Treasury figuring out how the shared services pieces fit into governmentwide puzzle

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Jason Miller | April 17, 2015 6:36 pm

Over the next few months, answers to some of the most pressing questions about how financial management shared services will work must be clarified.

The Office of Management and Budget, the Treasury Department and the CFO Council are trying to plug the holes in the shared services process that thwarted the effort a decade ago.

Whether it’s ensuring the four current civilian agency shared service providers or the new ones OMB expects to name in the coming weeks have the capacity to take on large agencies, or whether it’s the role of the private sector in this latest effort, or whether it’s the process by which Treasury will work with customer agencies to determine which shared service provider is most suitable and make sure there is lasting governance, reducing the amount of uncertainty about how version 2 of financial management shared services will work is among the administration’s top priorities over the next six months.

“We are further along now in creating a repeatable process for [shared services], which I think is really important to having this be sustainable as we work through the next 10 to 12 years, which is what I think is the vision for the [OMB March 2013] memo,” said Beth Angerman, the director of Treasury’s Office of Financial Innovation and Transformation (OFIT), which is the program manager for the financial management shared services initiative.

“What everyone has started to slowly recognize are the great benefits of shared services,” she said. “Why pay for 24 pizzas if we all could order one and just pay for the slice? There is great skepticism. I think you’ve even seen it with the discussion you’ve had with the private sector and what their role will be. So making sure everyone is on board and supportive of the overall initiative, and it’s not just financial management. This whole idea of shared services is becoming a theme, if you will. So we need to make sure we are leveraging the good work and processes that already have been done, because I don’t see it going away.”


In part three of the special report, Shared Services Revisited, Federal News Radio explores how OFIT is putting the pieces in place to create a successful shared services program.

OMB reintroduced the concept of shared services for financial management systems in March 2013. The White House issued a memo creating a federal-first policy when agencies upgrade their financial systems.

Over the last year, OFIT and OMB have slowly been putting the processes together to smooth out some of the long-standing problems.

In the mid-2000s under the George W. Bush administration, OMB introduced this concept of shared services, offering both public and private sector options. Large agencies mostly opted out of initiative, instead deciding to upgrade their systems on their own. OMB said mostly small agencies took advantage of the shared service providers.

But after a series of failed financial management projects at large agencies, and the fact that OMB estimates agencies are spending $8 billion a year for the operation, maintenance and upgrade of these financial systems, the administration decided to push through with another attempt at shared services.

Angerman said this time, the government is in a different place than it was a decade ago.

“I think there are some CFOs who do not want to be in the business anymore of running a system. They want to be able to focus on the data. They want to be able to do analytics. They want better information available to them, more frequently and shift their focus from running a system to being able to use the data to make better decisions,” she said. “What I see most often when I talk to the community is that while they all see the benefits, there is proof in the pudding, and so there needs to be some success, and that’s where we are today.”

A recent Association of Government Accountants survey supports OMB’s belief that this time is different for shared services. The survey found 62 percent of the respondents believe shared services will work in government as a way to consolidate redundant systems and operations, while 34 percent say it will work in a limited way.

“The big take away from that summit and survey is more open communication and more interaction in town hall type settings with all the stake holders is important,” said Carlos Otal, a managing partner with Grant Thornton who helped oversee the AGA summit and survey. “OMB, agencies, Treasury and the private sector can overcome a lot by getting on the same page and figuring out how we will achieve what everyone will say is a valid objective, which is reducing financial management costs and improving the effectiveness of the systems.”

Otal said the more agencies can get on common platforms and use the same configurations and account code structures, the more standard data will be available, which will give agencies the ability to better analyze their financial information and also compare it to other agencies to make decisions.

But before agencies can reap the benefits of a shared, standardized system — which is among the highest rated answers from the AGA survey of what is most important about moving to shared services — Treasury and OMB must detail how the process will work.

Angerman said the first step was to expand the number of federal shared service providers. After a two- round application process where potential providers had to prove their capabilities, OMB and Treasury are expected to name new providers in the coming weeks.

“The landscape is changing. Those that we are used to seeing in this space, it may be changing a bit. As FIT, we are keeping at the forefront of this whole process the idea that we need to make sure the providers that we name can respond appropriately to the demand of the marketplace,” she said. “We got less than a dozen [applicants].”

OMB named Treasury, Transportation, Interior and the General Services Administration as federal civilian providers in 2004. Industry and government sources say GSA is likely to get out of the financial management shared services business, leaving the three legacy providers to be joined by new ones.

While Angerman wouldn’t comment on potential new providers, several industry sources say the Agriculture Department, the Environmental Protection Agency and the Veterans Affairs Department are likely to have applied to be new shared services centers.

Once OMB designates the new providers, OFIT will work with customer agencies on finding the best match. OFIT developed the FIT Agency Modernization and Evaluation (FAME) process, which helps agencies answer a series of questions to find the best match.

Angerman reiterated Treasury and OMB will not mandate agency customers go with specific providers, but they will ensure the match makes sense based on internal and external factors, such as capacity and other customers who are on tap to move.

“We are working with the applicants, the agencies interested in becoming providers, as to what their needs are to be able to operate the level we are expecting a provider to be able to operate. What are the gaps they’ve identified? What are the issues they have?” she said. “We are coming up with plans and recommendations that we will make. In some parts we will need OMB, and in others, there are solutions FIT is working on that we can hopefully help to respond to some of the needs of the providers.”

Industry and other experts say Treasury and OMB must consider giving providers money to prepare for the influx of customers.

Angerman said there are several possible solutions to the need for upfront money to prepare providers but wouldn’t offer any further details on what those solutions may be.

“Everyone hits a limit, and we are working with the providers who applied to understand what their capacity limits would be. But that doesn’t mean we stop. It means you have to then start saying, ‘Is that an opportunity? Is that where the door opens to leverage the great skills the private sector can bring in terms of implementation and integration work?'” she said. “And that’s when I go back to how can we be more powerful if we join together to make this happen and support the initiative.”

Despite the fact that OMB and Treasury are outlining the course of action, the departments of Commerce and Housing and Urban Development and the Coast Guard are in discussions with current shared service providers to move their financial systems this year.

“What we are doing now is looking at the rest of the community and saying, ‘What is the timeline for addressing when we might have to be able to do more than one at a time so we can address the demand?'” Angerman said. “That is part of what sparked us to look at what the limitations may be and how we can address them.”

OMB and Treasury say this move to shared services is expected to take five or 10 or more years, but the long- term goal is to get agencies out of running their financial management systems and focus on their mission.

OMB Director Sylvia Burwell summed up the administration’s view on shared services best at a House Appropriations Committee hearing Wednesday. She said the end goal around shared services is to find the place in government that does the function the best, and let them do it.


Shared Services Revisited

OMB mandates use of shared-service providers for agency financial systems

Familiar questions, few answers so far for OMB’s latest financial systems effort

Financial management providers ill- equipped to take on large customers