Education wants to put financial management in the cloud

The Education Department wants to take its financial management system to the cloud.

Education issued a request for information Nov. 18 seeking ideas for infrastructure-as-a-service and platform-as-a-service for the Education Department's Central Automated Processing System (EDCAPS).

Education's system includes five different components:
•Financial-management support software
•Grants-management system
•Contracts and purchasing support system
•Travel-management system
•Nortridge Loan system

-Jason Miller, FederalNewsRadio.com
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Recent GAO Publications

The Government Accountability Office recently released the following publications:

Troubled Asset Relief Program: Status of Efforts to Address Transparency and Accountability Issues, by Gene L. Dodaro, acting comptroller general, before the Senate Committee on Banking, Housing, and Urban Affairs.
GAO-09-1048T, September 24.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-1048T

Results-Oriented Management: Strengthening Key Practices at FEMA and Interior Could Promote Greater Use of Performance Information.
GAO-09-676, August 17.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-676
Highlights - http://www.gao.gov/highlights/d09676high.pdf

Government Performance: Strategies for Building a Results-Oriented and Collaborative Culture in the Federal Government, by Bernice Steinhardt, director, strategic issues, before the Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security, Senate Committee on Homeland Security and Governmental Affairs.
GAO-09-1011T, September 24.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-1011T
Highlights - http://www.gao.gov/highlights/d091011thigh.pdf

DCAA Audits: Widespread Problems with Audit Quality Require Significant Reform.
GAO-09-468, September 23.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-468
Highlights - http://www.gao.gov/highlights/d09468high.pdf

DCAA Audits: Widespread Problems with Audit Quality Require Significant Reform, by Gregory D. Kutz, managing director, forensic audits and special investigations, and Gayle L. Fischer, assistant director, financial management and assurance, before the Senate Committee on Homeland Security and Governmental Affairs.
GAO-09-1009T, September 23.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-1009T

Recovery Act: Funds Continue to Provide Fiscal Relief to States and Localities, While Accountability and Reporting Challenges Need to Be Fully Addressed.
GAO-09-1016, September 23.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-1016
Highlights - http://www.gao.gov/highlights/d091016high.pdf

Recovery Act: Funds Continue to Provide Fiscal Relief to States and Localities, While Accountability and Reporting Challenges Need to Be Fully Addressed (State Appendixes).
GAO-09-1017SP, September 23.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-1017SP

Troubled Asset Relief Program: Status of Government Assistance Provided to AIG.
GAO-09-975, September 21.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-975
Highlights - http://www.gao.gov/highlights/d09975high.pdf

Low-Income and Minority Serving Institutions: Management Attention to Long-standing Concerns Needed to Improve Education's Oversight of Grant Programs.
GAO-09-309, August 17.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-309
Highlights - http://www.gao.gov/highlights/d09309high.pdf

Ryan White CARE Act: Effects of Certain Funding Provisions on Grant Awards.
GAO-09-894, September 18.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-894
Highlights - http://www.gao.gov/highlights/d09894high.pdf

Pension Benefit Guaranty Corporation: More Strategic Approach Needed for Processing Complex Plans Prone to Delays and Overpayments.
GAO-09-716, August 17.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-716
Highlights - http://www.gao.gov/highlights/d09716high.pdf

Management Report: Opportunities for Improvements in FDIC's Internal Controls and Accounting Procedures.
GAO-09-943R, September 15.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-943R

DOD Business Systems Modernization: Navy Implementing a Number of Key Management Controls on Enterprise Resource Planning System, but Improvements Still Needed.
GAO-09-841, September 15.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-841
Highlights - http://www.gao.gov/highlights/d09841high.pdf

Mineral Revenues: MMS Could Do More to Improve the Accuracy of Key Data Used to Collect and Verify Oil and Gas Royalties.
GAO-09-549, July 15.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-549
Highlights - http://www.gao.gov/highlights/d09549high.pdf

Royalty-in-Kind Program: MMS Does Not Provide Reasonable Assurance It Receives Its Share of Gas, Resulting in Millions in Forgone Revenue.
GAO-09-744, August 14.
http://www.gao.gov/cgi-bin/getrpt?GAO-09-744
Highlights - http://www.gao.gov/highlights/d09744high.pdf

IG community honors auditors and investigators

Nearly 100 federal employees and agency teams tasked with fighting government fraud and waste received kudos from two top councils on integrity and efficiency on Thursday.

