From 500 to 70, OMB reduces number of financial system requirements

The Office of Management and Budget actually canceled a financial management circular earlier this month.

Circular A-127 no longer governs agency financial management systems. Instead, OMB rolled a small set of these old requirements into the new Appendix D of Circular A- 123 back in September.

OMB said Appendix D went into effect Oct. 1 and therefore rescinded all previously issued versions of Circular A-127 from Dec. 19, 1984; July 23, 1993; June 10, 1999; Dec. 1, 2004; and Jan. 9, 2009.

Norman Dong, the acting controller at OMB, said the goal of the rescission of A- 127 and the new Appendix D is to improve the quality, utility and the reliability of federal financial information.

The new guidance features only 70 requirements that OMB hopes will drive agencies toward outcomes such as reporting timely financial data or eliminating waste, fraud and abuse.

Dong said Appendix D now focuses on ways agencies can gauge how well they are in meeting the requirements of the Federal Financial Management Improvement Act (FFMIA), such as the number of and nature of material weaknesses and audit opinion from the inspector general or third party analysis. Formerly A-127, and now Appendix D, help agencies implement FFMIA.

Another major change with Appendix D is the focus on shared services. OMB has strongly encouraged agencies to move to federal shared service providers for financial management when appropriate, but some of the requirements under A-123 made it more difficult.

Dong said one example of this change in approach to financial management happened when a service provider and customer agency initially had discussions about hosting the system and identified more than 700 gaps between how the customer and provider were doing business. But, he said, when they shifted the conversation away from how they were doing business and focused on what needs to be achieved, the number of differences dropped dramatically.

OMB eventually will fold Appendix D into the rewrite of Circular A-123, governing the internal controls of agency financial management.

Dong said the goal is to rationalize and harmonize OMB's guidance on federal financial management. He said it's important to make sure the requirements are reasonable and rationale.

OMB announced in February it would lead an effort to do the first major grants policy rewrite in years.

Dong said OMB will release the A-123 update in the coming months. He said OMB is conferring with agencies on a number of different aspects of the rewrite, including the improper payments requirements.

In addition to the A-123 update, OMB released a new bulletin on Oct. 21, giving agencies an updated set of minimum standards for their financial audits.

OMB made 26 changes to the 67-page document around areas such as reporting, written representation from management and the scope of the audit.

-Jason Miller, FederalNewsRadio.com
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OMB updates financial reporting rules

What: Appendix D to Circular No. A-123, Compliance with the Federal Financial Management Improvement Act of 1996

Why: Federal agencies are getting new flexibility in modernizing their financial management systems, per a Sept. 20 memo from Sylvia Burwell, director of the Office of Management and Budget.

The new framework changes the way agencies comply with the Federal Financial Management Improvement Act (FFMIA), to eliminate some restrictions on technology products and phase out a testing and certification program for the deployment of financial management software, while paving the way for the use of shared services across agencies. The OMB has also established a set of common goals for financial management across all federal agencies. The memo also charges the Treasury Department with developing requirements for federal financial management systems.

-Adam Mazmanian, FCW.com
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OMB Circular A-123, Appendix D Becomes Effective October 1, 2013

On September 20th, the interim final version of OMB Circular A-123, Appendix D, Compliance with the Federal Financial Management Improvement Act of 1996 (M-12-23) was released.  Appendix D, effective October 1, 2013, provides additional guidance and defines new requirements for Financial Management Systems determining compliance with the FFMIA.  Appendix D rescinds all previously issued versions of Circular A-127, Financial Management Systems.

Please see http://www.whitehouse.gov/sites/default/files/omb/memoranda/2013/m-13-23.pdf for OMB Circular A-123, Appendix D.

OMB gives agencies more control over financial management systems

Agencies are gaining more control over how to upgrade their financial management systems.

Instead of a strict set of rules around the technology requirements for federal systems, the Office of Management and Budget will rescind Circular A-127 that governs financial systems, and, through this memo, move and simplify those regulations into Appendix D of Circular A-123.

