Financial Management Systems
Experience with Prior Migration and Modernization Efforts Provides Lessons Learned for New Approach Gao ID: GAO-10-808 September 8, 2010In 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 services available from external providers. In response to a request to study FMLOB-related issues, this report (1) identifies the steps agencies have taken, or planned to take, to modernizing their core financial systems and migrate to an external provider and (2) assesses the reported benefits and significant challenges associated with migrations, including any factors related to OMB's new financial systems modernization approach. GAO's methodology included surveying federal agencies to obtain the status of their financial management systems as of September 30, 2009 (prior to OMB's March 2010 announcement of a new approach), and interviewing officials with selected agencies, external providers, and OMB. In oral comments on a draft of this report, OMB stated its position that it was too early for GAO to draw conclusions on its new approach because it is still a work in progress. For this reason, GAO is not making any new recommendations. However, GAO observes that the experience and challenges related to prior migration and modernization efforts offer important lessons learned as OMB continues to develop and implement its new approach.
In an effort to capitalize on new technologies to help address serious weaknesses in financial management and help meet their future financial management needs, federal agencies continued to modernize their core financial systems, which often has led to large-scale, multiyear financial system implementation efforts. For the last 6 years, OMB has promoted the use of shared services as a means to more efficiently and effectively meet agency core financial system needs. Overall, 14 of 23 civilian Chief Financial Officer (CFO) Act agencies are planning to complete their efforts to deploy 14 new core financial systems at various times through fiscal year 2018, and in connection with their modernization efforts, 10 of the 14 agencies are migrating, or planning to migrate, hosting and application management support services to external providers. GAO also found that the CFO Act agencies were not using a limited number of external providers, a critical element of OMB's original approach. Five of the 10 agencies planned to rely on five different commercial providers, while 2 of the 10 planned to rely on the same federal provider and 3 had not determined the provider. In contrast, smaller agencies were more frequently relying on the four federal shared service providers to provide core financial system support services to leverage the benefits of using external providers. The most common benefits of migrating cited by CFO Act agencies were external providers' expertise, the potential for cost savings, and the agencies' ability to focus more on mission-related responsibilities. However, CFO Act agencies and external providers cited various challenges affecting modernization and migration efforts, such as reengineering business processes and the ability of external providers to provide specific solutions that meet complex agency needs. In March 2010, OMB announced a new financial systems modernization approach that focuses on the use of common automated solutions for transaction processing, such as invoicing and intergovernmental transactions. OMB issued a memorandum in June 2010 that included guidance for key elements of its new approach, such as agencies splitting financial system modernization projects into smaller segments. This new guidance also requires CFO Act agencies to halt certain modernization projects, pending OMB review and approval of revised project plans. Important aspects of the new approach have not yet been developed or articulated and OMB has stated that it plans to develop additional guidance. In GAO's view, it is critical that OMB's new guidance elaborate on the new approach and address key issues such as goals and performance plans clearly linked to strategies for achieving them, a governance structure, and specific criteria for evaluating projects. GAO believes these issues need to be addressed to reduce risks and help ensure successful outcomes as OMB moves forward with its new approach. GAO will continue to work with OMB to monitor the implementation of its new approach.
GAO-10-808, Financial Management Systems: Experience with Prior Migration and Modernization Efforts Provides Lessons Learned for New Approach
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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:
September 2010:
Financial Management Systems:
Experience with Prior Migration and Modernization Efforts Provides
Lessons Learned for New Approach:
GAO-10-808:
GAO Highlights:
Highlights of GAO-10-808, 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 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 services available
from external providers. In response to a request to study FMLOB-
related issues, this report (1) identifies the steps agencies have
taken, or planned to take, to modernizing their core financial systems
and migrate to an external provider and (2) assesses the reported
benefits and significant challenges associated with migrations,
including any factors related to OMB‘s new financial systems
modernization approach. GAO‘s methodology included surveying federal
agencies to obtain the status of their financial management systems as
of September 30, 2009 (prior to OMB‘s March 2010 announcement of a new
approach), and interviewing officials with selected agencies, external
providers, and OMB.
In oral comments on a draft of this report, OMB stated its position
that it was too early for GAO to draw conclusions on its new approach
because it is still a work in progress. For this reason, GAO is not
making any new recommendations. However, GAO observes that the
experience and challenges related to prior migration and modernization
efforts offer important lessons learned as OMB continues to develop
and implement its new approach.
What GAO Found:
In an effort to capitalize on new technologies to help address serious
weaknesses in financial management and help meet their future
financial management needs, federal agencies continued to modernize
their core financial systems, which often has led to large-scale,
multiyear financial system implementation efforts. For the last 6
years, OMB has promoted the use of shared services as a means to more
efficiently and effectively meet agency core financial system needs.
Overall, 14 of 23 civilian Chief Financial Officer (CFO) Act agencies
are planning to complete their efforts to deploy 14 new core financial
systems at various times through fiscal year 2018, and in connection
with their modernization efforts, 10 of the 14 agencies are migrating,
or planning to migrate, hosting and application management support
services to external providers. GAO also found that the CFO Act
agencies were not using a limited number of external providers, a
critical element of OMB‘s original approach. Five of the 10 agencies
planned to rely on five different commercial providers, while 2 of the
10 planned to rely on the same federal provider and 3 had not
determined the provider. In contrast, smaller agencies were more
frequently relying on the four federal shared service providers to
provide core financial system support services to leverage the
benefits of using external providers.
The most common benefits of migrating cited by CFO Act agencies were
external providers‘ expertise, the potential for cost savings, and the
agencies‘ ability to focus more on mission-related responsibilities.
However, CFO Act agencies and external providers cited various
challenges affecting modernization and migration efforts, such as
reengineering business processes and the ability of external providers
to provide specific solutions that meet complex agency needs. In March
2010, OMB announced a new financial systems modernization approach
that focuses on the use of common automated solutions for transaction
processing, such as invoicing and intergovernmental transactions. OMB
issued a memorandum in June 2010 that included guidance for key
elements of its new approach, such as agencies splitting financial
system modernization projects into smaller segments. This new guidance
also requires CFO Act agencies to halt certain modernization projects,
pending OMB review and approval of revised project plans. Important
aspects of the new approach have not yet been developed or articulated
and OMB has stated that it plans to develop additional guidance. In
GAO‘s view, it is critical that OMB‘s new guidance elaborate on the
new approach and address key issues such as goals and performance
plans clearly linked to strategies for achieving them, a governance
structure, and specific criteria for evaluating projects. GAO believes
these issues need to be addressed to reduce risks and help ensure
successful outcomes as OMB moves forward with its new approach. GAO
will continue to work with OMB to monitor the implementation of its
new approach.
View [hyperlink, http://www.gao.gov/products/GAO-10-808] or key
components. For more information, contact Kay L. Daly at (202) 512-
9095 or Naba Barkakati at (202) 512-2700.
[End of section]
Contents:
Letter:
Background:
Some Agencies Have Used Migration of Core Financial Systems as Part of
Modernization Efforts, but Shared Services Use Is Limited:
Benefits and Challenges of Agency Migrations Raise Important Issues
for OMB's New Financial Systems Modernization Approach:
Concluding Observations:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Modernization and Migration of Core Financial Systems and
Services to External Providers:
Appendix III: Case Studies of Agency Migration and Modernization
Efforts:
Appendix IV: Key Characteristics of Selected External Providers:
Appendix V: Reported Benefits and Challenges Related to Agency
Migration and Modernization Efforts:
Appendix VI: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Summary of Core Financial Systems Reported by 23 CFO Act
Agencies as of September 30, 2009:
Table 2: Summary of Current, Planned, and Expected Systems Use of
External Providers as Reported by 23 CFO Act Agencies as of September
30, 2009:
Table 3: Summary of Major Advantages of Migrating to External
Providers Reported by CFO Act Agencies:
Table 4: Summary of Major Disadvantages of Migrating to External
Providers Reported by CFO Act Agencies:
Table 5: Current Core Financial Systems Fully Deployed at CFO Act
Agencies as of September 30, 2009:
Table 6: Core Financial Systems CFO Act Agencies Plan to Fully Deploy
after September 30, 2009:
Table 7: USDA's Key Migration and Modernization Activities:
Table 8: FCC's Key Migration and Modernization Activities:
Table 9: DOJ's Key Migration and Modernization Activities:
Table 10: OPM's Key Migration and Modernization Activities:
Table 11: Key Characteristics of OMB-Designated Federal Shared Service
Providers:
Table 12: CFO Act Agency Perspectives on Migrating and Modernizing
Core Financial Systems:
Table 13: Reported Key Challenges Affecting CFO Act Agency Migration
and Modernization Efforts:
Figures:
Figure 1: Timeline of USDA's Key Migration and Modernization
Activities:
Figure 2: Timeline of FCC's Key Migration and Modernization Activities:
Figure 3: Timeline of DOJ's Key Migration and Modernization Activities:
Figure 4: Timeline of OPM's Key Migration and Modernization Activities:
Abbreviations:
BPD: Bureau of Public Debt:
CBIS: Consolidated Business Information System:
CFO: Chief Financial Officer:
CGAC: Common Government-wide Accounting Classification:
COTS: commercial off-the-shelf:
DOD: Department of Defense:
DOJ: Department of Justice:
E-gov: electronic government:
ERP: enterprise resource planning:
FCC: Federal Communications Commission:
FFIS: Foundation Financial Information System:
FFMIA: Federal Financial Management Improvement Act of 1996:
FFS: Federal Financial System:
FIT: Office of Financial Innovation and Transformation:
FMLOB: financial management line of business:
FMMI: Financial Management Modernization Initiative:
FSIO: Financial Systems Integration Office:
GFIS: Government Financial Information System:
GSA: General Services Administration:
HRLOB: human resource line of business:
IT: information technology:
JFMIP: Joint Financial Management Improvement Program:
LMP: Logistics Modernization Program:
NBC: National Business Center:
NFC: National Finance Center:
NRC: Nuclear Regulatory Commission:
OMB: Office of Management and Budget:
OPM: Office of Personnel Management:
SSP: shared service provider:
UFMS: Unified Financial Management System:
USDA: Department of Agriculture:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
September 8, 2010:
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:
Over the years, the federal government has spent billions of dollars
annually on developing or acquiring, implementing, and maintaining
financial management systems that often fail to meet cost, schedule,
and performance goals. 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, which, among
other things, provided an approach to increase agencies' use of shared
service solutions in connection with their modernization efforts.
Specifically, this approach required agencies to migrate certain
common services supporting their core financial systems,[Footnote 1]
such as information technology (IT) hosting and application
management,[Footnote 2] to a limited number of external providers.
[Footnote 3] According to OMB, shared service solutions would enable
economies of scale by centrally locating, or consolidating, solution
assets and reusing federal and commercial subject matter expertise
through common acquisitions, interface development, and application
management. OMB also expected the reduction in the number of agencies
implementing their own systems to reduce the risks, and associated
costs, of systems implementations. As previously reported, we have
supported and called for such initiatives to standardize and
streamline common systems, which can reduce costs.[Footnote 4] The
effectiveness of financial management systems is critical in
facilitating agencies' ability to institute strong financial
management and internal controls.[Footnote 5]
In response to your request to study a range of FMLOB-related issues,
in May 2009, we reported that although OMB had made some progress
toward implementing the initiative, extensive work remained before its
goals would be achieved.[Footnote 6] Specifically, OMB had not fully
addressed our March 2006 recommendations to fully integrate four key
building blocks into FMLOB implementation efforts, specifically, the
need to (1) develop a concept of operations to help guide FMLOB-
related activities, (2) define standard business processes to promote
consistency within and across agencies, (3) develop a strategy and
establish a timetable for ensuring that agencies' financial management
systems are migrated to a limited number of service providers, and (4)
define and effectively implement applicable disciplined processes
necessary to properly manage financial management system
implementation projects.[Footnote 7] This report addresses the
remaining aspects of your request dealing with migration efforts at
agencies and external providers, including (1) identifying the steps
agencies have taken, or plan to take, toward modernizing their core
financial systems and migrating to an external provider and (2)
assessing the reported benefits associated with migrations and
significant challenges, including any factors related to OMB's newly
announced financial systems modernization approach (new approach),
that may affect modernization and migration efforts at agencies and
external providers. Specifically, in June 2010, during the performance
of our work, OMB announced key elements of its new approach, which
will focus, in part, on the development of common automated solutions
for transaction processing, the requirement for agencies to split
financial system modernization projects into smaller segments not to
exceed 24 months, and increasing oversight and review of financial
system projects.[Footnote 8] Further, under the new approach, OMB is
no longer requiring the use of external providers in all cases for
core financial systems, but supports such arrangements when they are
cost effective.
To identify the steps agencies have taken or plan to take in their
financial systems migration and modernization efforts and assess
related benefits and challenges, we conducted a survey of the 24 Chief
Financial Officers (CFO) Act of 1990 agencies to obtain information
regarding their current and planned core financial systems and
migration activities as of September 30, 2009.[Footnote 9] To obtain
additional information on modernization and migration efforts among
selected agencies, we performed four agency case studies.[Footnote 10]
To identify FMLOB efforts among smaller agencies, in addition to the
Federal Communications Commission case study, we interviewed
knowledgeable officials with the Small Agency Council[Footnote 11] and
the four OMB-designated federal shared service providers (SSP).
[Footnote 12] We also reviewed and analyzed policies and guidance
related to migration and modernization activities obtained from OMB
and the Financial Systems Integration Office (FSIO) and interviewed
key officials of these organizations to obtain their perspectives on
FMLOB-related benefits and challenges. In addition, we interviewed key
officials of two commercial vendors supporting two of the case study
agencies and the four federal SSPs concerning their FMLOB-related
efforts at CFO Act and non-CFO Act agencies. We also reviewed guidance
issued by OMB regarding its new approach for federal financial
management systems.
We conducted this performance audit from June 2009 through September
2010 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. Appendix I
includes additional details on our scope and methodology. We requested
comments on a draft of this report from the Acting Director of OMB or
his designee. The OMB Controller provided oral comments on the draft
report, including technical comments, which we incorporated as
appropriate into the report.
Background:
Modernizing financial management systems so they can produce reliable,
useful, and timely 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 financial management, Congress passed
a series of financial and IT management reform legislation dating back
to the early 1980s, including the CFO Act[Footnote 13] and the Federal
Financial Management Improvement Act of 1996 (FFMIA).[Footnote 14]
FFMIA, in particular, requires the 24 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. FFMIA also requires auditors, as part of the 24 CFO Act
agencies' financial statement audits, to report whether those
agencies' financial management systems substantially comply with these
requirements. In addition, the Clinger-Cohen Act of 1996[Footnote 15]
requires OMB to improve the acquisition, use, and disposal of IT by
the federal government and continually assess the experiences of
executive agencies in managing IT, among other responsibilities.
Following enactment of this law, OMB revised Circular No. A-130,
Management of Federal Information Resources, which established policy
for the management of federal information resources and designated OMB
as responsible for overall leadership and coordination, as well as the
development and maintenance of a governmentwide strategic plan for
federal information resources management within the executive branch.
Despite these efforts, long-standing financial management systems
weaknesses continue to present a formidable management challenge in
providing accountability to the nation's taxpayers and agency
financial statement auditors continue to report that many agencies'
systems do not substantially comply with FFMIA requirements.[Footnote
16]
FMLOB Migration and Other Financial Management System Guidance:
In March 2004, OMB launched the 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. The stated goals of the FMLOB initiative
were 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 or
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. According
to a December 2005 OMB memorandum, to achieve the FMLOB vision--and
enable efforts to achieve its goals--federal agencies must have
competitive options available for financial systems.[Footnote 17] OMB
described a shared service solution framework consisting of a limited
number of providers that deliver competitive alternatives for agencies
investing in financial system modernizations and provide financial
management services for multiple organizations. OMB stated that the
economies of scale and skill of a provider will allow it to provide
federal agencies with a lower-risk, lower-cost, and increased service
quality alternative for financial system modernization efforts.
According to OMB, when the FMLOB is successful, federal agencies will
have the ability to migrate from one solution to a more competitive or
better performing alternative that is offered by a limited number of
stable and high-performing providers.
In May 2006, OMB established a migration policy and issued its
Competition Framework for FMLOB Migrations to provide guidance to
agencies planning to migrate their financial management systems and
services.[Footnote 18] According to this migration policy, "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 must either migrate to
a [SSP] or qualified private sector provider, or be designated as an
[SSP]. At a minimum, agencies must consider pursuing hosting and
application management shared services. However, agencies may also
consider other shared services, such as accounting or transaction
processing." This policy was subsequently incorporated into OMB
Circular No. A-127 in January 2009; this circular provides guidance on
the use and selection of external providers to ensure that agencies
rely on such providers to help manage their systems and no longer
develop their own unique systems.[Footnote 19]
As program manager for the FMLOB initiative, FSIO had a significant
role in achieving FMLOB goals, including the development of standard
business processes, core financial system requirements, and testing
and product certification.[Footnote 20] In March 2010, OMB announced
that FSIO was ceasing operations effective March 31, 2010, stating
that FSIO had achieved its objectives of developing governmentwide
financial management business processes and data elements.[Footnote
21] As part of its new approach, OMB also announced in March 2010 the
creation of the Office of Financial Innovation and Transformation
(FIT) within the Department of the Treasury's Office of Fiscal
Service. FIT's stated mission includes (1) helping set a new course
for federal financial management using automated solutions to reduce
duplicate work at individual agencies and (2) assisting in ensuring
consistency with a long-term financial management systems strategy for
the federal government. In June 2010, OMB announced key elements of
its new approach, which will focus on (1) implementing smaller project
segments that deliver critical functionality sooner, (2) increasing
oversight and review of financial system projects, (3) promoting
higher impact shared service efforts related to transaction
processing, (4) assessing compliance with financial system
requirements, and (5) revising the process for certifying financial
management software.[Footnote 22]
Some Agencies Have Used Migration of Core Financial Systems as Part of
Modernization Efforts, but Shared Services Use Is Limited:
In an effort to capitalize on new technologies to help address
financial management weaknesses and help meet their financial
management needs, about half of the CFO Act agencies are in the
process of or have plans to modernize their core financial systems,
which often involve large-scale, multiyear financial system
implementation efforts. According to the results of our survey, 12 of
23 civilian CFO Act agencies have migrated, or plan to migrate,
certain services supporting 16 current systems to 12 external
providers in connection with their modernization efforts. Because of
the number of separate external service providers involved, the
progress toward a shared service framework among the CFO Act agencies
has been limited.
