Financial Management Systems
OMB's Financial Management Line of Business Initiative Continues but Future Success Remains Uncertain Gao ID: GAO-09-328 May 7, 2009In March 2004, the Office of Management and Budget (OMB) launched the financial management line of business (FMLOB) initiative, in part, to reduce the cost and improve the quality and performance of federal financial management systems by leveraging shared service solutions and implementing other reforms. In March 2006, GAO reported that OMB's approach did not fully integrate certain fundamental system implementation-related concepts and recommended OMB take specific actions. This report discusses (1) OMB's progress in addressing GAO's prior FMLOB recommendations and implementation challenges and (2) the effectiveness of OMB's monitoring of financial management system modernization projects and their costs. GAO's methodology included reviewing OMB's FMLOB-related guidance and reports and interviewing OMB and Financial Systems Integration Office (FSIO) staff.
OMB has made progress toward implementing the FMLOB initiative. In March 2006, GAO recommended that OMB place a high priority on fully integrating four key concepts into its approach. As shown in the table, OMB has completed actions to fully address 5 of GAO's 18 recommendations. Although OMB has made progress toward completing the remaining 13 recommendations, extensive work remains before the goals of the FMLOB initiative are achieved. For example, OMB has yet to finalize a financial management system concept of operations, the first and foremost critical building block on which the remaining three concepts will be built. In addition, development of a migration timeline reflecting agencies' commitment for migrating to shared service providers has not yet been completed. Further, agencies are not required to consider migrating until the next major release of their core financial system and much work remains before the software used by shared service providers will incorporate the standard business processes currently under development. Accordingly, FSIO officials stated it could take 15 years or more before software that incorporates these standard business processes is in use governmentwide. We recognize that the FMLOB initiative represents a long-term effort; however, expediting efforts to address our prior recommendations could help achieve more effective and timely benefits. Until OMB fully integrates the four key concepts into its approach, the extent to which FMLOB goals will be achieved is uncertain. The Chief Financial Officers Act of 1990 and other information technology (IT) reform legislation contain requirements related to OMB's oversight of agency financial management systems modernization and other IT projects. Achieving FMLOB goals requires effective OMB oversight of agency modernization projects, but OMB has yet to fully address GAO's previously reported oversight-related recommendations such as taking actions to define and ensure that agencies effectively implement disciplined processes and develop a more structured review of agency efforts. In addition, OMB does not obtain and report complete and accurate data concerning agencies' spending on financial management system modernization projects. The lack of sufficient information and processes to effectively monitor agency modernization efforts and their costs limits OMB's ability to evaluate and help reduce the risks associated with financial management system implementations as well as achieve FMLOB goals.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-328, Financial Management Systems: OMB's Financial Management Line of Business Initiative Continues but Future Success Remains Uncertain
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Report to the Chairman, Subcommittee on Federal Financial Management,
Government Information, Federal Services, and International Security,
Committee on Homeland Security and Governmental Affairs, U.S. Senate:
United States Government Accountability Office:
GAO:
May 2009:
Financial Management Systems:
OMB's Financial Management Line of Business Initiative Continues but
Future Success Remains Uncertain:
GAO-09-328:
GAO Highlights:
Highlights of GAO-09-328, a report to the Chairman, Subcommittee on
Federal Financial Management, Government Information, Federal Services,
and International Security, Committee on Homeland Security and
Governmental Affairs, U.S. Senate.
Why GAO Did This Study:
In March 2004, the Office of Management and Budget (OMB) launched the
financial management line of business (FMLOB) initiative, in part, to
reduce the cost and improve the quality and performance of federal
financial management systems by leveraging shared service solutions and
implementing other reforms. In March 2006, GAO reported that OMB‘s
approach did not fully integrate certain fundamental system
implementation-related concepts and recommended OMB take specific
actions.
This report discusses (1) OMB‘s progress in addressing GAO‘s prior
FMLOB recommendations and implementation challenges and (2) the
effectiveness of OMB‘s monitoring of financial management system
modernization projects and their costs. GAO‘s methodology included
reviewing OMB‘s FMLOB-related guidance and reports and interviewing OMB
and Financial Systems Integration Office (FSIO) staff.
What GAO Found:
OMB has made progress toward implementing the FMLOB initiative. In
March 2006, GAO recommended that OMB place a high priority on fully
integrating four key concepts into its approach. As shown in the table,
OMB has completed actions to fully address 5 of GAO‘s 18
recommendations. Although OMB has made progress toward completing the
remaining 13 recommendations, extensive work remains before the goals
of the FMLOB initiative are achieved. For example, OMB has yet to
finalize a financial management system concept of operations, the first
and foremost critical building block on which the remaining three
concepts will be built. In addition, development of a migration
timeline reflecting agencies‘ commitment for migrating to shared
service providers has not yet been completed. Further, agencies are not
required to consider migrating until the next major release of their
core financial system and much work remains before the software used by
shared service providers will incorporate the standard business
processes currently under development. Accordingly, FSIO officials
stated it could take 15 years or more before software that incorporates
these standard business processes is in use governmentwide. We
recognize that the FMLOB initiative represents a long-term effort;
however, expediting efforts to address our prior recommendations could
help achieve more effective and timely benefits. Until OMB fully
integrates the four key concepts into its approach, the extent to which
FMLOB goals will be achieved is uncertain.
Table: Progress toward Addressing GAO‘s Recommendations:
Key concepts: Concept of operations;
Number of GAO recommendations: 4;
Status of recommendations: Completed: 0;
Status of recommendations: Not completed: 4.
Key concepts: Standard business processes;
Number of GAO recommendations: 5;
Status of recommendations: Completed: 2;
Status of recommendations: Not completed: 3.
Key concepts: Migration strategy;
Number of GAO recommendations: 5;
Status of recommendations: Completed: 2;
Status of recommendations: Not completed: 3.
Key concepts: Disciplined processes;
Number of GAO recommendations: 4;
Status of recommendations: Completed: 1;
Status of recommendations: Not completed: 3.
Key concepts: Total;
Number of GAO recommendations: 18;
Status of recommendations: Completed: 5;
Status of recommendations: Not completed: 13.
Sources: GAO analysis, OMB and FSIO data.
[End of table]
The Chief Financial Officers Act of 1990 and other information
technology (IT) reform legislation contain requirements related to OMB‘
s oversight of agency financial management systems modernization and
other IT projects. Achieving FMLOB goals requires effective OMB
oversight of agency modernization projects, but OMB has yet to fully
address GAO‘s previously reported oversight-related recommendations
such as taking actions to define and ensure that agencies effectively
implement disciplined processes and develop a more structured review of
agency efforts. In addition, OMB does not obtain and report complete
and accurate data concerning agencies‘ spending on financial management
system modernization projects. The lack of sufficient information and
processes to effectively monitor agency modernization efforts and their
costs limits OMB‘s ability to evaluate and help reduce the risks
associated with financial management system implementations as well as
achieve FMLOB goals.
What GAO Recommends:
GAO recommends that the Director of OMB take action to facilitate
complete and accurate reporting of agency spending on financial
management system modernization projects. GAO reaffirms its prior
recommendations and emphasizes the need to address those that have not
yet been completed. OMB generally agreed with GAO‘s recommendation,
described actions being taken, but expressed concern with part of the
recommendation.
View [hyperlink, http://www.gao.gov/products/GAO-09-328] or key
components. For more information, contact Kay Daly at (202) 512-9095 or
Naba Barkakati at (202) 512-2700.
[End of section]
Contents:
Letter:
Background:
Progress Continues but Achieving FMLOB Goals Requires Much More Work
and Time:
Previously Identified Weaknesses Continue to Hamper OMB Oversight of
Financial Management System Modernization Projects:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Status of Prior GAO Recommendations:
Appendix III: Comments from the Office of Management and Budget:
Appendix IV: GAO Contacts and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Progress toward Addressing GAO's Recommendations:
Table 2: GAO Recommendations--Concept of Operations:
Table 3: GAO Recommendations--Standard Business Processes:
Table 4: GAO Recommendations--FMLOB Migration Strategy:
Table 5: GAO Recommendations--Disciplined Processes:
Figures:
Figure 1: Overview of OMB Management Watch List Process:
Figure 2: Overview of OMB High Risk List Process:
Abbreviations:
CFO: Chief Financial Officer:
CIO: Chief Information Officer:
ConOps: concept of operations:
DHS: Department of Homeland Security:
DOD: Department of Defense:
ERP: enterprise resource planning:
FEA: Federal Enterprise Architecture:
FFMIA: Federal Financial Management Improvement Act:
FMFIA: Federal Managers' Financial Integrity Act:
FMLOB: financial management line of business:
FSIO: Financial Systems Integration Office:
IG: inspector general:
IT: information technology:
JFMIP: Joint Financial Management Improvement Program:
LMP: Logistics Modernization Program:
OFFM: Office of Federal Financial Management:
OMB: Office of Management and Budget:
PMA: President's Management Agenda:
SFFBP: Standard Federal Financial Business Processes:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
May 7, 2009:
The Honorable Thomas R. Carper:
Chairman Subcommittee on Federal Financial Management, Government
Information, Federal Services, and International Security:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
Dear Mr. Chairman:
The federal government's ability to efficiently and effectively manage
and oversee its day-to-day operations and programs relies heavily on
the ability of agency financial management systems[Footnote 1] to
produce complete, reliable, timely, and consistent financial
information for use by executive branch agencies and Congress. Agencies
continue to spend billions of dollars on maintaining, developing, and
implementing financial management systems throughout the federal
government. Although modernization of these systems is expensive, these
efforts represent a critical element in facilitating agencies' ability
to institute strong financial management as called for by the Chief
Financial Officers (CFO) Act of 1990,[Footnote 2] Federal Financial
Management Improvement Act of 1996 (FFMIA),[Footnote 3] and other
financial management reform legislation.
Over a number of years, we have reported that modernizing federal
financial management systems has been a challenge at many federal
agencies[Footnote 4] due, in part, to the past practices of each
federal agency attempting to implement its own systems which have all
too often resulted in failure, have been delayed, and cost too much.
Recognizing the seriousness of this problem, in March 2004, the Office
of Management and Budget (OMB) launched the financial management line
of business (FMLOB) initiative, in part, to improve the outcome of
governmentwide financial management system modernization efforts and
provide timely and accurate data for decision making through the use of
more cost-effective shared service solutions. Under this approach,
agencies are to consider the use of certain shared service providers
for meeting common support services, such as information technology
(IT) hosting and application management, rather than investing in
costly and redundant agency-specific solutions.
In March 2006, we made 18 recommendations to help reduce the risks
associated with financial management system implementation efforts and
facilitate the implementation of the FMLOB initiative across the
government.[Footnote 5] Specifically, we recommended that OMB place a
high priority on fully integrating into its approach four key concepts:
(1) developing a concept of operations that articulates the
interrelationships among financial management systems and how the
shared service provider concept fits into the overall federal financial
management framework, (2) defining standard business processes to
promote consistency within and across agencies, (3) developing a
strategy for ensuring that agencies' financial management systems are
migrated to a limited number of service providers, and (4) defining and
effectively implementing applicable disciplined processes necessary to
properly manage financial management system implementation projects.
[Footnote 6]
Because of your continuing interest in transforming the federal
government's financial management systems and the broad-reaching impact
of the FMLOB initiative, you asked us to study a range of issues
related to the FMLOB initiative as well as efforts at shared service
providers and agencies involved in migrating to those providers. As
agreed to with your office, this report provides the results of the
first phase of our work, including our efforts to determine (1) OMB's
progress toward addressing our prior recommendations related to the
FMLOB initiative and other challenges that impede its implementation
and (2) the effectiveness of OMB's monitoring of FMLOB and financial
management system modernization projects, including their costs. We
will address the remaining aspects of your request primarily related to
FMLOB-related efforts at shared service providers and agencies involved
in migration activities during the next phase of our work.
We reviewed and analyzed FMLOB-related policies, guidance, reports, and
memoranda obtained from OMB and the Financial Systems Integration
Office (FSIO)[Footnote 7] related to their respective efforts to
address our prior recommendations as well as efforts to monitor, and
measure the costs of, financial management system modernization
projects. In addition, we conducted interviews with key OMB and FSIO
officials as well as officials with other selected organizations
knowledgeable about large financial management transformation
initiatives to obtain views on FMLOB efforts and related challenges. We
also interviewed knowledgeable officials of two agencies from among
those agencies spending the most on financial management modernization
projects to obtain information on agency reporting of such costs. We
conducted this performance audit from February 2008 through May 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. Details on our scope and
methodology are included in appendix I.
Background:
Modernization of agency financial management systems has been an
ongoing challenge due, in part, to federal agency attempts to develop
and implement their own stovepiped systems that all too often have
resulted in failure, been delayed, or cost too much. Recognizing the
need for a more holistic approach to address the seriousness of these
problems, OMB launched the FMLOB initiative in March 2004, in
connection with the 2001 President's Management Agenda (PMA).[Footnote
8]
In part, the FMLOB initiative is intended to reduce the cost and
upgrade the quality and performance of federal financial management
systems by leveraging shared service solutions and implementing other
governmentwide reforms that foster efficiencies in federal financial
operations. According to OMB, the goals of the FMLOB initiative are to
(1) provide timely and accurate data for decision making; (2)
facilitate stronger internal controls that ensure integrity in
accounting and other stewardship activities; (3) reduce costs by
providing a competitive alternative for agencies to acquire, develop,
implement, and operate financial management systems through shared
service solutions; (4) standardize systems, business processes, and
data elements; and (5) provide for seamless data exchange between and
among federal agencies by implementing a common language and structure
for financial information and system interfaces.
In connection with this initiative, OMB developed an approach for
agencies to migrate financial management systems to a limited number of
application service providers, such as OMB-designated shared service
providers or private sector entities, which is intended to avoid costly
and redundant agency investments in "in-house" financial management
systems. These providers are third-party entities that manage and
distribute software-based services and solutions to customers across a
wide area network from a central data center. This concept has commonly
been used in the private sector and in other foreign governments where
application service providers provide services such as payroll, sales
force automation, and human resource applications to many clients. OMB
is the executive sponsor for the FMLOB initiative and in conjunction
with FSIO, provides oversight and guidance for the initiative. In
addition to serving as the program manager for the FMLOB initiative,
FSIO is responsible for core financial systems requirements
development, testing and product certification, supporting the federal
financial management community on priority projects, and other
activities.