"Despite the transformation that requires all of us to be able to work in a dynamic environment, we have remained focused on our core mission," said Daniel Levinson, inspector general of the Health and Human Services Department and chairman of the President's Council on Integrity and Efficiency awards program. The 11th annual ceremony, held in Washington, coincided with the 30th anniversary of the 1978 Inspector General Act, which established the duties and responsibilities of the watchdog organizations.

The awards were handed out by the President's Council, which includes IGs appointed by the president, and the Executive Council on Integrity and Efficiency, which includes IGs who are appointed by agency heads.

Winners included the asset forfeiture team at the Agriculture Department that handled National Football League quarterback Michael Vick's dog-fighting operation, and the team from the Special Inspector General for Iraq Reconstruction Office that investigated the physical soundness of the Mosul Dam.

The Sentner Award for Dedication and Courage, the IG community's highest honor, went posthumously to Paul Converse, a special auditor with the Iraq Reconstruction IG office who was killed in Iraq last March.

Marlane Evans, deputy inspector general for audit at Agriculture won the Alexander Hamilton Award, while the department's Link Team won the Gaston L. Gianni, Jr. Better Government Award for its investigation of electronic benefits transfer fraud. The Transportation Department team that investigated lapses in the Federal Aviation Administration's inspections program at Southwest Airlines won the Glenn/Roth Award for Exemplary Service. Education Department Inspector General John Higgins Jr., won the June Gibbs Brown Career Achievement Award. James Noeth, deputy inspector general for audit at the National Science Foundation, and Housing and Urban Development Department special agent Edwin Bonano both won awards for individual accomplishment.

-Alyssa Rosenberg, GovExec.com
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FederalNewsRadio - Ask the CFO - Larry Warder (ED)

Department of Education

Larry Warder - Chief Financial Officer

It may be the Department of Education but from a Financial Management point of view, it might be better described as a bank. Warder says the department essentially encompasses two businesses: grant-making and student aid. On the grant-making side, Warder says the department has turned to technology to implement the necessary performance metrics and internal controls necessitated by initiatives like No Child Left Behind. He also says the department is working with states to on standardizing the way in which critical information, which while not always financial in nature, is collected. Warder also talks about his role as acting head of the department's student loan office at a time when there is increasing scrutiny on the billion-dollar industry.

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FederalNewsRadio - Ask the CFO - Larry Warder (Ed)

Department of Education

Larry Warder - Chief Financial Officer

It may be the Department of Education but from a Financial Management point of view, it might be better described as a bank. Warder says the department essentially encompasses two businesses: grant-making and student aid. On the grant-making side, Warder says the department has turned to technology to implement the necessary performance metrics and internal controls necessitated by initiatives like No Child Left Behind. He also says the department is working with states too on standardizing the way in which critical information, which while not always financial in nature, is collected. Warder also talks about his role as acting head of the department's student loan office at a time when there is increasing scrutiny on the billion-dollar industry.

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Financial chiefs make progress on audits, improper payments

In 1991, a year after Congress passed the Chief Financial Officers Act requiring agencies to exercise better financial controls and provide accurate and timely financial data that could be reviewed by independent auditors, only one of the 24 agencies covered by the law was able to receive a clean bill of financial health -- the General Services Administration. Now, 19 departments and independent agencies have received clean audits for the past two years.

To Linda Combs, that's incredible progress. She should know. Combs served in numerous financial management positions across the federal government, beginning with the Reagan administration and ending last month, when she retired after two years as comptroller at the Office of Management and Budget.

Today, 12 agencies have achieved that standard, according to OMB. "CFOs have taken a lot of responsibility for helping their business units to use financial data in better ways. What I like to say about the CFO Act is that it took CFOs from the backroom to the boardroom. I think [Comptroller General] David Walker first said that, but I've adopted that quote because it's so descriptive of what happened," Combs says.

Progress hasn't come easily. Only in the last two years have most agencies been able to meet the 45-day reporting requirement for providing financial statements at the close of the fiscal year -- and many of those reports were filed only after Herculean manual efforts by employees working overtime to meet the deadline.

Progress has been labor intensive, but it's also been measurable. In an area of particular importance to taxpayers, OMB estimates that improper payments declined to $36.3 billion for programs that reported $45.1 billion in 2004. While that's still a lot of money paid out incorrectly, it's an improvement, relatively speaking.