Agencies' Efforts to Modernize Core Financial Systems to Meet
Financial Management Needs:
Over the years, federal agencies have struggled to develop and
implement numerous core financial systems to help meet their financial
information needs for managing and overseeing their day-to-day
operations and programs.[Footnote 23] As shown in table 1, the
civilian agencies, representing 23 of the 24 CFO Act agencies,
identified 45 fully deployed core financial systems in use as of
September 30, 2009, in response to our survey of the 24 CFO Act
agencies.[Footnote 24] While some of these agencies have recently
completed efforts to deploy modernized systems, 17 agencies continue
to use 25 aging legacy systems to help meet their needs, including 8
core financial systems placed into operation prior to 1990. Additional
information on the 45 current civilian CFO Act agency core financial
systems can be found in table 5 of appendix II.
Recognizing the importance of effective core financial systems in
meeting their financial information needs and efforts to address
financial management weaknesses, many agencies are modernizing these
current core financial systems. In this regard, 14 of the 23 civilian
CFO Act agencies identified 14 systems they plan to fully deploy after
fiscal year 2009, which will replace 27 of the current legacy systems.
However, agencies provided this information prior to the issuance of
OMB's June 2010 guidance concerning oversight and review of financial
system projects, and some of these 14 planned systems may no longer be
viable projects under that guidance. Additional information on the 14
planned civilian CFO Act agency core financial systems can be found in
table 6 of appendix II.
Table 1: Summary of Core Financial Systems Reported by 23 CFO Act
Agencies as of September 30, 2009:
Current systems;
Legacy: Agencies: 17;
Legacy: Systems: 25;
Modern[A]: Agencies: 13;
Modern[A]: Systems: 20;
Total: Agencies: 23;
Total: Systems: 45.
Planned systems;
Legacy: Agencies: [Empty];
Legacy: Systems: [Empty];
Modern[A]: Agencies: 14;
Modern[A]: Systems: 14;
Total: Agencies: 14;
Total: Systems: 14.
Current systems expected to be replaced by planned systems;
Legacy: Agencies: 13;
Legacy: Systems: 17;
Modern[A]: Agencies: 5;
Modern[A]: Systems: 10;
Total: Agencies: 14;
Total: Systems: 27.
Total systems expected (end state)[B];
Legacy: Agencies: [Empty];
Legacy: Systems: 8;
Modern[A]: Agencies: [Empty];
Modern[A]: Systems: 24;
Total: Agencies: [Empty];
Total: Systems: 32.
Source: GAO analysis of CFO Act agencies' survey responses.
Note: This includes civilian agencies only. Department of Defense
systems have not been included. For current systems, the number of
agencies does not total to 23 because agencies may have both legacy
and modern systems. In addition, systems listed reflect agency survey
responses and are subject to change based on reviews being conducted
under OMB Memorandum M-10-26, Immediate Review of Financial Systems IT
Projects, issued in June 2010.
[A] For purposes of this report, we defined modern systems as those
that are based on core financial software products qualified and
tested by FSIO under its 2003 full test, 2005 incremental test, or the
latest version upgrade test.
[B] This row includes total systems expected (end state) and remaining
after planned systems fully deployed (expected by fiscal year 2018).
[End of table]
In addition to the 23 civilian CFO Act agencies that responded to the
survey, the Department of Defense (DOD) identified one current system,
even though it responded that it has more than 100 core financial
systems.[Footnote 25] DOD also identified 6 enterprise resource
planning (ERP) systems it plans to deploy from 2011 through 2017.
[Footnote 26] For example, DOD's General Fund Enterprise Business
System is an ERP system that is expected to eliminate 87 current
systems and to be used by approximately 79,000 users once it is fully
deployed in January 2012. Detailed information that DOD reported on
its current and planned systems is included in tables 5 and 6 in
appendix II.
Because of the scope and complexity of agency modernization efforts,
especially those involving highly integrated ERP systems, these large-
scale projects often involve system implementations extending over
several years before their intended benefits can be realized. For
example, in 1999, the Army initiated its Logistics Modernization
Program (LMP) in order to better manage its inventory and repair
operations at various depots.[Footnote 27] Although the Army
anticipates completing its 12-year multiphased deployment in fiscal
year 2011, this project reflects the substantial challenges in large-
scale deployments, such as a lack of a comprehensive set of metrics
with which to measure the success of implementation.[Footnote 28]
Similarly, the Department of Justice (DOJ) is involved in a multiyear
modernization effort to replace six core financial systems and
multiple procurement systems operating across the agency with a new
integrated core financial system (referred to as the Unified Financial
Management System, or UFMS). DOJ expects to complete its efforts to
deploy UFMS in 2013, 10 years after the initial alternatives analysis
related to this project was completed. Additional information
concerning core financial system modernization efforts at DOJ and
other selected case study agencies can be found in appendix III.
Migration of Core Financial Systems to External Providers:
Although OMB's previous FMLOB guidance focused on migrating support
services in connection with new or upgraded agency systems rather than
previously deployed systems, 12 of the 23 civilian CFO Act agencies
reported that they had already migrated, or plan to migrate, IT
hosting or application management services supporting 16 of the 45
current systems that had already been fully deployed as of September
30, 2009. Further, these agencies plan to rely on eight different
commercial providers and four federal SSPs to provide services for
current systems.[Footnote 29] Of the 32 expected systems noted in
table 1, there are 14 agencies relying on or expecting to rely on 11
providers--4 federal SSPs and 7 commercial providers--to support 17
core financial systems. Table 2 summarizes civilian agencies' use of
external providers--either federal SSPs or commercial providers--for
hosting or application management of the 45 current, 14 planned, and
32 expected core financial systems.
Table 2: Summary of Current, Planned, and Expected Systems Use of
External Providers as Reported by 23 CFO Act Agencies as of September
30, 2009:
Federal SSP;
Current: Systems: 6;
Current: Providers[A]: 4;
Planned: Systems: 2;
Planned: Providers[A]: 1;
Expected (end state): Systems: 6;
Expected (end state): Providers[A]: 4.
Commercial provider;
Current: Systems: 8;
Current: Providers[A]: 8;
Planned: Systems: 5;
Planned: Providers[A]: 5;
Expected (end state): Systems: 7;
Expected (end state): Providers[A]: 7.
Provider to be determined;
Current: Systems: 2;
Current: Providers[A]: [Empty];
Planned: Systems: 3;
Planned: Providers[A]: [Empty];
Expected (end state): Systems: 4;
Expected (end state): Providers[A]: [Empty].
Subtotal;
Current: Systems: 16;
Current: Providers[A]: 12;
Planned: Systems: 10;
Planned: Providers[A]: 6;
Expected (end state): Systems: 17;
Expected (end state): Providers[A]: 11.
Not relying or expected to rely on external providers;
Current: Systems: 29;
Current: Providers[A]: [Empty];
Planned: Systems: 4;
Planned: Providers[A]: [Empty];
Expected (end state): Systems: 15;
Expected (end state): Providers[A]: [Empty].
Total;
Current: Systems: 45;
Current: Providers[A]: [Empty];
Planned: Systems: 14;
Planned: Providers[A]: [Empty];
Expected (end state): Systems: 32;
Expected (end state): Providers[A]: [Empty].
Source: GAO analysis of CFO Act agencies' survey responses.
Note: This includes civilian agencies only. DOD systems have not been
included. In addition, systems listed reflect agency responses to
survey and are subject to change based on reviews being conducted
under OMB Memorandum M-10-26, Immediate Review of Financial Systems IT
Projects, issued in June 2010.
[A] The number of providers listed includes each provider only once
even though it may service multiple agency systems (e.g., federal
SSPs).
[End of table]
Overall, 14 of the 23 civilian CFO Act agencies are planning to
complete their efforts to deploy 14 planned systems at various times
through fiscal year 2018. Ten of these 14 agencies reported that they
migrated, or plan to migrate, IT hosting and application management
services supporting 10 of the 14 core financial systems they plan to
fully deploy after September 30, 2009. In connection with these
migrations, 5 of the 10 agencies plan to rely on five different
commercial providers, while 2 of the 10 rely, or plan to rely, on the
same federal SSP to provide these services, and 3 of the 10 have not
determined who the provider will be. In addition, DOD is planning to
use two commercial providers for 2 of its 6 planned systems. Table 6
in appendix II includes additional information concerning the
migration of selected support services for the 14 planned civilian
agency core financial systems and 6 planned DOD systems.
In addition to IT hosting and application management support services,
eight CFO Act agencies reported that they have migrated, or plan to
migrate, transaction processing services to external providers.
Specifically, DOD, the Department of Homeland Security, the Department
of Labor, and the Nuclear Regulatory Commission (NRC) (as shown in
table 6 of app. II) reported that they plan to rely on external
providers to provide transaction processing support services for their
planned systems while the Department of Transportation, the Department
of the Treasury, the General Services Administration, and NRC (as
shown in table 5 of app. II), reported that they already rely on
external providers for these services for their existing systems.
Rather than migrating these services, some large agencies are
consolidating their transaction processing activities in-house at the
agency level or integrating internal accounting operations through
their own internal agency shared solution (e.g., the Department of
Agriculture and DOJ, as described in app. III).
In June 2010, OMB stated that its attempts to mandate the use of
shared services under its previous policy--for hosting and application
management--yielded inconsistent results as medium and large agencies
encountered the same types of costs and risks with an external
provider as they did when modernizing in-house. In contrast, smaller
agencies are more frequently relying on external providers to provide
core financial system support services to leverage the benefits of
using external providers, as discussed in more detail later in this
report. Specifically, according to officials at the four federal SSPs,
90 non-CFO Act agencies rely on the support services these providers
offer. Federal SSP officials also stated that smaller agencies more
frequently rely on the transaction processing support services they
provide. For example, according to an official from one federal SSP,
it provides transaction processing services to all of its 45 non-CFO
Act client agencies. See appendix IV for information on the number of
clients serviced by federal SSPs.
Benefits and Challenges of Agency Migrations Raise Important Issues
for OMB's New Financial Systems Modernization Approach:
Agencies and external providers reported that migrating support
services to external providers offers advantages for helping smaller
agencies, in particular, to capitalize on the benefits associated with
sharing the services and solutions available through external
providers. However, while federal agencies and external providers have
made varied progress toward implementing the FMLOB initiative, they
continue to face significant challenges affecting their efforts to
modernize core financial systems and migrate selected services
supporting them. OMB officials acknowledged that efforts to capitalize
on shared services at large agencies have achieved limited success
and, in a March 2010 memorandum, announced a need to develop a new
approach for financial systems in the federal government.[Footnote 30]
The benefits and challenges experienced through agency and provider
efforts to implement the FMLOB initiative offer important lessons
learned that if considered could assist OMB in developing its new
approach.
Potential Benefits and Challenges of Agency Migrations to External
Providers:
Modernization and migration efforts highlighted a number of lessons
learned regarding potential benefits and challenges of agency
migrations to external providers. The potential benefits and
challenges summarized in this section were identified by the 24 CFO
Act agencies, smaller, non-CFO Act agencies, and external providers
through survey results, interviews, and agency case studies. We also
identified challenges with agency migrations related to OMB's guidance
on competition. See appendix V for more details on key benefits and
challenges reported related to agency migration and modernization
efforts.
As shown in table 3, external providers' experienced staff, the
potential for cost savings through shared services, increased
economies of scale, and the ability to focus on mission-related
responsibilities were cited in the survey responses of CFO Act
agencies as some of the benefits and advantages of migrating core
financial system support services to external providers. For example,
Treasury cited potential cost savings and benefits associated with
using an external provider such as resource sharing, provider
expertise in solving application problems, and using cloud computing
concepts.[Footnote 31] In May 2010, we also reported potential
benefits associated with cloud computing, such as economies of scale
and the faster deployment of patches to address security
vulnerabilities.[Footnote 32] According to external provider
officials, smaller agencies rely more frequently on external providers
for transaction processing than CFO Act agencies and benefit from
providers' use of shared instances of software applications and
standard interfaces across multiple clients, and their ability to more
efficiently process complex transactions.
Table 3: Summary of Major Advantages of Migrating to External
Providers Reported by CFO Act Agencies:
Advantages to migrating services to external providers: Potential cost
savings through shared resources;
IT hosting: [Check];
Application management: [Check];
Transaction processing: [Check].
Advantages to migrating services to external providers: Economies of
scale;
IT hosting: [Check];
Application management: [Check];
Transaction processing: [Check].
Advantages to migrating services to external providers: Allow agency
to focus on mission;
IT hosting: [Check];
Application management: [Check];
Transaction processing: [Check].
Advantages to migrating services to external providers: Greater
efficiency and reliability through experienced staff;
IT hosting: [Check];
Application management: [Check];
Transaction processing: [Check].
Advantages to migrating services to external providers: Increased data
capacity and scalability;
IT hosting: [Check];
Application management: [Empty];
Transaction processing: [Empty].
Advantages to migrating services to external providers: Enhancement in
infrastructure;
IT hosting: [Check];
Application management: [Empty];
Transaction processing: [Empty].
Advantages to migrating services to external providers: Enforceable
service-level agreements;
IT hosting: [Check];
Application management: [Check];
Transaction processing: [Empty].
Advantages to migrating services to external providers: Shift of
responsibility to service provider;
IT hosting: [Empty];
Application management: [Check];
Transaction processing: [Empty].
Advantages to migrating services to external providers:
Standardization;
IT hosting: [Empty];
Application management: [Check];
Transaction processing: [Empty].
Advantages to migrating services to external providers: Tighter
integration with IT hosting services;
IT hosting: [Empty];
Application management: [Check];
Transaction processing: [Empty].
Advantages to migrating services to external providers: Disaster
recovery site;
IT hosting: [Check];
Application management: [Empty];
Transaction processing: [Empty].
Source: GAO analysis of CFO Act agencies' survey responses.
[End of table]
To help realize these benefits, CFO Act agencies also identified a
variety of key factors that contribute to successful migrations. Many
of the factors cited involve the effective use of disciplined
processes, such as clearly defining requirements and performing gap
analyses to ensure that agency needs will be met, performing
appropriate testing and data conversion procedures, minimizing
customizations of software, and reengineering business processes to
facilitate greater standardization.[Footnote 33] In addition, agencies
cited the need for (1) appropriate and adequate resources to lead,
plan, manage, execute, and oversee modernization and migration
activities; (2) clearly defined expected outcomes and responsibilities
of key stakeholders; and (3) effective service-level agreements and
other mechanisms that could help ensure that the intended benefits of
migrating are achieved.[Footnote 34]
CFO Act agencies also cited various concerns about migrating to
external providers, such as the ability of external providers to
provide solutions that meet the complex and unique needs associated
with large agency migrations. As shown in table 4, CFO Act agencies
expressed concerns about the general loss of control, flexibility, and
subject matter expertise and various risks they will experience if IT
hosting, application management, and transaction processing are
migrated and whether providers had the capacity to meet the extensive
needs associated with large CFO Act agencies. External providers
acknowledged these concerns, but cited additional challenges affecting
their migration-related efforts, such as agencies' resistance to
adopting common processes used by providers and the lack of a clear
mechanism for ensuring that agency migrations occur as intended.
Table 4: Summary of Major Disadvantages of Migrating to External
Providers Reported by CFO Act Agencies:
Disadvantages to migrating services to external providers: Governance
issues/loss of control;
IT hosting: [Check];
Application management: [Check];
Transaction processing: [Check].
Disadvantages to migrating services to external providers: Loss of
unique requirements/loss of flexibility;
IT hosting: [Check];
Application management: [Check];
Transaction processing: [Empty].
Disadvantages to migrating services to external providers: Potential
infrastructure risks;
IT hosting: [Check];
Application management: [Check];
Transaction processing: [Empty].
Disadvantages to migrating services to external providers: Potential
implementation cost/risk;
IT hosting: [Check];
Application management: [Check];
Transaction processing: [Empty].
Disadvantages to migrating services to external providers: Loss of
agency subject matter expertise;
IT hosting: [Empty];
Application management: [Check];
Transaction processing: [Check].
Disadvantages to migrating services to external providers: Capacity;
IT hosting: [Check];
Application management: [Empty];
Transaction processing: [Empty].
Disadvantages to migrating services to external providers: Security
risks;
IT hosting: [Check];
Application management: [Empty];
Transaction processing: [Empty].
Disadvantages to migrating services to external providers: Competing
priorities of multiple customers;
IT hosting: [Empty];
Application management: [Check];
Transaction processing: [Empty].
Disadvantages to migrating services to external providers: Limited
cost savings;
IT hosting: [Empty];
Application management: [Empty];
Transaction processing: [Check].