Although the FMLOB initiative was launched in 2004, modernizing federal
financial management systems so they can produce reliable, useful, and
timely financial data needed to efficiently and effectively manage the
day-to-day operations of the federal government has been a high
priority for Congress for many years. In recognition of this need, and
in an effort to improve overall federal financial management, Congress
passed a series of financial management reform legislation dating back
to the early 1980s. Some of the notable legislation included in this
series are the (1) Federal Managers' Financial Integrity Act of 1982
(FMFIA),[Footnote 9] (2) CFO Act of 1990, (3) Government Performance
and Results Act of 1993,[Footnote 10] (4) Government Management Reform
Act of 1994,[Footnote 11] (5) FFMIA, (6) Clinger-Cohen Act of 1996,
[Footnote 12] and (7) Accountability of Tax Dollars Act of 2002.
[Footnote 13] FFMIA, in particular, requires the departments and
agencies covered by the CFO Act to implement and maintain financial
management systems that comply substantially with (1) federal financial
management systems requirements, (2) applicable federal accounting
standards, and (3) the U.S. Government Standard General Ledger at the
transaction level. In addition to the specific requirements related to
financial management systems contained in FFMIA, the Clinger-Cohen Act
of 1996 requires the head of each executive agency to establish
policies and procedures to ensure that, among other things, the
agency's financial systems are designed, developed, maintained, and
used effectively to provide financial or program performance data.
OMB plays a central role in governmentwide efforts to meet the
requirements included in these reforms including the establishment of
federal financial management policy and guidance, as well as overseeing
the implementation and management of federal financial management
systems and other IT investments. Specifically, the CFO Act of 1990
established OMB's Office of Federal Financial Management (OFFM) to
carry out various financial management functions, including (1)
providing overall direction and leadership to the executive branch on
financial management matters by establishing financial management
policies and requirements, and by monitoring the establishment and
operation of federal government financial management systems; (2)
reviewing agency budget requests for financial management systems and
operations; and (3) monitoring the financial execution of the budget in
relation to actual expenditures, including timely performance reports.
The Clinger-Cohen Act of 1996 expanded OMB responsibilities further to
include establishing processes to analyze, track, and evaluate the
risks and results of major capital investments in information systems
made by executive agencies. In addition, in implementing the E-
Government Act of 2002[Footnote 14] OMB's Office of Electronic
Government and Information Technology is responsible for, among other
matters, providing overall leadership and direction to the executive
branch on electronic government; overseeing the development of
enterprise architectures within and across agencies; and overseeing
implementation of IT throughout the federal government, including
monitoring and consulting on agency technology efforts, as well as
identifying opportunities for joint agency and governmentwide IT
projects.
OMB's IT Investment Oversight Efforts:
In connection with these responsibilities, OMB reviews and evaluates IT
spending and other information submitted by the agencies during the
budget formulation process. Specifically, in accordance with OMB
Circular No. A-11, Preparation, Submission and Execution of the Budget,
agencies are required to provide information related to their IT
investment projects. As part of this process, agencies submit Capital
Asset Plans and Business Cases (exhibit 300s) and Agency IT Investment
Portfolios (exhibit 53s) that provide information useful for evaluating
agency financial management system projects. Agency exhibit 300s are
intended to describe the business case for each investment and serve as
the primary means of justifying IT investment proposals as well as
monitoring IT investments once they are funded. Further, as a reporting
tool, exhibit 300s are intended to help demonstrate to agencies'
management, as well as to OMB, that major projects have strong business
cases for the investment and meet other administration priorities in
defining the proposed cost, schedule, and performance goals.
Similarly, information included on agency exhibit 53s is designed, in
part, to help OMB better understand the amounts agencies are spending
on IT investments as well as provide information in support of cost
analyses prescribed by the Clinger-Cohen Act of 1996. For example,
agencies are required to classify investment projects into one of six
categories[Footnote 15] as well as specify how much of these amounts
are for development and modernization[Footnote 16] of IT versus
operating and maintaining the status quo for IT. In addition, agencies
are required to report amounts being spent on each investment over a 3-
year period including the current and prior fiscal years as well as the
amount included in the agencies' budget request for the next fiscal
year. As part of the Budget of the United States Government, OMB
publishes a Report on IT Spending for the Federal Government
representing a governmentwide compilation of exhibit 53 data submitted
by agencies across the federal government.
As part of its efforts to oversee federal IT investments during the
last few years, OMB has taken steps to identify IT projects that
warrant additional attention by including them on either its Management
Watch List and High Risk List, or both. OMB places major IT projects it
considers to be poorly planned on the Management Watch List based, in
part, on its detailed review of agency exhibit 300s[Footnote 17] and
agencies are to submit remediation plans addressing the weaknesses
identified. OMB updates the Management Watch List quarterly and
projects are removed from the list as agencies remediate the weaknesses
identified with these projects' business cases. Figure 1 shows OMB's
process for developing the Management Watch List.
Figure 1: Overview of OMB Management Watch List Process:
[Refer to PDF for image: illustration]
Project scoring:
OMB scores IT projects‘ exhibit 300s using specific evaluation
criteria.
Watchlist:
OMB places IT projects with unqualified project managers or weaknesses
in planning, security, privacy, or earned value management techniques,
and other areas, on its Management Watch List.
Remediation plan:
Agencies submit remediation plans to address business case weaknesses
to OMB.
OMB follow up:
OMB follows upon Management Watch List projects and provides feedback,
as needed.
Project removal:
OMB removes projects from the Management Watch List as agencies
remediate the weaknesses identified.
Source: GAO analysis, OMB information.
[End of figure]
In addition to the Management Watch List, OMB requires agencies to
identify high-risk projects that require special attention from
oversight authorities and the highest levels of agency management and
OMB places them on its High Risk List. These projects are not
necessarily at risk of failure, but may be on the list because they
meet criteria[Footnote 18] specified by OMB for inclusion. Further,
agency Chief Information Officers (CIO) are to assess, confirm, and
document each of these projects' performance based on whether the
project was meeting one or more of four performance evaluation
criteria[Footnote 19] and identify those with performance shortfalls.
Figure 2 shows OMB's process for developing the High Risk List.
Figure 2: Overview of OMB High Risk List Process:
[Refer to PDF for image: illustration]
Criteria development:
OMB develops and provides high-risk project criteria to agencies .
Project identification:
Agency CIO officials identify list of projects in their IT project
portfolios that meet OMB‘s high-risk project criteria.
Lists submitted and finalized:
Agencies submit initial list to OMB for review and work with OMB
examiners to finalize the list.
Project performance shortfalls identified:
Agency CIOs assess, confirm, and document project performance and
identify projects with performance shortfalls.
Results documented:
For projects with shortfalls, agencies provide quarterly performance
reports to OMB.
Performance report review:
OMB reviews quarterly performance reports for projects with shortfalls
to evaluate progress.
Source: GAO analysis, OMB information.
[End of figure]
Progress Continues but Achieving FMLOB Goals Requires Much More Work
and Time:
OMB and FSIO efforts to implement the FMLOB initiative continue to show
progress and have effectively addressed 5 of the 18 recommendations and
made progress toward addressing the remaining 13 recommendations we
made[Footnote 20] related to four areas considered key building blocks
for governmentwide financial management systems--a concept of
operations, standard business processes, migration strategy, and
disciplined processes. Table 1 summarizes the status of efforts to
address our prior recommendations in each of these four areas.
Additional information on the progress and remaining actions we believe
are needed to address each recommendation can be found in appendix II.
For example, OMB and FSIO have developed guidance to assist agencies'
efforts in selecting shared service providers and preparing for
migration, and have taken steps to encourage agencies to embrace
standard business processes that will help provide consistency as they
are adopted across federal agencies.
Table 1: Progress toward Addressing GAO's Recommendations:
Key concepts: Concept of operations;
Number of GAO recommendations: 4;
Status of recommendations: Completed: 0;
Status of recommendations: Not completed: 4.
Key concepts: Standard business processes;
Number of GAO recommendations: 5;
Status of recommendations: Completed: 2;
Status of recommendations: Not completed: 3.
Key concepts: Migration strategy;
Number of GAO recommendations: 5;
Status of recommendations: Completed: 2;
Status of recommendations: Not completed: 3.
Key concepts: Disciplined processes;
Number of GAO recommendations: 4;
Status of recommendations: Completed: 1;
Status of recommendations: Not completed: 3.
Key concepts: Total;
Number of GAO recommendations: 18;
Status of recommendations: Completed: 5;
Status of recommendations: Not completed: 13.
Sources: GAO analysis, OMB and FSIO data.
[End of table]
While guidance and communication-related efforts are important, OMB and
FSIO efforts have not yet fully integrated any of the four key building
blocks into the FMLOB implementation approach. Further, the
recommendations not yet completed, in particular, involve critical
elements integral to success and will require much more extensive work
before the promised benefits of the FMLOB initiative can be fully
realized. OMB has not completed development of a concept of operations
representing the first and foremost building block on which all system
planning processes as well as the remaining building blocks are built.
This critical tool is essential for providing an overall road map for
FMLOB efforts by describing the interrelationships among financial
management systems and how information is to flow from and through
them, within and across agencies, and ensuring the validity of each
agency's implementation approach. Even if FMLOB-related activities
proceed as planned, efforts to address our recommendations related to
this and other key concepts involve a variety of challenges which, in
some cases, could take years to fully resolve. For example, according
to FSIO officials, it may take as many as 15 years or more before
software that incorporates the standard business processes currently
under development is in use governmentwide. In addition, development of
a migration timeline reflecting agencies' commitment to migrating to
shared service providers has not yet been completed. OMB officials
stated that a draft migration timeline as well as a draft concept of
operations have been developed and are under internal review. Until OMB
finalizes these critical tools, the extent to which its efforts to date
address our recommendations remains unclear.
As previously reported,[Footnote 21] we believe OMB has correctly
recognized that enhancing federal financial management systems needs to
be addressed as a governmentwide solution, rather than individual
agency stovepiped efforts designed to meet a given entity's needs.
However, given the implications of this initiative and the extended
time frames involved, we emphasize the need to expedite efforts to
address our remaining recommendations. Such efforts are essential to
help facilitate FMLOB implementation and achieve a more effective and
timely realization of benefits. Achieving the goals of the FMLOB
initiative and reducing the risks associated with continuing individual
agency stovepiped efforts will depend, in part, on continued strong
executive leadership and commitment and the effectiveness of efforts to
address our recommendations and other challenges facing this
initiative.
Efforts Remain to Finalize a Concept of Operations:
Given the far-reaching impact of the FMLOB initiative on governmentwide
financial management systems, an effective governmentwide concept of
operations that identifies the nature of and interrelationships among
federal financial management systems is an essential tool to ensure
that both system implementation and other FMLOB-related efforts achieve
intended results. Although this initiative began in 2004, and we
reported that efforts were under way to develop a concept of operations
in our 2006 report,[Footnote 22] as shown in table 2, none of our four
prior recommendations related to this area have been completely
addressed. Further, developing a concept of operations was not included
as a priority in OMB's January 2008 memorandum to agency CFOs[Footnote
23] that summarized FMLOB priorities through December 2009. OMB
officials stated that a draft concept of operations is in internal
review; however, they did not provide us an estimated date for its
completion. OMB officials stated that finalizing a concept of
operations has been a challenge due to limited resources available to
devote to this effort, as well as the need to ensure that the various
elements of a concept of operations are appropriately linked to
relevant guidance, policy documents, and requirements such as the core
financial system requirements. We agree with OMB's recognition of this
need and believe it helps to illustrate the importance of finalizing
this critical tool. Given the importance of articulating how the shared
service provider concept fits into the overall federal financial
management system framework and how systems operated at the agency and
governmentwide level should be integrated, we believe efforts should be
taken to expedite the completion of a clear concept of operations.
Table 2: GAO Recommendations--Concept of Operations:
Recommendation: Develop a concept of operations;
Status: Not completed.
Recommendation: Identify the interrelationships among federal financial
systems and how the application service provider concept fits into this
framework;
Status: Not completed.
Recommendation: Prescribe which financial management systems should be
operated at an agency level and which should be operated at a
governmentwide level and how those would integrate;
Status: Not completed.
Recommendation: Define financial management systems in the Federal
Enterprise Architecture (FEA) to be more consistent with the similar
definitions used in FFMIA and OMB Circulars No. A-11 and No. A-127;
Status: Not completed.
Recommendation: Total;
Status: Completed: 0;
Status: Not completed: 4.
Sources: GAO analysis, OMB and FSIO data.
[End of table]
OMB and FSIO officials, as well as knowledgeable officials from other
selected organizations, and our recent work related to financial
management system implementations, confirm the need for an effective
governmentwide concept of operations to guide FMLOB efforts. For
example, identifying the interrelationships among financial management
systems within and across agencies would help to identify and avoid
additional stovepiped efforts designed to meet their unique needs when
common solutions to address their common needs are more effective. A
clear understanding of the flow of information from and through these
systems is also needed to ensure that the FMLOB initiative goal of
providing accurate and timely data for decision making is achieved.
The federal government is one of the largest and most complex
organizations in the world and its agencies use a variety of financial
management systems and other systems that interrelate with them to meet
their needs. As a result, defining the nature and scope of the systems
involved in transformation initiatives, such as FMLOB, is an important
aspect for ensuring that efforts are properly aligned and focused
toward meeting clearly articulated goals. Officials at the Department
of Defense's (DOD) Business Transformation Agency considered this a
critical element of the lessons they learned in achieving progress
toward developing a framework for DOD efforts to transform a multitude
of business systems[Footnote 24] to better meet its financial
management needs. We concur with this assessment and, as we testified
in February 2008,[Footnote 25] we believe DOD is making progress toward
establishing a framework to guide its business transformation efforts.
