                   Included among these decisions is deciding how best to automate its
                   operations. The Corporation currently relies on existing information sys-
                   tems from other financial agencies, but recognizes that the systems in
                   use today may have to be expanded or replaced to be able to carry out
                   its mission. To help define its information needs and to select appro-
                   priate equipment, the Corporation needs effective IRM leadership and
                   planning.


                   ‘The term information resources management means the process of (1) defining in a systematic way
                   the information needed to effectively accomplish an agency’s missions, goals, and objectives; and (2)
                   managing information resources to efficiently and economically meet the defined information needs.



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                          B-239796




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                          IIowever, at the time of our review, the Resolution Trust Corporation
                          was not adequately planning for its information processing needs. First,
                          it had no senior IRM official to provide overall direction in managing its
                          information resources, Second, it had not defined a strategic IKM plan
                          that describes automation’s role in achieving the Corporation’s mission.
                          Without this plan, the Corporation risks acquiring and implementing
                          information systems that will not support its information needs, priori-
                          ties, or mission objectives. Third, it had not described how planned sys-
                          tems and major organizational components fit together. This increases
                          the risk that the Corporation will acquire inappropriate information
                          technology that will not meet its automation needs.

                          In addition, we found that the Oversight Board-whose role, among
                          other things, is to review periodically the overall performance of the
                          Resolution Trust Corporation-was       not reviewing key decisions relating
                          to the Corporation’s IHM activities. The absence of IKM oversight
                          increases the risk that the Corporation’s planning, acquisition, and use
                          of information resources will not satisfy the overall needs of the
                          organization.

                          The Resolution Trust Corporation has a monumental task and recognizes
                          the importance of effectively managing its information technology. This
                          report includes a recommendation to the Oversight Board to ensure that
                          the Resolution Trust Corporation strengthens the management of its
                          information resources. Corporation officials generally agreed with our
                          findings, conclusions, and recommendations, and are taking correct,ivc
                          actions. Specifically, Corporation officials intend to hire a senior IIZM
                          official to provide leadership to the Corporation’s automation activities
                          and to develop the necessary support structures, including a strategic
                          plan and a systems architecture, to effectively manage the design, devel-
                          opment, and implementation of the agency’s information technology.


                          Our nation is now dealing with the problems caused by the thrift crisis.
Background                Hetween 1980 and 1988 more than three and a half times as many
                          thrifts failed as in the previous 45 years.! In response to this crisis, on
                          August 9, 1989, the President signed into law the Financial Institutions
                          Reform, Recovery, and Enforcement Act of 1989 (Public Law 101-73).
                          The act created the Resolution Trust Corporation to manage and

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                                                ...^^^   _. of the
                                                                ^._thrift crisis, SW Financial Institutions Rrform, Iiccovc~y,
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                          Page 2                                          GAO/IMTEC-90-76Technology Leadership Needed
resolv@ institutions that come under its jurisdiction and to dispose of
any residual thrift assets in a manner prescribed by the act. An esti-
mated 600 thrifts, with assets totalling about $300 billion, are expected
to be resolved by the Resolution Trust Corporation over the next several
years. To carry out this function, the act authorized $60 billion to the
Corporation. According to a senior Corporation official, the Resolution
Trust Corporation had about 3,600 employees as of May 1990, and
expects to have about 6,300 employees by 1991.

The act also created the Oversight Board to provide general oversight
over the Corporation. The Oversight Board consists of the Secretary of
the Treasury, the Secretary of Housing and Urban Development, the
Chairman of the Board of Governors of the Federal Reserve System, and
two independent members. The Board has a staff headed by a president
to conduct its administrative and programmatic operations.