Timothy Hill, director of the Office of Financial Management and chief financial officer at the Centers for Medicare and Medicaid Services, told the House Budget Committee in July that CMS executes four parallel strategies to reduce error rates: prevention of improper payments, early detection of errors, coordination with outside entities to identify fraud, and enforcement.

This year, CMS estimates that Medicare contractors will process well over 1 billion claims from providers, physicians and suppliers for items and services covered by the program. Last year, Medicare outlays were nearly $382 billion.

Another area of notable progress across federal agencies has been real property management. Two years ago, the government had no centralized inventory of its real property -- no reliable data reflecting the operation and maintenance costs of federal facilities, where facilities were located, what condition they were in, whether they were critical to agencies' missions. In 2005, OMB launched an effort to create such an inventory. In the process, it disposed of $4.5 billion in excess property.

Chief financial officers at every agency share a common purpose. They all are responsible for ensuring that agencies comply with accounting and reporting laws, and they play key roles in strategic planning. But their function can vary significantly from agency to agency. When William M. McCabe was acting chief financial officer at the Education Department, his attention was on the business of making loans and issuing grants.

"The primary focus was an outflow of cash," he says. Now he is chief financial officer at the Nuclear Regulatory Commission, an agency that bills for a lot of the services it performs for its mission of ensuring safety and security at civilian nuclear power plants. "The focus has a more commercial bent -- billing for services, recovering that money," he says.

For many CFOs, including McCabe, improving finance and accounting systems has required greater cooperation with other chief executives, especially chief information officers. "I work very closely with our new CIO, Darren Ash," says McCabe. "We're working on many fronts together, looking at investments as a portfolio other than a single stovepipe, system by system. We want to make sure we're spending money wisely and not redundantly."

The Nuclear Regulatory Commission formed a capital planning and investment control process, chaired by the CIO, to make sure investments in technology are tied to the budget and planning process. "It becomes more and more critical the larger we get. It comes down to managing this growth," McCabe says.

It was a similar level of cooperation between CIO and CFO that led the Homeland Security Department last year to cancel its financial management modernization program known as eMerge, after investing more than $52 million -- but well before spending an estimated $229 million on the system.

Homeland Security, which was formed from the merger of 22 agencies in 2003, inherited dozens of separate financial systems that were unable to share data across the department, creating a host of problems with functions ranging from paying employees accurately to processing travel vouchers. The eMerge program was intended to integrate finance, accounting, procurement and asset management systems, but it ran into technical challenges and the department cut its losses, said David L. Norquist, Homeland Security's chief financial officer, at a Senate hearing in June.

Homeland Security is migrating agencies to one of two finance and accounting systems adopted by the Customs and Border Protection directorate and the Transportation Security Administration. "When you review the different systems the department has, these two agency solutions stand out. They use core accounting applications that are also used by other large federal agencies with unqualified audit opinions," said Norquist.

Rather than buy a new departmentwide system, Homeland Security plans to migrate nearly all agencies to either the TSA system or the CBP system by 2011. At that point, the department plans to choose one of the two to meet all its financial management needs.

When it comes to financial management, the Defense Department remains the elephant in the room. With an operating budget that dwarfs all other agencies combined, finance and accounting systems there are hugely complicated, and most weren't designed to provide data in the way agencies are now required to provide it.

By focusing on material weaknesses that are problems across the department, Defense is making measurable progress, according to a senior official at OMB: "They have very specific action plans associated with strengthening controls around the inventory and valuation of those different items, and they've made measurable progress in improving the readiness of those audit areas."

This year, in a first for any large component of the Defense Department, the Army Corps of Engineers is going through an outside audit. The audit, which was being conducted "off cycle," according OMB, was not yet complete at press time, "but the fact that they were ready to do an audit and have gone through 97 percent of the process at this point -- and things look like they went very well -- is tremendous progress," the OMB official says. Another major entity at Defense -- the Marine Corps -- is nearly ready to face outside auditors as well.