While we are in broad agreement with the goals of OMB's FMLOB
initiative, it appears that OMB is not looking broadly enough as it
frames its efforts. According to OMB and FSIO officials, FMLOB-related
efforts are initially focused on addressing agency core financial
systems needs and therefore may not currently fully address the
existing interrelationships between core financial systems and the
financial portion of mixed systems.[Footnote 26] Recent revisions to
OMB's Circular No. A-127 issued in January 2009 confirm our concerns
that the importance of these interrelationships is not adequately
incorporated into OMB's approach. Specifically, OMB's revised guidance
states that federal financial management system requirements for
determining substantial compliance with FFMIA include computer security
requirements and internal controls as well as FSIO core financial
system requirements but explicitly do not include the existing
financial management systems requirements related to mixed systems.
[Footnote 27]
Due to the magnitude of efforts and challenges associated with
modernizing financial management systems across government,
knowledgeable officials at other selected organizations we spoke with
stated that focusing on addressing agency core financial system needs
first may be appropriate. Nonetheless, an essential part of developing
an effective, comprehensive concept of operations includes identifying
the interrelationships between core financial systems and other
systems, such as payroll or inventory systems, which perform financial
functions. In addition, agencies are increasingly considering the use
of large, complex, and costly enterprise resource planning (ERP)
programs to provide an integrated solution for addressing both
financial and mission-related business needs. DOD, in particular, has
been making significant investments in a number of ERPs to take
advantage of the enterprisewide features that address various financial
management and other business needs. We have reported[Footnote 28]
that, as envisioned, DOD's Navy ERP program is expected to cost
approximately $2.4 billion over its 20-year life cycle and to be fully
operational in fiscal year 2013. As we previously reported, a concept
of operations should have a clear definition and scope of the financial
management activities to be included and identify the
interrelationships of core financial and other systems such as ERPs.
The ability to properly align governmentwide and agency efforts also
depends, in part, upon the availability of effective concepts of
operations at the governmentwide level as well as the agency level. We
have reported[Footnote 29] the lack of adequate concepts of operations
associated with agency financial management system projects, including
selected projects at the Army, the Department of Homeland Security
(DHS), and the Department of the Treasury. For example, in connection
with the Army's efforts to achieve total asset visibility, we reported
[Footnote 30] that, without a concept of operations, the Army is
hindered in its ability to apply an enterprise view in (1) making
decisions as to how certain systems will individually and collectively
enhance the Army's asset accountability and (2) determining what
changes are needed in its related business processes. As a result, we
also reported that the Army failed to take advantage of business
process reengineering opportunities, perpetuating the use of some of
its cumbersome and ineffective business processes used in existing
legacy systems.
Finally, participants at a Comptroller General's forum[Footnote 31]
held in December 2007 on improving federal financial management systems
confirmed our concerns regarding the need for a concept of operations,
pointing out that OMB's various lines of business initiatives[Footnote
32] are serving to preserve existing stovepipes. For example,
participants said it is unclear why separate lines of business are
needed for budget and financial management. OMB officials stated that
FSIO has been working with OMB staff knowledgeable of the federal
enterprise architecture (FEA)[Footnote 33] to better understand and
document the relationships between mixed and core financial systems as
well as communicate with the various lines of business initiatives and
help ensure they are effectively coordinated.
OMB's Current Priorities Focus on Standardization and Transparency:
Adopting standardized processes is a fundamental step needed for all
financial management system implementations. Recognizing the importance
of this step in connection with implementing the FMLOB initiative, we
made five recommendations,[Footnote 34] as shown in table 3, related to
identifying, defining, and implementing standard business processes to
help facilitate greater efficiency and consistency, lower the cost, and
improve the quality and performance of financial management operations
across government. OMB and FSIO efforts have effectively addressed two
of our five recommendations by encouraging agencies to embrace, and
requiring shared service providers to adopt, standard business
processes in support of the FMLOB initiative. For example, in a July
2008 memorandum,[Footnote 35] OMB encouraged the federal financial
management community to begin preparations for adopting standard
business processes by taking several actions, including using such
processes as a framework for system implementation projects.
Much work remains before the standard business processes needed to
realize the goal of optimizing financial management practices across
government become operational. According to FSIO officials, the process
of developing the first set of standard business processes and
incorporating them into software products certified as meeting FSIO
core financial system requirements may take up to 3 years to complete
under existing plans. We also recognize that incorporating standard
business processes into operational systems will be a much longer-term
effort since OMB is not requiring agencies to consider migrating to a
shared service provider until upgrading to the next major release of
their core financial systems, and adoption of these standards is not
required until migration occurs. Accordingly, FSIO officials stated it
may take up to 15 years to incorporate the standards currently under
development into software, subsequently test and certify the software,
and implement the certified software governmentwide. According to OMB
officials, this approach reflects OMB's recognition of the long-term
nature of agency modernization efforts and the need to provide agencies
time to adequately assess FMLOB migration risks.
Table 3: GAO Recommendations--Standard Business Processes:
Recommendation: Define standard business processes;
Status: Not completed.
Recommendation: Describe the standard business processes that are
needed to meet federal agencies' needs;
Status: Not completed.
Recommendation: Develop a process to identify those business processes
that are needed to meet unique agency needs;
Status: Not completed.
Recommendation: Require application service providers to adopt standard
business processes to provide consistency;
Status: Completed.
Recommendation: Encourage agencies to embrace new processes;
Status: Completed.
Recommendation: Total;
Status: Completed: 2;
Status: Not completed: 3.
Sources: GAO analysis, OMB and FSIO data.
[End of table]
Due to the wide array of current business processes in use across
agencies to address common and agency-specific needs, OMB and FSIO
officials acknowledge that developing standard business processes that
can be used across all federal agencies is a significant challenge.
Thus far, their efforts to increase standardization have resulted in
the development and issuance of three standard business processes, and
OMB expects two more to be finalized by September 2009.[Footnote 36] In
a January 2008 memorandum to agency CFOs,[Footnote 37] OMB acknowledged
that efforts during the transparency and standardization stage of the
FMLOB initiative have taken longer than expected. However, OMB added
that the additional time has allowed for the preparation of more
comprehensive material and greater buy-in and support for the
initiative. Nonetheless, expediting efforts to address our prior
recommendations related to standard business processes is essential
since the ability to operationalize these standards, and begin
realizing their benefits, depends on their completion.
The extended time frame for implementing the FMLOB initiative involves
other challenges, such as responding to changes in stakeholder needs or
new financial reporting requirements. For example, FSIO officials
stated that financial management systems currently used to compile and
report financial information on a governmentwide level will face unique
transition-related challenges as agencies begin to use systems that
incorporate the recently developed common governmentwide accounting
classification structure and FMLOB-compliant standard business
processes. Specifically, modernization efforts under way at Treasury
will need to ensure that certain centralized systems will receive,
process, report, and transmit financial data to and from these
agencies' systems. In addition, these centralized Treasury systems will
need to continue to interface with and convert information received
from agency legacy systems to ensure the overall consistency of
consolidated information used for government financial reporting and
other purposes. To ensure that these issues are properly identified and
managed during the transition period, FSIO officials stated that they
are working with Treasury data architects to facilitate the data
standardization effort and develop a joint plan that includes Treasury
system update milestones. However, these challenges and the risks
associated with agency legacy systems that produce financial management
information using inconsistent business processes will continue until
the standardization envisioned by the FMLOB initiative is actually
implemented across the federal government.
Migration Strategy Developed, but Timetable for Migration Is Unclear:
Recognizing the historical tendency for agencies to view their needs as
unique and resist standardization, we made five
recommendations,[Footnote 38] as shown in table 4, related to
developing a strategy for ensuring that agencies are migrated to a
limited number of shared service providers. OMB has effectively
addressed two of these recommendations, including developing guidance
to assist agencies in their migration efforts. In addition, OMB has
taken steps toward addressing the remaining three recommendations in
this area related to developing a migration strategy, articulating a
clear goal and criteria for ensuring that agencies are migrated, and
developing a timeline, or migration path, for when agencies should
migrate to a shared service provider. However, efforts to develop such
a timeline are taking longer than expected and this important tool has
not yet been finalized. Until a reliable, detailed timetable for
migrations across the federal government is developed, the ability to
assess when governmentwide migrations will be completed remains
limited.
Table 4: GAO Recommendations--FMLOB Migration Strategy:
Recommendation: Develop a strategy for ensuring that agencies are
migrated to a limited number of application service providers in
accordance with OMB's stated approach;
Status: Not completed[A].
Recommendation: Articulate a clear goal and criteria for ensuring
agencies are subject to the application service provider concept and
cannot continue developing and implementing their own stovepiped
systems;
Status: Not completed[A].
Recommendation: Establish a migration path or timetable for when
agencies should migrate to an application service provider;
Status: Not completed.
Recommendation: Provide the necessary information for an agency to
select an application service provider;
Status: Completed.
Recommendation: Develop guidance to assist agencies in adopting a
change management strategy for moving to application service providers;
Status: Completed.
Recommendation: Total;
Status: Completed: 2;
Status: Not completed: 3.
Sources: GAO analysis, OMB and FSIO data.
[A] Although OMB has developed a migration strategy and articulated its
goal that agencies are subject to the application service provider
concept, we are deferring our final assessment of these recommendations
until we complete a more in-depth analysis as part of our planned
follow-on work.
[End of table]
As previously noted, we plan to address key issues related to OMB's
migration strategy in the second phase of our work and therefore are
deferring an assessment of OMB's efforts in this area. Specifically, we
plan to review the implementation of OMB's strategy at shared service
providers and agencies involved in migration activities during the next
phase of our work. OMB's Competition Framework for FMLOB Migrations
(Competition Framework) and Migration Planning Guidance, provided
important guidance to agencies to support and facilitate shared service
provider migration activities. This guidance includes principles
agencies must use when acquiring new financial management systems and
best practices for managing organizational changes and developing
effective change management strategies to ensure that migrations
achieve intended results. Agencies are required to comply with OMB's
stated migration strategy and OMB relies, in part, on information
agencies provide with their budget submissions to ensure they are
planning their migration activities accordingly. In addition, OMB
officials stated that they hold meetings with agencies to discuss this
and other information regarding FMLOB-related activities such as the
life cycle of existing agency financial management systems, IT
investment plans, and ongoing migration activities.
While we plan to perform an in-depth analysis of OMB's strategy as part
of our follow-on work, we found that additional efforts are needed to
develop a timeline for agency migrations, as well as efforts to
continue refining and developing additional tools to facilitate the
effectiveness of agency efforts. A migration timeline reflecting
agencies' IT investment plans that are aligned with existing financial
management system life cycles and their commitment toward migrating
their financial management systems to shared service providers would
help to ensure that agencies do not continue developing and
implementing their own stovepiped systems. Such a timeline would
provide greater assurance that the migrations will actually occur as
planned and help guide and assess governmentwide progress. OMB
officials told us they are working with agencies to develop an overall
migration timeline and expected to have it in place by the end of 2008.
However, this important tool has not yet been finalized and OMB could
not provide an estimated completion date. As a result, the reliability
of targets reported by OMB[Footnote 39] for migrating agencies,
including its February 2008 estimate[Footnote 40] that many migrations
are expected through 2015, is unclear. In addition to a migration
timeline, FSIO and OMB officials acknowledged that agencies need
additional migration guidance and tools in more specific areas that
will further improve the efficiency and effectiveness of agency
migration activities--such as tools for navigating the acquisition
process for shared financial services, providing templates for
developing agency service-level agreements, and providing agencies with
change management support and training.
Additional Actions Needed in Defining and Implementing Disciplined
Processes:
To help reduce the risks associated with financial management system
implementations, we highlighted the importance of incorporating
disciplined processes into implementation efforts and made four
recommendations,[Footnote 41] as shown in table 5, to ensure that they
are more effectively used to properly manage and oversee specific
projects. OMB has issued guidance, such as the Competition Framework
and the Migration Planning Guidance, which effectively addresses our
recommendation to provide a standard set of practices to guide
migrations from legacy systems to new systems and shared service
providers. Additional efforts are needed to fully address the remaining
three recommendations in this area.
Table 5: GAO Recommendations--Disciplined Processes:
Recommendation: Define and ensure agencies effectively implement
disciplined processes necessary to properly manage the specific
projects;
Status: Not completed.
Recommendation: Provide specific guidance to agencies on disciplined
processes for financial system implementations;
Status: Not completed.
Recommendation: Provide a standard set of practices to guide the
migrations from legacy systems to new systems and application service
providers;
Status: Completed.
Recommendation: Develop processes to facilitate oversight and review
that allow for a more structured review and follow-up of agencies'
financial system implementation projects;
Status: Not completed.
Recommendation: Total;
Status: Completed: 1;
Status: Not completed: 3.
Sources: GAO analysis, OMB and FSIO data.
[End of table]
OMB officials expressed the belief that existing guidance provides
sufficient descriptions and requirements to agencies involved in
federal IT capital investment projects and system implementations
regarding the use of disciplined processes. Further, they stated that
additional guidance is not needed since agencies will be migrating to
an established shared service provider with a proven track record and
would therefore incorporate the disciplined processes used by the
provider, which would reduce or eliminate the traditional project
management tasks associated with system implementations. Although the
use of such providers may help reduce risks related to core financial
system migrations, this position does not address the need for more
effective guidance to clearly communicate the extent to which agencies
are required to ensure that disciplined processes are incorporated into
all financial management system implementations. Our review of OMB
guidance indicates that its existing guidance does not adequately
define specific disciplined processes nor adequately specify agency
requirements concerning their use in connection with financial
management system implementations. For example, our analysis of OMB
guidance related to requirements management, risk management, data
conversion, and testing activities that agencies should follow during
system implementations shows that the guidance describes the purpose
and high-level descriptions of these activities, but does not
adequately describe and provide sufficient guidance regarding the
methods agencies could use to incorporate certain critical disciplined
processes into their implementation efforts.
