The Daily Signal - How to Transform a Massive Government Agency: Lessons From a Trump Appointee

Episode Date: January 3, 2022

Shortly after taking office as secretary of the U.S. Department of Housing and Urban Development, Dr. Ben Carson recruited a retired finance and strategy expert to become the agency’s chief financial officer. Irving Dennis, appointed by President Donald Trump in late 2017, stepped into the job and quickly discovered the mess he inherited. Dennis spent 37 years at Ernst & Young, a major accounting firm. He would use that private-sector experience to fix HUD. In a new book, “Transforming a Federal Agency: Management Lessons from HUD’s Financial Reconstruction,” Dennis recounts the roadblocks he faced at HUD and the bureaucratic barriers he overcame to set the agency on a better course. His story shows there’s an alternative to the financial mismanagement that plagues federal agencies—and how he fixed one of them. Dennis spoke to The Daily Signal about his experience. Read a lightly edited transcript on DailySignal.com or listen to the interview on “The Daily Signal Podcast.” Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Daily Signal podcast for Monday, January 3rd. I'm Virginia Allen. And I'm Rob Bluey. Happy New Year. We're so glad to be kicking off the Daily Signal podcast for 2022 with a conversation featuring Irv Dennis. He's the former chief financial officer at the U.S. Department of Housing and Urban Development, an author of a new book, transforming a federal agency, management lessons from HUD's Financial Reconstruction. We also read your letters to the editor and share a good news story.

about how one organization is changing the lives of women experiencing crisis pregnancies. As we begin the new year together, Virginia and I want to tell you about our favorite way to get the news every morning. It's called the Morning Bell. And each weekday, the Daily Signal delivers the top news and commentary directly to your inbox for free. You'll be able to read about the policy debates, shaping the agenda, analysis from Heritage Foundation experts, and commentary from leading conservatives like Ben Shapiro, Dennis Prager, and Cal Thomas. It's easy to sign up. Just visit DailySignal.com and click on the connect button in the top right corner of the page. We'll start sending you the morning bell tomorrow. Now stay tuned for today's show. Coming up next.

We are joined on the Daily Signal podcast by Irving Dennis. He's the former chief financial officer at the U.S. Department of Housing and Urban Development and the author of a new book, Transforming a Federal Agency, management lessons from HUD's Financial Reconstruction. Irv, welcome to the show. Thank you. Thank you for having me, and I look forward to our conversation. Well, I've had the opportunity to interview Dr. Ben Carson,

HUD's former secretary, twice on this program, and I've heard stories from him and others about the reforms at HUD. So before we dive in, just take a moment to explain to us what HUD is, who it serves and your role there. So HUD is a cabinet level agency. as you know, and we primarily serve to make sure that there's affordable housing to the underserved, if you will. It's a very complex organization. There are, I guess, about 40 different programs, Rob, and it also includes FHA and Jenny May, which supports the housing markets for those in need.

It's a complex agency. I was brought aboard to assist in the Reconstruise, constructing their financial infrastructure, if you will. They were without a CFO for a lot of years, and they had a lot of material weaknesses, and I really appreciate the opportunity to work with Secretary Carson and helping transform the agency from a financial standpoint, as well as from a digital and IT modernization standpoint. Irv, let's go back to 2018. What was the situation like there when you first arrived?

So when I arrived, they had not had a CFO of serious consequence for about eight years. There was a person that the prior administration had nominated. Unfortunately, passed away in office, and they had not replaced this. So it was basically without a CFO. And without a CFO, you saw a deterioration in their financial infrastructure. They had nine material weaknesses. They had four disclaimers in the audit. and it's not to bore the audience with the definition of material weaknesses and disclaimers.