OMB Director Sylvia Burwell wrote in a memo to agency leaders that said, "The goal of this Appendix is to transform our compliance framework so that it will contribute to efforts to reduce the cost, risk, and complexity of financial system modernizations. The objective of this approach will be to provide additional flexibility for federal agencies to initiate smaller-scale financial modernizations as long as relevant financial management outcomes (e.g., clean audits, proper controls, timely reporting) are maintained."

In a nutshell, implementing the Federal Financial Management Improvement Act (FFMIA) has become arduous and ended up forcing agencies into costly financial management upgrades.

So now Appendix D is more streamlined. OMB reduced the number of requirements from more than 500 to about 60 that focus on outcome or output.

OMB began to dismantle FFMIA regulations over the last several years. The administration closed down the Federal Systems Integration Office (FSIO) in March 2011 and moved a lot of the oversight and standards work to the Treasury Department's Office of Financial Innovation and Transformation (OFIT).

-Jason Miller, FederalNewsRadio.com
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OMB following a familiar path as it shapes new financial internal controls

The Office of Federal Financial Management is taking a page out of the cybersecurity reform book in how it's changing how agencies oversee spending.

OFFM is updating its Circular A-123 guidance to be more like the future vision of cybersecurity — based on risk and data, and done more than every three years.

Mike Wetklow, the chief of the accountability performance branch at OFFM in the Office of Management and Budget, said there are several guiding principles going into the revision, including integrating an internal controls framework, reducing the compliance burdens and innovation through data analysis.

"Many of these principles we are putting in practice, we're going to have examples of charge cards, improper payments and data analytics," said Wetklow during a panel discussion at the Association of Government Accountant's Internal Control and Fraud Prevention Training event Tuesday in Washington. "We have a lot of things we are trying to do differently like, for example, with Hurricane Sandy last year. There was a memo earlier in the year about internal control plans. A lot of our discussions were we didn't want to make this a new Recovery Act or have this big compliance exercise right in the middle of disaster response, but to really use the internal controls as a risk management tool. We didn't ask agencies to document their control environment, the risk assessment, the control activities, the full gauntlet of all those things. We asked them to simply do a thoughtful analysis of their risks that came about from the extra funding that went into their programs, and just work with OMB on that."

Federal financial management and cybersecurity policy face similar challenges. Both need to keep up with the changing environment and expectations, and move from a static to a dynamic approach.

Like FISMA, A-123 turned into a static process.

A-123 is a 30-plus-year-old policy from OMB regarding how agencies, and specifically CFOs and their budget staffs, handle the oversight of money, otherwise known as internal controls. Internal controls ensure agencies meet policy and legislative requirements for financial reporting and the effectiveness and efficiency of programs.

OMB last revised A-123 in 2004 after Congress passed the Sarbanes-Oxley bill.

Experts say this latest set of changes is part of the pendulum that seems to swing every decade or so between more or less reporting requirements.

He said one of the biggest changes is what is being added to A-123 to meet the intent and spirit of Congress when it wrote the Federal Financial Management and Improvement Act (FFMIA).

"In the near term, and this will be literally in a couple of weeks, we plan to rescind OMB Circular A-127 and replace it with a new Appendix D to A-123," Wetklow said. "And if you ask yourself, why A-123? When you read the committee report [to FFMIA], it talks a little about financial systems. It talks more about internal controls, business processes, and visibility into government operations. Our hope in what we are doing is we are going to reduce compliance burdens by getting rid of all of these complicated checklists that only serve to drive system's costs and risks, and integrate our processes with the already existing things in A-123."

A-127 addresses financial management system requirements. OMB slowly has been moving away from strict financial management system requirements, and focusing more on standards and outcomes over the last decade.

He said A-123 also will need to be integrated with several other initiatives including new credit card abuse guidance OMB issued last week, improper payment laws that includes the Do Not Pay list and other changes to financial oversight that have come over the past 10 years.

-Jason Miller, FederalNewsRadio.com
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OMB reworking financial system requirements to focus on outcomes, not inputs

CAMBRIDGE, Md.— The Office of Management and Budget is finalizing a new directive to change federal financial management processes.

The goal is to make it easier for agencies to balance their books, and for vendors to provide software to help them do that.

Adam Goldberg, the executive architect for the Treasury Department, said this new guidance, which is about 30 days or so away from being finalized and made public, would update Circular A-127.