For example, sound requirements management processes, in part, should
ensure that requirements[Footnote 42] are stated in clear terms that
allow for quantitative evaluation and traceability among various
requirements documents. With regard to traceability, OMB guidance
[Footnote 43] states that "a complete set of requirements that maintain
traceability throughout the Design, Development and Testing phases will
contribute to the system's success." However, this and other OMB
guidance does not provide detailed guidance on how agencies are to
ensure traceability is to be attained (e.g., through the use of a
requirements traceability matrix) nor does it include specific guidance
requiring test plans to include links to the specific requirements they
address.
For data conversions, OMB guidance does not address the need to
consider specific issues that apply uniquely to converting data as part
of the replacement of a financial system, such as identifying specific
open transactions and balances to be established through automated or
manual processes, as well as using different conversion options
[Footnote 44] for different categories of data. Data conversion issues
can also result in problems beyond financial reporting such as those we
previously reported in June 2005[Footnote 45] in connection with the
Army's implementation of its Logistics Modernization Program (LMP)
involving excess items being ordered and shipped to one of its depots.
Specifically, we noted that three truckloads of locking washers (for
bolts) were mistakenly ordered and received, and subsequently returned,
because of data conversion problems.
Further, the guidance does not specifically address or require agencies
to incorporate characteristics typically found in successful
disciplined testing efforts, such as processes that ensure test results
are thoroughly inspected and test cases that include exposing the
system to invalid and unexpected conditions. Without specific guidance
on the use of these and other disciplined processes during financial
management system implementations, agency projects may not achieve
their intended results within established resources (costs) and on
schedule.
In addition to guidance, officials at OMB, FSIO, and other
organizations cited challenges associated with the lack of appropriate
resources to ensure disciplined processes are implemented in connection
with financial management system projects. For example, officials at
FSIO and DOD's Business Transformation Agency told us that agencies do
not always maintain or involve internal staff with appropriate system
implementation and business process expertise needed to ensure
successful implementations. Further, according to OMB officials, OMB's
ability to perform detailed implementation oversight reviews on all
financial management system projects continues to be hampered due to
the limited staff available to perform them. Although we recognize this
challenge, we continue to believe that proper oversight should entail
verification that disciplined processes are, in fact, incorporated into
these projects in order to maximize their likelihood of success.
As we previously reported,[Footnote 46] requiring agencies to have
their financial management system projects undergo independent
verification and validation reviews could provide an alternative means
for ensuring agencies are incorporating disciplined processes into
these projects. According to OMB officials, they do not need to require
agencies to use independent verification and validation as a tool
because most large agencies are already using independent verification
and validation contractors to monitor large system implementations. In
addition, OMB officials said they do not believe it would be
appropriate to require all system implementations to use independent
verification and validation contractors since they may not be cost-
justified on smaller, less complex projects. OMB officials stated that
they rely, in part, on activities OMB performs in connection with
assessing projects for inclusion on its Management Watch List and High
Risk List to identify projects having implementation risks needing
further attention.
As described in more detail in the next section of this report, while
Management Watch List and High Risk List related activities are
designed to identify planning and performance deficiencies and provide
useful information to assist OMB in monitoring IT modernization
projects, they do not provide for an adequate assessment of the extent
to which agencies are incorporating disciplined processes to better
manage financial management system modernization projects. Further, we
continue to believe that verifying that projects adequately incorporate
disciplined processes, whether performed by an independent verification
and validation contractor or otherwise, is an essential aspect of
effectively overseeing financial management system implementation
projects to ensure the risks associated with these projects are managed
to acceptable levels.
Other Challenges and Risks Highlight Importance of Continued Strong
Commitment:
FMLOB implementation efforts are affected by other broad and
crosscutting issues related to the overall federal financial management
environment such as ensuring the availability of sufficient resources
and federal financial management human capital strategies, and
addressing the myriad of weaknesses in existing systems across federal
agencies. Given the potential far-reaching impact of the FMLOB
initiative on governmentwide financial management systems, continued
strong commitment and leadership is essential to ensure that progress
continues and the FMLOB goals are achieved.
As we recently reported,[Footnote 47] the federal government is taking
unprecedented actions to restore stability to the financial markets
that will likely have a significant effect on the federal government's
financial condition. As our nation works through these and other fiscal
challenges, difficult choices and trade-offs involving the use of
significant resources will be unavoidable. The knowledgeable officials
at OMB, FSIO, and other organizations we spoke with generally agree
that securing the resources needed to achieve FMLOB initiative goals
will be an ongoing challenge.
Similarly, the officials we spoke with generally agreed that agencies
face challenges associated with skills, knowledge, and experience
imbalances in their workforce which, without corrective action, are
expected to worsen in light of anticipated retirements of federal
civilian workers in coming years. In this respect, our work at
Treasury, DOD, DHS, and other agencies has confirmed that problems
associated with strategic workforce planning, human resources, and
change management have hampered financial management operations and
system implementations and help to illustrate that the federal
financial management workforce supporting the business needs of today
is not well positioned to meet the needs of tomorrow. Participants at a
Comptroller General's forum[Footnote 48] suggested that federal
financial management human capital strategies could be better focused
on attracting and retaining a new technology-savvy generation of
financial professionals. However, FSIO officials noted that they
believe the FMLOB-related efforts to standardize business processes,
operate financial management systems through shared service solutions,
and provide training materials and change management support will help
mitigate the growing shortage of federal financial management human
capital. As we previously reported,[Footnote 49] effective human
capital management is critical to the success of systems
implementations and the extent to which these and other efforts will
lead to having staff with the appropriate skills is key to achieving
financial management improvements.
In addition, in connection with our efforts to report annually on the
implementation status of FFMIA, we continue to report[Footnote 50] that
assessments for the 24 CFO Act agencies illustrate that agencies still
do not have effective financial management systems, including
processes, procedures, and controls in place that can routinely produce
reliable, useful, and timely financial information that federal
managers can use for day-to-day decision-making. Further, problems at
some agencies, such as DOD and DHS, are so severe and deep-rooted that
we have designated their transformation efforts as high risk due to
financial management and business practices that adversely affect their
ability to control costs, ensure basic accountability, measure
performance, and meet other financial management needs. Against the
backdrop of our nation's long-term fiscal imbalance, addressing these
issues represents key challenges to fully realizing the world-class
financial management anticipated by Congress through the enactment of
federal financial management reform legislation as well as FMLOB
initiative goals.
Given the broad spectrum of challenges associated with modernizing
federal financial management systems, strong leadership and commitment
of OMB, FSIO, and other key FMLOB stakeholders are especially important
to ensure that needed improvements are achieved. Knowledgeable
officials from the other selected organizations we interviewed
generally agreed that the success of the FMLOB initiative will depend,
in part, on OMB's ability to lead the multifaceted efforts of many
stakeholders toward achieving effective, common, financial management
system solutions over a long period of time. We concur with this
position and believe additional attention and efforts toward addressing
our prior recommendations, as well as continuing careful consideration
of the significant challenges, will serve to facilitate the
implementation of this important initiative.
Previously Identified Weaknesses Continue to Hamper OMB Oversight of
Financial Management System Modernization Projects:
Since 2005, we have made various recommendations[Footnote 51] to OMB
aimed at improving its oversight of agency financial management system
modernization and other IT projects. OMB has yet to take sufficient
actions to fully address these recommendations, despite the critical
role of OMB oversight, established in various statutes,[Footnote 52] in
helping to ensure the success of agency modernization efforts. In
addition, OMB has yet to resolve challenges we previously reported on
the need to capture the costs of all financial management system
investments in order to better evaluate agency modernization efforts.
Achieving FMLOB goals requires effective OMB oversight of agency
modernization projects. Until the weaknesses we previously reported are
fully addressed, the FMLOB initiative and agency financial management
system modernization efforts remain at increased risk of not meeting
their intended goals.
Actions Still Needed to Address Prior Recommendations Related to
Oversight of Financial Management System Modernization and Other IT
Projects:
Although OMB has taken steps to address some of the oversight-related
recommendations we have made since 2005, it has yet to fully address
them. For example, OMB has updated the criteria used to identify high-
risk projects and issued various guidance such as the Migration
Planning Guidance issued in September 2006 that provides useful
instruction to agencies on managing system modernization projects as
well as the risks associated with migrating to shared service
providers. However, OMB has not yet fully addressed our prior
recommendations aimed at maximizing the use of the Management Watch
List and High Risk List as tools that facilitate its oversight and
review of IT projects including financial management system
modernization efforts. Further, as indicated in the previous section of
this report, OMB has not yet fully addressed our prior recommendations
related to disciplined processes[Footnote 53] including defining and
providing specific guidance to agencies on disciplined processes,
developing processes to facilitate oversight and review of agencies'
financial system implementation projects, and ensuring that agencies
effectively implement disciplined processes.[Footnote 54]
OMB oversight efforts include assessing financial management system and
other IT investments using specific criteria to evaluate business cases
and determine whether they represent high-risk projects. OMB includes
agency projects warranting additional oversight and management
attention based on these assessments in its quarterly Management Watch
List and High Risk List. While OMB has taken steps to more effectively
use the Management Watch List and High Risk List as oversight tools,
additional actions are needed to fully address our prior
recommendations and further improve its oversight of agency IT
projects.[Footnote 55] For example, although OMB performed
governmentwide and agency-specific analyses of Management Watch List
projects' deficiencies in 2008, it needs to continue to use this list
to prioritize projects needing follow-up and to report to Congress on
management areas needing attention. In addition, OMB has yet to
publicly disclose the deficiencies, if any, associated with projects
included in the High Risk List. Disclosing these deficiencies would
allow OMB and others to better analyze the reasons projects are poorly
performing, identify management issues and other root causes that
transcend individual agencies, and evaluate corrective actions.
Further, OMB's criteria for assessing projects and determining which
are to be included on these quarterly lists does not adequately address
the need to assess whether agencies have, in fact, implemented the
necessary disciplined processes to help ensure their success.
As previously discussed, OMB officials stated that their reviews of
agency financial management system modernization projects do not
generally focus on the extent to which agencies are following
disciplined processes and that OMB does not have sufficient resources
to conduct such reviews. According to OMB officials, its reviews of
financial management systems and related modernization efforts focus
primarily on agencies' compliance with the requirements of FFMIA and
ensuring that effective remediation plans are developed and implemented
to address identified FFMIA deficiencies. Reviewing these projects to
monitor whether FFMIA deficiencies are addressed is important; however,
such efforts do not provide adequate assurance that agencies are using
disciplined processes to manage their projects. Such assurance is
critical since our work and that of others has shown that agency
modernization failures have often been due, in part, to not adhering to
disciplined processes during system implementation efforts. Until the
weaknesses we previously reported are fully addressed, the FMLOB
initiative and agency financial management system modernization efforts
remain at increased risk of not meeting their intended goals.
OMB Oversight Efforts Do Not Adequately Capture and Consider Spending
on Financial Management System Modernization Projects:
In 2006, we reported[Footnote 56] that one of the key challenges OMB
faces when evaluating financial management system modernization efforts
is capturing all financial management system investments and their
related costs. Capturing and reporting useful spending information
continues to be a challenge due, in part, to the way in which agencies
categorize projects according to existing OMB guidance. As a result,
the ability to fully consider the risks associated with financial
management system modernization projects and more effectively focus
oversight activities is adversely affected.
In April 2008, OMB reported[Footnote 57] that agencies planned to spend
$925 million on financial management systems modernizations for fiscal
year 2009. However, the methodology OMB used to report this overall
governmentwide estimate did not provide a complete and accurate measure
of spending on these projects. Specifically, agencies are required to
indicate certain FEA categories that each project relates to in
connection with their exhibit 53 submissions. While OMB's estimate of
agencies' planned spending includes amounts related to five of these
categories, it does not take into account certain types of mixed
systems that support financial management activities, such as those
related to supply chain management.[Footnote 58] For example, even
though DOD's Navy ERP project is a business system with many integrated
financial management functions, OMB's estimate did not include any of
the $112 million planned to be spent on this project in fiscal year
2009 because it was identified as a supply chain management project.
For projects involving mixed systems such as the Navy ERP, OMB guidance
requires agencies to provide the percentage of planned spending on
projects associated with the financial portion of these systems related
to their budget request for the next fiscal year.[Footnote 59] However,
such percentages were not incorporated in the methodology for
estimating planned agency spending on financial management systems for
fiscal year 2009. In addition, OMB guidance does not require agencies
to specify the amount that was actually spent on the financial portion
of mixed system projects in prior and current years. Further, on the
basis of our review of spending data for two selected agencies, the
reliability of information reported by agencies is unclear.
Specifically, these two agencies interpreted OMB's guidance differently
and, as a result, used inconsistent methodologies for determining the
percentages they reported. OMB officials informed us that they are
reviewing the guidance related to estimating financial management
system percentages to determine whether additional data or
clarifications are needed. OMB officials also stated that they were
uncertain as to whether focusing significant efforts in this area would
provide useful information or be an appropriate use of resources that
should be focused on potentially more important priorities.
We agree that managing and evaluating mixed system projects in many
cases may not involve focusing on the financial portion of mixed
systems on a stand-alone basis. However, OMB's current processes for
obtaining and reporting agency spending on financial management system
modernization efforts does not provide sufficient information to
facilitate an adequate evaluation of their financial risks. An
effectively designed risk-based approach for focusing limited financial
management oversight resources should take into consideration the
relative risks associated with all modernization projects that support
financial management functions. Further, focusing efforts on helping to
ensure the success of large mixed system projects that involve
significant financial management-related portions versus other less
costly financial management system modernization projects may be a
prudent course of action and may help justify the need for additional
resources to address the risks they represent.
Spending data highlighting the investments being made on different
types of financial management system modernization projects, including
core financial systems and mixed systems with significant financial
management components, would help efforts to evaluate the relative
magnitude of--and risks associated with--agency efforts in these areas.
Until OMB efforts to obtain and report spending on financial management
system modernization projects and related guidance take into account
the need for information to better evaluate the relative risks
associated with these investments, the ability to effectively align
oversight activities based on these risks will be adversely affected.