-Katherine McIntire Peters, GovExec.com

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ED FSA is Looking for a CFO

Department of Education - Federal Student Aid
Posted: September 18, 2007

Title: CFO

Duties: The Chief Financial Officer serves as the principal financial advisor to the Chief Operating Officer of the Federal Student Aid Department of the U.S. Department of Education on matters related to planning, budgeting, finance and procurement functions. He/she serves as the principal senior executive in FSA responsible, for long-range, strategic and operational planning; performance measurement; budget interpretation, formulation, justification and execution; financial accounting; planning and implementation of fee setting and collection activities; procurement activities; and, in collaboration with the Chief Information Officer, financial systems management. The CFO provides administrative oversight to the activities of the Financial Management Group, Asset Management Group, Budget Group, and Financial Management Systems Group, and manages a diverse work force consisting of approximately 75 employees with four direct reports and one deputy.

Experience: Requirements are at least ten years experience in the financial management field, an advanced degree, such as a Master’s in Business or Public Administration, and experience managing a minimum of 30 employees in an organization that generates a minimum of $100M.

Contact:
Tiffany McCarty
JDG Associates, Ltd.
1700 Research Boulevard
Rockville, MD 20850
301-340-2210
Email: mccarty@jdgsearch.com

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Agencies need to improve service-level agreements

For the Office of Management and Budget’s Line of Business initiatives to work successfully, agencies must learn to write better, more comprehensive service-level agreements.

Federal experts said that is one of the most difficult parts of the shared-services concept.

“Writing SLAs is a weakness in the fee-for-service model,” said Danny Harris, the Education Department’s deputy chief financial officer, during a panel discussion on shared services.

Harris, who also is chairman of the CFO Council’s Financial Systems – Financial Systems Integration Office (FSIO) Oversight Transformation Team committee, said too often agencies write ambiguous SLAs that results in disagreements among providers and customers.

Mary Mitchell, the Financial Management Line of Business program manager and executive director of FSIO, said her program office has released SLA templates for agencies to use. FSIO asked providers and customers to update their agreements based on these templates, she said.

But the challenge is customer agencies have fewer disincentives with federal providers than with private-sector providers, Mitchell said.

Dick Burk, OMB’s chief architect, said the way and ability to terminate a shared-services agreement still is a gray area in the initiative.

Harris added that having financial-management standards also will make it easier to migrate because vendor’s products all will be similar.

Mitchell said agencies have had standards, but there has been too much flexibility or variation in how they were applied. FSIO and the FM LOB are developing and mandating specific standards such as a governmentwide cost accounting standard.

-Jason Miller, FCW.com

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Commentary: Beyond data processing

Analysis contributes to better management

Before 1999, most agencies that are required to comply with the Chief Financial Officers Act received less than unqualified opinions on their annual financial statement audits. Furthermore, most took more than three months to produce those “less-than-pristine” financial statements.

Fast forward to 2006, when 19 of 24 CFO Act agencies received clean opinions on their statements and all produced their statements within 45 days after the end of the fiscal year.

Though these accomplishments are significant and should boost the American taxpayers’ confidence in our ability to manage their money, the trillion-dollar question is, what now? Worthy follow-up initiatives range from decreasing the cost of our financial systems and operations, to increasing the clarity of our annual Performance and Accountability Reports, to improving the accuracy and timeliness of our intragovernmental transactions (i.e. the Intra-Governmental Payment and Collection system). An intriguing quest for us should be the movement of our organizations away from mere data processing and toward data analysis.

Now, federal financial practitioners are moving away from being merely shepherds of the financial data assembly line. They are ensuring the cleanliness of their data by building proper controls and edits into the automated core systems that process their data. They can now turn their attention to the more important task of analyzing the data that results from the processing life cycle.

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-Danny Harris, DCFO, Education Department

PMA Scorecard FY2007 Q3 Released

The latest President’s Management Agenda (PMA) Scorecard released today by the Office of Management and Budget (OMB) included two new areas where selected agencies will be assessed—the Improved Credit Management Initiative and the Health Information Quality and Transparency Initiative.

Through the Improved Credit Management Initiative, agencies will strengthen how they award and service Federal loans, manage their portfolios, and collect debt. The Federal Government is one of the world’s largest lenders. It had $251 billion in direct loans outstanding and over $1.1 trillion in loan guarantees as of the end of fiscal year 2006. This initiative is supported by the Federal Credit Council, consisting of representatives from the Departments of Agriculture, Education, Housing and Urban Development, Treasury, and Veterans Affairs, and the Small Business Administration.

Overall, agencies’ performance in implementing the President’s Management Agenda this quarter was uneven with 13 downgrades and 9 upgrades in status.