A-127 defines the processes and policies agencies should follow when managing their financial management systems. Goldberg said A-127 instructs agencies on how to meet the requirements based on which systems meet government requirements and testing.

Goldberg said Treasury, working as OMB's implementation arm, changed the approach to determine the requirements of financial management systems.

OMB last revised A-127 in January 2009, shortly before President Barack Obama took office.

Goldberg said the Federal Financial Management Improvement Act calls for agencies to meet certain requirements in how they report financial data. The revised A-127 will tell agencies what the end results have to look like, rather than saying how or by what systems, and they can get there anyway they see fit.

He added this change likely will open the door to new vendors to provide shared services or partner with one of the four federal shared service providers for financial management.

Additionally, Goldberg said Treasury is developing a product/service catalog for financial management services.  Goldberg said the catalog pilot should be in place by the end of the calendar year.

All of these efforts build on OMB's requirement from March for agencies to move to a shared service provider for financial management when it's time to upgrade their systems.

Goldberg said reducing the number of requirements and focusing them on outcomes or outputs will make it easier to make the transition.

-Jason Miller, FederalNewsRadio.com
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Timeline: The Evolution of Financial Management in the Federal Government

(This interactive timeline is part of Federal News Radio's special report, Rise of the Money People.)

The roots of today's federal financial systems oversight can be traced back to the Accounting and Auditing Act of 1950, which authorized the head of each federal agency to establish internal controls over its assets.

The act also tasked the Government Accountability Office with drawing up accounting standards for agencies and, through audits, ensuring that agency internal controls met those standards.

Over the last three decades, Congress has expanded the scope of financial oversight at agencies, and, with the help of new technology, provided for greater transparency in agencies' fiscal reporting.

This timeline provides an overview of the initiatives introduced by the White House and legislation enacted by Congress to establish greater oversight of government spending.

-Michael O'Connell, FederalNewsRadio.com
VIEW THE TIMELINE AND READ MORE...

Shared Services Strategy from OMB and Treasury Previewed at AGA’s Third Annual Federal Financial Systems Summit

Over 400 government financial professionals gathered at AGA’s Federal Financial Systems Summit in Washington last week to learn about and to discuss the near-term and future prospects of Federal financial management and systems in a budget constrained environment. The summit provided for an open dialogue between federal agency stakeholders, private-sector sponsors and key policymakers from the Office of Management and Budget (OMB) and the U.S. Department of the Treasury (Treasury) through town hall-style sessions where participants were encouraged to engage each other and openly express their thoughts, ideas and concerns.

Danny Werfel, Controller, OMB and Richard Gregg, Fiscal Assistant Secretary, Treasury, set the tone at the event by declaring a renewed commitment to drive federal agencies seeking to modernize their financial management systems to utilize shared services, where possible. In alignment with OMB’s Office of Electronic Government “Shared First” strategy, OMB and Treasury will be issuing new guidance very soon, and coordinating with agencies to leverage shared services for their core financial systems modernization initiatives.


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Oracle Federal Forum Session Highlights for Federal Financial Managers

6th Annual Oracle Federal Forum 

Wednesday, 14 November 2012
7:30 AM – 4:00 PM

Wardman Park Marriott
2660 Woodley Road NW
Washington, DC 20008

Forum Tracks
(Session 1 – 10:15 a.m., Session 2 – 11:25 a.m., Session 3 – 12:35 p.m.)

Financial, Budget and Resource Management

• Oracle Financial Management Product Update
  • Oracle continues to be a leading provider of enterprise application solutions to the federal government. Cliff Godwin, Senior Vice President for Oracle E-Business Suite Development, and John Webb, Vice President for PeopleSoft Product Strategy, will provide a product update of these two applications solutions. They will also discuss benefits and directions that impact Oracle federal customers as these product solutions continue to evolve.
    
    Cliff Godwin, Senior Vice President, E-Business Suite Development, Oracle
    John Webb, Vice President for PeopleSoft Product Strategy, Oracle
• Enterprise Performance Management and Business Intelligence Customer Success Stories
  • The requirement for federal agencies to translate layers of data into useful information has never been greater. The federal budget process is one example of this requirement; when setting budgets an agency needs to determine and justify the resources needed to deliver on programmatic goals and objectives. A number of federal agencies have implemented Oracle Enterprise Performance Management solutions to support the budget formulation, execution, and analysis phases of the spending cycle. This session will feature customers who have done just that and have achieved real value.
    