Conclusions:
OMB's FMLOB initiative represents an important step toward improving
the outcome of financial management system modernization efforts so
that agencies have systems that generate reliable, useful, and timely
information for decision-making purposes. Although OMB continues to
make progress in addressing our prior recommendations to help ensure
the success of this initiative, much work remains. Specifically, 13 of
the 18 recommendations we made on integrating four key building blocks
into FMLOB implementation efforts have yet to be fully addressed.
Without an effective concept of operations providing the foundation to
guide FMLOB-related activities, efforts to modernize federal financial
management systems are at an increased risk of not fully achieving
their goals. Further, addressing many of our recommendations will
require extensive work to complete remaining development activities
and, more importantly, actually place them into operation to achieve
the federal financial management framework envisioned. In addition,
despite its critical role in overseeing agency financial management
systems modernization efforts, OMB has not yet fully addressed our
oversight-related recommendations, including assessing whether agencies
have incorporated disciplined processes into their modernization
efforts, fully using its Management Watch List and High Risk List to
more effectively oversee projects, and reporting to Congress. Across
the federal government, agencies have financial management system
modernization efforts under way and the success of these efforts will
depend on OMB's and agencies' efforts to ensure that disciplined
processes are effectively used to help reduce the risk of system
implementation failures. Therefore, we reaffirm the need for OMB to
expedite its efforts to fully address the recommendations we have made
in prior reports, including those dealing with specific oversight
procedures to minimize their associated risk. OMB efforts to obtain and
report information on how much agencies spend on modernizing federal
financial management systems do not enable it or Congress to adequately
understand and evaluate the risks associated with such projects.
Consistent and diligent OMB commitment toward oversight, including
efforts to incorporate appropriate spending data, will be critical to
the overall success of efforts to modernize federal financial
management systems.
Recommendation for Executive Action:
To assist oversight efforts specifically related to federal financial
management systems, we recommend that the Director of OMB take actions
to facilitate complete and accurate reporting of actual and planned
spending related to financial management system modernization projects,
including the financial portion of mixed systems that significantly
support financial management functions, and make necessary changes in
existing guidance to meet these needs.
Agency Comments and Our Evaluation:
We received written comments from the Deputy Controller of OMB on a
draft of this report (these comments are reprinted in their entirety in
appendix III). In its comments, OMB generally agreed with our
recommendation to facilitate complete and accurate reporting of actual
and planned spending related to financial management system
modernization projects and described actions being taken to address
this recommendation. OMB also provided technical comments on a draft of
this report that we incorporated as appropriate.
In its comments, OMB expressed concern with part of our recommendation
directed at better capturing cost information specifically related to
the financial portion of mixed systems and stated that it is evaluating
the need for such information. According to OMB, its preliminary
analysis shows that breakouts of this cost data would have limited
value for decision making because such a distinction is highly
subjective and would not likely change agencies' investment decisions.
OMB did not provide the preliminary analysis for our review. OMB
believes it would be more cost-effective to focus its resources on
other, higher risk areas, such as finalizing the concept of operations.
However, as discussed in our report, the resources devoted to the
financial portion of mixed systems are significant and, although
determining the amount of such resources may be subjective, we believe
more effective OMB guidance and oversight could further improve the
accuracy, consistency, and usefulness of such information. The
implementation of mixed system projects is critical because these
systems provide input to the core financial system and in some cases
are the sole source of data needed by management to make informed
decisions. OMB needs such cost information to effectively evaluate the
risks associated with financial management system modernization
projects, including mixed systems, thus ensuring that its oversight
efforts are properly aligned to focus on those projects needing
increased attention.
We are sending copies of this report to the Ranking Member,
Subcommittee on Federal Financial Management, Government Information,
Federal Services, and International Security, Senate Committee on
Homeland Security and Governmental Affairs, and the Chairman and
Ranking Member, Subcommittee on Government Management, Organization,
and Procurement, House Committee on Oversight and Government Reform. We
are also sending copies to the Director of OMB and Director of FSIO. In
addition, this report will be available at no charge on the GAO Web
site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact Kay Daly, Director, Financial Management and Assurance, who may
be reached at (202) 512-9095 or dalykl@gao.gov, or Naba Barkakati,
Chief Technologist, Applied Research and Methods, who may be reached at
(202) 512-2700 or barkakatin@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in appendix IV.
Sincerely yours,
Signed by:
Kay L. Daly:
Director, Financial Management and Assurance:
Signed by:
Naba Barkakati:
Chief Technologist:
Applied Research and Methods:
Center for Engineering and Technology:
[End of section]
Appendix I: Scope and Methodology:
To determine the Office of Management and Budget's (OMB) progress
toward addressing our prior recommendations related to the financial
management line of business (FMLOB) initiative, we reviewed relevant
OMB and Financial Systems Integration Office (FSIO) policies, guidance,
reports, and memorandums related to actions taken and actions remaining
and interviewed key OMB and FSIO officials, including senior officials
in OMB's Office of Federal Financial Management (OFFM) and Office of
Electronic Government and Information Technology (E-Gov and IT). We
also reviewed laws and regulations related to the FMLOB initiative and
relevant prior GAO reports to identify and assess the risks and
challenges associated with implementing the FMLOB initiative. (See the
Related GAO Products list at the end of this report.) In addition, to
obtain views on challenges related to implementing the FMLOB
initiative, we interviewed OMB and FSIO officials as well as other
officials from organizations involved in large business transformation
initiatives and knowledgeable of federal financial management system
improvement efforts and reviewed relevant reports from these
organizations including the Financial Standards and Processes Division
within the Department of Defense Business Transformation Agency, the
Association of Government Accountants, and the National Academy of
Public Administration.
To determine how effective OMB monitors FMLOB and financial management
system modernization projects, including those reported on its
Management Watch List and High Risk List, we reviewed our prior reports
specifically related to OMB efforts to improve the identification and
oversight of projects on these lists and interviewed senior OMB OFFM
and Office of E-Gov and IT officials on the nature and extent of
efforts to monitor financial management system and other IT projects.
To assess OMB's efforts to monitor agency spending on FMLOB and
financial management system modernization projects, we reviewed and
analyzed reports and data provided by OMB and selected agencies related
to agency spending on IT projects. In assessing the reliability of
spending amounts reported by agencies, we (1) reviewed relevant OMB
policies, guidance, reports, and memorandums, (2) reviewed spending
data submitted by agencies to OMB on their Agency IT Investment
Portfolio (exhibit 53) as required by OMB Circular No. A-11, Section
53, and (3) interviewed senior OMB OFFM officials to gain an
understanding of their efforts to collect, analyze, and report agency
spending on financial management system projects. In addition, we
identified six agencies that reported the largest amounts of fiscal
year 2007 spending for financial management-related modernization
projects and interviewed officials from two of these agencies
knowledgeable of efforts related to preparing and submitting agency
exhibit 53s to OMB and whose reported fiscal year 2007 spending for
financial management-related modernization projects represented 22
percent of total federal agency spending on such IT projects.[Footnote
60] We believe that the results of our analysis of data provided by the
two agencies selected, combined with our analysis of guidance and data
obtained from OMB, provide a sufficient basis for our conclusion that
spending data submitted by agencies on the exhibit 53 are not reliable
for purposes of accurately measuring agency spending on financial
management system modernization projects.
We conducted this performance audit from February 2008 through May
2009, in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
We requested comments on a draft of this report from the Director,
Office of Management and Budget, or his designee. Written comments from
OMB are discussed in the Agency Comments and Our Evaluation section and
reprinted in appendix III. We also received technical comments from
OMB, which we incorporated as appropriate.
[End of section]
Appendix II: Status of Prior GAO Recommendations:
This appendix provides a summary of the progress made by OMB, in
conjunction with FSIO, in addressing prior GAO recommendations[Footnote
61] related to the FMLOB initiative. In addition, this appendix
provides our overall assessment and status of whether this progress
fully addressed each recommendation and a summary of the remaining
actions we believe are necessary to fully address those that have not
yet been completed.
Concept of operations:
GAO recommendation: 1. Develop a concept of operations;
Status: Not completed;
Progress and remaining actions: Progress:
* According to OMB officials, a draft FMLOB concept of operations
(ConOps) has been developed; however, it has not yet been finalized and
officials would not provide an estimate for when it will be completed.
According to OMB officials, the FMLOB ConOps will initially focus
primarily on core financial systems at the individual agency level.
While this focus is important, the development of a ConOps describing
the activities, needs, and interrelationships of core and noncore
governmentwide financial management systems would assist in providing a
valuable foundation for future financial management modernization
efforts. Until this critical tool is finalized, the extent to which OMB
efforts to date address this recommendation remains unclear;
Remaining actions:
* Finalize and issue a concept of operations document that includes the
following components;
- describes the operations that must be performed, who must perform
them, and where and how the operations will be carried out;
- clearly defines and describes the scope of financial management
activities;
- describes how the various elements of federal financial systems and
mixed systems interrelate;
- describes how information flows from and through these systems; and;
- explains how financial management systems at the agency and
governmentwide levels are designed to operate cohesively.
GAO recommendation: 2. Identify the interrelationships among federal
financial systems and how the application service provider concept fits
into this framework;
Status: Not completed;
Progress and remaining actions:
Progress:
* Refer to recommendation 1 describing progress related to developing a
ConOps that would describe the interrelationships among federal
financial management systems and how financial management operations,
including those performed by shared service providers, will be carried
out. In addition, OMB Circular No. A-127, revised in January 2009,
contains guidance on the use, selection, and monitoring of shared
service providers. However, this revised guidance does not adequately
reflect the critical interrelationships between core and noncore
financial systems. Specifically, it states that noncore financial
system requirements are not part of the requirements to be used for
determining substantial compliance with the Federal Financial
Management Improvement Act (FFMIA). This represents a significant
change from prior guidance that implemented FFMIA Sections 803(a)[A]
and 806b provisions requiring that all financial management systems be
evaluated to determine compliance with applicable requirements.
Excluding noncore financial management systems from the scope of these
provisions raises significant questions on how these systems will be
evaluated in the future and the level of assurance that noncore systems
provide reliable, timely, and useful financial information;
Remaining actions:
* Refer to recommendation 1 describing remaining actions related to
developing a ConOps which, among other things, describes the
interrelationships among federal financial management systems and how
financial management operations, including those performed by shared
service providers, should be carried out.
GAO recommendation: 3. Prescribe which financial management systems
should be operated at an agency level and which should be operated at a
governmentwide level and how those would integrate;
Status: Not completed;
Progress and remaining actions:
Progress:
* Refer to recommendation 1 describing progress related to developing a
ConOps that would describe the interrelationships among federal
financial management systems, including how systems operated at the
agency and governmentwide levels should operate cohesively;
* According to an OMB January 2008 memorandum,[C] in connection with
financial management modernization efforts, federal agencies will only
be permitted to acquire, and shared service providers allowed to
implement, software products that are certified as meeting FSIO core
financial systems requirements. Migration Planning Guidance issued in
September 2006 provides additional guidance on the services and systems
offered by shared service providers on behalf of agencies;
* According to OMB officials, an FMLOB Segment Architecture[D] is being
developed to align with the Federal Enterprise Architecture (FEA)
Reference Modele and will provide additional clarification on the
integration of financial management systems;
Remaining actions:
* Refer to recommendation 1 describing remaining actions related to
developing a ConOps which, among other things, would describe the
interrelationships among federal financial management systems,
including how systems operated at the agency and governmentwide levels
can operate cohesively;
* Ensure that efforts to develop and issue an FMLOB Segment
Architecture are appropriately aligned with a comprehensive financial
management system ConOps.
GAO recommendation: 4. Define financial management systems in the
Federal Enterprise Architecture (FEA) to be more consistent with the
similar definitions used in FFMIA and OMB Circulars No. A-11 and No. A-
127;
Status: Not completed;
Progress and remaining actions:
Progress:
* Refer to recommendation 1 describing progress related to developing a
ConOps that would clearly define and describe the scope of financial
management activities and describe how the various elements of federal
financial systems and mixed systems interrelate;
* In addition, refer to recommendation 2 describing revised OMB
Circular No. A-127 guidance on financial management systems;
* According to OMB officials, the FMLOB Segment Architecture is being
developed to align with the FEA Reference Model and proposed changes to
increase FEA alignment with OMB Circular Nos. A-11 and A-127 will be
submitted to the Federal CIO Council Architecture and Infrastructure
Committee;
Remaining actions:
* Ensure that collective efforts to define financial management
systems, including the development and issuance of the FMLOB Segment
Architecture and future revisions to OMB Circular Nos. A-11 and A-127,
effectively resolve inconsistencies in how they are defined in the FEA
and FFMIA.
Standard business processes:
GAO recommendation: 5. Define standard business processes;
Status: Not completed;
Progress and remaining actions:
Progress:
* OMB, in conjunction with FSIO, has made progress towards developing
standard business processes, including the issuance of the following
guidance:
- the common governmentwide accounting classification structure (July
2007);
- charge card data elements specification, which standardizes
governmentwide requirements for data elements (December 2007);
- payment and funds management standard business processes (July 2008);
and;
- receivable management standard business process (November 2008);
* In addition, according to OMB's January 2008 memorandum[F] to agency
chief financial officers (CFO), OMB projected that efforts to provide
certain additional guidance on common governmentwide business
standards, processes, data, and rules would be accomplished by December
2009 including:
- finalizing the reimbursables and reporting standard business
processes;
- updating the Core Financial Systems requirements to incorporate the
business standards; and;
- identifying and beginning the development of additional standards,
such as interface data elements, to assist in lowering the risk and
cost of implementing financial systems;
Remaining actions:
* Finalize and issue the business standards for reimbursables and
reporting processes;
* Update the Core Financial Systems and noncore systems requirements to
incorporate the business standards;
* Identify and develop additional common governmentwide business
standards, processes, data, and rules, such as interface data elements,
to assist in lowering the risk and cost of implementing financial
systems.