Disadvantages to migrating services to external providers: Increase in
cost;
IT hosting: [Empty];
Application management: [Empty];
Transaction processing: [Check].
Source: GAO analysis of CFO Act agencies' survey responses.
[End of table]
We found similar migration challenges related to OMB's guidance on
competition affecting agency and external provider migration efforts,
its implementation, and effective oversight. For example, we found
that agencies were not always required to migrate to an external
provider and did not always conduct a competition for IT hosting and
application management because they had already decided to use
existing in-house resources to meet their needs (e.g., DOJ, which is
discussed in more detail in app. III). On the other hand, we found
that those agencies migrating to external providers were not using a
limited number of external providers, raising significant questions
regarding the extent to which the services they are to provide will be
shared with other agencies and any related potential cost savings will
be realized. Specifically, as previously discussed, based on survey
responses, 14 CFO Act agencies were relying, or planning to rely, on a
total of 11 different external providers to support 17 expected
systems and providers for 4 of the 17 systems were still to be
determined.
Unlike similar efforts to implement other OMB electronic government (E-
gov) initiatives, the FMLOB guidance does not provide a mechanism for
determining the appropriate number of providers needed or describe a
governance structure to help ensure that agencies migrate to one of
the specific providers identified.[Footnote 35] For example, prior
policies for the human resource line of business (HRLOB) and E-Payroll
initiatives[Footnote 36] both involved the migration of agency-
performed functions common across federal agencies to specifically
designated shared service centers.[Footnote 37] Further, in connection
with the E-Payroll initiative, established in June 2002, four
providers were selected to furnish payroll services for the executive
branch. In its latest annual report to Congress on E-gov benefits, OMB
reported that migrations of payroll functions performed by other
agencies to these providers had been completed.[Footnote 38]
Lessons Learned Raise Key Issues to Consider for Achieving
Modernization Goals under OMB's New Approach:
OMB officials acknowledged that efforts to modernize financial
management systems under its FMLOB initiative have achieved limited
success and that a new approach is needed. Detailed information on
OMB's new approach is not yet available because of its early stage of
implementation. However, we have summarized the key elements of its
new approach and identified related issues, generally based on lessons
learned from prior migration and modernization efforts, for OMB to
consider as it moves forward with its implementation.
Summary of OMB's New Approach:
To address ongoing challenges with financial management practices, OMB
announced a new financial systems modernization approach, which
encompasses the following five key areas.
* Shared services for transaction processing. In March 2010, OMB and
Treasury announced the creation of FIT, within Treasury, effective on
April 5, 2010.[Footnote 39] FIT is expected to coordinate with the CFO
Council to identify and facilitate the acquisition or development of
initial operating capabilities for automated solutions for transaction
processing. Initially, FIT's efforts will focus on developing
operating capabilities for vendor invoicing and intergovernmental
transactions. According to OMB, based on the success of interested
agencies' efforts to pilot initial capabilities of new solutions, they
will be phased in across the federal government as other agencies
request to adopt them. OMB stated that its previous policy captured
under the FMLOB initiative--requiring agencies to either serve as SSPs
or leverage their services--will no longer be mandated in all cases,
but supports such arrangements when they are cost effective.
* Segmented approach for deploying systems. OMB's new approach for
agencies seeking to deploy a financial system includes limiting the
overall length of development projects to 24 months and splitting them
into segments of 120 days or less, in part to help simplify planning,
development, project management, and other tasks and prioritize the
most critical financial functions.[Footnote 40]
* Oversight and review of financial system projects. According to the
June 2010 memorandum, agencies should identify upfront a series of
milestones, warning flags, and stop points over the course of the
segment life cycle that if deemed necessary, could result in the
project being suspended and returned to planning. In addition,
mechanisms for review of project status by senior management should be
incorporated into project plans. In this regard, the memorandum
directed CFO Act agencies to immediately halt activities,[Footnote 41]
as of the date of the memorandum, on financial system modernization
projects over a specified dollar threshold pending OMB review and
approval of revised agency project plans reflecting this guidance. The
guidance also stated that OMB will review project status on a
quarterly basis through fiscal year 2012 and that project segment
milestones must be met in order to release funding for additional
segments.[Footnote 42] In addition, OMB announced the establishment of
the Financial Systems Advisory Board under the CFO Council, which will
make recommendations to OMB on selected projects being reviewed in
accordance with the memorandum.
* Compliance with financial system requirements. OMB stated in its
June 2010 memorandum that current core financial system requirements
remain in effect and federal agencies have an ongoing responsibility
to comply with them. OMB is also initiating a performance-based
approach for compliance with financial system requirements that it
believes will reduce the cost, risk, and complexity of financial
system modernizations. OMB plans to issue a revision to OMB Circular
No. A-127, Financial Management Systems, which will update existing
requirements and include new guidance on how agencies and auditors
will assess compliance with these requirements.
* Process for certifying financial management software. In March 2010,
OMB announced the discontinuation of FSIO's core financial system
software testing and certification function and announced that FSIO
operations would cease effective March 31, 2010.[Footnote 43] OMB's
June 2010 memorandum states that OMB is reforming the software testing
and certification program by shifting the accountability of software
performance to vendors through self-certification. Under this
approach, agencies will hold vendors accountable in the same manner in
which other contractual obligations are enforced and will be able to
hold contractors specifically accountable for false certifications.
OMB also plans to provide additional details related to testing
process changes in its revision to OMB Circular No. A-127 and revisit
this policy on an annual basis.
Key Issues Moving Forward:
OMB's decision to embark on this new approach raises several key
issues that have far-reaching implications for the government,
software vendors, and external providers. Recognizing that the new
approach is in an early stage of implementation, the steps taken so
far do not fully describe a strategy that will address these issues
moving forward, nor do they yet fully take into account lessons
learned associated with previous governmentwide modernization efforts,
including, in particular, the FMLOB migration activities discussed
earlier in this report. Without sufficient detail on how these issues
are to be addressed, uncertainties exist concerning the potential
effectiveness of OMB's new approach. The following describes key
issues related to each of the five areas of OMB's new approach.
Shared Services for Transaction Processing:
Key issues:
* How will the new approach be implemented and what governance
structure will be established to fully realize the benefits of common
solutions and new technologies?
* How will new governmentwide shared solutions that are intended to
perform functions currently performed at agencies work with current
core financial systems and solutions?
* What guidance will be provided to agencies to encourage their
participation in, and adoption of, the new solutions envisioned in the
new approach?
Previous efforts to realize the benefits associated with shared
services have been challenging, in part because of the lack of a
governance structure that ensures agency adoption of shared service
solutions. Agency participation in the new solutions being developed
by FIT is voluntary and OMB's previous policy regarding migrations to
external providers is no longer mandated. Therefore, the potential
benefits that will actually be realized through shared services are
uncertain.
According to the Institute of Electrical and Electronic Engineers, a
concept of operations is normally one of the first documents produced
during a disciplined development effort.[Footnote 44] OMB officials
stated that they are developing an overall concept of operations but
did not provide us an estimated timeframe for its completion. We
previously reported on the need for this critical tool to provide an
overall road map for describing the interrelationships among financial
management systems and how information is to flow from and through
them and within and across agencies, and ensuring the validity of each
agency's implementation approach.[Footnote 45] In addition, a concept
of operations can be used to communicate overall quantitative and
qualitative system characteristics to users, developers, and other
organizational elements and would allow stakeholders to understand the
user organizations, missions, and organizational objectives from an
integrated systems point of view. We recognize that OMB's new approach
is in an early implementation stage and guidance is still being
developed. However, implementing this approach without certain policy
guidance carries risk. For instance, without a concept of operations
that provides an overall road map to guide implementation efforts, it
is unclear how the new governmentwide solutions envisioned under the
new approach will integrate with current or planned core financial
systems, as well as how they will impact numerous smaller agencies
that have already migrated to federal SSPs.
In addition, the governance structure for implementing OMB's new
approach will involve efforts expected to be performed by FIT. OMB has
described certain activities FIT is expected to perform, but
additional information concerning its purpose, its authority, and the
resources to be devoted to its efforts remain unclear. For example,
although OMB stated that FIT will assist in ensuring consistency with
a long-term financial management systems strategy for the federal
government, the specific role that FIT will play in developing or
implementing a strategy or overseeing efforts to achieve its goals has
not yet been defined.
Segmented Approach for Deploying Systems:
Key issues:
* What actions will be taken to help ensure that agencies' efforts to
reduce the scope of modernization projects so that they can be
completed within 24 months do not inappropriately emphasize schedule-
driven priorities at the expense of achieving event-driven objectives?
* What guidance will be provided to ensure that agencies have
developed an overall, high-level system architecture that clearly
defines specific development projects that provide interim
functionality?
Although efforts to reduce the scope of agency modernization projects
so that they can be completed within 24 months may result in more
manageable projects, we have previously reported on the importance of
capturing metrics that identify events and trends to assess whether
systems will provide needed functionality rather than schedule-driven
approaches that may lead to rework instead of making real progress on
a project.[Footnote 46] The process for ensuring that future
modernization projects conducted under the new approach will align
with governmentwide and agency goals, achieve measurable results, and
minimize future work-arounds and rework has not yet been clearly
described.
The Clinger-Cohen Act highlights the need for sound, integrated agency
IT architectures and lays out specific aspects of a process agency
chief information officers are to implement in order to maximize the
value of agencies' IT investments.[Footnote 47] For example,
consistent with OMB's new approach, the act also advocates the use of
a modular acquisition strategy for a major IT system. Under this type
of strategy, an agency's need for a system is satisfied in successive
acquisitions of interoperable increments. However, the act also states
that each increment should comply with common or commercially accepted
standards applicable to IT so that the increments are compatible with
other increments of IT that make up the system. Some agency financial
system modernization projects involve the implementation of large,
integrated ERP systems--which may be designed to perform a variety of
business-related tasks, such as accounts payable, general ledger
accounting, and supply chain management across multiple organizational
units--to help achieve agency strategic goals. Given the tightly
integrated nature of these systems, the extent to which implementation
projects can be modified and segmented to achieve OMB's objective for
delivering interim functionality to help agencies address critical
needs has not yet been determined.
Oversight and Review of Financial System Projects:
Key issues:
* What specific criteria will be used to evaluate agency modernization
project plans and task orders requiring OMB review and approval?
* What steps will be taken to ensure that appropriate procedures and
resources are in place at the agency level to avoid an improper
impoundment of funds?
* How will the roles and responsibilities of OMB, the Financial
Systems Advisory Board, or others involved in conducting the reviews
and their efforts be defined and measured?
Our prior work has linked financial management system failures, in
part, to agencies not effectively incorporating disciplined processes
shown to reduce software development and acquisition risks into their
implementation projects.[Footnote 48] We support the principle of
increased oversight and review of projects as called for in our prior
recommendations. However, the criteria for performing quarterly
assessments of agency modernization projects do not clearly define how
such assessments will evaluate the extent to which agencies are
embracing disciplined processes. Further, OMB's template for capturing
information on agency projects identifies numerous aspects to be
reviewed; however, agencies are not required to provide information
needed to assess the effectiveness of testing and data conversion
efforts necessary to ensure that substantial defects are detected
prior to implementation and that modifications of existing data enable
them to operate in a different environment. These and other
disciplined processes are critical for successfully implementing a new
system. Effective oversight to ensure that they are incorporated into
agency and governmentwide system implementation projects will also
continue to be a critical factor in the success of future
modernization efforts envisioned under OMB's new approach.
In addition, OMB's direction and CFO Act agencies' implementation of
the direction to immediately halt activities on financial system IT
projects pending the outcome of OMB's review present additional risks
concerning adherence to procedures to be followed for impoundments of
budget authority, as prescribed in the Impoundment Control Act of
1974.[Footnote 49] Not all delays in obligating funds are
impoundments, but where OMB has given direction to agencies to halt
the issuance of new task orders or new procurements, we are concerned
that agencies may misinterpret that as a direction to withhold budget
authority from obligation either during the review process or upon the
decision to terminate an investment. OMB issues general guidance in
OMB Circular No. A-11 on the applicable procedures for compliance with
the Impoundment Control Act. However, in 2006, we reported to Congress
and OMB that executive agencies had improperly impounded budget
authority following the President's submission of proposals to
Congress to rescind certain budget authority because, in part,
agencies were not fully aware of the nature of the proposals and their
intended effect on currently available budget authority.[Footnote 50]
OMB officials stated that none of the 24 CFO Act agencies identified
an impoundment resulting from OMB's direction, but OMB had not
evaluated the potential impact of the direction on the agencies'
budget authority nor had it issued any clarifying guidance to the
agencies to alert them to the potential for impoundments that might
arise if agencies withheld budget authority by not awarding contracts
as directed.
Moreover, OMB's reliance on the Financial Systems Advisory Board to
assist in the review of agency modernization projects will depend, in
part, on the availability of sufficient resources to perform effective
reviews and having clear criteria for selecting projects and
performing the reviews. Having clear, measurable criteria for
determining which projects are to be assessed and that provides for
objective assessments would help ensure that they are performed
completely and consistently for all projects and that oversight
efforts help achieve intended results. The extent to which CFOs and
chief information officers from major agencies or other experts will
be available and used to perform such reviews, including whether such
officials may be involved in reviewing projects related to their own
agencies, has not been specified. While OMB officials told us that
they plan to take steps to exclude officials from reviewing systems at
their own agencies, the process for doing so has not been disclosed.
Compliance with Financial System Requirements and Process for
Certifying Financial Management Software:
Key issues:
* How will system requirements and standard business processes be
updated and maintained?
* What criteria will be used to determine whether a performance-based
approach for compliance with financial system requirements reduces the
cost, risk, and complexity of financial system modernizations?
* What actions will be taken to help ensure that discontinuing FSIO's
software testing and certification program does not result in lack of
interoperability across agency systems?
* What steps will be taken to ensure that vendor self-certifications
comply with applicable provisions of the Federal Acquisition
Regulation?
* What guidance will be provided to agencies to clarify any changes in
agency responsibilities for testing and validating software
functionality?
FSIO played a significant role in helping to identify and document
federal financial management system requirements and the standard
business processes on which they should be based. Such efforts were
aimed at preventing duplicative research and compilation across
government. Prior to ceasing operations effective March 31, 2010, FSIO
was working to finalize an exposure draft and issue an updated version
of core financial system requirements intended, in part, to reflect
changes necessary to align them with current standard business
processes. OMB's June 2010 memorandum states that it plans to issue a
revision to OMB Circular No. A-127 to update existing requirements and
to provide guidance for agencies and auditors on how to assess
compliance. The extent to which these changes will affect
modernization efforts as well as improve the ability of financial
systems to help address long-standing weaknesses is undetermined.
While OMB's plan to require vendors to self-certify software
functionality is intended to shift accountability for software
performance to vendors, it does not change vendor accountability for
delivering products that meet specified standards. It also does not
eliminate the need to develop and update those standards as new
requirements are established to facilitate future improvements. Our
work on financial management systems modernizations and industry
standards has identified the importance of clearly defining systems
requirements and managing those requirements throughout system
implementations, and failure to do so can have a significant negative
impact on their success.[Footnote 51] OMB plans to provide additional
guidance related to the change in the testing process in an upcoming
revision to OMB Circular No. A-127 and revisit the policy on an annual
basis. However, it is not clear if OMB will be defining system
standards and keeping those definitions up to date going forward or if
these tasks will be delegated to another entity.
The Government Performance and Results Act of 1993 (Results Act)
highlights the importance of strategic plans and performance plans as
a means for assisting agencies to achieve desired results.[Footnote
52] We previously reported that strategies should be specific enough
to enable an assessment of whether they would help achieve the goals
of the strategic plan.[Footnote 53] We also reported on how
collaborative efforts involving multiple agencies to address
crosscutting issues--such as federal financial management
modernization efforts--could benefit from a governmentwide strategic
plan that identifies long-term goals and the strategies needed to
address them, aligned performance goals, and improved performance
information that assists decision making to improve results.[Footnote
54] Recognizing OMB's critical role in governmentwide efforts, such as
those envisioned under this new approach, the Clinger-Cohen Act, and
OMB's implementing guidance, OMB Circular No. A-130, specifically
require OMB to develop a strategic plan for managing information
resources. Further, incorporating performance plans, goals, and other
key elements that facilitate performance measurement and monitoring is
essential for ensuring that efforts are appropriately aligned to
achieve desired results. It will be essential that performance plans
are expressed in an objective, quantifiable, and measurable form that
clearly links strategic goals with the strategies to be used to
achieve them.
Concluding Observations:
OMB's FMLOB initiative represented an important effort intended to
reduce costs and improve the quality and performance of federal
financial management systems that agencies depend on to generate
reliable, useful, and timely information needed for decision-making
purposes. In connection with their efforts to implement this
initiative and modernize their systems, many agencies took steps to
migrate selected core financial system support services to external
providers. The use of external providers by smaller agencies in
particular highlights potential benefits to be realized through these
efforts, such as adopting common processes and sharing software. Other
agencies continue to rely on aging legacy systems--even though they
may have migrated to an external provider. Agencies continue to be
challenged with reengineering business processes and effectively
incorporating disciplined processes into their implementation efforts
to help ensure their success.
OMB announced a new strategy and plans for future financial management
system modernization efforts, and began issuing a series of guidance
on its new approach from March 2010 to June 2010. However, it is too
early to determine the extent to which this new approach will address
the cost, risk, and complexity of financial system modernizations. The
experience and challenges related to efforts to implement the FMLOB
initiative provide important lessons learned as OMB continues to
develop and implement its new approach. OMB has stated that it plans
to develop additional guidance, such as a governmentwide concept of
operations, a long-term financial management systems strategy, and a
revised OMB Circular No. A-127. Critical next steps will include OMB
elaborating on its new approach to address key issues. The following
includes our observations on these issues.