The latest scorecard can be found at: http://www.whitehouse.gov/results/agenda/fy07q3_scorecard.pdf.

Today's GAO Publication

The Government Accountability Office (GAO) today released the following report:

Managerial Cost Accounting Practices: Implementation and Use Vary Widely across 10 Federal Agencies.
GAO-07-679, July 20
http://www.gao.gov/cgi-bin/getrpt?GAO-07-679
Highlights - http://www.gao.gov/highlights/d07679high.pdf

OMB controller to retire

Linda Combs, controller at the Office of Management and Budget and head of its Office of Federal Financial Management, has resigned effective Aug. 10. She plans to retire and return to North Carolina. She has sought to make agencies more accountable and improve their financial management since taking the position in May 2005.

Danny Werfel, OMB’s deputy controller, will be acting controller, an OMB spokeswoman said.

Under Combs’ guidance, agencies reduced their improper payments by $8 billion, increased the number of clean audits and shortened the reporting time from five months to 45 days to produce their annual financial statements. OMB also produced the first governmentwide inventory of real property, he said.

Agencies also must follow guidance to certify that they have put in place internal controls for financial reporting under OMB’s Circular A-123, which is similar to the requirement in the private sector mandated by the Sarbanes-Oxley law.

Linda Combs’ experience in government spans three presidential administrations. She previously was chief financial offer at the Transportation Department and the Environmental Protection Agency. She also had various oversight and executive-level management positions at the departments of Education, Veterans Affairs and Treasury during the Reagan and Bush administrations.

-Mary Mosquera, FCW.com

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NRC Names William McCabe Chief Financial Officer

The Nuclear Regulatory Commission today announced the selection of William M. McCabe as Chief Financial Officer.

McCabe brings more than 28 years of experience in financial management. He has directed domestic and international corporate operations, financial system design and architecture of business operating solutions and public service financial management. Prior to his selection, McCabe served the Department of Education as Chief of Staff and Senior Advisor, and Acting Chief Financial Officer and key advisor to senior management since 2002.

McCabe received his Bachelor of Science, specializing in Finance and Economics, from the University of Maryland, College Park. He received his Master of Business Administration, specializing in Finance and Investments, from George Washington University, Washington, DC.

McCabe will assume his duties on Monday, June 25, 2007.

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Education Secretary Spellings Appoints Lawrence Warder as Acting Chief Operating Officer of Federal Student Aid

U.S. Secretary of Education Margaret Spellings has designated the Department's Chief Financial Officer Lawrence Warder as Acting Chief Operating Officer of Federal Student Aid (FSA) effective today.

FSA was created by Congress in 1998 as a performance-based organization and delivers approximately $77 billion of financial aid each year to more than 10 million students and their families. In January 2005, its student aid programs were removed from the GAO High-Risk designation list after 15 years. Today, FSA delivers more aid to more students at a lower operating cost with greater accuracy than at any point in its history. In addition, FSA has continued to reduce the default portion of the student loan portfolio by nearly 40 percent since FY2000, at the same time that the overall outstanding student loan portfolio doubled.

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OMB reports progress in IT management

A new Office of Management and Budget report gives agencies positive marks for making strong business cases for information technology projects, but identifies an increasing number of high-risk initiatives.

The report shows that the number of IT business cases on the OMB management watch list dropped from 346 as of December 31, 2006, to 183 as of March 31, 2007.

Business cases for IT investments end up on the list if OMB officials find one or more weaknesses. The plans -- required under the 1996 Clinger-Cohen Act -- are then targeted for follow-up so that potential problems can be corrected before the project begins.

Plans are dropped from the list once agencies demonstrate through additional documentation and information on planning that they have addressed the problems.

Meanwhile, the number of projects on a separate "high risk" list jumped from 477 to 549 during the first quarter of 2007 (from Dec. 31, 2006, to March 31, 2007). According to OMB, the high-risk designations have increased because agencies are doing a better job of overseeing projects.

Placements on the high risk list, established by OMB in August 2005, are determined by projects' complexity or level of importance. The 549 initiatives on the list represent about $12.9 billion in projected IT spending for fiscal 2008. OMB has decided they need attention from "the highest level of agency management," but in a statement, noted they are not necessarily at risk for failure.