GAO recommendation: 6. Describe the standard business processes that
are needed to meet federal agencies' needs;
Status: Not completed;
Progress and remaining actions: Progress:
* Refer to recommendation 5 describing progress toward defining and
developing standard business processes;
* OMB, in conjunction with FSIO, issued Financial Management Systems
Standard Business Processes for U.S. Government Agencies[G] in July
2008, which describes the Standard Federal Financial Business Processes
(SFFBP) intended to provide guidance for implementing efficient core
financial business processes that are consistent across government. The
SFFBPs include:
- sequenced activities for core business processes;
- business rules for governing the process steps;
- data elements and definitions related to these business processes
(e.g., information contained on an obligation such as document source
and number, item number, price per item); and;
- relationships among the data elements as they exist in the actual
business activities;
* While the SFFBP currently provides detailed descriptions, process
steps, flowcharts, and other guidance for the payment, funds, and
receivables management processes, descriptions of other standard
business processes identified so far (i.e., reimbursables and
reporting), as well as data objects and elements, have not yet been
described. In addition, since the SFFBP focuses on core financial
business processes, standard business processes associated with noncore
financial business processes have not yet been described;
Remaining actions:
* Refer to recommendation 5 describing remaining action needed to
identify and define standard business processes;
* Develop, finalize, and issue descriptions of the business standards
for reimbursables and reporting processes;
* Identify, develop, and describe additional common governmentwide
business standards, processes, data, and rules, such as interface data
elements, including those needed to meet agencies' needs associated
with noncore financial business processes.
GAO recommendation: 7. Develop a process to identify those business
processes that are needed to meet unique agency needs;
Status: Not completed;
Progress and remaining actions:
Progress:
* OMB Circular No. A-127, revised in January 2009, requires agencies to
register approved exceptions to the standard configuration to meet
their needs;
Remaining action:
* According to OMB officials, OMB's priority is to focus on
governmentwide standard business processes that generally affect all
agencies. Although OMB has not yet focused on developing standard
business processes that meet unique agency needs, OMB must further
develop its process to identify agencies' unique requirements and
proceed to define standard business processes designed to meet them.
GAO recommendation: 8. Require application service providers to adopt
standard business processes to provide consistency;
Status: Completed;
Progress and remaining actions:
Progress:
* According to a January 2008 OMB memorandum,[H] once business
standards have been completed, incorporated into core financial system
requirements, and tested during the FSIO software qualification and
certification process, agencies will only be permitted to acquire, and
shared service providers allowed to implement, certified products as
configured with the standards. Limiting the products that shared
service providers can use to those that are configured to meet standard
business processes effectively addresses this recommendation.
GAO recommendation: 9. Encourage agencies to embrace new processes;
Status: Completed;
Progress and remaining actions:
Progress:
* See recommendation 8 describing progress related to incorporating
standard business processes into core financial system requirements and
requiring shared service providers to only use certified products
configured with the standard. In addition, this memorandum requires
agencies to adopt these standards when they move to a shared service
provider;
* In a July 2008 memorandum[I] announcing the issuance of certain
standard business processes described in recommendation 5, OMB
encouraged the financial management community, including federal
agencies, to begin preparations for adopting standard business
processes by (1) analyzing existing business practices and processes,
(2) gaining an understanding of the standard federal financial business
processes, (3) analyzing the gap between existing and future processes,
and (4) using standard business processes as a framework for system
implementation projects;
* In addition, OMB's and FSIO's ongoing work with focus and working
groups consisting of agency and other federal financial management
community stakeholders to develop SFFBPs provides effective
opportunities to help encourage agencies to develop and embrace
standard business processes and performance measures.
Migration strategy:
GAO recommendation: 10. Develop a strategy for ensuring that agencies
are migrated to a limited number of application service providers in
accordance with OMB's stated approach;
Status: Not completed;
Progress and remaining actions:
Progress:
* See recommendation 2 describing revised OMB Circular No. A-127 on the
use of shared service providers;
* In a January 2008 memorandum,[J] OMB reiterated guidance contained in
the Competition Framework for Financial Management Lines of Business
Migrations (Competition Framework) issued in May 2006 requiring, with
limited exception, an agency seeking to upgrade to the next major
release of its current core financial management system or modernize to
a different core financial management system to either migrate to a
shared service provider or qualified private sector provider, or be
designated as a shared service provider. An agency may rely on its in-
house core financial management system operations without being
designated as a shared service provider only if the agency demonstrates
that its own operations represent a best value and lower risk
alternative over the life of the investment;
* OMB also issued Migration Planning Guidance in September 2006 to help
agencies prepare for and manage a migration of their financial
management system operations to a shared service provider. According to
the Migration Planning Guidance, all agencies are expected to decide
whether to migrate their technology hosting administration and
application management to a shared service provider or to become a
provider themselves within 10 years;
* To help ensure that agencies are migrating in accordance with its
stated approach, according to OMB officials, OMB uses information
obtained from agencies, such as the life cycles of agencies' existing
financial management systems and exhibit 300s, and through discussions
specifically related to financial management systems which occur at
least annually, or more frequently during active migration planning or
transition activities;
Remaining actions:
* Although OMB has developed a migration strategy, we defer our final
assessment of these actions toward addressing this recommendation until
we complete a more in-depth analysis as part of our planned follow-on
work.
GAO recommendation: 11. Articulate a clear goal and criteria for
ensuring agencies are subject to the application service provider
concept and cannot continue developing and implementing their own
stovepiped systems;
Status: Not completed;
Progress and remaining actions: Progress:
* See recommendation 10 describing OMB's progress to clearly articulate
the applicability of the shared service provider concept to agencies;
Remaining actions:
* Although OMB has taken steps to articulate a clear goal and criteria
for ensuring agencies are subject to the shared service provider
concept, we defer our final assessment of these actions toward
addressing this recommendation until we complete a more in-depth
analysis as part of our planned follow-on work.
GAO recommendation: 12. Establish a migration path or timetable for
when agencies should migrate to an application service provider;
Status: Not completed;
Progress and remaining actions:
Progress:
* See recommendation 10 describing progress related to establishing a
migration path or timetable;
* Although these efforts articulate the applicability of the shared
services concept to federal agencies and represent important elements
of an overall migration strategy, additional efforts are needed for an
effective strategy including the establishment of clear migration
timelines and processes to effectively monitor progress toward meeting
them. OMB's recent estimates for when agencies will be migrated to
shared service providers are unclear, indicating that many have been
scheduled through fiscal year 2015 while some have not yet been
scheduled. According to OMB officials, although OMB has been working to
develop a detailed migration timeline it has not yet been finalized.
Until this tool is finalized, the extent to which OMB efforts to date
address this recommendation remains unclear;
Remaining actions:
* Develop clear and measurable goals, including specific timelines for
migrating to shared service providers based, in part, on the life cycle
of existing financial management systems.
GAO recommendation: 13. Provide the necessary information for an agency
to select an application service provider;
Status: Completed;
Progress and remaining actions:
Progress:
* The Competition Framework issued by OMB in May 2006 provides
additional guidance to help agencies select a shared service provider
and requires agencies undertaking steps to acquire new financial
management systems to comply with four guiding principles, including
considering providers with a demonstrated capability, using a
competitive process, implementing an accountability structure, and
tracking results;
* In September 2006 OMB issued its Migration Planning Guidance designed
to help agencies prepare for and manage a migration of their financial
management system operations to a shared service provider. In January
2009, OMB revised Circular No. A-127 providing additional guidance on
the use of shared service providers.
GAO recommendation: 14. Develop guidance to assist agencies in adopting
a change management strategy for moving to application service
providers;
Status: Completed;
Progress and remaining actions:
Progress:
Migration Planning Guidance issued in September 2006 includes a section
on Change Management Best Practices, which provides considerations for
managing the organizational changes to facilitate the transition from
an agency's existing financial systems or operations to a shared
service provider. This section includes in-depth descriptions of best
practices in a variety of areas that can assist agencies in developing
and adopting an effective change management strategy including the role
of leadership, governance, organizational structure, migration team
composition, human capital management, and stakeholder and
communications management.
Disciplined processes:
GAO recommendation: 15. Define and ensure agencies effectively
implement disciplined processes necessary to properly manage the
specific projects;
Status: Not completed;
Progress and remaining actions:
Progress:
* OMB issued guidance related to disciplined processes in its Migration
Planning Guidance issued in September 2006 which provides agencies with
high-level guidance to manage their systems modernization projects and
manage risks of migrating to shared service providers;
* See recommendations 8 and 10 describing progress related to requiring
agencies to migrate to shared service providers and only permitting
them to use the certified products as configured to meet required
standard business processes. According to OMB officials, using shared
service providers with proven track records will help to reduce or
eliminate traditional project management tasks commonly associated with
system implementations;
* However, additional efforts are needed to adequately define the
critical elements of disciplined processes needed and steps to be taken
to ensure they are adequately implemented. In our review of OMB
guidance on selected disciplined processes, we noted that OMB guidance
does not provide in-depth information on each of the selected
disciplined processes. For example, OMB guidance does not adequately
address how agencies are to ensure the traceability of requirements as
well as the need to consider specific issues that apply uniquely to
converting data as part of the replacement of a financial system,
incorporate test cases that expose the system to invalid and unexpected
outcomes, and ensure thorough inspection of test results. In addition,
OMB reviews of agencies' financial management systems implementations
generally do not focus on implementation of the disciplined processes;
Remaining actions:
* Thoroughly define the disciplined processes (i.e., requirements
management, testing, data conversion and system interfaces,
configuration, risk and project management, quality assurance)
necessary to properly manage projects;
* Map each of the disciplined processes to OMB guidance that contains
clear and specific instructions requiring their use and how each
disciplined process should be performed;
* Issue guidance specifically related to disciplined processes
necessary to properly manage specific projects;
* Provide oversight and more structured reviews specifically related to
financial management projects to ensure that disciplined processes are
effectively implemented.
GAO recommendation: 16. Provide specific guidance to agencies on
disciplined processes for financial system implementations;
Status: Not completed;
Progress and remaining actions:
Progress:
* See recommendation 15 describing progress related to specific
guidance provided to agencies on disciplined processes including the
issuance of Migration Planning Guidance, OMB Circular No. A-11, Part 7,
and a May 25, 2007, memorandum.[K] Of these, the Migration Planning
Guidance provides the most specific guidance related to financial
management system implementations. However, as described in
recommendation 15, additional efforts are needed to provide guidance to
address the use of disciplined processes in connection with financial
management system implementations;
Remaining actions:
* See recommendation 15 describing remaining actions needed to address
the use of disciplined processes necessary to properly manage specific
financial management system implementation projects.
GAO recommendation: 17. Provide a standard set of practices to guide
the migrations from legacy systems to new systems and application
service providers;
Status: Completed;
Progress and remaining actions:
Progress:
* See recommendations 8, 13, and 14 describing progress related to
issuing the Competition Framework, Migration Planning Guidance
including Change Management Best Practices, and OMB's January 2008
memorandum providing guidance for agencies planning to migrate their
agency's financial management systems and services to new systems and
shared service providers.
GAO recommendation: 18. Develop processes to facilitate oversight and
review that allow for a more structured review and follow-up of
agencies' financial system implementation projects;
Status: Not completed;
Progress and remaining actions:
Progress:
* OMB issued a variety of guidance on financial management system
requirements and the implementation of IT projects that facilitates the
oversight and review of financial system implementation projects;
* OMB uses information obtained from agencies such as the life cycles
of agencies' existing financial management systems, exhibit 300s, and
through discussions specifically related to financial management
systems implementation projects which occur at least annually, or more
frequently during active migration planning or transition activities;
* During the budget formulation process, OMB analyzes information
related to agency financial management system and other IT projects and
identifies those warranting additional attention on its Management
Watch List and High Risk List;
These efforts represent important aspects of OMB's oversight of
financial management system implementation projects. However, OMB has
not developed a structured process to facilitate its overall oversight
efforts related to these projects. In addition, OMB does not adequately
capture spending specifically related to financial management system
modernization projects, which limits its ability to fully consider the
financial risks associated with these efforts. Also, we recently
testified[L] that although OMB has taken steps to improve the
identification of poorly planned and poorly performing projects,
additional efforts are needed to address prior recommendations to
improve the planning, management, and oversight of these projects.
Finally, the extent of problems related to financial management system
implementation projects that continue to be reported indicate the need
for additional oversight efforts designed to further identify and
prevent failures in the future;
Remaining actions:
* Enhance existing oversight efforts to improve financial management
system implementations by:
- developing a structured process to identify and evaluate specific and
systemic implementation weaknesses and risks specifically related to
financial management system modernizations, including those associated
with projects on the Management Watch List and High Risk List and
others identified through reviews of agency provided information, as
well as their costs, and discussions with agency officials;
- implementing processes to ensure that agencies more effectively and
consistently comply with guidance related to implementing financial
management system modernization projects, including the use of
disciplined processes to reduce the risk of implementation failures;
and;
- clarifying guidance so that agencies consistently report planned and
actual spending related to financial management system modernization
projects including the financial portion of mixed systems.
Sources: GAO analysis, OMB and FSIO data.
[A] According to FFMIA Section 803(a), agencies are required to
implement and maintain financial management systems that comply
substantially with federal financial management systems requirements,
applicable federal accounting standards, and the United States
Government Standard General Ledger at the transaction level.
[B] Pursuant to FFMIA Section 806 (4), (5), and (6), "financial
management systems" includes the financial systems and the financial
portions of mixed systems necessary to support financial management,
including automated and manual processes, procedures, controls, data,
hardware, software, and support personnel dedicated to the operation
and maintenance of system functions; "financial system" includes an
information system, comprised of one or more applications, which is
used for--(a) collecting, processing, maintaining, transmitting, or
reporting data about financial events; (b) supporting financial
planning or budgeting activities; (c) accumulating and reporting cost
information; or (d) supporting the preparation of financial statements;
and "mixed system" means an information system that supports both
financial and nonfinancial functions of the federal government or
components thereof.
[C] OMB, Memorandum, Update on the Financial Management Line of
Business (Washington, D.C.: Jan. 28, 2008).
[D] According to OMB, segment architecture defines a simple road map
for a core mission area, business service, or enterprise service that
is driven by business management and delivers products that improve the
delivery of services to citizens and agency staff. From an investment
perspective, segment architecture drives decisions for a business case
or group of business cases supporting a core mission area or common or
shared service.