* As we have previously reported in connection with the FMLOB
initiative, a concept of operations is one of the first and foremost
critical building blocks and is needed to provide an overall road map
to guide implementation of OMB's new approach in accordance with best
practices. Until a well-defined concept of operations is developed,
questions remain on how the proposed governmentwide solutions can be
integrated with current and planned agency financial management
systems.
* Articulating key aspects of a strategic plan, such as goals and
performance plans clearly linked to strategies for achieving them and
expressed in an objective, quantifiable, and measurable form, is also
critical for the success of OMB's new approach. In addition, a
governance structure that provides clear roles and responsibilities of
key stakeholders, such as the Financial Systems Advisory Board and
FIT, is necessary to help ensure that the stated goals are achieved.
Further, detailed guidance and criteria will be important for
understanding how ongoing and future modernization projects will be
evaluated.
* In developing its strategy, it is also important for OMB to clarify
the need to mitigate the risks involved with the new requirements for
agencies to revise project plans to shorter increments. These risks
include agencies adopting a schedule-driven approach rather than
focusing on achieving event-driven results consistent with agency
needs. In addition, providing guidance to agencies on incorporating
relevant OMB Circular No. A-11 procedures would help to ensure that
OMB efforts to review financial system IT projects under its new
approach do not result in improper impoundments.
* As part of OMB's revisions to Circular No. A-127, several
clarifications would help provide agencies with direction to implement
OMB's new approach, including (1) the requirements for using an SSP,
(2) the new process for developing and updating federal financial
management system requirements and standard business processes, and
(3) the performance-based approach for determining FFMIA compliance.
We recognize that OMB is still in the process of fully implementing
this new approach and completing related guidance. However, addressing
these and other identified key issues and overcoming the historical
tendency for agencies to view their needs as unique and resist
standardization will depend on prompt and decisive action to develop
an effective governmentwide modernization strategy and related
guidance. We are not making any new recommendations in this report
because of the early implementation stage of OMB's new approach;
however, we will continue to work with OMB to help ensure that it
provides agency management and other stakeholders with the guidance
needed to bring about meaningful improvements in financial management
systems. Finally, to ensure that taxpayers' dollars are used
effectively and efficiently, continued congressional oversight will be
crucial for transforming federal financial management systems to
better meet federal government needs.
Agency Comments and Our Evaluation:
We requested comments on a draft of this report from the Acting
Director of OMB or his designee. On August 31, 2010, the OMB
Controller provided oral comments on the draft report, including
technical comments, which we incorporated as appropriate. Overall, the
Controller was concerned that it was too early for GAO to draw
conclusions on the change in policy that was published in OMB
Memorandum M-10-26 issued on June 28, 2010, and that the report needed
to better reflect the new approach as being a work in progress in the
beginning stages of implementation. To help address OMB's concern, we
included additional references to the early implementation stage of
OMB's new approach. The Controller also stated that the questions
raised in the report were good for framing the issues, and that some
of them were in the process of being addressed. For example, he stated
that the planned revisions to OMB Circular No. A-127 will address
issues raised on systems requirements and the process for certifying
software. We have updated the report accordingly. The Controller also
stated that the members of the new Financial Systems Advisory Board
adopted a charter dated August 1, 2010, which provides additional
detail and specificity on the role and responsibilities of the Board
members. We were provided the charter on September 2, 2010, and will
evaluate it as part of our future work. We continue to believe that
the questions and issues raised in the report need to be addressed by
OMB in order to reduce risks and help ensure successful outcomes as it
moves forward with its new approach and develops additional guidance.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies to the Ranking
Member, Subcommittee on Federal Financial Management, Government
Information, Federal Services, and International Security, Senate
Committee on Homeland Security and Governmental Affairs; the Chairman
and Ranking Member, Subcommittee on Government Management,
Organization, and Procurement, House Committee on Oversight and
Government Reform; and the Acting Director of OMB. The report also
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 VI.
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 address our objectives, we surveyed chief financial officers (CFO),
or their designees, at the 24 CFO Act agencies. We asked each agency
to identify the core financial systems that were fully deployed in the
agency as of September 30, 2009, and any that the agency planned to
fully deploy after that date.[Footnote 55] Through the use of e-
mailed, self-administered questionnaires, we collected descriptive
information on modernization and migration-related activities about
each core financial system, as well as overall agency activities and
perspectives regarding financial management line of business (FMLOB)
migration efforts. We designed and tested these questionnaires in
consultation with subject matter experts at GAO and the Financial
Systems Integration Office (FSIO), GAO survey research methodologists,
and selected agency officials. Data collection took place from
November 2009 to April 2010. All 24 agencies responded to the survey
request and returned questionnaires on 46 currently deployed systems
and 20 planned systems that they had identified, as shown in appendix
II, tables 5 and 6, respectively.[Footnote 56]
While all agencies returned questionnaires, and therefore our data are
not subject to sampling or overall questionnaire nonresponse error,
the practical difficulties of conducting any survey may introduce
other errors into our findings. In addition to questionnaire design
activities discussed above, to minimize errors of measurement,
question-specific nonresponses, and data processing errors, GAO
analysts (1) pretested draft questionnaires with two agency officials
prior to conducting the survey, (2) contacted respondents to follow up
on answers that were missing or required clarification, and (3)
answered respondent questions to resolve difficulties they had
answering our questions during the survey. In addition, we tested the
accuracy of selected responses provided by three agencies by comparing
them to data we obtained from case studies.
To obtain more detailed information on steps taken to modernize core
financial systems and migrate related support services to external
providers, we performed case studies at the Department of Justice
(DOJ), Department of Agriculture (USDA), Federal Communications
Commission (FCC), and Office of Personnel Management (OPM).[Footnote
57] These agencies were selected to provide a variety of perspectives
from agencies actively involved in core financial system modernization
efforts. Specifically, the criteria used to select agencies for the
case studies included (1) different software solutions, (2) a mix of
large and small agencies, and (3) differing experiences concerning the
use of external providers to support their core financial systems. To
identify the use of different software solutions and differing
experiences concerning the use of external providers, we reviewed an
inventory of CFO Act agency and non-CFO Act agency core financial
systems published by FSIO as of December 2008 that identified
agencies' software, versions, and providers, where applicable, that
hosts the systems, as well as selected 2008 agency performance and
accountability reports.[Footnote 58] To provide a mix of large and
small agencies, we selected at least one agency from each of three
strata defined by gross costs as reported in the 2008 Financial Report
of the United States Government.[Footnote 59] To help ensure an
efficient use of audit resources, we did not select agencies for which
GAO had done work involving their financial management systems for our
case study work performed in this review. We obtained and summarized
information regarding these case study agencies from documentation
provided by the agencies, such as capital asset plans and alternatives
analyses. We also interviewed key agency officials involved with the
implementations, including CFOs and project managers. We did not
evaluate the effectiveness of the acquisition and implementation
processes used by the case study agencies. In addition, we did not
verify the accuracy of the data provided.
To identify the benefits of, and key challenges that agency officials
report as having an impact on, their efforts to modernize and migrate
core financial systems to external providers, we reviewed and analyzed
survey results from the 24 CFO Act agencies. In addition, we reviewed
policies, guidance, reports, and memorandums obtained from the Office
of Management and Budget (OMB), FSIO, the four selected case study
agencies, the four OMB-designated federal shared service providers
(SSP), two commercial vendors supporting migration activities at
selected case study agencies, and prior GAO reports. The four OMB-
designated federal SSPs were the Department of Transportation's
Enterprise Services Center, the Department of the Interior's National
Business Center, the Department of the Treasury's Bureau of Public
Debt's Administrative Resource Center, and the General Services
Administration's Federal Integrated Solutions Center. We interviewed
knowledgeable officials of these organizations, as well as a co-chair
of the Small Agency Council Finance Committee[Footnote 60] and
chairman of its Financial Systems Subcommittee (the CFO of the Equal
Employment Opportunity Commission and Deputy CFO of the Federal Energy
Regulatory Commission, respectively) and the team leader of the CFO
Council's[Footnote 61] FSIO Oversight Transformation Team concerning
key factors that contribute to successful migrations and significant
challenges that may affect migration efforts at agencies and external
providers.
We also interviewed key OMB officials, including the Controller and
Deputy Controller of the Office of Federal Financial Management, to
discuss these factors as well as governmentwide efforts toward
migrating core financial systems to external providers and OMB's newly
announced policy and financial systems modernization approach (new
approach). We obtained and reviewed recent policies and guidance
[Footnote 62] issued by OMB, such as OMB Memorandum M-10-26[Footnote
63] calling for an immediate review of financial systems projects. We
analyzed OMB's new approach, in relation to relevant laws,
regulations, and guidance, including the Clinger-Cohen Act,[Footnote
64] the CFO Act,[Footnote 65] the Federal Financial Management
Improvement Act of 1996 (FFMIA),[Footnote 66] OMB Circular No. A-127,
[Footnote 67] OMB Circular No. A-130,[Footnote 68] and standards set
by the Institute of Electrical and Electronic Engineers.
We conducted this performance audit from June 2009 through September
2010 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 Acting
Director of OMB or his designee. We received oral and technical
comments from the OMB Controller, which are discussed in the Agency
Comments and Our Evaluation section and incorporated as appropriate.
[End of section]
Appendix II: Modernization and Migration of Core Financial Systems and
Services to External Providers:
Tables 5 and 6 summarize responses received from CFO Act agencies
concerning their core financial systems[Footnote 69] and efforts to
migrate selected core financial system support services to external
providers.[Footnote 70] The agencies completed separate questionnaires
on each identified core financial system and the status of activities
related to migrating information technology (IT) hosting, application
management, and transaction processing services supporting these
systems to external providers as of September 30, 2009.[Footnote 71]
The status of agency migration activities and use of external
providers are categorized as follows:
* Migrated - (provider). Agency has already migrated this service to a
federal SSP or commercial provider as indicated.
* Planned - (provider). Agency has decided and planned to migrate this
service to a selected federal SSP or commercial provider as indicated.
* Planned - (provider undetermined). Agency has decided to migrate
this service but has not yet selected a provider.
* Undecided. Agency has not decided to migrate this service.
* Not planned. Agency does not plan to migrate this service to an
external provider.
Table 5 summarizes the results of the 24 CFO Act agency responses
related to 46 current core financial systems, including 45 civilian
systems and 1 defense system, that agency officials identified as
being fully deployed as of September 30, 2009. Of these, 12 agencies
reported that they have already migrated, or plan to migrate, IT
hosting or application management core financial system support
services to external providers for 16 systems. Further, 4 agencies
reported that they rely on external providers for transaction
processing services supporting 4 systems.
Table 5: Current Core Financial Systems Fully Deployed at CFO Act
Agencies as of September 30, 2009:
Agency: Agency for International Development[C];
System name: Phoenix - Financial Systems Integration;
Year deployed[A]: 1998;
Vendor and software name[B]: AMS Momentum v.6.0;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Agriculture[D];
System name: Foundation Financial System;
Year deployed[A]: 1998;
Vendor and software name[B]: AMS Federal Financial System v5.5;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Commerce;
System name: National Technical Information Service;
Year deployed[A]: 1990;
Vendor and software name[B]: Custom;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Commerce;
System name: Commerce Business System;
Year deployed[A]: 1999;
Vendor and software name[B]: Oracle v.10g;
Use of external provider for: IT hosting: Migrated - federal SSP;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Commerce;
System name: Momentum;
Year deployed[A]: 2003;
Vendor and software name[B]: CGI Momentum v.6.2;
Use of external provider for: IT hosting: Undecided;
Use of external provider for: Application management: Undecided;
Use of external provider for: Transaction processing: Undecided.
Agency: Department of Defense[E];
System name: DLA-Enterprise Business System;
Year deployed[A]: 2005;
Vendor and software name[B]: SAP v.6.0;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Education[D];
System name: Financial Management Support System;
Year deployed[A]: 2002;
Vendor and software name[B]: Oracle Federal Financials v.11.5.10;
Use of external provider for: IT hosting: Undecided;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Energy;
System name: Standard Accounting and Reporting System;
Year deployed[A]: 2005;
Vendor and software name[B]: Oracle Federal Financials v.11.5.9;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Health and Human Services[F];
System name: Financial Accounting Control System;
Year deployed[A]: 1992;
Vendor and software name[B]: Federal Success;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Health and Human Services[F];
System name: National Institutes of Health Business System;
Year deployed[A]: 2001;
Vendor and software name[B]: Oracle E-Business Suite 11.5.10;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Health and Human Services[F];
System name: Unified Financial Management System;
Year deployed[A]: 2005;
Vendor and software name[B]: Oracle E-Business Suite, v.11.5.10;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Migrated -
commercial provider;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Homeland Security[G];
System name: Integrated Financial Management Information System;
Year deployed[A]: 1996;
Vendor and software name[B]: Digital Systems Group IPL v.5.1.6;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Homeland Security[G];
System name: Federal Financial Management System;
Year deployed[A]: 1998;
Vendor and software name[B]: Savantage Federal Financial Management
v.3.0 R.2.12;
Use of external provider for: IT hosting: Planned - commercial
provider;
Use of external provider for: Application management: Undecided;
Use of external provider for: Transaction processing: Undecided.
Agency: Department of Homeland Security[G];
System name: Momentum Financials;
Year deployed[A]: 2000;
Vendor and software name[B]: CGI Momentum Financials v.6.1.6;
Use of external provider for: IT hosting: Undecided;
Use of external provider for: Application management: Undecided;
Use of external provider for: Transaction processing: Undecided.
Agency: Department of Homeland Security[G];
System name: Core Accounting System;
Year deployed[A]: 2003;
Vendor and software name[B]: Oracle Federal Financials v.11.5.10;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Homeland Security[G];
System name: Enterprise Financial Management System;
Year deployed[A]: 2005;
Vendor and software name[B]: Oracle Federal Financials v.11.5.9;
Use of external provider for: IT hosting: Undecided;
Use of external provider for: Application management: Undecided;
Use of external provider for: Transaction processing: Undecided.
Agency: Department of Homeland Security[G];
System name: SAP;
Year deployed[A]: 2005;
Vendor and software name[B]: SAP R/3, v.6.0;
Use of external provider for: IT hosting: Planned - provider
undetermined;
Use of external provider for: Application management: Undecided;
Use of external provider for: Transaction processing: Undecided.
Agency: Department of Housing and Urban Development[H];
System name: HUDCAPS/FFS;
Year deployed[A]: 1995;
Vendor and software name[B]: AMS Federal Financial System v.5.6.1;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Housing and Urban Development[H];
System name: FHA Subsidiary Ledger;
Year deployed[A]: 2003;
Vendor and software name[B]: : PeopleSoft Federal Financials v.8.8;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Housing and Urban Development[H];
System name: Ginnie Mae Financial and Accounting System;
Year deployed[A]: 2006;
Vendor and software name[B]: PeopleSoft Financials v.8.9;
Use of external provider for: IT hosting: Migrated - commercial
provider;
Use of external provider for: Application management: Migrated -
commercial provider;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of the Interior[D];
System name: Federal Financial System;
Year deployed[A]: 1988;
Vendor and software name[B]: AMS Federal Financial System v. 5.1.7;
Use of external provider for: IT hosting: Migrated - federal SSP;
Use of external provider for: Application management: Migrated -
federal SSP;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Justice[I];
System name: Financial Management System;
Year deployed[A]: 1985;
Vendor and software name[B]: INFOR E Series 98.01;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Justice[I];
System name: Financial Management Information System;
Year deployed[A]: 1974;
Vendor and software name[B]: Information Builders FOCUS;
Use of external provider for: IT hosting: : Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Justice[I];
System name: STARS;
Year deployed[A]: 1998;
Vendor and software name[B]: : Computer Data Systems FARS;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Justice[I];
System name: Unified Financial Management System -ATF;
Year deployed[A]: 2009;
Vendor and software name[B]: CGI Momentum 6.1.5b;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Justice[I];
System name: SAP;
Year deployed[A]: 2000;
Vendor and software name[B]: SAP/Enterprise Core Component, v. 6.0;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Justice[I];
System name: Unified Financial Management System-DEA;
Year deployed[A]: 2009;
Vendor and software name[B]: CGI Momentum 6.1.5;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Labor[D];
System name: Department of Labor Accounting and Related Systems;
Year deployed[A]: 1989;
Vendor and software name[B]: Custom;
Use of external provider for: IT hosting: Migrated - commercial
provider;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of State;
System name: Joint Financial Management System;
Year deployed[A]: 2003;
Vendor and software name[B]: CGI Momentum 6.0;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of the Treasury;
System name: BEP Management Information System;
Year deployed[A]: 1985;
Vendor and software name[B]: INFOR/SSA Global Technologies
Consolidated Application System v.3.0;
Use of external provider for: IT hosting: Planned - commercial
provider;
Use of external provider for: Application management: Planned
- commercial provider;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of the Treasury;
System name: People Soft Financials;
Year deployed[A]: 2001;
Vendor and software name[B]: : PeopleSoft Financials v.8.4;
Use of external provider for: IT hosting: Undecided;
Use of external provider for: Application management: Undecided;
Use of external provider for: Transaction processing: Undecided.