- Daniel Pulliam, GovExec.com

Notable Projects Included on the Watch List:

USDA
Human Resources Line of Business: Service Center
Farm Program Modernization (MIDAS)

ED
Grants Administration Payment System (GAPS)
Travel Management System (TMS)
Contracts and Purchasing Support System (CPSS)
Budget Formulation and Execution Line of Business
Federal Student Aid Financial Management System (FSA FMS)

HHS
HHS Consolidated Acquisition System

DHS
DHS - Financial Management Transformation (2008)
FEMA -Integrated Financial Management Information System (IFMIS) (2008)

DOL
OCFO - DOL Labor Executive Accountability Program

DOT
DOTXX071: DOT eGrants Consolidation

Treasury
Financial Analysis & Reporting System (FARS) Applications -Major
Debt Management Accounting System (DMAS)
Oracle e-Business Suite
Travel Reimbursement and Accounting System
Financial Management Information System (FMIS)
Integrated Financial System/CORE Financial System (IFS)
OCC ENTERPRISE SYSTEMS

VA
VA-Wide e-Travel Solution-2008
Financial & Logistics Integrated Technology Enterprise (FLITE)-2008
Financial Management System (FMS)-2008
Payroll/HR Systems-2008
Capital Asset Management System-2008

NASA
NASA Integrated Enterprise Management - Core Financial
NASA Integrated Enterprise Management - Integrated Asset Management

NRC
Budget Formulation Application (BFA)
License Fee Billing System Replacement (Fees System Replacement)
Human Resources Management System (HRMS)
License Fee Billing System (Fees System)
Cost Accounting System (CAS)

OPM
Human Resources Line of Business (HR LOB)

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Labor, Transportation, VA win kudos for performance reports

The Labor, Transportation and Veterans Affairs departments won accolades for the transparency and accountability of their reports on their performance Tuesday, as officials discussed the possibility that such data could be linked more closely with budget submissions in future years.

The three agencies earned top rankings for overall reporting, transparency and leadership on an annual evaluation of agencies' performance and accountability reports conducted by the Mercatus Center at George Mason University. The same agencies were among those at the top of the list last year, too.

The center judges the agencies' reports on their activities, rather than the activities themselves. It found that the 10 agencies that scored "satisfactory" or better on their fiscal 2006 reports accounted for just 13 percent of federal noninterest spending, down from 15 percent the previous year.

At an event announcing the center's findings, researchers and officials discussed the possibility that the Office of Management and Budget will require additional performance information in the congressional budget justification documents that agencies send to Capitol Hill every year.

Some participants questioned whether the performance information would be removed from the annual reports and moved to the budget documents, to reduce the burden on agencies, which are sometimes asked to provide similar information in slightly different formats for the two processes.

But Robert Shea, OMB's associate deputy director for management, said removing the information from the performance and accountability reports is not under discussion, in part because of statutory requirements that it be publicly available.

Shea said it ultimately comes down to what information lawmakers want, noting that performance data "will only be useful to the appropriators if the appropriators want it."

He cited the Education Department as ahead of the curve in sharing performance data with the Hill, and noted that some appropriators have passed language requiring other agencies to use Education's format.

He said updated guidance for next year's performance and accountability reports will be issued through OMB's Circular A-11, to be finalized in June.

- Jenny Mandel, GovExec.com

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How financial reforms add up to better decisions

Housing and Urban Development Department officials distributing post-Sept. 11 recovery funds were the department’s first employees to receive e-mails containing real-time financial information on their program.

Other HUD officials are developing measures to evaluate the per-unit cost of different approaches for delivering housing.

Those initiatives may not seem extraordinary, but they are: They were made possible only by years of effort to automate and streamline accounting practices at department offices around the country. And HUD’s deputy chief financial officer, Jim Martin, said the department is still finding ways to translate its improved financial management into improved program management.

“We see opportunities to make these kinds of decisions throughout the department,” Martin said.

Across government, agencies have spent years overhauling their financial management practices. They are standardizing accounting practices, automating data collection, consolidating financial systems and struggling to obtain clean audits.

A key goal of the effort is giving managers accurate and current financial data with which to make decisions.

Senior financial officials at some agencies say that is starting to occur. And officials say they are closing in on the ability to give managers access to real-time and program-specific financial data on their desktops.