[E] According to OMB, the FEA consists of a set of interrelated
"reference models" designed to facilitate cross-agency analysis and the
identification of duplicative investments, gaps, and opportunities for
collaboration within and across agencies. Collectively, the reference
models comprise a framework for describing important elements of the
FEA in a common and consistent way.
[F] OMB, Memorandum, Update on the Financial Management Line of
Business (Washington, D.C.: Jan. 28, 2008).
[G] FSIO, Financial Management Systems Standard Business Processes for
U.S. Government Agencies (Washington, D.C.: July 18, 2008).
[H] OMB, Memorandum, Update on the Financial Management Line of
Business (Washington, D.C.: Jan. 28, 2008).
[I] OMB, Memorandum, Federal Financial Management Standard Business
Document (Washington, D.C.: July 18, 2008).
[J] OMB, Memorandum, Update on the Financial Management Line of
Business (Washington, D.C.: Jan. 28, 2008).
[K] OMB Memorandum, Use of Performance-Based Management Systems for
Major Acquisition Programs (Washington, D.C.,: May 25, 2007).
[L] GAO, Information Technology: OMB and Agencies Need to Improve
Planning, Management, and Oversight of Projects Totaling Billions of
Dollars, GAO-08-1051T (Washington, D.C.: July 31, 2008).
[End of table]
[End of section]
Appendix III: Comments from the Office of Management and Budget:
Executive Office Of The President:
The Controller:
Office Of Management And Budget:
Washington, D.C. 20503:
April 20, 2009:
Ms. Kay Daly:
Director, Financial Management and Assurance:
United States Government Accountability Office:
Washington, DC 20548:
Dear Ms. Daly:
Thank you for the opportunity to comment on the Government
Accountability Office (GAO) draft report entitled "Financial Management
Systems: OMB's Financial Management Line of Business Initiative
Continues but Future Success Remains Uncertain (GAO-09-328)." We
appreciate GAO's continued efforts to evaluate agencies' progress in
modernizing their financial management systems and its valuable
insights into improving this critical area.
Under the FMLoB, the Office of Management and Budget (OMB), the
Financial Systems Integration Office (FSIO), and Federal agencies are
working collaboratively to strengthen financial management practices
across the government by developing common business standards,
developing common data standards, and moving financial systems to
shared services. Specifically, FSIO issued government-wide financial
business process standards for the following: Funds Management and
Payment Management, Receivables Management, Reports. and Reimbursable
Management. To support the standardization efforts, OMB updated
Circular No. A-127, Financial Management Systems, on January 9, 2009.
In general, OMB agrees with the first part of GAO's recommendation to
facilitate complete and accurate reporting of actual and planned
spending related to financial management system modernization projects.
We are currently reviewing agency reported spending data to determine
whether any refinement to OMB guidance is needed as well as exploring
opportunities to make cost data on agency financial system
implementation and support activities available publicly. With respect
to the second part of GAO's recommendation, OMB is evaluating whether
it is necessary to better capture cost information with respect to the
financial portion of mixed systems. Our preliminary analysis shows that
breakouts of this data in this manner would have limited value for
decision making because such a distinction is highly subjective and
would not likely change an agencies investment decisions. Further, we
believe there will he greater benefit to dedicating resources to other
higher risk areas such as finalizing the Concept of Operations.
We appreciate the opportunity to comment on the draft report, including
a series of technical suggestions that were provided separately by OMB
staff. We look forward to working with GAO in improving Federal
financial management systems. If you have any questions please feel
free to contact Adam Goldberg, Chief, Financial Analysis and Systems
Branch, at 202-395-7583.
Sincerely,
Signed by:
Daniel Werfel:
Deputy Controller:
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Kay L. Daly, (202) 512-9095 or dalykl@gao.gov:
Naba Barkakati, (202) 512-2700 or barkakatin@gao.gov:
Staff Acknowledgments:
Individuals making major contributions to this report were Chris
Martin, Senior-Level Technologist; Michael LaForge, Assistant Director;
Sabine Paul, Assistant Director; Latasha Brown; Francine DelVecchio;
Jim Kernen; Patrick Tobo; and Leonard Zapata.
[End of section]
Related GAO Products:
Information Technology: Management and Oversight of Projects Totaling
Billions of Dollars Need Attention. [hyperlink,
http://www.gao.gov/products/GAO-09-624T]. Washington, D.C.: April 28,
2009.
Financial Management: Persistent Financial Management Systems Issues
Remain for Many CFO Act Agencies. [hyperlink,
http://www.gao.gov/products/GAO-08-1018]. Washington, D.C.: September
30, 2008.
Information Technology: Treasury Needs to Better Define and Implement
Its Earned Value Management Policy. [hyperlink,
http://www.gao.gov/products/GAO-08-951]. Washington, D.C.: September
22, 2008.
DOD Business Systems Modernization: Important Management Controls Being
Implemented on Major Navy Program, but Improvements Needed in Key
Areas. [hyperlink, http://www.gao.gov/products/GAO-08-896]. Washington,
D.C.: September 8, 2008.
Information Technology: Agencies Need to Establish Comprehensive
Policies to Address Changes to Projects' Cost, Schedule, and
Performance Goals. [hyperlink, http://www.gao.gov/products/GAO-08-925].
Washington, D.C.: July 31, 2008.
Information Technology: OMB and Agencies Need to Improve Planning,
Management, and Oversight of Projects Totaling Billions of Dollars.
[hyperlink, http://www.gao.gov/products/GAO-08-1051T]. Washington,
D.C.: July 31, 2008.
Fiscal Year 2007 U.S. Government Financial Statements: Sustained
Improvement in Financial Management Is Crucial to Improving
Accountability and Addressing the Long-Term Fiscal Challenge.
[hyperlink, http://www.gao.gov/products/GAO-08-926T]. Washington, D.C.:
June 26, 2008.
Fiscal Year 2007 U.S. Government Financial Statements: Sustained
Improvement in Financial Management Is Crucial to Improving
Accountability and Addressing the Long-Term Fiscal Challenge.
[hyperlink, http://www.gao.gov/products/GAO-08-847T]. Washington, D.C.:
June 5, 2008.
Highlights of a Forum Convened by the Comptroller General of the United
States: Improving the Federal Government's Financial Management
Systems. [hyperlink, http://www.gao.gov/products/GAO-08-447SP].
Washington, D.C.: April 16, 2008.
Defense Travel System: Overview of Prior Reported Challenges Faced by
DOD in Implementation and Utilization. [hyperlink,
http://www.gao.gov/products/GAO-08-649T]. Washington, D.C.: April 15,
2008.
Defense Business Transformation: Sustaining Progress Requires
Continuity of Leadership and an Integrated Approach. [hyperlink,
http://www.gao.gov/products/GAO-08-462T]. Washington, D.C.: February 7,
2008.
Homeland Security: Responses to Posthearing Questions Related to the
Department of Homeland Security's Integrated Financial Management
Systems Challenges. [hyperlink,
http://www.gao.gov/products/GAO-07-1157R]. Washington, D.C.: August 10,
2007.
Financial Management: Long-standing Financial Systems Weaknesses
Present a Formidable Challenge. [hyperlink,
http://www.gao.gov/products/GAO-07-914]. Washington, D.C.: August 3,
2007.
Cost Assessment Guide: Best Practices for Estimating and Managing
Program Costs. [hyperlink, http://www.gao.gov/products/GAO-07-1134SP].
Washington, D.C.: July 2007.
DOD Business Transformation: Lack of an Integrated Strategy Puts the
Army's Asset Visibility System Investments at Risk. [hyperlink,
http://www.gao.gov/products/GAO-07-860]. Washington, D.C.: July 27,
2007.
Business Modernization: NASA Must Consider Agencywide Needs to Reap the
Full Benefits of Its Enterprise Management System Modernization Effort.
[hyperlink, http://www.gao.gov/products/GAO-07-691]. Washington, D.C.:
July 20, 2007.
Managerial Cost Accounting Practices: Implementation and Use Vary
Widely across 10 Federal Agencies. [hyperlink,
http://www.gao.gov/products/GAO-07-679]. Washington, D.C.: July 20,
2007.
Homeland Security: Transforming Departmentwide Financial Management
Systems Remains a Challenge. [hyperlink,
http://www.gao.gov/products/GAO-07-1041T]. Washington, D.C.: June 28,
2007.
Homeland Security: Departmentwide Integrated Financial Management
Systems Remain a Challenge. [hyperlink,
http://www.gao.gov/products/GAO-07-536]. Washington D.C.: June 21,
2007.
Managerial Cost Accounting Practices at the Department of Interior.
[hyperlink, http://www.gao.gov/products/GAO-07-298R]. Washington, D.C.:
May 24, 2007.
DOD Business Systems Modernization: Progress Continues to Be Made in
Establishing Management Controls, but Further Steps Are Needed.
[hyperlink, http://www.gao.gov/products/GAO-07-733]. Washington, D.C.:
May 14, 2007.
Information Technology: DHS Needs to Fully Define and Implement
Policies and Procedures for Effectively Managing Investments.
[hyperlink, http://www.gao.gov/products/GAO-07-424]. Washington, D.C.:
April 27, 2007.
Fiscal Year 2006 U.S. Government Financial Statements: Sustained
Improvement in Federal Financial Management Is Crucial to Addressing
Our Nation's Accountability and Fiscal Stewardship Challenges.
[hyperlink, http://www.gao.gov/products/GAO-07-607T]. Washington, D.C.:
March 20, 2007.
Federal Financial Management: Critical Accountability and Fiscal
Stewardship Challenges Facing Our Nation. [hyperlink,
http://www.gao.gov/products/GAO-07-542T]. Washington, D.C.: March 1,
2007.
Defense Business Transformation: A Comprehensive Plan, Integrated
Efforts, and Sustained Leadership Are Needed to Assure Success.
[hyperlink, http://www.gao.gov/products/GAO-07-229T]. Washington, D.C.:
November 16, 2006.
Defense Travel System: Estimated Savings Are Questionable and
Improvements Are Needed to Ensure Functionality and Increase
Utilization. [hyperlink, http://www.gao.gov/products/GAO-07-208T].
Washington, D.C.: November 16, 2006.
Financial Management: Improvements Under Way but Serious Financial
Systems Problems Persist. [hyperlink,
http://www.gao.gov/products/GAO-06-970]. Washington, D.C.: September
26, 2006.
Defense Travel System: Reported Savings Questionable and Implementation
Challenges Remain. [hyperlink, http://www.gao.gov/products/GAO-06-980].
Washington, D.C.: September 26, 2006.
Managerial Cost Accounting Practices: Department of Agriculture and the
Department of Housing and Urban Development. [hyperlink,
http://www.gao.gov/products/GAO-06-1002R]. Washington, D.C.: September
21, 2006.
Department of Defense: Sustained Leadership Is Critical to Effective
Financial and Business Management Transformation. [hyperlink,
http://www.gao.gov/products/GAO-06-1006T]. Washington, D.C.: August 3,
2006.
Information Technology: Agencies and OMB Should Strengthen Processes
for Identifying and Overseeing High Risk Projects. [hyperlink,
http://www.gao.gov/products/GAO-06-647]. Washington, D.C.: June 15,
2006.
Financial Management Systems: Lack of Disciplined Processes Puts
Effective Implementation of Treasury's Governmentwide Financial Report
System at Risk. [hyperlink, http://www.gao.gov/products/GAO-06-413].
Washington, D.C.: April 21, 2006.
Managerial Cost Accounting Practices: Departments of Health and Human
Services and Social Security Administration. [hyperlink,
http://www.gao.gov/products/GAO-06-599R]. Washington, D.C.: April 18,
2006.
Financial Management Systems: DHS Has an Opportunity to Incorporate
Best Practices in Modernization Efforts. [hyperlink,
http://www.gao.gov/products/GAO-06-553T]. Washington, D.C.: March 29,
2006.
Financial Management Systems: Additional Efforts Needed to Address Key
Causes of Modernization Failures. [hyperlink,
http://www.gao.gov/products/GAO-06-184]. Washington, D.C.: March 15,
2006.
Managerial Cost Accounting Practices: Departments of Education,
Transportation, and the Treasury. [hyperlink,
http://www.gao.gov/products/GAO-06-301R]. Washington, D.C.: December
19, 2005.
CFO Act of 1990: Driving the Transformation of Federal Financial
Management. [hyperlink, http://www.gao.gov/products/GAO-06-242T].
Washington, D.C.: November 17, 2005.
National Aeronautics and Space Administration: Long-standing Financial
Management Challenges Threaten the Agency's Ability to Manage Its
Programs. [hyperlink, http://www.gao.gov/products/GAO-06-216T].
Washington, D.C.: October 27, 2005.
Managerial Cost Accounting Practices: Departments of Labor and Veterans
Affairs. [hyperlink, http://www.gao.gov/products/GAO-05-1031T].
Washington, D.C.: September 21, 2005.
Managerial Cost Accounting Practices: Leadership and Internal Controls
Are Key to Successful Implementation. [hyperlink,
http://www.gao.gov/products/GAO-05-1013R]. Washington, D.C.: September
2, 2005.
Army Depot Maintenance: Ineffective Oversight of Depot Maintenance
Operations and System Implementation Efforts. [hyperlink,
http://www.gao.gov/products/GAO-05-441]. Washington, D.C.: June 30,
2005.
Information Technology: OMB Can Make More Effective Use of Its
Investment Reviews. [hyperlink,
http://www.gao.gov/products/GAO-05-276]. Washington, D.C.: April 15,
2005.
[End of section]
Footnotes:
[1] The term financial management systems includes the financial
systems and the financial portions of mixed systems necessary to
support financial management, including automated and manual processes,
procedures, controls, data, hardware, software, and support personnel
dedicated to the operation and maintenance of system functions.
[2] Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990).
[3] Pub. L. No. 104-208, div. A., § 101(f), title VIII, 110 Stat. 3009,
3009-389 (Sept. 30, 1996).
