# Presentation: 442655

## IT Cost AccountingDecision Brief for NOAA CIO Council

- Zach Goldstein
- NESDIS
- January 16, 2007

## 		Agenda

- Challenges
- Benefits
- Solution
- Approach
- Request of CIO Council

## 		Challenges

- IT expenditures are pervasive but hidden among almost all NOAA activities
- NOAA program and line office managers have little understanding of their financial requirements or expenditures for information management functions
- Current IT-related object class codes do not
- distinguish among the uses of ADP or telecommunications equipment
- Identify the purposes of IT contractual services
- Break-out IT from non-IT costs within a contract
- Identify federal employee activities as IT or non-IT-related
- Determining IT security cost has been difficult, time consuming and yields questionable results (e.g. C&A cost, % IT security dollars against IT budget)
- Recent increase in IT data calls that include IT cost elements

## 	Challenges (continued)

- Line Offices lack ability to easily capture IT cost data
- Line Offices do not have a uniform approach in capturing and analyzing IT costs
- Line Offices lack ability to review IT costs against organizational measures of performance and priorities in order to allow senior management to make informative decisions for capital reallocation (e.g. IT operation vs. IT security)
- CFOs demanding greater historical cost detail in IT budget requests
- CIO Council provides IT spending guidance through PPBES but can’t determine what is actually obligated or spent for IT

## Challenges (continued)

- Common IT performance metrics such as Total Cost of Ownership difficult to calculate and compare
- Cost distribution for proposed common IT services are difficult to measure or defend against scrutiny
- Charge-back basis are ad-hoc and difficult to compute
- Absence of charge-back causes under investment in shared infrastructure
- Lack of an IT cost accounting structure prevents portfolio analysis and management

## Benefits of Establishing a Common IT Cost Structure

- Better IT cost identification, analysis and reporting, especially IT security
- Enhances CFO and CIO interaction
- Comparability among NOAA line offices, projects and programs
- Better links IT expenditures with Goals/Programs
- Foundation for better investment and portfolio management
- Facilitates charge-back
- Benchmarking against other federal and private sector organizations
- Activity Based Costing to support efficiency initiatives

## Costs, Difficulties and Risks of a Common IT Cost Structure

- Costs
- Time and cost to set up and maintain the cost reporting structure
- Time to record employee time
- Contract modifications for increased cost reporting detail
- Difficulties
- Agreement on common categories – belief we’re unique
- Resistance to changes – e.g., federal employees charging time to multiple cost centers, capturing federal employee time as part of IT project costs
- Risks/*Mitigation*
- Data capture burden causes non-compliance
*Limit data capture to validated, recurring requirements, secure executive advocacy, and include in employee performance assessment*
- Confusion and lack of compliance will yield inaccurate or incomplete data
*Educate and train. Audit data quality*
- Misinterpretation of data, even if accurate and complete, because it is not comparable or analyzed without context (e.g., differences among workload, activity or output measures)
*Define common measures and always provide data in context*

## Solution

- Outcome – Specified tasks, each with a 3-place alpha/numeric code, for NOAA information management-related activities
- Follow model of NOAA facility maintenance
- First define high-level reporting and decision-making requirements for IT investment management
- 	- OMB, DOC reporting requirements
- 	- NOAA, Goal, Council, LO management responsibilities
- Identify a common group of IT cost categories and/or elements that are implied by the requirements
- Assess, screen cost elements by expected materiality
- Integrate into existing financial management system (e.g. Commerce Business System) and feeder systems (e.g. WebTA) with cost rollup (e.g. NOAA) and decomposition (e.g. Line Offices) capabilities
- Plan the implementation of data structure into future systems and plan the development of needed IT management applications

## Notional Plan

- Assemble cross functional working group
- NESDIS willing to chair
- Working group members from OCIOs and OCFOs to be identified within two weeks of NOAA CIO Council approval of this project
- Meet with NOAA Facility Management and review Gartner research to leverage lessons learned
- Develop project plan detailing tasks and interim deliverables and frequent checkpoints
- Define application requirements (required reports and questions to be answered) and recommend cost categories/elements
- Consider IT cost accounting structures of other organizations, federal and private sector
- Consider materiality of cost category
- Consider availability of activity and output measures
- CIO Council decision point (April 2007)

## Notional Plan (continued)

- Paper prototype
- Two months
- Desktop exercise with IT employees and IT COs/COTRs
- Verify cost structure meets reporting requirements and answers questions
- Estimate costs, difficulties and risks of approach
- CIO Council decision point (June 2007)
- Selected Line Offices pilot approach
- One fiscal year duration – FY 2008
- Two LOs (e.g., NWS and NESDIS), selected projects, selected offices within LOs
- NOAA programs?
- Document CIO, CFO and NEP/NEC approval of piloting plan

## Notional Plan (continued)

- Evaluate effectiveness and cost of pilots and implement refinements based on customer and stakeholder feedback
- 9-month checkpoint (June 2008) – consider expanding in FY 2009
- 13-15 month checkpoint – present results of first fiscal year
- Develop plan for NOAA-wide implementation in 2010
- Allocate new applications to existing, emerging (e.g., a  NOAA commitments system) or future systems
- Target cost accounting structure for implementation in current financial systems, possibly in advance of specific applications which will use the cost elements
- Develop communication and implementation plan to raise awareness and facilitate organizational adoption
- Document CIO, CFO and NEP/NEC approval of plan

## Decisions Requested of CIO Council	

- Agree IT cost accounting should be addressed by this Council
- Approve creation of working group to
- review other experiences (e.g., NOAA Facilities, Gartner research)
- review and modify notional plan,
- draft project plan,
- create example list of cost categories, and
- report back to CIO Council in April 2007
- Nominate one person from each LO to serve on working group, invite LO CFO to nominate members also
- Agree that working group selects leader or designate an LO to provide working group leadership