To carry out its mission, the Corporation currently relies on existing
information systems from other financial agencies for the purposes of
financial reporting, savings and loan monitoring, and asset liquidation.
It recognizes that the systems in use today may have to be expanded or
replaced to be able to meet its external reporting responsibilities, such
as providing semiannual financial reports to Congress, periodic reports
of availability and disposition of low income housing to the Department
of Housing and Urban Development, and related semiannual inventories
of real property assets. In February 1990 the Corporation hired a con-
tractor to evaluate its entire reporting requirements and related infor-
mation needs, and to help determine the ability of existing systems or
proposed new systems to satisfy these requirements.




“As used here, the term resolve means to conclude the affairs of a thrift either through the sale of the
institution or the liquidation of its assets.



Page 3                                           GAO/IMTEC9O-76Technology Leadership Needed
                           I%239796




                           responsibilities and was relying on a contractor to evaluate the Corpora-
                           tion’s reporting requirements and information needs. This lack of strong
                           leadership increases the risk that the Corporation’s information
                           resources management will be fragmented and uncoordinated. In addi-
                           tion, the Corporation may not be able to properly evaluate the technical
                           direction of its contractor to ensure that the contractual requirements
                           are satisfactorily completed.

                           According to the Corporation’s executive director, the Federal Deposit
                           Insurance Corporation’s senior IRM official was expected to provide lead-
                           ership to the Kesolution Trust Corporation’s automation efforts. As a
                           related financial agency, the Federal Deposit Insurance Corporation had
                           been providing managerial and technical support to the Resolution Trust
                           Corporation. In addition, the Resolution Trust Corporation was using the
                           Federal Deposit Insurance Corporation’s IKM policies and procedures as
                           guidelines in conducting its IRM activities. However, because these agen-
                           cies’ responsibilities differed, this official realized that the Corporation
                           needed its own senior IRM official and related policies, standards, and
                           procedures. At the time our audit work was completed, Corporation offi-
                           cials had modified the organization’s structure to establish a separate
                           IRM function. These officials also planned to hire a senior IRM official to
                           provide for central leadership of the Corporation’s automation activities
                           and establish policies, standards, and procedures for managing its infor-
                           mation resources.


Strategic Plan Needed to   To effectively manage its information technology, the Resolution Trust
Guide Information          Corporation will also need a strategic IRM plan to guide its automation
                           efforts. Information resources management strategic planning is critical
ResourcesActivities        to focusing an agency’s use of information resources toward achieving
                           the organization’s mission. The strategic planning process should pro-
                           vide the vital link between an organization’s business strategy and its
                           information assets and resources. In this regard, federal policy requires
                           agencies to establish multiyear strategic plans for information
                           resources.” Further, federal guidance suggests that such plans should
                           identify an agency’s mission, relate each automation program objective




                           “Office of Management and Budget Circular A-130, Management of Federal Information Resources
                           (Dec. 12,1985).



                           Page 6                                      GAO/IMTEWO-76 Technology Leadership Needed
that will meet current and future agency needs. By looking at its infor-
mation systems needs from a structured planning perspective and
acquiring a systems architecture that best addresses these needs, the
agency can minimize costly hardware and software acquisitions that
may not achieve the desired objectives.

The Resolution Trust Corporation planned to purchase and use informa-
tion technology without developing a systems architecture. For
example, separate divisions of the Corporation were planning to procure
computer hardware and software before the Corporation’s overall infor-
mation needs were determined as part of a strategic planning process. In
addition, the Corporation was relying upon the institutional knowledge
of a few key employees in acquiring computer equipment without first
defining the Corporation’s functional and data requirements. In dis-
cussing the need for a systems architecture with Corporation officials,
we learned that they were preparing a data dictionary8 and establishing
a data control group to ensure that data are standardized throughout
the agency. While this is an important step, unless it is part of a well-
conceived systems architecture, the agency increases the risk that
lengthy and costly system conversions and replacements may later be
needed to provide managers with timely and complete program
information.