    Crissman Nichols, Budget Analyst for the United States Census Bureau, Budget Division, Systems and Reporting Staff
    Neeraj Sharma, Infrastructure Lead, Office of Finance and Accounting, Indian Health Service
• Deriving Benefits from Shared Services
• The federal government has adopted a “shared first” policy when it comes to implementing new financial management systems. As a number of agencies are evaluating how to upgrade or improve current systems they are examining how shared services can provide a positive return on investment for their agency. This session will share solutions from three agencies that have adopted a shared services approach and have achieved significant gains.
  
  Dennis Coleman, Chief Financial Officer, Office of the CFO, Office of Personnel Management
  Kristine Prael, Deputy Chief, Finance and Procurement Systems Division, U. S. Department of the Interior, Interior Business Center
  Paul E. Deuley, Director, ARC Division of Franchise Services, Department of the Treasury

Workshops and Afternoon Sessions: (These sessions all run from 1:45 p.m. – 2:45 p.m.)

Oracle E-Business Suite Federal Financials Development Update

• Attend this session to hear the latest information on development's planned investment areas and regulatory changes we are tracking, including:
• Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS)
• Intra-Governmental Payment and Collections (IPAC)
• Secure Payment System (SPS)
• Payment Application Manager (PAM)
• Payment Information Repository (PIR)
• System for Award Management (SAM)
  
  Mike Barker, Director, Federal Programs, Oracle

PeopleSoft Federal Financials Development Update

• Attend this session to hear the latest information on development's planned investment areas and regulatory changes we are tracking, including:
• Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS)
• Intra-Governmental Payment and Collections (IPAC)
• Secure Payment System (SPS)
• Payment Application Manager (PAM)
• System for Award Management (SAM)
• Payment Information Repository (PIR)
• Do Not Pay Business Center
  This presentation will also include an overview of the new 9.2 general features and functionality that provide value for all markets.
  
  Terry Thomas, Director PeopleSoft Financials Product Management, Oracle  

View All Sessions Here

Register Here

GAO: OMB Review of Financial Systems Projects

The following report was released by GAO.

Financial Management Systems:
Status of OMB's Review of Financial System Projects.
GAO-12-184R, February 8.
http://www.gao.gov/products/GAO-12-184R

OMB cuts back financial management programs

The Office of Management and Budget canceled two federal financial management programs and significantly reduced the scope of five others following a broad review that was launched over the summer.


According to Jeffrey Zients, federal chief performance officer, the OMB canceled systems under development for the Department of Veterans Affairs and the Small Business Administration, saving more than $500 million.

Three financial management programs at the Department of Health and Human Services as well as one at the Department of Homeland Security and one at the Justice Department will proceed with a narrowed scope. The government said the changes will save $680 million.

This summer, the OMB halted new spending on selected federal agencies' financial management systems, requiring reviews before the projects could continue. The agency cited the typical sluggishness and high cost of the projects.

With the review now complete, Zients said about half of the 20 identified programs are on track.

Besides the two cancellations and five scaled-down projects, the OMB has accelerated the most useful parts of the programs of the Department of Housing and Urban Development and the Environmental Protection Agency, according to Zients.

Additionally, the OMB said it has made another $200 million in budget reductions in various agencies.


-Marjorie Censer, WashingtonPost.com
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Financial management systems in need of upgrade

FederalNewsRadio.com In Depth with Francis Rose interviews:
Bob Tobias, director of public sector executive education, American University

Managers are being asked to "do more with less." Making smart choices requires a strong financial management system, but many agencies just don't have one in place.

"Many departments find it incredibly difficult because it's very expensive. By the time an agency gets all of its individual ... agencies in identifying what it needs and developing the IT project, the IT has made advances and then it's back to the drawing board," said Bob Tobias, director of public sector executive education at American University, in an interview with In Depth with Francis Rose.