Agency: Department of the Treasury;
System name: Oracle E-Business Suite;
Year deployed[A]: 2002;
Vendor and software name[B]: Oracle Federal Financials v.11.5.10;
Use of external provider for: IT hosting: Migrated - federal SSP;
Use of external provider for: Application management: Migrated -
federal SSP;
Use of external provider for: Transaction processing: Migrated -
federal SSP.
Agency: Department of the Treasury;
System name: Integrated Financial System;
Year deployed[A]: 2005;
Vendor and software name[B]: SAP v. 4.6c;
Use of external provider for: IT hosting: Undecided;
Use of external provider for: Application management: Undecided;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of the Treasury;
System name: Financial Accounting and Services Division;
Year deployed[A]: 2006;
Vendor and software name[B]: CGI Momentum Financials v.5.0.1;
Use of external provider for: IT hosting: Planned - provider
undetermined;
Use of external provider for: Application management: Planned -
provider undetermined;
Use of external provider for: Transaction processing: Not planned.
Agency: Department of Transportation;
System name: DELPHI;
Year deployed[A]: 2000;
Vendor and software name[B]: Oracle E-Business Suite v.11.5.10;
Use of external provider for: IT hosting: Migrated - federal SSP;
Use of external provider for: Application management: Migrated -
federal SSP;
Use of external provider for: Transaction processing: Migrated -
federal SSP.
Agency: Department of Veterans Affairs[J];
System name: Financial Management System;
Year deployed[A]: 1995;
Vendor and software name[B]: CGI-AMS Federal Financial System v.
4.0.7G;
Use of external provider for: IT hosting: Undecided;
Use of external provider for: Application management: Undecided;
Use of external provider for: Transaction processing: Not planned.
Agency: Environmental Protection Agency[D];
System name: Integrated Financial Management System;
Year deployed[A]: 1989;
Vendor and software name[B]: CGI Federal Financial System v.5.1;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: General Services Administration;
System name: Pegasys;
Year deployed[A]: 2000;
Vendor and software name[B]: CGI Momentum v.6.2.3;
Use of external provider for: IT hosting: Migrated - federal SSP;
Use of external provider for: Application management: Migrated -
federal SSP;
Use of external provider for: Transaction processing: Migrated -
federal SSP.
Agency: National Aeronautics and Space Administration;
System name: SAP;
Year deployed[A]: 2003;
Vendor and software name[B]: SAP v.6.0;
Use of external provider for: IT hosting: Undecided;
Use of external provider for: Application management: Undecided;
Use of external provider for: Transaction processing: Not planned.
Agency: National Science Foundation[D];
System name: Financial Accounting System;
Year deployed[A]: 1980's;
Vendor and software name[B]: Custom;
Use of external provider for: IT hosting: Undecided;
Use of external provider for: Application management: Undecided;
Use of external provider for: Transaction processing: Not planned.
Agency: Nuclear Regulatory Commission[D];
System name: Federal Financial System;
Year deployed[A]: 1992;
Vendor and software name[B]: AMS Federal Financial System;
Use of external provider for: IT hosting: Migrated - federal SSP;
Use of external provider for: Application management: Migrated -
federal SSP;
Use of external provider for: Transaction processing: Migrated -
federal SSP.
Agency: Office of Personnel Management[D];
System name: Government Financial Information System;
Year deployed[A]: 2001;
Vendor and software name[B]: CGI Momentum and Procurement v.3.7.2/4.6;
Use of external provider for: IT hosting: Migrated - commercial
provider;
Use of external provider for: Application management: Migrated -
commercial provider;
Use of external provider for: Transaction processing: Undecided.
Agency: Small Business Administration[K];
System name: Loan Accounting System;
Year deployed[A]: 1982;
Vendor and software name[B]: Custom;
Use of external provider for: IT hosting: Migrated - commercial
provider;
Use of external provider for: Application management: Migrated -
commercial provider;
Use of external provider for: Transaction processing: Not planned.
Agency: Small Business Administration[K];
System name: Financial Reporting Information System/Consolidated
General Ledger;
Year deployed[A]: 2000;
Vendor and software name[B]: Custom;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency: Small Business Administration[K];
System name: OCFO Oracle Administrative Accounting System;
Year deployed[A]: 2001;
Vendor and software name[B]: Oracle Federal Financials v.11.5.10.2;
Use of external provider for: IT hosting: Migrated - commercial
provider;
Use of external provider for: Application management: Migrated -
commercial provider;
Use of external provider for: Transaction processing: Undecided.
Agency: Social Security Administration;
System name: Social Security Online Accounting and Reporting Systems;
Year deployed[A]: 2004;
Vendor and software name[B]: Oracle Federal Financials v.12.0.6;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Source: GAO survey of 24 CFO Act agencies.
[A] Year deployed reflects agency responses on the fiscal year the
system was first placed into operation.
[B] Vendor and software name include the current software name and
version reported by the agency. In addition, CGI now owns Momentum and
Federal Financial System (FFS), which were purchased from American
Management Systems (AMS), and Oracle now owns PeopleSoft.
[C] According to its survey response, the Agency for International
Development has partnered with the Department of State for the
department to provide certain hosting, application management, and
transaction processing services supporting Agency for International
Development's core financial system. However, the Department of State
is not a designated federal SSP as defined by OMB. Therefore, Agency
for International Development is not shown as using an external
provider.
[D] This agency plans to replace its current core financial system.
See table 6 for additional details regarding the core financial system
the agency plans to fully deploy after September 30, 2009.
[E] The Department of Defense (DOD) has over 100 core financial
systems; however, officials only provided a response for one core
financial system that was fully deployed as of September 30, 2009.
Upon inquiry, DOD officials could not provide sufficient information
concerning DOD's current core financial systems.
[F] The Department of Health and Human Services plans to replace one
of its three current core financial systems. See table 6 for
additional details regarding the core financial system the agency
plans to fully deploy after September 30, 2009.
[G] The Department of Homeland Security plans to replace its current
core financial systems with one planned system. See table 6 for
additional details regarding the core financial system the agency
plans to fully deploy after September 30, 2009.
[H] The Department of Housing and Urban Development plans to replace
all three of its current core financial systems with one planned
system. See table 6 for additional details regarding the core
financial system the agency plans to fully deploy after September 30,
2009.
[I] The Department of Justice plans to replace five of its six current
core financial systems with one planned system. See table 6 for
additional details regarding the core financial system the agency
plans to fully deploy after September 30, 2009.
[J] At the time of our survey, the Department of Veterans Affairs
planned to replace this system. Subsequent to conducting our survey,
the project planned to replace this system was canceled, and according
to department officials, they have not decided whether to replace this
system.
[K] The Small Business Administration plans to replace all three of
its current core financial systems with one planned system. See table
6 for additional details regarding the core financial system the
agency plans to fully deploy after September 30, 2009.
[End of table]
In addition to completing separate questionnaires concerning current
core financial systems that were fully deployed as of September 30,
2009, agencies completed separate questionnaires for 20 core financial
systems, including 14 civilian and 6 defense systems, that they
planned to fully deploy after that date, as shown in table 6. The
surveys were conducted prior to the issuance of OMB's new guidance.
Accordingly, the impact, if any, of the new policy on agencies' plans
to deploy new core financial systems is not reflected in table 6. Some
of these systems have already been partially deployed at bureaus or
other subagency components within the agencies, and therefore some
services may have already been migrated to an external provider even
though full deployment had not yet occurred as of September 30, 2009.
Of these systems, 10 agencies reported that they have already
migrated, or plan to migrate, IT hosting and application management
services supporting 10 systems; 4 agencies reported that they either
do not plan, or had not yet made a decision, to migrate both these
services supporting 4 systems; and 1 agency, the Department of
Defense, reported that it did not plan to migrate these services for 4
planned systems and had migrated both services for 1 system and
application management services for 1 system. In addition, 4 agencies
reported that they plan to rely on external providers to provide
transaction processing services supporting 4 planned systems.
Table 6: Core Financial Systems CFO Act Agencies Plan to Fully Deploy
after September 30, 2009:
Agency[A]: Department of Agriculture;
System name: Financial Management Modernization Initiative;
Year to be deployed[B]: 2012;
Vendor and software name: SAP v. 6.0;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency[A]: Department of Defense;
System name: Logistics Modernization Program;
Year to be deployed[B]: 2011;
Vendor and software name: SAP ECC6.0;
Use of external provider for: IT hosting: Migrated - commercial
provider;
Use of external provider for: Application management: Migrated -
commercial provider;
Use of external provider for: Transaction processing: Migrated -
commercial provider.
Agency[A]: Department of Defense;
System name: General Fund Enterprise Business System;
Year to be deployed[B]: 2012;
Vendor and software name: SAP ERP v.6.0 and SAP v.7.0;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Migrated -
commercial provider;
Use of external provider for: Transaction processing: Not planned.
Agency[A]: Department of Defense;
System name: Defense Agencies Initiative;
Year to be deployed[B]: 2013;
Vendor and software name: Oracle-E Business Suite 11.5.10.2;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Undecided.
Agency[A]: Department of Defense;
System name: Defense Enterprise Accounting and Management System;
Year to be deployed[B]: 2015;
Vendor and software name: Oracle E-Business Suite v.11i;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency[A]: Department of Defense;
System name: Expeditionary Combat Support System;
Year to be deployed[B]: 2017;
Vendor and software name: Oracle E-Business Suite v.R12;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency[A]: Department of Defense;
System name: Navy-ERP;
Year to be deployed[B]: 2013;
Vendor and software name: SAP ERP v.5.0;
Use of external provider for: IT hosting: Department of Education: Not
planned;
Use of external provider for: Application management: Department of
Education: Not planned;
Use of external provider for: Transaction processing: Department of
Education: Not planned.
Agency[A]: Department of Education;
System name: Financial Management Support System Release 12;
Year to be deployed[B]: 2014;
Vendor and software name: Oracle Federal Financials v.12;
Use of external provider for: IT hosting: Undecided;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency[A]: Department of Health and Human Services;
System name: Healthcare Integrated General Ledger Accounting System;
Year to be deployed[B]: 2012;
Vendor and software name: Oracle E-Business Suite, v.11.5.10;
Use of external provider for: IT hosting: Migrated - commercial
provider;
Use of external provider for: Application management: Migrated -
commercial provider;
Use of external provider for: Transaction processing: Not planned.
Agency[A]: Department of Homeland Security;
System name: Transformation and Systems Consolidation;
Year to be deployed[B]: 2018;
Vendor and software name: To be determined;
Use of external provider for: IT hosting: Planned - provider
undetermined;
Use of external provider for: Application management: Planned -
provider undetermined;
Use of external provider for: Transaction processing: Planned -
provider undetermined.
Agency[A]: Department of Housing and Urban Development;
System name: HUD Integrated Core Financial System;
Year to be deployed[B]: Unknown;
Vendor and software name: Oracle-PeopleSoft Federal Financials v9.x;
Use of external provider for: IT hosting: Planned - provider
undetermined;
Use of external provider for: Application management: Planned -
provider undetermined;
Use of external provider for: Transaction processing: Not planned.
Agency[A]: Department of the Interior;
System name: Financial and Business Management System;
Year to be deployed[B]: 2013;
Vendor and software name: SAP v.6.0;
Use of external provider for: IT hosting: Migrated - federal SSP;
Use of external provider for: Application management: Migrated -
federal SSP;
Use of external provider for: Transaction processing: Not planned.
Agency[A]: Department of Justice;
System name: Unified Financial Management System;
Year to be deployed[B]: 2013;
Vendor and software name: CGI Momentum;
Use of external provider for: IT hosting: Not planned;
Use of external provider for: Application management: Not planned;
Use of external provider for: Transaction processing: Not planned.
Agency[A]: Department of Labor;
System name: New Core Financial Management System;
Year to be deployed[B]: 2010;
Vendor and software name: Oracle Federal Financials R12;
Use of external provider for: IT hosting: Planned - commercial
provider;
Use of external provider for: Application management: Planned -
commercial provider;
Use of external provider for: Transaction processing: Planned -
commercial provider.
Agency[A]: Department of Veterans Affairs;
System name: Integrated Financial Accounting System[C];
Year to be deployed[B]: 2014;
Vendor and software name: To be determined;
Use of external provider for: IT hosting: Planned - provider
undetermined;
Use of external provider for: Application management: Planned -
provider undetermined;
Use of external provider for: Transaction processing: Not planned.
Agency[A]: Environmental Protection Agency;
System name: Financial System Modernization Project;
Year to be deployed[B]: 2012;
Vendor and software name: CGI Momentum v.6.4x;
Use of external provider for: IT hosting: Planned - commercial
provider;
Use of external provider for: Application management: Planned -
commercial provider;
Use of external provider for: Transaction processing: Not planned.
Agency[A]: National Science Foundation;
System name: iTRAK;
Year to be deployed[B]: 2016;
Vendor and software name: To be determined;
Use of external provider for: IT hosting: Undecided;
Use of external provider for: Application management: Undecided;
Use of external provider for: Transaction processing: Not planned.
Agency[A]: Nuclear Regulatory Commission;
System name: Financial Accounting and Integrated Management
Information System;
Year to be deployed[B]: 2011;
Vendor and software name: CGI Momentum Financials;
Use of external provider for: IT hosting: Planned - federal SSP;
Use of external provider for: Application management: Planned -
federal SSP;
Use of external provider for: Transaction processing: Migrated -
federal SSP.
Agency[A]: Office of Personnel Management;
System name: Consolidated Business Information System;
Year to be deployed[B]: 2011;
Vendor and software name: Oracle E-Business Suite/Hyperion R.12 and
PRISM 6.1;
Use of external provider for: IT hosting: Migrated - commercial
provider;
Use of external provider for: Application management: Migrated -
commercial provider;
Use of external provider for: Transaction processing: Undecided.
Agency[A]: Small Business Administration;
System name: Loan Management and Accounting System;
Year to be deployed[B]: 2015;
Vendor and software name: Oracle E-Business Suite R.12;
Use of external provider for: IT hosting: Planned - commercial
provider;
Use of external provider for: Application management: Planned -
commercial provider;
Use of external provider for: Transaction processing: Undecided.
Source: GAO survey of 24 CFO Act agencies.
[A] Planned projects listed reflect agency responses to survey for
planned systems as of September 30, 2009 and are subject to change
based on reviews being conducted under OMB Memorandum M-10-26 issued
in June 2010. Based on original survey responses, the following nine
agencies do not have plans to deploy additional core financial systems
after September 30, 2009: Agency for International Development,
Department of Commerce, Department of Energy, Department of State,
Department of the Treasury, Department of Transportation, General
Services Administration, National Aeronautics and Space
Administration, and Social Security Administration.
[B] Year to be deployed reflects agency responses on the fiscal year
the system is planned to be fully deployed.
[C] Subsequent to conducting our survey, according to the Department
of Veterans Affairs, this project was canceled.
[End of table]
[End of section]
Appendix III: Case Studies of Agency Migration and Modernization
Efforts:
Additional information concerning selected federal agencies' migration
and modernization efforts is presented in this appendix. The four case
study agencies are USDA, FCC, DOJ, and OPM. All four of these agencies
reported similar reasons for undertaking efforts to modernize their
core financial systems, including reliance on out-dated software that
adversely affected their ability to meet financial management
challenges, and had a goal of implementing a solution that will
provide agencywide, streamlined, real-time accounting and reporting
capability. We did not evaluate the effectiveness of the acquisition
and implementation processes used by the case study agencies or verify
the data provided.
Department of Agriculture:
Project details:
Financial Management Modernization Initiative;
Planned software solution: SAP;
IT Hosting: USDA National Finance Center (NFC);
USDA‘s total estimated life cycle cost from 2007 to 2014: $300.3
million;
Users: Agencywide 14,000 users at full deployment;
Source: USDA.
USDA is taking steps to modernize its core financial systems using a
solution based on SAP commercial off-the-shelf (COTS) software that is
intended to provide agencywide online, real-time transaction
capability and access. USDA's Financial Management Modernization
Initiative (FMMI) is intended to replace the Foundation Financial
Information System (FFIS) and consolidate and eliminate multiple
systems currently used in various USDA component agencies and staff
offices. USDA launched FMMI after identifying the need to upgrade
department and agency financial and administrative payment and program
general ledger systems.
In 2005, USDA began efforts to identify its new core financial system
needs and took steps to determine what software and services could be
provided by federal SSPs, private software vendors, and other
commercial providers. Figure 1 and table 7 summarize the key migration
and modernization activities used by USDA to identify and deploy a
core financial system solution.
Figure 1: Timeline of USDA's Key Migration and Modernization
Activities:
[Refer to PDF for image: timeline]
March 2004:
FMLOB initiative launched.
August 2005:
Initial alternatives analysis.
December 2005:
Request for information.
August 2006: Solicitation for integrator and software.
December 2008:
Software selected/integrator selected.
February 2009:
IT host (NFC) selected.
October 2009:
Phase 1 deployed.
December 2011:
Final agency deployment.
Sources: USDA officials and documentation.
[End of figure]
Table 7: USDA's Key Migration and Modernization Activities:
Key activities: Identify need for new system;
Description: In 2003, the vendor announced plans to stop supporting
its Federal Financial System (FFS), which was currently in place at
USDA, requiring USDA to determine whether to maintain the system
itself or replace it. USDA external auditors had also identified
control deficiencies related to the current system. Two additional
requirements USDA identified were to get real-time transaction updates
as opposed to batch updates, and consolidate multiple legacy software
systems with one core financial system. Based on these factors, USDA
began efforts to determine the most effective way to move forward.
