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Wednesday, June 30, 2010

Is industry facing a $20B hit?

OMB's freeze on financial management and modernization projects might cost opportunities for contractors

Industry today had a mixed reaction to the Obama administration’s move to halt any project that updates a federal financial management system and to change the features of future projects.

Some companies working on agencies’ financial systems are unsure about how they will get hit by the new directive. At the same time, one small business welcomes the news of smaller projects, instead of the mammoth, built-from-scratch systems. Overall though, everyone’s going to get hit, experts say.

On June 28, Obama administration officials said they were forcing agencies to stop projects to modernize financial management systems, until officials in the Office of Management and Budget review and approve the project. Currently 30 projects are on hold, according OMB. The total cost spent on these projects is anticipated to be $20 billion over the life of these projects, with an additional $3 billion spent annually. Officials also issued a policy to chop large modernization projects into smaller bits, which would keep tighter reins on projects that tend to veer off course.

Several of the large companies that work with the government on financial systems were still trying to find out as much as they can about the new guidance. Several spokesmen said they needed more information about the projects and the project reviews before commenting. Without those details, they couldn’t get a good sense of what’s likely to happen and how the policy would affect their companies, and industry overall.

One expert who works at a major IT company was sure of one thing: This would be a hot topic of conversation in the coming days.

The underlying issue is spending money wisely. Jeffrey Zients, deputy director for management and federal chief performance officer, said the overall effort is getting higher returns for the roughly $80 billion the government spends on information technology.

Zients said he wants to use the private sector’s approach of checking a program frequently to keep things on track.

However, Doug Davidson, publisher of the Federal Financial Management News Web Log, said the small companies will be get hit by OMB’s hold. When the projects stop, the big companies, which are often the prime contractors, have to scale back their work. The companies will reserve their resources for their own employees and let the subcontractors go, he said.

In the end, companies that maintain agencies’ legacy systems will benefit from OMB’s memo, he said. With no new projects, agencies must rely on their current systems. Davidson agreed with OMB’s principle of saving money and reducing the government’s risks. But the consequences of stopping modernization projects can hurt the government more than some projects, especially those that are in the final stages of implementation.

-Mathew Weigelt, FederalComputerWeek.com

FEMA struggles with financial systems controls

The Federal Emergency Management Agency financial management systems continue to have cybersecurity vulnerabilities and lack contingency plans for its databases.

A new report released Monday by the Office of the Inspector General at the Department of Homeland Security (DHS) details FEMA's ongoing problems in securing their systems. Auditor say the agency failed to resolve 22 of the 58 findings, while the other 36 are new weaknesses.

Inspectors also found FEMA was not in compliance with the Federal Financial Management Improvement Act of 1996 (FFMIA). This legislation aims to ensure that agency financial systems provide accurate, reliable and timely information.

The most serious problems are related to controls over security management, access to programs and data, program changes and contingency planning. Inspectors say that together, these deficiencies "limited FEMA's ability to ensure that critical financial and operational data were maintained in such a manner to ensure confidentiality, integrity, and availability."

-Meg Beasley, FederalNewsRadio.com

Monday, June 28, 2010

Cutting Waste by Reforming IT

As I’ve written before, one source of ineffective and inefficient government is the technology gap between the public and private sectors.While a productivity boom has transformed private sector performance over the past two decades, the federal government has almost entirely missed this transformation and now lags far behind on efficiency and service quality. We are wasting billions of dollars a year, and more importantly are missing out on the huge productively improvements other sectors have benefited from.

Quite simply, we can’t significantly improve the efficiency and effectiveness of the federal government without fixing IT.

That’s why today, in our ongoing effort to make sure that taxpayers’ dollars are spent on projects that work, we are taking three specific actions to advance IT reform.

First, I am directing all executive departments and agencies to stop issuing new task orders or procurements for all financial system modernization projects – an area of persistent problems – pending review and approval by OMB of new, more streamlined project plans. Financial system modernizations projects in the federal government have become too large and complex. By setting the scope of projects too broadly rather than focusing on essential business needs, federal agencies are incurring substantial cost overruns and lengthy delays in planned deployments. Compounding this problem, projects persistently fall short of planned results once deployed. For instance, the Department of Veterans Affairs (VA) has invested over $300 million in two financial system projects over the past 10 years. The first project ended in failure and no operational capability has been realized with the second.

Across the government, there are approximately 30 financial systems projects that are affected by this policy. The total cost expended on these projects is anticipated to be $20 billion over the life of these projects, with an approximate annual spend of $3 billion. OMB expects this new process to result in a significant reduction in these amounts.

Second, the Federal Chief Information Officer Vivek Kundra will undertake detailed reviews of the highest risk IT projects across the federal government. Agencies will be required to present improvement plans to the CIO for projects that are behind schedule or over budget. Where serious problems continue to exist, there will be adjustments to Fiscal Year 2012 agency budgets.