At the time of our review, Resolution Trust Corporation officials
believed that the contractor would provide the Corporation with a sys-
tems architecture. However, on the basis of our discussions, Corporation
officials realized that this was not part of the contract. They agreed
with the importance of preparing a systems architecture before
purchasing or developing information technology. As part of developing
the Corporation’s IRM strategic plan, a senior Corporation official stated
that the new IRM official will ensure the development of a systems archi-
tecture for the Corporation.




"A data dictionary is a centralized repository of information about data such aa its meaning, relation-
ships to other data, origin, usage, and format.



Page 7                                            GAO/IMTECSO-76Technology Leadership Needed
As part of the Board’s planned oversight of the Resolution Trust Corpo-
ration’s information resources management, we recommend that it
oversee the Corporation’s plans to (1) strengthen its IRM leadership; (2)
develop an IRM strategic plan; and (3) develop a systems architecture to
help define the appropriate information technology to meet the Corpora-
tion’s information needs.


We discussed the contents of this report with senior officials of the
Oversight Board and Resolution Trust Corporation, who generally
agreed with our findings, conclusions, and recommendations. We have
incorporated their comments as appropriate. Through these discussions,
these officials explained that to expeditiously establish their operations,
they had much to accomplish in a short period of time. They now recog-
nize the need to move ahead in strengthening the Corporation’s IRM
activities.

We are providing copies of this report to other interested members of
Congress, executive branch agencies, and the public. We will also make
copies available to others upon request.

This work was performed under the direction of Howard G. Rhile,
Director, General Government Information Systems, who can be reached
at (202) 275-3455. Other major contributors are listed in appendix II.




Ralph V. Carlone
Assistant Comptroller General




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                                 B-239793




                        The Resolution Trust Corporation will need to effectively manage its
Corporation’s           information resources to meet the challenges facing it, Integral parts of
Information Resources an information resources management process include IRM leadership to
Need to Be Effectively ption
                          rovide overall direction to an agency’s automation activities, prepara-
                              of a strategic IRM plan that describes how automation will con-
Managed to Achieve      tribute to the agency’s mission, and a well-conceived systems
Its Mission             architecture that shows how individual systems and major components
                                 fit together to satisfy an agency’s needs.4 In other agencies, we have
                                 found that inadequate leadership and planning have often resulted in
                                 information technology projects fraught with escalating costs, long
                                 delays, and elusive benefits.


Leadership Is Essential in       Strong, central leadership by a senior IRM manager with the support of
Managing Information             top management is essential for developing and implementing a work-
                                 able planning process to manage agency automation activities. We have
Resources                        found that most successful automation efforts begin with a senior man-
                                 ager who has both a clear vision of how the agency can benefit from
                                 information technology and a commitment to making this vision a
                                 reality. A senior IRM manager with clear lines of authority, accounta-
                                 bility, and responsibility for managing information resources can help to
                                 ensure that the agency properly defines its information needs and
                                 promulgates consistent policies and guidance to ensure effective, effi-
                                 cient usage of information resources. In this connection, federal law
                                 requires agencies to designate a senior official who will be responsible
                                 for the agency’s information management activities.”

                                 At the Resolution Trust Corporation, we did not find strong, central
                                 leadership in agency IRM activities, nor were there clear lines of account-
                                 ability, authority, and responsibility for managing information
                                 resources. For example, the Corporation had no senior IRM official and
                                 had not developed comprehensive policies, standards, and procedures
                                 for managing, acquiring, and using information resources. In addition,
                                 Resolution Trust Corporation officials stated that the Corporation’s
                                 staff lacked sufficient technical expertise to completely carry out IRM

                                 ‘At a GAO symposium in October 1989, leaders from industry, the Congress, and the executive agen-
                                 cies agreed on several principles to guide the effective acquisition and management of information
                                 technology. These principles emphasize the need for effectively managing an agency’s information
                                 resources, including leadership and planning. For more information, see our symposium report
                                 Meeting the Government’s Technology Challenge: Results of a GAO Symposium (GAO/IMTEC-90-23,
                                 February 1990).
                                 “The Paperwork Reduction Act of 1980, P.L. 96-611, Dec. 11, 1980. Corporation officials said that
                                 this requirement applies to the Corporation.