But think of it as 13 areas in the financial infrastructure that could not be audited and they did not have significant or controls in place to properly account for the flow of funds through the agency. In addition, there are multiple financial reporting aspects that come out of the federal government between the Gone Act and the Data Act and other financial reports that HUD was not in compliance with. So basically think of it as all the financial reporting that's required of a cabinet-level agency. HUD was not in compliance with any of them. So, you know, it's interesting when you think about that compared to the private sector, and, you know, I spent 37 years with Ernst & Young, so I had a strong sense of,

and I was an audit partner with Ernstead Young, so I have a strong. sense of financial controls and financial discipline and what excellent looks like in that area. And HUD just wasn't in compliance with any of it. So I knew we had a big hill to climb to transform the agency from getting the financial infrastructure in place that you would expect of a large agency. Well, Irv, I'm curious how it got so bad to the point that you just described, but also how you were able to transform this massive government department in just a few short years. Yeah, it's a good question. And my book addresses a lot of that. My book does go through the complexity of HUD. And, you know, my book talks about what qualified me for the position.

And when you think about how it did get this bad, I do dedicate a chapter to that. And I think of two broad things, the lack of leadership, you know, without a CFO at the helm driving financial excellence, you will see a deterioration in the infrastructure. That happens in the private sector as well, and that's sort of what happened at HUD. The other big difference is there's, you know, there's really a sort of a lack of accountability. In the private sector, if you have material weaknesses in areas that are, you can't audit, and you have disclaimers in the audit, But your shareholders and the other stakeholders of that private entity does not allow that to happen. You've got to get that fixed pretty quick or else you'll lose the confidence of those folks

and they will not invest or support the entity. You know, you don't have that. That dynamic is different in federal government. You know, there's plenty of oversight between the GAO, Congress, and OMB, but there's really no teeth to force accountability. So I think with the lack of leadership and the lack of accountability, the deterioration happened and was there. And your question of how do you make that switch and how do you turn it around? It's a good question, and I spent a lot of time on that in the book. And I think it of it a 10-stage process.

You know, we had leadership. I brought the discipline of a vision and how to fix it and how to transform it. So we have leadership. And I spent a lot of time when I was in the private sector as an audit partner, I spent a lot of time evaluating governance, evaluating people, process, and technology. And within those four areas, if all of those are working well in a private company, they will work, the company works well. You've got a good discipline.

You've got good financial infrastructure. You have good controls. And you have confidence that all of the wheels are turning properly. So I spent a lot of time studying governance, people, process, and technology while in my first hundred days. And quite frankly, all those areas needed homework. So once I spent some time learning the business, developing relationships, developing my own credibility, and working closely with our people within the CFO shop, we put a governance process in place. Like I mentioned, HUD has about 40 different programs, FHA and Jenny May, and everyone is working in a bit of a silo.

So most important thing I did initially was break down those silos and have everyone working together with one HUD in mind versus everyone operating their own individual businesses. We spent a lot of time on improving process. We spent a lot of time on the technology side. We introduced artificial intelligence, robotics, digital analytics, digital analysis, and brought in some of the IT modernization that you see. see in the private sector, we brought that to bear at that HUD. We spent a lot of time on the people side trying to have people think differently about what HUD can be by introducing these new processes and new concept, and it was actually ended up being quite successful. We spent a lot of time on the audit process. There was a real disconnect between a working relationship

between the auditors and HUD. I spent a lot of time making sure that relationship was improved, and that was also a big part of our success. We also spent a lot of time on enterprise fraud and risk management. That was an area that needed some homework, and we had a great team in place, and putting that discipline throughout HUD was also very helpful to us. Irv, you mentioned your role.

You spent 37 years at Ernst's. and Young, a major accounting firm. It seems that an important part of this transformation was your own background in the private sector. What did that experience teach you about transforming HUD? Yeah, it's a good question, Rob. And I actually addressed this in my book. Before I took the role, my initial interview

with the chief of staff and Secretary Carson, I had just retired, was running 130 miles an hour for 37 years. I was actually scheduled to teach at OSU. I live out in Columbus, Ohio. And I didn't think I wanted to jump into something as full-time as a CFO of a complicated cabinet-level agency. But they kept calling every few weeks, and I talk about this in the book, the process of getting into the role. And I really did some soul-searching. You know, am I qualified to jump into this role and make a real difference?