Third, OMB’s Deputy Director for Management Jeff Zients will develop recommendations, within 120 days, for improving the federal government’s overall IT procurement and management practices. These recommendations will address the root-causes of problems plaguing federal IT projects and focus on proven best practices from inside and outside the federal government. They will include higher standards for project management practices and personnel, additional mechanisms for holding managers accountable for project results, and more rigorous review processes.

Together, these three steps will provide a strong start to our reforming of federal IT, which is essential to improving the effectiveness and efficiency of the Federal Government and giving taxpayers more value for their tax dollars.


-Peter Orszag, Director, OMB

Postal Service finds $75B dollar overpayment

In what could be the best game of Monopoly™ ever, Postmaster General John Potter may have just drawn a card that reads "Inspector General finds error in your favor. Collect $75 billion dollars."

The Inspector General for USPS took a closer look at the Civil Service Retirement System and found massive overpayments dating back decades.

Michael Thompson, Director of Capital Investments for the Postal Service Office of Inspector General, explained for Federal News Radio, "the Postal Service, since 1972, has overfunded by $75 billion its share of civil service retirement and the reason for that is because the methodology that's used is not comparable to the methodolgies that's used for all the other federal retirement funds."

Thompson said the Office of Personnel Management, in deciding how much the Postal Service should pay into the CSRS, is currently using a different method developed in 1974. They've said they aren't going to change unless Congress tells them to, according to Thomson.

"The money is sitting in the civil service retirement fund. It's not as though the money is not there. It is there. It's just that the Postal Service has continually paid more than it should have paid."

All it would take, according to Thompson, is for either the OPM to make the change or for Congress to legislate it. That might seem simple enough, but with so much money involved, no one's getting off the dime, literally.

-Suzanne Kubota, FederalNewsRadio.com

Federal government paid $110 billion in improper payments

The federal government made $110 billion worth of improper payments in fiscal 2009, according to the text of a new Office of Management and Budget website.

Dubbed PaymentAccuracy.gov, this new OMB website centralizes and visualizes into graphs information about federal improper payments made to individuals, organizations and contractors.

The reported fiscal 2009 amount is $38 billion more than the reported fiscal 2008 amount; federal officials attribute the increase to improved detection capabilities as well as more federal outlays for economic stimulus.

An improper payment occurs when a recipient receives either too much or too little of an intended federal payment, or when the recipient misuses the funds, or even when there's a lack of sufficient documentation to prove that a payment was proper.

According to a dataset available from another OMB website, overpayments from programs found to be susceptible to significant improper payment from fiscal 2004 through fiscal 2009 were worth almost $148.7 billion, while underpayments were worth almost $23.6 billion. However, because both over- and under- payments in the dataset are an optional data element, it's difficult to state with certainty whether those numbers are accurate.

According to PaymentAccuracy.gov, programs at the worst risk of improper payments generally are federal benefit efforts. The worst absolute offender in fiscal 2009, based on incomplete data, was Medicare Parts A and B, which made improper payments of $35.4 billion, or 12.4 percent of its $285.1 billion in outlays.

However, in terms of percentage of outlays misdirected to improper payments, the Agriculture Department's National School Lunch Program took the crown with 16.4 percent of its $9.4 billion outlay misdirected into improper payments, an absolute value of $1.6 billion.

In his blog post, Orszag also applauded the Senate's June 23 passage of the "Improper Payments Elimination and Recovery Act of 2010," sponsored by Sen. Thomas Carper (D-Del.). The bill requires agencies to follow OMB prescriptions for financial management programs to combat improper payments. The House passed a similar bill (with the same title) on April 28; the two bills nonetheless require reconciliation, however. The House bill also contains a section that would require federal agencies to follow OMB prescriptions on reducing improper payments.

Read more: Federal government paid $110 billion in improper payments - FierceGovernmentIT

OMB's Werfel plugs financial modernization

Over the last two decades, it has not been unusual for a federal agency to invest millions of dollars, and as many as ten years, to modernize its financial management IT system.

But now, federal officials are re-thinking the way that financial management systems are upgraded, to save money, and also to better take advantage of rapidly changing technology.

Danny Werfel, the comptroller with the White House Office of Management and Budget, delivered his remarks on the subject of modernization as part of his keynote address to the AFFIRM CIO/CFO Summit meeting at the Capitol Hilton hotel yesterday.

Werfel says a change in the way that financial management systems are upgraded in agencies has been long overdue.

As hinted in recent months by other top White House IT officials, OMB is now considering a draft memo mandating that agencies adopt a new approach to financial management system modernization. An approach that favors modernizing specific modules in a system as needed, with the newest technology available, and within a much shorter timeframe to completion.

Werfel also acknowledged the need, in these modernization projects, for agencies to take the time to properly import legacy data from older financial management systems, in order to help agency top level managers to gain perspective on the mission of their department.

-Max Cacas, FederalNewsRadio.com

Tuesday, June 22, 2010

Orszag says he's leaving as budget head in July

By BEN FELLER (AP) – 49 minutes ago

WASHINGTON — White House Press Budget Director Peter Orszag says he's stepping down next month.