Key activities: Perform alternatives analysis;
Description: In the 2005 alternatives analysis, USDA considered four
alternatives (with associated estimated costs for the 2006 to 2020
time frame):
* OMB-designated federal SSP ($766 million);
* Commercial vendor ($604 million);
* In-house ($588 million);
* In-house/SSP hybrid ($781 million);
USDA also documented consideration of outsourcing integration, IT
hosting, application management, and business processing functions.
According to agency officials, the large volume of USDA transactions
was a concern for the federal SSPs, particularly with respect to
business processing functions. USDA chose the in-house solution based
on a combination of lower cost, value, and risk factors. USDA
determined that the in-house alternative would have less adverse
impact on financial management operations at USDA. Currently, USDA
hosts its existing system at the National Finance Center (NFC), and
USDA officials stated most of the infrastructure is already in place
to host the new system.
Key activities: Solicitations and contract awards for software and
determined services;
Description: USDA performed a combined public-private competition for
implementation and integration and software services. It received
offers from three commercial vendors and no federal SSPs. USDA chose a
FSIO/Joint Financial Management Improvement Program-certified COTS
core financial software product with implementation and integration
support from a private contractor. In addition, USDA conducted a
public-private competition for IT hosting, and found that an in-house
solution would be best. USDA received three offers from federal
processing centers, and chose NFC for IT hosting.
Key activities: Deployment status and reported challenges;
Description: In October 2009, USDA deployed FMMI to headquarters and
one agency and planned to continue deployment at its remaining
agencies through the end of 2011. According to USDA officials, USDA
made changes to the original schedule and delayed deployment to
agencies because of funding constraints and management decisions. USDA
performed a gap analysis and other reviews that identified a need for
some system modifications, including interface with the Department of
the Treasury Intra-Governmental Payment and Collection System and
incorporation of the Common Government-wide Accounting Classification
(CGAC) structure. USDA officials stated that a standard configuration
had been developed and would be deployed at remaining bureaus within
USDA. In addition to funding constraints and system modifications,
USDA officials reported that reengineering its business processes and
resistance to changes within the organization resulting from its FMMI
efforts presented additional challenges. USDA officials also reported
that because of USDA's unique needs and large transaction volume,
migrating services supporting FMMI to an external provider would not
be in its best interest at this time.
Sources: USDA officials and documentation.
[End of table]
Federal Communications Commission:
Project details:
Core Financial Replacement System;
Planned software solution: Momentum 6.3.4;
IT hosting and application management: CGI;
FCC‘s total estimated life cycle cost from 2006 to 2018: $32.8 million;
Users: Agencywide 250 users at full deployment.
Source: FCC.
FCC identified a need to modernize its core financial systems and
selected a Web-based version of Momentum COTS software to provide
agencywide online, real-time transaction capability and access. FCC's
planned new core financial system is also intended to interface
electronically with common governmentwide software applications and to
replace a number of peripheral supporting software applications
currently in use at FCC. FCC's Core Financial System Replacement
Project is intended to replace the Federal Financial System (FFS),
which is an older, nonintegrated system that relies on batch
processing of transactions and is currently hosted by the Department
of the Interior's National Business Center (NBC). The new core
financial system is planned to be used as the system of record for all
external reporting requirements, including financial statement
preparation access and processing.
In 2005, FCC began efforts to identify its core financial system needs
and took steps to determine what software and services could be
provided by federal SSPs, private software vendors, and other external
providers. Figure 2 and table 8 summarize the key modernization and
migration activities taken by FCC to identify and plan a core
financial system solution.
Figure 2: Timeline of FCC's Key Migration and Modernization Activities:
[Refer to PDF for image: timeline]
March 2004:
FMLOB initiative launched.
September 2005:
Alternatives analysis.
September 2006:
Project Management Office contractor selected.
May 2007:
Request for information.
September 2007:
Solicitation for integrator and IT host.
September 2008:
Integrator and IT host selected.
October 2010:
Agency deployment.
Sources: FCC officials and documentation.
[End of figure]
Table 8: FCC's Key Migration and Modernization Activities:
Key activities: Identify need for new system;
Description: FCC's previous host, NBC, notified the agency that it
could no longer support FFS, which required FCC officials to assess
whether they would maintain the system themselves or replace the
system. FCC external auditors had also identified control deficiencies
related to the current system. Two additional requirements FCC
identified were to get real-time transaction updates as opposed to
batch updates and comply with OMB initiatives related to standard
business processes and external provider migration. Based on these
factors, FCC began efforts to determine the most effective way to move
forward with its financial management system.
Key activities: Perform alternatives analysis;
Description: In 2005, FCC officials performed a review to identify and
assess possible alternatives for maintaining or replacing the core
financial system. FCC determined qualitative considerations and
estimated risk-adjusted life cycle costs for four alternatives:
* Status quo ($16.2 million);
* Modify existing core financial system ($19.8 million);
* Develop a custom core financial system ($19.8 million);
* Acquire a COTS product ($12.9 million);
FCC determined that the fourth alternative, to acquire a certified
COTS product, combined with IT hosting support, would meet FCC's goal
of streamlining financial operations and incorporating FSIO
requirements and standard business processes. The first two
alternatives were not viable because the current FFS would not be
supported after October 1, 2006.
FCC noted that both the qualitative and quantitative information
received for the alternatives analysis was highly preliminary and was
not detailed. FCC planned to obtain more specific responses from the
federal SSPs, major COTS product vendors, and system integrators in
the federal marketplace during the contract competition process. FCC
performed a separate review to determine what services should be
outsourced and what functions should be performed in-house. Per agency
officials, unique FCC accounting needs and the possible loss of
flexibility and control contributed to officials' decision not to
outsource business processing functions.
Key activities: Solicitations and contract awards for software and
determined services;
Description: FCC performed a combined public-private competition for
implementation, IT hosting, application management, and software
services. Prior to the formal solicitation, FCC issued a market
request questionnaire and received information about provider
capabilities from nine commercial vendors and three federal SSPs. Of
these, only four commercial vendors and one federal SSP submitted
formal offers. FCC noted that the information provided by these
external providers was useful, but evaluating available options was
time consuming and challenging.
Key activities: Deployment status and reported challenges;
Description: Because FCC experienced some challenges with implementing
the standard version of Momentum, it developed a modified version and
plans to begin deployment on October 14, 2010. A project management
office contractor assisted in developing and comparing specific FCC
accounting requirements to Momentum standard processes. FCC asked CGI
to incorporate some enhancements based on differences identified. Some
of these enhancements related to newly developed FSIO standard
business processes that though not yet required, FCC identified as
needed. For example, FCC enhancements included specific details of
interfaces with the FedDebt system, budgetary reporting functions, and
incorporation of CGAC. FCC officials commented that their
comprehensive review and inclusion of requirements in their
solicitation package will be a critical factor in determining the
success of their migration efforts. They also commented that they have
developed an effective plan for monitoring contractor performance, and
handling changing requirements and customer needs that will also be
critical factors to the success of their migration efforts.
Sources: FCC officials and documentation.
[End of table]
Department of Justice:
Project details:
Unified Financial Management System;
Planned software solution: CGI Federal Momentum Financials;
DOJ‘s total estimated life cycle cost from 2003 to 2021: $1.1 billion;
Users: Agencywide 35,000 users at full deployment.
Source: DOJ.
DOJ is configuring its Unified Financial Management System (UFMS) to
improve financial management and procurement operations across DOJ.
UFMS is planned to replace six core financial management systems and
multiple procurement systems currently operating across DOJ with an
integrated COTS solution. According to officials, UFMS should allow
DOJ to streamline and standardize business processes and procedures
across all of its components, providing secure, accurate, timely, and
useful financial data to financial and program managers across the
department, and produce component-and department-level financial
statements. In addition, the system is intended to assist DOJ by
improving financial management performance and to aid departmental
components in addressing the material weaknesses and nonconformances
in internal controls, accounting standards, and systems security
identified by DOJ's Office of Inspector General. Finally, the system
is intended to provide procurement functionality to streamline
business processes, provide consolidated management information, and
provide the capability to meet all mandatory requirements of the
Federal Acquisition Regulation and the Justice Acquisition Regulations.
In 2003, DOJ began efforts to identify its new core financial system
needs and took steps to determine what software and services could be
provided by private software vendors and other external providers.
Figure 3 and table 9 summarize the key migration and modernization
activities taken by DOJ to identify and deploy a core financial system
solution.
Figure 3: Timeline of DOJ's Key Migration and Modernization Activities:
[Refer to PDF for image: timeline]
February 2003:
Solicitation for software.
May 2003:
Initial alternatives analysis.
March 2004:
Software contract award.
March 2004:
FMLOB initiative launched.
May 2005:
Solicitation for integrator.
December 2005:
Integrator selected.
June 2006:
Independent verification and validation contractor selected.
January 2009:
Drug Enforcement Administration deployment.
September 2013:
Final agency deployment.
Sources: DOJ officials and documentation.
[End of figure]
Table 9: DOJ's Key Migration and Modernization Activities:
Key activities: Identify need for new system;
Description: In 2003, the vendor announced plans to stop supporting
FFS, which required DOJ to determine if it would maintain the system
itself or replace the system. In addition, DOJ determined that it
wanted a single, unified financial management system across the
department to streamline interagency business processes and reporting.
By consolidating multiple legacy software systems into one core
financial system, it hoped to reduce auditor-reported internal control
weaknesses.
Key activities: Perform alternatives analysis;
Description: In the 2003 alternatives analysis, three alternatives
were considered as follows (with estimated costs):
* Status quo ($532.4 million);
* Cross-servicing with another agency ($606.8 million);
* COTS implementation ($609.7 million);
The COTS implementation solution was chosen based on best overall
value. The COTS option scored significantly higher on the qualitative
analysis than the other two options. According to DOJ officials, this
option was chosen to significantly improve financial management
processes and procedures and reduce the cost of operations and
maintenance for financial management across the department.
Key activities: Solicitations and contract awards for software and
determined services;
Description: DOJ first held a competition for software in 2003;
it received offers from four commercial vendors and selected Momentum.
In 2005, DOJ held another public-private competition for integration
and implementation services. It received offers from two commercial
vendors. In a separate selection process, another contractor was
chosen to perform independent verification and validation services.
While moving through the modernization decision process, DOJ
considered outsourcing services. However, DOJ decided it would be most
advantageous to pursue standardizing and unifying its financial
management system in-house prior to pursuing outsourcing options. DOJ
cited concerns as to whether external providers could handle its
transaction capacity and classified data needs, and decided to
consider becoming an SSP after its implementation is completed. As a
result, no competitions were conducted for IT hosting, application
management, and transaction processing.
Key activities: Deployment status and reported challenges;
Description: DOJ's implementation approach is intended to ensure
standardization and complement the Momentum base product, which allows
for standard processes, data, and reporting capabilities. DOJ will
utilize a shared configuration of Momentum throughout the department.
This agency configuration has only been fully deployed at one
component, the Drug Enforcement Administration, and was partially
deployed at four additional components. The deployment timeline was
adjusted because of funding challenges and refinement of the
implementation strategy to include updated technology. Staged
deployment is planned to continue at remaining bureaus through the end
of 2013. DOJ officials cited challenges associated with storage of
secure data, large capacity, and resistance to change in connection
with their UFMS modernization efforts.
Sources: DOJ officials and documentation.
[End of table]
Office of Personnel Management:
Project details:
Consolidated Business Information System;
Planned software solution: Oracle v12;
IT hosting and application management: Accenture;
OPM‘s total estimated life cycle cost from 2008 to 2018: $135.4
million;
Users: Agencywide 1,500 users at full deployment.
Source: OPM.
OPM is taking steps to modernize its core financial systems using a
solution based on Oracle COTS software that is intended to provide
agencywide online, real-time transaction capability and access. The
Consolidated Business Information System (CBIS) is intended to
consolidate and eliminate multiple systems currently used by OPM with
the initial deployment October 1, 2009, replacing the Government
Financial Information System (GFIS). GFIS included CGI Momentum, which
is used for salaries and expenses, and a revolving fund. OPM deployed
phase I, release 1 of CBIS to replace Momentum and, according to
officials, plans to launch phase II to incorporate trust fund
accounting are currently under review by OPM leadership. Under CBIS,
OPM also replaced its contract administration software, Procurement
Desktop, with the Compusearch PRISM solution during phase I, release 1.
In 2005, OPM began efforts to identify its core financial system needs
and took steps to determine what software and services could be
provided by federal SSPs, private software vendors, and other external
providers. Figure 4 and table 10 summarizes the key actions taken and
challenges encountered by OPM in identifying a core financial system
solution.
Figure 4: Timeline of OPM's Key Migration and Modernization Activities:
[Refer to PDF for image: timeline]
March 2004:
FMLOB initiative launched.
June 2005:
First alternatives analysis.
September 2005:
IT host (BPD) selected.
January 2007:
Revised alternatives analysis.
July 2007:
Request for information.
November 2007:
Solicitation of integrator and host.
August 2008:
Integrator/host selected.
October 2009:
Phase I deployed.
January 2011: Phase II deployment.
Sources: OPM officials and documentation.
[End of figure]
Table 10: OPM's Key Migration and Modernization Activities:
Key activities: Identified need for new system;
Description: In 2003, the vendor announced plans to stop supporting
FFS, OPM's system for its trust funds at the time, requiring OPM to
determine if it would maintain the system itself or replace the
system. OPM decided to use this as an opportunity to improve and
update agency business processes to current standards. In addition, it
decided to reduce cuff or feeder systems and move to real-time
transaction updates as opposed to batch updates.
Key activities: Performed first alternatives analysis;
Description: In the 2005 alternatives analysis, OPM considered the
following three alternatives (estimated costs for the 2005 to 2014
time frame):
* In-house upgrade to CGI-AMS's Momentum 6.x ($73.93 million);
* Cross-service upgrade to CGI-AMS's Momentum 6.x ($55.95 million);
* Cross-service migration to Oracle Federal Financials ($52.90
million);
OPM noted that costs did not include amounts for data cleanup or
business process reengineering. OPM chose the cross-service migration
to Oracle Federal Financials because of its strong financial benefits,
integrated core accounting with internal and external feeder systems,
and real-time ad hoc reporting features.
OPM entered into an interagency agreement with the Department of the
Treasury's Bureau of Public Debt (BPD) in 2005 for IT hosting and
other services but, according to OPM officials, mutually agreed to
discontinue the interagency agreement based on BPD's inability to meet
OPM's reimbursable business needs.
Key activities: Performed second alternatives analysis;
Description: In 2007, OPM performed a second alternatives analysis
with three other options considered (estimated risk-adjusted life
cycle costs):
* Cross-service integration/migration to IT hosting vendor ($69.4
million);
* Cross-service for IT hosting service ($53.2 million);
* Cross-service migration with federal SSP ($50.5 million);
OPM chose cross-service integration/migration to IT hosting vendor
because it enabled the agency to extricate itself from the business of
implementing and managing financial systems, provided significantly
improved processes, and reduced operations and maintenance costs. OPM
decided to keep transaction processing in-house for control and
staffing purposes.
Key activities: Solicitations and contract awards for software and
determined services;
Description: In 2005, an interagency agreement provided that BPD would
perform IT hosting and other services. Then in 2007, OPM conducted a
combined public-private competition for software, integration, and
hosting services. One federal and five commercial providers submitted
offers. From these, three commercial providers were determined to be
in the competitive range and provided demonstrations to OPM. During
the modernization process, OPM considered outsourcing services and
determined that it was only advantageous to outsource IT hosting and
application management. Unique needs, loss of control, and staffing
concerns were the main disadvantages cited to migrating transaction
processing.
Key activities: Deployment status and reported challenges;
Description: Phase I deployment occurred in October 2009 for key
accounting transactions including salary, expense, and revolving fund
transactions. In addition, the results of mock conversions identified
some enhancements needed to specific interfaces and customizations.
The systems integrator/host demonstrated that CGAC elements are
included in the Oracle instance used by OPM. OPM has unique trust fund
requirements that may require review and approval from OMB to
supplement the standard Oracle configuration upon initiation of phase
II of CBIS. Phase II deployment planned for fiscal year 2011 was
delayed 1 year because of problems with the RetireEZ system
development. OPM originally considered a phase III of CBIS. However,
an official assessment or approval for a phase III of CBIS has not yet
occurred. According to OPM officials, leadership changes at pivotal
points in the modernization process have been problematic for OPM.
Sources: OPM officials and documentation.
[End of table]
[End of section]
Appendix IV: Key Characteristics of Selected External Providers:
OMB designated four federal entities--(1) the National Business Center
of the Department of the Interior; (2) the Administrative Resource
Center, Bureau of Public Debt, of the Department of the Treasury; (3)
the Federal Integrated Solutions Center of the General Services
Administration; and (4) the Enterprise Services Center of the
Department of Transportation--as SSPs for federal financial
management. All four SSPs offer IT hosting, application management,
transaction processing, and system implementation services or have a
structure for providing all four of these services. Although the SSPs
offer the four basic services mentioned above, the specific services
provided may vary based on the requirements, size, and complexity of
the client agency. SSPs typically offer a range of the following four
basic services:
* IT hosting services may include systems management and monitoring,
disaster recovery, help desk, network security compliance and
controls, and continuity of operations plans and testing.
* Application management services may include system/software
administration, application configuration, application setup and
security, user access and maintenance, configuration management, and
coordination of application upgrades and fixes.
* Transaction processing services may include account maintenance and
reconciliation, financial reporting, regulatory and managerial
reporting, standard general ledger reconciliation, payment processing,
billings and collections, accounts payable, accounts receivable,
travel payments, relocation payments, budgetary transactions, and
fixed asset accounting.