But good news is hardly the rule when it comes to federal finances. Viewed broadly, federal financial management is poor. For 10 straight years, the Government Accountability Office has declined to offer an opinion on the government’s overall finances due to inadequate accounting for cross-agency balances, problems preparing financial statements and other issues.

The finances of two of the largest agencies, the Defense and Homeland Security departments, are routinely described as tangled, opaque and years from being auditable. Last year, the financial management systems of 17 of the 24 agencies failed to comply with the 1996 Federal Financial Management Improvement Act. That number has barely budged since the act passed. And auditors cite ongoing problems including lack of accurate and timely data, poor procedures for reconciling funds and noncompliance with accounting standards.

The most frequently cited problem, however, is nonintegrated financial systems. For most of their histories, agencies and individual bureaus have used unique systems and standards to keep their books, developing cultures around their own procedures. With accounts effectively in different languages, financial managers must translate to share data. That process is slow, expensive and mistake-prone.

Progress on addressing that problem varies. Agencies such as the Social Security Administration, the National Science Foundation, the Environmental Protection Agency and the Labor, State and Commerce departments get good marks from OMB.

But bigger, decentralized agencies struggle.

But the books are improving. Agencies have been chipping away at accounting problems since the 1990 passage of the Chief Financial Officers Act, which created the CFO position and mandated annual financial reports. Under the president’s management agenda, launched in 2001, the Office of Management and Budget has pushed agencies to achieve clean audits, fix material weaknesses in financial controls and meet reporting deadlines, among other initiatives.

The pace of change accelerated recently. Under OMB’s Circular A-123, the government’s version of the Sarbanes-Oxley Act, agencies in fiscal 2006 began implementing new internal accounting controls. For the last two years, OMB has required CFOs to issue audited financial statements within 45 days of the fiscal year’s close, rather than the nearly five months it sometimes previously took.

In 2006, OMB also required all agencies upgrading their financial systems to consolidate their accounting, payments and recording systems with those of other agencies, either by using shared service providers under the so-called lines of business initiative or by becoming shared service providers themselves. To opt out, an agency must show it can operate its own system for less money and with less risk than it could through sharing services.

In connection with the financial management line of business, OMB is developing a common governmentwide accounting code, set to be issued next month. The agency is also issuing guidance for agencies to standardize processes for funds control, accounts payable, accounts receivable and financial reporting to the Treasury Department.

But OMB officials warn against making compliance an end in itself, noting that to achieve top ratings on the initiatives that make up the financial management portion of the president’s management agenda, agencies must show that they are using financial information to guide decisions.

Good accounting is no longer just the financial managers’ job. Success requires help from all managers with budget oversight, CFOs stress.

“If they are running their own program, we want them implementing [financial management guidelines],” said Justice Department Assistant Attorney General for Administration Lee Lofthus.

Most agencies in recent years have made financial management, along with other PMA-related goals, a part of the performance plans of senior executives. But financial managers at many agencies say the shift is broader.

The Education Department is “driving down from the secretary’s office” the message that internal controls are not just the Office of the Chief Financial Officer’s responsibility, said Danny Harris, deputy CFO at Education. “It is program managers and contract officers. That is a big change.”

Managers are increasingly required to document financial procedures, ensure that internal controls are in place, and integrate budget and performance goals.

- Daniel Friedman, FederalTimes.com

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GSA to seek commercial financial management providers

The General Services Administration will release a request for proposals in June for commercial shared-service providers to supply financial management, according to Danny Harris, the Education Department’s deputy chief financial officer.

GSA’s Financial Systems Integration Office (FSIO) will select a small number of vendors from which agencies can choose to provide services under the Financial Management Line of Business consolidation initiative.

The commercial providers will join four agencies that are delivering financial management shared services: the Treasury Department’s Bureau of Public Debt, the Interior Department’s National Business Center, the Transportation Department and GSA.

The Office of Management and Budget has directed that agencies migrate their core financial services to providers when they upgrade their financial management systems.

Large agencies have been hesitant to outsource their complex systems and processes. After one large agency makes the move with minimum risk, others will follow, Harris said March 13 at the annual Federal Financial Management Conference sponsored by FSIO.

“The initiative is making progress, but I don’t think we’ll get the speed we need until a large agency validates the value proposition,” Harris said. He is also team leader of the CFO Council’s Financial Systems Oversight Team.

