Agencies will have to take a test to measure just how ready they are to move their financial management system to a federal shared-service provider.
The Treasury Department’s Office of Financial Innovation and Transformation (OFIT) and OMB will run the tests, which are specifically designed for large agencies, that over the past nine years have been reluctant to use these common services.
“What the test will do is we’ll say, ‘What are the business requirements you have established for your financial system?’ We will compare and contrast them to the requirements of a standard, common, generic shared-service provider. And the closer your requirements are to that generic shared-service provider, the higher score you will get on the test and the more amenable OMB is going to be to propose funding and approve such a system in the President’s budget,” said Danny Werfel, OMB’s controller, in an exclusive interview with Federal News Radio. “The further you are away, the more bells and whistles, the more integrated requirements you are seeking out that makes you very different from a shared service provider footprint, the lower your score will be on the test and the more difficulty you will have in getting support from OMB for that solution.”
He said the message agencies need to understand is OMB’s goal is to have them use simple, non-unique and generic systems for their basic general ledger accounting system.
Werfel said OMB is developing a governmentwide policy that should be out in the next few weeks to formalize how this new process will work. OFIT will develop and initiated the test of agency business requirements.
Multiple benefits from the test results
He said the scores will be helpful for both OMB and the agency.
“They will have insight into these deviations between their systems requirements and a generic shared service provider,” Werfel said. “They and OMB will have to dig deep to understand why these deviations are taking place, are they really that necessary? It’s those deviations that I believe often drive up the cost and risk of our system modernization efforts.”
OMB has been trying to get financial-management systems under control since 2004 when it launched the Line of Business initiative.
Under the LOB program, OMB, the CFO Council and the predecessor to OFIT, the Joint Financial Management Improvement Program (JFMIP) and the Federal Systems Integration Office (FSIO), created standards around financial management systems and data. The administration, under President George W. Bush, then named four federal agency shared-service providers — the Defense Finance and Accounting Service, the General Services Administration, the Interior Department’s Interior Business Center and the Treasury Department’s Bureau of Public Debt.
Agencies were supposed to move to one of these four centers of excellence when their current financial system reached the need for an upgrade. The shared service providers were successful in getting small and micro-agencies to move, but few, if any, large agencies made the jump, and the few that did, found it difficult. Many larger agencies ended up going with private sector providers, including the Labor Department and the Environmental Protection Agency, instead of a federal provider.
Taking a transactional approach
When the Obama administration came into office in 2009, Werfel focused on creating shared services for specific functions of the financial management system such as electronic invoicing or intergovernmental transactions.
In July 2010, OMB also halted new financial modernization programs and put 30 others through the TechStat process to fix long-standing cost, schedule and performance challenges. In the end, the Government Accountability Office (http://www.federalnewsradio.com/548/2783800/OMBs-pause-of-financial-systems-had-little-effect-on-cost-schedule) found the pause on system development had little effect on most of the programs.
First, he said, in 2004 OMB wanted agencies to move their entire financial systems to a provider and integrate all systems through a common architecture, which looked good on paper, but turned out to be too difficult in reality. This approach is focused only on general ledger systems.
“We realized that it was too much change management all at once, it was too much of a technology upgrade that wasn’t aligned well with our organization’s current capacity to manage change and modernize,” Werfel said. “That doesn’t mean you get away from shared service. In fact, it only reinforces that you have to do shared services, but do shared services, we believe, in the way they were intended, which is to hit a common denominator of solutions that are, again, common to multiple agencies.”
When OMB tried to integrate all the different parts of the financial system, it became too complex and agencies tried to customize too much.
Werfel said this time around moving to a shared service provider is all about staying with the basics and therefore should be easier, especially for large agencies.
Low-risk, low-cost alternative
Agencies can match their requirements with those of the shared-service providers—based on OMB’s mandate—and therefore keep their requirements simple and common.
“For them, when they are sitting down to develop their requirements, they’re taking a very similar approach to our smaller and medium-sized agencies and coming with a very generic, basic footprint, very similar to what our shared-service providers are offering,” he said. “That does a couple of things. One, it keeps their solution simpler and therefore lower risk. That also leads to a lower cost solution, and it gives them the opportunity move into a shared service provider more fluidly.”
OMB and Treasury will continue to pursue the transactional programs, such as electronic invoicing, separately from this effort.
All of these efforts, Werfel said, are about giving low-risk, low-cost alternative to agencies to improve their financial systems’ performance.
The new policy and approach to shared services shouldn’t surprise too many people.
“In the area of financial systems, it’s important we go through iterations, talk to the community, talk to the vendor community, both software providers and the integrators, and vet and float different ideas,” Werfel said. “We’ve been out there talking about this concept of testing the differential between agency requirements and a generic shared service provider for some time.”
Under the LOB approach, OMB gave private sector providers an opportunity to compete for work, and many won contracts. Werfel said under the new approach, OMB wants agencies to initially focus on moving to a federal shared service provider, but he hasn’t closed the door on vendor providers.
He said stage one of this initiative is to use the federal providers’ requirements as the benchmark.
“It may be possible that an agency comes back and says they have downsized their requirements and got them very tight — there’s a lot of discipline, making sure there are no bells and whistles — but as we look around at our various options and alternatives, the business case we are putting together consistently points to a private shared service provider and not a government shared service provider,” Werfel said. “If that is the legitimate finding, then I think we will all sleep well at night knowing the agency is choosing the right low-risk, low-cost solution. But at the same time, as part of the discipline, I think it’s very important that agencies closely look at our federal shared service providers as part of that option. We are not yet at that Pareto optimal position in terms of the number of agencies that are leveraging our federal shared service providers, and I want to make sure we get there.”
Tom Temin is the host of The Federal Drive, which airs from 6-9 a.m. on 1500 AM in the Washington, DC region and online everywhere. Tom has 30 years experience in journalism, mostly in technology markets. Before coming to Federal News Radio, he was a long-serving editor-in-chief of Government Computer News and Washington Technology magazines.