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                          0239766




                          to this mission, state the objectives in measurable terms, establish pri-
                          orities for the agency’s automation efforts, and describe how the agency
                          will move from existing to planned systems.7

                          The Resolution Trust Corporation had not defined or prepared a com-
                          prehensive IRM strategic plan that contained management’s vision of
                          automation’s role in achieving the agency’s mission, and did not have a
                          planning process in place to prepare such a plan. The Corporation
                          expected a contractor to deliver an IRM strategic plan. We found that the
                          contractor was to provide the Corporation with important planning
                          information such as its reporting requirements and related information
                          needs. However, contractor officials stated and our analysis confirmed
                          that this effort will not deliver critical elements of strategic planning.
                          For example, the contractor was not tasked with providing the Corpora-
                          tion with an integrated plan of action for accomplishing program mis-
                          sions and objectives, or a plan to move from its existing information
                          systems to planned information systems. Consequently, the Corporation
                          risks acquiring and operating costly information technology that may
                          not meet its needs, perform as desired, be cost-effective, or be compat-
                          ible with existing and future Corporation systems.

                          Resolution Trust Corporation officials agreed that the Corporation
                          should establish a multiyear IRM planning process that would include the
                          preparation of a strategic plan. According to a Corporation official, the
                          senior IRM official, when appointed, will ensure that this plan is com-
                          pleted as part of the planning process.


Well-ConceivedSystems     For maximum efficiency and effectiveness, the Resolution Trust Corpo-
Architecture Needed to    ration’s information systems should be planned and developed using a
                          systems architecture that best meets the agency’s information needs. A
Provide the Foundation    systems architecture defines information requirements, flow and system
for Building Technology   interfaces, and shows how individual systems and major components fit
                          together to satisfy an agency’s needs. From a technical standpoint, a
                          systems architecture defines hardware, software, and communications
                          standards (e.g., data communications protocol standards, programming
                          language standards) and characteristics (e.g., software portability,
                          system robustness) that are critical to providing a technical platform

                          7For more information on federal strategic planning guidance, see the Office of Management and
                          Budget, General Services Administration, and Department of Commerce’s jointly issued document, 4
                          Five-Year Plan for Meeti
                          Federal Government, Vo                                                     ‘s Information Technology
                          Issues (GAO/OCG-89STH, November 1988).



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                                                   IS-239796




                                                   Oversight is critical to ensuring that an agency’s planning, acquisition,
The Oversight Board                                and use of information resources will meet organizational needs.
Needsto Oversee the                                Through the Financial Institutions Reform, Recovery, and Enforcement
Corporation’s                                      Act of 19389,Congress has given the Oversight Board certain duties and
                                                   authorities with respect to overseeing the Kesolution Trust Corporation
Information Resources                              and its activities. These duties include reviewing the overall perform-
Management                                         ante of the Corporation on a periodic basis, including its management
                                                   activities and internal controls. Oversight of the Corporation’s IIZM activ-
                                                   ities is among these duties.

                                                   However, we found that the Oversight Board did not oversee key Corpo-
                                                   ration activities related to defining information needs and selecting
                                                   appropriate equipment. The Oversight Board’s operational managers
                                                   believed that information resources management activities were admin-
                                                   istrative rather than managerial in nature and as such were outside
                                                   their oversight responsibilities. As a result, the Board did not conduct
                                                   assessments of the Corporation’s planning, acquisition, and use of infor-
                                                   mation resources. The absence of oversight increases the risk that the
                                                   Corporation’s information resources will not meet its overall mission. In
                                                   discussing the need for such oversight, the acting president of the Over-
                                                   sight 13oard agreed with the need to have the Board oversee the Corpo-
                                                   ration’s IRM activities. In this regard, the Oversight Board asked the
                                                   newly formed Office of the Inspector General, in May 1990, to begin to
                                                   conduct information resources management reviews. The Board also
                                                   plans to designate its vice president of finance to be responsible for
                                                   reviewing the Corporation’s key IRM activities and overseeing similar
                                                   reviews conducted by the Office of the Inspector General.