And, you know, at Ernst & Young, spending 37 years, I worked on large public companies. Some of my clients that I was a coordinating partner on included McDonald's and Abbott Labs and large global companies. So when you're not a partner, you do develop an awful lot of knowledge on business processes, on business technology, financial controls, internal controls, and corporate governance. So I felt confidence after some reflection that my experience at EY prepared me to step into a CFO role and really make a difference and help turn the agency around. Public accounting and the big four accounting firms and even the big kind accounting firms really do prepare you for taking on bigger roles outside of the auto profession. And so my experience of understanding governance, understanding financial excellence, if you will, was gave me the confidence to do this. You mentioned how you were not necessarily eager to jump into a complicated situation like this.

And yet Dr. Carson must have persuaded you to come out of retirement to take this job. Was there a particular motivation, public service, serving noble individual and secretary like him that ultimately decided, you decided that it was worth your time and investment? Yeah, it's a great question. I also discussed that in the book too. And my goal in retirement was to do meaningful work and give back. I grew up a very humble beginnings and I really enjoyed my career and it provided myself and my family a lot through the last 37 years. So I really wanted to give back into a meaningful work. And that's what teaching was going to be at Ohio State.

But meeting with Secretary Carson and his vision and his calm demeanor in his very intellectual way, he said, we have an opportunity here to make a difference in the American lives. And he came out of retirement to do this as well, and that was very inspirational to me. So every time he called, the juices flowed a little bit. And my wife said, every time they call, I see the excitement of your eyes. So let's just make this happen. So she gave me the permission to come out of retirement. And working with the team, it was a great team.

And just being around him is very inspirational. And he actually, you know, he gave me the courage. He said, you'll bring a lot of great experience here. And we'll all work together and make a big difference. And that's sort of what happened. He's a great man. I had the opportunity to see him just a couple of weeks ago on the Armstrong Williams show. And I still look up to him as somebody who is a great public servant and has really done an enormous amount of good for Americans in our country as a result of not only his service under President Trump, but prior to that as a brain surgeon. Irv, let me ask you this, because others have said that these problems that you were trying to address just couldn't be fixed.

I'm curious, when you arrived at HUD, what was the culture like there, maybe among the civil servants or some of the other political appointees you were serving with? Yeah, you know, I think the culture was such of everyone kind of doing their own thing and their own silos, and each program operated on its own. And I would say the morale in the CFO office was low. I mean, they felt like they were getting beat up on for several years. And I said to our team, I said, look, we're getting, the CFOs taking all the heat. But a lot of these issues stem from the programs controls and processes. And the programs were doing their own thing without any real oversight from the CFO office. So part of the transformation that I talk about in the book is having strong governance and strong oversight.

And I said to our CFO team, we need to have a controllership function, like you would, in the private sector, that oversees each of the programs, FHA and Jenny May. We need to be working together. And if they're making changes within their business processes or the controls, the CFOs should. be aware of that and almost approve it and make sure that the numbers are being rolled up properly with proper accounting. So it was really the governance and this and giving the CFO team the confidence to go out and have that oversight and be able to make those decisions and and provide that working relationship was a big part of the big part of the success. So, you know, and also getting everyone to think differently about IT modernization and bringing in robotic RPA, robotic process programs

and doing the IT modernization that goes on in the private sector was very helpful to us. And we started small. We had an RPA process that we took an accrual or accounting process that took 2200 hours. We applied some robotics to it. It brought that down to 65 hours. So we had 2,100 hours that we could devote to improving other processes versus just moving numbers around. And once we planted that seed within our team, you can see the energy start,

and you can see people's mind start to explode with ideas of how we can make this more efficient and better and effective. And that created a lot of energy within the CFO office. That was exciting to see. So the morale was low at first, and we got that turned around in three and a half years. You write in the book, which is called transforming a federal agency, about some of the roadblocks you faced at HUD. It clearly wasn't easy to overcome some of the bureaucratic barriers, as you've just explained to us. Looking back now, what are you most proud of accomplishing?