* System implementation services may include implementation and
integration support services, requirements analysis, system
conversions, project management, systems testing, change management,
and training.
To help monitor and measure the performance of selected external
providers in connection with the financial management line of business
(FMLOB) services they provide, SSPs and agencies rely on service-level
agreements, which are binding agreements that define the specific
level and quality of the operational and maintenance services that an
external provider will provide to a customer agency and outline
penalties and incentives that may arise from not performing or
exceeding the expected service levels. The inclusion of appropriate
and clearly defined performance measures and metrics in service-level
agreements is important for ensuring the usefulness of this tool.
OMB's FMLOB Migration Planning Guidance defines the four service
categories and related performance metrics. Although specific metrics
included in service-level agreements are negotiated and may vary,
examples of performance metrics related to the services described
above include the following:
(1) For IT hosting, system availability; average total response time
for system components; resolution time for critical, high, medium, and
low incidents; number of security incidents in the past year; and file
recovery time.
(2) For application management, average time to restore mission-
critical application functionality; unplanned downtime; percentage of
on-time upgrades; and average retrieval time for archived data.
(3) For transaction processing, invoice process cycle time; percentage
of financial transactions with errors; average business days to close
the books; and number of business days to report after closing books.
(4) For system implementation services, percentage of standard
financial management system requirements fulfilled; percentage of
satisfactory postimplementation survey responses; and reduction in
help desk volume.
SSPs are also required to operate and maintain a COTS software package
in compliance with FSIO core financial system requirements. As shown
in table 11, three of the four SSPs use the Oracle software package,
while two of the four use a Momentum software package. One SSP offers
SAP software. In addition to the software offered by each SSP, table
11 also provides an overview of key characteristics of the four OMB-
designated federal SSPs including detailed information regarding the
number of full-time equivalent staff dedicated to providing financial
management services and the clients they serve. The selected
characteristics provide context for the financial management systems-
related operations of the four federal SSPs.
Table 11: Key Characteristics of OMB-Designated Federal Shared Service
Providers:
Parent organization;
Enterprise Services Center: Department of Transportation;
National Business Center: Department of the Interior;
Administrative Resource Center: Bureau of the Public Debt, Department
of the Treasury;
Federal Integrated Solutions Center: General Services Administration.
Total number of client agencies[A];
Enterprise Services Center: 7;
National Business Center: 26;
Administrative Resource Center: 18;
Federal Integrated Solutions Center: 46.
Number of CFO Act agency clients;
Enterprise Services Center: 1;
National Business Center: 3;
Administrative Resource Center: 2;
Federal Integrated Solutions Center: 1.
Number of non-CFO Act agency clients;
Enterprise Services Center: 6;
National Business Center: 23;
Administrative Resource Center: 16;
Federal Integrated Solutions Center: 45.
Funding structure[B];
Enterprise Services Center: Franchise fund;
National Business Center: Working capital fund;
Administrative Resource Center: Franchise fund;
Federal Integrated Solutions Center: Working capital fund.
Full-time equivalents dedicated to financial management system
activities;
Enterprise Services Center: 440;
National Business Center: 267;
Administrative Resource Center: 170;
Federal Integrated Solutions Center: 22.
Software offered[C];
Enterprise Services Center: Oracle;
National Business Center: Momentum, SAP, Oracle;
Administrative Resource Center: Oracle;
Federal Integrated Solutions Center: Momentum.
Instances[D];
Enterprise Services Center: One instance;
National Business Center: For Momentum, four separate instances;
for SAP, one instance;
and for Oracle, two instances (13 of 14 clients are on one instance);
Administrative Resource Center: Three instances (16 of 18 clients are
on one instance);
Federal Integrated Solutions Center: One instance.
Source: GAO analysis of SSP data.
[A] The total numbers of clients listed for each SSP were derived by
counting each overall agency as one client (i.e., multiple agency
components were counted as one agency).
[B] Franchise funds and working capital funds are types of
intragovernmental revolving funds that operate as government-run, self-
supporting, businesslike enterprises to provide a variety of common
administrative services (e.g., information technology support and
transaction processing) to other federal agencies on a fee-for-service
basis. These funds are required to recover the full costs of services
provided from the agencies they serve and often operate on a break-
even basis over time.
[C] According to National Business Center (NBC) officials, NBC is
retiring its legacy system--the Federal Financial System (FFS). NBC no
longer offers FFS to new clients as a software solution, and existing
clients using FFS will migrate to other solutions.
[D] According to federal SSP officials, an instance is a uniquely
configured and separate installation of a software application.
[End of table]
[End of section]
Appendix V: Reported Benefits and Challenges Related to Agency
Migration and Modernization Efforts:
This appendix includes additional details on the key benefits and
challenges of agencies migrating their core financial systems to
external providers for IT hosting, application management, and
transaction processing. The potential benefits and challenges include
those reported by the CFO Act agencies in response to our survey. The
surveys were conducted prior to the issuance of OMB's new guidance.
Accordingly, the effect, if any, of the new policy is not reflected in
agencies' responses. Non-CFO Act agencies' use of external providers
also highlights potential benefits and challenges. While external
providers cited efforts to address agency concerns, they also
highlighted their own concerns and challenges with agency migrations.
We also noted other migration challenges related to OMB's guidance on
competitions.
Potential Benefits of Agency Migrations Reported by CFO Act Agencies:
Based on survey responses concerning the potential advantages and
disadvantages of migrating core financial system support services, 16
of the 24 (67 percent) CFO Act agencies believe that the benefits of
migrating IT hosting greatly or somewhat outweighed their concerns,
while 14 of 24 (58 percent) reported similar perceptions concerning
the benefits of migrating application management services to external
providers. In comparison, as shown in table 12, the responses
indicated the perception that potential disadvantages outweigh any
potential advantages of migrating transaction processing services to
an external provider for 10 of the 24 (42 percent) CFO Act agencies.
Table 12: CFO Act Agency Perspectives on Migrating and Modernizing
Core Financial Systems:
Type of service: IT hosting;
Advantages greatly outweigh disadvantages: 9;
Advantages somewhat outweigh disadvantages: 7;
Advantages equal to disadvantages: 2;
Disadvantages somewhat outweigh advantages: 1;
Disadvantages greatly outweigh advantages: 3;
Don't know: 2.
Type of service: Application management;
Advantages greatly outweigh disadvantages: 8;
Advantages somewhat outweigh disadvantages: 6;
Advantages equal to disadvantages: 1;
Disadvantages somewhat outweigh advantages: 3;
Disadvantages greatly outweigh advantages: 5;
Don't know: 1.
Type of service: Transaction processing;
Advantages greatly outweigh disadvantages: 1;
Advantages somewhat outweigh disadvantages: 1;
Advantages equal to disadvantages: 3;
Disadvantages somewhat outweigh advantages: 5;
Disadvantages greatly outweigh advantages: 10;
Don't know: 4.
Source: GAO analysis of CFO Act agencies' survey responses.
[End of table]
According to CFO Act agency responses to our survey, some of the
potential benefits of migrating the IT hosting, application
management, and transaction processing services for agencies' core
financial systems to external providers include the following:
* Potential cost savings through shared resources. For example, the
Nuclear Regulatory Commission cited cost reductions in equipment
purchase and maintenance costs, as well as the number of staff needed
to maintain the application and process transactions.
* Allowing agency to focus on mission. For example, OPM stated that
migrating its financial management system to an IT hosting provider
enables OPM to extricate itself from the business of managing
financial systems, transfers some of the risk associated with
implementing and maintaining the system, and allows the CFO
organization to concentrate on its goal of providing strategic
direction based on financial data.
* Greater efficiency and reliability through experienced staff. For
example, the Department of Transportation stated in its survey
response that benefits include having a provider that has experience
with the specific equipment, operations, and maintenance required by
the hosted application.
Reported Potential Benefits on the Use of Federal SSPs by Non-CFO Act
Agencies:
According to Small Agency Council officials, small agencies are more
likely to migrate to external providers because they do not have
sufficient resources to support infrastructures required to operate
and maintain core financial systems. For example, according to one
federal SSP, many of its clients consist of small commissions, such as
the Election Assistance Commission, that rely on the "end-to-end"
services the SSP provides. Further, according to officials at the four
federal SSPs, their efforts toward acquiring additional clients are
primarily focused on small to midsized agencies that may lack
sufficient resources or expertise to meet their core financial system
needs. The following summarizes the key reported benefits for non-CFO
Act agencies.
* Potential cost savings through shared resources. Based on
information provided by SSP officials, their clients share the same
instance of core financial software hosted and maintained by SSPs with
eight or more other clients, on average.[Footnote 72] Federal SSP
officials stated that the use of shared instances and other tools,
such as standard interfaces that facilitate the exchange of data
between core financial systems and other systems, enables agencies to
realize significant cost savings by spreading IT hosting, maintenance,
and other related costs among multiple clients.
* Greater efficiency and reliability. According to FCC officials, FCC
is currently modernizing its core financial system and is migrating to
a commercial provider to take advantage of the provider's expertise in
acquiring and maintaining the latest technology to meet FCC's needs.
Further, since federal SSPs process transactions for multiple
agencies, they are able to devote more resources toward processing
complex transactions than smaller agencies that may not individually
be required to handle such transactions on a regular basis. For
example, according to one SSP, although many agencies do not process a
large number of transactions involving employees' permanent changes in
duty stations, the SSP maintains the expertise and capability to
efficiently process these complex transactions on a regular basis
because of the volume it is required to handle on behalf of all its
clients.
* Enhanced compliance with federal standards. External providers are
working to incorporate changes in software to facilitate agencies'
efforts to comply with new standards and requirements, such as the
Common Governmentwide Accounting Classification (CGAC) and other
recently issued standard business processes.[Footnote 73] According to
a federal SSP official, having a limited number of providers
incorporate these changes into a common solution shared by multiple
agencies, rather than each agency spending valuable resources to
accomplish the same objective on its own, represents a significant
advantage for the agencies relying on the shared solutions the SSP
provides.
Reported Challenges Related to Agency Modernization and Migration
Efforts:
CFO Act agencies highlighted system implementation disciplined
processes, along with reengineering their business processes, among
the greatest modernization challenges they face. Additional
information on these and other reported key challenges affecting CFO
Act agency modernization and migration efforts can be found in table
13.
Table 13: Reported Key Challenges Affecting CFO Act Agency Migration
and Modernization Efforts:
Type of challenge: Reengineering business processes to take most
advantage of available resources and technologies;
Number of responses[A]: 18.
Type of challenge: Reengineering business processes to conform to
newly issued Financial Management Systems Standard Business Processes
for U.S. Government Agencies, issued by FSIO and the CGAC structure;
Number of responses[A]: 17.
Type of challenge: System implementation activities related to
configuration and interfaces;
Number of responses[A]: 16.
Type of challenge: System implementation activities related to testing;
Number of responses[A]: 16.
Type of challenge: Obtaining/maintaining adequate project team
resources with appropriate expertise and leadership;
Number of responses[A]: 16.
Type of challenge: Addressing existing financial management system and
other related deficiencies;
Number of responses[A]: 15.
Type of challenge: System implementation activities related to data
conversion;
Number of responses[A]: 15.
Type of challenge: System implementation activities related to
requirements management;
Number of responses[A]: 13.
Type of challenge: System implementation activities related to risk
management;
Number of responses[A]: 12.
Type of challenge: Obtaining adequate funding;
Number of responses[A]: 12.
Type of challenge: Identifying external providers with the ability to
meet agency requirements;
Number of responses[A]: 12.
Type of challenge: Adhering to federal acquisition requirements and
processes;
Number of responses[A]: 11.
Type of challenge: Managing, evaluating, and monitoring external
provider performance throughout period of performance;
Number of responses[A]: 10.
Type of challenge: System implementation activities related to project
management;
Number of responses[A]: 10.
Type of challenge: Justifying migration of core financial system to
external providers as better value than existing in-house services or
other alternatives;
Number of responses[A]: 9.
Type of challenge: Obtaining information on the performance of
external providers (federal SSPs or other commercial vendors that
provide FMLOB migration services) to select best provider;
Number of responses[A]: 9.
Type of challenge: Usefulness of FMLOB guidance and tools;
Number of responses[A]: 8.
Type of challenge: Obtaining commitment from top leadership;
Number of responses[A]: 7.
Source: GAO analysis of CFO Act agencies' survey responses.
[A] Number of 24 CFO Act agency survey respondents indicating that the
specified challenges were a great or moderate challenge to their
agency's migration efforts excluding "Don't Know" and "N/A" responses.
[End of table]
The following summarizes key examples of CFO Act agency survey and
case study results related to challenges associated with migrating IT
hosting, application management, and transaction processing to
external providers.
* Department of Health and Human Services officials expressed concerns
about the loss of control and risks associated with allowing another
entity to manage or host the infrastructure on which an agency's
critical data reside, which could become impaired or compromised.
* Agencies cited concerns with the loss of flexibility associated with
using the same setup and configurations across agencies in order to
achieve efficiencies and cost savings governmentwide. In addition,
agencies stated that they were reluctant to forgo their established
business processes, noting that they would lose the benefits
associated with their unique business processes and the technical
expertise of internal staff who support and use them. For example, the
Department of Energy cited concerns with losing agency capabilities
and subject matter expertise and becoming totally reliant on the
service provider.
* Case study agency officials expressed concerns that although COTS
products help enable agencies to use common platforms to modernize
their core financial systems, the products need additional
enhancements to help meet common agency needs. For example, these
officials identified a need for (1) enhancements that effectively
address new governmentwide CGAC and FSIO standard business
processes[Footnote 74] and agency budgetary reporting needs and (2)
common interfaces that facilitate the exchange of financial data
between agency core financial systems and governmentwide systems, such
as the FedDebt system. Further, recognizing that unreconciled
intragovernmental information continues to impede the preparation of
the federal government financial statements each year,[Footnote 75]
they stated that intragovernmental transaction processing should be
further clarified.[Footnote 76]
* Case study agency officials stated that their agencies each worked
individually with selected COTS vendors to produce enhanced solutions
to meet their needs. For example, the case study agencies noted that
they have had to develop interfaces to existing solutions such as
payroll, travel, reporting, and FedDebt that should already be part of
a standard configuration. Agency officials were unable to specify the
portions of their modernization costs that are specifically
attributable to meeting software and configuration needs they have in
common with other agencies.
Reported Challenges Related to OMB's Competition Framework:
Although external providers acknowledged agency migration concerns and
stated that they were taking steps to address them, they cited
additional challenges affecting their migration-related efforts. For
example, external provider officials stated that overcoming agencies'
resistance to adapting their business processes to those used by
external providers is a significant challenge. Further, according to
one SSP official, although OMB had a goal of migrating agencies to a
limited number of stable and high-performing providers, it lacked a
clear mechanism for enforcing agencies, especially large agencies,
migrate to an external provider in a manner consistent with the goals
of the FMLOB initiative. Specifically, based on survey responses, CFO
Act agencies reported that they were relying, or planning to rely, on
a total of 6 different external providers for IT hosting and
application management services supporting their planned systems and a
total of 12 different providers to provide these services for their
current systems.
We also noted other challenges related to OMB's Competition Framework
that affect agency and external provider migration efforts. OMB's
Competition Framework, as well as revisions made to OMB Circular No. A-
127, require agencies to conduct competitions among external providers
to help evaluate different options available for meeting their needs.
The following is a summary of these reported challenges.
* According to one federal SSP, some agency solicitations for shared
services consist of lengthy, detailed requirements and other
information that can sometimes result in unnecessarily expensive and
time-consuming efforts to review and provide required responses.
Federal SSP officials noted that the federal government may spend a
significant amount of federal funds on demonstrations, especially in a
situation where all four SSPs respond to a request for a demonstration
from a single agency. Moreover, officials at SSPs also expressed
concerns about the significant challenges they face in competing with
commercial vendors and acquiring additional clients because of the
limited resources they can devote to such activities.
* Federal SSP officials stated that full cost recovery requirements
associated with being a franchise fund or working capital fund place
federal SSPs at an inherent disadvantage when competing against
commercial vendors under OMB's Competition Framework.[Footnote 77]
According to federal SSP officials, they may not bid on agency
solicitations that would involve significant start-up costs to meet an
agency's unique needs if doing so would not also benefit other clients
they serve that would also bear a portion of these costs. These
officials also stated that commercial vendors have more flexibility to
price their bids aggressively in early years to acquire additional
business and rely on efforts to recoup their costs in subsequent
years. External providers also reported seeing an increase in
agencies' desire to use firm-fixed price contracts and include
performance incentives and disincentives in service-level agreements
which, according to SSP officials, are difficult for them to
accommodate because of full cost recovery requirements.
* According to DOJ officials, DOJ did not conduct a competition
because the department determined that federal SSPs could not
accommodate its capacity, security requirements, and unique accounting
needs based on limited information received about SSP capabilities and
costs during preliminary planning discussions related to its financial
management system modernization effort. However, DOJ officials
acknowledged that they did not receive sufficient information to fully
evaluate the capabilities of the federal SSPs and stated that they
were not sure whether all aspects of their preliminary determination
would hold true if more research were conducted and SSP capabilities
had improved.
[End of section]
Appendix VI: 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:
In addition to the contacts named above, individuals who made major
contributions to this report were Chris Martin, Senior-Level
Technologist; Michael LaForge, Assistant Director; Jehan Abdel-Gawad;
Lauren Catchpole; Francine DelVecchio; F. Abe Dymond; Latasha Freeman;
Wilfred Holloway; Jim Kernen; Theresa Patrizio; Carl Ramirez; Jerome
Sandau; Pamela Valentine; and Carolyn Voltz.