The Environmental Protection Agency last month awarded CGI Federal of Fairfax, Va., an $84 million contract as its shared-services provider for the agency’s Financial System Modernization Project. The EPA’s 10-year award is the first for a large system procurement conducted by a major agency under the line of business.

-Mary Mosquera, FCW.com

The big issue for FM LOB

Small agencies see the benefits in shared services, but large agencies don’t want to give up their control

The Office of Management and Budget’s plan to turn agency financial management upside down has left many large agencies with motion sickness.

Large agencies shudder at the thought of outsiders performing their financial-management processes, and that fear is causing a delay in the across-the-board savings OMB has been hoping to achieve under the Financial Management Line of Business Consolidation effort.

“Hosting, that’s not scary. Someone else handling your business processes, that’s scary,” said Danny Harris, Education Department deputy chief financial officer and team leader of the Financial Systems Oversight Team for the CFO Council. “Nightmares of poor internal controls come to mind.”

At least five large agencies have justified not moving to one of the four public-sector shared-services providers or a private-sector vendor in the past few years. Their justifications centered on the fact that they were already implementing a new system or upgrading an existing one that meets the governmentwide financial requirements (see story, Leaders want reporting on same page, Page 8).

While large agencies have been tepid about using the FM LOB, small agencies are jumping on the shared-services-provider bandwagon in large numbers. And these smaller agencies may have something to teach their larger brethren when it comes to moving to SSPs.

Small agencies have been taking advantage of shared services for years, even before OMB initiated the Financial Management Line of Business, said Anton Porter, deputy CFO at the Federal Energy Regulatory Commission and liaison for small agencies to the CFO Council.

“If you are a large agency, you don’t see any real examples of a shared-services provider handling a large external customer that has a tremendous amount of volume and complexity in their financial-business processes,” Harris said.

And there really are no commercial providers that handle a large volume of federal financial business transactions, he said.

Despite the perception that shared-services providers cannot adequately handle large agencies’ business, the providers can indeed handle the volume of transactions, locations, number of dollars and the number of heavy users, said Doug Bourgeois, director of the Interior Department’s National Business Center, a financial-management and human resources shared-services provider. NBC, for example, is supporting Interior’s move to Financial Business Modernization System, including operations and services, he said.

OMB directed in the fiscal 2006 budget request that agencies migrate their core financial services to providers when they upgrade their financial-management systems.

OMB said that, to date, of the 25 CFO Act agencies, four have become SSPs and four have migrated to one of them, including the Environmental Protection Agency earlier this month (see story, Page 8). Currently, the Agriculture Department, Housing and Urban Development Department, and the Office of Personnel Management are in various phases of their FM LOB competitions, OMB said.

Over the next 10 years, OMB anticipates that two to three of the CFO Act agencies annually will compete to migrate to a shared-services provider.

The Federal Accountability for Tax Dollars Act of 2002 placed the same financial reporting requirements on small agencies as on large CFO Act agencies, including requirements for financial statements and use of a financial system that meets federal requirements.

For larger agencies, OMB and FSIO need to bolster the business case to move. Agencies have to have good financial, programmatic and management reasons to move, Harris said.

The likely scenario is that FM LOB will prove to be good for small agencies; some large agencies will come aboard, some will not, Bourgeois said.

“From a leadership standpoint, it may not be the right answer because economies of scale and effectiveness gains are not achieved until you migrate the service part,” he said. “The transactions and operations folks are where you get maximum effectiveness and efficiency gain for the government.”

- Mary Mosquera, GCN.com

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GCN eSeminar: An Inside Look at the Financial Management Line of Business

Date: Tuesday, February 27, 2007
Time: 10:00 AM, Eastern Standard Time

Dr. Danny Harris, deputy chief financial officer with the Education Department and leader of the Financial Systems Integration Office's Oversight Transformation Team, and GCN assistant managing editor for news Jason Miller will host a discussion at 10 a.m. Feb. 27 on the status and impact of the financial management Line of Business consolidation effort.

During this program, you will hear:

• An overview of FM LOB.
• An update on the status of initiatives to date, including guidance and standards that the initiatives are producing.
• Tips to moving to a shared service provider.
• The benefits of the FM LOB and using a shared service provider.

After Dr. Harris’ online presentation, there will be an in-depth question-and-answer session moderated by Mr. Miller. The entire InSight eSeminar will be made available in an online archive for your review.

Register Here