Orszag, who served a grueling stint as director of the Office of Management and Budget, a Cabinet-level rank, confirmed his planned resignation in a brief interview with The Associated Press on Tuesday. He said he views passage of last year's economic recovery act as his most significant accomplishment.

White House Press Secretary Robert Gibbs said Tuesday that "a number of very talented candidates" were being considered to replace Orszag. Gibbs said Orzag has served on an economic team that "has faced the greatest economic crisis any president has faced since the Great Depression."

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) — White House Press Secretary Robert Gibbs says Budget Director Peter Orszag has decided to leave his job.

Gibbs on Tuesday confirmed Orszag's planned resignation after a grueling stint as director of the Office of Management and Budget, a Cabinet-level rank that gave him a pivotal role in shaping and defending how the administration spends the public's money.

Gibbs didn't give a timeline but said it would before the administration begins to write its next budget. The budget isn't released until February but work on it begins well ahead of that.

"Peter has served alongside and within a valuable economic team that has faced the greatest economic crisis any president has faced since the great depression. It is an enormous task," Gibbs said.

Monday, June 21, 2010

Improper payments getting scrutiny at Federal agencies

From "White House tells agencies to use data analysis to reduce improper payments" by Jason Miller on FederalNewsRadio.com:

"The Obama administration is attacking the $100 billion improper payments problem on yet another front.

"Along with expanding the use of recovery audits by vendors, the White House now is focusing more attention on the agency processes.

"President Barack Obama Friday signed a memo requiring agencies 'to review current pre-payment and pre-award procedures and ensure that a thorough review of available databases with relevant information on eligibility occurs before the release of any federal funds.'

"These databases now are known as the 'Do Not Pay List.' The Office of Management and Budget must provide the White House a plan for further integration of these disparate databases by mid-October."


Wednesday, June 09, 2010

OMB to Tackle Financial Systems

Developing financial management systems that work has been a big, persistent pain for agencies for years and years. But now the Office of Management and Budget wants to see if they can provide a solution. The office is getting ready to issue new rules to try to rein in the runaway systems, according to an article by Jason Miller at Federal News Radio.

The upshot of the memo: develop financial systems more incrementally to control costs and improve performance. According to a draft memo written by OMB director Peter Orszag, the White House "would halt all new financial management system modernization projects worth at least $10 million, and all existing task orders for ongoing development efforts worth more than $500,000," according to FNR. Agencies would have to have their financial management modernization plans approved by OMB.

The memo seems to pull from the U.S. Government 2009 Financial Report, which was released on Feb. 26. The report "said agencies must reconsider expensive, long-term investments in favor of shorter-term, more efficient information technology solutions . . . ," according to a March 5 Nextgov article. However, OMB didn't follow the report's recommendation to rely more on shared services.

-Allan Holmes, NextGov.com

Exclusive: OMB to propose major changes to financial management systems

The Office of Management and Budget is considering major changes to the way agencies develop and implement financial management systems.

In a draft memo obtained by Federal News Radio, OMB director Peter Orszag would halt all new financial management system modernization projects worth at least $10 million, and all existing task orders for ongoing development efforts worth more than $500,000.

The draft memo calls for OMB to approve agency implementation plans.

Additionally, OMB would apportion money quarterly to pay for the next phase of the system development instead of letting an agency have the entire amount at once.

"[T]his memorandum initiates a re-examination of these expensive and lengthy investments in financial management solutions in favor of shorter-term, lower-cost, and easier-to-manage solutions," Orszag writes in the draft memo.

OMB would require agencies to break projects into segments that last no longer than 90 days and the entire project should go on for no more than 24 months. Agencies to focus on their most critical needs first in this segmented approach, the memo states.

Agencies must submit to OMB 60 days after the memo is finalized revised project plans to outline strategies for reducing costs, shortening the timeline and reduce risks.

The memo also would call for OMB and a new Financial Systems Advisory Board, which would be made up of the agency chief financial officers and chief information officers, to review projects and make recommendations to OMB.

OMB also is removing the mandate for agencies to move to shared service providers. The memo encourages the use of these common providers, but only when it makes most sense.

"Further, financial management shared service efforts will now focus on the higher impact area of transaction processing. OMB, Department of the Treasury and the CFO Council will identify and facilitate the acquisition or development of common automated solutions for transaction processing."

An OMB spokeswoman says OMB doesn't comment on draft policy.

-Jason Miller, FederalNewsRadio.com

Tuesday, June 01, 2010

OMB Issues Draft Memo Regarding Significant Financial Management Systems Project Changes

According to multiple sources, a draft memorandum from OMB was sent to CFO Act agencies late last week for comment regarding an immediate review of high-risk financial systems IT projects.

Included in this guidance is a requirement that all CFO Act agencies immediately halt the issuance of new task orders or new procurements for all financial system projects pending review and approval from OMB.

The final guidance will also:

  • Set forth guiding principles for the acquisition and project management of new financial systems;
  • Specify the procedures for an immediate review and evaluation of current financial system modernization projects; and
  • Clarify and updates OMB policies on financial management shared services, financial system standards, and financial software testing and certification.