When it comes to financial management systems, one of the biggest debated issues is whether or not to "start from scratch with a new fiscal year." One option for agencies is a financial management software package, but Tobias rejects using a software package, saying it does not solve the problem of transferring the agency's current data into the package.

The Office of Management and Budget requires five-year rolling budgets. Maintaining two separate systems and reconciling those systems every year "creates cost-efficiency and effectiveness problems," Tobias said.

An overhaul of financial systems is a tough sell to lawmakers, who take a "if it's not broken, don't fix it" stance, Tobias said. He added that Congress and the Obama administration are more concerned with creating public policy than maintaining and implementing those policies already created.

In order for the financial systems to be updated, a "confluence of events" have to happen, including credibility with Congress, the GAO and inspectors general about the need, cost and staffing to design and implement a program.
This all requires "a great deal of significant leadership time, energy and effort by political appointees who turn over pretty quickly," Tobias said.

Compounding this problem is the current budgetary standstill, with the federal government operating on a continuing resolution.


READ MORE or LISTEN HERE...

OMB's new approach to agency financial modernization lacks strategy, says GAO

The Office of Management and Budget's new approach to federal financial system modernization is riddled with uncertainty, according to a new Government Accountability Office report.

Specifically, although OMB has directed agencies to adopt to-be-developed common automated solutions for certain common transactions and warned them against financial system projects that take longer than 24 months to implement, it nonetheless lacks a strategy and a concept of operations to guide implementation efforts, the GAO states. The congressional watchdog issued its report on OMB's new financial system modernization thinking on Sept. 8.

For example, when it comes to agency adoption of common processing solutions--such as for intergovernmental transactions--without an established concept of operations, it's unclear how those common solutions will integrate with existing core financial systems, the GAO notes. The report cites Institute of Electrical and Electronic Engineering guidance which states that a concept of operations is normally one of the first documents produced during a disciplined development effort.

OMB official told GAO auditors they're developing a concept of operations, but did not provide a timeframe for its completion. OMB officials also said they're updating OMB Circular A-127 to include new standards for agencies when developing and updating federal financial management system requirements. However, GAO auditors add that it's not clear whether OMB will keep those standards up to date, and if it won't, then which organization will.

As for OMB's directive that agencies not implement financial system efforts that take longer than 24 months to complete, the GAO report says OMB lacks guidance to ensure that such efforts provide needed functionality rather than merely comply with a scheduled deadline.

-David Perera, FierceGovernmentIT.com

READ MORE...
For more:
- download the report, GAO-10-808 (.pdf)
- download OMB memo M-10-26 (.pdf), which outlines OMB's new approach to federal financial systems

Advisory board to help OMB assess financial management systems

The Office of Management and Budget has named a new advisory board to help it assess the state of federal financial management systems. OMB has opted to halt new spending on systems costing $20 million or more pending a review. The board, which will have no chairman, will include:

-- W. Todd Grams, acting chief financial officer at the Department of Veterans Affairs

-- Jon M. Holladay, acting chief financial officer at the Agriculture Department

-- Danny A. Harris, chief information officer at the Education Department

-- Jerry E. Williams, chief information officer at the Department of Housing and Urban Development

-- Colleen Barros, chief financial officer at the Department of Health and Human Services' National Institutes of Health

-- David M. Fisher, director of the Defense Department's Business Transformation Agency

-WashingtonPost.com
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Federal financial management system projects that have been frozen

The Office of Management and Budget made good on its promise to halt new spending on some federal agencies' financial management systems, last week releasing a list of 20 projects that cannot move forward until new plans are approved.

The programs span the agencies -- and more are likely to follow. In a statement, OMB said it expects about 30 financial system projects to be reviewed, but some systems are still being reviewed to see if they qualify.

OMB Director Peter Orszag called for the freeze on new task orders and procurements for selected systems' development or modernization, citing the typical sluggishness and high cost of the projects. To move forward, agencies must prepare plans that divide the projects into short-term tasks and include active monitoring of their progress.

Below is a list of the 20 projects, the total value of the contracts awarded thus far and the top identified contractor -- by contract value -- working on each one, according to the government's database.

-- Financial Management Modernization Initiative [FMMI]: $118.7 million - Accenture ($96 million)
Modernizes the Agriculture Department's outdated financial system technology.