I think a couple of things. I'm probably most proud of changing the culture in a way that people were energized to work. We took our employee survey scores, which the government monitors pretty closely. And the CFO shop was really low, was the lower quadrant of the federal agencies at large, and it was last at HUD. And by the time we finished in my final year, we were leaving. at HUD and we were also in the upper quadrant of the measures that the federal government monitors.

So that change in morale was really, really something I was very proud of and proud of our team. I think we also changed the mindset of people thinking differently and knowing what can be. And getting a clean audit opinion for the first time in eight years was something. something I was also very proud of. And the reason that is, because it just gives people within the CFO shop and HUD at large a feeling of pride that their work mattered. We were able to make changes.

And you just feel better about your work when you get a good scorecard at the end of the day. You bet. Yeah, absolutely. Now, several years ago, Er, have I covered the EPA's creation of an Office of Continuous Improvement? That's the Environmental Protection Agency. I'm just curious, was there any competition among federal agencies during the Trump administration when it came to improving their performance and doing the things you were able to do at HUD?

You know, it's a good question. I don't know the answer to that from a standpoint of I was so laser focused on what we were doing at HUD that we were starting at the very bottom of the ladder. and we needed to get us to, one, an even keel with other agencies. And then when we did the IT modernization, maybe that put us, it became a leading, or best practice in many of our processes and procedures. So I don't know that I felt necessarily competitive, but I was really focused on improving HUD and getting us to where I knew they could be, where they could be.

Now, you were recognized for your accomplishments, winning awards. now writing this book about where are you able to go and improve things. But my question is, will the changes you made stick? So often we hear about the good work that was done, only to have the next administration come in and undo it. So what's the outlook today? Yeah, I actually did dedicate a chapter to the book on, you know, what makes it sustainable.

And, you know, it's every time you reach your goal, you've got to think about the next thing and keep moving and keep improving. So making a sustainable starts, in my view, and I mentioned I do address this in the book, keeping the governance structure in place. And that can be difficult in government because unlike the private sector where the executive team and the leadership team doesn't change that often. You'll have a change of a CEO. You'll have a change of a couple of board members. You may have a change of a CFO, but by and large, the culture is there, the strategy is there, and 90% of the leadership team is there.

And government is very different. You've got a different dynamic in that every four to eight years, you're wiping out all of the politicals and a whole new leadership team. You're coming in with perhaps a new agenda and a new strategy. So the governance structure, keeping that in place or getting it ramped up quickly, I think, is very. is very important to making it sustainable. I think the controllership function with the oversight from the CFO office, which can be done at the career level, I think is very important to keep in place. You know, I think the developing the workforce of the future is really important within government at large,

not just at HUD. I do think in the private sector, the workforce is a little more ahead of the government workforce. in getting ready for this digital age that we're in. Continuing the program of the RPA and the digitalization is very important to continue the progress. We used the shared service center. We improved that while I was there. I think there's more opportunity to utilize the shared service center that comes out of Treasury. That'll be very important to expand that. We were doing a lot of customer experience and call center to make it easier for the people that were you

serve to work with HUD there was more work to do in that area and I hope that continues and then the whole data analysis and analytics and those initiatives I think will be really important to continue and if I you know I my my team was aware of the vision and the roadmap and I'm hopeful that that will continue and But I do dedicate a chapter of that in transforming a federal agency in my book because I think it is so important that, you know, some of that infrastructure stuff is hopefully gets embedded into the process that doesn't fall apart later on. Well, Irv, as we as we wrap up here, would you encourage people to take a job in government based on your experience? And if they did follow in your footsteps, what advice do you have for them? You know, I actually spend a lot of time in my book talking about opportunities working inside the, inside federal government.

And I'm sort of embarrassed to say this, that I wasn't expecting the quality and the dedication of the federal workforce to the mission at hand. There are a tremendous amount of smart people. The people work very hard. It's a story that doesn't get told too often, so I spent a lot of time my book talking about that. I would encourage anyone that has an appetite and a desire to work inside the federal government to do so. And I think of myself that if I had spent two or three years working in the executive branch, understanding how laws are passed, how policy is made, and how the regulatory environment works, I would have been a better advisor to my clients.