[4] See the list of Related GAO Products at the end of this report.
[5] GAO, Financial Management Systems: Additional Efforts Needed to
Address Key Causes of Modernization Failures, [hyperlink,
http://www.gao.gov/products/GAO-06-184] (Washington, D.C.: Mar. 15,
2006).
[6] Disciplined processes represent best practices in systems
development and implementation efforts that have been shown to reduce
the risks associated with software development and acquisition efforts
to acceptable levels and are fundamental to successful system
implementations. Examples of disciplined processes include requirements
management, testing, risk management, data conversion, and project
management.
[7] In December 2004, the Joint Financial Management Improvement
Program (JFMIP) Principals voted to modify the roles and
responsibilities of the JFMIP, resulting in the creation of FSIO. FSIO
assumed responsibility for coordinating the work related to federal
financial management systems requirements and is serving as the Program
Manager for the FMLOB Initiative. OMB's Office of Federal Financial
Management (OFFM) is responsible for issuing the new or revised federal
financial management system requirements. See OMB, Memorandum, Update
on the Financial Management Line of Business and the Financial Systems
Integration Office (Washington, D.C.: Dec. 16, 2005).
[8] The PMA was created to address the need for citizen-centered,
results-oriented, and market-based federal government initiatives.
Pursuant to the PMA, OMB created Lines of Business initiatives which
address redundant information technology (IT) investments and business
processes across the federal government including case management,
grants management, human resources management, federal health
architecture, information systems security, budget formulation and
execution, geospatial, and IT infrastructure.
[9] Pub. L. No. 97-255, 96 Stat. 814 (Sept. 8, 1982) (codified at 31 U.
S. C. § 3512(c), (d)).
[10] Pub. L. No. 103-62, 107 Stat. 285 (Aug. 3, 1993).
[11] Pub. L. No. 103-356, 108 Stat. 3410 (Oct. 13, 1994).
[12] 40 U.S.C. §§ 11101-11704.
[13] Pub. L. No. 107-289, 116 Stat. 2049 (Nov. 7, 2002).
[14] Pub.L. No. 107-347 § 101(a), 116 Stat. 2899, 2902-05 (Dec. 17,
2002) (codified, in relevant part, at 44 U.S.C. § 3602(a), (f)).
[15] Pursuant to OMB Circular No. A-11, Section 53, agencies are
required to specify IT investments related to (1) Mission Area Support,
(2) Infrastructure, Office Automation, and Telecommunications, (3)
Enterprise Architecture and Planning, (4) Grants Management Systems,
(5) Grants to State and Local IT Investments, and (6) National Security
Systems.
[16] According to OMB Circular No. A-11, Section 53, spending on
modernization projects consists of program costs for new investments,
changes, or modifications to existing systems to improve capability or
performance, changes mandated by Congress or agency leadership,
personnel costs for investment management, and direct support.
[17] According to OMB, major investments are placed on the Management
Watch List based on its review of agency project business cases for the
following reasons: weak security section; weak nonsecurity section;
project manager rating mismatched between agency's exhibit 53 & exhibit
300; the project manager identified for the investment has not been
validated as qualified for the investment per the agency's exhibit 53;
agency failed to receive a "satisfactory" or better evaluation by the
agency's inspector general (IG) as reported in its annual Federal
Information Security Management Act reports for the quality of its
certification and accreditation process and for the quality of its
privacy impact assessment process; agency is rated red for the cost/
schedule performance element of the PMA E-Gov Scorecard; and general
overall consistency issues with the content within the submitted
exhibit 300. In addition, projects with a low composite score related
to all the reasons previously described are placed on the Management
Watch List.
[18] According to the materials supplementing the President's budget
for fiscal year 2009, OMB listed the following criteria for identifying
high-risk projects: complex projects, projects with a high degree of
political or citizen interest, projects with cross-organizational or
agency impact or interdependencies with other systems efforts, major
systems on the Management Watch List at the conclusion of the prior
fiscal year that continue to warrant heightened attention during
project execution, major systems formally designated as an E-Government
or Line of Business shared service provider, E-Government initiative
migration projects that are planned or under way, existing or legacy
agency systems retiring once their functionality has been migrated to a
common solution, and program or program management office activities
supporting governmentwide common solutions.
[19] According to OMB guidance, agencies are to determine, for each of
their high-risk projects, whether the project was meeting the following
performance evaluation criteria: (1) establishing baselines with clear
cost, schedule, and performance goals; (2) maintaining the project's
cost and schedule variances within 10 percent; (3) assigning a
qualified project manager; and (4) avoiding duplication by leveraging
interagency and governmentwide investments.
[20] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[21] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[22] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[23] OMB, Memorandum, Update on the Financial Management Line of
Business (Washington, D.C.: Jan. 28, 2008). With regard to FMLOB
priorities, the memorandum stated that the FMLOB initiative will
continue with transparency and standardization projects related to
incorporating FMLOB business standards and enhancing tools to assist
agencies in evaluating and migrating to shared service solutions.
[24] Ronald W. Reagan National Defense Authorization Act for Fiscal
Year 2005, Pub. L. No. 108-375, § 332, 118 Stat. 1811, 1854 (Oct. 28,
2004 (codified at 10 U.S.C. § 2222(j)(2)), defines a defense business
system as an information system, other than a national security system,
operated by, for, or on behalf of the department that is used to
support business activities, such as acquisition, financial management,
logistics, strategic planning and budgeting, installations and
environment, and human resources management. The act states that such
systems are to include financial systems, mixed systems, financial data
feeder systems, and IT and information assurance infrastructure.
[25] GAO, Defense Business Transformation: Sustaining Progress Requires
Continuity of Leadership and an Integrated Approach, [hyperlink,
http://www.gao.gov/products/GAO-08-462T] (Washington, D.C.: Feb. 7,
2008).
[26] The term mixed system means an information system that supports
both financial and nonfinancial functions of the federal government or
components thereof.
[27] OMB Circular No. A-127 (revised), Financial Management Systems
(Washington, D.C.: Jan. 9, 2009).
[28] GAO, DOD Business Systems Modernization: Important Management
Controls Being Implemented on Major Navy Program, but Improvements
Needed in Key Areas, [hyperlink,
http://www.gao.gov/products/GAO-08-896] (Washington, D.C.: Sept. 8,
2008). According to DOD, Navy ERP is to address the Navy's long-
standing problems related to financial transparency and asset
visibility. Specifically, the program is intended to standardize the
Navy's acquisition, financial, program management, maintenance, plant
and wholesale supply, and workforce management business processes
across its dispersed organizational components. When the program is
fully implemented, it is to support over 86,000 users.
[29] GAO, DOD Business Transformation: Lack of an Integrated Strategy
Puts the Army's Asset Visibility System Investments at Risk,
[hyperlink, http://www.gao.gov/products/GAO-07-860] (Washington, D.C.:
July 27, 2007); Homeland Security: Departmentwide Integrated Financial
Management Systems Remain a Challenge, [hyperlink,
http://www.gao.gov/products/GAO-07-536] (Washington, D.C.: June 21,
2007); and Financial Management Systems: Lack of Disciplined Processes
Puts Effective Implementation of Treasury's Governmentwide Financial
Report System at Risk, [hyperlink,
http://www.gao.gov/products/GAO-06-413] (Washington, D.C.: Apr. 21,
2006).
[30] [hyperlink, http://www.gao.gov/products/GAO-07-860].
[31] GAO, Highlights of a Forum Convened by the Comptroller General of
the United States: Improving the Federal Government's Financial
Management Systems, [hyperlink,
http://www.gao.gov/products/GAO-08-447SP] (Washington, D.C.: Apr. 16,
2008).
[32] In March 2004, OMB initiated a governmentwide analysis of five
lines of business--financial management, human resources management,
grants management, federal health architecture, and case management--
and in March 2005 started a task force to address a sixth line of
business on IT security. Three additional lines of business were
initiated in March 2006 on budget formulation and execution,
geospatial, and IT infrastructure optimization.
[33] The FEA commenced in 2002 and is a business-based framework for
governmentwide improvement intended to identify opportunities to
simplify processes and unify work across the agencies and within the
lines of business of the federal government that maximizes technology
investments to better achieve mission outcomes. The FEA includes the
Business Reference Model, which provides a framework for facilitating a
functional view of the government's lines of business such as the
support functions necessary to conduct government operations and the
resource management functions that support all areas of the
government's business, including financial management.
[34] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[35] OMB, Memorandum, Federal Financial Management Standard Business
Document (Washington, D.C.: July 18, 2008).
[36] FSIO, Financial Management Systems Standard Business Processes for
U.S. Government Agencies (Washington, D.C.: July 18, 2008). This
document presents governmentwide common processes and activities,
standard business rules, and data exchanges for core financial business
processes. It contains detailed descriptions of the funds, payment, and
receivables management processes. OMB, in conjunction with FSIO,
released exposure drafts for review and comment for the Reports
Management and Reimbursables Management standard business processes in
February and March 2009, respectively.
[37] OMB, Memorandum, Update on the Financial Management Line of
Business (Washington, D.C.: Jan. 28, 2008).
[38] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[39] OMB, Federal Financial Management Report 2007 (Washington, D.C.:
Jan. 31, 2007).
[40] OMB, Budget of the United States Government Fiscal Year 2009,
Analytical Perspectives, Supplemental Materials, Table 9-9 (Washington,
D.C.: Feb. 4, 2008).
[41] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[42] Requirements are the specifications that system developers and
program managers use to design, develop, or acquire a system.
[43] OMB, Migration Planning Guidance (version 1), Section 4.1 Project
Schedule Overview (Washington, D.C.: September 2006).
[44] Options such as not converting data, processing new transactions
and activity only, establishing transaction balances in the new system
for reporting purposes, converting open transactions from the legacy
system, and recording new activity on closed prior-year transactions
should be considered when determining the scope and timelines
associated with financial system data conversion.
[45] GAO, Army Depot Maintenance: Ineffective Oversight of Depot
Maintenance Operations and System Implementation Efforts, [hyperlink,
http://www.gao.gov/products/GAO-05-441] (Washington, D.C.: June 30,
2005).
[46] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[47] See our audit report on our audit of the federal government's 2008
and 2007 consolidated financial statements that was incorporated in the
2008 Financial Report of the United States Government published by the
Department of the Treasury (Dec. 15, 2008).
[48] [hyperlink, http://www.gao.gov/products/GAO-08-447SP].
[49] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[50] GAO, Financial Management: Persistent Financial Management Systems
Issues Remain for Many CFO Act Agencies, [hyperlink,
http://www.gao.gov/products/GAO-08-1018] (Washington, D.C.: Sept. 30,
2008).
[51] GAO, Information Technology: OMB Can Make More Effective Use of
Its Investment Reviews, GAO-05-276 (Washington, D.C.: Apr. 15, 2005);
Information Technology: Agencies and OMB Should Strengthen Processes
for Identifying and Overseeing High Risk Projects, [hyperlink,
http://www.gao.gov/products/GAO-06-647] (Washington, D.C.: June 15,
2006); and [hyperlink, http://www.gao.gov/products/GAO-06-184].
[52] The CFO Act of 1990, Clinger-Cohen Act of 1996, and E-Government
Act of 2002 contain various requirements related to OMB's evaluation
and oversight of agency financial management systems modernization and
other IT projects.
[53] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[54] Disciplined processes represent best practices in systems
development and implementation efforts that have been shown to reduce
the risks associated with software development and acquisition efforts
to acceptable levels and are fundamental to successful system
implementations. Examples of disciplined processes include requirements
management, testing, risk management, data conversion, and project
management.
[55] GAO, Information Technology: OMB and Agencies Need to Improve
Planning, Management, and Oversight of Projects Totaling Billions of
Dollars, [hyperlink, http://www.gao.gov/products/GAO-08-1051T]
(Washington, D.C.: July 31, 2008) and Information Technology:
Management and Oversight of Projects Totaling Billions of Dollars Need
Attention, [hyperlink, http://www.gao.gov/products/GAO-09-624T]
(Washington, D.C.: Apr. 28, 2009). On April 28, 2009, we testified that
the future of the Management Watch List and High Risk List is uncertain
because OMB officials stated that they have not decided if the agency
plans to continue to use these lists. In addition, we testified that
OMB needs to decide if it is going to continue to use these lists and,
if not, OMB should promptly implement other appropriate mechanisms to
help oversee IT investments.
[56] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[57] OMB, Fiscal Year 2009 Information Technology Budget (Apr. 15,
2008). This estimate includes planned spending related to investments
mapped to specific FEA Reference Model categories including financial
management (management of resources and back office services), asset/
materials management, planning and budgeting, and revenue collection.
[58] OMB's FEA Reference Model Mapping Quick Guide (FY09 Budget
Preparation), July 2007, is a guide to help agencies map their
investments to FEA reference models in connection with completing the
exhibit 53 and exhibit 300. Supply chain management investments include
financial management system-related projects that, according to this
guide, consist of investments related to goods and services
acquisition, inventory control, and logistics management.
[59] According to OMB Circular No. A-11, the total investment for
financial management systems is equal to the aggregated total of budget
execution, budget formulation, and financial systems, and agencies are
required to provide the estimated percentages of each investment's
total budget authority associated with each of these three areas.
Further, this guidance specifies that agencies are to only identify the
financial percentage applicable to the financial portion of mixed
systems related to their budget request for the next fiscal year.
[60] The percentage of total federal agency spending on IT projects
attributable to financial management-related modernization projects is
based on agency-provided spending data contained in OMB's Report on IT
Spending for the Federal Government For Fiscal Years 2007, 2008, and
2009 (Washington, D.C.: April 2009). Financial management-related
modernization projects consist of those that agencies considered to
predominately support financial functions and represent new
investments, changes, or modifications to existing systems to improve
capability or performance, changes mandated by Congress or agency
leadership, personnel costs for investment management, and direct
support.
[61] GAO, Financial Management Systems: Additional Efforts Needed to
Address Key Causes of Modernization Failures, [hyperlink,
http://www.gao.gov/products/GAO-06-184] (Washington, D.C.: Mar. 15,
2006).
[End of section]
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