                                                   As a startup organization, the Corporation faces daunting challenges
Conclusions and                                    and pressing priorities in accomplishing its mission. Since its formation,
Recommendation                                     the Corporation has been making a number of automation decisions
                                                   without establishing the strong leadership and comprehensive IRM plan-
                                                   ning needed to effectively manage its information resources. This lack of
                                                   strong IRM leadership and planning increases the risk that the informa-
                                                   tion technology that the Corporation develops or acquires may not-in
                                                   the end-support     its mission objectives, On the basis of our discussions
                                                   with them, Resolution Trust Corporation and Oversight Board officials
                                                   agreed that the Corporation needs to provide more effective leadership,
                                                   strategic planning, and a systems architecture to manage its information
                                                   resources.




                                                   Page 8                              GAO/IMTEG90-76   Technology   Leadership   Needed
                                                                                  ,
Appendix I
                                                                                      J
Objectives,Scope,and Methodology


              Our first objective was to assess the adequacy of key components of the
              Resolution Trust Corporation’s management of its information
              resources. Specifically, we assessed the adequacy of the Corporation’s
              management of the planned acquisition, development, and use of infor-
              mation resources. This included an evaluation of the Corporation’s IRM
              leadership, strategic plan, and systems architecture to ensure that it
              obtains and uses information efficiently, effectively, and economically.
              Our second objective was to assess the Oversight Board’s role in over-
              seeing the Corporation’s information resources management. We con-
              ducted our review at the Washington, D.C., headquarters offices of the
              Resolution Trust Corporation, the Federal Deposit Insurance Corpora-
              tion, and the Oversight Board.

              To assess the adequacy of the Resolution Trust Corporation’s manage-
              ment of its information resources, we obtained and reviewed documen-
              tation supporting the Corporation’s plans and budgets that described
              how the Corporation was managing, acquiring, and using its information
              resources. We also interviewed officials in the agency’s divisions of asset
              and real estate management, financial operations, and resolutions and
              operations to determine their existing and planned automation efforts.
              In addition, we met with officials at the Federal Deposit Insurance Cor-
              poration to determine the extent of their management and technical sup-
              port to the Resolution Trust Corporation. We also met with the
              contractor who was defining the Corporation’s reporting requirements
              and information needs to assess the extent to which this effort would
              provide the Corporation with a strategic IRM plan. At the Oversight
              Board, we met with officials to evaluate the Board’s role with respect to
              overseeing and assessing the Corporation’s information resources
              management.

              To assess the adequacy of the Corporation’s information resources man-
              agement, we used applicable laws, and federal standards and guidelines
              promulgated by the Office of Management and Budget, the General Ser-
              vices Administration, and the Department of Commerce. In addition, we
              used the management principles that were developed at our information
              technology symposium in October 1989.

              Our work was performed in accordance with generally accepted govern-
              ment auditing standards, from February through June 1990.




              Page 10                            GAO/IMTEG!W76 Technology Leadership Needed
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            II                                                                                                      -
llkjor Contributors to This Report


                        Richard J. Hillma n, Assistant Director
Information             William D. IIades-.,Iv. , Tpc:hnical
                                                  _ _--.-. ~_ Accictant    nirwtnr

Management and          Robert C. Sorgen, kaluator-in-Charge
                        Rajiv S. Gujral, Technical Adviser
Techcology Division,    Tamara J. Haley, Computer Scientist
Washington, DC.
                        Raymond .J. Wyrsch, Senior Attorney
Office of the General
Counsel




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