And then conversely, if everyone in government on the infrastructure side had two or three years in the private sector knowing what financial excellence looks like, I think our government would be better. But I spent a lot of time talking to college students, and I put onto my agenda speaking about the opportunities in the federal government. There's not a industry that's not touched by government. you can move around pretty easily within agencies. So I think it's a tremendous career opportunity. And I didn't have that perspective before I went into, before I worked at that HUD. But I certainly do now, and I've become a big fan of what a meaningful career path

that could be working inside of government. Thank you for your public service, sir. We appreciate it. And finally, you're now working at the American Cornerstone Institute with Dr. Carson again. Can you tell our listeners about the organization and how they can learn more about it? Sure.

So we have a tremendous website. It's called American Cornerstone Institute, as you said. Secretary Carson wanted to set up this not-for-profit to promote the principles of our founding fathers and of our nation and have the discussion in a nonpartisan civil way. and the pillars are faith, liberty, community, and life. And we have a great website that talks about our programs and what we're doing. And there's about six or seven of us from HUD that are working with Secretary Carson on this.

And we want to where we're not only doing op-eds and quarterstone conversations with talk about matters that are important in today's society within our four pillars, But we're also developing educational programs. We started The Little Patriots, which is educational programs for kindergarten through fifth grade. And we'll expand that as we grow. And again, it's talking about why America matters and promoting founding principles of our nation. We're also working on a program within our more perfect union agenda. And what we're doing there is we're developing a college certification course to educate people that are interested.

did in the executive branch, talking about the confirmation process, talking about getting a job within the executive branch, talking about how the executive branch interacts with the legislation and judicial branch. So we're excited about that, and we'll be launching that sometime in early spring next year. But it's a great group of people. We're working hard. We had a very successful first year, and Eric and Cornerstone Institute.com, and you can see all about what we're doing and where we are. Irv Dennis, thanks so much for your leadership, not only there today, but also in the past at HUD.

I certainly appreciate learning more about how you were able to transform this big government agency. Again, the book is called Transforming a Federal Agency Management Lessons from HUD's Financial Reconstruction. we'll be sure to leave a link in both the transcript and the show notes for any listeners who would like to learn more about it. Irv, thanks so much. If you're tired of high taxes, fewer health care choices, and bigger and bigger government, it's time to partner with the most impactful conservative organization in America. We're the Heritage Foundation, and we're committed to solving the issues America faces.

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supported Public Policy Research Institute. Start watching now at heritage.org slash YouTube and don't forget to subscribe and share. Virginia, as always, you have a good news story to kick off our week. Over to you. Thanks so much, Rob. It is great to be back and kicking off 2022 with some good news here on the podcast. And as we think about what lies ahead of us in 2022, one of the most significant issues may just be protecting life. In December, the Supreme Court heard oral arguments for a case that could ultimately overturn Roe v. Wade. We will likely find out the Justice's decision in June on that case, but if Roe v. Wade is overturned, many moms facing crisis pregnancy situations, they're going to need help and support. Moms like Michaela, who at the

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Current or expectant mothers are invited to live at the home for up to three years. and are given tools and resources to get back on their feet and receive education and life-scale training. I was so afraid coming here that it would be like rumors of shelters that I had heard. But the fact that I have my own private room, it's really like a house like anyone else is staying in. The Daily Signal recently spoke with Michaela, and she said that what women in a crisis pregnancy like me need the most is safety, but also the feeling of safety. It's not enough that you are safe, that you are in a shelter. It was important for me after I moved in that I felt accepted and emotionally cared for

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They don't feel like they're separated. They are living in a community. They're around neighbors that have children and they're riding their bikes and they have babies and they're strolling. around and so they see that this is the way America is. This is the way your life should be. Kathleen says that at Mary Shelter, we defy that untruth, that we only care about the baby in the womb. We love the baby born and unborn, and we love the woman. If you want to learn more about Mary Shelter and how you can support the work that they are doing, you can visit Mary ShelterVA.org. Virginia, thanks so much for sharing that story about Mary Shelter.

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