-- Commerce Business Systems[CBS]: $48.6 million - MIL Corp. ($15.6 million)
An integrated financial management system that has been implemented in 12 of the 14 Commerce Department bureaus.
[DOC modernization remains in the planning stages]

-- Financial Management Support System: $68.6 million -- no contractor identified
The financial management system for the Education Department.
[EDCAPS]

-- CF iManage: $174.4 million -- IBM ($132.2 million)
Used by the Energy Department to improve financial and business efficiencies and integrate budget with performance.

-- Financial Replacement System: $109.8 million - CGI Federal ($83.1 million)
Modernizes the Environmental Protection Agency's financial systems to integrate systems.
[Financial System Replacement Project FSMP]

-- NIH Business System: $128.9 million - IAE Solutions ($20 million)
Standardizes financial data for the Department of Health and Human Services' National Institutes of Health.

-- Healthcare Integrated General Ledger Accounting System: not available - EDS (now HP Enterprise Services) ($4.7 million)
Allows the Department of Health and Human Services' Center for Medicare and Medicaid Services to account for payments.
[IBM is the incumbent contractor]

-- Transformation and System Consolidation: Information not available.
[TASC - Proposals submitted, award pending]

-- Integrated Financial Management Improvement Project: Information not available.

-- Financial and Business Management System: $165.3 million - IBM ($116 million)
Integrates financial management, acquisition, property management, travel and more for the Interior Department.
[FBMS]

-- Unified Financial Management System: $174.3 million - IBM ($150 million)
Brings together existing and future financial management and procurement operations across the Justice Department.
[UFMS]

-- New Core Financial Management System: $63 million - GCE ($50.6 million)
Reduces duplicate processes and provides real-time transactions for the Labor Department.

-- Joint Financial Management System: $267.8 million - Haynes Inc. ($199.5 million)
A financial system collaboration between the State Department and the U.S. Agency for International Development.
[CGI recently awarded 10 yr, $400M consolidation and O&M contract]

-- Delphi - $153.3 million - no contractor identified
The Transportation Department's financial management and accounting system.
[Tantus-Onpoint, SRA]

-- Integrated Financial System/CORE Financial System: $24.4 million - CSC ($24.4 million)
Used by the Treasury Department's Internal Revenue Service for budget, payroll and all financial reporting, among other tasks.

-- Oracle e-Business Suite: $102.4 million - immixTechnology ($100.5 million)
Handles accounting, budgeting and reporting for the Treasury Department's Bureau of the Public Debt.

-- Financial and Logistics Integrated Technology Enterprise: $98.7 million -- no contractor identified
An initiative to replace existing financial and asset management systems with integrated systems at the Department of Veterans Affairs.
[FLITE - rumored to be cancelled]

-- Financial Accounting System: not available - Booz Allen Hamilton ($122.2 million)
Used by the National Science Foundation to monitor and execute about 20,000 active awards to more than 1,500 awardees.

-- Consolidated Business Information System: $97.4 million - Accenture ($79.9 million)
A new financial management system for the Office of Personnel Management.

-- Oracle Administrative Accounting: $22.5 million - SRA International ($22.1 million)
Serves as the system of record for the funding and expenditure of the Small Business Administration's dollars.

-Marjorie Censer, washingtonpost.com
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Q&A: Mark Forman and Jeff Steinhoff on the new direction of federal financial IT

When the White House released a June 28 memo (.pdf) telling agencies not to initiate new development spending on federal financial management systems worth more than $20 million until the Office of Management and Budget has reviewed spending plans, it was just the latest sign that changes to the way the government manages financial IT systems are underway.

FierceGovernmentIT caught up with Mark Forman, former head of the Office of Management and Budget office of e-government and information technology--now a partner at KPMG--and Jeff Steinhoff, former Government Accountability Office assistant comptroller general for accounting and information management--also at KPMG, as executive director of the firm's government institute--for their reactions to the memo.

Read more: Q&A: Mark Forman and Jeff Steinhoff on the new direction of federal financial IT - FierceGovernmentIT

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.

READ OMB MEMO M-10-26 HERE...

-Peter Orszag, Director, OMB
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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
READ MORE or LISTEN HERE...

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
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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
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