[End of section]
Footnotes:
[1] Under the Federal Financial Management Improvement Act of 1996,
section 806(5), "financial system" includes an information system
comprising one or more applications that is used to (1) collect,
process, maintain, transmit, or report data about financial events;
(2) support financial planning or budgeting activities; (3) accumulate
and report cost information; or (4) support the preparation of
financial statements. OMB Circular No. A-127, Financial Management
Systems (Washington, D.C., Jan. 9, 2009) generally refers to financial
systems as "core financial systems" and provides an additional
description of their use and the functions they may perform, such as
general ledger management, funds management, payment management,
receivable management, and cost management.
[2] According to OMB's FMLOB Migration Planning Guidance, hosting is
defined as services that house, serve, and maintain files, software
applications, and databases. Application management is defined as
services to maintain, enhance, and manage all types of software
applications, including maintenance, upgrades, and performance
analysis.
[3] OMB Circular No. A-127 states that if agencies cannot immediately
migrate to an external provider (i.e., OMB-designated federal shared
service providers and commercial vendors), they should take
incremental steps by moving their hosting or application management
support to a provider. Prior guidance contained in OMB's Competition
Framework for FMLOB Migrations issued in May 2006 required agencies to
consider, at a minimum, pursuing hosting and application management
shared services.
[4] 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).
[5] 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.
[6] GAO, Financial Management Systems: OMB's Financial Management Line
of Business Initiative Continues but Future Success Remains Uncertain,
[hyperlink, http://www.gao.gov/products/GAO-09-328] (Washington, D.C.:
May 7, 2009).
[7] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[8] OMB Memorandum M-10-26, Immediate Review of Financial Systems IT
Projects (Washington, D.C., June 28, 2010).
[9] CFOs were established under 31 U.S.C. § 901(b) for 24 specific
agencies that are subject to the CFO Act, as amended: the Departments
of Agriculture (USDA), Commerce, Defense (DOD), Education, Energy,
Health and Human Services, Homeland Security, Housing and Urban
Development, the Interior, Justice (DOJ), Labor, State,
Transportation, the Treasury, and Veterans Affairs; Environmental
Protection Agency; National Aeronautics and Space Administration;
Agency for International Development; General Services Administration
(GSA); National Science Foundation; Nuclear Regulatory Commission;
Office of Personnel Management (OPM); Small Business Administration;
and Social Security Administration.
[10] Case study agencies were selected to provide a mix of large and
small agencies using different software solutions and having different
past experiences concerning the use of external providers to support
their core financial systems. Case studies were performed at three CFO
Act agencies (DOJ, USDA, and OPM) and one non-CFO Act agency (the
Federal Communications Commission).
[11] The Small Agency Council is a voluntary management association
representing about 80 small agencies with generally fewer than 500
employees. According to the council, its efforts are intended to help
federal policy oversight agencies develop management policies
affecting small agencies and exchange approaches for improving
management and productivity in small agencies to strengthen their
internal management practices.
[12] The four OMB-designated federal SSPs are the Department of the
Treasury's Bureau of Public Debt's Administrative Resource Center, the
Department of the Interior's National Business Center, the Department
of Transportation's Enterprise Services Center, and GSA's Federal
Integrated Solutions Center.
[13] Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990).
[14] Pub. L. No. 104-208, div. A., § 101(f), title VIII, 110 Stat.
3009, 3009-389 (Sept. 30, 1996).
[15] 40 U.S.C. §§ 11101-11704.
[16] See our audit report on the federal government's 2009 and 2008
consolidated financial statements that was incorporated into the 2009
Financial Report of the United States Government published by the
Department of the Treasury (Feb. 26, 2010). For fiscal years 2009 and
2008, auditors for 10 and 14 of the 24 CFO Act agencies, respectively,
reported that the agencies' financial management systems did not
substantially comply with one or more of the three FFMIA requirements.
[17] OMB Memorandum, Update on the Financial Management Line of
Business and the Financial Systems Integration Office (Washington,
D.C., Dec. 16, 2005).
[18] OMB Memorandum, Competition Framework for Financial Management
Lines of Business Migrations (Washington, D.C., May 22, 2006).
[19] OMB Circular No. A-127 prescribes policies and standards for
executive departments and agencies to follow concerning their
financial management systems. It also states that if agencies cannot
migrate to a federal SSP or commercial provider immediately, then they
should take incremental steps by moving their hosting or application
management support to a provider. An agency is required to conduct
public-private competitions (i.e., between federal SSPs and commercial
vendors) in connection with its modernization efforts and may rely on
its in-house operations if the agency demonstrates to OMB that its
internal operations represent a best value and lower-risk alternative.
[20] 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.
[21] OMB Memorandum, Update on the Financial Systems Integration
Office (Washington, D.C., Mar. 16, 2010).
[22] OMB Memorandum M-10-26, Immediate Review of Financial Systems IT
Projects.
[23] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[24] Table 1 includes the 23 civilian CFO Act agencies only. Because
DOD officials did not provide comprehensive information concerning
DOD's current core financial systems, we were unable to include DOD
systems.
[25] See appendix II for more information concerning DOD's survey
responses.
[26] An ERP system is an automated system using commercial off-the-
shelf software and consisting of multiple, integrated functional
modules that perform a variety of business-related tasks, such as
accounts payable, general ledger accounting, and supply chain
management.
[27] LMP is an ERP system intended to transform the Army's logistics
operations in six core processes: order fulfillment, demand and supply
planning, procurement, asset management, materiel maintenance, and
financial management. If effectively implemented, LMP is expected to
provide the Army benefits associated with commercial best practices,
such as inventory reduction, improved repair cycle time, and increased
response time. Additionally, LMP is intended to improve supply and
demand forecast planning and maintenance workload planning, and
provide a single source of data for decision making. Through 2009, the
Army has reportedly expended about $1.1 billion to implement LMP, and
estimates a total life cycle cost in excess of $2.6 billion to procure
and operate the system. When LMP is fully implemented, it is expected
to include approximately 21,000 users at 104 locations worldwide, and
it will be used to manage more than $40 billion worth of goods and
services, such as inventory managed at the national level and repairs
at depot facilities.
[28] GAO, Defense Logistics: Actions Needed to Improve Implementation
of the Army Logistics Modernization Program, [hyperlink,
http://www.gao.gov/products/GAO-10-461] (Washington, D.C.: Apr. 30,
2010).
[29] Two agencies reported plans to migrate their IT hosting or
application management support services supporting two current core
financial systems but had not yet identified a specific external
provider, in part, because they were still evaluating their needs and
the services that providers offer.
[30] OMB Memorandum, The Office of Financial Innovation and
Transformation (Washington, D.C., Mar. 30, 2010).
[31] Although exact definitions vary, cloud computing can, at a high
level, be described as a form of computing where users have access to
scalable, on-demand IT capabilities that are provided through Internet-
based technologies.
[32] GAO, Information Security: Federal Guidance Needed to Address
Control Issues with Implementing Cloud Computing, [hyperlink,
http://www.gao.gov/products/GAO-10-513] (Washington, D.C.: May 27,
2010).
[33] Disciplined processes represent best practices in systems
development, acquisition, 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.
[34] According to OMB's FMLOB Migration Planning Guidance, a service-
level agreement is a mutually binding agreement negotiated between a
service provider and a customer that defines the specific level and
quality of the operational and maintenance services that an external
provider will provide to a customer agency and outlines penalties and
incentives that may arise from not performing or exceeding the
expected service levels. The inclusion of appropriate and clearly
defined performance measures and metrics in service-level agreements
is important for ensuring the usefulness of this tool. See app. IV for
additional information on selected metrics used to monitor and measure
the performance of selected external providers in connection with the
FMLOB services they provide.
[35] In 2002, OMB identified 25 initiatives related, in part, to
eliminating redundant, nonintegrated business operations and systems
covering a wide spectrum of government, including the E-Payroll
initiative, which involved the migration of payroll functions
performed across 26 federal agencies to four payroll providers
selected to furnish payroll services for the executive branch.
[36] According to HRLOB migration guidance, the vision of the HRLOB
initiative is to provide governmentwide, modern, cost-effective,
standardized and interoperable human resource solutions providing
common core functionality to support the strategic management of human
capital and addressing duplicative and redundant human resources
systems and processes across the federal government. The HRLOB
governance structure establishes the oversight and development of
common solution(s) for the transformation of the federal government to
a standardized solution or set of solutions whereby customer agencies
will have the option to choose from a public or private shared service
center for their human resources functions and to facilitate a
seamless integration of human resources solutions. According to OMB,
the E-Payroll initiative benefits agencies by permitting them to focus
on mission-related activities rather than on administrative payroll
functions and helps to reduce payroll processing costs through
economies of scale, avoiding the cost of duplicative capital system
modernization activities, standardizing and consolidating
governmentwide federal civilian payroll services and processes by
simplifying and standardizing related policies and procedures and
improving integration of payroll, human resources, and finance
functions.
[37] According to OMB Memorandum, Competition Framework for Human
Resources Management Line of Business Migrations (Washington, D.C.,
May 18, 2007), agency HRLOB migrations shall result in the selection
of an approved public or private sector shared service center with a
demonstrated ability to leverage technology, expertise and other
resources to achieve best value for the taxpayer. According to HRLOB
Migration Planning Guidance, a panel composed of representatives from
the HRLOB Multi-Agency Executive Strategy Committee reviewed and
qualified the current shared service centers consisting of five public
and four private sector shared service centers. In addition, OMB
Memorandum, Consolidating and Standardizing Federal Civilian Payroll
Processing (Washington, D.C., Jan. 10, 2003) provided E-Payroll
migration guidance requiring executive branch agencies to migrate to
two payroll processing partnerships (one partnership consisting of the
Defense Finance and Accounting Service and GSA and the other
consisting of USDA's National Finance Center and the Department of the
Interior's National Business Center).
[38] OMB, Fiscal Year 2010 Report to Congress on the Benefits of the E-
Government Initiatives (Washington, D.C., January 2010). According to
OPM, the final agency migration scheduled under the E-Payroll
initiative was completed in September 2009.
[39] OMB Memorandum, The Office of Financial Innovation and
Transformation.
[40] OMB Memorandum M-10-26, Immediate Review of Financial Systems IT
Projects.
[41] According to OMB, CFO Act agencies are required to halt (1) all
financial system modernization projects with $20 million or more in
planned spending on development or modernization expenses and (2) the
issuance of new task orders for projects identified as high risk by
OMB. According to OMB, such projects include those involving the
deployment of core financial systems and noncore financial systems
deployed in conjunction with other business systems.
[42] OMB may employ flexibility regarding funds control for projects
that have a proven track record of achieving specific milestones
within well-defined segments.
[43] OMB Memorandum, Update on the Financial Systems Integration
Office.
[44] See Institute of Electrical and Electronic Engineers Std. 1362-
1998. The institute is a nonprofit, technical professional association
that develops standards for a broad range of global industries,
including the IT and information assurance industries and is a leading
source for defining best practices.
[45] [hyperlink, http://www.gao.gov/products/GAO-06-184] and
[hyperlink, http://www.gao.gov/products/GAO-09-328].
[46] GAO, Financial Management Systems: Lack of Disciplined Processes
Puts Implementation of HHS' Financial System at Risk, [hyperlink,
http://www.gao.gov/products/GAO-04-1008] (Washington, D.C.: Sept. 23,
2004).
[47] According to 40 U.S.C. § 11315(a), an IT architecture is an
integrated framework for evolving or maintaining existing, and
acquiring new, IT to achieve the agency's strategic and information
resources management goals.
[48] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[49] The Impoundment Control Act of 1974, 2 U.S.C. ch. 17B, prescribes
the authorized purposes and procedures to be followed for impoundments
of budget authority. An impoundment is any action or inaction by an
officer or employee of the federal government that precludes
obligation or expenditure of budget authority.
[50] GAO, Impoundments Resulting from the President's Proposed
Rescissions of October 28, 2005, B-307122 (Washington, D.C.: Mar. 2,
2006).
[51] [hyperlink, http://www.gao.gov/products/GAO-06-184].
[52] According to the Results Act, performance goals associated with
strategic plans should be expressed in an objective, quantifiable, and
measurable form or, if not feasible, described with sufficient
precision and in such terms that would allow for an accurate,
independent determination of performance that meets the described
criteria.
[53] GAO, Managing for Results: Critical Issues for Improving Federal
Agencies' Strategic Plans, [hyperlink,
http://www.gao.gov/products/GAO/GGD-97-180] (Washington, D.C.: Sept.
16, 1997).
[54] GAO, Government Performance: Strategies for Building a Results-
Oriented and Collaborative Culture in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO-09-1011T] (Washington,
D.C.: Sept. 24, 2009).
[55] Specifically, agencies were asked to complete separate
questionnaires for each core financial system. However, agencies with
more than 10 systems were asked to only complete questionnaires on the
10 systems they considered to be their most significant, along with
the rationale they used to determine their relative significance.
[56] This includes one agency, the Department of Defense (DOD), that
returned questionnaires on one currently deployed system and 6 planned
systems. Upon inquiry, DOD officials could not provide sufficient
information concerning the number of DOD's current or planned core
financial systems, but stated that DOD has over 100 current core
financial systems. However, based on other recent work performed
related to DOD enterprise resource planning systems, we determined
that the inclusion of the 7 systems identified provides useful,
relevant data concerning significant core financial system
modernization projects.
[57] Additional information concerning the results of work performed
at case study agencies can be found in appendix III.
[58] For the selected case study agencies, OPM was the only CFO Act
agency that had attempted to migrate to an external provider. USDA and
DOJ do not plan to migrate because they have decided to continue using
existing in-house resources. FCC previously utilized a federal shared
service provider and was in the process of migrating to a commercial
provider.
[59] Department of the Treasury, 2008 Financial Report of the United
States Government (Washington, D.C., Dec. 15, 2008). Agencies selected
for case studies were selected from among those with gross costs, as
reported, in three strata: gross costs of $100 billion or more (USDA),
less than $100 billion but more than $10 billion (DOJ and OPM), and
$10 billion or less (FCC).
[60] The Small Agency Council Finance Committee consists of financial
management officials from small, independent federal agencies that
meet to discuss and address specific items of interest to the
community and coordinate the activities of the agencies of its
members, including those related to consolidation and modernization of
financial systems; improving quality of financial information,
financial data and information standards; internal controls;
legislation affecting financial operations and organizations; and
other financial management matters.
[61] The CFO Council was established by section 302 of the CFO Act to
advise and coordinate the activities of the agencies of its members on
such matters as consolidation and modernization of financial systems,
improved quality of financial information, financial data and
information standards, internal controls, legislation affecting
financial operations and organizations, and any other financial
management matters. See 31 U.S.C. § 901 note.
[62] OMB Memorandum, Update on the Financial Systems Integration
Office and OMB Memorandum, The Office of Financial Innovation and
Transformation.
[63] OMB Memorandum M-10-26, Immediate Review of Financial Systems IT
Projects.
[64] 40 U.S.C. §§ 11101-11704.
[65] Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990).
[66] Pub. L. No. 104-208, div. A., § 101(f), title VIII, 110 Stat.
3009, 3009-389 (Sept. 30, 1996).
[67] OMB Circular No. A-127, Financial Management Systems (Washington,
D.C., Jan. 9, 2009).
[68] OMB Circular No. A-130, Management of Federal Information
Resources (Washington, D.C., Nov. 28, 2000).
[69] According to OMB Circular No. A-127, a core financial system is
an information system that may perform all financial functions
including general ledger management, funds management, payment
management, receivable management, and cost management. The core
financial system is the system of record that maintains all
transactions resulting from financial events and is specifically used
for collecting, processing, maintaining, transmitting, and reporting
data regarding financial events. Other uses include supporting
financial planning and budgeting activities, and preparing financial
statements.
[70] According to OMB Circular No. A-127, an external provider is an
OMB-designated federal SSP or a commercial vendor. Currently, there
are four federal SSPs: the Department of the Interior's National
Business Center, the General Services Administration's Federal
Integrated Solutions Center, the Department of the Treasury's Bureau
of the Public Debt's Administrative Resource Center, and the
Department of Transportation's Enterprise Services Center.
[71] Although OMB Circular No. A-127 does not require agencies to
migrate core financial system transaction processing activities,
external providers offer this service to agencies, along with IT
hosting and application management services.
[72] According to federal SSP officials, an instance is a uniquely
configured and separate installation of a software application.
[73] Financial Systems Integration Office, 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.
[74] Financial Systems Integration Office, Financial Management
Systems Standard Business Processes for U.S. Government Agencies. 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, receivables, reimbursables, and reports management processes.
[75] Specifically, auditors continue to report that the government is
unable to reconcile differences between intragovernmental transactions
reported by purchasing and selling agencies and cited different
formatting of transaction data reported by the purchasing and selling
agencies as a significant contributor to intragovernmental transaction
differences.
[76] In March 2010, the Department of the Treasury announced an
initiative to create a central utility for intragovernmental
transactions and implement business processes that would require
authorization from both parties (receipt and acceptance) to the
transaction prior to the settlement/payment transaction.
[77] Franchise funds and working capital funds are types of
intragovernmental revolving funds that operate as government-run, self-
supporting businesslike enterprises to provide a variety of common
administrative services (e.g., information technology support and
transaction processing) to other federal agencies on a fee-for-service
basis. These funds are required to recover the full costs of providing
services from the agencies they serve and often operate on a break-
even basis over time.
[End of section]
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